REPORT FOR THE FIRST HALF OF 2019/20 - Voestalpine

 
REPORT FOR THE
FIRST HALF OF 2019/20

voestalpine AG
www.voestalpine.com
voestalpine GROUP
KEY FIGURES

Q 1 2019/20 VS. Q 2 2019/20
In millions of euros                                                                  Q 1 2019/20          Q 2 2019/20        Change
                                                                                    04/01 – 06/30/2019   07/01 – 09/30/2019     in %

Income statement
Revenue                                                                                     3,336.1              3,205.5        –3.9
EBITDA                                                                                        370.9                294.6       –20.6
Depreciation                                                                                  214.3                221.7         3.5
EBIT                                                                                          156.7                 72.9       –53.5
Profit before tax                                                                             124.4                 38.1       –69.4
Profit after tax1                                                                              90.4                 24.8       –72.6

Statement of financial position
Investments in tangible and intangible assets
and interests                                                                                 170.9                166.6        –2.5
Equity                                                                                      6,712.1              5,994.7       –10.7
Net financial debt                                                                          3,896.5              4,503.1        15.6
Net financial debt in % of equity (gearing)                                                  58.1%                75.1%

Financial key figures
EBITDA margin                                                                                 11.1%                 9.2%
EBIT margin                                                                                    4.7%                 2.3%
Cash flows from operating activities                                                           –86.3                288.3      434.1

Share information
Share price, end of period (euros)                                                           27.17                21.08        –22.4
Market capitalization, end of period                                                       4,850.4              3,763.2        –22.4
Number of outstanding shares, end of period                                           178,520,566          178,520,566           0.0
EPS – earnings per share (euros)                                                              0.44                 0.10        –77.3

Personnel
Employees (full-time equivalent), end of period                                              51,670               51,275        –0.8
1
    Before deduction of non-controlling interests and interest on hybrid capital.
H 1 2018/19 VS. H 1 2019/20
In millions of euros                                                                  H 1 2018/19          H 1 2019/20        Change
                                                                                    04/01 – 09/30/2018   04/01 – 09/30/2019     in %

Income statement
Revenue                                                                                     6,674.0              6,541.6        –2.0
EBITDA                                                                                        860.1                665.5       –22.6
Depreciation                                                                                  380.6                436.0        14.6
EBIT                                                                                          479.5                229.6       –52.1
Profit before tax                                                                             421.5                162.5       –61.4
Profit after tax1                                                                             319.9                115.2       –64.0

Statement of financial position
Investments in tangible and intangible assets
and interests                                                                                 474.6                337.5       –28.9
Equity                                                                                      6,550.9              5,994.7        –8.5
Net financial debt                                                                          3,599.0              4,503.1        25.1
Net financial debt in % of equity (gearing)                                                  54.9%                75.1%

Financial key figures
EBITDA margin                                                                                 12.9%                10.2%
EBIT margin                                                                                    7.2%                 3.5%
Cash flows from operating activities                                                           165.0                202.0       22.4

Share information
Share price, end of period (euros)                                                           39.40                21.08        –46.5
Market capitalization, end of period                                                       6,947.0              3,763.2        –45.8
Number of outstanding shares, end of period                                           176,320,566          178,520,566           1.2
EPS – earnings per share (euros)                                                              1.69                 0.54        –68.0

Personnel
Employees (full-time equivalent), end of period                                              51,931               51,275        –1.3
1
    Before deduction of non-controlling interests and interest on hybrid capital.
CONTENTS
This report is a translation of the original report in German, which is solely valid.

INTERIM                                                CONDENSED INTERIM CONSOLI-
MANAGEMENT REPORT                                      DATED FINANCIAL STATEMENTS

 4 Economic Environment                                 22 Consolidated Statement
		 and Course of Business                              		 of Financial Position

 6 Report on the Financial                                24 Consolidated Statement of Cash Flows
		 Key Performance Indicators
                                                        25 Consolidated Statement
		 of the voestalpine Group
                                                       		 of Comprehensive Income
   8 Steel Division
                                                        27 Consolidated Statement
  10 High Performance Metals Division                  		 of Changes in Equity

  12 Metal Engineering Division                           28 Notes

  14 Metal Forming Division                             46 Management Board Statement
                                                       		 in accordance with Section 125 (1)
  16 Investments
                                                       		 Austrian Stock Exchange Act 2018
 16 Business Transactions with                         		  (Börsegesetz 2018 – BörseG 2018)
		 Associated Companies or Parties

  16 Risk Management

  17 Outlook

  19 Investor Relations
LETTER FROM THE
              MANAGEMENT BOARD

              Ladies and Gentlemen:

              This Interim Report for the business year 2019/20 differs from its predecessors in many ways. We
              entered a phase of great uncertainty at the start of the business year 2019/20 following a long
              period of economic expansion. The leading economic indicators for the manufacturing industry that
              are key to our interests point to a significant weakening of the economic momentum worldwide. And
              Europe, our most important market, is the one where the downturn is the most pronounced.
              Having made extensive investments in recent years, now is the time for us to create new financial
              leeway for further development options. This means that questions related to the Group’s total
              asset structure, its ability to generate cash flows, and earnings optimization—in this order—are at
              the top of our current agenda. All requisite programs have been launched and are already being
              implemented.
              While the current uncertainties and the resulting business climate will constrain our strategic options
              in the near term, our longer-term strategy of growing and extending the value chain remains valid,
              and we are pursuing it with an eye toward our liabilities.
              The most recent changes in the global economic order—first and foremost the global trade war, but
              also the future development of Europe as an economic region whose interest in maintaining an all-­
              encompassing industrial value chain is obviously waning—require an agenda that transcends purely
              short-term optimization strategies at the operating level. In the coming months, therefore, we will look
              closely at the ramifications of the changes in the global economic order for the positioning in the long
              term of all of the Group’s key business segments.
              That such phases are demanding and challenging is only natural. The Management Board’s current
              focus thus is on reducing debts and stabilizing earnings.

              The Management Board

REPORT FOR THE FIRST HALF OF 2019/20                                                                                3
INTERIM
MANAGEMENT REPORT
This report is a translation of the original report in German,
which is solely valid.

ECONOMIC ENVIRONMENT                                    many, in particular, also on account of the weak-
AND COURSE OF BUSINESS                                  ening of its automotive industry.
                                                        The European Central Bank (ECB) has responded
Uncertainty continued to characterize the overall       through fiscal measures aimed at stimulating
economic environment in the first half of the           investments: It has continued to lower interest
business year 2019/20. Current triggers such as         rates and has restarted its large-scale asset pur-
the global trade wars and the Brexit (along             chases, also known as “quantitative easing” (QE).
with its ramifications, especially in Europe) had a     It is only natural that these developments would
growing impact on the real economy. As a range          negatively affect the performance of voestalpine,
of precursor indicators already show, in actual         which generates a good two-thirds of its revenue
fact the willingness to make investments has de-        in Europe. Shrinking demand from the auto in-
clined worldwide. While service sectors with a          dustry, reduced investments, and the downturn
predo­minantly regional orientation as well as          in the manufacturing sector on the whole have
consumers’ spending patterns have largely re-           broad implications for voestalpine’s divisions.
mained robust so far, the first signs of negative       Two positive developments stand out, however:
collateral effects are making themselves felt on        the railway infrastructure segment as well as the
these sectors too.                                      aerospace industry. Both of them succeeded in
                                                        avoiding the negative dynamic during the first
EUROPE                                                  half of the business year 2019/20. The steel in-
The economy in Europe on the whole still managed        dustry, by contrast, was buffeted in the reporting
to generate slight growth toward the end of the         period not only by slowing demand from individ-
reporting period. Yet the gap between the manu­         ual market segments, but also by large volume
facturing sector and the service sector (which          steel imports to Europe as well as the high cost of
continues to run smoothly) has grown substan-           raw materials.
tially since the start of the business year. Both the
good employment situation and consumers’ strong         NORTH AMERICA / USA
purchasing power have helped to fuel the expan-         In North America, economic growth remained on
sion of the service sector, although the momentum       track in the first two quarters of the business year
recently slowed a bit in this area also.                2019/20, even though here, too, the growth rates
Europe’s export-oriented industrial sector, by          have recently begun to slacken somewhat. While
contrast, is increasingly suffering under the ­global   consumption continued to boost growth, toward
trade barriers as well as the general decline in        the end of the first half of the current business
investments. This sector has had to contend with        year investment activity as well as housing con-
negative growth rates since the start of the current    struction declined for the first time in years. Aside
business year. These developments affect Ger-           from the slackening of the economy worldwide,

4
growing uncertainties and falling corporate ­profits   reacted to these developments with a number of
              have put a break on investments here as well.          measures aimed at stimulating growth. So far,
              Just as in Europe, demand from the railway infra-      however, the positive expectations tied to these
              structure sector as well as the aerospace industry     interventions have not yet borne fruit over the
              for the products of the voestalpine Group contin-      course of the current business year. As a result,
              ues unabated. By contrast, the Group’s production      consumption in China has remained weak, and
              levels had to be adjusted in response to declining     the country has not yet succeeded in offsetting
              demand from the oil and natural gas sector.            the substantial downturn in its automotive indus-
              Given the Section 232 restrictions on imports, on      try. Over time, the state-controlled infrastructure
              the whole the U.S. market has become a difficult       and real estate projects have led to a considerable
              economic proposition for voestalpine.                  expansion of steel production in China—the world’s
                                                                     largest steel producer by far. In turn, this triggered
              SOUTH AMERICA / BRAZIL                                 a substantial increase in the cost of raw materials,
              While the Brazilian economy managed to expand          above all iron ore.
              a bit at the start of the business year 2019/20,       The Chinese branches of the voestalpine Group
              the momentum flattened out yet again over the          have profited from the government’s stimulus
              summer. Investment activity, which had received        programs in the railway infrastructure segment.
              a boost through fiscal measures, slowed as much        Low demand from both the consumer goods in-
              as did manufacturing activity. Exports expanded        dustry and the automotive industry have affect-
              a bit across the board, but remained at a low          ed particularly the tool segment.
              level on the whole not least due to developments
              in Argentina. Production of Brazil’s most important    In sum, therefore, the voestalpine Group was
              export commodity—iron ore—was ramped up to             confronted with a substantial dampening of eco-
              normal levels for the first time since the fatal dam   nomic sentiment. Europe, which accounts for the
              break in early 2019.                                   largest portion of voestalpine’s regional portfolio,
              Overall, the voestalpine Group’s Brazilian sites       also had the weakest momentum. European steel
              delivered solid performance in this moderate           production during the reporting period was char-
              economic environment.                                  acterized by an extraordinary situation: Falling
                                                                     demand and strong import pressures in tandem
              ASIA / CHINA                                           with sharp increases in raw materials prices have
              The trade war with the United States has put a         impacted financial results.
              substantial brake on China’s economic develop-         It is precisely in this highly uneven economic en-
              ment. It has triggered not only the downturn in        vironment that voestalpine’s strategy displayed
              exports, but has also affected domestic consump-       its strengths. These include the Group’s focus on
              tion. As in the past, China’s central government       technologically sophisticated markets as well as

REPORT FOR THE FIRST HALF OF 2019/20                                                                                     5
its investments in recent years to extend the value     about one half of its business volume. By contrast,
chain. The railway infrastructure segment, the          the Metal Forming Division was confronted with
aerospace industry, storage systems as well as          the greatest drop in earnings due to the cooling
welding technology—all of which delivered good          of the automotive industry as well as high start-up
performance in the first six months of the business     costs at its automotive plant in Cartersville,
year 2019/20—provide solid evidence thereof.            Georgia, USA. As a result, the EBITDA of the voest­
                                                        alpine Group on the whole fell from EUR 860.1
                                                        million in the previous year by 22.6% to EUR 665.5
REPORT ON THE FINANCIAL                                 million in the first half of the business year 2019/20.
KEY PERFORMANCE INDICATORS                              EBIT plummeted year over year by more than one
OF THE voestalpine GROUP                                half, from EUR 479.5 million to EUR 229.6 million.
                                                        At net financial income of EUR –67.1 million in
Following years of growth, the voestalpine Group        the first half of the business year 2019/20 (previ-
posted a slight decline in revenue for the first half   ous year: EUR –58.0 million), the profit before
of the business year 2019/20. This decline c ­ hiefly   tax for the reporting period is EUR 162.5 million
reflects the dampening of economic sentiment            (previous year: EUR 421.5 million). Based on a
in important economic regions and/or customer           tax rate of 29.1% (previous year: 24.1%), the
segments as well as the resulting negative effect       profit after tax for the first half of the business
on the Group’s delivery volume. Price developments      year 2019/20 plunged by 64.0%, from EUR 319.9
paint a differentiated picture: Prices at both the      million in the same period of the previous year to
High Performance Metals Division and the M    ­ etal    EUR 115.2 million in the reporting period.
Engineering Division (with the exception of wire        The gearing ratio (net financial debt as a per-
products) were higher on account of the in­creases      centage of equity) of the voestalpine Group rose
in the cost of raw materials. By contrast, steel        sharply, both year over year and compared with
prices in the Steel Division fell due to deteriorat-    the annual reporting date. This is chiefly due to
ing market conditions despite rising pre-materials      accounting issues and not to the Group’s oper-
costs. All divisions except the Metal Forming           ating performance. For one, a portion of this
Division had to contend with declining sales. In        increase stems from the recognition of leases
sum, this resulted in a 2.0% decrease in revenue,       pursuant to IFRS 16, which raised the interest-
from EUR 6,674.0 million in the first half of the       bearing liabilities by about EUR 437 million com-
business year 2018/19 to EUR 6,541.6 million in         pared with the annual reporting date. For anoth-
the first half of the business year 2019/20.            er, on September 9, 2019, the Management Board
The downturn in the voestalpine Group’s earnings        of voestalpine AG resolved to fully redeem the
was substantially greater year over year. Although      EUR 500 million hybrid bond issued in 2013 as
the previous year’s comparative figure already          of October 31, 2019. This means that, as of Sep-
was lower due to non-recurring effects in the Steel     tember 30, 2019, the hybrid bond is recognized
Division (the complete overhaul of its most im-         in financial liabilities and not in equity. As regards
portant blast furnace), the Group’s individual          the Group’s operating performance, the increase
earnings categories all experienced significant         in working capital compared with the March 31,
declines in the first half of the current business      2019, reporting date adversely affected the debt
year on account of the challenging market envi-         ratio even though it was more or less stable year
ronment. All four divisions were affected by this       over year. Given these developments, net finan-
development, albeit to different degrees. The           cial debt rose from EUR 3,599.0 million as of
Metal Engineering Division posted the smallest          September 30, 2018 (or EUR 3,125.4 million as
earnings decline, because its relatively stable         of the March 31, 2019, reporting date) to EUR
Railway Systems business segment accounts for           4,503.1 million as of September 30, 2019. During

6
the same period and due to the redemption of                      In turn, this caused the gearing ratio to climb
                               the hybrid bond, equity fell from EUR 6,550.9                     from 54.9% as of September 30, 2018 (and 46.6%
                               million as of September 30, 2018 (or EUR 6,709.8                  as of the March 31, 2019, reporting date) to
                               million as of the March 31, 2019, reporting date)                 75.1% as of September 30, 2019.
                               to EUR 5,994.7 million as of September 30, 2019.

COMPARISON OF THE QUARTERLY AND SIX-MONTH FIGURES OF THE voestalpine GROUP
In millions of euros                             Q1                                       Q2                      H1
                                           2018/19  2019/20                         2018/19  2019/20        2018/19  2019/20             Change
                                               04/01–           04/01–              07/01–        07/01–       04/01–       04/01–         in %
                                           06/30/2018       06/30/2019          09/30/2018    09/30/2019   09/30/2018   09/30/2019

Revenue                                      3,469.0           3,336.1              3,205.0    3,205.5       6,674.0      6,541.6           –2.0
EBITDA                                         513.0             370.9                347.1      294.6         860.1        665.5          –22.6
EBITDA margin                                 14.8%             11.1%                10.8%       9.2%         12.9%        10.2%
EBIT                                           323.8             156.7                155.7       72.9         479.5        229.6          –52.1
EBIT margin                                    9.3%              4.7%                 4.9%       2.3%          7.2%         3.5%
Profit before tax                              294.3             124.4                127.2       38.1         421.5        162.5          –61.4
Profit after tax1                              226.3              90.4                 93.6       24.8         319.9        115.2          –64.0
Employees
(full-time equivalent)                        51,827           51,670                51,931     51,275       51,931       51,275            –1.3
1
    Before deduction of non-controlling interests and interest on hybrid capital.

Net financial debt can be broken down as follows:

NET FINANCIAL DEBT
In millions of euros                                                                                              09/30/2018         09/30/2019

Financial liabilities, non-current                                                                                      2,376.3         3,584.6
Financial liabilities, current                                                                                          1,756.7         1,689.1
Cash and cash equivalents                                                                                                –264.0          –312.5
Other financial assets                                                                                                   –256.0          –442.5
Loans and other receivables from financing                                                                                –14.0           –15.6
Net financial debt                                                                                                      3,599.0         4,503.1

REPORT FOR THE FIRST HALF OF 2019/20                                                                                                              7
STEEL DIVISION

QUARTERLY DEVELOPMENT OF THE STEEL DIVISION
In millions of euros          Q1                        Q2                      H1
                        2018/19 2019/20           2018/19 2019/20         2018/19 2019/20          Change
                            04/01–     04/01–         07/01–     07/01–       04/01–     04/01–      in %
                        06/30/2018 06/30/2019     09/30/2018 09/30/2019   09/30/2018 09/30/2019

Revenue                   1,276.4     1,182.1      1,139.2     1,139.0     2,415.6     2,321.1        –3.9
EBITDA                      223.9       150.6        118.5       109.9       342.4       260.5       –23.9
EBITDA margin              17.5%       12.7%        10.4%        9.6%       14.2%       11.2%
EBIT                        145.0        60.8         36.7        20.2       181.7        81.0       –55.4
EBIT margin                11.4%        5.1%         3.2%        1.8%        7.5%        3.5%
Employees (full-
time equivalent)          11,111      10,730        10,972     10,682       10,972      10,682         –2.6

MARKET ENVIRONMENT                                      caused order levels to decline because the in­
AND BUSINESS DEVELOPMENT                                dustry’s production levels dropped to an extent
Following two years of good developments in the         even greater than that revealed by the sales
European steel industry, demand has gradually           figures. Yet the export-oriented mechanical en-
dampened in the course of the calendar year             gineering industry also had to contend with de-
2019 to date. Exorbitant increases in premateri-        clining momentum, as did the white goods and
als prices in tandem with decreases in steel p­ rices   consumer goods industry. Solely the construction
have aggravated the tensions in steelmakers’            industry remained robust during the first half of
environment. Add to that continued high imports         the business year 2019/20.
of steel into the EU’s Single Market. In July 2019,     The energy sector, which is the most important
iron ore prices climbed to a level not seen since       customer segment of the Heavy Plate business
2013 owing to both temporary production shut-           segment, experienced overall declines. Project
downs and unexpectedly strong demand for raw            activities in this sector, especially in the demand-
materials from China. The “Safeguard Measures”          ing deep sea pipeline segment, were as restrained
initiated by the European Union were unable by          as before. Only the niche segment of high-­quality
and large to contain the pressure generated by          clad plates for the downstream activities of the
flat steel imports. In turn, this lowered European      oil and natural gas sector exceeded expectations.
steelmakers’ production of crude steel by about         There were no major shutdowns at the direct re-
3% in the first eight months of 2019 compared           duction plant in Corpus Christi, Texas, USA, during
with the same period of the previous year.              the business year to date, and production pro-
The Steel Division, too, was exposed to these           ceeded as planned. Nonetheless, both the rise in
conditions in the first half of the business year       iron ore prices and the decline in scrap prices over
2019/20. Thanks to long-standing customer re-           the summer had adverse effects on the facility’s
lationships, however, it succeeded nonetheless          performance.
in delinking itself to some extent from price de-
velopments in spot markets. But the increases in        FINANCIAL KEY PERFORMANCE INDICATORS
the price of iron ore had substantially negative        Year over year, the Steel Division’s revenue fell by
effects on costs. The great importance of the           3.9%, from EUR 2,415.6 million in the first half
German automotive industry to the Steel Division        of 2018/19 to EUR 2,321.1 million in the first half

8
of the reporting period due to slightly weaker           The quarter-on-quarter (QoQ) comparison of the
              deliveries and somewhat lower prices. Although           first and second quarters of the 2019/20 business
              the previous year’s comparative figure for de­           year shows the fallout from the increasingly diffi-
              liveries was about 10% lower than that for the           cult economic environment in addition to cus-
              first half of the business year 2017/18 owing to         tomary seasonal shortfalls. Against this backdrop,
              the general overhaul of Blast Furnace A, sales for       revenue fell by 3.6%, from EUR 1,182.1 million in
              the first six months of the current business year        the first quarter of the business year 2019/20 to
              declined a little bit yet again due to macroeco-         EUR 1,139.0 million in the second quarter. While
              nomic factors. Prices fell, particularly in the short-   the percentage decline in volumes corresponds
              term contract business, but remained largely             to the generally expected shortfall in the summer
              stable for the time being in connection with an-         quarter, the increases in the cost of iron ore did
              nual contracts. The dampened economic sentiment          not lead to higher steel prices as it did in the past;
              that has gripped the European steel industry             on the contrary, they triggered further price de-
              is reflected chiefly on the earnings side. Given         clines in the short-term contract business. As a
              the continual increase in raw materials prices           result, the quarter-on-quarter decline in earnings
              that stem from sharp increases in iron ore prices,       exceeded the fall in revenue many times over due
              lower prices have had an additional negative             to the price/cost pressures. Consequently, EBITDA
              effect on earnings growth. Accordingly, in the           dropped by 27.0%, from EUR 150.6 million in the
              first half of the business year 2019/20 EBITDA           first quarter of the business year 2019/20 to EUR
              dropped year over year by 23.9%, from EUR                109.9 million in the second quarter; the EBITDA
              342.4 million (margin of 14.2%) to EUR 260.5             margin fell accordingly from 12.7% to 9.6%.
              million (margin of 11.2%).

REPORT FOR THE FIRST HALF OF 2019/20                                                                                       9
HIGH PERFORMANCE METALS DIVISION

QUARTERLY DEVELOPMENT OF THE HIGH PERFORMANCE METALS DIVISION
In millions of euros         Q1                       Q2                       H1
                       2018/19 2019/20          2018/19 2019/20          2018/19 2019/20          Change
                           04/01–     04/01–        07/01–     07/01–       04/01–     04/01–       in %
                       06/30/2018 06/30/2019    09/30/2018 09/30/2019   09/30/2018 09/30/2019

Revenue                    780.3      777.6        765.6      723.3       1,545.9     1,500.9         –2.9
EBITDA                     129.2       99.2        100.6       78.2         229.8       177.4        –22.8
EBITDA margin             16.6%      12.8%        13.1%      10.8%         14.9%       11.8%
EBIT                        91.9       57.1         63.8       35.3         155.7        92.4        –40.7
EBIT margin               11.8%       7.3%         8.3%       4.9%         10.1%        6.2%
Employees (full-
time equivalent)         14,344      14,302       14,528     13,837        14,528      13,837          –4.8

MARKET ENVIRONMENT                                    a weakening of automotive demand, which had
AND BUSINESS DEVELOPMENT                              corresponding adverse effects on both tool steel
The ongoing global decline in demand for tool         and high-speed steel for cutting tools. By contrast,
steel defined the first half of the business year     the aerospace segment delivered further growth
2019/20 for the High Performance Metals Division.     while the oil and natural gas segment remained
Worldwide, the weakness of the automotive in-         largely stable. The Section 232 protectionist tariffs
dustry lowered the number of both vehicles pro-       of 25% on all steel products that the United States
duced and new models brought to market. De-           imposed continue to generate strong uncertain-
mand for tool steel suffered commensurately. But      ty in the market, simultaneously intensifying com-
the consumer goods industry also weakened             petitive pressures.
worldwide and thus was unable to offset devel-        In South America, the situation improved but
opments in this product segment.                      marginally during the first half of the business year
The special materials segment presented a much        2019/20.
better picture during the reporting period. For       The market environment in Asia was shaped by
example, activities related to the oil and natural    the trade war with the United States, especially in
gas industry were generally stable, albeit at a       China. Here, too, the dramatic downturn in auto-
slightly weaker level. Despite softening global       motive production after years of stable growth
markets, the division succeeded not only in suc-      as well as restrained demand from the consumer
cessfully leveraging investments to expand its        goods industry were the main factors driving the
product portfolio but also in substantially enhanc-   market decline.
ing its competitiveness.                              Capacity utilization at those of the division’s plants
It even posted considerable growth in the aero-       that are chiefly focused on tool steel was substan-
space segment during the business year to date.       tially lower due to the significant declines in de-
Thanks to its investment in a new fast forge press,   mand than that at plants mainly geared to special
the High Performance Metals Division now is the       materials. Consequently, efficiency-boosting
only European manufacturer of demanding               measures aimed at stabilizing earnings and gen-
pre-materials for aircraft engine discs.              erating cash flow were introduced at all produc-
Its performance in Europe and North America           tion facilities.
largely paralleled this scenario. The market saw

10
Steps to lower costs were also taken in the global     the first half of the business year 2019/20. For
              Value Added Services business segment. In par-         example, deliveries fell by 12% year over year.
              ticular, this concerns human resources, investments,   The significant increase in the cost of the division’s
              and inventory management. But it does not affect       most important alloy material (nickel) caused the
              the consistent alignment of Value Added Services       prices for tool steel and special materials to rise
              with the Group’s aim to differentiate itself from      across the board. Against this backdrop, the 2.9%
              the competition. In addition to offering expand-       decline in revenue, from EUR 1,545.9 million in
              ed services, increasingly this approach also in-       the previous year to EUR 1,500.9 million in the
              cludes achieving efficiency gains for customers’       current year, is relatively moderate. The decline
              benefit.                                               in EBITDA is due chiefly to lower capacity utiliza-
              By now, the High Performance Metals Division           tion at the division’s production facilities and
              manufactures components and parts using ad-            declining sales. On the whole, the operating result
              ditive manufacturing processes (3D printing) at        dropped by 22.8 year over year, from EUR 229.8
              seven sites worldwide. The division’s proprietary      million to EUR 177.4 million, causing the EBITDA
              development of powder alloys is a unique selling       margin to shrink from 14.9% to 11.8%.
              proposition (USP) in this market and underscores       The quarter-on-quarter (QoQ) comparison of the
              its position as a premium supplier. Additive pro-      first and second quarters of the 2019/20 business
              cesses enable completely new ways of designing         year also shows declining KPIs, most of which stem
              components and parts, boosting not only the            from seasonal effects. As a result, revenue fell by
              range of technical applications but also their         7.0% quarter on quarter, from EUR 777.6 million
              operational cost-effectiveness. Transcending its       to EUR 723.3 million. Given unchanged pricing,
              role as a component supplier, the division provides    this is due to weaker volume trends. Moreover, the
              specialist expertise to its customers regarding        summer quarter (i.e. a period of slightly declining
              additive manufacturing processes already in the        demand for seasonal reasons) is generally used
              design phase.                                          to carry out more extensive maintenance work,
                                                                     with the commensurate effect on costs. These two
              FINANCIAL KEY PERFORMANCE INDICATORS                   factors lowered the division’s EBITDA between the
              The increasingly difficult economic environment        first and the second quarter of the business year
              is reflected in the key performance indicators         2019/20 by 21.2%, from EUR 99.2 million (margin
              (KPIs) of the High Performance Metals Division for     of 12.8%) to EUR 78.2 million (margin of 10.8%).

REPORT FOR THE FIRST HALF OF 2019/20                                                                                    11
METAL ENGINEERING DIVISION

QUARTERLY DEVELOPMENT OF THE METAL ENGINEERING DIVISION
In millions of euros         Q1                       Q2                      H1
                       2018/19 2019/20          2018/19 2019/20         2018/19 2019/20         Change
                           04/01–     04/01–        07/01–     07/01–       04/01–     04/01–     in %
                       06/30/2018 06/30/2019    09/30/2018 09/30/2019   09/30/2018 09/30/2019

Revenue                    799.8      778.8        747.6      758.7      1,547.4     1,537.5        –0.6
EBITDA                      98.5       90.0         85.3       82.3        183.8       172.3        –6.3
EBITDA margin             12.3%      11.6%        11.4%      10.8%        11.9%       11.2%
EBIT                        56.3       44.9         44.4       31.4        100.7        76.3       –24.2
EBIT margin                7.0%       5.8%         5.9%       4.1%         6.5%        5.0%
Employees (full-
time equivalent)         13,577      13,371       13,512     13,369       13,512     13,369         –1.1

MARKET ENVIRONMENT                                    However, pricing adjustments were unable to
AND BUSINESS DEVELOPMENT                              fully offset the massive increases in the cost of
The first half of the business year 2019/20 has       raw materials.
delivered a mixed bag for the Metal Engineering       The globally positioned welding consumables
Division. While the Railway Systems and welding       segment delivered solid growth across all key
consumables segments developed along a very           markets despite the worldwide cooling of the
solid trajectory, the wire technology and tubulars    economy during the reporting period. Besides
(seamless tubes used in oil and natural gas ex-       positive effects from internal restructurings in
ploration) segments, which are part of the Indus-     recent years, expansions of the product portfolio
trial Solutions segment, were confronted with a       as well as this segment’s ongoing development
difficult market environment.                         into a one-stop system provider of welding equip-
The turnout systems segment met with good de-         ment and consumables have contributed to this
mand in almost all of its key markets worldwide.      positive development.
In China, state-sponsored stimulus programs           The wire technology segment, which manufactures
have boosted the rail technology business, among      wire and steel bars chiefly for the automotive
others, whereas in Europe demand is being ­driven     industry, has faced declining demand as well as
by the investment backlog that had built up in        rising competitive pressures since the start of the
recent years. In North America, by contrast, a        current business year. This led to the elimination
period of very solid development in the railway       of one shift at the Donawitz, Austria, facility back
sector gave way to first signs of a weakening to-     in April 2019; the plant has been operating triple-­
ward the end of the business year’s first half,       shift operations since then.
which was triggered by the general d   ­ ownturn in   On top of the impact of the U.S.’s protectionist
the goods manufacturing industry.                     Section 232 tariffs, in the first six months of the
Thanks to its strong focus on the European mar-       business year 2019/20 the tubulars segment
ket, the premium rail technology segment bene-        (seamless tubes for oil and natural gas explora­
fited from largely satisfactory demand in the         tion) was also confronted with the gradual dete-
first two quarters of the business year 2019/20.      rioration of its North American market. These

12
developments also led to the reduction of oper-           succeeded in substantially expanding its business
              ations at the Donawitz facility in April 2019 from        activities, was key to the generally good perfor-
              four shifts to three.                                     mance of the Railway Systems segment. Against
              Due to the softening economy and the ensuing              this backdrop, at EUR 1,537.5 million the division’s
              cuts in the number of shifts in individual rolling        revenue in the first half of the business year
              facilities of processing operations, modes of pro-        2019/20 closely tracked that achieved in the
              duction at the LD steelmaking plant in Donawitz           same period of the previous year (EUR 1,547.4
              were adjusted accordingly and the use of the              million). The good earnings performance of
              burden (mix of raw materials) was optimized. In           Railway Systems was pivotal to the relatively
              the first two quarters of the current business year,      moderate decline in EBITDA by 6.3%, from EUR
              developments in the cost of raw materials, par-           183.8 million (margin of 11.9%) in the first half of
              ticularly that of iron ore, were driven by high volati­   the business year 2018/19 to EUR 172.3 million
              lity and generally rising prices. This put a d­ amper     (margin of 11.2%) in the reporting period. By
              on the division’s earnings, because the increase          contrast, the Indus­trial Systems segment’s perfor-
              in raw materials prices could be passed on to             mance was uneven. While the welding consumables
              customers only in part.                                   segment posted stable earnings, the EBITDA of
              Steps to lower costs and boost efficiency are             the wire technology and tubulars segments fell
              being implemented in all of the division’s entities.      dramatically.
              In addition, we continue to pursue our strategy of        The outcome of the quarter-on-quarter compar-
              continually refining all products and expanding           ison is similar, in that it pinpoints the effects of
              the product portfolio in the direction of an ex-          declining industrial activity in Europe on the In-
              tended value chain, not least in order to circum-         dustrial Systems segment. In terms of both revenue
              vent the growing pressure on commodity products.          and earnings, the performance during the business
                                                                        year to date of segments that are exposed to
              FINANCIAL KEY PERFORMANCE INDICATORS                      general economic developments continued to
              Year over year, the Metal Engineering Division            deteriorate. This was intensified by seasonally
              posted stable revenue in the first half of the busi-      lower demand in the summer quarter. Both the
              ness year 2019/20. Declines in the Industrial Sys-        revenue and earnings of the Railway Systems
              tems segment were offset through increases in             segment rose slightly from the first to the second
              the Railway Systems segment. Sales of wire and            quarter of the business year 2019/20. The division
              seamless tube products were substantially lower           on the whole posted rev­enue of EUR 758.7 million
              due to the intensifying downturn in both the auto­        for the second ­quar­ter of the current business
              motive and the energy industry. As regards rail           year, down 2.6% from the previous year’s level of
              technology, deliveries of tracks increased by about       EUR 778.8 million. At 8.6%, the decline in EBITDA
              5% in the reporting period. Prices also rose be-          from EUR 90.0 million (margin of 11.6%) to EUR
              cause higher raw material costs were passed on            82.3 million (margin of 10.8%) was a bit more
              to customers. The turnout systems segment, which          pronounced.

REPORT FOR THE FIRST HALF OF 2019/20                                                                                     13
METAL FORMING DIVISION

QUARTERLY DEVELOPMENT OF THE METAL FORMING DIVISION
In millions of euros           Q1                        Q2                        H1
                         2018/19 2019/20           2018/19 2019/20           2018/19 2019/20           Change
                            04/01–     04/01–          07/01–     07/01–         04/01–     04/01–       in %
                        06/30/2018 06/30/2019      09/30/2018 09/30/2019     09/30/2018 09/30/2019

Revenue                     748.0        737.6           697.1     715.7       1,445.1     1,453.3         0.6
EBITDA                       84.4         58.4            68.2      48.7         152.6       107.1       –29.8
EBITDA margin              11.3%         7.9%            9.8%      6.8%         10.6%        7.4%
EBIT                         55.7         24.3            38.7      13.8          94.4        38.1       –59.6
EBIT margin                 7.5%         3.3%            5.6%      1.9%          6.5%        2.6%
Employees (full-
time equivalent)           11,938      12,374        12,052       12,486       12,052      12,486           3.6

MARKET ENVIRONMENT                                         productivity has risen. But numerous other opti-
AND BUSINESS DEVELOPMENT                                   mization measures will be necessary to meet the
The performance of the Metal Forming Division              originally planned targets. In China, the growth
in the first half of the business year 2019/20             rates of the German premium auto brands have
was weaker overall. Aside from the declining eco-          fallen a bit in a sharply shrinking automotive
nomic momentum in major customer segments                  market overall, but the local branches of Auto-
and regions, the division was also confronted              motive Components succeeded nonetheless in
with a massive increase in the start-up costs of a         benefiting from the solid demand.
component plant for the automotive industry in             Declining automotive sales worldwide also had
the United States.                                         a negative impact on the Tubes & Sections busi-
To date, the business climate in the Automotive            ness segment in the first half of the business year
Components business segment has clouded over               2019/20. The Rotec Group, which specializes in
during the current business year. The decline of           safety components for the automotive industry
about 2% in the sales of Europe’s renowned auto­           and is a link in the global supplier industry, was
makers triggered a slightly greater decline in             faced with lower sales as well as shrinking supply
production. In North America, demand for the               chain inventories. Regionally, orders from the
locally manufactured products of the Automotive            commercial and construction machinery industry
Components segment was altogether satisfac­tory            in Europe have declined. But the traditionally
in an otherwise stagnating market. While the               late-cycle construction industry is still delivering
number of new light vehicle registrations has              largely stable performance in the European S  ­ ingle
fallen, the strong trend toward sport utility vehicles     Market. The Tubes & Sections business segment
(SUVs) remains unbroken. Our plant in Cartersville,        benefited from much better demand in the U   ­ nited
Georgia, USA, which is in its start-up phase, had          States, relatively speaking. Both storage tech­
to contend with substantially higher start-up costs        nology and the aerospace industry are the bed-
in the first half of the current business year. This       rock of the solid order volume in this region. So
had a correspondingly negative impact on the               far, Brazil’s trends toward a recovery have been
business segment’s earnings. Some of the steps             weaker than expected.
that have been taken to ameliorate the situation           Although the momentum in its market has been
have already been successfully implemented, and            steadily declining in the most recent quarters, the

14
Precision Strip business segment delivered a ­largely    Automotive Components as well as Warehouse
              satisfactory performance in the first half of the        & Rack Solutions business segments. While the
              business year 2019/20 thanks to its good market          start-up of the Cartersville plant had a positive
              position. While orders on hand recently stabilized       effect on revenue in Automotive Components,
              at a lower level in China, the segment’s environ-        the positive performance of Warehouse & Rack
              ment in the U.S. has become less favorable. The          Solutions was largely driven by the completion of
              European market for the products of the Precision        numerous projects. Earnings, however, present
              Strip business segment is shrinking, too, but cus-       a completely different picture. The decline in
              tomers’ order levels still remain relatively solid.      this key performance indicator stems to a large
              The Warehouse & Rack Solutions business segment,         degree from the start-up difficulties at the Carters­
              which specializes in manufacturing and installing        ville plant. Owing to the gradual dampening of
              high-bay warehouses and system racks, has been           economic sentiment, all business segments of
              profiting for years from the excellent e-commerce        the Metal Forming Division other than Warehouse
              business climate. Hence the scope of this segment’s      & Rack Solutions recorded declining profits. On
              projects in the first two quarters of the current        the whole, EBITDA fell year over year by 29.8%,
              business year was highly satisfactory. In contrast       from EUR 152.6 million (margin of 10.6%) in the
              to the U.S. market, which continues to prosper in        first half of the business year 2018/19 to EUR
              this respect, the project pipeline in Europe has         107.1 million (margin of 7.4%) in the reporting
              recently been buffeted by declining market dy-           period.
              namics.                                                  Quarter to quarter, the division’s key financial
                                                                       indicators point to declines that stem from both
              FINANCIAL KEY PERFORMANCE INDICATORS                     economic and seasonal effects. Revenue fell by
              The Metal Forming Division had to contend with           3.0%, from EUR 737.6 million in the first quarter
              significant year-over-year declines in earnings in       of the business year 2019/20 to EUR 715.7 million
              the first half of the business year 2019/20 despite      in the second quarter. Solely the Automotive Com-
              stable revenue growth. This downturn is due only         ponents business segment managed to offset
              in part to the general downward trend; it stems          shrinking delivery volumes at other sites thanks
              for the most part from the sharply higher start-up       to the steep ramp-up curve at the Cartersville
              costs at the Automotive Components plant in              plant that continued unabated. In terms of earn-
              Cartersville, Georgia, USA. As a result, the segment’s   ings, the weakening trend affected especially the
              revenue of EUR 1,453.3 million is practically the        two larger business segments (Tubes & Sections
              same as in the same period of the previous year          and Automotive Components). As a result, EBITDA
              (EUR 1,445.1 million). The revenue of both Tubes         dropped by 16.6%, from EUR 58.4 million (margin
              & Sections and Precision Strip was down slightly         of 7.9%) in the first quarter of the business year
              on account of the prevailing business climate, yet       2019/20 to EUR 48.7 million (margin of 6.8%) in
              these declines were offset by increases in the           the second quarter.

REPORT FOR THE FIRST HALF OF 2019/20                                                                                     15
INVESTMENTS                                            a highly advanced stage. The forging facility will
                                                       be up and running in the next few months. The
Following a steady stream of investments in recent     High Performance Metals Division already invest-
years, some of which substantially exceeded de-        ed in a high-tech fast forge press for highly stress
preciation, the voestalpine Group made fewer           resistant, rotating aircraft turbine components a
investments in the business year 2019/20 to date.      year earlier.
As a result, this key performance indicator will be
more or less equivalent to depreciation in the         The investment volume of the Metal Engineering
current business year. This must be considered         Division in the first half of the business year 2019/20
against the backdrop of both the weakening             (EUR 61.3 million) was slightly less than in the first
economy and the optimization of processes in           half of the business year 2018/19 (EUR 65.4 mil-
previously implemented projects. Overall, the          lion). Currently, this division’s most important pro­
investments of the voestalpine Group fell by           ject involves the construction of a new continuous
28.9%, from EUR 474.6 million in same period           casting facility (“CC4”). This cutting-edge facility
the previous year to EUR 337.5 million in the first    will replace the existent one (“CC2”) and create
half of the business year 2019/20.                     the conditions for even greater improvements in
                                                       the product quality of the pre-materials used in
The investments of the Steel Division dropped          processing operations. It is slated to be commis-
by almost two thirds, from EUR 206.8 million in        sioned at the end of the current business year.
the previous year to EUR 72.2 million in the re-
porting period. The comprehensive overhaul of          The investment expenditure of the Metal Forming
Blast Furnace A at the Group’s facility in Linz,       Division in the first half of the business year 2019/20
Austria, from June 2018 through the end of Sep-        (EUR 81.0 million) was 14.8% less than that in the
tember 2018 was the last of its major projects to      first half of the business year 2018/19 (EUR 95.1
be implemented. Presently, the Steel Division is       million). In recent years, this division had focused
focused on optimizing existent facilities as well      on the international rollout of its product innova-
as on select replacement and maintenance in-           tions in automotive components (among others
vestments. Among other things, the project to          in China, the United States, and Mexico). This year,
replace the crane track girders in the steelworks      it is focused on optimizing processes at individu-
is now entering the second phase. And a testing        al facilities. The Tubes & Sections business segment
center is being established for the strip steel seg-   is currently pushing investments in new process
ment to determine the mechanical properties of         technologies. For example, it invested in a power­
cold-rolled steel strip.                               ful processing center in Shelbyville, Kentucky, USA,
                                                       specifically for the aerospace industry. The French
At EUR 114.3 million, the investments of the High      entity, Profilafroid, also focused on issues of pro-
Performance Metals Division in the first half of       duction technology in the first half of the business
the business year 2019/20 were 12.1% higher            year 2019/20 by installing a customized section-
than the investments of EUR 102.0 million in the       ing line.
first half of the business year 2018/19. Currently,
this division’s most important project concerns
the construction of the new special steel plant in     BUSINESS TRANSACTIONS
Kapfenberg, Austria. Specialized companies             WITH ­ASSOCIATED COMPANIES
are building the steel factory floor, the energy       OR PARTIES
delivery system as well as the piping systems, thus
ensuring that the construction work remains on         Information regarding business transactions with
schedule. The factory floor will be completed by       associated companies and parties is available in
the end of February 2020. The second half of the       the Notes.
calendar year 2021 should see the completion
of the project on the whole as well as the onset
of the start-up phase. Work on another key pro­        RISK MANAGEMENT
ject at the Kapfenberg site—a next-generation
production facility for the construction of struc-     Proactive risk management, as it has been under­
tural aircraft components—has already reached          stood by and practiced in the voestalpine Group

16
for many years, serves both to ensure the existence      retroactively claim the energy tax rebate for pe-
              of the Group as a going concern in the long term         riods after February 1, 2011. In its subsequent
              and to boost its value and thus is key to the success    ruling, the Austrian Federal Finance Court declared
              of the Group overall. As part of the systematic risk     that the restriction to manufacturing companies
              management process (which is undertaken Group-           did not take effect. The Tax Office appealed this
              wide several times a year in uniform fashion) and        decision to the Higher Administrative Court, which
              as part of internal control systems (ICS, which are      in September 2017 (decision dated 9/14/2017,
              also integral elements of the Group’s structural         EU 2017/0005 and 0006-1) again sought recourse
              and workflow organization) material risks are            with the ECJ. The final applications of the advocate
              systematically recorded, analyzed, assessed, and         general were filed on February 14, 2019. To date,
              subjected to permanent monitoring early on;              it is not known when the decision on the matter
              appropriate measures to minimize risks are taken         pending before the ECJ (C-585/17) will be hand-
              as necessary.                                            ed down. No adverse impact is anticipated for
                                                                       the voestalpine Group.
              The risk environment of the voestalpine Group in
              the first six months of the current business year as     Based on the insights gained as a result of past
              well as compared with the prior years has remained       economic and financial crises and their effects
              largely unchanged. Material fields of risk—such          on the voestalpine Group, additional steps—pri-
              as the availability of raw materials and energy          marily of a corporate nature—were taken in recent
              supplies, the loss of critical production facilities,    years to minimize the Group’s risk exposure, which
              the loss of critical IT systems, the CO2 issue, knowl-   are also described in detail in the Annual Report
              edge management, or financial risks—and the              2018/19, and these measures have been and
              respective precautionary measures thus have              are being consistently implemented in the current
              remained largely the same. The material fields of        business year. Given the ongoing difficulties in
              risk and the respective measures to minimize risk,       the economic environment, as before a working
              which were presented and described in detail in          group is tasked with monitoring any fallout from
              the Annual Report 2018/19 of the voestalpine             the Brexit decision. Consequences arising from
              Group (Annual Report 2018/19, “Report on the             (punitive) tariffs and global trade disputes are
              Company’s Risk Exposure”), thus remain valid for         subject to continuous monitoring as well.
              this interim management report.
                                                                       The measures that have been put in place to avert
              There were no changes with respect to the disclo-        or prevent identified risks aim to reduce potential
              sures in the Management Report for the business          losses and/or minimize the likelihood of losses
              year 2018/19 regarding the Austrian energy tax           occurring.
              rebate. Note that the Austrian Federal Finance
              Court (Bundesfinanzgericht) has directed a request       It must be stated that, as of the date of this in­
              for a preliminary ruling to the European Court of        terim management report, the risk exposure of
              Justice (ECJ) (BFG 10/31/2014, RE/5100001/2014).         and resulting uncertainties in the voestalpine
              The amendment of the Austrian Energy Tax Rebate          Group are limited and manageable, and do not
              Act (Energieabgabenvergütungsgesetz) by means            ­threaten the continuation of the Group as a going
              of the 2011 Austrian Budget Accompanying Act              concern. There are no threats to the company as
              (Budgetbegleitgesetz – BBG 2011), which applies           a going concern in the future, nor are any such
              to periods after December 31, 2010, limited the           risks discernible as of the semi-annual reporting
              energy tax rebate to manufacturing companies.             date.
              Subsequently, the question of whether this restric-
              tion, which may be deemed state aid, violated
              EU law was submitted to the ECJ for a preliminary        OUTLOOK
              ruling; this has actually been affirmed by the court
              (ECJ 7/21/2016, docket no. C-493/14, Dilly’s             The Management Board’s assessment at the
              Wellnesshotel GmbH). As a result, the restrictions       start of the business year 2019/20—specifically,
              pursued by the Budget Accompanying Act 2011              that the previous year’s performance based on
              did not enter into force with legal effect and,          EBITDA would probably be achievable again in
              therefore, service providers, in particular, can         the current business year—was premised on a

REPORT FOR THE FIRST HALF OF 2019/20                                                                                    17
number of factors. At the time, the key influencing      toward the end of the current business year’s first
variables in market and cost terms on which this         half, to significant demand declines in many mar-
assumption was based were as follows:                    kets that are key to the voestalpine Group.
»»A cooling of the economy in the markets that           Although iron ore prices did ease over the summer,
  are key to voestalpine, but no recessionary or         the expected margin growth did not materialize.
  crises scenarios;                                      Record imports into the European Union combined
»»A cooling of the momentum in the automotive            with weak intra-European demand continued to
  industry, but no new dramatic distortions in the       depress steel prices at the end of this reporting
  automotive market on account of the new emis-          period.
  sions test to be introduced in Europe in Septem-       Given these negative macroeconomic develop-
  ber 2019;                                              ments, the scenario posited at the start of the
»»No negative effects from the global trade wars         current business year no longer applies. From
  and/or the Brexit above and beyond the anti-           today’s vantage point, it is to be expected that
  cipated cooling of the economy;                        the third business quarter is likely to be as difficult
»»A normalizing of iron ore prices over the course       as the second quarter of the business year 2019/20.
  of the business year; and                              Positive effects from both seasonal influences
»»Positive dispositions of challenges internal to        and the resolution of intracorporate issues as well
  the company.                                           as earnings contributions from the steps taken to
                                                         lower costs and boost efficiency should take effect
Key assumptions largely did not come to pass             in the business year’s last quarter.
over the course of the first six months of the current   In this difficult environment, the Management
business year.                                           Board’s focus is on measures designed to stabilize
While the intracorporate challenges are being            earnings and generate free cash flow. Aside from
dealt with and certain improvements are still            short-term actions, over the next few months this
expected to be realized, the slowdown in the             will also entail examining the ramifications of the
momentum of the automotive industry has been             changed global economic framework for the
both more intense and widespread than ­originally        long-term positioning of all of the Group’s mate-
expected, even though the new emissions test             rial business segments.
that was introduced in September of this year did        At this point in time, the Management Board of
not trigger the distortions seen a year ago.             voestalpine AG thus expects EBITDA of about
The global trade war along with protectionist            EUR 1.3 billion for the business year 2019/20—
policies have clearly crimped investments in many        an assessment that is largely in line with market
parts of the world and thus have led, particularly       expectations.

18
INVESTOR
              RELATIONS

              voestalpine AG VS. THE ATX AND INTERNATIONAL INDICES
              Changes compared to March 31, 2019, in %

                voestalpine         ATX (Austria)   STOXX Index (Europe)   DJ Industrial Index (USA)

              110

              105

              100

               95

               90

               85

               80

               75

               70

               65

                    April 1, 2019                                                                               September 30, 2019

              DEVELOPMENT OF THE                                              economic indicators, such as the Ifo Business
              voestalpine SHARE                                               Climate Index or the Purchasing Managers’ Indi-
                                                                              ces (PMI) for the processing industries in Europe,
              At the start of the 2018 calendar year—i.e. right               have declined yet further due to the resulting
              at the time at which the U.S. launched its trade                uncertainties, especially in export-driven econo-
              wars against the rest of the world—the precursor                mies. The initial impact of these developments on
              indicators in Europe began to weaken, putting                   the global economy already made themselves
              increasing pressure on the shares of companies                  felt during the second half of the 2018 calendar
              sensitive to macroeconomic developments. The                    year, first in China and then in Europe as well.
              trade war between the United States and China                   While China counteracted the decline in both
              has escalated in the 2019 calendar year. Leading                consumer and export-driven segments through

REPORT FOR THE FIRST HALF OF 2019/20                                                                                           19
economic growth measures in the construction                            ing in minor negative territory of −2% at the end
and infrastructure industry, the economic head-                         of September 2019, the price of voestalpine’s
winds in Europe have intensified substantially in                       stock was highly volatile during the entire period.
the course of the 2019 calendar year. The eco-                          Regularly recurring, geopolitical uncertainties—
nomic downturn has had its greatest impact in                           such as the growth of Italy’s sovereign debt, the
the European steel sector. In this industry, the                        uncertain resolution of the Brexit, the U.S.’s conflict
decline in demand has intensified what were al-                         with Iran, the attacks on the oil industry in the
ready challenging structural conditions, for ex-                        Middle East, etc.—that pushed fears of a recession
ample, the rising cost of CO2 allowances as well                        into the forefront of investors’ minds further ag-
as ineffective steps to limit surging steel imports.                    gravated the large fluctuations. Against this
To make matters worse, the economic environment                         backdrop, the voestalpine share had to contend
in downstream processing has become increas-                            with a loss of just under 25% in the first half of
ingly difficult too.                                                    the business year 2019/20. While its price at the
                                                                        start of the business year still was EUR 28.04, its
Capital market players responded by issuing                             closing price as of the end of September 2019
lower earnings forecasts which, in turn, intensified                    was EUR 21.08. In contrast to the ATX, the Dow
the downward spiral of voestalpine’s share price                        Jones Industrial and the STOXX Index Europe even
in the first six months of the business year 2019/20,                   followed a slightly positive trend in the same
thus prolonging the previous year’s trend. While                        period.
the ATX trended laterally during this period, end-

BONDS

                                                                                                         Interest   Share price
Type of bond                                             ISIN number           Issuing volume                rate (09/30/2019)

Hybrid bond 2013                                    AT0000A0ZHF1              EUR 500 million          7.125%1                     100.39
Corporate bond 2014–2021                            AT0000A19S18              EUR 400 million            2.25%                     103.45
Corporate bond 2017–2024                            AT0000A1Y3P7              EUR 500 million           1.375%                     102.88
Corporate bond 2019–2026                            AT0000A27LQ1              EUR 500 million          +1.750%                     103.13
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    Interest rates: 7.125% p.a. from issue date to October 31, 2014 (excl.); 6% p.a. from October 31, 2014, to October 31, 2019;
    five-year swap rate (from October 29, 2019) +4.93% p.a. from October 31, 2019, to October 31, 2024;
    thereafter three-month EURIBOR +4.93% p.a. + step-up of 1% p.a. from October 31, 2024.

REDEMPTION OF THE 2013 HYBRID BOND                                      500 million in full pursuant to the Bond Conditions
On September 9, 2019, the Management Board                              effective as of the bond’s first possible call date,
of voestalpine AG resolved to redeem the 2013                           namely, October 31, 2019 (redemption date).
hybrid bond that had an issuing volume of EUR

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