Business area review
Steel Europe
| 1st half ended March 31, 2009 |
1st half ended March 31, 2010 |
2nd quarter ended March 31, 2009 |
2nd quarter ended March 31, 2010 |
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|---|---|---|---|---|---|---|---|---|---|---|
| Order intake | million € | 3,345 | 5,499 | 1,479 | 2,999 | |||||
| Sales | million € | 5,174 | 4,948 | 2,326 | 2,667 | |||||
| Earnings before taxes (EBT) | million € | 454 | 267 | 109 | 163 | |||||
| Adjusted EBT | million € | 466 | 267 | 112 | 163 | |||||
| Employees | March 31 | 37,380 | 34,872 | 37,380 | 34,872 |
The Steel Europe business area brings together the Group's carbon flat steel activities, mainly in the European market. The ThyssenKrupp Steel Europe operating unit is focused on the production of high-grade flat-rolled carbon steel, while the Processing operating unit processes steel into tinplate, electrical steel, tailored blanks and other components.
Orders improved, sales slightly lower
The business area received orders worth €5.5 billion in the 1st half 2009/2010, up 64% year-on-year. The increase was due exclusively to higher volumes. Compared with the prior year, sales were 4% lower at €4.9 billion. Although shipments increased substantially, this was offset by a significant reduction in average selling prices. Due to the high share of contract business in overall sales, the return to an upward price trend in the 2nd quarter will not have a positive impact until later in the reporting year. We were able to agree price increases in the quarterly contracts at April 01.
Earnings before taxes were €267 million, €187 million down from the prior-year period. This was mainly due to the fall in average selling prices and to higher costs as a result of underutilization of equipment. The restructuring measures carried out in the prior fiscal year and the expanded cost-reduction programs bolstered earnings but were unable to fully offset the negative market effects.
The companies of the Steel Europe business area employed a total of 34,872 people on March 31, 2010, 2,508 or 6.7% fewer than a year earlier. The reduction was mainly due to personnel adjustments under the 20/10 program at ThyssenKrupp Steel Europe AG and in the metal forming business. The scale of short-time working was significantly reduced: Only around 800 employees were still affected in March.
Performance of the operating units
Sales declined slightly in the ThyssenKrupp Steel Europe operating unit, the business area's main revenue driver. Improved volumes were unable to offset the significant fall in prices. The increase in industry sales was due in particular to outside-customer business, which recorded a sharp decline a year earlier and now profited from restocking. Positive impetus also came from distributors and steel service centers. Shipments to automotive customers stabilized increasingly but following last year's collapse were still significantly lower than the record levels of 2007 and 2008. Mainly as a result of the fall in prices, pre-tax profits were well down from the prior year, despite ongoing measures to stabilize earnings.
Equipment utilization improved further in the 2nd fiscal quarter as the markets stabilized and demand picked up. After blast furnace A was fired back up at investee company Hüttenwerke Krupp Mannesmann in January 2010, all available blast furnaces are now once again in use and are currently operating to full capacity. Crude steel production including supplies from Hüttenwerke Krupp Mannesmann was 6.3 million metric tons in the 1st half 2009/2010, 22% higher than the low prior-year level. Capacity utilization also improved in the downstream processing lines, allowing short-time working to be reduced further.
The downstream activities combined in the Processing operating unit showed a mixed picture. Overall, sales and pre-tax earnings were also down year-on-year.
The tinplate unit continued to hold up well, recording only slight declines in shipments, sales and prices. The sharp volume-related increase in sales of medium-wide strip was due to the recovery in demand, above all from automotive suppliers and rerollers. By contrast, sales of grain-oriented electrical steel decreased. While volumes remained more or less unchanged, the business increasingly faced significant reductions in selling prices. Sales of heavy plate were down as a result of the difficult situation in important customer sectors such as the truck industry and shipbuilding.
The tailored blanks business recorded higher sales and continued to profit from the government stimulus programs for the auto industry in many European countries and the USA. The metal forming business also benefited from this and increased its sales. Color/Construction recorded a year-on-year decrease in sales. Despite improving volumes in individual construction segments, such as the garage door industry, and in parts of the automotive industry, the market as a whole – including prices – remained tight.
Steel Americas
| 1st half ended March 31, 2009 |
1st half ended March 31, 2010 |
2nd quarter ended March 31, 2009 |
2nd quarter ended March 31, 2010 |
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|---|---|---|---|---|---|---|---|---|---|---|
| Order intake | million € | 0 | 23 | 0 | 23 | |||||
| Sales | million € | 0 | 23 | 0 | 23 | |||||
| Earnings before taxes (EBT) | million € | (98) | (36) | (22) | (32) | |||||
| Adjusted EBT | million € | (98) | (36) | (22) | (32) | |||||
| Employees | March 31 | 1,529 | 2,256 | 1,529 | 2,256 |
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 also organizes slab logistics between Brazil, Germany and the USA.
Major projects close to startup
The major projects for the production and processing of carbon flat steel in Brazil and the USA will start up in the 2nd half 2010. The supply of starting material has begun in both Brazil and the USA. We will react to changes in the economic conditions by taking a flexible approach to the startup of the second production line in Brazil.
Earnings situation and workforce
The earnings situation is currently dominated by the startup costs for the projects and the ramp-up of production. In the 1st half, the Steel Americas business area reported a pre-tax loss of €36 million. In addition to the project startup costs, this figure is mainly the result of adverse currency effects from cash and cash equivalents held in Brazilian reals.
On March 31, 2010 Steel Americas had 2,256 employees, 727 more than a year earlier.
Budgets being met
The presentation of the projects in the USA and Brazil will be submitted to the Supervisory Board of ThyssenKrupp AG on May 12, 2010. As things stand, the amended project budgets as approved by the Supervisory Board in January 2010 will be met for both the Brazilian iron and steel mill and the processing plant in Alabama. For the Brazilian iron and steel mill, the investment budget is €5.2 billion with planned expenditures of €5.9 billion. The investment budget for the processing plant in Alabama is 3.6 billion US dollars, with planned expenditures of 3.8 billion US dollars.
Iron and steel mill in Brazil
Construction work in Santa Cruz in the Brazilian state of Rio de Janeiro is progressing well. The port terminal, materials handling facilities and sinter plant are at an advanced stage of completion; 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. The sinter plant started production in April.
We will start up the first production line with one blast furnace and one converter in mid 2010; the second converter will go into operation after the first line has stabilized. As things stand, startup of the second blast furnace is planned for early to mid 2011. The total annual production capacity will be more than 5 million metric tons of crude steel.
At the end of March 2010 more than 23,000 people were working on the construction site, and CSA in Brazil had around 1,500 employees.
Processing plant in the USA
Construction work on our processing plant in Calvert, Alabama/USA is also in full swing. With construction largely on schedule, we expect the hot rolling mill to come on line in mid 2010. The cold rolling mill and pickling line will start production before the end of the fiscal year. Due to the economic situation, completion of the coating lines will be postponed until next fiscal year. The US plant will process slabs produced in Brazil into high-quality flat products. Until the Brazilian mill starts production, slabs will be supplied from Germany. The first two deliveries were made in the 2nd quarter 2009/2010.
Hot-rolled capacity will be more than 5 million metric tons per year. This includes the rolling capacity required for Stainless Global's stainless steel plant in Alabama.
At the end of March 2010 around 5,400 people were working on the construction site, and ThyssenKrupp Steel USA had around 800 employees.
Entry to the NAFTA market
In parallel with the construction work we have systematically continued our market analyses of price and volume trends and customer requirements in the NAFTA region and prepared our sales plans for the ramp-up phase in line with the wishes of our customers. 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 and the tube/pipe industry.
Demand on the North American market for premium flat-rolled carbon steel increased again in the 2nd quarter 2009/2010, although the sharp price rises for raw materials (ore, coking coal) are currently making it difficult to plan starting material costs and selling prices. We have already received the first orders from customers in the NAFTA region.
Stainless Global
| 1st half ended March 31, 2009 |
1st half ended March 31, 2010 |
2nd quarter ended March 31, 2009 |
2nd quarter ended March 31, 2010 |
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|---|---|---|---|---|---|---|---|---|---|---|
| Order intake | million € | 1,785 | 2,503 | 818 | 1,560 | |||||
| Sales | million € | 2,161 | 2,671 | 988 | 1,461 | |||||
| Earnings before taxes (EBT) | million € | (610) | (176) | (367) | (117) | |||||
| Adjusted EBT | million € | (550) | (176) | (307) | (117) | |||||
| Employees | March 31 | 12,079 | 11,235 | 12,079 | 11,235 |
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 cooperation with Steel Americas.
Orders improved, losses reduced
The business area's order situation improved in the 1st half 2009/2010. The volume of orders received increased by 50% year-on-year. There was particularly strong growth in stainless cold-rolled (+55%) and hot-rolled (+94%). Order volumes were stable for nickel alloys but down by 54% for titanium. In terms of value, the business area's order intake increased by 40% to €2.5 billion, mainly due to the year-on-year rise in alloy surcharges.
Overall deliveries were up 37% from the prior-year period to 1.1 million metric tons. Reflecting the trend in order intake, shipments of cold-rolled and hot-rolled stainless steel increased, while deliveries of titanium and nickel alloys declined. Overall sales climbed 24% to €2.7 billion.
1st-half earnings before taxes at Stainless Global increased by €434 million year-on-year but remained negative to the tune of €176 million. However, all operating units in the stainless steel business reported substantially lower losses, thanks mainly to significantly lower inventory writedowns, targeted cost reductions, and a generally improved market situation permitting higher base prices and better utilization of production capacities. We continued to systematically implement the restructuring measures resolved at the end of 2008/2009 at all locations. At the same time, the SPRINT performance-enhancement program created the basis to sustainably improve our earnings and competitiveness and further flexibilize our cost base.
At March 31, 2010 Stainless Global had 11,235 employees, 844 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 ThyssenKrupp Nirosta and ThyssenKrupp Acciai Speciali Terni. Sales were also substantially higher. Following a heavy loss in the 1st half of the prior year, Nirosta's earnings were vastly improved. Earnings also improved at ThyssenKrupp Acciai Speciali Terni. In both operating units, higher base prices and increased cold-rolled shipments played a role in this. Continued stable growth in the forging operations additionally bolstered earnings at ThyssenKrupp Acciai Speciali Terni.
ThyssenKrupp Mexinox and Shanghai Krupp Stainless also recorded higher order and shipment volumes and improved sales and pre-tax earnings. Hire rolling orders from the Chinese market led to increased utilization of cold-rolled capacities and – in conjunction with higher shipments and improved prices – contributed to growth in earnings.
As a result of the worldwide recovery in demand, both orders and sales at ThyssenKrupp Stainless International were almost doubled.
By contrast, business at ThyssenKrupp VDM was impacted by the postponement or cancellation of numerous customer projects. Order intake was stable for nickel alloys but significantly lower year-on-year for titanium mill products. Sales in both businesses fell sharply. Despite the introduction of restructuring measures and the virtual absence of inventory writedowns, EBT remained negative.
Stainless steel mill in the USA
A modern, integrated stainless steel mill is being built in Alabama/USA in cooperation with Steel Americas at a cost of 1.4 billion US dollars. The startup phase for the stainless steel mill is being extended. We intend to start production with one cold rolling mill and an annual cold-rolled capacity of around 100,000 metric tons in October 2010, expanding capacity in the subsequent period to a maximum of 140,000 tons per year. Startup of the remaining facilities is being kept flexible, allowing for an accelerated ramp-up at any time. The same applies to the startup 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, as we continue to believe in the need for an optimized stainless steel production location on the North American market.
Materials Services
| 1st half ended March 31, 2009 |
1st half ended March 31, 2010 |
2nd quarter ended March 31, 2009 |
2nd quarter ended March 31, 2010 |
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|---|---|---|---|---|---|---|---|---|---|---|
| Order intake | million € | 6,735 | 5,740 | 2,719 | 3,059 | |||||
| Sales | million € | 7,104 | 5,641 | 3,109 | 2,881 | |||||
| Earnings before taxes (EBT) | million € | (76) | 172 | (106) | 60 | |||||
| Adjusted EBT | million € | (76) | 91 | (106) | 60 | |||||
| Employees | March 31 | 45,674 | 31,482 | 45,674 | 31,482 |
With 500 locations in 40 countries, the Materials Services business area specializes in materials distribution, logistics and services, the provision of technical services as well as services for industrial plants and steel mills. In addition to rolled steel, stainless steel, tubes and pipes, nonferrous metals, specialty materials and plastics, Materials Services also offers services from processing and logistics to warehouse and inventory management through to supply chain and project management.
Slight recovery in demand and prices – effective cost-reduction programs
At €5.6 billion, the business area's 1st-half sales were 21% lower than a year earlier. This was due in particular to lower prices for metallic materials and the disposal of ThyssenKrupp Industrieservice and ThyssenKrupp Safway, whose figures are included in the 1st quarter only.
With volumes slightly higher but material prices still not satisfactory overall, Materials Services reported significantly improved EBT of €172 million. Non-recurring gains on the aforementioned disposals had a positive impact, but even excluding these, profits at €91 million were considerably higher year-on-year. Significantly lower costs at all levels played a major role in this.
At the end of the reporting period the business area had 31,482 employees, some 14,000 fewer than a year earlier. The change was mainly attributable to the disposals at Industrial Services. However, low workloads also necessitated job cuts at almost all companies of the Metals Services unit. The completion of major projects saw a reduction of around 1,000 in the headcount at Special Services.
Performance of the operating units
The Metals Services operating unit combines our global materials, warehouse, service and direct-to-customer business activities. Although the downturn in volumes and prices on our key European and North American markets came to a halt in the 1st quarter, the first signs of recovery were not seen until the end of the 2nd quarter. Despite a moderate increase in volumes in our warehouse business, sales were still significantly lower year-on-year; this applied to all regions, as despite the upward trend in the 2nd quarter prices still failed to reach the level of 2008/2009. Thanks to demand from the automotive industry, the auto-related service center activities showed a significant improvement on the very weak prior-year period. International direct-to-customer business suffered in general from subdued demand and fierce competition for the few major projects available. Following a substantial loss in the prior-year period as a result of drastic price falls which necessitated high writedowns on inventory, the operating unit achieved a significant improvement in 1st-half earnings and – thanks not least to massive cost reductions – reported a pleasing pre-tax profit.
The Special Services operating unit encompasses the materials and supply chain management activities for the aerospace industry and the plastics business. It also includes raw materials trading, system solutions in railway and construction equipment, and steel mill and technical services. While the plastics, aerospace and raw materials businesses performed in part very strongly, sales in the railway and construction equipment areas were lower due to weather-related postponements and financing difficulties for major projects. Our steel mill-related services acquired new projects in Brazil; capacity utilization in Germany increased due to improved workloads in the steel industry. The operating unit's EBT fell short of the prior-year level but still made the largest contribution to business area profits.
Following the disposal of ThyssenKrupp Industrieservice and ThyssenKrupp Safway in the 1st quarter, the sales and EBT of these businesses are included in the 1st-half figures of the Industrial Services operating unit on a prorated basis only. The remaining unit was impacted with a time lag by the economic crisis, which is now also affecting energy sector orders. This was compounded by weather-related restrictions and delays. 1st-half sales and pre-tax profits were down from the prior-year period.
Elevator Technology
| 1st half ended March 31, 2009 |
1st half ended March 31, 2010 |
2nd quarter ended March 31, 2009 |
2nd quarter ended March 31, 2010 |
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|---|---|---|---|---|---|---|---|---|---|---|
| Order intake | million € | 2,751 | 2,445 | 1,189 | 1,215 | |||||
| Sales | million € | 2,636 | 2,447 | 1,293 | 1,221 | |||||
| Earnings before taxes (EBT) | million € | 308 | 308 | 149 | 153 | |||||
| Adjusted EBT | million € | 308 | 308 | 149 | 153 | |||||
| Employees | March 31 | 43,306 | 42,787 | 43,306 | 42,787 |
The Elevator Technology business area supplies passenger and freight elevators, escalators and moving walks, passenger boarding bridges, stair and platform lifts as well as service for the entire product range. Almost 43,000 employees at more than 900 locations provide a tight-knit service network to keep us close to customers.
Continued high earnings
Despite the difficult environment on many property markets and negative exchange-rate effects, the business area performed well in the 1st half 2009/2010. Orders fell 11% to €2.4 billion due to the sharp decline in the market for new installations; excluding exchange-rate factors the decrease was 10%. All operating units reported lower orders apart from Asia/Pacific. Sales at €2.4 billion were down 7%, or 5% excluding exchange-rate factors. In the service business, the number of maintenance units under contract increased.
Elevator Technology generated pre-tax earnings of €308 million, maintaining the very high prior-year level. All operating unit returned profits.
At 42,787, the number of employees at March 31, 2010 was slightly lower than a year earlier.
Performance of the operating units
Order intake in the Central/Eastern/Northern Europe operating unit was lower year-on-year due to weaker new installations business in almost all regions. Sales were also down from the prior-year period. While the operations in Germany, northern and eastern Europe and the Benelux countries remained stable, there was a marked fall in sales in the United Kingdom. Weaker earnings in the UK were also the main reason for the decrease in the operating unit's EBT.
Orders in the Southern Europe/Africa/Middle East operating unit fell short of the prior-year level, due in particular to the decline in new installations and modernization business in Spain and Portugal. By contrast, the activities in the Gulf region remained stable. Thanks to growth in Italy and the Gulf region, sales of the operating unit expanded slightly. Earnings before taxes were unchanged from the prior year.
Orders and sales at the Americas operating unit fell for exchange-rate reasons, but above all due to the continuing negative trend on the US property market. By contrast with the US market, business in Brazil expanded further. Pre-tax earnings almost matched the very high prior-year figure, as operating improvements in particular in the service business all but offset the negative exchange-rate effects.
Pleasing growth in Chinese new installations business resulted in a slight increase in order intake at the Asia/Pacific operating unit. Sales and pre-tax earnings were significantly higher year-on-year. Thanks to optimization measures implemented in recent years, the Korean company once again returned a profit. The other regions also reported positive earnings contributions, maintaining or improving on the year-earlier figures.
Business was weaker at the Escalators/Passenger Boarding Bridges operating unit, resulting in year-on-year decreases in orders, sales and EBT.
The Accessibility operating unit reported a fall in order intake and sales. Despite growth in Europe, the difficult situation on the US housing market continued to have a negative impact. Earnings before taxes were also slightly lower than a year earlier for volume reasons.
Plant Technology
| 1st half ended March 31, 2009 |
1st half ended March 31, 2010 |
2nd quarter ended March 31, 2009 |
2nd quarter ended March 31, 2010 |
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|---|---|---|---|---|---|---|---|---|---|---|
| Order intake | million € | 2,268 | 2,148 | 517 | 824 | |||||
| Sales | million € | 2,265 | 1,894 | 1,187 | 940 | |||||
| Earnings before taxes (EBT) | million € | 173 | 168 | 74 | 73 | |||||
| Adjusted EBT | million € | 178 | 168 | 79 | 73 | |||||
| Employees | March 31 | 13,186 | 12,934 | 13,186 | 12,934 |
The Plant Technology business area is a leading international supplier of chemical plants, refineries, cement and minerals plants, innovative solutions for the mining and handling of raw materials, 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.
Performance remains stable
Plant Technology recorded orders of €2.1 billion in the 1st half 2009/2010, almost matching the extraordinarily high prior-year figure. While order levels remained good at Uhde and ThyssenKrupp Fördertechnik, and System Engineering profited from the acquisition of a major order for a body-in-white line, Polysius reported a decline in new business. The plant engineering market continued to be characterized by uncertainty and delayed investment decisions by customers.
Sales fell 16% to €1.9 billion due to billing technicalities. Orders in hand of around €6.6 billion at March 31, 2010, mainly for long-term project business, continue to secure well over one year's sales and increased further in the course of the 1st half 2009/2010.
With a pre-tax profit of €168 million, Plant Technology again delivered a pleasing result in the 1st half 2009/2010. The main contributions to earnings came from Uhde, Polysius and ThyssenKrupp Fördertechnik.
The number of employees at March 31, 2010 decreased by 1.9% compared with a year earlier to 12,934. This was mainly due to the disposal 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 workloads at some foreign locations of Uhde. However, the strong order situation led to an increase in employee numbers in particular at ThyssenKrupp Fördertechnik.
Performance of the operating units
The Uhde operating unit recorded a significant year-on-year increase in 1st-half order intake thanks to major orders for fertilizer plants in Abu Dhabi and Egypt and for a hydrogen plant in India. By contrast, sales were significantly lower than a year earlier, when several major orders were billed. Earnings before taxes were level with the high prior-year level.
The Polysius operating unit, which builds plants for the cement and minerals industry, reported a sharp fall in order intake in the 1st half 2009/2010. This was mainly due to the positive effect of several major orders in the prior-year period and the postponement of several projects in the reporting period. However, thanks to the good level of orders in hand, sales remained at the year-earlier level. EBT fell just short of the good prior-year figure.
Orders received for mining and handling equipment showed pleasing growth. Thanks 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 and peripheral equipment in India, the ThyssenKrupp Fördertechnik operating unit achieved a significant year-on-year improvement in order intake. Sales and pre-tax earnings were also up from the high prior-year figures.
The System Engineering operating unit – focused on production systems and assembly lines for the automotive industry – reported a substantial increase in orders. Higher order intake mainly in the body-in-white business more than offset the lower order levels for parts production caused by lower production volumes and temporary plant closures at individual customers. Sales were lower year-on-year due to billing technicalities. Reduced orders for parts production, underutilization in the assembly systems business and nonrecurring items at a foreign company weighed on EBT.
1st-half orders and sales at Transrapid in 2009/2010 were higher than a year earlier. Due among other reasons to a Chinese supply and service contract, Transrapid returned a pre-tax profit.
Components Technology
| 1st half ended March 31, 2009 |
1st half ended March 31, 2010 |
2nd quarter ended March 31, 2009 |
2nd quarter ended March 31, 2010 |
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|---|---|---|---|---|---|---|---|---|---|---|
| Order intake | million € | 2,306 | 2,506 | 1,016 | 1,337 | |||||
| Sales | million € | 2,399 | 2,581 | 1,100 | 1,344 | |||||
| Earnings before taxes (EBT) | million € | 6 | 106 | (47) | 63 | |||||
| Adjusted EBT | million € | 32 | 106 | (21) | 63 | |||||
| Employees | March 31 | 29,223 | 27,894 | 29,223 | 27,894 |
The Components Technology business area supplies a broad range of high-tech components for wind turbines, the automotive and construction machinery industries, and general engineering applications. Our activities for the automotive industry focus on crankshafts and camshafts, steering systems, dampers, springs and the assembly of axle modules.
Positive performance
The positive performance of the business area improved further in the course of the 1st half 2009/2010. Sales were up 8% to €2.6 billion. Especially in the 2nd fiscal quarter the market environment recovered. Despite negative exchange-rate effects due to the weakness of the US dollar, sales were 22% higher than the prior-year quarter. The pick-up in demand in the automotive industry was due in part to government stimulus packages in virtually all European countries, the USA, Brazil and China.
Pre-tax earnings reached €106 million, a substantial year-on-year increase. 2nd-quarter profits were also significantly higher than in the preceding quarter. There were distinct improvements in earnings at the automotive operating units, all of which returned profits. Positive effects came from the demand recovery in the automotive sector, lower restructuring expense and the restructuring measures initiated in the previous year. The restructuring measures are focused on structural capacity adjustments and include both personnel cutbacks and plant closures in Europe and the USA. Further cost-reduction programs were also carried out.
At the end of March 2010, Components Technology had 27,894 employees, 1,329 fewer than a year earlier. The workforce adjustments mainly related to automotive companies but also affected the other parts of the business area.
Performance of the operating units
The performance of the operating units was mixed.
Following a good 1st quarter, the automotive supply business continued to perform strongly and achieved a clear year-on-year improvement in the 1st half 2009/2010. Increased customer orders for assembled camshafts, steering systems, dampers, springs and axle module assembly resulted in higher sales at Presta Camshafts, Presta Steering and the Bilstein group. In the 2nd quarter, all these operating units returned pre-tax profits.
At the forging group, 1st-half sales of forged crankshafts for cars and trucks were also up year-on-year. Compared with the prior-year period, the 2nd quarter saw significant growth and a return to profit. Demand increased in particular on the Brazilian market. By contrast, sales in Europe were lower than a year earlier, although there were signs of a recovery in the last few months.
The US foundries of Waupaca, which produce components for cars, trucks and other applications, profited from increased market demand and further savings on the healthcare program. 1st-half sales were significantly higher than a year earlier in US dollars and slightly higher in euros when adjusted for exchange-rate effects. Following a loss in the prior year, the unit once again returned a healthy pre-tax profit.
With demand in the construction machinery and general engineering sectors still weak and wind energy customers placing orders for immediate needs only, order intake and sales declined in the slewing ring, ring and construction machinery component businesses of Rothe Erde and Berco. However, there were signs of a slight recovery in construction machinery in the 2nd quarter, due in part to depleted customer inventories. For demand reasons, Rothe Erde was unable to match its high prior-year profit but remained the business area's main earnings driver. An extensive cost-reduction program was implemented to adapt to the change in the workload. Berco significantly reduced its losses, especially in the 2nd quarter.
Marine Systems
| 1st half ended March 31, 2009 |
1st half ended March 31, 2010 |
2nd quarter ended March 31, 2009 |
2nd quarter ended March 31, 2010 |
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|---|---|---|---|---|---|---|---|---|---|---|
| Order intake | million € | 2,049 | 249 | 193 | 139 | |||||
| Sales | million € | 917 | 541 | 371 | 287 | |||||
| Earnings before taxes (EBT) | million € | (84) | (17) | (117) | (7) | |||||
| Adjusted EBT | million € | (14) | 3 | (47) | 8 | |||||
| Employees | March 31 | 8,305 | 6,669 | 8,305 | 6,669 |
Following the restructuring of our shipyards, the Marine Systems business area will in the future concentrate on its outstanding worldwide position in naval shipbuilding.
Order situation remains very weak
The market environment for Marine Systems remained very unfavorable. Newbuild or modernization projects for naval ships were postponed, the civil shipbuilding business virtually collapsed due to drastic overcapacities, and demand for high-class mega yachts remained subdued. The market for repairs, refits and conversions also declined.
Against this background, order intake in the 1st half 2009/2010 fell by 88% to €249 million. The new orders include a design project for the new generation of Swedish "A26" submarines. The contract with Turkey for six material packages to build export class 214 submarines, which was initialed in the last fiscal year, is expected to come into effect in summer 2010 after final financing details have been clarified.
Sales in the reporting period reached €541 million, a year-on-year decrease of 41%. The main reasons for this decline were lower levels of completion for some submarine projects and the complete absence of sales from the submarine orders for Greece, which were cancelled in September 2009.
The business area reported a pre-tax loss of €17 million, mainly due to the charge from Hellenic Shipyards in Greece. Excluding these nonrecurring items, earnings were break-even.
At the end of March 2010 Marine Systems had 6,669 employees, 1,636 fewer than a year earlier. The decrease was the result of the initiated restructuring of the shipyards.
Restructuring of the shipyards
The extensive restructuring of the Marine Systems business area was continued in the 1st half 2009/2010.
The design and project management activities of the surface naval vessel business at Blohm + Voss Nordseewerke are to be transferred to a 50/50 joint venture with the Abu Dhabi MAR Group. At the same time it was agreed to sell 100% of the mega yacht construction business and an initial 80% share of both the ship repair and the component production activities. In addition, Abu Dhabi MAR will acquire the employees and facilities of the merchant shipbuilding operations of HDW-Gaarden in Kiel, which were discontinued in fall 2009. The contracts for these agreements were signed on April 13, 2010.
The agreement reached with SIAG Schaaf Industrie AG in the 1st fiscal quarter on the establishment at the Emden site of a production facility for offshore wind turbines and the transfer of around 700 employees came into effect on March 08, 2010.
Corporate at ThyssenKrupp AG
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 non-operating real estate and inactive companies. Sales of services by Corporate companies to Group companies in the reporting half-year were €62 million, compared with €60 million a year earlier.
Corporate reported a pre-tax loss of €275 million, a year-on-year improvement of €21 million. This was mainly due to higher net interest income.
Consolidation mainly includes the results of intercompany profit elimination.
