Salzgitter Group with lower sales and result

In line with expectations, the Salzgitter Group took a significantly greater hit from the economic impact of the Corona pandemic in the second quarter of 2020 than in the first three months of the year. The slump in demand from the automotive industry in particular placed a burden on our company, while the construction sector proved to be stable. Accordingly, compared with 2019, the Group’s subsidiaries reported capacity utilization that had dropped between 10 and 70 %. Moreover, the – even before the current crisis – excessively generous import quotas for duty-free steel imports into the European Union provided no protection whatsoever, as the percentage share of these imports was even higher in the second quarter due to slack demand for steel in the EU.

Against this backdrop, the Salzgitter Group’s external sales were down by 20 % in the first half of 2020 compared with the year-earlier period (€ 3,631.0 million; H1 2019: € 4,526.2 million), which was due in particular to lower volumes. The pre-tax result came in at € -127.8 million (H1 2019: € 145.3 million), essentially reflecting the decline in capacity utilization in the second quarter, and the resulting lower earnings contributions of all business units. A counter effect emanated from rigorous measures introduced at an early stage to reduce costs and secure liquidity, along with a contribution of € 34.0 million from Aurubis AG, an investment accounted for using the equity method (H1 2019: € 56.4 million). An after-tax result that stands at € -144.7 million (H1 2019: € 96.4 million) brings earnings per share to € -2.70 (H1 2019: € 1.73) and return on capital employed to –6.3 % (H1 2019: 7.9 %). With an equity ratio of 34.4 %, the Salzgitter Group’s balance sheet continues to be sound.

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

“The Corona crisis has made recent months surely some of the most challenging in our company’s history. In times such as these, we take our guidance from the principles of proportionality and weighing up the benefits between the best possible protection of our employees’ health and safeguarding our company's ability to operate. We have therefore taken extensive, risk-mitigating precautions at short notice and created transparency regarding the occurrence of infections throughout the entire Group. We are similarly focusing on managing the economic impact of the pandemic. Securing the Group’s liquidity takes the utmost priority. The key financials of the first half of 2020 prove that we have been successful in our weighing up of interests. The impact of the pandemic on our business has been cushioned, not least thanks to our strategy that is aligned to a diversified corporate portfolio. Though mastering the challenges presented by Corona is naturally the focus of our activities at present, we are keeping our sights firmly fixed on securing the medium- and long-term future of the Salzgitter Group. With the feasibility study of direct iron ore production at the Wilhelmshaven site agreed in June, we have taken another concrete step in our transformation process toward low CO2, hydrogen-based steel production based on our SALCOS® (SAlzgitter Low CO2 Steelmaking) technology concept that has attracted a great deal of attention.

We anticipate that the second and third quarter will likely mark the bottoming out of the current crisis. At the same time, the strength and the timescale of a feasible macroeconomic recovery in the second half of the year are subject to great uncertainty. In this volatile environment, the Salzgitter Group’s developments cannot be predicted in the usual way, meaning that only a rough estimate is possible.

Against this backdrop, we anticipate the following for the Salzgitter Group in the current financial year 2020:

    a notable reduction in sales,

    a negative pre-tax result in the low to mid-triple digit million euro range, and

    a return on capital employed (ROCE) that is tangibly below the previous year's figure.

We also refer to the fact that further opportunities and risks from currently unforeseeable trends in selling prices, input material prices and capacity level developments, as well as changes in the exchange rates, may considerably affect performance in the course of the financial year 2020. The resulting fluctuation in the consolidated pre-tax result may be within a considerable range, either to the positive or to the negative.”

Source and photo: Salzgitter AG