In the first quarter of the financial year 2015, the Salzgitter Group achieved the highest pre-tax profit since the second quarter of 2011. In spite of the upcoming regular major repair of a blast furnace that will burden profit by around € 80 million in the second half of the year, the foundations have been laid for the Group's sustainable return to the profit zone. Against the backdrop of merely marginal improvements in Europe's economic environment and the protracted structural crisis in the European steel market, this gratifying trend is reflected first and foremost in the powerful impact exerted by the groupwide "Salzgitter AG 2015" restructuring program. Also after another reduction in the actuarial rate applicable to pension provisions to only 1.5 %, the company continues to enjoy an extremely sound financial basis, with an equity ratio of 31 % and a net credit balance of € 345 million.

In the reporting period, external sales remained virtually unchanged compared with the year-earlier period (€ 2,287.9 million; first quarter of 2014: € 2,300.9 million). Earnings before taxes of € 51.8 million significantly exceeded the figure posted in the first quarter of 2014 (€ -8.7 million). Along with particularly positive performance by the Strip Steel and Plate / Section Steel business units, all the other business units also contributed to this success. Pre-tax profit comprises a profit contribution of € 3.1 million by the Aurubis investment (first quarter 2014: € 8.2 million). The after-tax result stood at € 32.7 million (first quarter of 2014: € -13.3 million), which brings basic earnings per share to € 0.58 (first quarter of 2014: € -0.26). The return on capital employed (ROCE) was recorded at 7.5 % (first quarter of 2014: 0.4 %).

In the first three months of 2015, the shipments of the Strip Steel Business Unit fell marginally short of the level achieved in the previous year's period in what remained a fiercely competitive environment. Lower selling prices caused external sales to drop slightly to € 524.8 million (first quarter of 2014: € 575.4 million). At € 16.6 million, the business unit's pre-tax results nonetheless rose appreciably (first quarter of 2014: € -2.2 million). This growth was attributable above all to Salzgitter Flachstahl GmbH (SZFG) that, thanks to excellent production output and more favorable raw materials procurement prices, completed its return to the profit zone. Another milestone in optimizing metallurgy production costs has been achieved with SZFG's pulverized coal injection plant that was successfully taken into operation at the end of March.

Europe's heavy section and plate markets presented a disparate picture during the period under review. Whereas price increases were implemented in the section business due to higher exports to the dollar region, plate demand remained subdued, accompanied by declining selling prices. The Plate / Section Business Unit reported stable external sales (€ 253.2 million; first quarter of 2014: € 251.8 million) in connection with an upturn in shipments. The pre-tax result almost reached breakeven (€ -0.7 million; first quarter of 2014: € -22.4 million). This significant improvement reflects both the plate producers' success in considerably raising their result as well as Peiner Träger GmbH's swift implementation of restructuring and operational optimization that enabled the company to deliver a profit.

In the Energy Business Unit the suspension of the South Stream contract and the low demand of oil and gas producers burdened the order situation of European plants operating in the line pipe business. By contrast, the US tube rolling mills enjoyed a high level of basic capacity utilization, delivering commensurately positive results. Tough competition and the resulting cost pressure in some products segments of the precision tubes business were counteracted by the measures implemented under the "Salzgitter AG 2015" program. Once again, the stainless steel tubes companies reported gratifying performance. Shipments of the Business Unit declined overall; external sales dropped to € 293.9 million (first quarter of 2014: € 338.9 million). The Energy Business Unit delivered a pre-tax loss of € 4.7 million, representing a notable improvement compared to the year-earlier period (first quarter of 2014: € -12.3 million).

The Trading Business Unit's shipment volumes increased in the first three months of 2015, driven first and foremost by international trading. External sales climbed to € 851.9 million (first quarter of 2014: € 774.6 million). At € 11.8 million, earnings before taxes more than doubled in a year-on-year comparison (first quarter of 2014: € 4.9 million).

The Technology Business Unit saw its order intake increase in the period under review. The business unit's external sales remained stable (€ 315.1 million; first quarter of 2014: € 313.0 million). The Technology Business Unit generated a presentable pre-tax profit of € 10.1 million, representing another rise compared with the year-earlier period (first quarter 2014: € 9.2 million). The KHS Group lifted its profit thanks to better service business. The KDE Group also advanced its result, while KDS' pre-tax profit was slightly lower in a year-on-year comparison.

The external sales of Industrial Participations / Consolidation increased to € 49.0 million as against the previous year's figure (first quarter 2014: € 47.2 million). Earnings before taxes of € 18.7 million exceeded the figure of € 14.1 million posted in the first quarter of 2014, and included € 3.1 million in earnings from the Aurubis investment (first quarter of 2014: € 8.2 million), as well as valuation effects from foreign exchange transactions that firmed up profit.

Guidance on the development of the macroeconomic situation is already fundamentally subject to a great deal of ­uncertainty, particularly in the current political and financial environment. The forward-looking statements below on the individual business units assume the absence of renewed recessionary developments in Europe. Instead, we anticipate a relatively restrained economic recovery in volumes and selling prices for our continuously fiercely contested main markets in the current financial year.

Given the sustained pressure on selling prices in the EU steel market, the Strip Steel Business Unit expects business to remain challenging in 2015 as well. Moreover, Salzgitter Flachstahl GmbH (SZFG) as by far the largest company of the business unit will have to absorb the considerable cost burden of around € 80 million for the scheduled relining of one of its large blast furnaces. The lower shipment volumes associated with this measure will therefore result in slightly lower sales. Savings on the cost front, also thanks to the new pulverized coal injection plant, will not be able to offset the extraordinary charges from the blast furnace relining. Without these burdening effects, a return to the profit zone could have well been expected. Including the direct and indirect impact of relining the blast furnace, the business unit's pre-tax result will fall notably short of the figure reported in 2014.

The Plate / Section Steel Business Unit will also continue to operate in a difficult market environment in the current financial year. The plate mills anticipate an only slight improvement in the result due to tough price competition and the suspension of the South Stream project. Following its turnaround, the primary aim of Peiner Träger GmbH will be to stabilize its business, also under difficult market conditions. Due to the temporary capacity underutilization of Salzgitter Mannesmann Grobblech GmbH and the ongoing restructuring of HSP Hoesch Spundwand GmbH, the development of sales and the pre-tax result of the business unit are subject to considerable unpredictability. The business unit will nonetheless be aiming at raising the pre-tax result. Sales are likely to decrease slightly.

As before, the Energy Business Unit will suffer from the weak European market for large-diameter pipes in 2015. This constellation will lead to more extended periods of capacity utilization shortfalls in the European mills. By contrast, the situation in North America presents an extremely positive picture, as the orders on hand secure the capacity utilization of the production sites far into the year 2016. The precision tubes companies expect stable demand from automotive manufacturers, whereas orders from the energy and industry product segments will remain fiercely contested. After a highly successful course of business in 2014, the seamless stainless steel tubes anticipate bookings at a good level. The Energy Business Unit expects sales overall to remain around the year-earlier level in 2015. Despite the large shortfall in the capacity utilization of European large-diameter pipe production sites, the pre-tax result is expected to improve due to the rigorous implementation of the measures under the "Salzgitter AG 2015" program and the non-recurrence of special charges.

The Trading Business Unit's stockholding steel trade anticipates raising sales and profit thanks to the ongoing concentration on higher-grade and pre-processed products, along with prices and demand conditions that are expected to stabilize in Europe. By contrast, international trading forecasts a downturn in sales, with profit nonetheless remaining satisfactory. All in all, we anticipate a lower level of sales for the business unit, as well as a notable decrease in pre-tax profit due to positive one-off effects that will not reoccur.

Based on a high order backlog, the Technology Business Unit anticipates a moderate increase in sales and an upturn in pre-tax profit. The growth targeted in profitable product segments, as well as the further expansion of the service business, combined with enhanced efficiency from the "Fit4Future 2.0" program, should enable the KHS Group to deliver higher sales and profit. The outlook for the KDS and the KDE Group is also very promising.

Based on planning by the individual business units, and taking account of further positive effects from the "Salzgitter AG 2015" program, we now assume the following for the Salzgitter Group in the year 2015:

  • stable sales,
  • a pre-tax profit in the lower to mid-double-digit million euro range and
  • a return on capital employed that is higher than the previous year's figure.

As in recent years, we make reference to the fact that opportunities and risks from currently unforeseeable trends in selling prices, input material prices and capacity level developments, as well as changes in the currency parity, may considerably affect performance in the course of the financial year 2015. The resulting fluctuation in the consolidated pre-tax result may, as current events show, be within a considerable range, either to the positive or to the negative. The dimensions of this range become clear if one considers that, with around 12 million tons of steel products sold by the Strip Steel, Plate / Section Steel, Energy and Trading business units, an average € 25 change in the margin per ton is sufficient to cause a variation in the annual result of more than € 300 million. Moreover, the accuracy of the company's planning is restricted by the volatile cost of raw materials and shorter contractual durations, on the procurement as well as on the sales side.

Disclaimer: Some of the statements made in this report 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 unforeseeable 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 as expected in terms of their scope and timing. Notwithstanding prevailing statutory provisions and capital market law in particular, the company undertakes no obligation to continuously update any forward-looking statements that are made solely in connection with circumstances prevailing on the day of their publication.

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