Salzgitter AG delivers nine-month operating result at breakeven in a tough market environment

• Diversification effective – Technology Business Unit heading for a record result
• Rigorous implementation of liquidity and profit improvement measures
• Structural adjustments at development stage – coordination with employee representatives
• Non-recurrent effects impacting the earnings forecast lay the foundations for future-proof positioning

The failure of the economy to recover and an economic environment dominated by high import volumes and non-competitive energy costs characterized the business performance of Salzgitter AG’s steel-related activities over the first nine months of the year 2024. The contribution from the participating investment in Aurubis AG accounted for using the (IFRS) equity method and the good result of the Technology Business Unit have served to bolster earnings.

As a result of the prices of most rolled steel products trending down compared with the previous year’s period, the Salzgitter Group’s external sales dropped to € 7.7 billion (9M 2023: € 8.4 billion). Also mainly due to selling prices, EBITDA (€ 320.6 million; 9M 2023: € 576.0 million) and earnings before taxes (€ – 141.2 million; 9M 2023: € 254.3 million) declined. The result includes a contribution of € 107.6 million (9M 2023: € 20.0 million) from Aurubis AG (IFRS accounting), an investment included at equity, along with impairment of around € 150 million (9M 2023: € 0) essentially relating to an adjustment in assets of companies belonging to the Mannesmann Precision Tubes Group as part of the Steel Processing Business Unit. The after-tax result came in at € – 197.7 million (9M 2023: € 193.7 million), which brings basic earnings per share to € – 3.74 (9M 2023: € 3.51). The return on capital employed (ROCE) stood at – 1.6 % (9M 2023: 6.5 %). The equity ratio remained at a very sound 43.3 % (9M 2023: 44.9 %).

Gunnar Groebler, Salzgitter AG’s Chief Executive Officer:

“The first nine months of the financial year 2024 proved very challenging not only for us but also for Europe’s entire steel industry. A weak economic environment and energy prices running at a persistently high level burdened profitability. Right up to today, there are still no signs of an imminent and sustainable recovery.  Against this backdrop we therefore have a clear strategic focus: on the one hand, preserving our competitiveness in the here and now while, on the other, securing the Group’s future viability through our ‘Salzgitter AG 2030’ strategy, inextricably paired with transforming steel production. We have made important headway in both areas. Implementing the first stage of SALCOS® is progressing apace – the first plant components have meanwhile been delivered and work on building the direct reduction plant’s reactor tower has commenced. With the sale of the Mannesmann Stainless Tubes Group now wrapped up, we are aligning the Group’s corporate structure even more firmly with the goals set out under ‘Salzgitter AG 2030’. In addition, the profit improvement and restructuring measures announced will serve to steadily strengthen our competitiveness.

A potential takeover bid for Salzgitter AG’ shareholders was announced last Monday. If such an offer were to be made, the Management Board and Supervisory Board would of course issue a reasoned statement in accordance with their legal obligations. Our focus on expanding Salzgitter AG’s aforementioned competitiveness and resilience and driving the long-term transformation forward remains firmly in place. Nothing has changed here, and nothing will!”

Birgit Potrafki, Chief Financial Officer:

“The challenging conditions in the market for the steel-related industry over the course of the year necessitate decisive measures and a focused strategy geared towards sustainable profitability.  The result of the first nine months of 2024 was impacted by market influences. A major driver behind the pre-tax loss of around €140 million in the first nine months of 2024 consisted of impairment totaling €150 million in the Steel Processing Business Unit. Thanks to the strong performance of the Technology Business Unit and our participating investment in Aurubis, we were nevertheless able to deliver breakeven overall in our operating earnings before taxes. We are working to counteract the current challenges on the one side with our established ‘Performance 2026’ profitability improvement program, and on the other through further short-term measures to stabilize earnings and secure liquidity. In addition, we are currently engaged in discussions on structural adjustments with the employee representatives. Although some of these decisions will be difficult, they are necessary to secure the Group’s future viability. We have one goal firmly in mind: to position the Salzgitter Group sustainably for the future.”

External sales by business unit (EUR million):

EBITDA by business unit (EUR million):

Earnings before taxes (EBT) by business unit (EUR million):

Outlook

Factoring in one-off items (impairment and restructuring provisions amounting to around € 270 million), and with regard to the current economic outlook for the remainder of the year, we anticipate the following for the Salzgitter Group in the financial year 2024:

• sales of between € 9.5 billion and € 10.0 billion,
• EBITDA of between € 275 million and € 325 million,
• a pre-tax loss of between € 275 million and € 325 million, and
• a return on capital employed (ROCE) discernibly below the year-earlier figure.

We make reference to the fact that criteria of the annual financial statements and opportunities and risks, including changes in the cost of raw materials, precious metal prices and exchange rates, may still have a considerable impact on the end of the financial year 2024.

The complete report released on the results of the first nine months of 2024 can be viewed at:  https://www.salzgitter-ag.com/en/investor-relations/news-and-publications.html.