Salzgitter Group generates profit in first quarter of 2003

15.05.2003 | Salzgitter AG


Salzgitter Group generates profit in first quarter of 2003

Although the general economic situation remained unsatisfactory both in Germany and on the relevant foreign markets, the Salzgitter Group succeeded in concluding the first quarter of 2003 with a profit slightly higher than that of the previous quarter.

The Group’s consolidated external sales amounted to € 1.3 billion in the first quarter of 2003. The 8 % sales growth compared with the first quarter of 2002 (consolidated sales of € 1.2 billion) can be attributed primarily to the performance of the Steel and Trading Divisions, as well as to the extended group of companies. Pre-tax profits amounted to € 6.2 million. The result was far lower than in the first quarter of 2002 (€ 20.1 million), although it represented a stabilization compared with the fourth quarter of the previous year (€ 4.6 million). While the results trend in the Tubes Division was strongly influenced by the downturn in demand that has been in evidence since the autumn of 2002, the Steel Division, which had been making considerable losses in the first quarter of last year, finished the quarter with a profit. Group ROCE (return on capital employed) amounted to 3.4 %, which was higher than in the previous quarter (3.0 %) but still below the ROCE attained in the first quarter of 2002 (7.5 %).

The Steel Division contributed € 406 million to the Group’s consolidated external sales, 6 % more than the € 383 million it generated in the same period last year. Total turnover, including sales within the group, amounted to € 555 million, 14 % more than last year, which underlined the increasing significance of the Group’s own distribution channels. The Division concluded the period under review with pre-tax profits of € 2.1 million, which represented an earnings swing of € 16 million compared with the first quarter of 2002 (€ -13.9 million). This quarterly result, with profits in the flat steel and plate segments, was burdened by a loss in the sections segment that resulted from the unprecedented high prices for scrap, the most important raw material for beam production, which remained at record levels in the spring.

In the internationally active Tubes Division, the Middle East crisis – on top of the generally poor economic situation – was responsible for the still comparatively subdued business develop­ments. The production of large tubes, in particular, suffered from temporarily low capacity utilization. Consolidated external sales in the first three months of 2003 amounted to € 240 million, 13 % below the figure attained in the same period last year (€ 277 million). Despite the decline in sales, the quarter was concluded with a pre-tax profit of € 0.2 million.

Thanks to a gratifying volume trend, particularly in international trading, and the extension of the group of consolidated companies by the first-time inclusion of Salzgitter International Inc., Houston (USA), the Trading Division’s external sales increased to € 500 million or 16 % above the comparable quarter of 2002. At € 2.4 million, pre-tax earnings did not quite reach their previous year’s level (€ 4.0 million).

The Services Division posted external sales of € 65 million (first quarter of 2002: € 56 million). Pre-tax profits amounted to € 3.0 million, which was € 0.8 million higher than in the comparable period last year.

The Processing Division concluded the period under review with external sales of € 55 million and pre-tax results of € -3.5 million. The profits generated by automobile industry suppliers were insufficient to compensate for the unsatisfactory results achieved by suppliers to the construction sector.

In view of the continuing lack of growth momentum both in Germany and for the EU as a whole, Salzgitter AG does not expect the next quarter to bring any fundamental changes in the business situation in the individual Divisions.

In the flat steel segment, sales prices are stabilizing in connection with satisfactory order activity. The earnings situation for sections will improve as a result of the recently realized revenue increases, further revenue increases and a downward trend in scrap prices. In the heavy plate segment, the gratifying trend of the first quarter should continue.

The market for steel tubes appears to have reached rock bottom. With the backlog of orders remaining low and order activity that is lively in some areas but still generally subdued, full capacity utilization for all of the production plants will again be unlikely in the second quarter. Against this background, the expectations for a far-reaching recovery in the sector are being focused on the second half of 2003.

Measures to improve earnings are being taken in all of the Group’s subsidiaries, the objectives being to improve quality and productivity and reduce the commitment of funds.

Taking the results of the above measures into account, Salzgitter AG is expecting positive consolidated pre-tax results in the first six months of 2003 and, assuming at least a slight improvement in the overall economic conditions in the sectors and regions with relevance for its Divisions, pre-tax results running into a medium, double-digit million region for 2003 as a whole.

Disclaimer:

Some of the statements made in this document possess the character of forecasts or may be interpreted as such. They are made upon the best of information and belief and by their nature are subject to the proviso that no further deterioration occurs in the economy or in the specific market situation pertaining to the Division companies, but rather that the underlying bases of plans and outlooks prove to be accurate in terms of their scope and timing.