Financial position
Analysis of cash flow statement
The amounts taken into account in the cash flow statement correspond to the balance sheet item "Cash and cash equivalents".
There was a cash inflow from operating activities of €833 million in the reporting period, compared with a cash outflow of €68 million in the corresponding prior-year period. The €901 million improvement in operating cash flows was mainly due to a smaller rise in working capital.
Cash outflow from investing activities increased by €714 million to €1,783 million. This was primarily due to an increase of €441 million to €1,689 million in capital expenditure on property, plant and equipment, mainly for the construction of the steel mill in Brazil, and to a €136 million increase in expenditures for acquisitions of consolidated companies. At the same time, proceeds from disposals of property, plant and equipment and of previously consolidated companies decreased in total by €144 million.
As a result, free cash flow, i.e. the sum of operating cash flows and cash flows from investing activities, improved by €187 million to €(950) million in the reporting quarter.
Cash outflow from financing activities was roughly level with the corresponding prior-year period at €700 million. Compared with the prior year, a higher net incurrence of interest-bearing financial liabilities was set against a €96 million increase in expenditures for the repurchase of stock and for dividend payments.
Analysis of balance sheet structure
Compared with September 30, 2007, the balance sheet total decreased by €218 million to €37,856 million. This includes an exchange rate-related reduction of €677 million.
Non-current assets increased by €780 million to €16,165 million. There was a translation-related decrease of €318 million but this was offset in particular by significant additions to property, plant and equipment, mainly due to progress on the construction of the steel mill in Brazil.
Despite an exchange rate-related decrease of €181 million, inventories increased in total by €98 million to €8,962 million. In the Stainless segment, inventories decreased by €359 million, reflecting volume and price-related reductions as well as exchange rate effects. There were increases in inventories in the Steel, Technologies, and Elevator segments reflecting the business situation. In the Services segment, taking into account exchange rate factors inventories increased in total by €234 million, mainly as a result of delayed customer orders and the consolidation of the Apollo group.
Taking into account a decrease of €199 million due to exchange rates, trade accounts receivable came to €7,561 million, roughly level with September 30, 2007. Sales-related increases were set against increased customer payments in the plant technology and marine systems businesses in the Technologies segment. Trade accounts payable decreased by €166 million. In addition to exchange rate effects the reduction was mainly due to billing deferrals and related to the Steel segment. The €420 million increase in current other non-financial assets to €1,939 million includes €282 million higher advance payments.
Cash and cash equivalents decreased in total by €1,688 million to €1,970 million. The decrease is mainly the result of the negative free cash flow caused by high investing activity (€950 million) and of further expenditures in connection with the share buyback (€523 million) and dividend payments (€660 million).
The decrease in total equity by €660 million to €9,787 million includes an increase in the amount of the net income achieved in the reporting period of €937 million. Dividend payments (€660 million), the share buyback (€523 million) as well as pre-tax expenses recognized directly in equity in connection with currency translation (€337 million) and unrealized losses from derivative financial instruments (€146 million) resulted in corresponding decreases in total equity.
The €209 million decrease in accrued pension and similar obligations is mainly due to exchange rate effects. Current and non-current interest-bearing financial liabilities increased in total by €480 million; the increase was mainly connected with the financing of the negative free cash flow. The €376 million increase in other non-financial liabilities to €7,480 million is mainly due to a €561 million increase in advance payments received and a €179 million reduction in liabilities from production orders.