voestalpine reports further recovery in key business segments during Q3 2020/2021
February 15, 2021
Austria’s voestalpine Group has reported further recovery in key business segments during the third quarter of the business year 2020/21. The group’s revenue as of Q3 2020/21 fell by 16.8% year over year, from €9.6 billion to €8 billion. At €683 million, EBITDA for the first three quarters of the business year 2020/21 is 18.4% less than the EBITDA of €837 million for the first three quarters of the business year 2019/20.
In the first nine months of the business year 2020/21, the performance of the group was said to be strongly shaped by the coronavirus (COVID-19) pandemic. While the business year’s first quarter was characterised by a fall in demand in almost all customer segments and regions, the second quarter saw a considerable rebound in major sectors.
Similarly to revenue, EBITDA also improved continually during the reporting period. EBIT dropped from -€82 million to -€34 million; the numbers for both the previous year and the reporting period contain significant non-recurring effects. These non-recurring effects in the amount of about €200 million adversely affected EBIT for the current business year’s first three quarters (Q1–Q3 2019/20: €345 million). At -€159 million, the profit after tax was also affected by impairment losses but remains largely stable year over year (Q1–Q3 2019/20: -€160 million).
The gearing ratio (net financial debt as a percentage of equity) improved substantially: from 80% as of December 31, 2019, to 58.4% as of December 31, 2020. While equity fell by 5% to €5.4 billion as of December 31, 2020 (down from €5.7 billion year over year), net financial debt dropped by 30.7%, from €4.6 billion in the previous year to €3.2 billion in the reporting period due to cuts in investment costs and reductions in working capital.
Upward trends in key business segments continued in the third business quarter despite renewed lockdowns. The automotive industry, in particular, gradually recovered following the production shutdowns during the Northern spring, once again returning to order levels during the Northern fall that equated roughly to those prior to the outbreak of the COVID-19 pandemic.
The construction, consumer goods, and white goods industries also managed to rapidly return to pre-COVID-19 order levels (the last two reportedly did well during the difficult first business quarter). However, conditions in the aerospace industry as well as in the oil and natural gas sector remained difficult.
The railway infrastructure technology segment developed along a stable, positive trajectory during the entire reporting period. The high-bay warehouses’ customer segment also posted highly satisfactory performance. Thanks to the growth in online commerce, this unit posted record order levels in Europe and North America during the Northern fall.
Year over year, the number of employees (FTE) in the group fell by 3.9% to 47,871. As of December 31, 2020, about 1,100 employees in Austria were still registered for short time work—down from 10,300 at the beginning of the COVID-19 crisis. Approximately 700 employees in Germany and an additional 470 internationally (especially in South Africa, France, and Great Britain) were still registered for short time work or similar programmes at the end of 2020.
“Our current performance in key customer segments has boosted our outlook,” stated Herbert Eibensteiner, chairman of the management board of voestalpine AG. “Our efforts with respect to cost savings and efficiency gains are having an effect. We are well-positioned and even succeeded in stabilising yet further in this difficult environment, substantially increasing the free cash flow, and decreasing our debt by one third.”
He added, “At the same time, we invested €450 million in our future. Positive market signals notwithstanding, it remains to be seen how the future course of the COVID-19 pandemic will affect the global economy.”
Going forward, voestalpine explains that the uncertainties surrounding economic developments have risen sharply due to the impact of the ongoing COVID-19 pandemic. It is completely unclear to date how the expansion of limitations on commerce will affect the consumption of European products. The risk of downtimes in production or of interruptions in essential supply chains owing to the pandemic also cannot be predicted at this time.
In no small part, this is why voestalpine’s management continues to focus on cost management and earnings stabilisation. Its efforts with respect to working capital management and curtailment of investments in order to support both cash flow and the group’s asset and capital structure will continue as well.
According to voestalpine, with the exception of the oil and natural gas sector as well as the aerospace industry, it believes that the economic rebound of the group’s main markets is more probable than not. Assuming that there will be no new major restrictions on economic activity and/or state-ordered measures owing to the COVID-19 pandemic, the management board currently forecasts EBITDA of about €1 billion for the entire business year 2020/21 and thus an amount at the upper end of the previously communicated range.