DGAP-News: Salzgitter AG: Focus on mitigating the impact of the Corona crisis; results of the first quarter largely unaffected

- Pre-tax result determined by negative valuation effects from fluctuations in precious metal prices
- Stringent earnings and liquidity management implemented
- Preliminary outlook for 2020: negative pre-tax result in a significant, most likely triple-digit million euro range

In the first quarter of 2020, the Salzgitter Group registered a pre-tax loss of €-31.4 million. The notably negative impact of the Corona crisis on the economy as from mid-March had not yet had any significant effect on the marginally negative quarterly results of the steel and tubes producing business units. The Trading Business Unit reported a result at breakeven, while the Technology Business Unit delivered another pre-tax profit. Owing to the valuation effects from fluctuations in precious metal prices, the contribution of Aurubis AG, an investment included at equity, was negative.

Due first and foremost to the lower steel prices compared with the previous year, in conjunction with the downturn in shipment volumes, the Salzgitter Group's external sales dropped to € 2,108.3 million (Q1 2019: € 2,293.8 million). The result before tax of €-31.4 million (Q1 2019: € 125.9 million) includes the contribution of €-18.7 million from the participating investment in Aurubis AG accounted for pursuant to the equity method (IFRS accounting) (Q1 2019: € 50.2 million). An after-tax loss recorded at €-43.7 million (Q1 2019: €+96.7 million) brings earnings per share to €-0.83 (Q1 2019: € 1.76) and return on capital employed to -2.4 % (ROCE; Q1 2019: 14.1 %). The net financial position (€-415 million; 2019/12/31: €-140 million) declined above all due to the payment of a fine to the German Federal Cartel Office. The equity ratio stands at a sound 35.3 % (2019. 36.9 %).

Chief Executive Officer Prof. Dr.-Ing. Heinz Jörg Fuhrmann elaborates on the current situation: "To start off with, I am pleased to announce that, thanks to numerous measures, we have been able to protect the health of our employees and have only had a very small number of infections in the workforce. We will be keeping a close eye on this in the future as well. Furthermore, motivation, identification and discipline contribute to mastering this unprecedented situation as best we can. This is borne out by the introduction of short-time work across large parts of the Salzgitter Group and the low-key, voluntary salary waivers on the part of many hundreds of managers in Germany and abroad. We are limiting the economic impact of the pandemic through rigorous cost and liquidity management. We have adopted a restrictive approach to new investments, while nevertheless continuing on with major strategic projects already initiated at the Salzgitter and Ilsenburg locations. When the Corona crisis subsides, we will be ideally positioned in terms of our technical production capabilities. It is now all the more important that the European Commission, in collaboration with the EU member states, sets in place the framework conditions so critical for safeguarding the existence of the steel industry in Europe. This includes the substantial adjustment of EU tariff quotas to demand, effective political instruments to avoid carbon leakage, along with effective measures for the actual implementation of decarbonization throughout the sector."

External sales by business unit (EUR million):

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

Outlook

The stabilizing tendencies on the European steel market came to an abrupt end with the restrictions placed on the economy due to the COVID-19 pandemic. Many sectors are faced with the threat of a recession in uncertain dimensions. No forecast in the familiar format can currently be made for the Salzgitter Group's business development in this uncertain environment. The range of feasible scenarios does not allow for exact quantification without entering into the realms of speculation.

Against this backdrop, we anticipate the following for the Salzgitter Group in the current financial year 2020:

- a notable reduction in sales,

- a negative pre-tax result in a significant, most likely triple-digit million euro range, and

- a return on capital employed (ROCE) that is tangibly below the previous year's figure.

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 division 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.

As in recent years, please note that opportunities and risks from currently unforeseeable trends in selling prices, input material prices and capacity level developments, as well as exchange rate fluctuations, may considerably affect performance in the course of the financial year 2020. The resulting fluctuation in the consolidated pre-tax result may be within a considerable range, either to the positive or to the negative. The dimensions of this volatility are illustrated by the following example: With around 12 million tons p.a. of steel products sold by the Strip Steel, Plate / Section Steel, Mannesmann and Trading business units, an average € 25 change in the margin per ton is already 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.

Contact:

Markus Heidler


Head of Investor Relations


Salzgitter AG

Eisenhüttenstraße 99

38239 Salzgitter


Phone +49 5341 21-6105

Fax +49 5341 21-2570

E-Mail [email protected]