Salzgitter announces Q1 results
German steel giant Salzgitter said that “The situation on the European steel market remained tense at the beginning of 2014. The persistent imbalance between supply and demand continues to put great pressure on margins. The market environment for steel products, also unfavorable outside the EU, combined with significant capacity underutilization in the large diameter tubes segment that eased only in April, determined the course of business in the Q1 of 2014.”
It said “Nonetheless, the Salzgitter Group improved its earnings, with the Salzgitter AG 2015 restructuring program, that has set profound processes of change in motion within the Group since mid 2013, making a major contribution. The tangible success in the sections business as well as in the precision tubes group affirms the expediency of this course of action and strengthens our motivation to vigorously forge ahead in implementing the extensive package of measures in all Group companies.”
As of March 31st 2014, the Group's net financial position stood at EUR 104 million. The decline in this position resulted mainly from the higher levels of operating activity and partly due to changes in the consolidated group in the context of reporting date related effects. The equity ratio of approximately 38% remained at a sound level. When considering the following YoY comparisons, it should be noted that the key data of the financial year 2013 have been restated to take account of the new Group organization structure and changes in the consolidation methods applied to participating interests under IFRS 11.
In the Q1 of 2014, the Group's external sales dropped below the year earlier figure (EUR 2,300.9 million; Q1 of 2013: EUR 2,448.5 million), owing mainly to the downtrend in the Trading and Plate/Section Steel business units caused by lower volumes and selling prices. Earnings before taxes amounted to EUR -8.7 million (first quarter of 2013: EUR -16.1million), influenced by a positive contribution from the Aurubis investment. Earnings after taxes of EUR -13.3 million were recorded (first quarter of 2013: EUR -17.1 million), which brings earnings per share to EUR -0.26 (Q1 of 2013: EUR -0.33). The return on capital employed (ROCE) posted 0.4% (Q1 of 2013: 0.3%).
Development of the business units;
The Strip Steel Business Unit reported an order intake that remained virtually unchanged from the previous year and growth in its external sales. Thanks to a slight increase in the result of Salzgit ter Flachstahl GmbH, that was also attributable to the lower cost of raw materials, the pretax result improved to EUR 2.2 million (Q1 of 2013: EUR 7.3 million).
The shipments of the Plate/Section Steel Business Unit dropped, owing in particular to the huge downturn in the shipment volumes of Salzgitter Mannesmann Grobblech GmbH, that was still producing plate for a major order of EUROPIPE GmbH in the Q1 of 2013, as well as due to the deliberate capacity adjustments at Peiner Trager GmbH (1 million tonne Model). External sales also declined accordingly. Although the loss of the two plate producers exceeded the previous year's level, the business unit's pre-tax result improved by almost one third to EUR 22.4 million (Q1 of 2013: EUR 32.0 million). This trend largely reflects the success of the measures consistently implemented under the Salzgitter AG 2015 program at Peiner Trager GmbH that generated a small pre-tax profit for the first time since 2008.
The Energy Business Unit's shipments exceeded the year earlier level, with all product segments contributing. The increase in external sales (EUR 338.9 million; Q1 of 2013: EUR 318.1 million) was mainly attributable to the precision tubes business. All in all, the Energy Business Unit reported earnings before taxes of EUR -12.3 million in the Q1 of 2014 (Q1 of 2013: EUR -11.1 million) largely determined by the negative at equity contribution of the EUROPIPE Group that was affected by capacity underutilization. By contrast, the precision tubes group achieved breakeven.
The Trading Business Unit saw shipments decline in the Q1 of 2014, due first and fore most to lower shipment volumes in international trading. In conjunction with the weaker price levels compared with 2013, external sales also dropped to EUR 774.6 million (first quarter of 2013: EUR 961.7 million). Earnings before taxes, though still satisfactory at EUR 4.9 million, fell short of the previous year's figure (Q1 of 2013: EUR 11.4 million).
Guidance;
The following guidance was compiled on the basis of the new Group organization structure that took effect on January 1st 2014. Guidance on the development of the macroeconomic situation is already fundamentally subject to a great deal of uncertainty, particularly in the current environment prevailing in Europe. In addition, the impact on performance of European and German energy and climate policies is also currently still difficult to predict. The forward-looking statements below on the individual business units assume the absence of renewed recessionary development. Instead, we anticipate a relatively restrained economic recovery in volumes and selling prices in the current financial year, with markets remaining fiercely contested.
Source - Strategic Research Institute