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Schmolz + Bickenbach achieves annual targets despite slowdown in the fourth quarter. CEO Clemens Iller commented: “In 2018 we achieved most of our targets despite strong headwinds in the final quarter. In the current market environment with many political and macroeconomic uncertainties, we forecast adjusted EBITDA of between 190 and € 230 million for the full-year 2019.”
Schmolz + Bickenbach, a global leader in special long steel, reported a 16.5 % increase in sales volume for 2018 to 2,093 kilotons, up from 1,797 kilotons in 2017. Revenue rose to € 3.313 billion, 23.7 % higher than in the previous year (2017: € 2.678 billion) thanks to the Ascometal Business Unit, which has been part of the Group since February 1, 2018, and higher sales prices. Adjusted EBITDA increased by 6.3 % to € 236.7 million, after € 222.7 million in 2017, and EBITDA by 17.0 % to € 251.4 million, after € 214.9 million in the previous year. The over-proportional increase in EBITDA is based on the badwill of € 45 million resulting from the Ascometal acquisition. Group result amounted to € -0.7 million after € 45.7 million in the full year 2017. The decline was caused by an impairment of € -108.6 million before taxes or € -81.1 million after taxes on the net assets of the Finkl Steel Business Unit. Implementation of the turnaround plan for Finkl Steel has already begun. Schmolz + Bickenbach plans not to pay a dividend for fiscal year 2018. Effects of the acquisition of Ascometal on results The results of Ascometal, recently acquired and managed as a Business Unit within the Group, have been included in the Group figures since February 2018. The figures for the relevant prior-year periods have not been adjusted, which has had significant effects on the comparative period. This is reflected in higher sales volume, revenue, and expenses. Ascometal made a positive contribution to adjusted EBITDA in the fourth quarter. Over the fiscal year 2018 as a whole, Ascometal achieved a slightly positive adjusted EBITDA. The moderate purchase price which, in comparison with the higher net assets, led to badwill and was reflected accordingly in EBITDA, was partially used as scheduled for restructuring and transformation expenses. Further measures will be implemented in 2019. The integration also had a substantial impact on the key figures in the balance sheet and statement of cash flows. Business development in fiscal year 2018 In 2018, the results of Schmolz + Bickenbach were strongly influenced by the acquisition of Ascometal and the impairment of Finkl Steel. The acquisition of Ascometal led to higher sales volume and revenue in the Group, while the adjusted EBITDA margin and free cash flow were lower as well as debt higher. From an operating point of view, the first half of the year was particularly pleasing, supported by strong market momentum, with even signs of overheating in the automotive industry in the first quarter. In the second half of the year, the demand for steel began to cool down in certain areas in face of increasing political and economic uncertainty. Especially the demand from the automotive industry sharply declined during the last quarter. The North American Business Unit Finkl Steel increasingly suffered from structural changes in the oil and gas industry and – via the Canadian location Finkl Steel Sorel – from US protective tariffs. Also the Swiss Business Unit Swiss Steel was affected towards the end of the year by the insufficient quotas of the so-called safeguard measures of the EU. However, in contrast to the automotive market, the mechanical and plant engineering industry showed a constant upward trend, albeit at a slower pace. The other end markets tended to be weaker, but remained robust overall. Prices for the most important raw materials followed the global economic trend and, with the exception of molybdenum (molybdenum oxide), which rose by 11 %, were significantly lower at the end of 2018 compared with year-end 2017. Scrap, for example, fell by approximately 23 %, nickel by around 17 % and ferrochrome by almost 22%. Sales volumes increased by 25.2 %, entirely driven by the quality & engineering steel (Q&E) product group Sales volume of stainless steel and tool steel fell by 3.1 and 6.7 %, respectively, for the year as a whole. Revenue increased by 23.7 % to € 3.313 billion, which was due to higher sales prices in all three product groups and higher sales volumes of Q&E. In 2018, the average sales price rose to € 1,583 per ton, 6.2 % higher than in the previous year (2017: EUR 1,490 per ton). Q&E revenue rose by 48.5 % to € 1.702 billion. Stainless steel and tool steel also recorded higher revenue of 6.8 % (to € 1.096 billion) and 1.1 % (to € 437.9 million), respectively. From a regional perspective, double-digit revenue growth was achieved in all three regions Europe, America and Africa/Asia/Australia, led by Europe with 26.7 %, followed by Africa/Asia/Australia with 14.9 % and America with 11.8 %. EBITDA adjusted for one-off effects increased by 6.3 % to € 236.7 million (2017: EUR 222.7 million). The one-off effects of € 14.7 million were the net of the positive contribution of badwill for the Ascometal acquisition (€ 45.1 million) and the transaction and restructuring expenses of € 30.4 million. The latter were mainly incurred for integration measures of Ascometal. At 7.1 %, the adjusted EBITDA margin was lower than in the previous year at 8.3 % due to the dilution effect of Ascometal. Before adjusting for one-off effects, EBITDA improved by 17.0 % to € 251.4 million compared to € 214.9 million in 2017. The corresponding margin was 7.6 % compared to 8.0 % in the same period of the previous year. The continued structural changes in the North American forging market, especially a general decline in demand for Finkl’s products for the oil and gas industry, overcapacities in production and the impact of the US steel safeguard measures on the Canadian production site, triggered an impairment charge at the Finkl Steel Business Unit. The after-tax effect on the Group result amounted to € -81.1 million (€ -108.6 million before taxes). A comprehensive turnaround plan for the Business Unit is already in execution. No particular further provisions needed to be taken. At € -43.4 million, the financial result in 2018 was slightly better than in 2017 at € -45.6 million. Earnings before taxes for 2018 were lower than in the previous year due to the impairment and amounted to € -8.7 million compared with € 42.4 million in 2017. This resulted in a tax income of € 8.0 million (2017: tax income of € 3.3 million) and a Group result of € -0.7 million (2017: € 45.7 million). A negative Free Cash Flow of € -159.8 million (2017: € 16.3 million) reflected the acquisition of Ascometal and the increased investment activity. The sudden slowdown of sales towards year-end added a temporary rise in inventories. Net debt rose accordingly to € 654.8 million, compared to € 651.0 million at the end of the third quarter of 2018. Net debt in relation to adjusted EBITDA (based on the last twelve months) rose slightly to 2.8 x after 2.7 x at the end of the third quarter of 2018.

Schmolz + Bickenbach expects further dip in growth in 2019

Kategorie:
Autor: Redaktion

Datum: 21. Mrz. 2019

Schmolz + Bickenbach, a global leader in special long steel, reported a 16.5 % increase in sales volume for 2018 to 2,093 kilotons, up from 1,797 kilotons in 2017. Revenue rose to € 3.313 billion, 23.7 % higher than in the previous year (2017: € 2.678 billion) thanks to the Ascometal Business Unit, which has been part of the Group since February 1, 2018, and higher sales prices. Adjusted EBITDA increased by 6.3 % to € 236.7 million, after € 222.7 million in 2017, and EBITDA by 17.0 % to € 251.4 million, after € 214.9 million in the previous year. The over-proportional increase in EBITDA is based on the badwill of € 45 million resulting from the Ascometal acquisition. Group result amounted to € -0.7 million after € 45.7 million in the full year 2017. The decline was caused by an impairment of € -108.6 million before taxes or € -81.1 million after taxes on the net assets of the Finkl Steel Business Unit. Implementation of the turnaround plan for Finkl Steel has already begun. Schmolz + Bickenbach plans not to pay a dividend for fiscal year 2018.
Effects of the acquisition of Ascometal on results
The results of Ascometal, recently acquired and managed as a Business Unit within the Group, have been included in the Group figures since February 2018. The figures for the relevant prior-year periods have not been adjusted, which has had significant effects on the comparative period. This is reflected in higher sales volume, revenue, and expenses. Ascometal made a positive contribution to adjusted EBITDA in the fourth quarter. Over the fiscal year 2018 as a whole, Ascometal achieved a slightly positive adjusted EBITDA. The moderate purchase price which, in comparison with the higher net assets, led to badwill and was reflected accordingly in EBITDA, was partially used as scheduled for restructuring and transformation expenses. Further measures will be implemented in 2019. The integration also had a substantial impact on the key figures in the balance sheet and statement of cash flows.
Business development in fiscal year 2018
In 2018, the results of Schmolz + Bickenbach were strongly influenced by the acquisition of Ascometal and the impairment of Finkl Steel. The acquisition of Ascometal led to higher sales volume and revenue in the Group, while the adjusted EBITDA margin and free cash flow were lower as well as debt higher.
From an operating point of view, the first half of the year was particularly pleasing, supported by strong market momentum, with even signs of overheating in the automotive industry in the first quarter. In the second half of the year, the demand for steel began to cool down in certain areas in face of increasing political and economic uncertainty. Especially the demand from the automotive industry sharply declined during the last quarter. The North American Business Unit Finkl Steel increasingly suffered from structural changes in the oil and gas industry and – via the Canadian location Finkl Steel Sorel – from US protective tariffs. Also the Swiss Business Unit Swiss Steel was affected towards the end of the year by the insufficient quotas of the so-called safeguard measures of the EU. However, in contrast to the automotive market, the mechanical and plant engineering industry showed a constant upward trend, albeit at a slower pace. The other end markets tended to be weaker, but remained robust overall.
Prices for the most important raw materials followed the global economic trend and, with the exception of molybdenum (molybdenum oxide), which rose by 11 %, were significantly lower at the end of 2018 compared with year-end 2017. Scrap, for example, fell by approximately 23 %, nickel by around 17 % and ferrochrome by almost 22%. Sales volumes increased by 25.2 %, entirely driven by the quality & engineering steel (Q&E) product group Sales volume of stainless steel and tool steel fell by 3.1 and 6.7 %, respectively, for the year as a whole.
Revenue increased by 23.7 % to € 3.313 billion, which was due to higher sales prices in all three product groups and higher sales volumes of Q&E. In 2018, the average sales price rose to € 1,583 per ton, 6.2 % higher than in the previous year (2017: EUR 1,490 per ton). Q&E revenue rose by 48.5 % to € 1.702 billion. Stainless steel and tool steel also recorded higher revenue of 6.8 % (to € 1.096 billion) and 1.1 % (to € 437.9 million), respectively. From a regional perspective, double-digit revenue growth was achieved in all three regions Europe, America and Africa/Asia/Australia, led by Europe with 26.7 %, followed by Africa/Asia/Australia with 14.9 % and America with 11.8 %.
EBITDA adjusted for one-off effects increased by 6.3 % to € 236.7 million (2017: EUR 222.7 million). The one-off effects of € 14.7 million were the net of the positive contribution of badwill for the Ascometal acquisition (€ 45.1 million) and the transaction and restructuring expenses of € 30.4 million. The latter were mainly incurred for integration measures of Ascometal. At 7.1 %, the adjusted EBITDA margin was lower than in the previous year at 8.3 % due to the dilution effect of Ascometal. Before adjusting for one-off effects, EBITDA improved by 17.0 % to € 251.4 million compared to € 214.9 million in 2017. The corresponding margin was 7.6 % compared to 8.0 % in the same period of the previous year.
The continued structural changes in the North American forging market, especially a general decline in demand for Finkl’s products for the oil and gas industry, overcapacities in production and the impact of the US steel safeguard measures on the Canadian production site, triggered an impairment charge at the Finkl Steel Business Unit. The after-tax effect on the Group result amounted to € -81.1 million (€ -108.6 million before taxes). A comprehensive turnaround plan for the Business Unit is already in execution. No particular further provisions needed to be taken.
At € -43.4 million, the financial result in 2018 was slightly better than in 2017 at € -45.6 million.
Earnings before taxes for 2018 were lower than in the previous year due to the impairment and amounted to € -8.7 million compared with € 42.4 million in 2017. This resulted in a tax income of € 8.0 million (2017: tax income of € 3.3 million) and a Group result of € -0.7 million (2017: € 45.7 million).
A negative Free Cash Flow of € -159.8 million (2017: € 16.3 million) reflected the acquisition of Ascometal and the increased investment activity. The sudden slowdown of sales towards year-end added a temporary rise in inventories.
Net debt rose accordingly to € 654.8 million, compared to € 651.0 million at the end of the third quarter of 2018. Net debt in relation to adjusted EBITDA (based on the last twelve months) rose slightly to 2.8 x after 2.7 x at the end of the third quarter of 2018.