Salzgitter generates a pre-tax profit of € 145 million in the first half year

In the first half of 2019, the Salzgitter Group reported generally satisfactory performance, with all business units making positive contributions to profit. The Group also closed the second quarter of the current financial year with a pre-tax profit (€ 19.4 million). Declining rolled steel prices in combination with further raw materials price hikes resulted in a downturn of the earnings situation of the steel-related segments. Meanwhile, the KHS Group as the largest unit of the Technology division, continues to develop very satisfactorily. The Group’s stability, also proven in more challenging phases, is due in particular to the rigorous implementation of its efficiency and growth programs.

“Following the best opening quarter since 2008, the gradual deterioration in framework conditions is now influencing the results of the Salzgitter Group as well. Our internal development and optimization endeavours consistently carried out over the past years have once again proved to be correct in this situation and serve to mitigate the effect of the gloomier market. We will be concertedly and decisively shaping the future of Salzgitter AG with new stimulus. Our imperturbable strategy that is anchored in sustainability is – aside from the large volume of CO2 certificates acquired as a precautionary measure for the fourth period of the EU’s trading system for greenhouse gas emission allowances – also reflected in the realization of the ‘Hot Dip Galvanizing Line 3’ investment project that will enable Salzgitter Flachstahl GmbH to reinforce its market position as a producer of premium products,” explains Chief Executive Officer Prof. Dr.-Ing. Heinz Jörg Fuhrmann.

In the first six months of 2019, the Salzgitter Group reported marginally lower external sales of € 4.5 billion compared with the previous year’s period (H1 2018: € 4.6 billion). The main driver of this development were the volume- and price-induced declines in the Strip Steel, along with the Plate / Section Steel and Trading business units. Earnings before taxes achieved a presentable € 145.3 million (H1 2018: € 198.6 million). Included is a contribution of € 56.4 million from the participating investment in Aurubis AG accounted for using the equity method (H1 2018: € 25.1 million). This figure comprises € 27.8 million (H1 2018: € 0) in income from an accounting adjustment through profit and loss in connection with the Aurubis shares acquired in the first six months of 2019 at an average price below the market value of the pro rata equity of the shares.

The after-tax result stood at € 96.4 million (H1 2018: € 135.4 million). Earnings per share therefore came in at € 1.73 (H1 2018: € 2.45) and return on capital employed at 7.9 %(H1 2018: 12.8 %).

The decline in the net financial position (€–164.4 million; 2018/06/30: € 239.5 million) resulted principally from the increase in working capital on the back of higher raw material prices, the replenishment of the participation in Aurubis AG, as well continuing our strategic investment projects such as the new heat treatment line at the Ilsenburg location. With an equity ratio of 34.8 % (2018/06/30: 36.3 %), Salzgitter AG enjoys a sound balance sheet, also after a reduction in the actuarial rate applicable to pension provisions to only 1.00 %. The successful new issuance of a bonded loan resulted in a temporary increase in the balance sheet total, specifically in cash and cash equivalents and liabilities of € 200 million. An increase virtually the same in assets and liabilities in an amount of € 128 million due to the application of the new IFRS 16 Leases is cash neutral.

Outlook

Salzgitter AG affirms its profit forecast for the financial year 2019 and anticipates:

• slightly lower sales above the € 9.0 billion mark,
• a pre-tax profit (EBT) of between € 125 million and € 175 million and
• a return on capital employed (ROCE) that is tangibly below the previous year's figure.

We refer to the fact that imponderables, including changes in the cost of raw materials, precious metal prices and exchange rates, along with global trade policy measures, may have a considerable impact over the course of the financial year 2019. The dimensions of this range become clear if one considers that, with around 6 million tons of steel products to be sold by the Strip Steel, Plate / Section Steel, Mannesmann and Trading business units by the end of the year, an average € 10 change in the margin per ton is already sufficient to cause a variation in the annual result of € 60 million.

Source: Salzgitter AG     Photo: Fotolia