Steel Division

MARKET ENVIRONMENT AND BUSINESS DEVELOPMENT

The Steel Division held its own in the first half of the 2024/25 business year in a generally challenging economic environment. While the first quarter bucked the trend on the European steel market and developed satisfactorily, a downturn in demand became apparent towards the end of the second quarter.

As in the previous business year 2023/24, demand for steel and steel products on the European market remained subdued overall in the reporting period. Despite the interest rate cuts by the European Central Bank in June and September, there was no noticeable recovery in the construction industry, which is one of the largest consumers of steel. Other major customers such as the mechanical engineering and consumer goods sectors also remained at a low level. As a result, steel prices on the European spot market continued to fall in the first half of 2024/25.

By focusing on top-quality sheet steel in the technologically most demanding segment, the Steel Division was largely able to escape this generally difficult environment in the first half of 2024/25. Long-term customer partnerships with a corresponding contract structure and a focus on niche products in top segments helped to counteract the pressure from the spot markets on the price side. The division was also faced with a satisfactory volume situation in the first few months, although this lost momentum after the Northern summer months.

The automotive industry in particular, which showed a largely stable demand trend for most of the reporting period, deteriorated noticeably after the Northern summer. Thanks to an excellent delivery performance and active market cultivation, the Steel Division has so far been able to compensate relatively well for the long-standing structural downward trend in European automotive production. The profit warnings issued by renowned car manufacturers in September 2024 signaled an unexpected further weakening of the automotive industry, which was also felt in the Steel Division towards the end of the first half of 2024/25.

The construction industry remained at a low level, unable to benefit from the European Central Bank’s interest rate cuts in the reporting period.

Subsequently, there were no significant signs of recovery in the consumer goods and white goods industries.

Demand from the mechanical engineering sector remained subdued. The low level of investment activity in European industry meant that there was no significant upward trend in the first half of the year.

The energy sector benefited from a good project landscape, with the Heavy Plate business segment in particular continuing to develop positively. Here, the strong position in the high-tech sector for complex pipeline projects led to a very pleasing demand situation in the current reporting period.

Raw materials relevant to steel production, such as iron ore and metallurgical coal, were largely stable in the first quarter of the 2024/25 business year, whereas prices on the global market declined in the second quarter of 2024/25.

Project implementation for the transformation of steel production in Linz went according to plan in the first half of 2024/25, both in terms of time and budget. In the reporting period, activities focused on the energy supply for the future electric arc furnace, which will replace a blast furnace in the first step in 2027.

FINANCIAL KEY PERFORMANCE INDICATORS

At EUR 2,918.1 million, the Steel Division’s sales revenue in the first half of 2024/25 fell by 6.7% compared to the previous year’s figure of EUR 3,128.3 million. This was primarily due to the decline in shipment volumes. The slightly lower price level in the current reporting period was largely offset by a better product mix. On the earnings side, the Steel Division recorded a positive development. The division was able to increase EBITDA by 11.2% from EUR 355.3 million (margin of 11.4%) in the first half of 2023/24 to EUR 395.2 million (margin of 13.5%) in the first half of 2024/25. Lower prices on the sales side were accompanied by declining raw material costs. The advantageous product mix in the form of high delivery volumes of clad heavy plate supported the Steel Division’s pleasing earnings level. The division achieved an increase in EBIT of 16.6% from EUR 226.7 million (margin of 7.2%) in the first half of 2023/24 to EUR 264.3 million (margin of 9.1%) in the first half of 2024/25.

In comparison over the course of the year, the financial performance indicators for the second quarter of 2024/25 were below the level of the first quarter of 2024/25. Sales revenue fell by 13.7% from EUR 1,566.1 million to EUR 1,352.0 million. This development was primarily due to declining shipping volumes at a slightly weaker price level. The operating result (EBITDA) fell by 27.9% from EUR 229.7 million in Q1 2024/25 to EUR 165.5 million in Q2 2024/25 and thus the EBITDA margin from 14.7% to 12.2%. The gross margin narrowed slightly as a result of the lower price level with a stable trend in raw material costs in a direct quarter-on-quarter comparison. Sales volumes were weaker, mainly due to seasonal influences. The operating result (EBIT) fell by 39.0% from EUR 164.2 million (margin of 10.5%) to EUR 100.1 million (margin of 7.4%) in the same period.

The number of employees (FTE) in the Steel Division was 10,924 as of September 30, 2024, an increase of 1.6% compared to the previous year (10,748 employees).