- Another difficult financial year: The coronavirus pandemic exacerbated an already strained situation during the year
- Net sales thus fell considerably: by 21.2% to €1.645 billion in the Dillinger Group and by 23.7% to €1.684 billion in the Saarstahl Group
- Dillinger Group closed the financial year with an EBITDA of -€68.9 million and an EBIT of -€192.8 million / Saarstahl Group recorded an EBITDA of -€70.4 million and an EBIT of – €171.2 million
- Saarstahl (71.2 %) and Dillinger (62.1 %) continue to have good equity ratios
- Both companies report a significant recovery in demand at the beginning of the year
- Forecasts for all of 2021 are cautiously optimistic but remain fraught with uncertainty, in particular due to the further development of the pandemic
- Dr. Karl-Ulrich Köhler, Chairman of the Board of Management of Dillinger and Saarstahl: "We need to accelerate implementation of the cost-cutting program and accomplish the turnaround quickly, effectively and permanently"
The Dillinger Group (Aktien-Gesellschaft der Dillinger Hüttenwerke [Dillinger] with its subsidiaries) and the Saarstahl Group (Saarstahl AG with subsidiaries) experienced another very difficult financial year in 2020. Both companies found themselves in challenging structural and economic conditions in 2019 and early 2020 due to, among other things, global protectionism and related tariffs, high overcapacity, and declines in demand in core customer segments such as the automotive, energy, and mechanical engineering industries. The coronavirus pandemic has dramatically intensified the existing crisis.
Dr. Karl-Ulrich Köhler, Chairman of the Board and CFO of Saarstahl and Dillinger, commented on the 2020 financial year at the virtual joint annual press conference for both groups of companies: “The coronavirus pandemic further exacerbated the already strained situation during the course of the year and led to a collapse in demand over the year, first at Saarstahl and, somewhat later, at Dillinger. For many months, we operated our production based on current conditions – sometimes at the lowest technically possible limits of the operating modes. Due to the high losses at both companies in the 2020 financial year, pressure to implement the recession-related cost-cutting program has intensified even further: we need to accelerate implementation of the program and accomplish the turnaround quickly, effectively and permanently.”
Business performance/Development of sales and earnings figures
Demand for wire and rod at Saarstahl collapsed noticeably starting in April and reached its low point in August; since autumn, new orders have recovered significantly. This is primarily due to the restart of production in the automotive industry. Dillinger experienced lagging performance and increasingly weak demand over the course of the 2020 financial year from core consumer segments such as mechanical engineering, retail, and the oil and gas pipeline segment. The offshore wind segment, on the other hand, performed satisfactorily. Dillinger has experienced a recovery of its business since the beginning of 2021. In 2020, both companies made greater use of the instrument of short-time work and were thus able to flexibly adjust the operation of their plants to the downturn in orders. Throughout the year, rigorous pandemic crisis management was also employed, with a wide range of measures to protect the health of employees.
Sales revenues of the Saarstahl Group fell by 23.7 % to €1.684 billion (previous year: €2.206 billion). Consolidated EBITDA (earnings before interest, taxes, depreciation and amortization) of the Dillinger Group amounted to -€70.4 million (2019: -€18.5 million) and the consolidated EBIT, i.e. earnings before interest and taxes, to -€171.2 million (2019: -€127.6 million). Investments in the Saarstahl Group amounted to €61.6 million (2019: €105.2 million).
Net sales of the Dillinger Group decreased by 21.2% to €1.645 billion (previous year: €2.087 billion). Consolidated EBITDA (earnings before interest, taxes, depreciation and amortization) of the Dillinger Group amounted to -€68.9 million (2019: €8.5 million) and the consolidated EBIT, i.e., earnings before interest and taxes, to -€192.8 million (2019: -€116.1 million). Investments in the Dillinger Group amounted to €41.7 million (2019: €72.4 million).
A majority of the investments made by Saarstahl and Dillinger, which were reduced overall, related to measures to improve environmental protection and reduce carbon emissions: for example, in the new coke gas injection system, hydrogen was used as a reducing agent in regular operation in the blast furnaces for the first time in Germany. In addition, a new compressed gas storage facility was commissioned at the Saarstahl site in Neunkirchen and, more recently, the new circular cooler with heat recovery at the sintering plant of ROGESA Roheisengesellschaft Saar (ROGESA) – a joint subsidiary of Dillinger and Saarstahl – for a total investment of €28 million.
Outlook for 2021
Dillinger and Saarstahl started 2021 with a considerably improved order situation and the companies anticipate an overall recovery in business activity and an improved earnings situation.
Forecasts are cautiously optimistic and fraught with uncertainty, particularly regarding the duration of the recovery and the further consequences of the ongoing coronavirus pandemic.
Driving the transformation
Improvement in the earnings figures will require consistent implementation of the ongoing costcutting program. Dillinger and Saarstahl therefore remain fully committed to the targeted cost savings of €250 million. With respect to savings in material costs, 90% of the defined €150 million target has now been backed by concrete measures achieved in the cost of materials and external services. The personnel measures to fulfil the intergenerational contract amount to €100 million. Implementation began in 2020, but the coronavirus has delayed implementation here.
“The turnaround will also require a strategic realignment, as we want to lead the market in our segments and close gaps in our product portfolio in order to occupy new market areas,” Köhler said. “The earnings contribution of €150 million from a realignment of the business strategy is also being pursued vigorously. We will be working intensively in the Management Board to accomplish the turnaround quickly and to improve performance in all areas. We have positioned ourselves for this by establishing the cross-divisional Transformation department,” Köhler said.
We are ready
Dillinger and Saarstahl are continuing to work strategically toward the goal of carbon-neutral steel production and are technologically ready and able to provide the solutions for this. The investments required for decarbonization cannot be easily accomplished, however, and producing carbon-neutral steel at competitive conditions is not possible within the current cost structure and framework conditions. Until the political conditions for profitable production of carbon-neutral steel are in place, Dillinger and Saarstahl will be pursuing an intensified reduction strategy. The efficiency limits of decarbonization on the existing blast furnace route will meanwhile be further explored and improved.
In addition to the coke gas injection system at the ROGESA blast furnaces, which were commissioned in August 2020, further projects are currently being advanced with the goal of carbon-neutral production: an IPCEI funding application was submitted in March for the H2SYNgas hydrogen project at the Dillingen site. This project is developing a technology at a ROGESA blast furnace to enable use of the company’s own process gases as well as considerable quantities of hydrogen for the blast furnace process. This will displace coke used in the blast furnace process and avoid carbon emissions. Feasibility studies are underway with Rio Tinto and Paul Wurth for production of low carbon sponge iron (Canada), and with Liberty Steel and Paul Wurth for a hydrogen-based direct reduction plant (France).
About Dillinger and Saarstahl
Dillinger is a world leader in the manufacture of steel heavy plate for the steel construction, machine manufacturing, offshore, offshore wind power and line pipe sectors. Saarstahl is a worldleading manufacturer of premium wire rod and bar steel for the automotive industry, the construction industry, and for general machine manufacturing. Both companies belong to SHS – Stahl-Holding-Saar and want to contribute with innovative products and intelligent technologies – together with their customers – to finding answers to global challenges including climate protection, energy efficiency, mobility and safety. More information can be found at www.dillinger.de or www.saarstahl.de
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