2005-2006 Financial Statements and Management Report

32
SERVICES ALMOST DOUBLED
ITS PROFITS, MAINLY THROUGH
OPERATING IMPROVEMENTS.
business. Sales initiatives to win new customers and improve customer penetration had a pleasing
effect, as did the first-time inclusion of the new companies ThyssenKrupp Xervon Energy and RIP in
Brazil. The operations in Germany also recorded growth. The in-plant logistics and production support
operating groups were further expanded. The energy sector was a major customer. By contrast, the
construction-related operations suffered from the weak state of the German market and low public
spending; however this was offset by the continuing outsourcing trend.
Sales of the Special Products business unit improved 3% from the high level of the prior year. The
raw materials and in particular the engineering operations made significant progress with numerous
new projects. Key factors in this were a pleasing level of domestic business, a strong increase in
exports and a continuing sharp focus on customer-specific services and integrated solutions. Sales of
rolled steel in the Far East were down from the extremely high level of the prior year. On the other hand,
tubular products performed very well with numerous new contracts. Sales here were much higher than a
year earlier. Technical trading benefited from a very good level of business, including in the offshore
area. The alloy and metal distribution business also performed well. Sales of Chinese blast furnace and
foundry coke and of coal were slightly weaker. Prices for imported coke from China as well as freight
rates decreased significantly compared with the prior year.
Earnings
The Services segment reported earnings of €482 million, up €221 million from a year earlier. In addition
to improvements at operating level, the absence of now-sold loss-making areas also had a positive
effect.
The Materials Services Europe business unit, which also includes the South American and Asia
businesses currently being built up, made the biggest contribution to income, improving significantly
on the very good profit of the previous year. Key to this was a substantial recovery on the global
materials markets, resulting in a demand overhang in many product areas with drastic price increases.
This applied to rolled steel, stainless steel, tubular products and in particular nonferrous metals. The
further expansion of business in Eastern Europe and the success of the performance programs initiated
in all areas also had a major influence.
The largest increase in profit was achieved by the Materials Services North America business unit.
Earnings almost trebled as a result of the product range, with a very high share of non-ferrous metals,
the targeted expansion of sales activities and the successful integration of new companies. Higher
supplies of titanium and aluminum products to the booming aerospace industry also contributed to
the earnings improvement.
The Industrial Services business unit achieved slight income growth. While the service business in
North America more than doubled its profits, the unit was impacted by non-recurring charges for
restructuring. This affected above all the process industry division in Germany, while the companies
working for the metal industry and manufacturing sector achieved higher profits.