Salzgitter Reports Strong Results for First Half of 2008
08/19/2008 - The Salzgitter Group achieves strong results in the first half of the financial year 2008, based in part on persistently high, stable demand for rolled steel and tubular products.
Despite significant cost increases for raw materials and energy as well as slowing global economic growth, the Salzgitter Group achieved strong results in the first half of the financial year 2008. The company attributes its strong results to persistently high, stable demand for rolled steel and tubular products.
Consolidated external sales of € 6.23 billion reflect a € 1.51 billion (+32%) increase compared to € 4.72 billion in the first half of 2007. Along with the very positive selling price trend and the volumes of steel and tubes, Salzgitter said the Technology Division’s Klöckner-Werke AG companies, which were not part of the group of consolidated companies in the year-earlier period, contributed to the sales growth with € 687.7 million.
Consolidated pre-tax profit of € 646.4 million fell only marginally short of the previous year’s record result (€ 663.6 million in the first half of 2007). While the producing steel and tubes companies came under pressure from surging costs, steel trading benefited from the rising spot-market prices in particular, reflecting a steady, welcome demand for steel. In addition to higher costs for raw materials and energy, results also reflect a total of € 59.2 million in additional material costs for price hikes effective from the start of the year; these increases will only exert their full influence on the expenses structure of the producing companies in the second half of the year.
The Group’s after-tax profit of € 436.9 million substantially exceeded the previous year’s figure (€ 398.7 million in the first half of 2007) as a result of the reduction in domestic corporate tax rate. Earnings per share came to € 7.64. Return on capital employed (ROCE) from industrial business reached 36.8% in the first six months of 2008; including income from the investment of funds of more than € 2 billion, ROCE amounted to 25.9% (ROCE in the first half of 2007: 31.4%).
The Steel Division’s strong order situation ensured very good capacity utilization and 4% higher shipments. Against the backdrop of rising selling prices, the division’s sales, which also includes deliveries to Group companies, climbed 11% to € 2.28 billion (vs. € 2.05 billion in the first half of 2007) and external sales rose 10% to € 1.61 billion (vs. € 1.46 billion in the first half of 2007).
Consolidated external sales of € 6.23 billion reflect a € 1.51 billion (+32%) increase compared to € 4.72 billion in the first half of 2007. Along with the very positive selling price trend and the volumes of steel and tubes, Salzgitter said the Technology Division’s Klöckner-Werke AG companies, which were not part of the group of consolidated companies in the year-earlier period, contributed to the sales growth with € 687.7 million.
Consolidated pre-tax profit of € 646.4 million fell only marginally short of the previous year’s record result (€ 663.6 million in the first half of 2007). While the producing steel and tubes companies came under pressure from surging costs, steel trading benefited from the rising spot-market prices in particular, reflecting a steady, welcome demand for steel. In addition to higher costs for raw materials and energy, results also reflect a total of € 59.2 million in additional material costs for price hikes effective from the start of the year; these increases will only exert their full influence on the expenses structure of the producing companies in the second half of the year.
The Group’s after-tax profit of € 436.9 million substantially exceeded the previous year’s figure (€ 398.7 million in the first half of 2007) as a result of the reduction in domestic corporate tax rate. Earnings per share came to € 7.64. Return on capital employed (ROCE) from industrial business reached 36.8% in the first six months of 2008; including income from the investment of funds of more than € 2 billion, ROCE amounted to 25.9% (ROCE in the first half of 2007: 31.4%).
The Steel Division’s strong order situation ensured very good capacity utilization and 4% higher shipments. Against the backdrop of rising selling prices, the division’s sales, which also includes deliveries to Group companies, climbed 11% to € 2.28 billion (vs. € 2.05 billion in the first half of 2007) and external sales rose 10% to € 1.61 billion (vs. € 1.46 billion in the first half of 2007).
Despite the exorbitantly higher cost of raw materials, energy sources and scrap (which were mostly not compensated by the improvements achieved in selling prices), the Steel Division closed the first half-year with a pre-tax profit of € 345.1 million (vs. € 377.2 million in the first half of 2007). The strongest returns were achieved with beams and plate, while the flat steel product segment, in contrast, slowed somewhat.
In the reporting period and despite differences in the various regions, the Trading Division benefited from the selling price uptrend, with shipments remaining virtually constant overall. The increase in the volume of the European companies compensated for the adverse trend in the North American market, where selling prices nonetheless also rose. Boosted by the steep increase in spot-market prices, the Trading Division’s external sales climbed 30% to € 2.66 billion (vs. € 2.05 billion in the first half of 2007), and the pre-tax profit rose 16% to € 140.7 million (vs. € 121.4 million in the first half of 2007). This was a new record high for a half-year.
In the reporting period and despite differences in the various regions, the Trading Division benefited from the selling price uptrend, with shipments remaining virtually constant overall. The increase in the volume of the European companies compensated for the adverse trend in the North American market, where selling prices nonetheless also rose. Boosted by the steep increase in spot-market prices, the Trading Division’s external sales climbed 30% to € 2.66 billion (vs. € 2.05 billion in the first half of 2007), and the pre-tax profit rose 16% to € 140.7 million (vs. € 121.4 million in the first half of 2007). This was a new record high for a half-year.
The Tubes Division’s external sales grew 22% to € 1.08 billion (vs. € 0.88 billion in the first half of 2007) owing to the extremely high order level and inclusion of the precision tubes companies that joined the division in July 2007. The mainstays of the expansion were the large-diameter and stainless steel tube activities, in contrast to the fiercely competitive line pipe business, which went into a temporary decline. Despite the considerable increases in the price of input materials, which also burdened the tubes business, the division delivered a pre-tax profit of € 152.1 million (vs. € 138.9 million in the first half of 2007).
The segment sales of the Services Division advanced by 14% to € 678.1 million (vs. € 595.0 million in the first half of 2007), which was mainly attributable to sales growth of the scrap trading company DEUMU. External sales rose 8% to € 284.9 million (vs. € 262.8 million in the first half of 2007), and the pre-tax result came to € 16.8 million (vs. € 14.3 million in the first half of 2007).
The Technology Division, whichmainly comprises the Klöckner-Werke Group, a majority holding not consolidated in the previous year's period, and SIG-Beverages acquired in April 2008, generated external sales of € 523.4 million in the first six months, with the filling and packaging segment making the greatest contribution. Pre-tax profit stood at € 12.2 million, burdened in the amount of € 2.8 million from the effect of the purchase price allocation.
External sales of the Consolidated and Others segment, which are based on the semi-finished product business with subsidiaries and customers outside the Group, grew to € 80.7 million (vs. € 65.6 million in the first half of 2007), driven by higher volumes and selling prices during the reporting period. The pre-tax result was impacted by reporting date-related changes in the value of derivatives, and the elimination of interim profit from sales generated internally and posted €-20.5 million in the period under review (vs. € 11.8 million in the first half of 2007).
Looking forward, the company noted that the environment in which it currently operates can be described as very satisfactory overall. The company projects that business as a whole should generally hold the current level through the second half of the year as well. The high cost of raw materials and energy, however, and the ongoing turbulence in the international financial markets constitute a considerable risk potential for the future economic development.
The Technology Division, whichmainly comprises the Klöckner-Werke Group, a majority holding not consolidated in the previous year's period, and SIG-Beverages acquired in April 2008, generated external sales of € 523.4 million in the first six months, with the filling and packaging segment making the greatest contribution. Pre-tax profit stood at € 12.2 million, burdened in the amount of € 2.8 million from the effect of the purchase price allocation.
External sales of the Consolidated and Others segment, which are based on the semi-finished product business with subsidiaries and customers outside the Group, grew to € 80.7 million (vs. € 65.6 million in the first half of 2007), driven by higher volumes and selling prices during the reporting period. The pre-tax result was impacted by reporting date-related changes in the value of derivatives, and the elimination of interim profit from sales generated internally and posted €-20.5 million in the period under review (vs. € 11.8 million in the first half of 2007).
Looking forward, the company noted that the environment in which it currently operates can be described as very satisfactory overall. The company projects that business as a whole should generally hold the current level through the second half of the year as well. The high cost of raw materials and energy, however, and the ongoing turbulence in the international financial markets constitute a considerable risk potential for the future economic development.
In the financial year 2008, the company said it would strive to attain notable growth within the Group, 50% of which will be due to the first-time full-year inclusion of the companies of the Klöckner Group in its new Technology Division. Based on the company’s strong performance in the first half-year, the company believes it can justify raising its pre-tax profit forecast for the Group to over one billion euros.
