Annual Report 2014 Annual Report 2014 Financial Year from January 1 to December 31, 2014 Who we are. Salzgitter AG ranks as one of Germany’s companies rooted in a long tradition. Our business activities are concentrated on steel and technology. Through its sustainable organic and external growth, our company has advanced to take its place as one of Europe’s leading steel and technology groups – with external sales of € 9 bil- lion in 2014, a crude steel capacity of more than 7 million tons and a workforce of over 25,000 employees. The primary objective of our company – now and in the future – is the preservation of our indepen- dence through profitability and growth. Our Group comprises around 200 domestic and international subsid- iaries and holdings and has been structured into the business units of Strip Steel, Plate / Section Steel, Energy, Trading and Technology since 2014. The share of Salzgitter AG is listed on the MDAX index of Deutsche Börse AG. Salzgitter Group in Figures 2014 20131) Crude steel production kt 7,287 7,149 External sales € m 9,040 9,310 Strip Steel Business Unit € m 2,060 2,018 Plate / Section Steel Business Unit € m 1,119 1,088 Energy Business Unit € m 1,227 1,309 Trading Business Unit € m 3,255 3,575 Technology Business Unit € m 1,198 1,118 Industrial Participations / Consolidation € m 182 202 EBIT before depreciation and amortization (EBITDA)2) € m 484 138 Earnings before interest and taxes (EBIT)2) € m 98 – 393 Earnings before taxes (EBT) € m – 15 – 483 Strip Steel Business Unit € m – 9 – 85 Plate / Section Steel Business Unit € m – 130 – 403 Energy Business Unit € m – 41 – 52 Trading Business Unit € m 60 31 Technology Business Unit € m 25 13 Industrial Participations / Consolidation € m 79 13 Net income/loss for the financial year € m – 32 – 490 Earnings per share – basic € – 0.6 – 9.1 Return on capital employed (ROCE)3) % 1.8 – 10.5 Cash flow from operating activities € m 599 141 Investments4) € m 270 359 Depreciation and amortization4) € m – 382 – 530 Balance sheet total € m 8,493 8,250 Non-current assets € m 3,575 3,622 Current assets € m 4,918 4,628 Inventories € m 1,992 1,973 Cash and cash equivalents € m 774 755 Equity € m 2,875 3,187 Liabilities € m 5,618 5,063 Non-current liabilities € m 3,116 3,035 Current liabilities € m 2,502 2,028 of which due to banks5) € m 342 159 Net position6) € m 403 303 Employees Personal expenses € m – 1,601 – 1,587 Core workforce on the reporting date7) empl. 23,555 23,446 Total workforce on the reporting date8) empl. 25,529 25,694 Disclosure of financial data in compliance with IFRS 4) Property, plant and equipment and intangible assets, excluding financial 1) 2013 restated assets 2) EBIT = EBT + interest expenses/–interest income; EBITDA = EBIT + 5) Current and non-current bank liabilities depreciation and amortization 6) Including investments, e.g. securities and structured investments 3) ROCE = EBIT (= EBT + interest expenses excl. interest portion in transfers 7) Excl. trainee contracts and excl. non-active age-related part-time work to pension provisions) divided by the sum of shareholders’ equity (excl. 8) Incl. trainee contracts and incl. non-active age-related part-time work calculation of deferred tax), tax provisions, interest-bearing liabilities (excl. pension provisions) and liabilities from finance leasing, forfaiting Annual Report 2014 of Salzgitter AG 8 Highlights of the Financial Year 2014 Annual Report 2014 of Salzgitter AG Highlights of the Financial Year 2014 9 01 The Executive The group organi- Board presents the zation structure established Annual Report 2013 at the under the “Salzgitter AG 2015” reorg­­ - Annual Results Press Conference anization project enters into force on on March 28, 2014. The Board subse- January 1, 2014. The Group’s organization quently engages in discussion with 03 structure is much more strongly aligned to capital markets representatives at customer and market requirements than 02 well-attended analysts’ confer- before and, along with restructuring the Salzgitter AG ences in Frankfurt am Main business units, also entails the combi- (SZAG) releases key data for and London. nation of companies and a new the financial year 2013. The compa- management structure. ny’s economic situation is dominated by the crisis in Europe’s industry. Guid- ance for the new financial year compared Assembly work with 2013 includes a significance increase commences on the plant technology in the pre-tax result close to break- of the pulverized coal injection plant invest- even and a once again moderately ment project at Salzgitter Flachstahl GmbH (SZFG). positive return on capital The plant that is due for commissioning in the summer employed. of 2015 is expected to notably reduce metallurgy costs. Together with its subsidiaries, the Salzgitter Group showcases HIGHLIGHTS OF THE material inventions for the steel processing industries at the Hanover trade fair. Special focus is placed on automotive light- weight construction and the topic of resource efficiency. The inno-­­ vative direct digital printing procedure of subsidiary KHS GmbH 2014 (KHSDE) for embellishing PET bottles is nominated for the Hermes FINANCIAL YEAR Award at the trade fair. With the “MANNESMANN. Tubes” and “Mannesmann is at Home with Us” trade fair slogans, the Salzgitter Group highlights the significance of the internationally Around acclaimed Mannesmann brand as synony- 04 600 shareholders mous with steel tubes of a quality that The Salzgitter and shareholder representa- traditionally excels. Group is one of the main tives attend SZAG’s General Meet- sponsors of the “Steels in Cars ing of Shareholders in Braunschweig and Trucks” (SCT) international con- on May 22. They approve the items on the ference in Braunschweig. The company agenda by a large majority. supports the high profile event with Dividend for the year 2013 amounts to presentations, an exhibition and € 0.20 per share, reflecting the fact guided tours of the integrated that SZAG continues to pursue a steelworks in Salzgitter. policy of steady dividend 05 06 distribution. Annual Report 2014 of Salzgitter AG 10 Highlights of the Financial Year 2014 Annual Report 2014 of Salzgitter AG Highlights of the Financial Year 2014 11 SZAG takes part for the first time in Wind- 09 force, a trade fair of the offshore wind industry in Bremen. German and VPSVerkehrs betriebe international exhibitors present the Peine-Salzgitter GmbH (VPS) entire value chain of the sector against 08 The Salzgitter Group looks back on a history of 150 years. the backdrop of symposiums held for closes the first half of 2014 with a The company is the central logistics national and international experts to significant year-on-year improvement in provider to the Salzgitter Group’s discuss markets, projects, envi- its pre-tax result close to breakeven. The effect steel companies. On the occasion ronmental protection and of the “Salzgitter AG 2015” restructuring program of its anniversary, VPS invites research. proceeding soundly in line in all business units also employees and partners to contributes to this result. an open day. 10 SZFG presents 07 The US-based group subsidiaries Berg Steel Pipe Corp. its new brand strategy (BSPC) and Berg Spiral Pipe Corp. (BSPM) are to deliver under the slogan of “Names 430,000 tons of large-diameter pipes for the ET Rover Sharpen the Image” at EuroBLECH pipeline project. This is the largest single contract in Hanover. HSD® (High Strength in the history of the two companies. Another and Ductility) steel applications two major contracts for 346,000 tons feature among the further high- worth of pipes follow on in the lights on show at this fourth quarter. trade fair. The Salzgitter Group The KHS Group stages an impressive turnaround impresses many of the 37,000 in the first nine months of 2014 and delivers visitors from Germany and abroad with earnings before taxes of € 5.5 million. its innovations showcased at BrauBeviale in German Federal President Joachim Gauck awards Nuremberg. The presentation of a test machine the “Deutscher Zukunftspreis – the German Presi- for the ground-breaking direct digital printing of dent’s Award for Innovation in Science and Technol- PET bottles features among the KHS exhibits that ogy” in Berlin, honoring the joint “Horizontal Belt elicit particular interest. A specialist jury of the German Casting of Steel – New High Performance Materials” 11 Packaging Award sponsored by the Federal Ministry project. The project is one of three innovations of Economics and Technology and open to interna- that are put forward for the prize following the tional contestants selects “Direct Print” in com- selection procedure. The project partners are bination with Nature MultiPackTM, also SZFG, SMS Siemag AG and Clausthal newly developed, as this year’s most University of Technology. innovative solutions. 12 Annual Report 2014 of Salzgitter AG Annual Report 2014 of Salzgitter AG 1212 Contents Contents 13 Salzgitter Group in Figures 5 Contents Consolidated Financial Statements Highlights of the Financial Year 2014 8 B Preface by the Executive Board 14 Report of the Supervisory Board 17 I. Consolidated Income Statement 146 Corporate Governance 20 II. Statement of Total Comprehensive Income 147 III. Consolidated Balance Sheet 148 IV. Cash Flow Statement 150 Group Management Report and Management Report on Salzgitter AG A V. Statement of Changes in Equity 152 Background Information on the Group VI. Notes 154 Segment Reporting 154 I. Business and Organization 28 Analysis of Fixed Assets 156 1. Group Structure and Operations 28 2. Management and Control 34 List of Shareholdings 160 3. Corporate Governance and Declaration Accounting Principles 172 of Conformity 44 Consolidation Principles and Methods 175 4. Employees 45 5. The Salzgitter Share 50 Consolidated Group 178 Currency Translation 179 Accounting and Valuation Principles 180 II.