Report on the financial key performance indicators of the voestalpine Group*

A weaker price environment compared to the previous year—due mainly to lower pre-material costs and extremely challenging conditions in the oil and natural gas sectors—was the primary reason for the decline in revenue by 6.5% from EUR 5,786.7 million in the first half of 2015/16 to EUR 5,407.8 million in the first half of 2016/17. As far as volumes are concerned, the markedly lower demand in the oil and natural gas sectors had a significant impact on the Seamless Tubes business segment (Metal Engineering Division), while the Steel Division was able to increase its delivery volume in a year-over-year comparison as a result of the solid market momentum for high quality, sophisticated steel products. The sole division that was able to increase its revenue in a year-over-year comparison was the Metal Forming Division due to its expansion of automotive activities.

As far as earnings are concerned, the first half of 2016/17 was characterized by a sharp decline in the Steel Division in the first three months of the business year; in the second quarter of 2016/17, the division experienced a strong upward trend as higher prices were reflected in newly concluded contracts with customers. Earnings in the Steel Division were diametrically opposed to the trend in the first half of the previous year, when the economic environment in the European steel sector deteriorated due to increasing imports. Start-up losses at the direct reduction plant in Texas, USA, as well as the reduced performance of blast furnace 5 to allow for the fine-tuning of the coal injection system amounting to more than EUR 30 million impacted the operating result in the first half of 2016/17.

While the performance of the Metal Engineering Division dropped off substantially as a result of positive non-recurring effects in the previous year due to changes in consolidation and the weakness of the energy sector mentioned above, the Special Steel Division and the Metal Forming Division increased their earnings figures in comparison with the previous year. Viewing the Group as a whole, EBITDA fell by 21.0% from EUR 892.1 million in the first half of 2015/16 to EUR 704.9 million in the first half of 2016/17. EBIT decreased by 35.9% from EUR 575.1 million to EUR 368.9 million. However; the comparison of earnings has limited informative value because of the non-recurring effects in the same period of the previous year in connection with the acquisition of the controlling interest in companies that are part of the Seamless Tubes and Turnout Systems business segments. Revaluations based on the fair values less depreciation of hidden reserves had a positive impact on EBITDA of voestalpine AG in the first half of 2015/16 at EUR 137.6 million and EBIT at EUR 125.2 million, while in the first half of 2016/17, the effect on EBIT was negative at EUR –7.5 million. Taking these non-recurring effects into consideration, consolidated EBITDA in the first half of 2016/17 was EUR 704.9 million, just 6.6% behind last year’s figure of EUR 754.5 million. As a result of the decline in revenue, the adjusted EBITDA margin remained constant at 13.0% Because of the increase in the level of depreciation, which only impacted EBIT, in a year-to-year comparison, the decline of EBIT, which has been adjusted for non-recurring effects, is somewhat higher at –16.3%—a decrease from EUR 449.8 million (margin: 7.8%) to EUR 376.4 million (margin: 7.0%).

In the first half of 2016/17, profit before tax includes non-recurring effects of EUR –7.5 million (previous year: EUR 125.2 million); profit after tax includes non-recurring effects of EUR –5.6 million (previous year: EUR 130.4 million). Adjusted for non-recurring income and expenses, profit before tax went down by 15.9% from EUR 379.3 million in the first half of 2015/16 to EUR 318.9 million in the first half of 2016/17. The decline of the adjusted profit after tax was of similar magnitude—17.6% from EUR 290.4 million to EUR 239.3 million.

In a year-over-year comparison, equity rose by 1.6% from EUR 5,524.4 million as of September 30, 2015 to EUR 5,610.5 million as of September 30, 2016. Compared to the reporting date of March 31, 2016 (EUR 5,651.6 million), equity declined slightly by 0.7%. In the first half of 2016/17, payment of dividends amounting to more than EUR 200 million and actuarial losses in connection with adjustments of the interest rate for provisions for obligations relating to employee benefits, which could not be completely compensated despite the solid development of earnings in the first half of 2016/17, had a negative impact on equity.

During the past twelve months, net financial debt grew by 6.9% from EUR 3,152.9 million as of September 30, 2015 to EUR 3,370.0 million as of September 30, 2016. The main reason for this increase in debt was the Group’s high level of investment activity, which was markedly higher than the level of depreciation. Compared to the reporting date of March 31, 2016, net financial debt increased by 9.4% from EUR 3,079.9 million to EUR 3,370.0 million; the reasons for the rise during this period were the increase in net working capital, outflow of capital for investments, and particularly, the payment of dividends in July 2016. As a result, the gearing ratio went up both in a year-to-year comparison and compared to the reporting date of the business year 2015/16. While it was 57.1% as of the reporting date of September 30, 2015 and 54.5% as of March 31, 2016, as of September 30, 2016, it was at 60.1%.

Net financial debt can be broken down as follows:

In the previous year, investment volume reached a new peak due to various major projects. Because only part of these projects could be completed in the past business year, the amount spent on investments was again considerably higher than the level of depreciation in this business year as well. Overall, however, investment expenditure nevertheless fell by 27.3% from EUR 647.3 million in the first half of 2015/16 to EUR 470.8 million in the first half of 2016/17.

As of September 30, 2016, the voestalpine Group had 48,786 employees (FTE). In a year-to-year comparison (48,719 FTE as of September 30, 2015), this is an increase of 0.1%. Headcount increased in the Special Steel Division due to acquisitions and in the Metal Forming Division due to an expansion of automotive activities. It decreased, however, in both the Steel Division and the Metal Engineering Division (adjustment in the number of personnel due to the difficult market conditions in the oil and natural gas sectors). Compared to the reporting date of March 31, 2016 (48,367 FTE), this is a gain of 0.9%.