- 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
Segment review
Steel: Business expanded
| 1st half ended March 31, 2007 |
1st half ended March 31, 2008 |
2nd quarter ended March 31, 2007 |
2nd quarter ended March 31, 2008 |
||||||
|---|---|---|---|---|---|---|---|---|---|
| Order intake | million € | 6,633 | 7,174 | 3,510 | 3,986 | ||||
| Sales | million € | 6,507 | 6,853 | 3,389 | 3,639 | ||||
| Earnings before taxes (EBT) | million € | 870 | 749 | 471 | 396 | ||||
| Employees (March 31) | 39,005 | 40,636 | 39,005 | 40,636 |
The Steel segment again expanded its business in the 1st half 2007/2008 compared with the prior-year period. The value of orders received rose by 8% to €7.2 billion. This was also due to an increase in order volumes, in particular in the 2nd fiscal quarter. The price increases implemented on the market also had an impact. Sales were up 5% to €6.9 billion, which was due to higher prices as shipments remained stable. Steel generated a profit of €749 million, compared with €870 million a year earlier. The decline is mainly due to pre-operating expense for the steel mill project in Brazil and higher starting material costs.
Corporate
The Corporate business unit combines the administrative functions of ThyssenKrupp Steel AG and manages the strategic projects in Brazil and the USA. The higher loss in the reporting period compared with the 1st half 2006/2007 was mainly due to the pre-operating costs for the Brazilian steel mill.
Steelmaking
Crude steel output at the Steelmaking business unit, which comprises the metallurgical operations in Duisburg and the logistics activities, was 3% lower than in the comparative prior-year period. Steelmaking operations had to be adapted to allow for the scheduled relining of blast furnace Schwelgern 1. The loss of hot metal production was compensated in part by the successful ramp-up of the new blast furnace 8, which started operation in December 2007. Steelmaking's sales were slightly lower than a year earlier; due to higher prices for supplies to downstream production operations, profits were higher.
Industry
The Industry business unit recorded an increase in sales in the 1st half, resulting mainly from higher shipments. Overall profits were lower than in the prior-year period, though the picture in the individual profit centers was mixed. Shipments to industrial customers increased as the market remained strong. Revenues were stable on average, but profits were significantly lower than a year earlier due to higher starting material costs which could not be compensated by increased efficiency. Thanks to the very good state of the market, the heavy plate business achieved a significant improvement in sales, with the increase attributable exclusively to prices. Earnings rose significantly from the good prior-year figure. The new Color/Construction competence center formed at the start of the fiscal year expanded its sales – mainly due to higher volumes – but profits were down. The same picture – lower profits and higher sales – was seen at the European steel service centers. The new steel service center in Poland in particular provided additional business. Overall, the Industry business unit once again delivered the biggest contribution to the segment's earnings.
Auto
Sales in the Auto business unit increased in the 1st half 2007/2008 due to increased revenues. Higher prices were agreed in the annual contracts negotiated by ThyssenKrupp Steel AG with automotive OEMs and suppliers effective January 01, 2008. By contrast, shipments were down, in particular for sheet and hot-dip coated sheet. Higher prices and continuous performance enhancement programs were unable to offset the higher raw material and energy costs. Earnings were lower than a year earlier. Tailored Blanks improved its profits, mainly through higher shipments as a result of consolidation. Effective March 01, 2008 the unit acquired a majority interest and industrial control of the operations of the TWB group, with production sites in the USA and Mexico. Our American steel service activities recorded significantly lower volumes, exacerbated by the negative effects of the stronger euro, although US dollar prices remained high. Sales were lower than a year earlier. Following a loss in the prior-year period, a profit was generated. The Metal Forming unit, which has been part of the Steel segment since the beginning of the past fiscal year, increased its sales. Key to this were an increasing presence on non-European markets and in Turkey, as well as operating growth on the European market. However, the unit continued to report a loss.
Processing
All the activities combined in the Processing business unit reported increases in sales and overall profits. In the tinplate business this was mainly due to higher volumes, while the improvement in the medium-wide strip business was price-related. The medium-wide strip business achieved higher earnings. By contrast, profits in the tinplate business were down, largely as a result of the substantial increases in starting material prices which could not be compensated in full by corresponding price adjustments. The electrical steel activities continued to perform very well in a market characterized by a demand overhang. Against the background of rising shipments and prices, sales and profits increased.
Stainless: Declining earnings due to lower prices
| 1st half ended March 31, 2007 |
1st half ended March 31, 2008 |
2nd quarter ended March 31, 2007 |
2nd quarter ended March 31, 2008 |
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|---|---|---|---|---|---|---|---|---|---|
| Order intake | million € | 4,098 | 4,151 | 2,185 | 2,001 | ||||
| Sales | million € | 4,378 | 3,793 | 2,407 | 1,955 | ||||
| Earnings before taxes (EBT) | million € | 616 | (7) | 291 | 38 | ||||
| Employees (March 31) | 12,218 | 12,042 | 12,218 | 12,042 |
ThyssenKrupp Stainless reported higher demand in the 1st half 2007/2008. Order volumes rose by around 40% compared with the prior-year period to 1.1 million metric tons. However, the prior year was characterized by high imports, high inventory levels at distributors and service centers, and not least a reluctance to buy on the part of distributors and end users due to the high nickel price. In value terms, order intake was up only slightly from the prior year at €4.2 billion. This was particularly due to the lower nickel prices, which caused stainless steel prices to fall significantly. The nickel price also reduced the value of orders for nickel alloys, while titanium recorded a strong volume-related increase.
At around 1.2 million metric tons, overall deliveries by ThyssenKrupp Stainless were roughly the same as in the prior-year period. While deliveries of stainless hot-rolled and nickel alloys declined, and stainless cold-rolled was level with a year earlier, there was a significant increase in deliveries of titanium. Sales of ThyssenKrupp Stainless fell 13% to €3.8 billion due to the lower selling prices.
The Stainless segment reported a drastic drop in earnings in the 1st half 2007/2008, down €623 million to €(7) million. This decrease was due mainly to the partial underutilization of capacity, which continued into the 1st fiscal quarter, and to significantly lower base prices. In addition, ThyssenKrupp Acciai Speciali Terni was impacted by higher electricity costs as a result of the EU Commission's negative decision regarding the legality of extended energy compensation payments. Earnings were also impacted by the weaker competitive situation for exports to the US dollar zone due to the strength of the euro. The trend toward rising base prices since December 2007 has had an increasingly positive impact and resulted in an earnings turnaround at the beginning of the 2nd quarter.
ThyssenKrupp Nirosta
In the 1st half 2007/2008 the ThyssenKrupp Nirosta business unit recorded a further recovery in demand from distributors and stable business with end customers. Order volumes rose significantly as a result. The value of orders also increased markedly. However, for price reasons sales at ThyssenKrupp Nirosta were lower than in the prior-year period. As a result of the low price level and the underutilization of capacity at times during the 1st fiscal quarter, earnings were significantly lower.
ThyssenKrupp Acciai Speciali Terni
ThyssenKrupp Acciai Speciali Terni reported higher orders for stainless products in the 1st half of the fiscal year, in particular from service centers and distributors. Sales decreased significantly from the prior-year level, in part due to the loss of production at the Turin plant following the tragic fire last December. Production operations in Turin have now been stopped and relocated to Terni. ThyssenKrupp Acciai Speciali Terni reported a loss in the 1st half 2007/2008. Central to this sharp decline was the weakening of the Italian market. In addition, the company faced higher electricity costs after the EU Commission found an extension of energy compensation payments to be unlawful. Earnings were also impacted by expense in connection with the relocation of production from Turin to Terni and the effects of the accident in Turin in December 2007.
ThyssenKrupp Mexinox
Despite a weakening of the market in the NAFTA region, ThyssenKrupp Mexinox reported a slight increase in order volumes. However, the value of orders and sales fell as a result of the lower prices. Earnings decreased significantly.
Shanghai Krupp Stainless
Shanghai Krupp Stainless recorded significantly higher order volumes in the 1st half 2007/2008, especially from distributors looking to replenish their low inventories. Production of ferritic stainless steels was increased in response to higher demand. Order intake and sales declined for price reasons. Shanghai Krupp Stainless's earnings were substantially lower than a year earlier. In addition to the continuing difficult market environment in China, the decrease in earnings was due to the absence of the contract work performed for ThyssenKrupp Nirosta in the prior-year period.
ThyssenKrupp Stainless International
The weak situation on the international stainless steel markets resulted in a substantial drop in orders and sales at ThyssenKrupp Stainless International. Earnings decreased significantly.
ThyssenKrupp VDM
In the nickel alloy business of ThyssenKrupp VDM, orders and sales were unchanged from the prioryear levels. The construction of a new forging line will widen the company's product range, particularly for the aerospace industry. In a relatively stable market environment and thanks to improved earnings from its US activities, ThyssenKrupp VDM recorded an increase in profit.
Technologies: Earnings improved
| 1st half ended March 31, 2007 |
1st half ended March 31, 2008 |
2nd quarter ended March 31, 2007 |
2nd quarter ended March 31, 2008 |
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|---|---|---|---|---|---|---|---|---|---|
| Order intake | million € | 6,511 | 6,320 | 3,083 | 3,108 | ||||
| Sales | million € | 5,596 | 5,851 | 2,804 | 3,029 | ||||
| Earnings before taxes (EBT) | million € | 256 | 365 | 108 | 186 | ||||
| Employees (March 31) | 53,274 | 53,637 | 53,274 | 53,637 |
The good performance of the Technologies segment continued in the 1st half 2007/2008. At €3.1 billion, 2nd quarter orders were level with the prior year. The figure for the 1st half was slightly lower than the comparative period of a year earlier, which was very positively impacted by the booking of major orders. Thanks to the good project situation in the plant technology sector, further major orders are expected in the quarters ahead. In line with the strong performance in orders, 1st half sales were up 5% from the previous year to €5.9 billion, although the US dollar/euro exchange rate had a negative effect. Orders in hand were €15.6 billion at March 31, 2008, securing more than a year's sales. The profit of €365 million is a record and a clear improvement on the previous year. The main contributory factors were the good order situation at Plant Technology, disposals, and lower costs at the holding company.
As part of the further optimization of the segment portfolio, a best owner was found in the 2nd quarter 2007/2008 for the Ravensburg plant of ThyssenKrupp Drauz Nothelfer, whose strengths lie in body-in-white lines and toolmaking. The plant was acquired by EBZ Systec GmbH, which specializes in body making engineering services, forming technology and information technology. As part of the general reorganization of the yacht business at ThyssenKrupp Marine Systems, a contract was also concluded for the sale of the Nobiskrug shipyard in Rendsburg. The buyer is Eagle River Capital Ltd., a group of companies focused on the manufacture and sale of ship components, engineering and services as well as facility management.
Plant Technology
1st half order intake at Plant Technology failed to match the high prior-year figure, but was once again at a good level. The prior-year period was very positively influenced by major orders, particularly for chemical plants and handling equipment. Cement plant engineering almost matched its strong prior-year performance. Overall, the good order and project situation at Plant Technology continues to be driven by high raw material and energy prices and strong global demand for cement. Due to the sharp increase in orders in hand and new orders, half-year sales showed a significant improvement on the high prior-year figures in all areas. Thanks to this strong performance, profits at Plant Technology increased significantly from the good level of the previous year. In general, the positive situation is being driven by global megatrends in the climate, environment, energy and infrastructure sectors, for which the segment supplies intelligent products and solutions.
Marine Systems
Marine Systems recorded a lower order intake in the 1st half of 2007/2008. While the repair and service business continued to enjoy very high demand, the other businesses failed to match their prior-year performance, mainly due to project postponements. Overall, sales of the business unit were slightly down year-on-year. The repair and service business achieved significantly higher sales, but sales of surface vessels and submarines were lower. Profits at Marine Systems were down from the prior year. Higher earnings in the repair and service unit were unable to fully offset profit declines in surface vessels.
Mechanical Components
The Mechanical Components business unit recorded rising demand for high-tech components for the auto and engineering industries. Despite the disposal of the precision forging operation, falling demand at the North American foundries, and the weak US dollar, order intake increased. Sales also rose slightly. In particular, demand for slewing bearings and rings for the wind energy sector showed continued growth. Mechanical Components achieved a profit which was significantly higher than in the prior-year period, mainly due to the strong performance of slewing bearings and rings as well as the disposal gain.
Automotive Solutions
The business unit's order and sales performance was marked by significant growth in axle modules, steering systems, body-in-white lines, tooling, and assembly systems. Automotive Solutions' profit in the 1st half of 2007/2008 was level with the prior year. Profits in the dampers, springs and axle modules business were slightly down from the prior-year level, which was positively impacted by a disposal gain in the 2nd quarter 2006/2007. By contrast, profits increased in the steering columns and systems business.
Transrapid
Transrapid made a small profit on unchanged sales.
Elevator: Continuing on growth track
| 1st half ended March 31, 2007 |
1st half ended March 31, 2008 |
2nd quarter ended March 31, 2007 |
2nd quarter ended March 31, 2008 |
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|---|---|---|---|---|---|---|---|---|---|
| Order intake | million € | 2,610 | 2,930 | 1,311 | 1,464 | ||||
| Sales | million € | 2,171 | 2,348 | 1,088 | 1,164 | ||||
| Earnings before taxes (EBT) | million € | (293) | 209 | (390) | 90 | ||||
| Employees (March 31) | 37,758 | 40,873 | 37,758 | 40,873 |
Elevator stayed on growth track in the 1st half of the reporting year. Both orders and sales increased significantly despite negative exchange rate effects and price and margin pressure. Order intake rose by 12% to €2.9 billion. Sales increased by 8% to €2.3 billion. Elevator made a profit of €209 million. At operating level, i.e. excluding the EU antitrust fine of around €480 million, earnings were 12% higher year-on-year.
Central/Eastern/Northern Europe
The Central/Eastern/Northern Europe business unit significantly bettered its prior-year order and sales performance. Business in France was positive thanks to a continuing high level of modernization projects. Business in Germany, the Benelux countries and Northern and Eastern Europe also continued to expand. The UK was the only area to record falling sales. The business unit's profit – excluding the EU antitrust fine – was level with the prior-year period. Earnings increases in Germany and France were offset by falling income in the UK.
Southern Europe/Africa/Middle East
The Southern Europe/Africa/Middle East business unit increased its orders and sales significantly in the 1st half of the fiscal year. This positive performance was mainly attributable to the operations in Spain and Italy. In Spain, business with new installations and services continued to expand, while the growth in Italy was mainly driven by the newly acquired companies. The profits of the business unit also increased substantially, with the Spanish operations playing a major role in this.
Americas
Despite very negative exchange rate effects the Americas business unit substantially exceeded its very good prior-year order intake and slightly increased its sales. The positive trend is attributable in particular to the North American operations. Business in Brazil was also very encouraging, exceeding the steady trend in the other countries of Latin America. The business unit's profits showed another year-on-year increase despite the negative exchange rate trend.
Asia/Pacific
The Asia/Pacific business unit recorded a marked rise in orders and a small increase in sales despite likewise negative exchange rate effects. Continuing strong growth in new installations in China played a large part in the strong performance. By contrast, orders and sales in Korea were down from the prior year. In contrast to the prior year, the business unit made a loss in the 1st half 2007/2008, mainly due to the costs of restructuring the Korean operations.
Escalators/Passenger Boarding Bridges
The business unit's orders and sales were lower year-on-year. The escalator business increased its order intake slightly, while sales were flat. The passenger boarding bridges business recorded significantly lower orders and sales due to the postponement of major orders. Overall, the business unit reported negative earnings. The escalator operations generated a profit, while passenger boarding bridges made a loss.
Accessibility
The Accessibility business unit continued its growth. The European operations expanded considerably, easily making up for the decline in the USA caused by the housing crisis. Profits were also slightly higher than a year earlier.
Services: Slight upward trend noticeable
| 1st half ended March 31, 2007 |
1st half ended March 31, 2008 |
2nd quarter ended March 31, 2007 |
2nd quarter ended March 31, 2008 |
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|---|---|---|---|---|---|---|---|---|---|
| Order intake | million € | 8,799 | 8,273 | 4,592 | 4,322 | ||||
| Sales | million € | 8,306 | 8,099 | 4,334 | 4,232 | ||||
| Earnings before taxes (EBT) | million € | 332 | 267 | 140 | 135 | ||||
| Employees (March 31) | 43,411 | 46,318 | 43,411 | 46,318 |
The Services segment achieved sales of €8.1 billion in the 1st half of 2007/2008, 3% down from the corresponding prior-year period. Profit reached €267 million, below the record level of 2006/2007. The profit drop in the 1st quarter was €60 million, but earnings in the 2nd quarter were only €5 million lower year-on-year.
Materials Services International
The Materials Services International business unit reported generally steady demand in the 1st half, slightly increasing its sales year-on-year thanks to the inclusion of the newly acquired companies Ferostav and Apollo Metals. The pressure on selling prices eased for most product groups from the start of the 2nd quarter. The massive price falls in stainless steel were halted towards the end of the 1st quarter, but prices are lower than a year ago. Sales of plastics were lower than expected despite the mild weather. On the extremely competitive Eastern European market, demand and prices improved in the course of the reporting period. Profits at Materials Services International showed a large fall from the corresponding prior-year period due to significantly lower margins. However the business unit remains the segment's highest earner.
Materials Services North America
The slowdown of the US economy has impacted the North American materials market. While demand from the manufacturing and capital goods sectors – the main customers of the business unit – was still satisfactory in the 1st half 2007/2008, demand from the auto and construction industries fell sharply. Flat and stainless steel products were particularly affected, while demand for nonferrous metals remained strong. The overall situation was accompanied by high margin pressure and intense competition. Added to this came the sharp depreciation of the US dollar against the euro. As a result the business unit recorded a decrease in sales and above all profits.
Industrial Services
Thanks to improved capacity utilization and orders the Industrial Services business unit increased its sales slightly, above all in the German engineering and energy sectors as well as in Brazil and North America. Despite the depreciation of the US dollar, sales in North America were unchanged from the prior year. Earnings of the business unit were slightly down year-on-year due to nonrecurring effects, but at operating level profits showed a further increase.
Special Products
Special Products equaled its very good prior-year sales performance. Losses due to a decline in international rolled steel business were outweighed by high demand and improved prices for metallurgical raw materials, coke and minerals. Sales of technical systems also increased in the 2nd quarter. The business unit comfortably exceeded its record prior-year earnings thanks in particular to the performance of the raw materials business.
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. The retained assets and liabilities of ThyssenKrupp Budd were also assigned to Corporate. The disposal in the meantime of this company's operations is responsible for the decrease in Corporate's sales compared with the 1st half of the prior year.
Corporate reported a loss of €181 million in the 1st half 2007/2008, €45 million higher than in the same period in fiscal 2006/2007. Whereas prior-year earnings were boosted by the sale of the operations of ThyssenKrupp Budd, earnings in the reporting period were negatively impacted by the fair value measurement of the cross-currency swap. Running counter to this was an improvement in risk provisions for contaminated land in the Real Estate unit.
Consolidation mainly includes the results of intercompany profit elimination.