In the first half of 2019, the Salzgitter Group reported generally satisfactory performance, with all business units making positive contributions to profit.
The Group also closed the second quarter of the current financial year with a pre-tax profit (EUR 19.4 million). Declining rolled steel prices in combination with further raw materials price hikes resulted in a downturn of the earnings situation of the steel-related segments. Meanwhile, the KHS Group as the largest unit of the Technology division, continues to develop very satisfactorily. The Group's stability, also proven in more challenging phases, is due in particular to the rigorous implementation of its efficiency and growth programs.
'Following the best opening quarter since 2008, the gradual deterioration in framework conditions is now having an effect on the results of the Salzgitter Group as well. Our internal development and optimization endeavors consistently carried out over the past years have once again proved to be correct in this situation and serve to mitigate the effect of the gloomier market. We will be concertedly and decisively shaping the future of Salzgitter AG with new stimulus. Our imperturbable strategy that is anchored in sustainability is - aside from the large volume of CO2 certificates acquired as a precautionary measure for the fourth period of the EU's trading system for greenhouse gas emission allowances - also reflected in the realization of the 'Hot Dip Galvanizing Line 3' investment project that will enable Salzgitter Flachstahl GmbH to reinforce its market position as a producer of premium products,' explains Chief Executive Officer Prof. Dr.-Ing. Heinz Jorg Fuhrmann.
In the first six months of 2019, the Salzgitter Group reported marginally lower external sales of EUR 4.5 billion compared with the previous year's period (H1 2018: EUR 4.6 billion). The main driver of this development were the volume- and price-induced declines in the Strip Steel, along with the Plate / Section Steel and Trading business units. Earnings before taxes achieved a presentable EUR 145.3 million (H1 2018: EUR 198.6 million). Included is a contribution of EUR 56.4 million from the participating investment in Aurubis AG accounted for using the equity method (H1 2018: EUR 25.1 million).
The after-tax result stood at EUR 96.4 million (H1 2018: EUR 135.4 million). Earnings per share therefore came in at EUR 1.73 (H1 2018: EUR 2.45) and return on capital employed at 7.9 %(H1 2018: 12.8 %).
The decline in the net financial position (EUR-164.4 million; 2018/06/30: EUR 239.5 million) resulted principally from the increase in working capital on the back of higher raw material prices, the replenishment of the participation in Aurubis AG, as well continuing our strategic investment projects such as the new heat treatment line at the Ilsenburg location. With an equity ratio of 34.8 % (2018/06/30: 36.3 %), Salzgitter AG enjoys a sound balance sheet, also after a reduction in the actuarial rate applicable to pension provisions to only 1.00 %. The successful new issuance of a bonded loan resulted in a temporary increase in the balance sheet total, specifically in cash and cash equivalents and liabilities of EUR 200 million. An increase virtually the same in assets and liabilities in an amount of EUR 128 million due to the application of the new IFRS 16 Leases is cash neutral.
We make reference to the fact that imponderables, including changes in the cost of raw materials, precious metal prices and exchange rates, along with global trade policy measures, may have a considerable impact over the course of the financial year 2019. The dimensions of this range become clear if one considers that, with around 6 million tons of steel products to be sold by the Strip Steel, Plate / Section Steel, Mannesmann and Trading business units by the end of the year, an average EUR 10 change in the margin per ton is already sufficient to cause a variation in the annual result of EUR 60 million.
Disclaimer: Some of the statements made in this report possess the character of forecasts or may be interpreted as such. These are made to the best of the Company's knowledge and judgment, 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 business units' companies, but rather that the underlying bases of plans and outlooks prove to be accurate as expected with regards to their scope and timing. Notwithstanding prevailing statutory provisions and capital market law in particular, the Company accepts 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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