German steel group, Salzgitter AG (“Salzgitter”), announced a pre-tax loss of €31.4mn ($34mn) in Q1 2020, compared with a profit of €125.9mn in the same quarter the prior year, according to the company’s financial results published on May 13.
The company noted that negative impact of the COVID-19 pandemic on the economy from mid-March onwards is yet to have any significant effect on the “marginally negative quarterly results” of its steel and tubes business units.
Salzgitter highlighted relatively lower steel prices and shipments, an adjusted valuation of its copper smelting investment (Aurubis AG), and the payment of a fine in January for colluding to fix steel plate prices as the main contributions to its loss making first quarter.
While the company’s crude steel production only declined 3.4pc from the prior year to 1.68mn mt in the first quarter, lower steel prices in conjunction with the downturn in shipment volumes resulted in an 8.1pc drop in the group’s external sales to €2.1bn.
In the Forecast, Opportunities and Risk Report segment of the financial statement, Salzgitter acknowledged that the coming quarters’ performance will be determined by global constraints on economic activities.
The company had already responded by curbing production, reduced working patterns, as well as by further measures designed to support earnings and liquidity, with the unforeseen duration of these measures highly dependent on the development of the COVID-19 outbreak.
Against this backdrop, Salzgitter went on to outline its expectations for the financial year 2020 with a notable reduction in sales and a negative pre-tax result in a “significant, most likely triple-digit million-euro range”.
With this, the company provided an example that a margin variance of €25/mt on an order book of 12mn mt per annum, from its Strip Steel, Plate/Section Steel, Mannesmann and Trading business units, would be sufficient to cause a fluctuation of €300mn to the company’s annual financial results.