The Salzgitter Group masters the challenges of the financial crisis with assuredness

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2009 will go down as one of the most difficult financial years in the 150-year history of the Salzgitter Group. During the first nine months the Group had to absorb a dramatic slump in demand for rolled steel products, among other occurrences. Thanks, on the one hand, to the sound and broad business base and the healthy financial position of the company and, on the other, to a program of swiftly implemented immediate measures to stabilize performance, all the challenges posed by the crisis were mastered with aplomb. With the onset of economic recovery, the Group was again generating a positive operating profit in the fourth quarter. As part of the process of drawing up the annual financial statements, extensive impairments and precautionary accounting-related measures were carried out that will serve to ease the burden on future periods.

Almost all the business activities of the Salzgitter Group were affected by the global economic crisis in the financial year 2009. As a consequence, consolidated external sales came in at € 7,818.0 million, which is considerably lower than the previous year's figure (2008: € 12,499.2 million). The Salzgitter Group closed the financial year 2009 with an operating loss of –€ 160.3 million. This figure comprises the € 60.2 million contribution to profit by the Aurubis shareholding as well as positive valuation-related effects. The profit forecast released in November was therefore exceeded. As announced at the same time, the financial statements include accounting-related non-recurrent effects. For instance, they comprise impairments of € 262.7 million and funds of € 73.4 million for streamlining measures. These components which affect net income and accord fully with a conservative accounting policy will already be instrumental in easing the burden on the results of the current financial year. All in all, the pre-tax loss is –€ 496.5 million (2008: +€ 1,003.4 million). Taking into account the tax revenues of € 109.6 million the consolidated loss posts –€ 386.9 million. Earnings per share come to –€ 7.10.

The economic and financial crisis had an especially strong impact on the Steel Division: The first months of the financial year saw no end to the dramatic market conditions that had already set in at the end of 2008. The downturn in demand and selling prices was so severe that, despite first signs of a recovery as from the third quarter, production, shipment and sales figures fell way short of the previous year’s results. The division recorded external sales of € 1,673.6 million (2008: € 3,001.7 million) and an operating loss of –€ 230.1 million. Moreover, € 139.0 million in impairment write-downs and € 4.5 million in restructuring expenses were included in this figure. The segment pre-tax result came to –€ 373.5 million overall (2008: +€ 545.6 million).

The extremely hostile market conditions were also reflected in the Trading Division’s figures: A steep decline in shipments, combined with partly dramatic price erosions, almost halved external sales to € 3,038.7 million (2008: € 5,621.7 million). The division closed the financial year with an operating loss of –€ 119.7 million. An additional € 2.3 million in restructuring expenses and € 6.1 million in impairment write-downs resulted in a pre-tax loss of –€ 128.0 million (2008: +€ 150.8 million).

The Tubes Division benefited from a healthy order book which guaranteed comfortable capacity utilization in most of the steel works during the first half year and partly even beyond. Capacity in the precision tubes segment was nonetheless consistently underutilized. Owing to the sustained sound performance of the large-diameter tubes segment in particular, external sales fell only marginally to € 2,044.6 million (2008: +€ 2,172.5 million). The contribution to operating profit came to € 171.6 million. Following € 29.9 million in impairment write-downs and € 37.7 million in restructuring expenses, the pre-tax profit came to +€ 104.0 million, thereby falling short of the exceptionally good year-earlier result (2008: +€ 311.8 million).

External sales generated by the Services Division declined to € 302.9 million (2008: +€ 519.3 million). This development was mainly the result of lower volumes and selling prices in scrap steel trading. The segment generated an operating profit of +€ 8.9 million; including € 0.7 million in restructuring expenses, pre-tax profit came to +€ 8.2 million (2008: +€ 23.9 million).

Source: Steelguru