Dillinger Hütte: 2008 turnover and financial results best in company’s history

The 2008 financial year was another highly successful one for the Dillinger Hütte Group (Dillinger Hütte with its subsidiaries), with the best turnover and financial results ever achieved by the company. Consolidated turnover for the Dillinger Hütte Group grew a vigorous 14%, to €3.3 billion. Earnings before interest, taxes, depreciation and amortization (EBITDA) increased to €960 million (2007: €811 million), and earnings before interest and taxes (EBIT) grew to €890 million (2007: €731 million). The Dillinger Hütte Group profited from consistent, very high demand in all customer segments for both product groups – linepipe and normal plate – which kept production facilities operating at high capacity. “The focus on premium-quality heavy plate proved successful once again in 2008, with the best turnover and earnings figures in the company’s history,” Board of Management Chairman Dr. Paul Belche said at the company’s annual press conference. “We have a highly skilled and dedicated workforce, modern facilities and a successful strategy that is also designed for times of crisis."

Good position in the heavy plate market in 2008

Worldwide demand for heavy plate remained very good until autumn 2008. Activity in many heavy plate consumer segments decreased noticeably at the end of the year, particularly in the construction machinery and ship building sectors. In contrast, steel processing companies supplying the energy sector have until recently maintained good utilization of capacities. This is particularly true for boiler and pressure vessel construction, the offshore industry, large-diameter pipe production, and heavy machine construction. In the last months of 2008 the heavy plate market became increasingly uneven: demand for simple heavy-plate grades weakened significantly and prices fell, after having risen consistently until the middle of the year. However, demand and prices remained stable at a high level in the specialty steels market segment – which involves plate in high-end qualities and with non-standard dimensions.

Double-digit increase in turnover

Production at the rolling mills in Dillingen and at the wholly owned subsidiary GTS Industries
S. A. in Dunkirk, France, reached 2.227 million tons, compared with a record-level of 2.388 million tons in the previous year. In all, Dillinger Hütte (DH) shipped 2.254 million tons of heavy plate (2007: 2.307 million). Due to the higher revenues, Dillinger Hütte Group achieved double-digit growth in its consolidated sales revenue to approximately €3.3 billion (2007: €2.9 billion). Dillinger Hütte alone achieved turnover of €3.032 billion.

Earnings again at a record level

As during the previous year, Dillinger Hütte and its subsidiaries were able to attain top earnings despite continued high costs for raw materials. Consolidated EBIT increased to approximately €890 million (2007: €731 million). EBITDA rose to €960 million (2007: €811 million). Consolidated return on sales (EBIT margin) amounted to 26.9% (2007: 25.2%) and the return on capital employed (ROCE) was 34.5 % (38.4 %).

Increase in staffing – along with increased level of vocational trainees

The total workforce at the Dillingen site increased by 1.7% from the previous year, with 5,322 employees at year’s end (31 Dec. 2007: 5,233 employees). These employees worked at Dillinger Hütte itself, at Zentralkokerei Saar GmbH, and at ROGESA Roheisengesellschaft Saar mbH. A total of 8,485 employees work within the Dillinger Hütte Group (2007: 8,278). In 2008, Dillinger Hütte increased its number of new trainees by 25%, to a total of 96. This brings the total number of young people currently undergoing their initial vocational training to 290 (2007: 274).

Intensified investment

In order to further develop the company’s technological capabilities, Dillinger Hütte continuously invests in the optimization and modernization of its facilities and processes. At €122 million, Dillinger Hütte's total investments for 2008 were once again significantly higher than in the previous year (€79 million). In addition, extensive investments amounting to €111 million (2007: €65 million) were made during 2008 in both subsidiaries – ROGESA Roheisengesellschaft Saar mbH and Zentralkokerei Saar GmbH (DH interest: 50%) – at the Dillinger location. Dillinger Hütte carried half of these investment costs, commensurate with the interest it holds in the companies. These sums are part of an ongoing investment program that began in 2007 and will continue through to 2011, with a total of approximately €530 million designed to strengthen the Dillingen location for the future.

A challenging 2009 for the Dillinger Hütte Group

In contrast to Europe’s other steel producers, Dillinger Hütte was able to produce at full capacity through the last quarter of 2008 and the first quarter of 2009. The first three months of 2009 continued to be marked by persistently good activity and good utilization of facility capacities. In the second quarter, however, the consequences of the worldwide financial and economic crisis also began to be clearly felt at Dillinger Hütte, raising serious uncertainties regarding the rest of the year. Under these circumstances, the company will be adjusting production as of the second quarter. Judging from the current situation, significant overall declines are to be anticipated in 2009 at Dillinger Hütte and its subsidiaries with regard to incoming orders, utilization of capacities, trends in sales turnover and financial results.
Based on the company’s consistent strategic alignment as a premium supplier in the worldwide heavy plate market with a highly specialized product mix, and as an internationally recognized supplier of linepipe plate for a promising energy market, Dillinger Hütte considers itself well armed and prepared to react flexibly and operate profitably within an exceedingly difficult market environment. For this reason, positive earnings are also anticipated for 2009.