Salzgitter Group updates on results for 2013
The structural crisis prevailing in the European steel industry presented the Salzgitter Group with special challenges in the financial year elapsed. Increasingly fierce price-led competition in the European market, combined with the drastic capacity underutilization of the large diameter tubes business, incurred a significant impact on earnings.
In addition, impairment at Peiner Trager GmbH, along with non recurrent restructuring expenses, burdened earnings before taxes in an amount of EUR 240 million. Against this backdrop, the Salzgitter AG 2015 program initiated back in the autumn of 2012 and implemented as from the H2 of 2013, will be assigned the highest priority in the future as well. The first measurable successes create additional motivation for forging ahead with the comprehensive measures. An equity ratio of almost 40 % and a net credit balance of EUR 300 million as of December 31st 2013 form a sound financial basis for this.
The Group's external sales declined to EUR 9,244.2 million owing to lower average selling prices for many steel products and reduced shipment volumes in the Tubes and Trading divisions. All in all, the Salzgitter Group reported a pre tax result of EUR 477.8 million. This figure includes restructuring expenses of EUR 54.6 million incurred by the Salzgitter AG 2015 program, impairment of EUR 185.0 in the sections business, as well as EUR 55.4 million in negative after tax contribution by Aurubis AG, a participation included at equity. The after tax result stood at EUR 489.6 million which brings earnings per share to EUR 9.10. Return on capital employed stood at –10.5 %.
The following guidance was compiled on the basis of the new Group organization structure that took effect on January 1st 2014. For the purpose of facilitating comparison with the previous year, the figures for the financial year 2013 resulting from preliminary consolidation and included in the annex reflect the new Group structure. 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 earnings resulting from European and German energy and climate policies is difficult to predict. The forward looking statements below on the individual business units assume the absence of renewed recessionary development in Europe. Instead, we anticipate a relatively restrained economic recovery in volumes and selling prices in the current financial year, with markets remaining fiercely contested.
As in recent years, we make reference to the fact that opportunities and risks from currently unforeseeable trends in selling prices, input material prices and capacity level developments, as well as changes in the currency parity, may considerably affect performance in the course of the financial year 2014. The resulting fluctuation in the consolidated pre tax result may, as current events show, be within a considerable range, either to the positive or to the negative.
The dimensions of this range become clear if one considers that, with around 12 million tons of steel products sold by the Strip Steel, Plate / Section Steel, Energy and Trading business units, an average EUR 25 contraction in the margin per ton is sufficient to cause a variation in the annual result of more than € 300 million. Moreover, the accuracy of the company's planning is restricted by the volatile cost of raw materials and shorter contractual durations, on the procurement as well as on the sales side.
Source – Strategic Research Institute