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 €1,954 million in the reporting period, compared with €1,509 million the year before. The growth in operating cash flows by €445 million was the result of a €2,991 million improvement in the net working capital situation relating to operating assets and liabilities including pensions and similar obligations. This was set against a €2,546 million decrease in net income before impairment losses/reversals in connection with non-current assets and before deferred taxes, income from investments accounted for by the equity method, and income from asset disposals.

Cash outflow from investing activities increased year-on-year by €253 million to €2,904 million. This was due in particular to an increase of €166 million to €2,733 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. However, compared with the prior year free cash flow improved by €192 million to €(950) million.

There was a cash inflow from financing activities of €3,322 million in the first 9 months of the current fiscal year, compared with €267 million in the corresponding prior-year period. This was due in particular to the €2,626 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 €161 million to €41,481 million.

Non-current assets increased overall by €2,281 million. This increase was mainly due to a €1,210 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 €457 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 the USA. In addition, deferred taxes increased by €561 million mainly in connection with losses which will have a tax-reducing effect in a future period.

Current assets decreased in total by €2,442 million. This reduction was mainly due to sharp declines in inventories and trade accounts receivable; running counter to this was an increase in cash and cash equivalents.

Inventories decreased by €2,309 million to €7,185 million. The decline concerned the Steel (€523 million) and Stainless (€853 million) segments and was the result in particular of production cutbacks as a consequence of the downturn on the steel and stainless markets in the reporting period. The additional significant decline in the Services segment (€827 million) was the result of a reduction in inventory volumes in conjunction with significant writedowns for price-related reasons.

The sharp fall (€2,217 million) in trade accounts receivable related in particular to the Steel (€506 million), Stainless (€246 million) and Services (€899 million) segments and was due to the significant weakening of business activity. The reduction in the Technologies segment (€315 million) was attributable above all to the sharp decline in automotive and construction machinery business.

The €2,369 million rise in cash and cash equivalents to €5,094 million was mainly the result of net borrowings in the amount of €3,971 million, which were set against a negative free cash flow (€(950) million) due to weaker business activity and high capital expenditure, and dividend payments of €643 million.

The €2,055 million reduction in total equity to €9,434 million related in the amount of €829 million to the net loss for the reporting period. On top of this came dividend distributions in the amount of €643 million in the reporting period, and expenses in connection with actuarial losses associated with the valuation of pensions recognized directly in equity (€791 million before taxes). Running counter to this were tax effects recognized directly in equity (€225 million).

Non-current financial liabilities increased in total by €5,531 million. Of this, €4,585 million related to the increase in non-current financial debt, €2,985 million of which was in connection with the issue of bonds. The €829 million increase in accrued pension and similar obligations mainly reflects the net actuarial losses recognized in the reporting period (€791 million).

Current liabilities decreased by €3,637 million. This was due in particular to the €2,330 million fall in trade accounts payable. This mainly related to the Steel (€591 million), Stainless (€568 million) and Services (€838 million) segments as a result of sharply declining business activity. The principal reason for the €335 million increase in current income tax liabilities was that it was not possible to fully offset the losses incurred against profit-making operations; this mainly affected the operations outside Germany. In addition, current financial debt decreased by €644 million, of which €500 million related to the redemption of a bond. The €411 million reduction in other current financial liabilities related in the amount of €341 million to the recognition of derivative financial instruments. The €399 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.