Engineering

2.3 Management report on on the Group Results of of operations of of the the business areas areas
The processing plant in in Alabama will will
have an annual hot-rolled capacity of of
over 5 million tons.
Adjusted EBIT negative but lower quarter by quarter
Adjusted EBIT came to €(1,071) million. This was mainly due to startup costs from the completion of the
projects, the ramp-up of the facilities and the entry into the NAFTA market. In addition there were higher
expenses for dealing with operating disruptions at the Brazilian steel mill, which mainly affected the coke
plant. Increased raw material prices likewise impacted earnings.
EBIT impacted by high impairment charges
The persistent, higher-than-expected startup losses gave us cause to test the assets of Steel Americas for
impairment. This test showed that impairment charges of €2,075 million had to be recorded. They mainly
related to property, plant and equipment and construction in progress, and to a lesser extent to transfer
taxes and inventories. The impairment charges amounted to roughly 25% of the relevant carrying amounts.
This resulted in an income tax reduction of €233 million.
The main reasons for the impairment charges were cost overruns in the construction of the mill in Brazil,
which resulted in higher acquisition costs, and the delayed ramp-up, which led to significant and persistent
startup losses. On top of this came the current and expected near-term relative strength of the Brazilian
currency, which is weighing on the competitiveness of the Brazilian mill. In addition, the continued weakness
of the sales markets in the USA and Europe had an effect, hampering market entry for Steel Americas’
products. The increase in the weighted average cost of capital also had an impact.
Steel mill in Brazil
The new integrated iron and steel mill near Rio de Janeiro produced around 2.8 million tons of slabs for the
US processing plant and Steel Europe in 2010/2011. The second blast furnace was fired up successfully;
however, work on the coke plant is progressing with delays. The final coke oven battery is scheduled to go
into operation in spring 2012. Total crude steel capacity is more than 5 million tons a year.
In December 2010 the dumping of hot metal resulted in graphite dust emissions. We took measures to
reduce the escape of free graphites into the air and capture them as far as possible. At no time was there
any danger to the health of employees or residents. All emissions since the startup of the new steel mill
have been well below the limits set by the Brazilian environmental authorities.
During the ramp-up the mill is operating initially under a provisional license. Following the ramp-up we are
confident of meeting all statutory requirements and obtaining a permanent operating license.
Processing plant in the USA
After a three-year construction period the new processing plant of Steel Americas in Calvert, Alabama, was
officially opened on December 10, 2010. It will have a total hot-rolled capacity of over 5 million tons per
year. Construction work for the hot and cold rolling mills was completed with the startup of the pickling line
in November 2010. Three of the four hot dip galvanizing lines were also put into operation in the reporting
year; the fourth and final line is expected to follow at the beginning of 2012.
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