Salzgitter : First quarter of 2017

Salzgitter Group consolidates uptrend with successful start to the year

• First quarter of 2017: € 77.1 million in earnings before taxes exceeds capital market expectations
  
• Upward revision of profit forecast for the financial year 2017 affirmed
  - pre-tax profit of between € 125 million and € 175 Million
  - discernibly higher return on capital employed in a year on year comparison
  
• Internal program of measures paying off

The Salzgitter Group was off to a good start to the financial year 2017 and, with its figures for the first three months, recorded the highest quarterly result since 2008. This performance was mainly attributable to the presentable results of the Strip Steel, Trading and Technology business units. Flanked by the effect of the European Union's trade defense measures, the Group's internal programs laid the foundation for this development. 'Without the consistent implementation of the measures we introduced in 2013 we would not be where we are now. Despite all adversity, we have rigorously pursued our strategy and engineered a return to the profit zone through our own endeavors. We are now seeing the fruit of our labors and, with our 'Salzgitter AG 2021' strategy approved at the end of 2016, have placed special emphasis on growth. In doing so, we will naturally not lose sight of the market-related and political challenges,' explained CEO Prof. Dr.-Ing. Heinz Jörg Fuhrmann in commenting on the visible success.
The Salzgitter Group's external sales (€ 2,353.9 million; first quarter of 2016: € 1,868.8 million) rose by a quarter in a year-on-year comparison. The Trading, Strip Steel and Plate / Section Steel business units made major contributions to this result, above all due to better average selling prices for steel products, with the other business units also reporting growth. Pre-tax profit advanced to € 77.1 million (first quarter of 2016: € 3.1 million) and includes € -7.6 million from the Aurubis investment (first quarter of 2016: € 11.6 million) that was negative due to the valuation of a bond exchangeable into shares. Earnings after taxes stood at € 48.7 million (first quarter of 2016: 1.0 million), which brings earnings per share to € 0.87 (first quarter of 2016: € - 0.00), while return on capital employed (ROCE) came in at 10.3 % (first quarter of 2016: 1.4 %). 2 With a net financial position of € 155.7 million and an equity ratio of 33 %, the company has a sound balance sheet and a comfortable financial basis.
Outlook
Following a good opening quarter, Salzgitter AG lifted its profit forecast on May 2, 2017, which we affirm below. We anticipate:

• an increase in sales to around € 9 billion,
  
• a pre-tax profit of between € 125 million and € 175 million, as well as
  
• a return on capital employed that is discernibly higher year on year.

The complete financial statements for the first quarter 2017 can be accessed at
https://www.salzgitter-ag.com/en/investor-relations/news-and-publications.html
The forward-looking statements on the individual business units assume the absence of renewed recessionary developments. Instead, we anticipate that the economies of our fiercely contested main markets will continue to firm up in the current financial year. As in recent years, please note that opportunities and risks from currently unforeseeable trends in selling prices, input material prices and capacity level developments, as well as exchange rate fluctuations, may considerably affect performance in the course of the financial year 2017. The resulting fluctuation in the consolidated pre-tax result may be within a considerable range, either to the positive or to the negative. The dimensions of this range become clear if one considers that, with around 12 million tons p.a. of steel products sold by the Strip Steel, Plate / Section Steel, Mannesmann and Trading business units, an average € 25 change in the margin per ton is sufficient to cause a variation in the annual result of more than € 300 million. Moreover, the accuracy of the company's planning is restricted by the volatile cost of raw materials and shorter contractual durations, on the procurement as well as on the sales side.
Disclaimer: Some of the statements made in this report possess the character of forecasts or may be interpreted as such. These are made to the best of the Company's knowledge and judgment, and by their nature are subject to the proviso that no unforeseeable deterioration occurs in the economy or in the specific market situation pertaining to the division companies, but rather that the underlying bases of plans and outlooks prove to be accurate as expected with regards to their scope and timing. Notwithstanding prevailing statutory provisions and capital market law in particular, the Company accepts no obligation to continuously update any forward-looking statements that are made solely in connection with circumstances prevailing on the day of their publication.