voestalpine — operating result 2006/07 for the first time over EUR 1 billion, dividend nearly doubled

• For the first time, the Group achieves a revenue of more than EUR 7 billion and an operating result of over EUR 1 billion. 
• The EBITDA and EBIT margins as well as the ROCE reach new record levels. 
• New highs also in revenues, results and margins of all four divisions. 
• Investments, research expenditures and current environmental expenses also reach new record values. 
• Price of voestalpine share gained 86%. 
• Recommended dividend of EUR 1.45 per share (previous year: EUR 0.78). 
• Positive outlook also for current business year 2007/08.
  
  
  

The 2006/07 business year was by far the most successful for the voestalpine Group in its history until now. In addition to a renewed increase in revenue and in all other key figures, the operating result could be significantly improved for the fifth year in a row—thus achieving a new record result for the third consecutive time. Moreover, all four divisions reported new historic highs in revenues, operating result and margins.

• Revenue increased by 13.1%, from EUR 6,230.6 million to EUR 7,049.8 million, thus passing the EUR 7 billion mark for the first time.
• EBITDA (profit from operations before depreciaton) improved by 26.5% from EUR 1,079.0 million to EUR 1,365.0 million. In the 2006/07 business year, the EBITDA margin increased from 17.3% to 19.4%. 
• With EUR 1,012.7 million, the EBIT (profit from operations) exceeded the previous year`s figure (EUR 724.1 million) by 39.9%. Thus, the EBIT not only passed the EUR 1 billion mark for the first time in the Group’s history, but also almost doubled within the last two business years. This results in a significant increase of the EBIT margin for 2006/07 from 11.6% to 14.4%. 
• Due to the significantly improved operating result, both profit before tax with an increase by 44.9% from EUR 674.3 million to EUR 977.2 million and the profit for the period (result after taxes), which increased by 45.4% from EUR 525.9 million to EUR 764.9 million as compared to the previous year, were significantly higher than last year. 
• Due to the brisk acquisition activities and the share repurchase program started in October 2006, the net financial debt increased by 39.6%, from EUR 376.9 million to EUR 526.2 million during the 2006/07 business year. At the same time, equity rose by 14.9% from EUR 2,547.3 million to EUR 2,926.3 million. This results in an increase of the gearing ratio (net financial debt as a percentage of equity) from 14.8% to 18%. The higher gearing is, however, solely due to the accelerated repurchase of own shares and the convertible bond respectively. 
• The earnings per share for the 2006/07 business year amount to EUR 4.77. Compared to last year’s figure of EUR 3.25, this corresponds to an increase by 46.8%. 
• Subject to approval by the Annual General Shareholders’ Meeting of voestalpine AG which will take place on July 4, 2007, a dividend of EUR 1.45 per share will be distributed to the shareholders for the 2006/07 business year. This corresponds to a dividend yield of 4.1%. The recommended dividend thus significantly exceeds the dividend of the previous business year, which—considering the share split having taken effect—amounted to EUR 0.78 per share. 
• As of March 31, 2007, the voestalpine Group had 25,326 employees worldwide (excluding apprentices), 42% of which working outside Austria. As compared to the previous year (22,918 employees), this corresponds to an increase of 2,408 employees or 10.5%, which is mainly due to acquisitions.
  

Only a quarter of the rise in revenue is due to acquisitions

In the 2006/07 business year, the revenue not only increased on the Group level, but in all of the four divisions as well. The most noticeable rise was reported by the Profilform Division (+23.2%), a significant increase was also achieved in the Railway Systems (+13.1%) and the Steel divisions (+11%). The growth in revenue of the Automotive Division came to 4%.

Compared to the previous year, the Group’s revenue increased by EUR 819 million; only a quarter of this growth in revenue (EUR 200 million) results from the first-time consolidation of acquired companies in the processing divisions Railway Systems, Profilform, and Automotive.

The increase in the Group’s revenue was therefore mainly attributable to the generally excellent business development in the Steel, Railway Systems and Profilform divisions. Particularly noteworthy in this regard are the business areas flat steel and heavy plate (Steel Division), rails and turnout technology, quality wire and seamless tubes (Railway Systems Division), special sections and storage technology (Profilform Division) as well as laser-welded blanks and precision parts (Automotive Division). In these segments, above-average increases in sales revenue could be achieved as compared to the previous business year.

Export quota increased to 84 %

As already in the previous business years, the proportion between steel and processing activities was more or less balanced with 49:51 also in 2006/07.
In the past business year, the export quota of the Group further increased from 82% to 84%.

Excellent result development for the Group as well as on the divisional level

The rise in the EBITDA by 26.5 % resulted from above-average improvements in the Profilform (+46.5%) and Railway Systems divisions (+46.5%) as well as a significant increase in the Steel Division (+22.7%). With a 7.9% increase, the Automotive Division also reported a clear improvement as compared to the previous year.

Operating result increased by almost 40% to more than EUR 1 billion

The extraordinary development of the Group’s EBIT (by almost 40% to more than EUR 1 billion for the first time) is also reflected in the impressive increases to new record results reported by each division. In addition to the continued increase in the Steel Division, the positive developments of the processing divisions Railway Systems and Profilform, which were again above average, should be pointed out. With a further increase in its EBIT, the Automotive Division is also on the right track.

In line with the trend reported for the revenue and the EBITDA, the most significant EBIT increase was achieved in the Profilform Division, which increased its operating result by 64.9%, while the improvements in the Railway Systems Division (36.1%) and the Steel Division (34.8%) more or less corresponded to the Group average. The performance in the Automotive Division was also very positive, with the EBIT rising by 10.1%, from EUR 38.6 million to EUR 42.5 million and thus reaching its highest level since the division was established in 2001.
With 5.2%, its EBIT margin (as compared to 4.9% in the preceding year) exceeded the 5% mark for the first time, which puts it in the very top level, in terms of the operating result, compared to other companies in the automotive supplier industry. The Railway Systems Division—which is now the most profitable division of the voestalpine Group—improved its EBIT margin from 13.6% to 16.4% and thus exceeded the Group’s average of 14.4%—as did the Profilform Division with an increase from 11.2% to 15.0% and the Steel Division with an increase from 12.2% to 14.8%.

Further improvement in the operating result of the voestalpine Group resulted from the overall increase in sales volumes in the major sectors, a higher price level as compared to the previous business year and the measures taken to further increase cost-effectiveness and to optimize the product mix. In the processing divisions Railway Systems, Profilform and Automotive, the newly acquired companies also contributed positive operating results and thus played a decisive role in increasing the EBIT as compared to the previous business year.

First-time consolidation of newly acquired companies

In the 2006/07 business year, the revenue, the operating results and the employees of the following acquired companies were fully consolidated for the first time: voestalpine Draht Finsterwalde GmbH, Rail Center Duisburg GmbH, TENS Spolka z.o.o. and Açotrilho (Railway Systems Division), Société Profilafroid, Société Automatique de Profilage (SAP) and ZAO voestalpine Arkada Profil (Profilform Division) as well as Gutbrod Stanz- und Umformtechnik GmbH, Hügel GmbH & Co. KG and Amstutz Levin & Cie (Automotive Division).
The following companies were fully consolidated for the last time: voestalpine Stahlhandel GmbH, Koellensperger Stahlhandel GmbH & Co KG, Neptun Stahlhandel GmbH, Veting voestalpine d.o.o., voestalpine Stahlhandel spol.s.r.o. as well as Rohstoffhandel GmbH, Schrott-Waltner GmbH and Eisenhandel Gebeshuber GmbH (all Steel Division).

Extensive acquisition activities

In the 2006/07 business year, the voestalpine Group continued its strategy of increasing value through growth-oriented acquisitions, while at the same time intensifying its focus on core-business related areas. In addition to substantial acquisitions in the processing divisions Railway systems, Profilform and Automotive aimed at further expanding the Group’s market position in specialized and technology-intensive product segments, the Group has promoted and basically completed the concentration on core business areas.

Surge in investments

The investments of the voestalpine Group continued to increase significantly also in the 2006/07 business year, as well. With EUR 906.1 million, they exceeded the investments of the previous business year (EUR 566.3 million) by 60%. Of the total investments, EUR 748.6 million were attributable to tangible fixed assets, EUR 139.5 million to intangible assets and EUR 18.0 million to equity holdings.

It should be pointed out that all four divisions have reported considerably stronger investment activities than in the previous business year. In all divisions, investments in tangible fixed assets once more focused on the expansion of production capacities for technologically and procedurally advanced specialty products, at the same time taking into account a further improvement of environmental sustainability, energy efficiency and the respective site infrastructure.

Current environmental expenditures reach new record high

The expenditures of the voestalpine Group on environmental measures remained on a high level during the 2006/07 business year. With EUR 47 million , they were just below the all-time high of the past year (EUR 50 million), while the current expenses for the operation and maintenance of existing environmental systems increased by almost 12% from EUR 169 million to EUR 189 million. In the 2006/07 business year, the focus of environmental activities was on the Steel Division and the Railway Systems Division, the two largest sites of the Group.

In the 2006/07 business year, the research and development expenses of the voestalpine Group increased, too. They amounted to EUR 66 million, representing an increase of 7.3% as compared to the previous year (EUR 61.5 million) and corresponding to a research rate (relative to Group revenue) of almost 1%. As measured by the value added, R&D expenses currently amount to 2.18%.

The upwards trend of the voestalpine share price which had started with the final decision to privatize in September 2003 continued without interruption during the 2006/07 business year. On March 30, 2007, the voestalpine share closed at a new high of EUR 54.30 corresponding to an increase of 85.8% compared to the beginning of the business year (EUR 29.23). It was thus not only able to significantly outperform Austria’s leading share index ATX as well as the international benchmark indices Stoxx (Europe) and Dow Jones Industrial (USA), but also achieved an increase in value of nearly 90% for the second business year in a row (2005/06: 88.4%).

On March 30, 2007, one day after the announcement of the public tender offer for BÖHLER-UDDEHOLM AG, the voestalpine share reached its all-time high to date; following a phase of stable development around the EUR 50 mark at the beginning of the 2007/08 business year, the share price increased sharply again at the end of May 2007. On June 4, 2007, the share reached a new provisional high at EUR 56.34.

The first quarter of the 2007/08 business year of the voestalpine Group is marked by consistently high demand. Whereas in the past two years, growth in Europe was fuelled by the continuous rise in exports, more recently, this favorable trend is increasingly supported by dynamic domestic demand. With the exception of the slightly less favorable economic situation in North America, the business climate in the other major economic regions of the world appears to remain stable at a high level, making a negative trend reversal throughout the further course of 2007 unlikely.

In this economic setting, the attractive market environment of the past few months, enjoyed by the Steel Division, seems to be protected, at least until the fall of 2007. For the most part, price increases for raw materials witnessed at the beginning of the year could be largely absorbed by corresponding price adjustments for finished products. With demand from all significant customer sectors being consistently strong and neither the inventory situation nor import developments signaling any critical tendencies, the Steel Division anticipates to repeat the positive performance of the past business year in the 2007/08 business year.

At the beginning of the 2007/08 business year, the Railway Systems Division started out in much the same way as it had in the previous year. Its core business, rails/turnout systems, is supported by a consistently positive business climate in Europe and a consistently high demand in the overseas markets. Since it began focusing on the most qualitatively demanding market segments, the niche sector of wires has been achieving stable high margins, which are likely to remain constant due to the sustained demand from all over Europe. The development for the next twelve months in the second niche sector, the seamless tubes segment, is the most difficult to forecast. Following a more than three-year rise in the market, the demand for oil-field tubes in specific regions appears to be constant; however, the recently added capacities are having a price-dampening effect. Among other things, on the basis of this information, we are consistently trying to secure attractive margins for the long term in this sector by adding new customer segments for seamless tubes (e.g., in the automotive industry). Overall, it appears that the Railway Systems Division will be able to obtain the same results in 2007/08 as in the previous year.

As far as the primary markets of the Profilform Division are concerned, the generally positive economic climate in the European Union and in Eastern Europe is expected to remain unchanged and the slightly weakened, but mainly stable business situation in the US is likely to continue. Sector-wise, the dynamics in the Russian construction industry will remain unchanged, and Western Europe, including Great Britain, is expected to continue on its path of positive growth. An equally stable situation is found in the transportation and storage sector, and even in the automotive industry (especially for commercial vehicle and bus construction) strong demand is likely to continue. In this stable environment, changes to the positive market situation in the tailored sections segment (custom roll forming) appear unlikely. The operating result of the Profilform Division should once again reach the previous year’s level, unless the business environment significantly deteriorates in the course of the current business year.

In the Automotive Division, the upwards trend witnessed in the past years will continue unabated in the 2007/08 business year. The positive effects of the restructuring and portfolio adjustment measures of the past were already clearly visible in 2006/07. In conjunction with additional market environment improvements, primarily in Europe, and with the above-average operating results contributed by the recently acquired division companies, results for 2007/08 will be higher once again. This continuous upwards trend is supported by a solid development in the laser-welded blanks and structural parts and components segments, the targeted use of additional market potentials for precision and safety parts, and an intended reduction of volatility for large pressed parts. After the Automotive Division grew by thirty percent through acquisitions in the past six months alone, the 2007/08 business year will be mainly characterized by integration measures.

From the current perspective and against the background of consistently positive developments in all four divisions of voestalpine AG – excluding acquisitions – it appears likely that the 2007/08 business year will once again yield an operating result approximating EUR 1 billion.