Summary

The Salzgitter Group emerges from the trough in the second quarter of 2009

In accordance with expectations, the Salzgitter Group was exposed to considerable pressure from the impact of the global financial and economic crisis in the first half of the financial year 2009. This was reflected above all in the results of the Steel, Trading and Technology divisions. While the positive contributions made by the tubes product segments, the Aurubis AG holding, and extensive funds invested had a stabilizing counter-effect, they were unable to compensate for the negative influences of the economic environment.

The Group’s external sales contracted in almost all product segments, by 34 %, owing to significant declines in shipments and selling prices. In the first half-year, the Salzgitter Group recorded a pre-tax loss. This result has absorbed significant accounting measures mainly in the Steel Division relating to adjustments to the value of inventories, along with other measures carried out in the 2008 financial statements, to ensure that the Group remains free from hidden inventory valuations burdens. The 23 % holding in the leading European copper producer Aurubis AG, a company consolidated at equity, contributed very satisfactory after-tax earnings of € 32.7 million. The consolidated after-tax result was negative.

In the first six months of 2009, the global recession had its strongest impact on the companies of the Steel Division. Capacity utilization in the Salzgitter and Peine mills, for instance, fell partly to around 50 % of capacity. The exorbitant plummeting of prices across all product groups, which only came to a halt in the summer, served to exacerbate the situation further. The falling price of raw materials was unable to ease the pressure on the halfyearly result attributable to initially higher levels of inventories bought at last year’s prices. Moreover, inventories held at the end of June were valued to insure that all significant down-valuation risks in the Steel division likely have been be accounted for. Including this burden, a pre-tax loss was recorded.

The challenging business situation has also hampered all activities in the Trading Division. The weak demand of many steel processors, compounded by huge destocking in the stockholding steel trade and the downturn in trading volume due to market conditions, caused external sales to decrease. The pre-tax result was also negative.

The Tubes Division delivered a distinct positive highlight thanks to the comparatively sound situation in the large-diameter pipes, HFI-welded tubes and stainless steel tubes product segments. External sales improved despite the unsatisfactory capacity utilization situation of the precision tubes companies. The division presented a most satisfactory result.

Reflecting the reduced level of production in the steel and rolling mills, the demand for raw materials and products of Services Division decreased.

The difficult situation in the international mechanical engineering sector was reflected in the sales and earnings figures of the Technology Division. External sales recorded a decline. As a consequence of capacity underutilization in most of the plants, a downtrend in margins in the plant engineering business and risk provisioning for old orders resulted in a pre-tax loss.

Guidance: As yet there are no signs of a strong and sustained turnaround in the steel market, as any distinct recovery tendencies in order intake and selling prices so far have only been discernable for a few product groups. The Salzgitter Group therefore anticipates a pre-tax loss in the second half-year as well which, however, is unlikely to be as high as that of the reporting period ended. In our opinion it is conceivable that more or less breakeven in monthly results may be achieved towards the end of the year.