- 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
- Corporate at ThyssenKrupp AG
Segment review
Steel: Massive drop in orders
| 1st quarter ended Dec. 31, 2007 |
1st quarter ended Dec. 31, 2008 |
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|---|---|---|---|---|---|---|
| Order intake | million € | 3,188 | 2,036 | |||
| Sales | million € | 3,214 | 2,925 | |||
| Earnings before taxes (EBT) | million € | 353 | 251 | |||
| Employees (Dec. 31) | 39,922 | 40,753 |
The Steel segment was sucked into the worldwide recession. In the 1st quarter 2008 / 2009 the value of new orders decreased year-on-year by 36% to €2.0 billion. This was a result of a massive drop in order volumes: Bookings declined by 56%, with reluctance to buy increasing in the course of the quarter. To keep production in cost-intensive steelmaking operations as constant as possible, initially ThyssenKrupp Steel AG halted slab purchases on the free market. From November, shifts were reduced in the downstream processing lines for hot-rolled, cold-rolled and coated flat products; the shutdowns were utilized for necessary modernization and repair work. In December, mainly around the turn of the year, shutdowns took place in the whole of production – except for technical necessities. Similar measures were taken at a number of subsidiaries. Because of the shutdowns in the processing lines, production in the steelmaking operations also had to be curtailed towards the end of the quarter.
Sales decreased by 9% to €2.9 billion as shipments fell by a quarter. The higher price levels agreed in long-term contracts had a positive effect. Prices in quarterly contracts were also higher than in the comparable prior-year period. At €251 million, pre-tax earnings were €102 million lower than a year earlier due to a sharp decline in shipments, particularly in the Industry and Auto business units.
The number of employees in the Steel segment increased year-on-year. This was due to the development of the new companies in Brazil and the USA and the inclusion of the TWB group in the USA as of March 01, 2008.
Corporate
The Corporate business unit comprises the administrative functions of ThyssenKrupp Steel AG and manages the construction projects in Brazil and the USA. The unit's loss was roughly level with the prior year and was due to the pre-operating costs of the steel mill in Brazil and the processing plant in Alabama.
Steelmaking
The Steelmaking business unit comprises the entire metallurgical operations in Duisburg and the transportation companies. Crude steel production including supplies from Hüttenwerke Krupp Mannesmann decreased by 14% to 3.2 million metric tons in the 1st quarter 2008 / 2009. There was a sharp fall in profits.
Industry
In the Industry business unit, shipments and sales were lower but profits were up slightly thanks to realized cost reductions. The Heavy Plate profit center reported steady shipments, increased sales and higher earnings. The Color/Construction competence center increased its sales and earnings, though shipments declined. New orders from customers in the appliance and construction industries in particular fell significantly. Strong competitive pressure also drove market prices down. The European steel service centers suffered a drastic drop in volumes. Lower production by auto manufacturers caused a slump in business for component suppliers. As a result, the service centers recorded a steep decline in sales and returned a loss.
Auto
Against the background of the crisis in the automotive industry, the Auto business unit reported lower sales and profits. This was due to the slump in volumes affecting all markets and customers. The picture for the individual businesses was mixed. At the Auto division of ThyssenKrupp Steel AG, positive price effects from annual contracts could not offset falling shipments. Profits were higher than a year earlier thanks to realized cost reductions. Tailored Blanks also recorded a decline in shipments, but sales improved slightly for price reasons. However, earnings fell significantly. The steel service centers in North America suffered a decline in volumes due to production shutdowns in the auto industry, whereas prices were higher. Sales remained virtually unchanged and profits even increased. Business at Metal Forming was also severely impacted by cutbacks and shutdowns in the auto sector. Sales decreased due to the lower level of orders, with the foreign subsidiaries disproportionately affected. A significantly higher loss was posted, partly as a result of further restructuring costs at Metal Forming in the amount of €9 million.
Processing
The Processing business unit comprises our tinplate, medium-wide strip and grain-oriented electrical steel operations. Sales softened slightly and the strong prior-year earnings could not be maintained. The picture for the individual businesses was very mixed. Contrary to the general steel market trend, there was no reduction in demand for tinplate and as a result the high sales volume of the year before was almost matched. Higher prices even allowed a moderate increase in sales revenue. Earnings improved. Considerably more difficult was the situation for medium-wide strip, where volumes collapsed due to the dependence on automotive suppliers and rerollers. As a result, sales and earnings fell short of the prior-year level. Sales of electrical steel were level with the year before, though profits were down.
Stainless: Serious fall in income
| 1st quarter ended Dec. 31, 2007 |
1st quarter ended Dec. 31, 2008 |
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|---|---|---|---|---|---|---|
| Order intake | million € | 2.150 | 966 | |||
| Sales | million € | 1.838 | 1.173 | |||
| Earnings before taxes (EBT) | million € | – 45 | – 249 | |||
| Employees (Dec. 31) | 12.075 | 12.167 |
ThyssenKrupp Stainless reported a massive drop in order intake in the 1st quarter 2008 / 2009 owing to the dramatic deterioration in the market environment. Order volumes fell by 50% to 337,000 metric tons. The decline in prices caused the value of orders received to decrease by as much as 55% to €966 million. The drop in demand impacted virtually the entire product spectrum: Order volumes were down by 53% for cold-rolled, 49% for hot-rolled and 27% for nickel alloys. Only titanium recorded a slight – 4% – rise.
Overall deliveries by ThyssenKrupp Stainless were 26% down from the prior-year quarter at 408,000 metric tons. The decline affected in particular stainless cold-rolled. Shipments of hot-rolled decreased slightly, while growth was achieved in nickel alloys and titanium. Sales of ThyssenKrupp Stainless fell by 36% to €1.2 billion in the 1st quarter 2008 / 2009. The main reasons were the reduced shipments together with lower alloy surcharges and base prices.
Stainless returned a loss of €249 million. All business units reported negative earnings. This serious fall in income in the total amount of €204 million was caused in particular by inventory writedowns in the amount of €194 million necessitated by the continued decline in prices for the raw materials required in stainless production such as nickel, chromium and molybdenum. This could only be partly contained by optimized inventory management. In addition, the steep slide in raw material prices caused further uncertainty and purchasing restraint among market participants. Distributors and service centers focused on reducing their inventories and keeping replenishment orders to a minimum. As a result of this pronounced and unprecedented demand weakness, base prices dropped in some cases to a level even below that of the weak prior-year quarter.
A further rise in electricity costs in particular in Italy and Germany also weighed on earnings. In all business units we have introduced measures to reduce costs and adjust capacity to the diminished workload. During the production shutdowns, leave was taken and working time accounts were run down, temporary employment contracts were not renewed, outsourced services were transferred back to our own workforce, and in some cases short-time working was agreed.
At the end of the 1st quarter the Stainless segment employed 92 more people than a year earlier. The growth was mainly the result of the additional 163 employees recruited for the future stainless steel plant in the USA, the employment of 31 apprentices at ThyssenKrupp Nirosta and minor changes caused by the expansion of processing capacities. This increase was partly offset by a reduction in the headcount in several business units, in particular ThyssenKrupp Acciai Speciali Terni as part of the ongoing reorganization involving the closure of the Turin location.
ThyssenKrupp Nirosta
As at the group's other stainless companies, the situation at ThyssenKrupp Nirosta was characterized by increasingly weak demand from distributors and reduced business with end customers. This generally negative situation was reflected in a significant drop in order intake. The resultant decline in shipments and lower prices led to a severe downturn in sales. Due to the weaker price level, the steep fall in output and shipments, and necessary inventory writedowns, the company reported a loss in the reporting period.
In response to the adverse economic climate, ThyssenKrupp Nirosta extended the year-end plant shutdown from two to four weeks. The stainless production plants remained closed from mid-December to mid-January. This period was utilized in part for maintenance and repair work. Residual leave and working time accounts were used to offset the extended plant shutdown.
ThyssenKrupp Acciai Speciali Terni
The Italian business unit ThyssenKrupp Acciai Speciali Terni was likewise severely affected by the slowdown in demand for stainless steel products in the 1st fiscal quarter. In response, production was cut in the cold-rolling mill and short-time working was agreed in the steelmaking shop. The production shutdowns at the plants were reflected in significantly lower sales. At ThyssenKrupp Titanium, too, capacities were underutilized as a result of weak demand from the aerospace and plant construction sectors. While shipments increased slightly, sales declined. Owing to the extremely weak market for flat-rolled stainless products, necessary inventory writedowns, and the downturn in titanium, the business unit closed the quarter with a loss. This was only partially offset by improved earnings at the forging operations. The relocation of the production facilities from Turin to Terni continued on schedule.
ThyssenKrupp Mexinox
At ThyssenKrupp Mexinox order volumes and sales were down from the prior-year quarter. A Sendzimir mill was closed down for a scheduled overhaul. The generally weak-to-recessionary situation on the Mexican and US markets coupled with the inventory writedowns necessitated by tumbling raw material prices resulted in a sharp fall in earnings.
Shanghai Krupp Stainless
Shanghai Krupp Stainless reported reduced order volumes. Owing to the lower price level in China and the plant's extremely weak workload due to major overcapacities in the region, sales were considerably lower than a year earlier. In addition, inventories had to be written down. All this led to a significant drop in earnings compared with the prior-year quarter.
ThyssenKrupp Stainless International
In the ThyssenKrupp Stainless International business unit, weak demand on the market led to a year-on-year reduction in both order intake and sales. Here, too, the situation was compounded by inventory writedowns at the service centers. The company reported a loss for the quarter.
ThyssenKrupp VDM
In the nickel alloy business of ThyssenKrupp VDM, the continued slide in raw material prices, especially for nickel and molybdenum, unsettled the markets; as a result customers were reluctant to place orders. Earnings were further impacted by the weak aerospace and automotive markets and the almost complete absence of orders from distributors and from the entire US market. ThyssenKrupp VDM also had to write down inventories and posted a loss as a result.
Technologies: High order intake in difficult market environment
| 1st quarter ended Dec. 31, 2007 |
1st quarter ended Dec. 31, 2008 |
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|---|---|---|---|---|---|---|
| Order intake | million € | 3.212 | 4.897 | |||
| Sales | million € | 2.822 | 2.921 | |||
| Earnings before taxes (EBT) | million € | 179 | 164 | |||
| Employees (Dec. 31) | 55.567 | 53.167 |
Technologies achieved a significant rise in order intake in the reporting quarter thanks to the continued good order backlog at Plant Technology and the receipt of a major order at Marine Systems. At €4.9 billion, orders were up 52% from the strong prior-year quarter. This outweighed the noticeable deterioration in the automotive supply business. At €2.9 billion sales were slightly higher year-on-year. Orders in hand at December 31, 2008 reached around €18 billion, mainly from long-term project business, securing more than a year's sales.
With a profit of €164 million, a pleasing level of earnings was again achieved. The main contributions to income came from Plant Technology and Mechanical Components.
The number of employees at the end of the 1st quarter decreased by 2,400 against the previous year, mainly reflecting the disposal of the precision forging operations, the Ravensburg plant and the Nobiskrug shipyard. At Plant Technology the workforce was increased to accommodate the workload.
Plant Technology
Order intake at Plant Technology showed further growth in the 1st quarter 2008 / 2009. The level of orders rose in particular for cement plant and mining and materials handling equipment. In China several new orders were received for aromatics plants. Thanks to the strong increase in orders in hand, sales exceeded the high prior-year level. Key factors continued to be the global trends in the climate, environmental, energy and infrastructure sectors. By working to reduce its high order backlog, Plant Technology again significantly improved on the strong profits of the prior-year period.
Marine Systems
With a major order for six material packages for the construction of class 214 submarines for South Korea, Marine Systems made a significant contribution to the segment's higher order intake. Added to this was a percentage of the order received for a taskforce supply ship for the German navy. The repair and service business remained stable at a high level. In the naval shipbuilding business higher sales were achieved on the basis of orders in hand. Overall Marine Systems returned a smaller profit than a year earlier.
Mechanical Components
The Mechanical Components business unit's spectrum of products and services includes high-tech components for the automotive and construction machinery sectors as well as for general engineering applications. Order intake and sales were lower year-on-year. Alongside disposals, this was attributable to the fall in demand in the automotive and construction machinery business triggered by the financial and economic crisis. Contrary to the general economic trend, however, business with slewing bearings and rings for the wind energy sector continued to grow. Overall profits fell just short of the good level of the prior-year quarter.
Automotive Solutions
Automotive Solutions supplies innovative system solutions for the automotive industry in the product areas steering systems, dampers, body-in-white lines, body and chassis components as well as assembly systems for engines, transmissions and axles. As a result of the global slump in demand in the auto industry, plant shutdowns and extended plant vacations in December, order intake and sales fell below the level of the prior-year quarter. However, as a supplier of equipment to the auto industry, System Engineering achieved higher sales on the basis of its order backlog. Due to the decline in demand the business unit reported a loss. Measures were introduced to reduce costs and adjust capacity to the lower workload. These included for example the taking of annual leave and running down of working time accounts, the release of temporary employees, production shutdowns and shorttime working.
Transrapid
Transrapid generated a lower level of sales. Restructuring expenditures to adjust capacity resulted in a seven-figure euro loss.
Elevator: Successful start
| 1st quarter ended Dec. 31, 2007 |
1st quarter ended Dec. 31, 2008 |
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|---|---|---|---|---|---|---|
| Order intake | million € | 1.466 | 1.562 | |||
| Sales | million € | 1.184 | 1.343 | |||
| Earnings before taxes (EBT) | million € | 119 | 156 | |||
| Employees (Dec. 31) | 40.191 | 43.599 |
Elevator made an extremely successful start to the 2008 / 2009 fiscal year. Both order intake and sales improved significantly against the prior-year quarter. Order intake climbed 7% to €1.6 billion. Sales were up by 13% to €1.3 billion.
Earnings also showed a 31% increase to €156 million.
The increase in the number of employees is attributable among other things to targeted acquisitions for the expansion of our service companies in the regional markets. Furthermore we have expanded our network of branches in particular in Eastern Europe, the Middle East and Asia.
Central/Eastern/Northern Europe
The Central/Eastern/Northern Europe business unit did not quite match its high prior-year order intake, due mainly to slower business at the British and French operations. However, sales profited from the previous year's high order intake and increased strongly. The French operations in particular achieved a significant sales improvement, driven by the continued growth of the modernization business. The other activities were also able to at least match and in some cases significantly exceed the prior-year sales level. The business unit's profit was substantially higher than the year before, with contributions from almost all regions. Only in Austria/Switzerland and the Eastern European operations, where the market is just being established, was there a slight drop in earnings.
Southern Europe/Africa/Middle East
The Southern Europe/Africa/Middle East business unit achieved a strong year-on-year increase in order intake. A major contribution to this growth came from the Spanish activities, due above all to the "Metro Madrid" project. We succeeded in significantly expanding new installations business in the Gulf states. Although the business unit's sales were down from the year before, this was attributable exclusively to the Spanish operations, where there was a decline in new installations business. The weaker Spanish business was also the main reason for the business unit's drop in profit.
Americas
Order intake at the Americas business unit was down from the strong prior-year quarter. The decline was attributable exclusively to the US activities, where the sub-prime crisis prevented a continuation of the high year-earlier level. However, the business unit's sales showed a distinct improvement on the previous year. In particular the new installations and services business in the USA profited from the strong order backlog of the year before. Sales in Brazil and Latin America were also very encouraging. The business unit's profit was significantly higher than a year earlier with contributions from all regions, particularly the US operations. Alongside a strong expansion of the service business, earnings in the new installations business also improved.
Asia/Pacific
The Asia/Pacific business unit significantly expanded its order intake and sales from the prior-year level, even though business in Korea was impacted by exchange-rate effects. The growth in order intake was focused on Korea and China. The sales improvement was primarily attributable to the Australian operations, which benefited from a very high order backlog, and continued strong growth in the new installations business in China. Thanks to the good business performance in China, profits were up from the previous year.
Escalators/Passenger Boarding Bridges
The Escalators/Passenger Boarding Bridges business unit significantly expanded its business volume compared with a year earlier. In both escalators and passenger boarding bridges we succeeded in increasing order intake and sales. The passenger boarding bridges business profited in particular from the major "Doha Airport (Qatar)" order. After reporting a loss the year before, the business unit returned a profit in the 1st quarter of the current fiscal year. Both the escalators and the passenger boarding bridges businesses contributed to this.
Accessibility
The Accessibility business unit continued its growth. The European and US companies expanded strongly. The earnings situation was also positive, with profits significantly exceeding the prior-year level. While the European activities reported growth in profits, the US operations continued to suffer from the downturn in the housing market.
Services: Impact of recession increasing
| 1st quarter ended Dec. 31, 2007 |
1st quarter ended Dec. 31, 2008 |
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|---|---|---|---|---|---|---|
| Order intake | million € | 3.951 | 3.746 | |||
| Sales | million € | 3.867 | 3.726 | |||
| Earnings before taxes (EBT) | million € | 132 | 30 | |||
| Employees (Dec. 31) | 43.054 | 45.173 |
The Services segment achieved sales of €3.7 billion in the 1st quarter 2008 / 2009, 4% down from the same period the year before. Since the beginning of the reporting year, demand for materials has fallen steadily. In addition, prices have plummeted, making it necessary to write down inventories by €54 million in the quarterly financial statements.
The mainly very good profits of the Industrial Services and Special Products business units and nonrecurring income from the sale of an investment in Brazil were not enough to offset the losses in the materials business, with the result that the segment's profit decreased by €102 million to €30 million. In all business units and at all levels of the segment, significant cost-reduction measures are being implemented.
Due to the strong expansion of the service operations in North America – especially Canada – and Brazil, and the first-time inclusion of the Apollo group, the headcount increased by over 2,000 employees.
Materials Services International
Despite the growth in the consolidated group, especially the addition of the Apollo group, the business unit reported a large drop in sales against the corresponding prior-year period. At almost all customers in almost all regions – Germany, Western and Eastern Europe, South America and Asia – workloads declined steeply due to the sales and financing problems. The market situation was characterized by production cutbacks, short-time working, plant shutdowns, extended vacations and further systematic destocking. In the wake of this development, demand and prices for metallic materials fell sharply. The plastics business was also weak, with orders from industry, above all from the construction sector, slipping significantly. The bleak price situation made it necessary to write down inventories at the end of the quarter. As a result, Materials Services International reported a quarterly loss for the first time in many years.
Materials Services North America
North America has been in a recession for a long time. The associated decline in demand and prices intensified further from the start of fiscal 2008 / 2009. Because the product mix is focused on carbon and stainless steel flat-rolled products and nonferrous metals, the negative impact on business was felt considerably more keenly here than in Europe and the rest of the world. Materials Services North America recorded a massive drop in sales against the 1st quarter of the previous year and reported a loss.
Industrial Services
Following the decision to sell Industrial Services to a best owner, the businesses not up for sale – steel mill services and industrial services in Brazil – were assigned to the Special Products business unit with effect from the beginning of fiscal 2008 / 2009.
The Industrial Services business unit recorded a significant year-on-year expansion in 1st quarter sales. A weaker workload in individual sectors, especially the auto industry, was set against pleasing growth in sales to the energy and petrochemicals sectors. Despite the recession, scaffolding services in North America delivered an excellent performance. Industrial Services reported not only higher sales but above all higher profits than a year earlier.
Special Products
1st quarter sales in the business unit – including the newly allocated activities – showed a slight improvement year-on-year. While the raw materials business was severely impacted by the slump in demand and dramatic fall in prices, it was still possible to bill major projects in the rolled steel and tubes business. Sales in the contractors' plant and railway equipment operations were considerably higher than in the same quarter the year before. The service activities newly allocated to the business unit contributed not only to sales but, thanks in particular to the Brazilian operations, also to the growth in earnings. This outweighed the decline in raw materials business. Special Products made the largest contribution to profits in the segment in the 1st quarter.
Corporate at ThyssenKrupp AG
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. Sales in the 1st quarter 2008 / 2009 reached €35 million, compared with €34 million in the prior-year quarter.
Corporate reported a loss of €108 million, €24 million higher than in the same period the year before.
This is mainly the result of lower interest income due to increased borrowing.
Consolidation mainly includes the results of intercompany profit elimination.