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 €623 million in the reporting period, compared with €833 million in the corresponding prior-year period. The €210 million deterioration in operating cash flows was mainly due to a €1,341 million decrease in net income before impairment losses/reversals in connection with non-current assets as well as before deferred taxes, which was set against a €1,048 million improvement in the net working capital situation.

Cash outflow from investing activities increased by €280 million to €2,063 million. This was due in particular to an increase of €227 million to €1,916 million in capital expenditure on property, plant and equipment, including advance payments.

As in the corresponding prior-year period, free cash flow – i.e. the sum of operating cash flows and cash flows from investing activities – was negative. Compared with the prior year, free cash flow deteriorated by €490 million to €(1,440) million.

There was a cash inflow from financing activities of €2,412 million in the 1st fiscal half, compared with a cash outflow of €700 million a year earlier. This was due in particular to the €2,644 million increase in borrowings, and outgoing payments in the prior year of €523 million for the purchase of treasury shares.

Analysis of the balance sheet structure

Compared with September 30, 2008 the balance sheet total decreased by €243 million to €41,399 million.

Non-current assets increased overall by €1,835 million. This increase was mainly due to a €946 million increase in property, plant and equipment, related mainly to construction progress on the major projects in Brazil and the USA, as well as a €356 million increase in advance payments on property, plant and equipment recognized under other non-current, non-financial assets, mainly in connection with the construction of the steel facility in Brazil. In addition, deferred taxes increased by €432 million mainly in connection with losses which will have a tax-reducing effect in a future period.

Current assets decreased in total by €2,078 million. This reduction was mainly due to sharp declines in inventories and trade accounts receivable and to an increase in cash and cash equivalents.

Inventories decreased in total by €1,055 million to €8,439 million. The decline concerned in particular the Stainless (€710 million) and Services (€492 million) segments and was the result of a reduction in inventory volumes in conjunction with significant writedowns for price-related reasons.

The sharp fall (€1,954 million) in trade accounts receivable related in particular to the Steel (€511 million), Stainless (€294 million) and Services (€675 million) segments and was due to the significant weakening of business activity.

The €963 million rise in cash and cash equivalents to €3,688 million was mainly the result of net borrowings in the amount of €3,105 million, which were set against a negative free cash flow (€(1,440) million) due to weaker business activity and high capital expenditure, and dividend payments of €640 million.

The €1,307 million reduction in total equity to €10,182 million related to the net loss for the reporting period (€199 million), dividend distributions in the amount of €640 million in the reporting period, and expenses in connection with actuarial losses associated with the valuation of pensions recognized directly in equity (€550 million before taxes). Running counter to this were tax effects recognized directly in equity (€177 million).

Non-current financial liabilities increased in total by €4,106 million. Of this, €3,497 million related to the increase in non-current financial debt and €517 million to the increase in accrued pension and similar obligations through the revaluation carried out at March 31, 2009 as a result of the significant changes in interest rates in Germany compared with September 30, 2008 and lower plan assets in connection with the negative developments on the international financial markets.

Current liabilities decreased by €3,042 million. This was due in particular to the €2,269 million reduction in trade accounts payable. This mainly related to the Steel (€591 million), Stainless (€695 million) and Services (€711 million) segments as a result of sharply declining business activity. In addition, current financial debt was reduced by €406 million. The €452 million reduction in other current non-financial liabilities resulted mainly from a decrease in liabilities to employees and from the exercise of a put option by One Equity Partner (OEP) in connection with the acquisition of the remaining 25% shareholding in ThyssenKrupp Marine Systems AG.