Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on SALZGITTER AG. We currently have 12 research reports from 1 professional analysts.
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Historic inventory had to be re-stated
10 Nov 16
Salzgitter’s revenue continued falling by 12.4% in Q3 (to €1.89bn) thus bringing the 9M number to €5.86bn (-12.4%). Based on the numbers management released a year ago, EBIT turned around from a Q3 15 loss of €50m to a profit of €28m. As a result, EBIT was up by 25% to €80m through to September whereas the 9M EBT number was down by 12% to €21m. The revenue number fell clearly short of our projection (€6.18bn) while the two profit numbers are higher (€67m and €19m, respectively). Cash generation was, however, very poor. Salzgitter typically generates high cash from operations (based on management’s definition) in Q3, but not this year. In fact, it was down by 98% to €3m only and the 9M number was a negative €3m, which is only the second time this century that it was negative after 9M.
Results were again very poor in Q2
10 Aug 16
Salzgitter’s revenue fell by 6.4% to €2.1bn in the last quarter which brought the H1 number to slightly less than €4bn (-12%). The respective EBIT numbers were -71% to €19m and -55% to €52m, i.e. Q2 EBIT was down by ‘only’ 31%. H1 net profit after minorities was €7m (-82%) and the total comprehensive loss amounted to €226m as the lower discount rate for calculating pension obligations (1.25% instead of 2.25% used at the end of 2015) resulted in a loss of €340m (before deferred taxes) and of €267m after tax. As a result of the hardly visible net profit of €7m and the comprehensive loss, the group’s shareholders’ funds have fallen by €238m to €2.65bn in H1 16. Pension provisions of €2.65bn are now, and for the first time, matching shareholders’ funds.
Q1 was a genuine disaster
13 May 16
Salzgitter’s revenue fell by 18% to €1.87bn, EBIT was down by 71% to €19m and pre-tax earnings collapsed by 94% to €3.1m. The group showed a net profit of €1.0m (€32.7m in Q1 15) but, after minorities, this translates into a loss of €0.1m. In fact, this was only achieved by booking a profit of €3.8m from discontinued operations, whereas this number was a negative of €12.2m a year ago.
Q1 16 pre-tax profit down by 94%
26 Apr 16
Salzgitter’s ad-hoc release indicates a pre-tax profit of €3.1m has been generated in the first quarter compared to €52m a year ago. The operating result has most probably been negative as the aforementioned profit number includes an at-equity profit of €12m from Aurubis compared to €3m a year ago. For the full-year, management’s guidance is for an ‘about break-even’ operating result. This will depend on when and which import duties are imposed by the EU. In addition, this guidance does not include further ‘one-off’ restructuring costs. As these costs have occurred regularly in the past and are likely to occur in the future as well, we do not regard them as one-offs.
Nothing but lip service
21 Mar 16
To improve the group’s resilience against Chinese steel imports, management has announced another cost-cutting exercise. Several hundred employees will have to leave four plants which employ a total of 1,900, out of a worldwide workforce of around 23,500 (the average was 23,677 in 2015). Assuming management is talking about 300 jobs, the cost savings will amount to some €20m or 0.2% of revenue. This is a very small number indeed and the past has shown that Salzgitter has never reduced the workforce. In fact, it was marginally up while personnel costs increased by 3% in a year when revenue fell by almost 5%. Since 2011, the last year when Salzgitter generated albeit a small but positive bottom line, the revenue number has now fallen by more than 12% but the average workforce increased by 1%. Consequently, personnel costs increased from 15.4% of total output in 2011 to 19.2% (it was 17.6% in 2014). In our opinion, it is the shareholder structure that prevents the group from genuinely reducing personnel costs. The State of Lower Saxony, which holds a blocking minority stake of 26.5%, has no interest in seeing unemployment rising. This pressing problem becomes all the more severe as VW (which is also controlled by this State) is also threatening to reduce employment. Consequently, only a genuine steel demand recovery will allow Salzgitter to return to reasonable profits, but this is not (yet) visible.
Pre-tax profit of €13m yields a net loss of €46m
26 Feb 16
Salzgitter had released indications for 2015 on 28 January. At that time, it projected the above pre-tax profit but did not give any net profit number. However, it had communicated in mid-January, that income tax charges would be higher than previously expected as Germany’s Upper Financial Court had made a decision that also impacted Salzgitter’s accounts. However, the additional tax charge mentioned then was €25m. Today’s release translates into total income tax charges of €58m. This includes €27m extra income tax charges relating to cum-ex dividend stripping activities of Salzgitter’s past.
08 Dec 16
Elderstreet stake acquired 02 GENERAL NEWS Globalworth premium In this issue Venture capital firm Draper Esprit has taken a 30.8% stake in venture capital trust manager Elderstreet. Both investment managers focus on the technology sector and they will be able to co-invest. Elderstreet has investments in a number of AIM-quoted companies through its VCTs. The purchase was funded by an issue of Draper Esprit shares worth just over £250,000. Simon Cook, the chief executive of Draper Esprit, is a former partner at Elderstreet so he knows the business and the people who run it, although he did leave more than 14 years ago. Cook has previously acquired portfolios from 3i and Cazenove, two other firms where he has worked. Draper Esprit has an option to acquire the remaining shares in Elderstreet, which has more than £25m under management. Adding Elderstreet to the group enables Draper Esprit to offer investors a range of EIS funds, VCTs and an ISA qualifying listed evergreen patient capital fund. The enlarged group has venture capital assets under management of more than £350m. At the end of September 2016, Draper Esprit had a net asset value of 352p a share, which is similar to the current share price. The June 2016 flotation price was 300p a share. Draper Esprit is quoted on Ireland’s Enterprise Securities Market as well as AIM.
01 Nov 16
Since our last outlook note, Quadrise has begun to supply MSAR for extended LONO sea trials, paving the way for commercial adoption from calendar H217 onwards. In August it signed a memorandum of understanding with clients in the Kingdom of Saudi Arabia (KSA), which is a key enabler for progressing the production-to-combustion pilot there. In October it completed a placing and open offer raising a total of £5.25m (gross). This should enable it to transition comfortably to the commercial phase on successful completion of the LONO and KSA trials.
Dividends reinstated; is it time to turn (more) optimistic?
08 Dec 16
Glencore continues to surprise the markets, earlier with its fast pace of asset disposals and now with the reinstatement of dividends. The following were the key details shared with investors in a meeting held on 1 December 2016: 1/ completed $6.3bn of asset disposals; 2/ reduced net debt (including readily marketable inventories) by $12.5bn over the last 18 months; 3/ reiterated trading’s 2016 EBIT guidance towards the upper end of the $2.5-2.7bn range; 4/ expects healthy annualised 2016 free cash flows – even at Q1 16 commodity price lows; at 2017 forward prices, FCFs are guided to be $6.5bn; 5/ dividends would be reinstated from 2017 – with $1bn to be paid in two equal tranches in H1 and H2; thereafter (i.e. 2018 onwards), $1bn would be a fixed annual dividend payment (banking on the stability of trading’s cash flows) plus a minimum 25% of FCFs from industrial activities. Production guided to grow Source – Investor Presentation December 2016 While copper would be negatively impacted by the end-of-life impact at Alumbera and the Ernest Henry divestment, the output for all other commodities is guided to be higher (in varying degrees).
Conviction List Q4 2016
05 Oct 16
Since its inception in 2010, the Conviction List has outperformed the market in 13 of 18 periods and a reinvested Conviction List would have returned 255% against a Small Companies index that would have returned 130%. Our Conviction List returned 3.7% over the last quarter; this was set against the benchmark UK Small Companies index that returned 11.3% over the same period. Our Q4 portfolio reflects our outlook for a temporary sweet spot for UK growth during the second half of 2016. The downside risk from the uncertainty of the EU Referendum result has been countered by stimulus from the Bank of England, signs of a looser fiscal stance and an 18% YoY reduction in the Sterling Exchange Rate. Compressed corporate fixed income spreads continue to provide a valuation underpin for global equities.