UPDATE: Salzgitter: Roughly Break-Even Still Possible In '09
May 27 2009 - 6:42AM
Dow Jones News
German steelmaker Salzgitter AG (SZG.XE) Wednesday said it has
become a little more optimistic about its further business
development in 2009 and reiterated its full-year outlook.
Chief Executive Wolfgang Leese told shareholders at the
company's annual general meeting that Germany's second-largest
steelmaker behind ThyssenKrupp AG (TKA.XE) anticipates the steel
market to normalize at the end of the summer holiday season, with
plant utilization rates expected to increase to between 75% and
80%.
Salzgitter's capacity utilization currently stands at 30% to 50%
as the company cut production, reflecting a sharp drop in demand
for its products due to the recession.
Steelmakers have been suffering under a drastic fall in steel
demand as key customers in the automotive, appliance and
construction industries cut orders due to the weak sales stemming
from the global economic downturn. Large steelmakers around the
world have responded to plummeting demand by cutting production,
shelving expansion projects and reducing their workforce in order
to conserve cash.
Salzgitter CEO Leese also Wednesday said the company still
believes reaching around break even in terms of pretax earnings in
2009 is possible provided there's a speedy and strong economic
recovery in the second half of the year.
Earlier this month, Salzgitter said a nearly break-even result
could mean a loss of EUR30 million to EUR50 million, considering
the size of the company. At the time, Chief Financial Officer Heinz
Joerg Fuhrmann such a result "isn't the most likely version"
because it would require a major turnaround in the market for steel
strip and beams, but he added it "isn't impossible".
Leese said that Salzgitter sticks to its plan to delay around
EUR200 million worth in investment in 2009 due to the
recession.
He also said Salzgitter has around 9,000 workers on short time
work in May, of which nearly 5,200 come from the company's steel
operations.
In April, around 8,000 of the company's staff were working
shorter hours.
Ongoing talks with iron ore suppliers will likely result in
price decreases of around 33%, Leese said. The comments came a day
after a deal struck between Anglo-Australian miner Rio Tinto PLC
(RTP) and Nippon Steel Corp. (5401.TO) that cut iron ore fines
prices for the Japanese steelmaker by 33%.
The Rio Tinto-Nippon deal is the first this year and could
become the benchmark for the other two big miners, BHP Billiton
Ltd. (BHP) and Companhia Vale do Rio Doce (RIO), which are
continuing negotiations with steel mills.
Iron ore prices for Salzgitter will most likely decline by a
similar amount, said Leese.
Company Web site: www.salzgitter-ag.de
-By Martin Rapp, Dow Jones Newswires; +49 69 29 725 503;
martin.rapp@dowjones.com
(Jan Hromadko in Frankfurt contributed to this report.)