1) Including sales with other divisions in the Group
The Tubes Division comprises numerous subsidiaries and associated companies that manufacture and process both welded and seamless steel tubes on three continents. The product portfolio consists mainly of pipelines and tubes of all diameters, ranging from gas pipelines through to injection tubes for diesel engines, stainless oil field and boiler tubes, precision tubes and cold-finished tubes for the automotive and machine building industries, as well as construction tubes in a variety of profiles.
Global steel tube production slowed slightly in the first six months of 2013 compared with the prior year. Particularly in the USA, demand from the important oil and gas sector was lower than the year before, as inventories were scaled-back and high delivery volumes from other countries flooded the market. In the energy sector, former sales markets for European suppliers, such as Russia and China, are increasingly becoming self-sufficient and competitors in export markets. The mechanical engineering sector reported a stable trend in the period under review, as opposed to demand for precision steel tubes from the automotive industry which disappointed expectations overall. Here, the marked discrepancy in demand between German premium manufacturers and producers mainly located in the lower price segment, for instance based in southern Europe, remained in evidence.
Following a difficult start to the year, the Tubes Division's order status saw no improvement in the second quarter. New orders were only 60 % of the high year-earlier figure that, however, included the major order for the Australian Icythys natural gas pipeline placed with EUROPIPE GmbH (EP). The decline in orders on hand is also primarily attributable to a considerable decline in orders in the large-diameter pipes business.
Shipments were marginally lower year on year, as the higher but still unsatisfactory volume of largediameter pipes was unable to compensate for the downturn in precision tube and HFI-welded pipe shipments. For this reason and due to selling prices, segment sales did not match the previous year's figure. External sales stood somewhat higher year-on-year.
Given the unsatisfactory order and capacity utilization situation in the European plants of the largediameter pipes segment in particular, compounded by that of the precision tubes segment and selling prices that largely came under pressure, the Tubes Division delivered a pre-tax loss of € 25.0 million (profit before tax in the previous year: € 8.3 million). With the exception of the stainless steel tubes segment, all product groups reported declines in their results.
Business development of the product segments:
Having put in a good start to the year, the development of both the project and standard business in the segment of HFI-welded pipes was very restrained. Order intake was therefore notably lower than the above-average level posted in the first six months of 2012; orders on hand also did not repeat the yearearlier figure. Shipments and sales declined appreciably owing to the production of significant project volumes in stock due for ongoing delivery only from the second quarter. The company delivered breakeven in its pre-tax results.
The precision tubes market, that was characterized by extreme consumer reticence toward the end of the financial year 2012 saw a slight upturn in demand in Germany in the first half of 2013 bolstered mainly by the strong export business of the premium automobile manufacturers. The French automotive market also grew slightly, albeit remaining at a persistently weak level. As a result, order intake at Salzgitter Mannesmann Precision Group (SMP Group) exceeded the low year-earlier figure. Orders on hand had nonetheless declined compared with a year ago. As the SMP Group's production capacities, similar to those of competitors, are underutilized, short-time work had to be introduced in some plants in the first six months of 2013. Alongside a drop in shipment volumes, lower sales and another increase in the pre-tax loss reflect the fierce price-led competition in the market. As part of the "Salzgitter AG 2015" program, the precision tube group's process and organization structures are being further streamlined in 2013. To this end Salzgitter Mannesmann Präzisrohr GmbH (MPR) was combined with Salzgitter Mannesmann Precision GmbH (SMP) as of April 30, 2013.
The seasonal slowdown in the product segment of seamless stainless steel tubes in the second quarter of 2013 and the most recent significant reluctance on the part of Germany's stockholding steel trade caused the new orders of Salzgitter Mannesmann Stainless Tubes Group (MST Group) to decline. The order book also fell short of the exceptionally high year-earlier figure. Shipments nonetheless exceeded the already good tonnage the same time a year ago, while sales remained stable. The MST Group generated higher earnings before tax in a year-on-year comparison.