Salzgitter Klöckner-Werke GmbH (SKWG), a wholly-owned subsidiary of Salzgitter AG (SZAG), has carried out cash and foreign currency management principally on a centralized basis for the companies belonging to the Salzgitter Group since January 1, 2012. Joint venture companies are not included.
The internal financing of Group companies is fundamentally conducted through making Group credit lines available in the context of Group financial transactions and, in individual cases, external loan guarantee commitments. To cover the financial requirements of foreign Group companies, in particular those outside the euro area, the Salzgitter Group also makes use of local lending markets. At the same time, it draws on the liquidity surplus of the Group companies for financing. Supplies and services within the Salzgitter Group are settled via internal accounts. Central finance management enables us to procure external capital at favorable conditions and has a positive impact on interest income. We calculate the Group’s liquidity requirements through financial planning with a multi-year planning horizon and a monthly rolling liquidity planning with a six-month forecasting horizon. Funds invested, medium-term bilateral credit lines, a syndicated credit limit and the use of bond markets guarantee that our liquidity requirements are covered.
For the purpose of further optimizing the financing structure, SKWG issued its first bonded loan in an overall volume of € 200 million in April 2016. Placement was carried out in two currencies, the euro and the US dollar. The volume was divided into fixed and variable tranches with terms of three, five and seven years. The initial average interest across all tranches amounted to around 1.8 % p.a.
Our international business activities generate cash flows in a number of different currencies. In order to secure against the resulting currency risk, Salzgitter Group companies must hedge foreign currency positions at the time when they arise in accordance with Group guidelines. Internal Audit monitors compliance with these regulations as part of its regular tasks. For transactions denominated in US dollar, which make up a major portion of our foreign currency transactions, the option of setting off sales and purchasing items (netting) is considered first within the Group. Any surplus amounts are covered by way of hedging transactions that are customary in the market.
Pension provisions still play a significant role in corporate financing. Based on a lower actuarial interest rate (1.75 %) derived from the current level of capital market rates, they amounted to € 2,449 million (previous year: € 2,327 million at 2.25 %). In accordance with the standards of international accounting, the effect of the overall actuarial rate was reported in equity with no effect on net income.
The cash flow statement (detailed disclosure in the section on the “Consolidated Annual Financial Statements”) shows the source and application of funds. The cash and cash equivalents referred to in the cash flow statement correspond to the balance sheet item “Cash and cash equivalents”.
|In € m||2016||2015|
|Cash inflow from operating activities||290.2||447.7|
|Cash outflow from investment activities||-363.6||-507.8|
|Cash inflow from financing activities||52.6||114.9|
|Change in cash and cash equivalents||-20.7||54.8|
|Changes in the Group of consolidated companies/changes in exchange rates||2.6||7.4|
|Cash and cash equivalents on the reporting date||818.1||836.2|
The Group generated € 290 million in cash flow from operating activities (previous year: € 448 million). The decline in comparison with 2015 results from the increase in inventories and trade payables, as well as to a precautionary payment of income taxes. The cash outflow from investment activities (€ 364 million) dropped in comparison with the year-earlier period (€ 508 million) in particular due to the lower level of disbursements for investments in property, plant and equipment and intangible assets.
In the financial year 2016, a positive cash flow from financing activities of € 53 million was generated (previous year: € +115 million) that was mainly due to the issuing of a bonded loan. A counter trend emanated from the redemption of part of the bonds and the repayment of a convertible bond. Dividend distribution for the financial year 2015 to the shareholders of SZAG amounted to approximately € 13 million, which equates to € 0.25 per share.
|In € m||2016/12/31||2015/12/31|
|Cash and cash equivalents acc. to balance sheet||818.1||836.2|
|+ Certificates held for trading||250.0||250.0|
|+ Other investments of funds||149.9||131.8|
|= Investments of funds||1,218.0||1,218.0|
|Financial liabilities acc. to balance sheet||946.0||827.9|
|– Liabilities from leasing agreements, from financing/#br#financial transactions and other||29.8||24.8|
|= Financial liabilities of net financial position||916.2||803.1|
|Net financial position||301.8||414.9|
The net financial position of € 302 million declined in comparison with 2015 (€ 415 million). While cash investments, including securities (€ 1,218 million) remained at the year-earlier level, this was offset by higher liabilities owed to banks of € 916 million (previous year: € 803 million) at the end of the financial year. The latter figure includes € 433 million in obligations attached to nominal convertible and exchangeable bonds. Obligations from finance lease are not included in the net financial position.
Additions to non-current assets from investments totaled € 359 million (previous year: € 419 million). Capitalized investments from these additions in property, plant and equipment and in intangible assets (€ 352 million) were almost fully covered by scheduled depreciation and amortization (€ 342 million). Financial assets rose by € 7 million, which was mainly attributable to investments in the securities portfolio for deferred compensation.
Along with the Strip Steel Business Unit (€ 189 million), major investments in non-current assets and intangible assets were made in the Mannesmann Business Unit (€ 88 million) in 2016.
Depreciation and amortization includes unscheduled write-downs of € 15 million (previous year: € 0).
|In € m||Group||
Strip Steel BU and Plate / Section
Strip Steel BU and Plate / Section
|In € m||2016||2015||2016||2015|
|Plate / Section Steel||23.8||38.8||46.2||49.0|
|Industrial Participations / Consolidation||21.9||27.8||27.6||27.6|
The liquidity and debt-to-equity ratios in the financial year 2016 are as follows:
|Solvency I (%)3)||123||132||116||130||156||169||192||211||157||211|
Solvency II (%)4)
Dynamic debt burden (%)5)
|Cash flow (€ m) from operating activities||290||448||599||141||427||-197||209||1,190||547||781|
|Net financial position (€ m)7)||-302||-415||-403||-303||-497||-508||-1,272||-1,561||-991||-2,115|
The Group’s total assets had increased by 2.7 % to € 8,450 million in comparison with the 2015 reporting date (€ 8,228 million). The increase in non-current assets (€ +50 million) resulted from the higher level of shares of the companies accounted for using the equity method (€ +48 million). In addition, deferred tax assets also increased (€ +55 million). This was offset by the lower level of non-current securities (€ –48 million). Current assets rose mainly owing to the increase in inventories (€ +92 million) as well as in other receivables and assets (€ +88 million).
|In € m||2016/12/31||%||2015/12/311)||%|
|Equity and liabilities||8,450||100.0||8,228||100.0|
As part of non-current assets, investments in property, plant and equipment and intangible assets (€ 352 million) were entirely offset by depreciation and amortization (€ 357 million). Working capital stood at € 2,165 million (–4.7 %), which is below the year-earlier figure.
The equity ratio (33.8 %) declined slightly in comparison with the previous year (34.5 %). The determining factor here was the reporting-date-related decline to 1.75 % in the actuarial interest rate applied to pension provisions (previous year: 2.25 %). This effect that increases provisions is reported under equity without effect on income and was offset by the lower non-current financial liabilities that arose through the reclassification of an exchangeable bond under current financial liabilities. Furthermore, trade payables are higher than in the previous year.
|Asset utilization ratio (%)3)||43.8||44.4||42.1||43.9||42.5||41.8||39.7||39.5||33.5||25.8|
|Inventory ratio (%)4)||21.8||21.3||23.4||23.9||23.2||23.9||19.9||18.2||29.3||24.8|
|Depreciation/amortization ratio (%)5)||13.9||13.3||15.3||20.7||13.6||13.5||14.2||21.3||11.7||11.7|
|Capital employed (€ m)||3,584||3,620||3,526||4,034||4,481||4,733||4,596||4,457||4,886||4,829|
|Working capital (€ m)||2,165||2,271||2,487||2,598||2,694||2,753||2,193||1,981||3,338||2,845|