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 /  /  /  / Trading Business Unit

Performance and General Business Conditions of the Business Units

Trading Business Unit

Key data 2016 2015
Shipments kt 5,038 5,473
Segment sales1) € m 2,881.0 3,313.1
Sales to other segments/Group companies € m -26.1 -102.4
External sales2) € m 2,855.0 3,210.7
Earnings before taxes (EBT) € m 45.2 32.2
EBIT before depreciation and amortization (EBITDA)3) € m 59.4 48.6
Earnings before interest and taxes (EBIT)3) € m 49.0 38.7

Alongside a well-developed organization of stockholding steel trading subsidiaries in Europe with a wide range of processing capabilities, the Trading Business Unit comprises companies specialized in plate, as well as an international trading network spanning the globe. Apart from the rolled steel, pipes and tubes products of the Salzgitter Group, it also sells the products of other manufacturers in Germany and abroad. Moreover, the Trading Business Unit procures input material for Group companies and external customers on the international markets.

In the third quarter, the consolidated scope of the Salzgitter Group was expanded retroactively as of January 1, 2016 to include:

  • Salzgitter Mannesmann International (HK) Ltd., Hong Kong (SMHK),
  • Universal OCEL spol. s r.o., Prague (UOC) and
  • Universal-Stal Sp. z o.o., Gliwice (USP).

Along with SMHK, a company in the trading business, UOC and USP maintain stockholding operations for heavy plate within the Universal Eisen und Stahl Group (UES Group). When drawing comparisons with the previous year, consideration must be given to the fact that the figures of these newly consolidated companies were not yet included in 2015.

Market development
The international steel markets reported generally subdued demand in 2016. The project business that was only partly satisfactory and the volatile price situation determined the sentiment of the main markets. The European market presented a similar picture. As from mid-February onward, the first isolated positive effects of the EU’s anti-dumping measures were observed that subsequently had positive effect on the price trend over the course of the second quarter, with momentum then slowing toward autumn. Demand in Germany remained stable overall at a nonetheless modest level.

Business development
Shipments of the Trading Business Unit remained below the year-earlier level due above all to the low level of international project business and the strategic realignment of the plate trade with a focus on high-margin orders. As a result, and due to prices that were notably lower in an annual average, segment and external sales declined significantly in a year-on-year comparison.

Although the earnings position of the stock holding steel trade remained weak in the first three months, the following months up until and including autumn brought a temporary widening of margins that was based on the steel price trend. Combined with the result of international trading, this led to a very presentable pre-tax profit of € 45.2 million (2015: € 32.2 million). The companies newly included in the consolidated group also had a positive impact on the figures.

Investments
Maintaining and upgrading existing facilities continued to form the focus of investments by the Trading Business Unit in 2016. The projects initiated by Salzgitter Mannesmann Stahlhandel GmbH (SMSD) to expand the finishing capacities of the German stockholding steel trade, as exemplified by extending the flame cutting operations at the Plochingen site, have been largely completed. The projects concerning the digitalization of sales processes are also making headway:

The “e-WORLD” project is aimed at enhancing the efficiency of sales and tapping the as yet unrealized potential of small customers more effectively. “e-CONNECT” links customer systems to SMSD systems based on defined standards, thereby ensuring the faster, more cost-effective and efficient exchange of information and data. The new web shop (“e-SHOP”) launched in April 2016 is designed to address additional customer groups.

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