ThyssenKrupp carried on seamlessly from a very good fiscal 2005/2006 in the 1st quarter 2006/2007. In a generally favorable economic environment we successfully continued our course of sustainable, profitable growth. Group sales increased by 13% from the prior-year quarter to €12.3 billion. Group earnings before taxes improved to €1,062 million from €425 million in the prior-year period.
The highlights for the 1st quarter 2006/2007 were as follows:
Order intake reached €13.3 billion, 15% more than in the corresponding prior-year quarter.
Sales increased by 13% to €12.3 billion.
EBITDA was €1,507 million, compared with €898 million in the 1st quarter of the prior year.
Earnings before taxes improved from €425 million in the prior-year quarter to €1,062 million.
Earnings per share increased to €1.31 from €0.49 in the prior-year quarter.
Net financial liabilities at December 31, 2006 were €391 million, an increase of €1,138 million compared with September 30, 2006, when we reported net financial receivables of €747 million. On December 31, 2005 net financial liabilities stood at €315 million.
Mergers & Acquisitions activities in the 1st quarter 2006/2007 focused on the Technologies, Services and Elevator segments. The disposal of the North American body and chassis operations of ThyssenKrupp Budd with sales of around €1 billion was largely concluded with the closing on November 30, 2006. The Technologies segment sold ThyssenKrupp Fundições Ltda, Brazil. Services acquired the aerospace service business of Alcoa and Schöbel Technik & Service GmbH, Oldenburg. The Elevator segment made a number of smaller acquisitions.
Since the merger ThyssenKrupp has carried out disposals representing sales of €9 billion and acquisitions accounting for sales of €8 billion.
We expect the generally positive business situation to continue in the further course of the year. For the full year 2006/2007 we forecast sales of €48 billion to €49 billion. Our sustainable goal for earnings before taxes is €2.5 billion. After exceeding this figure significantly in 2005/2006 we are confident of doing the same in the current fiscal year. A similar level is targeted for 2007/2008. This is based on the assumption that the world economy remains stable and energy prices stay within manageable limits.
Economic environment
The world economy continued to grow strongly in the second half of 2006, although the pace of expansion slowed in some regions. The situation on the international oil market eased a little, reducing slightly the risk of an energy price-induced slowdown in the global economy.
The situation in the industrialized countries remained positive. In Japan, the moderate upward trend continued thanks to rising exports. In the USA, robust growth has weakened slightly recently as a result of slower consumer and business spending. The economic upturn in the euro zone and Germany was stronger than expected. In Germany, high capital spending as well as increasing exports and rising private consumption provided growth impetus.
The developing countries in Asia, Latin America and Central and Eastern Europe were again among the most dynamic economic regions in the 2nd half of 2006. India and China in particular continued to record high growth rates.
In the sectors of importance to ThyssenKrupp the picture was as follows:
The international steel markets were in robust condition on the whole. World steel production in the final quarter of 2006 again significantly exceeded the comparable prior-year figure but there were regional differences. The Asian countries reported almost uninterrupted expansion, causing volume and price pressure through increased exports to the Western markets. North America was initially hit hardest by this. Against a background of increased supply, high inventory levels and weaker demand growth, the US steel industry cut back production. In Europe, too, market supply increased strongly under pressure from rising third-country imports, resulting in oversupply particularly at the lower end of the carbon steel flat product market. From fall 2006 this triggered a downward movement in steel prices for commodities in southern Europe but this was less pronounced than in the USA. In northern Europe, the market remained largely stable. Suppliers of higher- and high-quality carbon steel were able to achieve appropriate price increases enabling them to offset cost rises for raw materials, energy and goods.
The market for stainless steel flat products continued to improve in the fourth calendar quarter 2006. Producers in Europe significantly expanded their shipments despite temporary production losses at some producers, while order intake returned to normal towards the end of the year after unusually high orders in previous quarters. In this positive market environment, it was possible to raise base prices again in the fourth calendar quarter 2006. However, as a result of continuing strong demand combined with a relatively high price level in Europe and increasing overcapacities in Asia, imports also rose further, particularly into southern Europe. This trend resulted in a significant increase in inventories at distributors and service centers. The price situation for major raw materials showed no sign of easing; prices for nickel reached a new record level in the first quarter of the fiscal year. In North America, demand was also positive. Prices stabilized at a high level. Despite increased demand in Asia, prices there are unsatisfactory. In contrast to Europe and the USA, Asian manufacturers were unable to pass on increased raw material prices to the market due to the lack of an alloy surcharge. Strong demand for nickel alloys and titanium continued in the reporting quarter.
The international auto industry showed regional differences. Thanks to high production growth, China became the world's third-largest vehicle producer in 2006 after the USA and Japan. In Brazil too, vehicle production increased significantly in the fourth calendar quarter 2006. The performance of the auto industry in North America was weaker. In the USA, vehicle production in the final quarter of 2006 was markedly lower than a year earlier. US manufacturers lost market share to Asian and European producers. The auto market in Europe was positive. In the European Union, new car sales in the fourth calendar quarter 2006 were higher than a year earlier. The German car industry benefited from a positive market environment and a further increase in exports.
The mechanical engineering sector showed an improvement against a background of continuing high world economic growth and increasing investment. In the USA, Japan and China, mechanical engineering output increased further. Production in Germany also grew vigorously thanks to strong orders from Germany and abroad. The plant engineering sector also achieved high growth rates.
The construction sector reported growth in 2006 above all in the developing countries of Asia and in Central and Eastern Europe. In the USA, construction output weakened towards the end of the year. The situation in the German construction industry stabilized further. The biggest growth impetus is coming from commercial building, which is benefiting from the favorable economic situation.
ThyssenKrupp in figures * before taxes
1st quarter ended Dec. 31, 2005 1st quarter ended Dec. 31, 2006
Order intake million € 11,555 13,301
Sales million € 10,942 12,332
EBITDA million € 898 1,507
Income* million € 425 1,062
Employees December 31 184,980 184,240
Order intake and sales
In a generally pleasing economic environment demand for the products and services of ThyssenKrupp increased in the first quarter 2006/2007. Order intake rose by 15% from the prior-year quarter to €13.3 billion.
Group sales increased by 13% to €12.3 billion. The Steel and Stainless segments profited from high demand and increased prices for our carbon and stainless steel flat products. Technologies just failed to equal its prior-year sales as a result of the weak US dollar, disposals and lower sales in the automotive system business. Elevator increased its sales in all areas. Services also continued to expand, achieving record sales.
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