UPDATE: German Steelmakers Give Grim Outlooks After Difficult Quarter
15 Maggio 2012 - 11:07AM
Dow Jones News
Germany's two largest steelmakers Tuesday forecast sharp drops
in full-year operating profits as a fragile economy continues to
weigh on demand and prices for their products.
ThyssenKrupp AG (TKA.XE) and Salzgitter AG (SZG.XE) both warned
that the sovereign debt crisis in the eurozone as well as rising
prices for energy and raw materials still pose considerable threats
for the global economy.
They added, however, that trading conditions are expected to
improve in the remainder of the year, echoing comments from the
world's largest steelmaker by output--ArcelorMittal (MT)--which
last week said demand for its products is steadily improving.
"The widely feared escalation in Europe's debt crisis has not
materialized so far," said Salzgitter, the smaller of the two
companies. "This nonetheless poses a huge risk on a global scale,
as does the sharp increase in the oil price and various political
conflicts."
It added that it will "be a challenge" to achieve a pretax
profit in 2012, following a difficult and unprofitable first
quarter of the year. In 2011, pretax profit amounted to EUR202
million.
Rival ThyssenKrupp--Germany's largest steelmaker by
output--forecast adjusted earnings before interest and taxes in its
fiscal year ending Sept. 30 in the medium three-digit million euro
range. The company recorded an adjusted EBIT of EUR1.76 billion in
fiscal 2011. Market expectations for adjusted EBIT in fiscal 2012
are for EUR977 million, according to a Dow Jones Newswires poll of
seven analysts.
ThyssenKrupp's cautious earnings guidance sent the company's
shares lower early in Tuesday's trading session and at 0729 GMT the
stock was down EUR0.66 or 4.1% at EUR15.12.
In contrast, Salzgitter shares were up EUR0.17 or 0.5% at
EUR35.66. The company had previously indicated it could post a
first-quarter loss due to the difficult market environment.
The steelmakers' bleak outlooks for the global economy come as
both companies reported wider-than-expected net losses for the
three months to March 31, citing depressed steel prices that
couldn't be offset by strong performances in their technologies
operations.
ThyssenKrupp said its second-quarter net loss--including a
discontinued stainless-steel business that will be sold to
Outokumpu Oyi (OUT1V.HE)--was EUR587 million, compared with a
profit of EUR272 million in the same period a year-earlier. The
loss was considerably wider than the EUR36 million loss eight
analysts forecast in a Dow Jones poll.
Losses continued to be exacerbated by ThyssenKrupp's Steel
Americas business unit, which posted a EUR230 million loss before
interest and taxes due to the prolonged and costly ramp-up of new
steel mills in Brazil and the U.S.
Salzgitter's first-quarter net loss amounted to EUR15.5 million,
wider than the average EUR8.8 million expected by analysts polled
by Dow Jones.
ThyssenKrupp attributed its loss to depressed steel prices and
continuing losses at its new steel mills in the U.S. and Brazil,
which are in the process of being ramped-up.
"Margins in the materials business are being impacted by intense
competition and unsatisfactory prices," said ThyssenKrupp Chief
Executive Heinrich Hiesinger.
However, he added that trading conditions should improve in the
remainder of its fiscal year, with demand from emerging markets and
a recovering U.S. economy expected to mitigate margin pressures in
weak European markets.
"Overall we believe that we have passed the worst in terms of
earnings," he said.
Both companies' strong exposure to export-oriented industries
like automotives and machine engineering could help them record
earnings improvements as the year progresses.
Germany's gross domestic product grew far more than expected in
the first quarter of the year driven by a surge in net exports,
said the Federal Statistics Office, or Destatis.
-By Jan Hromadko, Dow Jones Newswires; +49 69 29 725 503;
jan.hromadko@dowjones.com
(Tom Fairless in Frankfurt contributed to this article.)
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