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  • voestalpine AG

    www.voestalpine.com

    voestalpine AG

    Farnborough International Airshow

    Capital Markets Day 2016

  • voestalpine AG

    Part I

    Aviation 2016

    Aircraft Raw Material Demand

    Global Supply Chain

    Aviation Industry China

    Part II

    voestalpine: A member of the club

    Special Steel Division

    Metal Forming Division

    Conclusion

    07/12/2016 CMD2016 Farnborough International Airshow 2

    Agenda

  • voestalpine AG

    www.voestalpine.com

    Highlights and Insights

    Aviation 2016

  • voestalpine AG

    The global aerospace market offers a steady growth

    within the next years.

    The global Aerospace market outlookBoeing current market outlook -

    Fleet in service evolution 2014-2034:

    Boeing and Airbus comprise two-thirds of

    materials consumed for aerospace globally

    This duopoly strongly influences behavior of

    entire aerospace supply chain.

    Boeing 36%

    Airbus 30%

    GE 5%

    CFM Intl 4%

    CFM 3%

    Rolls-Royce 3%

    Embraer; 2%

    Pratt & Whitney 2%

    other; 15%

    2015 Aircraft material demand by OEM707kt per year

    21.600

    43.560

    1.420

    38.050

    -17.510

    0

    5.000

    10.000

    15.000

    20.000

    25.000

    30.000

    35.000

    40.000

    45.000

    50.000E

    nd o

    f ye

    ar

    201

    4

    Rem

    ove

    dfr

    om

    serv

    ice

    Con

    vert

    ed to

    freig

    hte

    r

    New

    deliv

    erie

    s201

    5 to 2

    03

    4

    End o

    f ye

    ar

    203

    4

    Nu

    mb

    er

    of

    Air

    cra

    fts

    removed build Total fleet

    Source: Boeing Current Market Outlook 2015Source: ICF Analysis

    07/12/2016 CMD2016 Farnborough International Airshow 4

  • voestalpine AG

    Aircraft Market Outlook 2034

    asks for 38.050 new aircrafts

    7%

    70%

    13%

    9%

    1%

    Delivery units

    Large wide-body

    Medium wide-body

    Small wide-body

    Single aisle

    Regional Jet

    Source: Boeing Current Market Outlook 2015

    World Market Value: 5.570 $b

    New deliveries: 38.050 Airplanes

    Average airplane value: 150 ($M)

    Asia38%

    Europe19%

    North America

    21%

    Latin America

    8%

    Middle East8%

    C.I.S.3%

    Africa3%

    60% of new aircrafts go

    into emerging markets.

    07/12/2016 CMD2016 Farnborough International Airshow 5

  • voestalpine AG

    Main Drivers of the Aviation Industry

    07/12/2016 CMD2016 Farnborough International Airshow 6

    New Aircraft Delivery Demand

    Air travel demandAirlines ability to acquire

    new aircraft

    Economic

    Growth

    Oil Price vs.

    Air Fare

    Aircraft

    Retirements

    Availability of

    aircraft financing

    Sources

    Airlines

    Finance

  • voestalpine AG

    Different forecasts, different approach

    Airline Monitor

    Top down approach from global

    passenger growth rate to world fleet.

    demand oriented 5.1% RPM1

    Average build rate in 2035 is 2,500 AC

    Major OEMs (Boeing and Airbus)

    Bottom up approach from backlog and

    projected orders to build rate.

    Supply oriented Airbus 4.6% RPM1

    Boeing 4.9% RPM1

    Average build rate in 2035 is 2,450 AC

    07/12/20167

    1 Revenue Passenger Miles

    Source: Airline Monitor 02/2016, Boeing Current Market Outlook 2015, Airbus

    Global Market Forecast 2015

    CMD2016 Farnborough International Airshow

    1.300

    1.800

    2.300

    2.800

    2014 2019 2024 2029 2034

    Airline Monitor

    Boeing CMO

  • voestalpine AG

    0

    500

    1.000

    1.500

    2.000

    2.500

    3.000

    3.500

    4.000

    Nu

    mb

    er

    of

    Air

    cra

    fts

    Retired, scrapped, others

    Increase in fleet

    The average growth rate was increased

    to ~3.7% per year until 2035

    Retired small regional jets will be replaced by larger single-aisle aircrafts

    Retirement age increases to 27-30 years

    Source: Airline Monitor 06/2016

    Average Growth rate 2016-2035:

    ~ 3.7% per year

    07/12/20168 CMD2016 Farnborough International Airshow

  • voestalpine AG

    Aerospace a cyclical business with downturn

    approximately every 8-10 years

    0

    200

    400

    600

    800

    1.000

    1.200

    1.400

    1.600

    Year 1970 1975 1980 1985 1990 1995 2000 2005 2010

    To

    tal

    delivere

    d a

    ircra

    fts total delivered aircrafts

    The 70s

    recessionEnergy price

    recession

    Gulf war

    Tech bubble

    and 9/11

    -74%-42%

    -50% -35%

    Financial

    market

    meltdown

    Source: Airline Monitor, Aircraft History, 02/2016, GE Aviation marketing analysis, Ascend

    07/12/20169 CMD2016 Farnborough International Airshow

  • voestalpine AG

    Market Trends

    Low oil price supports airline profitability

    A change in aftermarket due to a slight overshoot in aircrafts

    China economy development

    The need for a MoM Middle of the Market Aircraft is heavily discussed

    Some sign that a slow down maybe underway but no evidence so far

    07/12/2016 CMD2016 Farnborough International Airshow 10

    Airbus and Boeing stay with their aggressive production plans

  • voestalpine AG

    Aerospace: Further a growth market!

    Airline Monitor and major OEM forecast an

    average growth of ~3.7% per year from

    2016-2035.

    Airbus and Boeing have a

    backlog of >12,000 aircrafts

    representing 8-10 years of steady

    production.

    Highest load factor of aircrafts ~80%

    and parked fleets are 10-15 years low.

    Source: Airbus, Boeing, Ascend, BCC analysis

    Homato

    07/12/2016 CMD2016 Farnborough International Airshow 11

  • voestalpine AG

    www.voestalpine.com

    voestalpine AG

    Outlook 2020

    Aircraft Raw Material Demand

  • voestalpine AG

    Aluminum

    Steel

    Superalloys

    Titanium

    other

    composites

    ~707 ktons

    2015 Aircraft Raw Material Demand

    07/12/2016 CMD2016 Farnborough International Airshow 13

    Aluminum

    Steel

    Superalloys

    Titanium

    Other

    composites

    ~12bUSD

    The aggregated fly to buy ratio is ~ 6

    Source: ICF International

  • voestalpine AG

    Aluminum

    Steel

    Superalloys

    Titanium

    other

    composites

    ~740 ktons

    2020 Aircraft Raw Material Demand

    07/12/201614

    Aluminum

    Steel

    Superalloys

    Titanium

    Other

    composites

    ~12,5bUSD

    The aggregated fly to buy ratio is ~ 6

    Source: ICF International; calculation with same commodity prices

    CMD2016 Farnborough International Airshow

    +0.7%

    +1.9%

    +4%

    +5.8%

    -0.7% (CAGR p. year)

  • voestalpine AG

    Majority of the aerospace material demand for

    value added is US based, followed by Europe

    07/12/2016 CMD2016 Farnborough International Airshow 15

    Aerospace raw material demand ~707ktons

    North America

    Europe

    Asia

    other

    by Region*

    Air Transport

    BGA**

    Heli

    Military

    by Market

    *) Region where most value-added work is performed

    **) Business and General Aviation

    Source: Aerolytics, 12/2015 Sheet and Plate Study

  • voestalpine AG

    www.voestalpine.com

    voestalpine AG

    Aviation Industry

    Global Supply chain

  • voestalpine AG

    Business Characteristics Aircraft

    Limited players

    Zero defect approach

    Trust (track record, safety), relationship and market power are key

    decision criteria

    Highly conservative business behavior

    (to become member of the club)

    Price pressure

    Serial business (small scale)

    Defined products through very tight specifications

    Frozen technologies

    Strict management of failures

    Low level of differentiation through the product/service portfolio

    Product characteristics typical for Operational Excellence

    The business

    with the highest

    entry barrier for

    mission critical

    parts/materials

    07/12/2016 CMD2016 Farnborough International Airshow 17

  • voestalpine AG

    A challenge to the supply chain!

    OEMs monitor their supply chain with frequent

    capacity audits and ramp-up control

    The supply chain is ready for the next growth

    peak, OEM requested supplier to make

    investment

    Possible over-capacity will have to be managed

    solely by supplier

    Suppliers constantly high performance over the

    next 3-4 years will guarantee them pole position

    in the following multi-year-bids

    Homato

    07/12/2016 CMD2016 Farnborough International Airshow 18

  • voestalpine AG

    The global Aerospace Value chain is worth ~600bUSD

    and employs more than 2.3 Million people*)

    07/12/2016 CMD2016 Farnborough International Airshow 19

    North America

    ~1,100,000 people

    ~310bUSD

    Europe:

    ~600.000 people

    ~175bUSDAsia*)

    ~600,000 people

    ~ 88bUSD

    France 8%

    200,000

    Germany 4%

    110,000

    UK 4.5%

    120.000

    Source: TKA 2014, BPac, Market reports Mexico, Morocco, Brazil

    *) w