Download - Salzgitter AG

7. Financial Position
Financial Management
As part of the Salzgitter Group SMG, a wholly owned subsidiary of SZAG, carries out cash and foreign
currency management mainly on a centralized basis for Group companies. Joint venture companies
are not included.
Financial management activities of the Holding consist in granting Group credit lines in the context of
Group financial transactions or, in individual cases, loan guarantee commitments. To cover the financial
requirements of Group companies abroad, SZAG also makes selective use of local lending and capital
markets, in particular outside the euro region. It also centralizes and draws on the surplus liquidity
of individual Group companies for financing purposes. Intra-group supplies and services are settled via
internal accounts within the Group. Central finance management enables capital to be borrowed at
favorable conditions, as well as exercising a positive effect on net interest income by reducing the volume
of external borrowing and optimizing cash investments. To calculate the liquidity requirements of
our Group, we carry out financial planning that incorporates a multi-year planning horizon alongside a
monthly rolling four-month planning process. Liquidity requirements are ensured through available
cash investments combined with the availability of sufficient bank credit lines.
In the financial year, we placed a € 300 million syndicated loan with an initial term of 5 years and
2 renewal options each of one year with our core circle of banks. The initial margin is 25 basis points.
Our international business activities also generate cash flows in a number of currencies. In order to
secure against the resulting currency risk, Group guidelines oblige Salzgitter Group companies to
hedge foreign currency positions at the time when they arise. The Group’s internal audit department
monitors compliance with these regulations by conducting regular checks. Currency transactions in
US dollars, which make up a significant share of our foreign currency transactions, are initially investigated
for the possibility for netting off sales and purchase items within the Group and then hedging
any amounts left over through forward exchange transactions and options.
Pension provisions still play a significant role in corporate financing. Owing especially to changes in
the group of consolidated companies against the backdrop of the countertrend of actuarial gains
(€ 38 million) resulting from the actuarial interest rate being adjusted from 4.5% to 5.25%, these
provisions came to € 1,792 million (2006: € 1,715 million).
Cash Flow Statement
The cash flow statement (detailed disclosure in the section entitled “Consolidated Financial Statements”)
shows the source and application of funds. The cash and cash equivalents referred to in the
cash flow statement correspond to the balance sheet item “Cash and Cash Equivalents”.
Due mainly to the growth in operating profit, the Group generated a remarkable increase in cash flow
of € 781 million from operations.