Report on the financial key performance indicators of the voestalpine Group

Following years of growth, the voestalpine Group posted a slight decline in revenue for the first half of the business year 2019/20. This decline chiefly reflects the dampening of economic sentiment in important economic regions and/or customer segments as well as the resulting negative effect on the Group’s delivery volume. Price developments paint a differentiated picture: Prices at both the High Performance Metals Division and the Metal Engineering Division (with the exception of wire products) were higher on account of the increases in the cost of raw materials. By contrast, steel prices in the Steel Division fell due to deteriorating market conditions despite rising pre-materials costs. All divisions except the Metal Forming Division had to contend with declining sales. In sum, this resulted in a 2.0% decrease in revenue, from EUR 6,674.0 million in the first half of the business year 2018/19 to EUR 6,541.6 million in the first half of the business year 2019/20.

The downturn in the voestalpine Group’s earnings was substantially greater year over year. Although the previous year’s comparative figure already was lower due to non-recurring effects in the Steel Division (the complete overhaul of its most important blast furnace), the Group’s individual earnings categories all experienced significant declines in the first half of the current business year on account of the challenging market environment. All four divisions were affected by this development, albeit to different degrees. The Metal Engineering Division posted the smallest earnings decline, because its relatively stable Railway Systems business segment accounts for about one half of its business volume. By contrast, the Metal Forming Division was confronted with the greatest drop in earnings due to the cooling of the automotive industry as well as high start-up costs at its automotive plant in Cartersville, Georgia, USA. As a result, the EBITDA of the voestalpine Group on the whole fell from EUR 860.1 million in the previous year by 22.6% to EUR 665.5 million in the first half of the business year 2019/20. EBIT plummeted year over year by more than one half, from EUR 479.5 million to EUR 229.6 million. At net financial income of EUR –67.1 million in the first half of the business year 2019/20 (previous year: EUR –58.0 million), the profit before tax for the reporting period is EUR 162.5 million (previous year: EUR 421.5 million). Based on a tax rate of 29.1% (previous year: 24.1%), the profit after tax for the first half of the business year 2019/20 plunged by 64.0%, from EUR 319.9 million in the same period of the previous year to EUR 115.2 million in the reporting period.

The gearing ratio (net financial debt as a percentage of equity) of the voestalpine Group rose sharply, both year over year and compared with the annual reporting date. This is chiefly due to accounting issues and not to the Group’s operating performance. For one, a portion of this increase stems from the recognition of leases pursuant to IFRS 16, which raised the interest-bearing liabilities by about EUR 437 million compared with the annual reporting date. For another, on September 9, 2019, the Management Board of voestalpine AG resolved to fully redeem the EUR 500 million hybrid bond issued in 2013 as of October 31, 2019. This means that, as of September 30, 2019, the hybrid bond is recognized in financial liabilities and not in equity. As regards the Group’s operating performance, the increase in working capital compared with the March 31, 2019, reporting date adversely affected the debt ratio even though it was more or less stable year over year. Given these developments, net financial debt rose from EUR 3,599.0 million as of September 30, 2018 (or EUR 3,125.4 million as of the March 31, 2019, reporting date) to EUR 4,503.1 million as of September 30, 2019. During the same period and due to the redemption of the hybrid bond, equity fell from EUR 6,550.9 million as of September 30, 2018 (or EUR 6,709.8 million as of the March 31, 2019, reporting date) to EUR 5,994.7 million as of September 30, 2019. In turn, this caused the gearing ratio to climb from 54.9% as of September 30, 2018 (and 46.6% as of the March 31, 2019, reporting date) to 75.1% as of September 30, 2019.

Net financial debt can be broken down as follows: