Salzgitter Group posts record nine-month results
German steelmaker Salzgitter AG announced healthy results for the first nine months of 2005 thanks to strong rolled steel and tubes businesses.
The company's sales increased 25 percent to € 5.38 billion, and pre-tax profit almost quadrupled from €157.2 million in 2004 to € 595.2 million. Pre-tax profit in the third quarter was €131.8 million, up €56.2 million year on year.
In the European steel market, the inventories of the steel traders, which have risen sharply since the start of the year, caused orders to flag significantly. This in turn led to a decline in spot market prices. Stable steel
consumption across virtually all market segments as well as cut backs in the
production volumes finally had the effect of causing inventories to return to largely normal levels in the third quarter. As a result, the prices of product segments such as flat steel began to firm up again.
The company cashed in from the substantial increase in tube shipments and sales, especially from the Vallourec SA and Vallourec & Mannesmann Tubes SA companies of the group. In the third quarter, Salzgitter Flachstahl GmbH also carried out a long-planned overhaul of one of its two large blast furnaces. This caused a significant decline in crude steel
production and placed a not insignificant burden on earnings.
Nevertheless, Salzgitter is still profiting from record steel prices last year, when customers such as Volkswagen AG booked about 40 percent of the company's expected output this year.
New orders for steel products recovered in September, a trend which persisted during the last few weeks and which is likely to encourage spot market prices to stabilize further. Whereas the sales volume of the Steel Division should rise in tandem with demand in the fourth quarter. Along with better conditions in the spot business, the results of ongoing negotiations on the purchase price of
coking coal and
iron ore, as well as long-term contracts on the sales side, will be decisive for the future profitability of the steel segment.