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12. novembris 2019

SCHMOLZ + BICKENBACH suffers from poor market situation

  • Sales volume in Q3 2019 with 405 kilotons significantly down year-on-year from 470 kilotons due to a pronounced and continued drop in demand
  • Adjusted EBITDA of EUR –32.9 million reflects poor market situation (Q3 2018: EUR 41.8 million)
  • In Q3 2019 the net assets of the Business Units DEW, Ascometal, Finkl Steel and Steeltec had to be impaired by EUR 297.4 million
  • Positive free cash flow of EUR 6.0 million thanks to continued successful inventory reduction, compared to EUR –2.6 million in Q3 2018
  • Net debt at EUR 724 million, slightly higher than at the end of Q2 2019 with EUR 709 million
  • Outlook 2019: SCHMOLZ + BICKENBACH expects adjusted EBITDA of less than EUR 70 million

 

CEO Clemens Iller said: "After a noticeable deterioration in demand had already been observed in the first half of the year, sales markets contracted on a broad basis in the third quarter. As in the first half of the year, the automotive industry was under the greatest pressure in a generally weak market environment. The downturn triggered by the usual seasonal decline in demand in the first two summer months was exacerbated by global political uncertainty and, in some cases, escalating trade disputes. Even in September, when order intake picks up again in a normal market environment, demand remained weak. Accordingly, the result for the third quarter was unsatisfactory despite ramped-up cost-cutting measures. As no reliable forecasts for future orders are made by customers, we have adjusted our expectations for the financial year in October downwards. At the same time, we announced a capital increase to strengthen the Company's financial base."

 

Financial key figures

 

 

Unit

9M 2019

9M 2018 1)

Δ in %

Q3 2019

Q3 2018

Δ in %

 

 

 

 

 

 

 

 

Sales volume

kilotons

1,442

1,595

– 9.6

405

470

– 13.8

Revenue

million EUR

2,361.8

2,517.2

– 6.2

670.1

780.0

– 14.1

Average sales price

EUR/t

1,637.9

1,578.2

3,8

1,654.6

1,659.6

– 0.3

Adjusted EBITDA

million EUR

49.9

197.0

– 74.7

– 32.9

41.8

EBITDA

million EUR

14.9

223.4

– 93.3

– 51.9

38.5

Adjusted EBITDA margin

%

2.1

7.8

– 4.9

5.4

EBITDA margin

%

0.6

8.9

– 7.7

4.9

EBIT

million EUR

– 360.4

142.7

– 376.0

11.7

Earnings before taxes

million EUR

– 398.5

113.7

– 390.3

3.2

Group result

million EUR

– 432.8

92.4

– 419.9

– 3.7

Investments

million EUR

82.3

67.6

21.7

34.6

31.7

9.1

Free Cash Flow

million EUR

41.5

– 173.4

6.0

– 2.6

 

Unit

30.9.2019

31.12.2018

Δ in %

30.6.2019 

 

 

 

 

 

 

 

 

 

 

Net debt

million EUR

723.5

654.8

10.5

709.3

 

 

Shareholders’ equity

million EUR

223.8

707.7

– 68.4

670.0

 

 

Gearing

%

323.3

92.5

105.9

 

 

Net debt/adj. EBITDA LTM (leverage)

x

8.2

2.8

4.3

 

 

Balance sheet total

million EUR

2,013.6

2,531.8

– 20.5

2,540.1

 

 

Equity ratio

%

11.1

28.0

26.4

 

 

Employees as at closing date

positions

10,451

10,486

– 0.3

10,415

 

 

Capital employed

million EUR

1,460.8

1,739.5

– 16.0

1,804.8

 

 

 

Unit

9M 2019

9M 2018 1)

Δ in %

Q3 2019

Q3 2018

Δ in %

 

 

 

 

 

 

 

 

Earnings/share 2)

EUR/CHF

– 0.46/– 0.51

0.10/0.12

– 0.44/– 0.49

0.00/0.00

Shareholders‘ equity/share 3)

EUR/CHF

0.24/0.26

0.75/0.88

0.24/0.26

0.75/0.88

Share price high/low

CHF

0.617/0.192

0.886/0.700

0.465/0.192

0.830/0.733

 

 

 

 

 

 

 

 

1) Including Ascometal, fully consolidated since February 1, 2018

2) Earnings per share are based on the result of the Group after deduction of the portions attributable to non-controlling interests

3) As at September 30, 2019 and as at December 31, 2018

 

 

Lucerne, November 12, 2019 – SCHMOLZ + BICKENBACH, a global leader in special long steel, today reported a 13.8% decline in sales volume from 470 kilotons in the third quarter of 2018 to 405 kilotons. Since average sales prices also fell slightly, the decline in revenue was slightly more pronounced at 14.1% to EUR 670.1 million from EUR 780.0 million. Adjusted EBITDA stood at EUR –32.9 million after EUR 41.8 million in the prior-year period and net debt at EUR 723.5 million, slightly higher than at the end of the second quarter of 2019 with EUR 709.3 million. A positive free cash flow of EUR 6.0 million was achieved (Q3 2018: EUR –2.6 million) and net working capital was reduced by EUR 59.6 million to EUR 872.1 million since year-end 2018.

 

Business development in the third quarter of 2019

After an already challenging first half of the year, the situation on the steel market deteriorated further. Whereas in the second quarter there were still indications that the decline in demand might slow down, particularly in the automotive industry, these were completely absent in the seasonally weak third quarter. In fact, demand from other important end markets continued to drop, putting the entire steel industry and its customers in the manufacturing industry under even greater pressure.

 

Due to the collapse of the relevant sales markets in the third quarter, a corresponding impairment test for intangible assets with finite expected useful lives and property, plant and equipment was performed as of September 30, 2019. Therefore the net assets of the business units DEW, Ascometal, Finkl Steel and Steeltec had to be adjusted by EUR 297.4 million. In the consolidated income statement this is recognized under depreciation, amortization and impairment. The impairment losses are presented in Note 15 of the Interim Report Q3 2019.

 

At 405 kilotons, 13.8% less steel was sold in the third quarter of 2019 than in the prior-year quarter with 470 kilotons. This was primarily to be attributed to the decline of 17.0% in sales volume of quality & engineering steel. This product group was significantly affected by the crisis in the automotive industry and the flattening in demand from the mechanical and plant engineering sector. Sales volume of tool steel was also lower than in the same quarter of the previous year. By contrast, the sales volume of the stainless steel product group went up by 2.6%.

 

The average sales price per ton of steel was EUR 1,654.6 in the third quarter of 2019, slightly lower than in the prior-year quarter with EUR 1,659.6 and the one in the second quarter of 2019 (EUR 1,661.7). The decline is caused by increased pricing pressure and the decline in scrap prices.

 

Revenue fell to EUR 670.1 million, 14.1% less than in the prior-year quarter (EUR 780.0 million). This decline was driven first and foremost by the quality & engineering steel product group, which recorded a loss of 23.1%. Revenue from stainless steel was down 3.6%, and from tool steel 11.3%.

 

In regional terms, nearly all regions posted a decline in revenue compared with the prior-year quarter.

 

Adjusted for one-time effects, EBITDA totaled EUR –32.9 million (Q3 2018: EUR 41.8 million), which was down on the prior-year quarter. One-time effects amounted to EUR 19.0 million and included amongst others a provision for restructuring of EUR 10.0 million for planned measures within the Business Unit DEW. Including these one-time effects, EBITDA fell to EUR –51.9 million (Q3 2018: EUR 38.5 million).

 

Accordingly, the adjusted EBITDA margin was –4.9% (Q3 2018: 5.4%), and the EBITDA margin was –7.7% (Q3 2018: 4.9%).

 

At EUR –14.3 million, the financial result was more negative than the EUR –8.5 million recorded in the same quarter of the previous year. This is due to the higher level of debt. Earnings before taxes (EBT) amounted to EUR –390.3 million (Q3 2018: EUR 3.2 million).

 

Tax expense amounted to EUR 29.6 million and compares with EUR 6.9 million in the prior-year quarter. The reason for the increase is the impairment of deferred tax assets in connection with the impairment of assets, which is in the amount of EUR 29.4 million included in the tax expense. In the third quarter of 2019, a consolidated loss of EUR 419.9 million had to be accepted after a loss of EUR 3.7 million was recorded in the third quarter of 2018.

 

Free cash flow was positive compared to the third quarter of the previous year thanks to the early implementation of measures to reduce net working capital – namely the reduction of inventories and trade receivables – and reached EUR 6.0 million after EUR –2.6 million in the third quarter of 2018.

 

At EUR 723.5 million, net debt, which comprises current and non-current financial liabilities less cash and cash equivalents, was higher than the figure of EUR 654.8 million at December 31, 2018. The main reason for the increase is the first-time application of IFRS 16, which increased net debt by EUR 59.0 million. The ratio of net debt to adjusted EBITDA (leverage, based on the last twelve months) increased accordingly from 2.8 to 8.2 as of December 31, 2018.

 

Outlook for the 2019 financial year

In the wake of the economic slowdown, which has led to a sharp decline in business activity, particularly in the manufacturing industry, the steel industry is now finding itself in difficulties. SCHMOLZ + BICKENBACH has also been affected. After the usual seasonal slowdown in the summer months, demand in September recovered from its August low, but much less than expected. There was no noticeable recovery in order intake or in the order situation in the first weeks of the fourth quarter.

 

Given these developments, the Company expects adjusted EBITDA to be below EUR 70 million. Due to the further rise in political and economic uncertainty and the usual seasonal decline in demand toward the end of the year, a more accurate forecast is not available for the 2019 fiscal year.

 

SCHMOLZ + BICKENBACH will continue to work hard to counteract negative market developments and try to minimize the impact on the Company. Besides stepping up its operational cost improvement and liquidity maintenance measures, the Company plans to carry out a capital increase in 2019 to return to a sustainable finance structure. This is to be approved by the shareholders at an Extraordinary General Meeting on December 2, 2019.

 

In operational terms, the main focus of SCHMOLZ + BICKENBACH is on implementing the next steps of the industrial integration of Ascometal. The takeover has set the course for the further strengthening of SCHMOLZ + BICKENBACH’s market position over the medium to long term. The Company intends to make full use of this opportunity, while at the same time working on improving its efficiency and profitability and optimizing its inventories. A second focus will be the implementation of measures to strengthen the results of operations of Finkl Steel.

 

Furthermore, SCHMOLZ + BICKENBACH intends to continue its efforts for personnel restructuring measures, initiated predominantly at DEW. Lastly, the Company will continue to work on the internal performance improvement programs (“PIP”) to lower the fix cost base and improve operational efficiency.

 

– END

 

For further information:

 

Dr Ulrich Steiner

Vice President Corporate Communications, Investor Relations & CSR

Telephone +41 (0)41 581 4120

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