- Corporate
- Steelmaking
- Industry
- Auto
- Processing
- ThyssenKrupp Nirosta
- ThyssenKrupp Acciai Speciali Terni
- ThyssenKrupp Mexinox
- Shanghai Krupp Stainless
- ThyssenKrupp Stainless International
- ThyssenKrupp VDM
- Plant Technology
- Marine Systems
- Mechanical Components
- Automotive Solutions
- Transrapid
- Central/Eastern/Northern Europe
- Southern Europe/Africa/Middle East
- Americas
- Asia/Pacific
- Escalators/Passenger Boarding Bridges
- Accessibility
- Materials Services International
- Materials Services North America
- Industrial Services
- Special Products
Segment review
Steel: Significant sales growth
| 9 months ended June 30, 2007 |
9 months ended June 30, 2008 |
3rd quarter ended June 30, 2007 |
3rd quarter ended June 30, 2008 |
||||||
|---|---|---|---|---|---|---|---|---|---|
| Order intake | million € | 9,895 | 10,939 | 3,262 | 3,765 | ||||
| Sales | million € | 9,920 | 10,755 | 3,413 | 3,902 | ||||
| Earnings before taxes (EBT) | million € | 1,298 | 1,138 | 428 | 389 | ||||
| Employees (June 30) | 38,950 | 40,733 | 38,950 | 40,733 |
The Steel segment again reported higher order intake and sales in the first 9 months of fiscal 2007/2008 compared with the corresponding prior-year period. The value of orders received rose by 11% to €10.9 billion. This was mainly due to an increase in order volumes but also to higher prices. Sales were up 8% to €10.8 billion due to the price improvements achieved. Shipments increased by 4%. Significant sales growth was also registered within the year. Rolled steel production for shipment to customers remained constant overall compared with the year before. An increase in hot strip production to meet market demand came at the expense of a slight decline in output of cold-rolled uncoated and coated products.
At €1,138 million, the pre-tax profit was €160 million lower than a year earlier. The decline is mainly due to the costs of the growth projects in Brazil and Alabama and the restructuring expenditures at Metal Forming. Another factor was the dramatic increase in raw material costs since January 2008 which could not be passed onto the market in full. The decline in earnings was partly offset by the additional cost-reduction program realized.
Corporate
The Corporate business unit combines the administrative functions of ThyssenKrupp Steel AG and manages the construction projects in Brazil and the USA. The higher loss was mainly due to the pre-operating costs for the Brazilian steel mill.
Steelmaking
The Steelmaking business unit comprises the metallurgical operations in Duisburg and the logistics activities. At 10.7 million metric tons, crude steel output in the reporting period was 1% lower than in the comparative year-earlier period. This was mainly attributable to the relining of the Schwelgern 1 blast furnace which was blown in again on April 17, 2008 - a few days later than planned. Steelmaking's sales in the reporting period were higher than the year before. The sharp rise in raw material costs was passed onto the segment's market-oriented units. Due to higher prices for supplies to downstream production operations, a higher profit was achieved.
Industry
The Industry business unit recorded an increase in sales due mainly to higher shipments and to a lesser extent to the slightly improved price level. Overall profits were lower than in the previous year because the significant rise in raw material costs could not be offset by cost-reduction measures. Against the background of very robust demand, we further increased sales to industrial customers, though we were unable to meet our customers' requirements in full. Average prices rose only slightly and could not offset the significant cost increases, with the result that profits were considerably lower than in the prior-year period. The same picture was seen at the Color/Construction competence center and the European steel service centers. The Heavy Plate business profited from continued encouraging demand for high-quality material. Sales of heavy plate increased disproportionately because price improvements were achieved in individual product areas. As a result, profits were slightly higher.
Auto
Sales in the Auto business unit increased thanks to the price improvements in annual contracts implemented at January 01, 2008. However, shipments in the reporting period were slightly lower than in the prior-year period. Sales and income in the individual business activities show a mixed picture. The Auto division of ThyssenKrupp Steel AG increased its sales on the back of higher prices, but suffered a drop in profits because the substantial cost increases could not be offset. Tailored Blanks returned higher earnings thanks above all to growth in sales volumes. A contributory factor here was the 100% takeover of the business of the US-based Thyssen Worthington Blanks group at March 01, 2008. The North American steel service activities reported a slight increase in profits, but sales were down as a result of a significant reduction in volumes. In the Metal Forming business, higher orders from the auto industry in the key European markets led to a rise in sales; an additional factor was the business's increasing presence in markets outside Europe. However, a considerably higher loss was posted because restructuring measures introduced, mainly in France, resulted in expenditure of €115 million.
Processing
The Processing business unit achieved higher sales and bettered its good prior-year earnings – mainly due to the positive trend in sales and prices in grain-oriented electrical steel. However, the tinplate business reported lower profits as cost increases could not be passed onto the market. The medium-wide strip business was likewise unable to offset the significant rise in slab costs with price adjustments. Earnings were therefore lower than in the corresponding year-earlier period, while sales increased.
Stainless: Sharp fall in profits
| 9 months ended June 30, 2007 |
9 months ended June 30, 2008 |
3rd quarter ended June 30, 2007 |
3rd quarter ended June 30, 2008 |
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|---|---|---|---|---|---|---|---|---|---|
| Order intake | million € | 6,041 | 5,883 | 1,943 | 1,732 | ||||
| Sales | million € | 6,986 | 5,726 | 2,608 | 1,933 | ||||
| Earnings before taxes (EBT) | million € | 912 | 86 | 296 | 93 | ||||
| Employees (June 30) | 12,187 | 12,037 | 12,187 | 12,037 |
In terms of volume, the order situation at ThyssenKrupp Stainless improved significantly in the first 9 months of fiscal 2007/2008. Order intake rose by 35% to 1.9 million metric tons. It must be borne in mind that the prior year was characterized by reluctance to buy on the part of distributors and end users due to high imports, high inventory levels at distributors and service centers, and the strongly fluctuating nickel price. Orders increased by 31% for cold-rolled and 47% for hot-rolled, while the total value of order intake decreased by 3% to €5.9 billion on account of the low base and nickel price level. The value of orders received for nickel alloys also declined as a result of the low price of nickel. Order intake for titanium semis increased mainly for volume reasons.
At around 1.8 million metric tons, the segment's overall deliveries were 3% higher than a year earlier. The volume of shipments for stainless cold-rolled and hot-rolled was roughly the same as in the prior-year period. Deliveries of nickel alloys showed a slight decline, while titanium deliveries increased. Sales fell 18% to €5.7 billion due mainly to lower selling prices.
The Stainless segment suffered a sharp drop in earnings in the first 9 months of the current fiscal year, down €826 million to €86 million. This decrease was mainly due to a significantly lower base price level and the partial underutilization of capacity in the first quarter of the fiscal year. In addition, the competitive situation for exports to the US dollar zone was made more difficult by the continued strength of the euro. Furthermore, earnings at ThyssenKrupp Acciai Speciali Terni were impacted by higher electricity costs as a result of the EU Commission's negative decision regarding the legality of extended energy compensation payments. After reporting a loss in the 1st quarter of the reporting year, the Stainless segment achieved an earnings turnaround in January 2008 thanks to a slight recovery in the market from the end of 2007. However, this positive trend was halted in the middle of the 3rd quarter when the positive base price trend, sustained until May 2008, came to an end. The main reason for this was subdued demand from distributors on account of declining nickel prices.
ThyssenKrupp Nirosta
In the reporting period the ThyssenKrupp Nirosta business unit profited in volume terms in Europe from a recovery in demand from distributors and stable business with end customers. However, for price reasons sales were lower than in the prior-year period. As a result of the considerably lower price level and the underutilization of capacity at times for demand-related reasons, earnings were significantly lower.
ThyssenKrupp Acciai Speciali Terni
At ThyssenKrupp Acciai Speciali Terni, the recovery in demand for stainless products - in particular from service centers and distributors - was reflected in order intake. The decline in sales at the Italian business unit was mainly the result of lower selling prices and the loss of production at the Turin plant following the accident last December. The plant has not been reopened. At Acciai Speciali Terni there was a dramatic fall in earnings due mainly to the weakening of the Italian stainless market and the Italian domestic economy. High electricity costs were also a factor. In addition, expenses were incurred for the relocation of production from Turin to Terni, which has now been completed, and the effects of the fire in Turin. Thanks to a robust market, the forging activities improved on their prior-year earnings.
ThyssenKrupp Mexinox
ThyssenKrupp Mexinox held up well in a difficult market environment in the NAFTA region. The volume of orders received was slightly higher than in the prior-year period. However, sales were lower for price reasons. The significant decline in profits was mainly attributable to the weak US market, the negative effects of which were only softened by the stable domestic market in Mexico.
Shanghai Krupp Stainless
Shanghai Krupp Stainless recorded higher order volumes compared with the year before. However it must be borne in mind that in the previous year a large part of capacity was utilized for internal contract work for ThyssenKrupp Nirosta following a fire at the Krefeld plant and as a result the level of orders received from the market was lower. Sales were down from the previous year and profits were significantly lower. In addition to the continuing weak and difficult market environment in China, the decrease was due to the absence of the contract work performed for ThyssenKrupp Nirosta in the prior-year period. Earnings were additionally impacted by the reduced volume of exports to the USA.
ThyssenKrupp Stainless International
The business unit reported a reduction in both order intake and sales on account of the difficult market environment and lower selling prices. The weak situation on the international stainless steel markets was mainly responsible for a substantial decline in margins and lower shipments which resulted in sharply reduced earnings.
ThyssenKrupp VDM
In the nickel alloy business, orders and sales fell short of the year-earlier level. The wire production operation was successfully relocated from Bärenstein to Werdohl. With the construction of the new forging line, which officially went into operation in May 2008, ThyssenKrupp VDM has increased its product range, particularly for the aerospace industry. However, the earnings level of the previous year could not be maintained. Benefiting from the weak US dollar, US suppliers increased their exports and intensified the price pressure on the European markets. At the same time the exchange rate meant that prices were too low for us to export profitably to the US dollar zone. However, our US activities reported a significant improvement in earnings.
Technologies: Excellent performance continued
| 9 months ended June 30, 2007 |
9 months ended June 30, 2008 |
3rd quarter ended June 30, 2007 |
3rd quarter ended June 30, 2008 |
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|---|---|---|---|---|---|---|---|---|---|
| Order intake | million € | 12,211 | 9,717 | 5,700 | 3,397 | ||||
| Sales | million € | 8,411 | 9,208 | 2,815 | 3,357 | ||||
| Earnings before taxes (EBT) | million € | 411 | 566 | 155 | 201 | ||||
| Employees (June 30) | 54,128 | 54,334 | 54,128 | 54,334 |
The good overall performance of the Technologies segment continued in the first 9 months of fiscal 2007/2008. At €3.4 billion, 3rd quarter orders again exceeded the good order intake levels of the previous quarters. The €9.7 billion bookings in the reporting period show a constant order volume of over €3 billion per quarter. However, the exceptionally high order level of the previous year, which was boosted by the booking of major orders, was not achieved. The project situation in plant technology remains good, thanks to numerous infrastructure projects and exploration projects in the raw materials sector. Orders in hand at June 30, 2008 increased to €15.7 billion, securing more than a year's sales. In line with the trend in orders, sales in the first 9 months climbed 9% year-on-year to €9.2 billion, despite negative US dollar exchange rate effects.
At altogether €566 million, profits in the first 9 months of 2007/2008 were significantly higher than the year before. The main contributory factors were the good order situation at Plant Technology, higher profits at Mechanical Components, as well as lower costs and higher income from investments at the segment holding company.
Plant Technology
The good order and project situation at Plant Technology continues to be driven by high raw material and energy prices and strong global demand for cement. However, the high order intake of the prior-year period, which was very positively impacted by individual major orders, was not matched. Due to the high level of orders in hand and new orders, sales showed a significant improvement on the prior-year figures in all areas. Thanks to the strong performance, profits at Plant Technology increased significantly from the good level of the previous year.
Marine Systems
Marine Systems recorded a significantly lower order intake in the first 9 months against the comparable year-earlier period, when key major orders were won in connection with the frigate program of the German Navy. While the repair and service business continued to enjoy very high demand, the surface vessel unit in particular failed to match its prior-year performance. The business unit's sales increased mainly as a result of the strong performance of the repair and service business. Profits at Marine Systems were down from the prior year. Higher earnings in the repair and service unit were unable to fully offset reduced profits in submarines and losses in surface vessels.
Mechanical Components
The business unit recorded generally positive demand for high-tech components for the auto and engineering industries in the first 9 months of 2007/2008. However, order intake did not quite match the prior-year level mainly due to the sale of the precision forging operation, falling demand at the North American foundries, and the weak US dollar. By contrast, sales were up slightly. In particular business with slewing bearings and rings for the wind energy sector showed continued growth. Mechanical Components returned a profit that was significantly higher than in the prior-year period, mainly due to the strong performance of slewing bearings and rings and the disposal gain. The main factors damping earnings were falling demand in the USA, higher starting material prices for the North American foundries, and in the case of exports the continued depreciation of the US dollar against the euro.
Automotive Solutions
The Automotive Solutions business unit's order and sales performance reflected significant growth in steering systems, axle modules, body-in-white lines, tooling, and assembly systems. In the first 9 months profits were level with the prior-year period.
Transrapid
With sales down, Transrapid made a small profit which was lower than in the prior-year period due mainly to higher restructuring expenditure.
Elevator: Successful growth track
| 9 months ended June 30, 2007 |
9 months ended June 30, 2008 |
3rd quarter ended June 30, 2007 |
3rd quarter ended June 30, 2008 |
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|---|---|---|---|---|---|---|---|---|---|
| Order intake | million € | 3,919 | 4,254 | 1,309 | 1,324 | ||||
| Sales | million € | 3,350 | 3,559 | 1,179 | 1,211 | ||||
| Earnings before taxes (EBT) | million € | (187) | 301 | 106 | 92 | ||||
| Employees (June 30) | 38,556 | 42,108 | 38,556 | 42,108 |
Elevator successfully stayed on growth track in the first 9 months of the reporting year. Despite very negative exchange rate effects and continuing price and margin pressure, both orders and sales showed an improvement on the prior year. Orders increased by 9% to €4.3 billion and sales by 6% to €3.6 billion.
Profits at Elevator rose to €301 million in the reporting period. Excluding the costs for plant closures in Austria and Spain and the EU antitrust fine of €480 million in the prior-year period, earnings at operating level were also higher.
Central/Eastern/Northern Europe
The Central/Eastern/Northern Europe business unit reported a substantial year-on-year increase in orders and sales. Business in Germany was on a par with the high prior-year level, while business in Northern and Eastern Europe and in the Benelux countries expanded dynamically. Orders in France matched the year-earlier level, and with a strong order backlog for modernization projects, sales showed a clear improvement. Excluding the EU antitrust fine, profits at the business unit were level with the previous year. While the resolved closure of the Gratkorn plant in Austria had a negative impact on earnings, profits from operations expanded significantly. All regions contributed to this with the exception of the UK.
Southern Europe/Africa/Middle East
The business unit increased its orders and sales significantly in the first 9 months. This performance was mainly driven by the operations in Spain and Italy. In Spain, business with new installations and services continued to expand pleasingly. Growth in Italy was mainly attributable to the newly acquired companies. The operations in Turkey and the Gulf region also reported significant growth. The profits of the business unit increased substantially, with the Spanish operations in particular playing a major part in this. Earnings were impacted by the planned closure of a production plant in Spain.
Americas
Despite very negative exchange rate effects, the Americas business unit slightly exceeded its very good prior-year order intake and sales. Excluding exchange rate effects, the North American operations achieved a significant improvement on their very good performance a year earlier. Business in South America, in particular Brazil, was very encouraging overall. Despite the negative exchange rate trend, the business unit's profits once again showed a significant year-on-year increase. This was largely attributable to a higher volume of business as well as to further efficiency enhancement measures in North America. There was also significant earnings growth in Brazil and the other countries of Latin America.
Asia/Pacific
The Asia/Pacific business unit recorded an increase in orders despite likewise negative exchange rate effects. Strong growth in China, India and Australia offset the decline in the Korean operations. Compared with the prior-year period, sales were down slightly, mainly due to the drop in Korean business. However, the sales growth in China was pleasing. In contrast to the prior year, the business unit recorded a loss in the first 9 months of the reporting year due to the restructuring of the Korean operations. Earnings at all the business unit's other operations were level with or slightly higher than the previous year.
Escalators/Passenger Boarding Bridges
Overall, orders and sales at the Escalators/Passenger Boarding Bridges business unit were lower year-on-year. Although the escalator business achieved a significant improvement in orders and a slight increase in sales, the postponement of major orders in the passenger boarding bridges business resulted in substantial declines in this area. The escalator business generated a profit, while passenger boarding bridges made a loss. Overall, the business unit reported negative earnings.
Accessibility
The Accessibility business unit continued to show pleasing growth. Order intake and sales were higher than a year earlier. While European business expanded significantly, the decline in the US housing market resulted in lower year-on-year sales. However, profits were up from the prior-year period, driven mainly by the European operations.
Services: Record earnings in the 3rd quarter
| 9 months ended June 30, 2007 |
9 months ended June 30, 2008 |
3rd quarter ended June 30, 2007 |
3rd quarter ended June 30, 2008 |
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|---|---|---|---|---|---|---|---|---|---|
| Order intake | million € | 12,921 | 12,950 | 4,122 | 4,677 | ||||
| Sales | million € | 12,614 | 12,702 | 4,308 | 4,603 | ||||
| Earnings before taxes (EBT) | million € | 550 | 515 | 218 | 248 | ||||
| Employees (June 30) | 43,098 | 46,506 | 43,098 | 46,506 |
The Services segment generated sales of €12.7 billion in the first 9 months of 2007/2008, €88 million more than in the corresponding prior-year period. The 3rd quarter was the best in the company's history, both for sales and earnings. Sales were €295 million higher than the comparable prior-year quarter at €4.6 billion. 3rd quarter profits reached a new record level of €248 million; after nine months, the segment's earnings of €515 million were only €35 million lower than the record profit of the year-earlier period.
Materials Services International
Due in particular to the pleasing 3rd quarter performance, the business unit recorded a clear increase in sales. Contributory factors in this were the strong demand for rolled steel and tubes, where prices were higher, and the first-time inclusion of the newly acquired companies Ferostav and Apollo Metals. Processing-related service operations reported a pleasing workload. By contrast, prices for stainless steel were unsatisfactory, and demand also decreased further. Business with nonferrous metals and plastics was subdued and fell slightly short of expectations. Demand and prices in the Eastern European market improved in the course of the fiscal year. In contrast to Western Europe, countries such as Russia, Bulgaria, the Czech Republic and Poland reported stronger growth. Although the business unit achieved a year-on-year improvement in 3rd quarter earnings, profits for the first 9 months were down from the prior-year period. However, Materials Services International remained the segment's highest earner.
Materials Services North America
The North American materials market failed to recover over the course of the fiscal year. Demand for rolled steel products and in particular for stainless steel remained poor, while the nonferrous metals business also slowed. This was accompanied by strong competitive and margin pressure and the sharp depreciation of the US dollar against the euro. As a result, the business unit was unable to match its prior-year sales and earnings figures.
The signing of a new 10-year contract with Boeing Commercial Airplane at the end of June 2008 provided an additional boost to the service business of Materials Services for the aerospace industry. The contract for integrated supply chain management covers global purchase pooling, deadline tracking, inventory management, the processing of all aluminum and titanium products, the optimization of in-plant materials flow and the coordination of 700 production plants and subcontractors.
Industrial Services
The business performance of Industrial Services continued to improve in the course of the fiscal year. Sales and earnings in the first 9 months were significantly higher than the record prior-year figures. In Germany, the order and workload situation was good, in particular in the engineering and energy sectors. Despite the depreciation of the US dollar against the euro, the performance of the North American operations was particularly pleasing. The focus here on specific areas of industry is having a very positive effect. The same was true of the new Brazilian operations, which achieved disproportionate growth.
Special Products
In the first 9 months of the fiscal year, sales in the Special Products business unit improved slightly on the high prior-year figure. Although overall international rolled steel and tube business was lower year-on-year, significant growth was achieved in Asia. Demand and prices for metallurgical raw materials, coke and minerals remained high, reaching new record levels for certain products and contributing to a further increase in sales. Sales of technical systems increased further, profiting from the continued expansion and modernization of infrastructure in numerous European and non-European regions. Thanks in particular to the performance of the raw materials business, the business unit exceeded its record prior-year earnings.
Corporate includes the Group's head office and internal service providers as well as inactive companies not assignable to individual segments. Also included here is the non-operating real estate, which is managed and utilized centrally by Corporate. The retained assets and liabilities of ThyssenKrupp Budd were also assigned to Corporate. The disposal in the meantime of this company's operations is responsible for the decrease in Corporate's sales compared with the first 9 months of the prior year.
Corporate reported a loss of €291 million in the first 9 months of 2007/2008, a decline of €176 compared with the comparable period in 2006/2007. This is mainly attributable to the absence of nonrecurring items with highly positive earnings effects in the prior year. These include income from the disposal of real estate as part of the concentration of ThyssenKrupp's German head offices as well as the departure of the North American automotive operations of ThyssenKrupp Budd. The decrease in earnings from the absence of these positive effects in the previous year was only partly offset in the reporting year by income in particular from risk provisions for contaminated land in the Real Estate unit.
Consolidation mainly includes the results of intercompany profit elimination.