Against the background of slowing global economic growth, ThyssenKrupp maintained its course in the 1st half of 2007/2008. As expected, order intake and sales matched the strong prior-year levels, while profits were higher than anticipated. The Group's earnings before taxes reached €1,388 million. They were impacted in particular by pre-operating costs of €128 million for the construction of the new steel mills and restructuring expense of €10 million in the Steel segment as well as gains on disposals of €27 million. The Group's earnings were lower than a year earlier, mainly due to the drastic decline in stainless steel prices.
The highlights for the 1st half of 2007/2008 were as follows:
Order intake was level with the previous year at €27.4 billion.
1st half sales were virtually unchanged against the prior-year period at €25.5 billion.
EBITDA was €2,280 million, compared with €2,538 million a year earlier.
1st half earnings before taxes decreased from €1,634 million in the prior year to €1,388 million.
Earnings per share rose from €1.76 to €1.85.
Net financial liabilities at March 31, 2008 were €1,988 million, an increase of €2,211 million compared with September 30, 2007, when we reported net financial receivables of €223 million. On March 31, 2007, net financial liabilities stood at €897 million.
TopGlobal growth slowerGlobal growth has slowed perceptibly in recent months, impacted in particular by turbulence on the international financial markets and the signs of a recession in the USA. Increasing raw material and oil prices also had a negative effect.
The economic picture in the USA has clouded recently. Gross domestic product in the final quarter of 2007 was only slightly higher than in the preceding quarter. Though private consumption continued to improve, investment slowed due to the negative developments in the housing sector. The downturn in the US economy accelerated in the 1st quarter of 2008. The slowdown in the euro zone was less severe. In Germany, the pace of growth slowed toward the end of the year due to declining private consumption. By contrast, business investment and foreign trade continued to improve. The moderate growth continued at the beginning of 2008.
In the developing countries of Asia, Latin America, and Central and Eastern Europe, economic growth showed little sign of slowing. China's economy has been expanding at double-digit rates. Brazil also recorded strong growth. In Russia and particularly in the new EU member states, economic activity remained robust thanks to solid domestic demand.
In the sectors of importance to ThyssenKrupp the picture was as follows:
Despite the slowing of the world economy, the international steel market expanded further. Crude steel output in the first three months of this year was 5.6% higher than in the corresponding prioryear period. Around half of the absolute growth was attributable to China. In the European Union, output was slightly lower than a year earlier. German steel producers continued to operate at full capacity. With workloads at steel processors remaining good, shipments of flat-rolled carbon steel from European suppliers reached an exceptionally high level. Orders also recovered strongly. In view of increasing steel prices, some steel users ordered beyond their actual needs. The demand overhang was reinforced by declining imports from third countries. The soaring level of global spot prices for steel in the 1st quarter 2008 was mainly due to increased costs and strong demand for iron ore. As import pressure eased and the stock situation returned largely to normal, European steel producers were able to pass on some of the costs to the market. Prices were increased significantly for quarterly deals at April 01, 2008.
Demand on the European market for stainless steel flat products recovered. Following a phase of very weak orders and deliveries in the summer months of 2007, order intake has improved significantly since the 4th calendar quarter 2007. As a result, deliveries by European producers have also risen recently, and in the 1st quarter 2008 once again reached the high prior-year level. Stock-holding distributors in particular made increasing purchases to replenish their heavily depleted stocks. The nickel price, which has stabilized at a relatively high level, also encouraged longer-term ordering. With order intake improving continuously and alloy surcharges stable or slightly lower, European producers were able to raise base prices appreciably at year end and in the 1st quarter 2008. By contrast, demand for stainless steel in the NAFTA region was subdued, and base prices decreased continuously. In China and the other Asian markets, end customers also adopted a wait-and-see approach. As a result, stock levels in the region remain at a high level. Although some Chinese producers attempted to improve market demand and the conditions for price increases by temporarily cutting back production, order intake remained subdued. The market for nickel alloys and titanium was comparatively stable.
The international auto markets continued to show strong regional differences. The highest growth at the beginning of the year was once again in the emerging markets. By contrast, demand in North America – which was already low – fell further. In the USA, sales of passenger cars and in particular light trucks were down in the 1st quarter 2008; vehicle production also declined significantly. The Brazilian auto industry recorded further high growth rates. In the European Union, new car registrations were slightly lower than a year earlier. While changes in taxation impacted demand in some Western European countries, there was a substantial increase in registrations in the new EU member states. In Germany, the domestic market recovered somewhat following the weak prior-year figures. With exports remaining high, car production was slightly down on the previous year.
Following a positive performance last year, growth on the global machinery market slowed at the beginning of 2008. In the USA, the economic downturn is impacting demand for capital goods. By contrast, there are no signs of cooling to date in China. The German mechanical engineering sector started the new year with a good order backlog. Orders grew by 16% in 2007 and improved further at the beginning of 2008 thanks to continued strong demand for capital goods.
Global construction activity continues to be driven by the countries of Asia and Central and Eastern Europe. In the USA, falling demand for housing construction is having a negative impact. In the German construction industry, especially commercial construction, the order situation has improved again in recent months.
ThyssenKrupp in figures 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 € 27,263 27,354 13,962 14,084
Sales million € 25,446 25,469 13,114 13,199
EBITDA million € 2,538 2,280 1,031 1,197
Earnings before taxes (EBT) million € 1,634 1,388 572 742
Employees (March 31) 187,919 195,828 187,919 195,828
TopOrder intake and sales remain stableOrder intake and sales were in line with expectations in the 1st half 2007/2008. Against the background of a global economic slowdown, orders were level with the prior year at €27.4 billion. New orders were lower at the Technologies and Services segments, virtually stable at Stainless and significantly higher at Steel and Elevator.
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