Engineering
Engineering
Engineering
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Letter to shareholders<br />
To assist our strategic development, we have drawn up a new Group mission statement with the involvement<br />
of many employees around the world. Under the motto “We are ThyssenKrupp”, it sums up our basic<br />
philosophy: customer and employee focus, innovativeness and quality, market leadership and<br />
internationality, community and diversity. We want to live these values more fully in the future.<br />
Steel Americas and Stainless Global: Book values adjusted<br />
One area of concern in 2010/2011 was the ramp-up of the new steel plants at Steel Americas, particularly<br />
in Brazil, which was associated with persistent losses. We also face negative developments which are beyond<br />
our control. For example, high raw material costs are negatively impacting our cost position, as are<br />
exchange-rate influences, specifically the relative strength of the Brazilian real. The slower recovery and<br />
currently renewed weakness of the markets in the USA and Europe are also hampering market entry for<br />
products of Steel Americas. As a consequence of this, we recognized impairment charges of €2.1 billion in<br />
our 2010/2011 financial statements. Irrespective of this, the successful completion of the ramp-up phase,<br />
optimization of production costs and successful entry to the US market represent our biggest opportunity for<br />
value growth in the short term. The strategic rationale remains unchanged, and we expect good returns in<br />
the medium term. For us as a premium supplier of flat-rolled carbon steel, the Americas are markets with<br />
potential, and our plants are an important key and a state-of-the-art base from which to establish ourselves<br />
there sustainably and profitably.<br />
Impairment charges totaling €800 million were also necessary at the previous Stainless Global business<br />
area – now Inoxum – in 2010/2011. €290 million related to goodwill impairment and €510 million to a fair<br />
value adjustment in connection with the carve-out of the entity. The main reasons for the fair value<br />
adjustment were the current valuations applied to stainless steel producers, which include high risk<br />
premiums and high discounts due to the unsolved structural problems on the stainless steel market.<br />
As a result, the Group’s operating (adjusted) EBIT was offset by total impairments of €2.9 billion. Adding in<br />
other net positive special items of €124 million, Group EBIT was negative at €(988) million.<br />
Tasks and outlook for 2011/2012: Challenging<br />
We began implementing the strategic measures immediately after the fundamental decisions were made by<br />
the Executive Board and Supervisory Board in May 2011. It remains our aim to complete the announced<br />
portfolio measures by the end of 2012. The first steps have now been successfully implemented: We have<br />
sold Metal Forming and created the conditions for the carve-out of Stainless Global. Positioning the Group for<br />
the future is one of the Executive Board’s permanent tasks. Portfolio optimization is therefore an ongoing<br />
process.<br />
Our earnings targets for the new fiscal year are subject to risks; the main reason for this are the growing<br />
uncertainties regarding the future of the economy. Just a few months ago there seemed little likelihood that<br />
the sovereign debt crisis and the financial market turbulence would spread to the real economy. Now the<br />
economic forecasts are being revised downwards more sharply and the risk of a slowdown is increasing. In<br />
view of the significant scale of the uncertainties, we cannot at present provide a reliable forecast for the fiscal