Salzgitter AG – focus on mitigating the impact of the Corona crisis

In the first quarter of 2020, the Salzgitter Group registered a pre-tax loss of €–31.4 million. The notably negative impact of the Corona crisis on the economy as from mid-March had not yet had any significant effect on the marginally negative quarterly results of the steel and tubes producing business units. The Trading Business Unit reported a result at breakeven, while the Technology Business Unit delivered another pre-tax profit. Owing to the valuation effects from fluctuations in precious metal prices, the contribution of Aurubis AG, an investment included at equity, was negative.

Due first and foremost to the lower steel prices compared with the previous year, in conjunction with the downturn in shipment volumes, the Salzgitter Group’s external sales dropped to € 2,108.3 million (Q1 2019: € 2,293.8 million). The result before tax of €–31.4 million (Q1 2019: € 125.9 million) includes the contribution of €–18.7 million from the participating investment in Aurubis AG accounted for pursuant to the equity method (IFRS accounting) (Q1 2019: € 50.2 million). An after-tax loss recorded at €–43.7 million (Q1 2019: €+96.7 million) brings earnings per share to €–0.83 (Q1 2019: € 1.76) and return on capital employed to –2.4 % (ROCE; Q1 2019: 14.1 %). The net financial position (€–415 million; 2019/12/31: €–140 million) declined above all due to the payment of a fine to the German Federal Cartel Office. The equity ratio stands at a sound 35.3 % (2019. 36.9 %).

Chief Executive Officer Prof. Dr.-Ing. Heinz Jörg Fuhrmann on the current situation:

“To start off with, I am pleased to announce that, thanks to numerous measures, we have been able to protect the health of our employees and have only had a very small number of infections in the workforce. We will be keeping a close eye on this in the future as well. Furthermore, motivation, identification and discipline contribute to mastering this unprecedented situation as best we can. This is borne out by the introduction of short-time work across large parts of the Salzgitter Group and the low-key, voluntary salary waivers on the part of many hundreds of managers in Germany and abroad. We are limiting the economic impact of the pandemic through rigorous cost and liquidity management. We have adopted a restrictive approach to new investments, while nevertheless continuing on with major strategic projects already initiated at the Salzgitter and Ilsenburg locations. When the Corona crisis subsides, we will be ideally positioned in terms of our technical production capabilities. It is now all the more important that the European Commission, in collaboration with the EU member states, sets in place the framework conditions so critical for safeguarding the existence of the steel industry in Europe. This includes the substantial adjustment of EU tariff quotas to demand, effective political instruments to avoid carbon leakage, along with effective measures for the actual implementation of decarbonization throughout the sector.”

Outlook

The stabilizing tendencies on the European steel market ended abruptly with the restrictions placed on the economy due to the COVID-19 pandemic. Many sectors are faced with the threat of a recession in uncertain dimensions. No forecast in the familiar format can currently be made for the Salzgitter Group’s business development in this uncertain environment. The range of feasible scenarios does not allow for exact quantification without entering into the realms of speculation.

Source and photo: Salzgitter AG