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.
Frequency of research reports
Research reports on
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.
The Slide Rule
12 Jan 17
What is The Slide Rule? The Slide Rule has been designed to dramatically simplify the identification of the best companies in the UK small/mid-cap sector by making a quantitative assessment of the relative potential of each company. At its core, The Slide Rule aims to identify those companies that create genuine shareholder value through strong returns on capital and solid growth, but also present a value opportunity with the potential tailwind of earnings momentum. Companies are assessed within a Quality, Value, Growth and Momentum (QVGM) framework.
The Monthly January 2017
09 Jan 17
Despite all the hullaballoo of the Brexit vote and the subsequent election of Donald Trump as the next US President, the UK stock market prospered last year, especially in the latter few months of 2016. The combination of a depreciating currency – making $ earnings more valuable in relative terms - and the Trump emphasis on infrastructure expenditure drove the stock market higher
Minor delay but lower cost and better visibility enhance the investment profile
13 Jan 17
First oil at Stella is delayed by about a month, reducing the contribution of Stella to FY17 production by the same period. While this has an impact on FY17e free cash flow, this is negligible to our valuation. More importantly, FY17 opex are estimated at only US$18/boe, below our estimates of US$20/boe. There are opportunities to reduce opex further. Harrier is expected to reach first oil in 2018, one year earlier than we expected and at a cost of US$40 mm lower than we anticipated. The overall development cost is less than US$6.0/boe. Ithaca holds numerous discoveries around Stella that would be developed with a similar cost structure to Harrier.
10 for 17
09 Jan 17
As always at the start of a year, there are significant uncertainties about the year ahead but I think in 2017, the level of uncertainly has decisively moved up a gear. In fact, a leading economist at the LSE, Ethan Ilzetzki, was recently quoted as saying “I view the current global economic environment as the most uncertain in modern history”. Wow.