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2016/2017 forecast

Overall assessment by the Executive Board

  • Pleasing progress on transformation of the Group and continuation of good operating performance in the first 9 months:
    • Sale of Brazilian steel mill CSA to Ternium in 2nd quarter concludes Steel Americas exit
    • Group and continuing operations with highest order intake since the start of the Strategic Way Forward; sales and adjusted EBIT higher year-on-year
  • However, also severe dislocations on the raw materials markets, especially for coking coal, with temporary effects on expected costs and net working capital
  • Sales and earnings forecast for the Group and the continuing operations affirmed; forecast for FCF before M&A of the Group revised (see below)

For key assumptions and expected economic conditions see forecast section and “Macro and sector environment” in the report on the economic position in the 2015 / 2016 Annual Report and this interim report.


2016 / 2017 forecast

  • Group sales and sales of the continuing operations to increase on a comparable basis in the high single-digit percentage rangeCapital goods businesses: on a comparable basis increase in single-digit percentage range
    • Capital goods businesses: on a comparable basis increase in single-digit percentage range for Components Technology and Elevator Technology; decrease in single-digit percentage range for Industrial Solutions
    • Materials businesses: on a comparable basis Materials Services, Steel Europe and Steel Americas (discontinued operation) to achieve increase in double-digit percentage range driven by volumes and in particular prices/costs
  • Adjusted EBIT of the Group expected to be around €1.8 billion (prior year: €1,469 million), sup-ported by €850 million planned EBIT effects from “impact”
  • Adjusted EBIT of continuing operations expected to be around €1.7 billion
  • Capital goods businesses
    • Components Technology: improvement in adjusted EBIT (prior year: €335 million) from significant rise in sales and slight improvement in margin (prior year: 4.9 %)
    • Elevator Technology: improvement in adjusted EBIT (prior year: €860 million) from slight sales growth and increase in adjusted EBIT margin by 0.5 to 0.7 percentage points (prior year: 11.5 %)
    • Industrial Solutions:
      • Short-term focus on reversing trend in orders and cash flow
      • Decline in adjusted EBIT due to partial underutilization (prior year: €355 million) with slight decline in sales
      • Marine Systems and chemical plant construction with temporary sharp decline in margin and earnings
      • Overall margin temporarily noticeably below target range of 6 to 7 %
    • Materials businesses
      • Materials Services: adjusted EBIT significantly higher year-on-year (prior year: €128 million)
      • Steel Europe: adjusted EBIT significantly higher year-on-year (prior year: €315 million)
    • Steel Americas (discontinued operation): adjusted EBIT significantly higher year-on-year (prior year: loss of €33 million); no depreciation due to classification as discontinued operation
    • Net income of the Group: with positive operating earnings and continuing restructuring expense, overall significant net loss expected (prior year: €261 million net income) exclusively as a result of negative earnings impact from sale of CSA
    • tkVA of the Group: clearly positive trend due to good operating performance, but as a result of negative earnings impact from sale of CSA overall significantly lower year-on-year (prior year: loss of €85 million)
    • Capital spending of the Group before M&A: expected around €1.5 billion (prior year: €1,387 million)
    • FCF before M&A of the Group: Negative in mid to higher three-digit million euro range (prior year: €198 million)
      • Due to the significant increase in net working capital at our materials businesses as a result of dislocations on raw materials markets and higher volumes and prices
      • Due to the earlier than expected closing of the sale of CSA to Ternium in the 4th quarter and absence therefore of the anticipated NWC release by CSA towards the end of the fiscal year. The absence of this NWC release results in a correspondingly higher purchase price. This is neutral for expected net financial debt and FCF overall but will burden FCF before M&A

Source: Interim Report 9 months 2016/2017, p. 20-21

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