voestalpine increases earnings in the second quarter of the business year – year-to-year comparison of first six months impacted by non-recurring effects in the previous year

• Marked upward trend in earnings from first to second quarter 2016/17
• Revenue declines by 4.9% from EUR 2.8 to EUR 2.6 billion in a comparison of the first and second quarters 2016/17
• Operating result (EBITDA) rises by 11.1% to EUR 371 million; EBITDA margin up from 12% to 14.1%
• EBIT (profit from operations) improves by 20.1% to EUR 201 million; EBIT margin up from 6.0% to 7.6%
• Comparison of earnings in first half of 2015/16 to first half of 2016/17 of limited informative value due to significant positive non-recurring effects in the previous year
• Revenue declines by 6.5% from EUR 5.8 billion to EUR 5.4 billion in a year-to-year comparison of first six months
• EBITDA falls by 21% from EUR 892 million to EUR 705 million (adjusted EBITDA declines by 6.6% from EUR 755 million to EUR 705 million; adjusted EBITDA margin remains constant at 13%
• EBIT drops by 35.9% from EUR 575 million to EUR 369 million (adjusted EBIT goes down by 16.3% from EUR 450 million to EUR 376 million); adjusted EBIT margin declines slightly from 7.8% to 7.0%
• Direct reduction plant in Texas opens after construction period of two and a half years

“While the oil and natural gas sectors continue to be extremely challenging, the steel sector profited in the most recent quarter from the positive effects of higher prices that had been signalized in the previous quarter. Furthermore, important customer segments remained constant at a high level, in particular the automotive industry and the aerospace sector, but the consumer goods industry as well.”

Dominated primarily by significant positive non-recurring effects in the same period of the previous year on one hand and on the other, impacted by the current still difficult economic conditions, a year-to-year comparison of the first six months (H1 2015/16 to H1 2016/17) shows a downward trend of the key economic indicators. A weaker price environment—due not least to lower pre-material costs—and continuing challenging conditions in the oil and natural gas sectors—were mainly responsible for the decline in revenue by 6.5% from EUR 5.8 billion to EUR 5.4 billion in the first half of 2016/17.

In a comparison of the results of the first six months with those of the previous year, EBITDA declined by 21% from EUR 892 million to EUR 705 million, while EBIT fell by 35.9% from EUR 575 million to EUR 369 million. However, because the previously mentioned positive non-recurring effects were due to consolidation changes in the Metal Engineering Division in the same period of the previous year, the comparison has limited informative value as far as operational figures are concerned. Taking these non-recurring effects (not related to operations) into consideration, consolidated EBITDA in the first half of 2016/17 is EUR 705 million, just 6.6% behind last year’s figure of EUR 755 million. The adjusted EBITDA margin remained constant at 13%. The decline of EBIT, adjusted for non-recurring effects, was 16.3%, going from EUR 450 million (margin: 7.8%) to EUR 376 million (margin: 7.0%).

In part as a consequence of a level of investment that was considerably reduced in comparison to the previous year—albeit still above the level of depreciation—and the payment of dividends in the second quarter, the gearing ratio (net financial debt in percent of equity) increased both in a year-over-year comparison and in a comparison with the reporting date of the business year 2015/16. While it was 57% as of the reporting date of September 30, 2015 and 55% as of March 31, 2016, as of September 30, 2016, it was at 60%. Investment expenditure declined compared to the first half of 2015/16 by 27.3% from EUR 647 million to EUR 471 million.

As of September 30, 2016, the voestalpine Group had 48,786 employees (FTE). In a year-to-year comparison, this is an increase of 0.1 %.

On October 26, 2016, the direct reduction plant in Corpus Christi, Texas, was officially opened after a construction period of just over two and a half years. The new plant has its own deep-sea port and is considered to be the largest and most modern facility of its kind in the world. After its successful commissioning, it is expected to reach full operating performance in the third quarter of 2016/17 with ongoing delivery to customers. The plant is slated to produce two million tons of high quality HBI (hot briquetted iron or sponge iron) annually, a sophisticated pre-material for steel production. 800,000 tons will be used in voestalpine’s own plants in Linz and Donawitz. The first shipload will leave the port of Corpus Christi for Europe before the end of the calendar year. The new plant opens up new potential for the future not just with regard to cost and technology; the utilization of HBI, which is manufactured using gas instead of coal, will enable a reduction of CO2 emissions by around 5% across the voestalpine Group.

While in the business year 2015/16, a very strong first half of the year was contrasted with a substantially weaker second half—both adjusted for non-recurring effects—it currently appears that in 2016/17, the second half of the year will see an improvement of EBITDA and EBIT compared to the first six months of the year. This expectation is confirmed by the movement from the first to the second quarter that saw prices recover considerably in the Steel Division’s contract business, resulting in a strong improvement in the division’s and therefore also the Group’s earnings.