Salzgitter announces report for the first nine months of 2013
The Salzgitter Group comes through the economic trough in the third quarter rigorous implementation of the "Salzgitter AG 2015" project
In the first nine months of 2013 the business activities of the Salzgitter Group were burdened by the structural crisis in the European steel industry, reflected by persistently fierce price led competition. The resulting unsatisfactory performance of the Steel Division was also determined by impairment and an unexpectedly high outlay for repair work on a blast furnace. At the same time, the large-diameter pipes business continued to suffer from a severe order shortfall. The prevailing unfavorable general conditions underscore the necessity of the extensive "Salzgitter AG 2015" restructuring program with a profit potential totaling more than € 200 million p.a. The program is being vigorously implemented on the basis of the prerequisites that were set in place at group level during the third quarter.
The Salzgitter Group's external sales declined by 10 % to EUR 7,246.7 million (first nine months of 2012: EUR 8,015.1 million) mainly due to lower rolled steel selling prices. Earnings before taxes stood at EUR –363.0 million (first nine months of 2012: EUR –42.6 million). This figure includes EUR 185.0 million in impairment in the sections product segment, as well as EUR 45.9 million (first nine months of 2012: EUR +44.6 million) in negative after-tax contribution by the 25 % holding in Aurubis AG, a participation included at equity. Based on an after-tax result of EUR –382.2 million (first nine months of 2012: EUR –48.2 million), basic earnings per share amount to EUR –7.12 (first nine months of 2012: EUR –0.95) and return on capital employed (ROCE) stood at –10.8 % (first nine months of 2012: 0.0 %).
With an equity ratio of 39 % and a positive net financial position that increased to EUR 447 million quarter on quarter, the Salzgitter Group continues to enjoy a decidedly sound financial basis for mastering the current challenges.
The sustained, huge competitive pressure in Europe's steel industry resulted in unsatisfactory selling prices that were in decline in a year-on-year comparison. New orders in the first nine months of 2013, however, were only marginally below the year-earlier tonnage. This was mainly attributable to curtailing production in the sections business owing to changes in the business concept of the Peine site. Production output was scaled back here to one million tons of both crude and rolled steel a year from August onwards. Thanks to an increase in strip steel volumes, rolled steel shipments exceeded the previous year's level. The division's external sales dropped by just under 10 % to EUR 1,853.6 million, pressured by selling prices (first nine months of 2012: EUR 2,037.6 million). Including EUR 185.0 million in impairment at Peiner Träger GmbH and an additional outlay of about EUR 15 million for extensive repair work on a blast furnace at Salzgitter Flachstahl GmbH, the Steel Division's pre-tax result stood at EUR –330.0 million (first nine months of 2012: EUR –149.8 million).
The Trading Division's shipments settled at the year-earlier level, largely due to the initial consolidation of Stahl-Metall-Service Gesellschaft für Bandverarbeitung mbH. By contrast, the division's external sales decreased notably to EUR 3,101.4 million (first nine months of 2012: EUR 3,659.0 million) due to the downturn in average selling prices. The division delivered earnings before tax of EUR 23.5 million (first months of 2012: EUR 42.0 million).
The business of the Tubes Division was determined by the pronounced capacity underutilization of the large-diameter pipe segment in the period under review. For this reason, order intake was significantly lower than in the first nine months of 2012 which, however, included a major pipeline order booked through the Trading Division. With the exception of seamless stainless steel tubes, shipment volumes fell in all product segments. With intragroup business in a discernible downtrend following final completion of the pipeline project, external sales remained virtually stable at EUR 1,137.8 million (first nine months of 2012: EUR 1,164.7 million). Against the backdrop of the poor capacity utilization of the large-diameter pipes segment, and given the pressure on the majority of margins, the Tubes Division disclosed a pre-tax loss of EUR –43.8 million (first nine months of 2012: EUR 17.2 million).
The Services Division's external sales stood at EUR 302.3 million, which is slightly lower than the year-earlier figure (first nine months of 2012: EUR 313.3 million). The division generated a pre-tax profit of EUR 3.7 million (first nine months of 2012: EUR 12.5 million). The lower result was largely attributable to a decline in earnings of the raw materials trading company DEUMU Deutsche Erz- und Metall-Union GmbH owing to a downturn in intragroup demand for steel scrap.
The Technology Division reported gratifying developments in the period under review. New orders rose appreciably, and external sales climbed to EUR 827.4 million (first nine months of 2012: EUR 813.9 million). Earnings before tax amounted to EUR 5.9 million, thereby exceeding the previous year's figure (first nine months of 2012: EUR 0.8 million). This success was attributable to the high degree of capacity utilization and the ongoing implementation of the KHS Group's "Fit4Future" program.
External sales of Other/Consolidation that are generated through business in semi-finished products with external parties stood at EUR 25.0 million and therefore corresponded to the year-earlier level (first nine months of 2012: EUR 27.5 million). The pre-tax result posted EUR –22.4 million, which is considerably lower than in the previous year (first nine months of 2012: EUR 34.8 million). This figure comprises an after-tax loss of EUR –45.9 million (first nine months of 2012: EUR 44.6 million) from the holding in Aurubis AG, an investment included at equity, that was largely attributable to valuation effects. This was offset by interest income.
Source – Strategic Research Institute