Download - Salzgitter AG

A Group Management Report and Management Report on Salzgitter AG I. Business and the Environment 96 97
7.3 Comparison between Actual and Targeted Performance
In our 2006 Annual Report, we believed it was ambitious to repeat the operating profit (2006: € 948
million) in the new financial year 2007. We nonetheless predicted that we would achieve a pre-tax
profit in the more challenging triple-digit euro range. In this context, we made explicit reference to
the fact that the opportunities and risks of the fluctuation potential of the consolidated result from
then unforeseeable cost, selling price, capacity utilization and currency trends could also be in the
triple-digit million range.
The decidedly favorable development in the Salzgitter Group has enabled us to generate a consolidated
pre-tax profit of € 1,314 million.
We provided information on this steady uptrend, which became increasingly evident during the
course of the year, by adjusting our forecast figures in the respective quarterly reports.
Consolidated sales of € 10,192 million were considerably above forecast. Alongside acquisitions where,
by definition, no planning can be carried out, all core divisions made a positive contribution to this
positive deviation. All divisions contributed to this positive budget variance, with the Trading, Steel
and Tubes Divisions making decisive contributions. The Services Division also generated higher sales
than envisaged. The first-time consolidation of Klöckner-Werke AG, acquired at the start of the second
half-year, also impacted the sales of the new Technology Division and of SMP/VPE/MRS in the Tubes
Division in the amount of € 513 million and € 153 million respectively. The greater use of the Group’s
own trading organization led to higher inter-company sales, which is not reflected in the contribution.
The main reasons behind the significant budget variance in pre-tax profit was the performance of the
Steel, Tubes and Trading divisions. Instead of cyclical trends, known in the past for their pronounced
swings and the fact that they generally occur with a time lag, the overall market situation in both the
steel and tubes segment was excellent in the financial year 2007. As a result of a claim waiver within the
Group, the Services Division also closed with an above-target result. Even excluding special influences,
the performance of this division was considerably higher. The new companies of the Technology
Division generated an overall pre-tax profit which, as already mentioned, was not reflected in the
planning.
With greater shipments overall, also including the fact that the production of flat rolled steel was
reduced in the fourth quarter with a view to stabilizing the margin, steadily rising selling prices and
despite the higher costs of raw materials and energy, the Steel Division posted a new all-time high,
with all operating steel companies contributing to this result. Pre-tax profit, which came to € 749.4
million, substantially outperformed the target figure.
The overall expansion in the global economy provided positive impetus for international steel trading,
with demand still strongest in the markets of Asia and Eastern Europe. Despite the import-induced
increase in inventories, the situation on the European market remained robust. Stockholding steel
traders benefited in Germany and the Benelux countries from the healthy order books of steel processing
companies. Demand in North America, however, slowed owing to inflated inventories and a sluggish
construction industry caused by the subprime crisis. The pre-tax profit of the Trading Division,
which came to € 212.5 million, was considerably above target and set a new record high. This was
Business and
the Environment