Schmolz + Bickenbach results heavily impacted by COVID-19
by Hans Diederichs
Schmolz + Bickenbach, one of the world’s leading special long steel companies, today reported a 17.1 % decrease in sales volumes, down to 457 kilotons from 551 kilotons in the first quarter of 2019. Revenue declined by 20.3 % from EUR 884 million to EUR 705 million. The financial figures for the first quarter of 2020 were marked by an initially cautious recovery, which was abruptly interrupted by the COVID-19 crisis. The decline in demand caused by production stoppages is reflected in reduced sales volumes and revenue. Adjusted EBITDA, net income and free cash flow were negative. Net debt was down 23.7 % compared with the end of 2019 as a result of the refinancing.
Business development in the first quarter of 2020
At 457 kilotons, 17.1 % less steel was sold in the first quarter of 2020 than in the prior-year quarter, where the volume was 551 kilotons. The fall is attributable to decreasing sales volume for quality & engineering steel, which were down 21.0 % on the back of the sharp drop in demand from the automotive industry, which is having a particularly strong impact on this product group. Sales volumes also decreased compared with the prior-year quarter in the two other product groups, stainless steel, and tool steel, but with less sharp declines of 3.2 % and 10.8 % respectively.
The average sales price per ton of steel came to EUR 1,542 for the first quarter of 2020 and was therefore lower than the prior-year figure of EUR 1,605 per ton. The decline is mainly due to lower scrap and alloy surcharges, but also to lower base prices.
The fall in prices and sales volume resulted in revenue of EUR 704.5 million, down 20.3 % on the prior-year quarter. At 31.5 %, the decline was most pronounced in the quality & engineering steel product group. Revenue from stainless steel was down 3.6 %, and from tool steel 15.7 %. Geographically, all regions and countries suffered a double-digit decline in revenue year on year.
Outlook for the 2020 fiscal year
SCHMOLZ + BICKENBACH will direct increased attention in 2020 on short-term liquidity protection measures to safely overcome the COVID-19 crisis and the resulting slump in demand, especially in the automotive industry. As part of the structural improvements, the focus will be on the consistent implementation of the turnaround plan. Priority will be placed here on the transformation and restructuring of Ascometal, the turnaround of Finkl Steel in North America and the restructuring of Steeltec, as well as personnel measures and operational improvements at DEW.
In view of the numerous uncertainties, particularly as a result of the COVID-19 crisis, forecasts for the 2020 financial year are still subject to a high degree of uncertainty.
Source and graphic. Schmolz + Bickenbach