EANS-News

voestalpine AG / Difficult environment has adverse impact on voestalpine?s results for the first half of the business year 2019/20 - Seite 2

Financial Reporting Standards (IFRS)-specifically, the recognition of leases
pursuant to IFRS 16-relative to the March 31, 2019, reporting date. For another,
the EUR 500 million hybrid bond issued in 2013 was called as of October 31,
2019, with the result that, as of September 30, 2019, it is recognized in
financial liabilities instead of in equity. Given these developments, the
Group's net financial debt climbed from EUR 3.6 billion as of September 30,
2018, to EUR 4.5 billion as of September 30, 2019. Equity declined from EUR 6.6
billion to EUR 6 billion in the same period due to the dividend payment and the
redemption of the hybrid bond. In turn, this caused the gearing ratio to rise
year over year from 55% to 75%.

Outlook

The Management Board's assessment at the start of the business year 2019/20-
specifically, that the previous year's performance based on EBITDA would
probably be achievable again in the current business year-was premised on a
number of factors. The key market and cost variables underlying the assessment
at the time were as follows: a cooling of the economy in markets that are
material to voestalpine, but no recessionary or crises scenarios; a cooling of
momentum in the automotive industry, but no new dramatic distortions in the
automotive market on account of the new emissions test to be introduced in
Europe in September 2019; no negative effects from the global trade conflicts or
the Brexit above and beyond the anticipated cooling of the economy; a
normalizing of iron ore prices over the course of the business year as well as
positive dispositions of challenges internal to the company.

Key assumptions largely did not come to pass over the first six months of the
current business year. While the intracorporate challenges are being dealt with
and certain improvements are still expected to be realized, the slowdown in the
momentum of the automotive industry has been both more intense and widespread
than originally expected, even though the new emissions test that was introduced
in September of this year did not trigger the distortions seen a year ago. The
global trade war along with protectionist policies have clearly crimped
investments in many parts of the world and thus have led, particularly toward
the end of the first half of the business year 2019/20, to significant demand
declines in many markets that are key to the voestalpine Group. Although iron
ore prices did ease over the summer, the expected margin growth did not
materialize. Record imports into the European Union combined with weak intra-
European demand continued to depress steel prices at the end of the current
reporting period.

Given these negative macroeconomic developments, the scenario posited at the