Business area review
Steel Europe
| 1st quarter ended Dec. 31, 2008 |
1st quarter ended Dec. 31, 2009 |
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|---|---|---|---|---|---|---|
| Order intake | million € | 1,866 | 2,500 | |||
| Sales | million € | 2,848 | 2,281 | |||
| Earnings before taxes (EBT) | million € | 345 | 104 | |||
| Adjusted EBT | million € | 354 | 104 | |||
| Employees | Dec. 31 | 38,048 | 35,582 |
The Steel Europe business area produces high-quality carbon steel flat products, mainly for the European market. The product range also includes tinplate, electrical steel, tailored blanks and steel components. The European and North American steel service centers were transferred to the Materials Services business area at the beginning of the fiscal year.
Higher order volumes, lower sales
The value of orders received by the Steel Europe business area in the 1st quarter 2009/2010 was €2.5 billion. This 34% increase was due exclusively to higher order volumes, which were well above the extremely weak prior-year level.
Sales decreased by 20% to €2.3 billion. The stabilizing effect of steady shipment volumes was outweighed by a substantial reduction in average selling prices due to market factors. Nevertheless the business area achieved a profit before taxes (EBT) of €104 million, though this was €241 million lower than a year earlier. The initiated cost-reduction and restructuring programs only partly offset the negative market effects.
The companies of the Steel Europe business area employed a total of 35,582 people on December 31, 2009, 2,466 fewer than a year earlier. The reduction was mainly due to the restructuring of the Metal Forming business and the implementation of the 20/10 program at ThyssenKrupp Steel Europe. The scale of short-time working was significantly reduced. On average, around 2,800 employees were affected in the reporting quarter.
Performance of the operating units
The ThyssenKrupp Steel Europe operating unit, the business area's main sales pillar, is organized essentially in the two sales areas Auto and Industry. Helped by a temporary sharp increase in demand from industrial customers beginning in mid-2009, shipments improved significantly compared with previous months to reach the level of the comparable prior-year period. Order volumes, which had collapsed in the 1st quarter 2008/2009, more than doubled. As a result, the value of new orders increased significantly.
Due to the recovery in demand from late summer, the workload situation eased gradually. Iron and steel making capacities that had previously been temporarily shut down were put back into operation. Blast furnace 9 was fired up on November 01, 2009. Blast furnace A at investee company Hüttenwerke Krupp Mannesmann (HKM) followed at the beginning of January 2010 in response to rising market demand. However, total crude steel production including supplies from HKM was down 7% year-on-year at just under 3 million metric tons. Utilization rates in the downstream processing lines also improved, but some capacities remained unutilized in the reporting quarter.
Following the temporary shutdowns in the previous months it was occasionally difficult to fully meet customer demand for deliveries at mostly very short notice. Sales were lower year-on-year due to the large fall in average selling prices. For the same reason EBT was well down from the prior year despite the cost-reduction measures introduced.
The individual downstream activities combined in the Processing operating unit showed a mixed picture. Overall, sales were lower than in the prior year; EBT also decreased substantially due to market factors.
At tinplate, the largest sub-unit of Processing, sales were slightly lower for volume reasons; the improvements achieved in selling prices had a positive effect. The medium-wide strip business, which had suffered an unprecedented volume slump a year earlier, profited from the strong recovery in demand from automotive suppliers and rerollers. Our grain-oriented electrical steel business, which was sucked into the crisis in 2009 with a time lag, recorded an above-average decline in sales due to slightly lower volumes and a fall in previously largely stable selling prices. In the heavy plate business the situation in important customer areas deteriorated further. Sales decreased sharply for volume and price reasons.
Our tailored blanks business recorded higher sales, with volumes benefiting strongly in the reporting quarter from government stimulus programs in many European countries and the USA. The metal forming business also profited from this, its sales remaining almost unchanged. As the restructuring of this business was completed in fiscal year 2008/2009, there were no further impacts on earnings in the reporting quarter. Color/Construction recorded a drop in sales from the prior year. Despite an improvement in volumes in individual segments, the market as a whole – including prices – remained tight.
Steel Americas
| 1st quarter ended Dec. 31, 2008 |
1st quarter ended Dec. 31, 2009 |
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|---|---|---|---|---|---|---|
| Order intake | million € | 0 | 0 | |||
| Sales | million € | 0 | 0 | |||
| Earnings before taxes (EBT) | million € | (76) | (4) | |||
| Adjusted EBT | million € | (76) | (4) | |||
| Employees | Dec. 31 | 1,263 | 1,794 |
With the Steel Americas business area we are tapping into the North American market for premium flat-rolled steel products. The business area includes the steel making and processing plants under construction in Brazil and the USA. It is also responsible for the shipment of slabs between Brazil, Germany and the USA.
Negative earnings
In the 1st quarter 2009/2010 the business area posted a pre-tax loss of €4 million. Major factors in the loss were the pre-operating costs associated with the project and substantial adverse currency effects from cash and equivalents held in Brazilian reals. At December 31, 2009 Steel Americas had 1,794 employees.
Flexible continuation of major projects
In response to the changed economic conditions we have modified the timetable for the ramp-up and commissioning of the individual works.
The Brazilian iron and steel mill will begin operation of the first production line with a blast furnace and a steelmaking converter in mid-2010; the start-up of the second converter and the ramp-up of the second blast furnace are currently planned for 2011. Planning is being kept flexible to enable us for example to respond swiftly to an earlier market recovery. The hot strip mill in the US processing plant will begin production in mid-2010. The further ramp-up will be flexible based on steel demand.
Iron and steel mill in Brazil
In its meeting on January 21, 2010 the Supervisory Board increased the investment volume for the Brazilian steel mill from €4.7 billion to €5.2 billion. This allowed additional costs, e.g. for the blast furnace section of the steel mill, environmental requirements, fire protection measures and an additional risk provision, to be included in the budget. There have been reductions in non-capitalizable costs. The total planned cash outflow has hardly changed since mid-2009 and stands at around €5.9 billion. The total production capacity will be over 5 million metric tons of crude steel per year.
Construction work in Santa Cruz in the Brazilian state of Rio de Janeiro is in full swing. The port terminal, materials handling facilities and sinter plant are largely complete. The power plant and blast furnaces were technically completed at the beginning of 2010. The same applies to the ancillary facilities such as power distribution and water treatment and to other infrastructure facilities. Due to supplier quality problems, the structural steel work needs to be reworked in some areas, particularly the coke plant and the melt shop.
At the end of 2009 around 21,000 people were working on the construction site and our Brazilian subsidiary had roughly 1,400 employees. The further recruitment of personnel has been adapted in line with the economic conditions.
The Brazilian iron ore producer Vale has increased its shareholding in ThyssenKrupp CSA, our Brazilian subsidiary for the steel mill, from around 10% to just under 27%; the purchase price was €965 million. This step confirms the value of our investment and of our industrial strategy. At the same time it further strengthens the basis for a long-term partnership between ThyssenKrupp and the strategically important raw materials supplier Vale.
Processing plant in the USA
In its meeting on January 21, 2010 the Supervisory Board approved an increase in the investment volume for the US plant by 10% to USD3.6 billion. The main reasons for the increase were higher costs for infrastructure, fire protection systems and cooling equipment. The expected cash outflow for the project is currently USD3.8 billion. The total hot-rolling capacity will be over 5 million metric tons per year.
Construction work in Alabama/USA is progressing well. We are continuing construction of the hot- and cold-rolling mills and the pickling line largely to schedule, which means these facilities will come on line between mid-2010 and the end of the fiscal year. The economic situation has caused us to postpone completion of the coating lines until the next fiscal year. The plant will process slabs produced in Brazil into high-quality flat products. Until the Brazilian production plant starts operation, slabs will be supplied from Germany.
At the end of 2009 around 4,500 people were working on the construction site, and over 400 people were employed at ThyssenKrupp Steel USA.
Preparations for market entry in full swing
In parallel with the construction work, we are preparing our market entry and sales plans for the ramp-up phase in line with the wishes of our customers in the NAFTA region. For this, our sales experts are intensifying their visits to key customers in the target automotive and electrical sectors as well as steel service centers, the construction sector and the tube/pipe industry. We are confident that our attractive product mix and our technological and logistical advantages over our competitors will allow us to make a successful entry to the NAFTA markets.
Stainless Global
| 1st quarter ended Dec. 31, 2008 |
1st quarter ended Dec. 31, 2009 |
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|---|---|---|---|---|---|---|
| Order intake | million € | 967 | 943 | |||
| Sales | million € | 1,173 | 1,210 | |||
| Earnings before taxes (EBT) | million € | (243) | (59) | |||
| Adjusted EBT | million € | (243) | (59) | |||
| Employees | Dec. 31 | 12,167 | 11,597 |
As a world-leading producer of stainless steels, the Stainless Global business area specializes in premium-quality stainless steel flat products and high-performance materials such as nickel alloys and titanium. The business area also includes the new stainless steel mill in Alabama, which is being built in close cooperation with Steel Americas.
Continued loss
The volume of orders received in the 1st quarter 2009/2010 showed a 29% improvement year-on-year. Strong growth was achieved in stainless cold-rolled (+38%) and hot-rolled (+74%), while orders for high-performance nickel alloys and titanium slipped 22% and 85% respectively. In terms of value, order intake at Stainless Global remained virtually unchanged at €0.9 billion, due mainly to lower alloy surcharges and reduced sales of high-performance materials compared with the prior-year quarter.
Overall deliveries were up 25% in the reporting period to 510,000 metric tons. Reflecting the trend in order influx, shipments of cold- and hot-rolled stainless steel increased, while deliveries of titanium and nickel alloys declined. Overall sales climbed 3% to €1.2 billion.
1st-quarter earnings at Stainless Global increased by €184 million year-on-year but remained negative to the tune of €59 million. However, all operating units reported substantially reduced losses, thanks mainly to significantly lower inventory write-downs, targeted cost reductions, and a generally improved market situation permitting base price hikes and increased utilization of production capacities. However, the market upturn lost momentum towards the end of the reporting period for seasonal reasons and because of renewed restraint brought on by the nickel price trend. In response to the continued loss-making situation, the operating units implemented the global restructuring measures resolved at the end of 2008/2009. They also achieved further cost reductions – mainly in the production and administrative areas.
At the end of 2009, Stainless Global employed 11,597 people, 570 fewer than a year earlier.
Performance of the operating units
Rising demand for stainless flat products led to significantly improved order volumes and higher shipments at both ThyssenKrupp Nirosta and ThyssenKrupp Acciai Speciali Terni. Sales at ThyssenKrupp Nirosta rose slightly but could not match the growth in shipments due to reduced alloy surcharges and changes in the product mix. After a high loss in the prior-year quarter, Nirosta returned only a small loss this time. The earnings situation at ThyssenKrupp Acciai Speciali Terni, too, showed a strong improvement. Both operating units benefited from higher base prices, increased cold-rolled volumes and accelerated implementation of the restructuring measures. Continued stable growth in the forging operations additionally bolstered earnings at ThyssenKrupp Acciai Speciali Terni.
ThyssenKrupp Mexinox and Shanghai Krupp Stainless recorded higher order and shipment volumes and significantly improved earnings. However, sales at ThyssenKrupp Mexinox were down due to lower base prices and alloy surcharges. Shanghai Krupp Stainless reported rising sales. Hire rolling orders from the Chinese market led to increased utilization of the cold-rolling capacities and – in conjunction with higher shipments and improved prices – contributed to the growth in earnings.
As a result of the worldwide recovery in demand, ThyssenKrupp Stainless International achieved growth in both order intake and sales.
Business at ThyssenKrupp VDM was impacted by the continued difficult situation especially in the aerospace industry. For both nickel alloys and titanium mill products, orders and sales were down from the prior year. Despite the introduction of restructuring measures and the virtual absence of inventory write-downs, earnings remained negative.
Stainless steel facility in the USA
A modern, integrated stainless steel mill is being built in Alabama/USA in close cooperation with Steel Americas. The investment volume amounts to 1.4 billion US dollars. The start-up phase for the stainless steel facilities is being extended. Production will begin in October 2010, initially with an annual cold-rolling capacity of around 100,000 metric tons. Planning for the start-up of the other facilities is flexible and the ramp-up can be accelerated whenever necessary. The same applies to the start-up of the melt shop, which was planned for early 2012 and can now be delayed by up to 24 months. The site will initially be supplied with starting material from the European mills.
The scope of the overall project remains unchanged, because we continue to believe in the need for an optimized stainless steel production location on the North American market.
Materials Services
| 1st quarter ended Dec. 31, 2008 |
1st quarter ended Dec. 31, 2009 |
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|---|---|---|---|---|---|---|
| Order intake | million € | 4,016 | 2,681 | |||
| Sales | million € | 3,995 | 2,760 | |||
| Earnings before taxes (EBT) | million € | 30 | 112 | |||
| Adjusted EBT | million € | 30 | 31 | |||
| Employees | Dec. 31 | 46,367 | 31,972 |
With 500 locations in 40 countries, the Materials Services business area specializes in materials distribution, logistics and services, and the provision of technical services. In addition to rolled steel, stainless steel, tubes and pipes, nonferrous metals and plastics, Materials Services also offers services from processing and logistics to warehouse and inventory management through to supply chain management. The business area offers technical and infrastructure services in the areas of railway and construction equipment, industrial plants and steel mills.
Demand and prices at low level
The Materials Services business area achieved sales of €2.8 billion in the 1st quarter 2009/2010, €1.2 billion or 31% lower than a year earlier. These figures reflect in particular a steep year-on-year fall in material prices. Over the full product range, demand and prices stabilized slightly.
The €112 million earnings for the quarter at Materials Services mainly reflect nonrecurring income from the disposal of the Industrial Services units. Excluding this effect, the business area returned a profit of €31 million, up slightly from the prior-year quarter.
The number of employees decreased by more than 14,000 compared with December 31, 2008. The main reason for the reduction was the disposal of ThyssenKrupp Industrieservice and ThyssenKrupp Safway. In addition, virtually all companies of the Metals Services operating unit had to make further adjustments in line with the workload.
Performance of the operating units
The Metals Services operating unit combines our global materials, warehouse, service and direct-to-customer business activities. In our key European and North American markets the downturn in volumes and prices came to a halt. Some areas showed a slight recovery, albeit at a very low level that still fell far short of the records reached in 2007 / 2008. This was true in particular of the tubes/pipes business. Volumes and prices for rolled steel, stainless and nonferrous metals showed a firmer/slowly rising trend. Day-to-day business was characterized mainly by minor orders and fierce competition. In international direct-to-customer business, the few major projects available were the subject of tough price competition. The operating unit's sales were considerably lower year-on-year. Earnings before taxes, which in the prior-year quarter were impacted by high inventory write-downs, showed a strong improvement.
The Special Services operating unit includes the materials and supply chain management activities for the aerospace industry and the plastics business now combined at ThyssenKrupp Plastics. This unit also incorporates raw materials trading, system solutions in railway and construction equipment, and steel mill and technical services. Despite the weak economic conditions, the plastics and aerospace activities remained encouragingly steady compared with the 1st quarter 2008/2009. The same applies to the raw materials business, which stabilized at a low level, though prices remained generally unsatisfactory. The railway and construction equipment activities suffered a decline in order volumes due to financing problems at numerous customers; this was further compounded by stiff price competition. The steel mill and technical service operations showed a mixed picture. The rallying steel market made for an improved workload in Europe, but in Brazil some major projects came to an end. Special Services was unable to match its prior-year sales, mainly on account of business in raw materials and equipment. Although its profits were down by more than half, based on adjusted EBT the operating unit made the largest contribution to the business area's profits.
In the Industrial Services operating unit, the 1st quarter 2009/2010 was mainly characterized by the closing of the disposals of ThyssenKrupp Industrieservice and ThyssenKrupp Safway at the end of November and mid-December respectively. As a result these companies are included in the interim financial statements on a prorated basis only. The remaining unit ThyssenKrupp Xervon performed well in view of the general economic situation.
Elevator Technology
| 1st quarter ended Dec. 31, 2008 |
1st quarter ended Dec. 31, 2009 |
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|---|---|---|---|---|---|---|
| Order intake | million € | 1,562 | 1,230 | |||
| Sales | million € | 1,343 | 1,226 | |||
| Earnings before taxes (EBT) | million € | 159 | 155 | |||
| Adjusted EBT | million € | 159 | 155 | |||
| Employees | Dec. 31 | 43,599 | 42,926 |
The Elevator Technology product range encompasses passenger and freight elevators, escalators, moving walks, passenger boarding bridges, stair and platform lifts as well as services for the entire product range. Almost 43,000 employees in over 60 countries at more than 800 locations provide a tight-knit service network to keep us close to customers.
Continued high earnings
Despite negative effects from the global financial and economic crisis, Elevator Technology continued its successful performance in the reporting period. The business volume fell short of the very high order intake and sales of the year-earlier quarter. Negative exchange-rate effects were a further factor in this. Due to the sharp decline in the new installations market, overall order intake slipped 21% to €1.2 billion; excluding exchange-rate factors orders were 18% lower. Sales at €1.2 billion were down 9%, or 5% excluding exchange-rate factors.
Elevator Technology generated a profit of €155 million, maintaining the very high earnings level of the prior-year quarter. All operating units returned a profit.
At 42,926, the number of employees at the end of the 1st quarter was slightly lower than a year earlier.
Performance of the operating units
Order intake at the Central/Eastern/Northern Europe operating unit was weaker than in the prior-year period due to a decline in new installations business in almost all regions. Sales and profits likewise fell short of the year-earlier level, mainly reflecting the downturn in the United Kingdom.
Order intake at the Southern Europe/Africa/Middle East operating unit was down from a year earlier due to weaker new installations business above all in Spain and the Gulf region. Sales were expanded in particular on the back of activities in the Gulf region. Earnings were unchanged from the prior-year quarter.
At the Americas operating unit, orders and sales decreased for exchange-rate reasons. The main losses were reported by the North American activities, while in South America sales were expanded. Earnings again reached the very high prior-year level, with operating improvements offsetting negative exchange-rate effects.
Order intake at the Asia/Pacific operating unit was down slightly. Growth in China was cancelled out by losses at the Korean operations. The expansion of business in China also triggered a marked rise in sales. Earnings were significantly higher year-on-year, with positive earnings contributions generated in all countries.
The volume of business at the Escalators/Passenger Boarding Bridges operating unit declined. Order intake and sales for both escalators and passenger boarding bridges fell short of the prior-year levels. Income was slightly lower.
Orders received at the Accessibility operating unit were slightly down from a year earlier. Growth in Europe offset declines in the USA, where the difficult situation on the housing market continued to have a negative impact. Sales also decreased due to the lower volume of US business. As a result, earnings were slightly lower year-on-year.
Plant Technology
| 1st quarter ended Dec. 31, 2008 |
1st quarter ended Dec. 31, 2009 |
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|---|---|---|---|---|---|---|
| Order intake | million € | 1,751 | 1,324 | |||
| Sales | million € | 1,078 | 954 | |||
| Earnings before taxes (EBT) | million € | 99 | 95 | |||
| Adjusted EBT | million € | 99 | 95 | |||
| Employees | Dec. 31 | 13,416 | 12,977 |
The Plant Technology business area is a leading international supplier of chemical plants, refineries, cement plants, innovative solutions for the mining and handling of raw materials and minerals, and production systems and assembly lines for the automotive industry. The business area's plants and processes open up new possibilities for environmental protection and sustainable development.
Stable performance in a more difficult market environment
Plant Technology achieved 1st-quarter order intake of €1.3 billion thanks to the continued good level of orders at Uhde and ThyssenKrupp Fördertechnik and the booking of a major order at System Engineering. However, compared with the exceptionally high level of the prior-year quarter, this represents a 24% decline. One contributing factor was the deferral of an order originally planned for the 1st quarter at Polysius. Overall, the plant engineering market was characterized by uncertainty and delayed investment decisions by customers, resulting partly from the restrictive lending policy of the banks.
At around €1.0 billion, sales were slightly down from the prior-year level due to billing technicalities. Orders in hand of around €6.6 billion at December 31, 2009, mainly for long-term project business, continue to secure more than one year's sales and were further increased in the course of the 1st quarter.
With EBT of €95 million, Plant Technology again delivered a pleasing result in the 1st quarter 2009/2010. The main contribution to earnings came from chemical plant construction.
The number of employees at December 31, 2009 decreased by 439 from a year earlier, due mainly to the sale of the special vehicle construction business of System Engineering, restructuring measures at System Engineering and Transrapid, and the scaling back of the workforce in line with the workload at some foreign locations of Uhde. However, the good order situation led to growth at Polysius and ThyssenKrupp Fördertechnik.
Performance of the operating units
Thanks to major orders for fertilizer production plants in Abu Dhabi and Egypt, 1st-quarter order intake at the Uhde operating unit, which specializes in chemical and refinery equipment, was significantly higher year-on-year. However, sales were slightly lower due to the delayed award of planned orders. Earnings again matched the high prior-year level.
The Polysius operating unit, a supplier of plant and equipment to the cement and minerals industry, recorded a sharp fall in order intake. This was due to the positive effect of several major orders in the previous year and the delay of several projects in the reporting period. However, thanks to the good level of orders in hand, sales exceeded the already high level of the year before. Earnings fell just short of the high year-earlier level.
Orders received for mining and handling equipment showed further pleasing growth in the 1st quarter 2009/2010 and again significantly exceeded the prior-year level. This was due in particular to orders for open-pit mining equipment including two fully mobile crushers in Brazil, a coal-handling plant for a power station in South Africa, and several mini power plants in India. Sales likewise remained high. Overall ThyssenKrupp Fördertechnik succeeded in maintaining the good earnings level of the previous year.
At System Engineering – which focuses on production systems and assembly lines for the automotive industry – higher order intake mainly in the body-in-white business largely offset the lower level of orders in parts production caused by lower production volumes and temporary plant closures at the auto manufacturers. 1st-quarter sales were lower year-on-year due to billing technicalities. Reduced orders in parts production and underutilization at assembly systems weighed on earnings in the 1st quarter 2009/2010.
Components Technology
| 1st quarter ended Dec. 31, 2008 |
1st quarter ended Dec. 31, 2009 |
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|---|---|---|---|---|---|---|
| Order intake | million € | 1,290 | 1,169 | |||
| Sales | million € | 1,299 | 1,237 | |||
| Earnings before taxes (EBT) | million € | 53 | 43 | |||
| Adjusted EBT | million € | 53 | 43 | |||
| Employees | Dec. 31 | 31,418 | 27,997 |
The Components Technology business area supplies a broad range of high-tech components for wind turbines, the automotive and construction machinery industry, and general engineering applications. Our activities for the automotive industry focus on crankshafts and camshafts, steering systems, dampers, springs and axle module assembly.
Positive performance
In a market environment still characterized by uncertainty, 1st-quarter sales reached €1.2 billion, with the weak US dollar causing negative currency translation effects. Sales were 5% lower year-on-year. Demand in the automotive industry in particular showed signs of picking up. This was partly the result of the incentives provided by stimulus programs in virtually all European countries, the USA and China. Further positive factors were the depleted inventories of our customers and growth in demand for heavy trucks in the USA.
Following considerable losses in the 3rd and 4th quarters of the previous fiscal year, the business area returned a profit of €43 million. The restructuring measures initiated in the previous year, aimed mainly at adjusting capacities in line with the downturn in demand for automotive supplies by means of personnel cutbacks and the closure of plants in Europe and the USA, are being systematically implemented. Further cost reduction programs were carried out, such as the lowering of administrative costs, further savings on the healthcare program of the American foundries and short-time working, especially at the Italian plants.
At the end of 2009, Components Technology had 27,997 employees, 3,421 fewer than a year previously. The decline in demand led to workforce cutbacks mainly at foreign automotive supply companies, but companies in other parts of the business area also reduced their workforces.
Performance of the operating units
The performance of the operating units showed a mixed picture. Order intake and sales of assembled camshafts, steering systems, dampers and springs at Presta Camshafts, Presta Steering and the Bilstein group generally showed pleasing growth and exceeded the level of the corresponding prior-year quarter.
At the forging group, sales of forged crankshafts for cars and trucks fell short of the level of the year-earlier quarter. The Brazilian and US markets showed distinct signs of recovery compared with previous quarters. In the USA, demand for heavy trucks increased among other things as a result of the new environmental regulations applying as of January 2010. By contrast, sales in Europe were lower than in the prior-year quarter but on a rising trend compared with previous quarters.
At the US foundry Waupaca, which produces components for cars, trucks and other applications, sales – adjusted for exchange-rate effects – were practically unchanged from a year earlier. Here, too, there were signs of recovery compared with previous quarters.
Weak demand in the construction machinery and general engineering sectors caused a decline in order intake and sales of slewing bearings, rings and construction machinery components at the operating units Rothe Erde and Berco.
Marine Systems
| 1st quarter ended Dec. 31, 2008 |
1st quarter ended Dec. 31, 2009 |
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|---|---|---|---|---|---|---|
| Order intake | million € | 1,856 | 110 | |||
| Sales | million € | 546 | 254 | |||
| Earnings before taxes (EBT) | million € | 33 | (10) | |||
| Adjusted EBT | million € | 33 | (5) | |||
| Employees | Dec. 31 | 8,319 | 7,593 |
As a leading systems supplier for naval surface vessels, submarines and premium-segment yachts, the Marine Systems business area combines the expertise and experience of long-standing European shipyards and various ship component companies under one roof. In the future Marine Systems will concentrate increasingly on its world leading position in naval shipbuilding.
Order situation weak
1st-quarter order intake was significantly lower than the year before, when a major order was booked for six material packages for the construction of class 214 submarines for South Korea. A major order from Turkey for six material packages to build export class 214 submarines has been initialed; the order is expected in the current fiscal year.
At €254 million, sales were just under half the level of the previous year. The main reasons for this were the lack of sales from the submarine orders for Greece which were cancelled in the previous quarter, and the absence of container ship orders.
In the quarter under review EBT was €(10) million. Key factors in the loss were the absence of earnings from the Greek orders and underutilization at the shipyards, especially in Greece but also at all German locations. Since as things stand at present the going-concern assumption for Hellenic Shipyards S.A. (HSY) cannot be maintained, the ongoing expenses of €5 million incurred in the 1st quarter 2009/2010 were excluded as a nonrecurring item, as a result of which the business area's adjusted earnings amount to €(5) million.
At the end of the year Marine Systems employed 7,593 people, 726 fewer than a year earlier.
Restructuring of the shipyards
Significant progress was made in the reporting quarter with the far-reaching restructuring of the Marine Systems business area in response to the order cancellations and the slump in demand in merchant shipbuilding. At the Emden and Hamburg locations, which are mainly involved in civil shipbuilding, viable cooperative ventures are currently being implemented which will safeguard jobs and reduce the risk of capacity underutilization.
In Emden, the wind turbine manufacturer SIAG Schaaf Industrie will use the site to produce components for offshore wind turbines and thus make a contribution to structural change in the region. Around 700 employees are being transferred to SIAG. Submarine projects and a taskforce supply ship on the order books will be completed to schedule in Emden. An agreement exists with SIAG to complete these during the ramp-up phase of the wind turbine production facilities.
In Hamburg it is planned to sell an 80% interest in each of the companies Blohm + Voss Shipyards, Blohm + Voss Repair and Blohm + Voss Industries to the Abu Dhabi MAR Group. In naval surface vessel construction, which remains a core business of Marine Systems, a cooperative venture with Abu Dhabi MAR is planned. ThyssenKrupp Marine Systems will retain a lead role in all projects with the German Navy and its NATO partners. The collaboration will significantly improve the marketing prospects for frigates and corvettes, above all in the Middle East and northern Africa.
Due to outstanding payments of €534 million, Howaldtswerke-Deutsche Werft (HDW) and Hellenic Shipyards (HSY) canceled the existing submarine construction programs with the Greek government. ThyssenKrupp has begun the process of selling HSY and is in talks on this with the Greek government.
Corporate at ThyssenKrupp AG
Following the reorganization, Corporate comprises the Group's head office including management of the business areas. It also includes the business services activities in the areas of finance, communications, IT and human resources, as well as the non-operating real estate and inactive companies. Sales of services by Corporate companies to Group companies in the first three months of the reporting year were €31 million, compared with €34 million a year earlier.
Corporate reported a pre-tax loss of €121 million, a year-on-year improvement of €34 million. This was mainly due to higher net interest income. In addition the prior-year figure was influenced by the fair-value recognition of cross-currency swaps.
Consolidation mainly includes the results of intercompany profit elimination.