For already the fifth time in succession the voestalpine Group has presented an improved half-year result. With a noticeable increase in revenue and all relevant financial key figures as compared to the previous year, the first six months of the financial year 2006/07 were the most successful ones so far in the history of the Group.
The most relevant figures developed as follows (as compared to the 1st six months of the financial year 2005/06):
The approximately 8% increase in sales to over EUR 3.5 billion is mainly due to organic growth in the Steel (+8.9%) and Railway Systems (+8.1%) divisions as well as an increase in sales in the Profilform Division (+6.9%), mainly due to acquisitions, while the Automotive Division recorded a slight decline in sales of 2.3%, which is attributable to a streamlining of the portfolio.
The significant improvement in EBITDA and EBIT is due, on the one hand, to the continued positive development in the Steel Division and, on the other, to above-average increases in some of the Processing Divisions, with the Profilform and Railway Systems Divisions, which both achieved their best half-year results to date, standing out in particular.
The Profilform Division increased EBITDA by 38.4% and EBIT by as much as 56.2%. The development in the Railway Systems division was similarly pleasing, with EBITDA up 33.0% and EBIT up 45.3% on the first half of the previous year. The Automotive division also increased its operating result by just under 6%, while EBITDA rose only marginally. Despite the already high level in the previous year, the Steel division also further increased both EBITDA (+4.4%) and EBIT (+8%).
The EBIT margins, which improved in all four divisions, were consistently close to the Group average of 13.0% in the Railway Systems (15.0%), Profilform (14.1%) and Steel (13.3%) divisions. At 4.4%, the Automotive division achieved its best EBIT margin in the first half of a financial year to date, slightly exceeding the previous year's figure (4.1%).
The pleasing development of the voestalpine Group's revenue and earnings in the first half of 2006/07 is the result of a generally stable or even increasing demand in Europe from all major customer industries (automotive and commercial vehicle industry, construction, household appliances, railroad infrastructure and energy) and thus increased delivery volumes as well as a higher revenue level compared to the previous year.
Three strategically important acquisitions were made in the first half of 2006/07, namely the two French profile manufacturers Profil à froid (Profilafroid) and Société Automatique de Profilage (SAP) as well as the Russian company ZAO ARKADA Profil (both in the Profilform Division) and Drahtwerk und Stahlhandel Finsterwalde GmbH, Germany (Railway Systems Division).
The voestalpine Group is also about to finalize another acquisition, which will take place in November 2006: The Railway Systems Division is planning - subject to antitrust approval - to acquire a majority stake in Stahlberg Roensch Duisburg GmbH. The services offered by this company include the storage of ultra-long rails, the preparation and assembly of long rail strips for construction sites and the reconditioning of used rails. The company generates annual sales of around EUR 6 million and employs 65 people.
The company's capacities for storing ultra-long high-performance rails and parts of its range of services have already been used to a considerable extent by the rail production company TSTG Schienen Technik GmbH &Co KG in Duisburg, which also belongs to the voestalpine Group. This acquisition will enable TSTG Schienen Technik, which focuses on supplying a large number of track construction sites according to the "just-in-time" principle, to further optimize its delivery flexibility and range of services for its main customer Deutsche Bahn AG.
Investments of the voestalpine Group amounted to EUR 258.0 million in the 1st half of 2006/07. Compared to the already high level of the previous year (EUR 254.0 million), this represents a further, albeit slight, increase (1.6%). The focus of investment activity was on major projects in the Steel and Railway Systems divisions.
In the first half of the 2006/07 business year, the share was able to continue its upward trend that has been ongoing since autumn 2004 - the beginning of the full privatization of voestalpine AG. In the first half of the year, the share price rose from EUR 28.87 to EUR 32.57, representing an increase in value of 29%. This trend also continued in the 3rd quarter of 2006/07, with the voestalpine share reaching a new high of EUR 38.00 on October 27, 2006.
The macroeconomic expectations in our August 2006 report on the first quarter of the 2006/07 financial year, namely a positive economic trend in Europe that is well secured until the end of the 2006 calendar year, have been fully confirmed. From today's perspective - especially against the background of continuing strong demand from all important customer sectors - this should not change significantly in the coming months, i.e. until summer 2007. Apart from a possible flattening of the economy in individual market segments characterized by overheating tendencies, the positive economic environment in Europe will therefore be maintained for the remainder of the 2006/07 financial year.
Against this backdrop, all four divisions of the voestalpine Group are expected to continue their stable development. Specifically, the revenue level achieved in the first half of the year should continue in the second half of the business year, although it should be noted that the winter half-year is always somewhat weaker in terms of earnings than the first six months due to seasonal factors. In addition, the earnings trend in the Steel Division in this period will be burdened by extraordinary costs of around EUR 40 million from the ramp-up of new large-scale plants ("Linz 2010" project).
With regard to the current development of prices on the European steel market, it should be noted that increased imports of commodities on the spot market have created a certain amount of price pressure in individual regions. This will not have any significant consequences for the Steel Division in the short term, as it is active in the high-quality segment and therefore not on the spot market. For the last quarter of the financial year (1st calendar quarter of 2007), the voestalpine Group's Steel Division is therefore expected to maintain its current revenue level.
As all three processing divisions (Railway Systems, Automotive, Profilform) as well as the Steel Division - despite the aforementioned restrictions - are expected to achieve a further improvement in results compared to the previous year, the voestalpine Group's operating result for the 2006/07 business year is expected to exceed EUR 800 million, thus setting a new record profit.