Salzgitter: considerable impact of COVID-19 pandemic on sales and result

In the first nine months of the financial year 2020, the Salzgitter Group recorded a pre-tax result of €– 224.4 million in a market environment severely impacted by the economic disruptions caused by the Corona pandemic. After the second quarter in which the Group’s subsidiaries reported capacity utilization reductions of up to 70% compared with 2019, order intake gradually recovered from the early summer months onward. In combination with the measures implemented at short notice to secure earnings and liquidity, the results of the Strip Steel, Trading and Technology business units recovered partly discernibly in the third quarter.

The Salzgitter Group’s external sales declined by around one fifth to € 5,264.3 million due to lower volumes and prices (9M 2019: € 6,637.3 million). The pre-tax result came in at €– 224.4 million (9M 2019: €+ 40.7 million). A countereffect emanated from the contribution of € 53.4 million (9M 2019: € 78.1 million) from Aurubis AG, an investment included at equity. An after-tax result that stood at €– 243.0 million (9M 2019: €– 29.8 million) brings earnings per share to €– 4.54 (9M 2019: €– 0.63) and return on capital employed to – 8.1% (9M 2019: +2.5%). The equity ratio of 32.9% remained stable (9M 2019: 32.8%) and underscores the still sound balance sheet of the Salzgitter Group.

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

“We reacted quickly and rigorously to the effects of the COVID-19 pandemic through the measures we took to secure earnings and liquidity. We are therefore on track, despite the significantly greater challenges in the current financial year, to achieving a pre-tax result in the year-earlier range excluding potential special effects in the context of the annual accounts. At the same time, we are forging ahead with securing the mid- and long-term future of the Salzgitter Group: Following the feasibility study agreed in June for the direct reduction of iron ore at Wilhelmshaven, we implemented further key components of our decarbonization strategy in the third quarter through commissioning the Salzgitter wind farm and taking delivery of the world’s most powerful high-temperature electrolyzer for the energy-efficient generation of hydrogen at Salzgitter Flachstahl. It gives me great pleasure that we will be in a position to offer our customers CO2-reduced, green strip steel before the end of 2020.”

Outlook

According to current estimates, the trough is likely to have bottomed out in the second and third quarter. The most recent events nevertheless show that the course of the pandemic in Germany and abroad, along with the associated development of the overall economic situation, remains subject to great uncertainty. In the light of the aforementioned, we anticipate the following for the Salzgitter-Group in the financial year 2020:

• a notable reduction in sales,
• a pre-tax result roughly in the year-earlier range (€– 253.3 million) excluding potential special effects in the context of the annual accounts, as well as
• a return on capital employed (ROCE) that is tangibly below the previous year's figure.

We refer to the fact that criteria of the annual financial statements and imponderables, including changes in the cost of raw materials, precious metal prices and exchange rates, may still have a considerable impact on the result of the financial year 2020.

Source and photo: Salzgitter AG