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A Group Management Report and Management Report on Salzgitter AG II. Profitability, Financial Position and Net Assets 118 119
The pre-tax profit of the Services Division came to € 40.4 million, thus outperforming the previous
year’s figure (€ 15.4 million) by € 25.0 million. The main reason for the sharp increase was an internal
waiver of a claim (€ 25.0 million) by the interim holding SMG in favor of SZAE, offset by € 3.6 million
in unscheduled impairment at SZAE. Net of this special effect, the operating profit of the division
stood at € 19.0 million. Along with SZAE’s improved operating profit, the remaining positive divergence
(€ +3.6 million) from the 2006 figure (€ 15.4 million) is mainly attributable to higher transport
volumes of VPS and HAN’s higher turnover of iron ore and coal.
Owing to the good capacity utilization figures, especially in the filling and packaging business (KHS),
which is the Technology Division’s largest segment, an operating profit of € 18.0 million was achieved
in the second half-year. Taking account of the effect of the mandatory purchase price allocation
required under IFRS, which mainly affects inventory valuation, pre-tax profit stood at € 4.0 million.
Divisional Results and Consolidated Net Income for the Year
in € mil. FY 2007 FY 2006
Steel 749.4 433.8
Trading 212.5 200.9
Tubes 302.5 262.91) Services 40.4 15.4
Technology 4.0 –
Other/Consolidation 5.1 941.82) Earnings before tax 1,313.9 1,854.8
Tax 408.8 345.2
Consolidated net income3) 905.1 1,509.6
Development of Substantive Income Statement Items
Explanations on the consolidated income statement, disclosed in detail in the section on “Consolidated
Financial Statements/Notes”, are as follows:
The increase in “Increase/decrease in finished work or work in progress/own work capitalized”
item was primarily attributable to the reporting date-related level of inventories of finished goods in
the large-diameter tubes product segment. Other operating income in 2006 included proceeds from
the sale of the Vallourec shares. The rise in materials expenses this year reflects the quite considerable
price hikes of raw materials and energy as well as changes in the group of consolidated companies.
Higher personnel costs, along with increased compensation, were also due to the larger group of
consolidated companies. The costs incurred by the hedging and disposal of the Vallourec shares were
included in other operating expenses in 2006. The disposal of shares in Vallourec also affected earnings
from associated companies. The investment of the cash from the sale of the Vallourec shares,
available for the first time for a whole year, raised interest income considerably.
1) Including Vallourec’s
contribution of € 73
million to the result
2) Including proceeds
of € 906.9 million
from the disposal of
Vallourec
3) Including minority
interests
Profitability, Financial
Position & Net Assets