Given the significant increase in imports from China in 2015, the steel companies in particular were confronted with an extremely challenging environment. Against this backdrop, we anticipated the following for the Salzgitter Group in 2016:
Due to the discernible stabilization in Europe’s steel market since the spring of 2016, the surprisingly sharp decline in Chinese dumped imports, with the resulting increase in the price levels of many steel products, we revised our profit forecast in June as follows:
In effect, due to lower-than-expected average selling prices,
By contrast, thanks to the profound success of the restructuring projects implemented and the effects of the first- EU anti-dumping measures, the following upward revisions to the forecast at mid-year were realized:
The performance of the individual segments compared with the projected development was as follows:
The Strip Steel Business Unit expected selling prices to stabilize as from the second half of 2016 depending on the EU’s anti-dumping measures. Based on the assumption of ongoing satisfactory demand and support from cost savings, the following was anticipated:
In the financial year ended, SZFG produced at the limits of its capacity. Nonetheless, sales declined (2016: € 1.8 billion) due to price pressure. By contrast, spot prices that rose as the year progressed and were gradually reflected in a better selling price quality were largely able to compensate for the losses accumulated in the first half of the year. The business unit was therefore able to deliver an improved pre-tax result (2016: € –2.3 million) that notably exceeded original expectations.
In the forecast for 2016, the Plate / Section Steel Business Unit was expected to operate in a difficult market environment. The plate mills above all were confronted with partly ruinous price declines due to the flood of imports. The section steel business anticipated another somewhat lower but nevertheless positive pre-tax result. It was, however, not anticipated that this result, combined with the non-recurrence of losses from Hoesch Spundwand GmbH (HSP) whose operations were discontinued at year-end 2015, would be sufficient to compensate for the plate mills’ deficit. We therefore assumed the following:
With sales in decline due to selling prices and shipments (2016: € 0.7 billion) and a reduction in the pre-tax loss to € –32.1 million, the business unit remained within the scope of the expectations announced at the start of the year. This figure includes order-related provisions, expenses of € 6.3 million for measures aimed at structural improvements in the plate companies as well as € 25.0 million in impairment reversals carried out on the assets of Peiner Träger GmbH (PTG).
The companies belonging to the Mannesmann Business Unit continued to operate in markets with varying potential in 2016. Low oil and gas prices dampened customers’ investment propensity. The first contracts that secured capacity utilization were nonetheless acquired in the large-diameter pipes business as early as the start of the year. All in all, we assumed:
As expected, sales declined in the year elapsed (2016: € 1.0 billion) due to selling prices and for structural reasons. Despite the improved results of the large-diameter pipe companies, the result before taxes (2016: € –22.4 million) did not reached the targeted year-earlier level due to an amount totaling € 21.0 million in expenses for structural measures and impairment.
In 2016, Trading Business Unit the forecasted a stabilization of the price level and a recovery in demand. International trading anticipated an upturn in shipments on the back of the recovery in project awards, and the stock holding steel trade also anticipated growth stimulus. Moreover, the assumption was made that there would be no repeat in the financial year 2016 of the support for profit from special items in 2015, which was likely to be reflected in:
Notably lower annual average prices and a downturn in shipment tonnage in international trading prevented the targeted sales growth from being achieved (2016: € 2.9 billion). Although the earnings position of the stock holding steel trade remained weak in the first three months, a temporary widening of margins in the following months up until and including autumn, combined with the result of international trading, contributed to a pretax profit that was notably higher year on year and therefore better than expected (2016: € 45.2 million).
Against the backdrop of fierce price-led competition for project business, the Technology Business Unit was expected to generate growth in profitable product segments and expand its service business. Based on a high level of orders on hand, a stable development was assumed
While sales (2016: € 1.3 billion) was in line with forecast, the segment outperformed earnings before taxes predicted at the start of the year (2016: € 28.4 million). This development also reflected the success of the improvement programs introduced.