EANS-News: voestalpine AG Difficult environment has adverse impact on voestalpine?s results for the first half of the business year 2019/20
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Mid Year Results
Linz - For the voestalpine Group, the first half of the business year 2019/20
was defined by a substantial dampening of sentiment in its economic environment.
Particularly in Europe, where voestalpine generates about two thirds of its
revenue, the weakening of the export industry due to increasing global barriers
to trade, decreasing demand from the automotive industry as well as fewer
investments affected all of the Group's divisions. But the global trade disputes
are being reflected in declining economic momentum in China and the United
States too. The adverse conditions in the steel sector intensified all the more
on account of massive increases in raw materials prices in tandem with
decreasing sales prices and large volume steel imports into Europe that continue
unabated. Furthermore, the financial expenditures for CO2 allowances in the
European Union as well as the corporate issue of start-up costs at the Group's
Automotive Components plant in Cartersville, Georgia, USA, continued to have
adverse impact on the profit margins.
Under these conditions, there was a decline in all earnings categories of the
voestalpine Group in the first half of 2019/20. As measures to stabilize
earnings, the cost-cutting and efficiency improvement programs already
implemented were further intensified.
Nevertheless, in this generally difficult macroeconomic environment, the
technology segments railway systems, aerospace, warehouse and rack-solutions as
well as welding technology recorded a stable, positive development, confirming
the strategic orientation of the voestalpine Group as a special and complete
system provider.
Investments reduced
Having made large investments in recent years, the voestalpine Group is cutting
back on its investment activity, reducing its investment volume in the first
half of the year by almost 30% to EUR 338 million (EUR 475 million a year
earlier).
Balance sheet structure affected by non-recurring items
The voestalpine Group's reported indebtedness in the first half of 2019/20 was
materially affected by accounting factors in addition to the operating
developments and the dividend payment. For one, the interest-bearing liabilities
rose by around EUR 437 million on account of a change in the International
Financial Reporting Standards (IFRS)-specifically, the recognition of leases
pursuant to IFRS 16-relative to the March 31, 2019, reporting date. For another,
the EUR 500 million hybrid bond issued in 2013 was called as of October 31,
2019, with the result that, as of September 30, 2019, it is recognized in
financial liabilities instead of in equity. Given these developments, the
Group's net financial debt climbed from EUR 3.6 billion as of September 30,
2018, to EUR 4.5 billion as of September 30, 2019. Equity declined from EUR 6.6
billion to EUR 6 billion in the same period due to the dividend payment and the
redemption of the hybrid bond. In turn, this caused the gearing ratio to rise
year over year from 55% to 75%.
Outlook
The Management Board's assessment at the start of the business year 2019/20-
specifically, that the previous year's performance based on EBITDA would
probably be achievable again in the current business year-was premised on a
number of factors. The key market and cost variables underlying the assessment
at the time were as follows: a cooling of the economy in markets that are
material to voestalpine, but no recessionary or crises scenarios; a cooling of
momentum in the automotive industry, but no new dramatic distortions in the
automotive market on account of the new emissions test to be introduced in
Europe in September 2019; no negative effects from the global trade conflicts or
the Brexit above and beyond the anticipated cooling of the economy; a
normalizing of iron ore prices over the course of the business year as well as
positive dispositions of challenges internal to the company.
Key assumptions largely did not come to pass over the first six months of the
current business year. While the intracorporate challenges are being dealt with
and certain improvements are still expected to be realized, the slowdown in the
momentum of the automotive industry has been both more intense and widespread
than originally expected, even though the new emissions test that was introduced
in September of this year did not trigger the distortions seen a year ago. The
global trade war along with protectionist policies have clearly crimped
investments in many parts of the world and thus have led, particularly toward
the end of the first half of the business year 2019/20, to significant demand
declines in many markets that are key to the voestalpine Group. Although iron
ore prices did ease over the summer, the expected margin growth did not
materialize. Record imports into the European Union combined with weak intra-
European demand continued to depress steel prices at the end of the current
reporting period.
Given these negative macroeconomic developments, the scenario posited at the
start of the current business year no longer applies. From today's vantage
point, it is to be expected that the third business quarter is likely to be as
difficult as the second quarter of the business year 2019/20 in terms of
earnings. Positive effects from both seasonal influences and the resolution of
intracorporate issues as well as earnings contributions from the steps taken to
lower costs and boost efficiency should take effect in the business year's last
quarter.
In this difficult environment, the Management Board's focus is on measures
designed to stabilize earnings and generate free cash flow. Aside from short-
term actions, over the next few months this will also entail examining the
ramifications of the changed global economic framework for the positioning of
all of the Group's material business segments.
At this point in time, the Management Board of voestalpine AG thus expects
EBITDA of about EUR 1.3 billion for the business year 2019/20-an assessment that
is largely in line with market expectations.
Key figures of voestalpine Group
____________________________________________________________________________
|(acc._IFRS)_____________________|H1_BY_2018/19____|H1_BY_2019/20____|Delta_%|
|________________________________|04/01/-09/30/2018|04/01/_09/30/2019|_______|
|Revenue_________________________|6,674.0__________|6,541.6__________|-2.0___|
|EBITDA__________________________|860.1____________|665.5____________|-22.6__|
|EBITDA_margin_in_%______________|12.9_%___________|10.2%____________|_______|
|EBIT____________________________|479.5____________|229.6____________|-52.1__|
|EBIT_margin_in_%________________|7.2_%____________|3.5%_____________|_______|
|Profit_before_tax_______________|421.5____________|162.5____________|-61.4__|
|Profit_after_tax_*______________|319.9____________|115.2____________|-64.0__|
|EPS_-_earnings_per_share_(euros)|1.69_____________|0.54_____________|-68.0__|
|Gearing-ratio_in_%_(09/30)______|54.9_%___________|75.1%____________|_______|
|In_millions_of_euros________________________________________________________|
*Before deduction of non-controlling interests and interest on hybrid capital.
voestalpine AG's 1st half results BY 2019/20 as of September 30, 2019, may be
viewed on the Company's website, www.voestalpine.com [http://
www.voestalpine.com/], under the "Investors" tab.
Further inquiry note:
Peter Fleischer
Head of Investor Relations
Phone: +43/50304/15-9949
Fax: +43/50304/55-5581
mailto:peter.fleischer@voestalpine.com
http://www.voestalpine.com
end of announcement euro adhoc
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issuer: voestalpine AG
voestalpine-Straße 1
A-4020 Linz
phone: +43 50304/15-9949
FAX: +43 50304/55-5581
mail: IR@voestalpine.com
WWW: www.voestalpine.com
ISIN: AT0000937503
indexes: WBI, ATX
stockmarkets: Wien
language: English