Oct 4 2006
The medium-term sales target of ThyssenKrupp AG is EUR50 billion. That's according to remarks made by Dr. Ekkehard Schulz, Executive Board Chairman of ThyssenKrupp AG, in Brazil, where the foundation stone for the new Brazilian steel mill of ThyssenKrupp Steel AG was laid today in Sepetiba in the state of Rio de Janeiro. Around EUR30 billion of these sales will be generated by product-oriented businesses and EUR20 billion by service-related activities. In the area of Steel, sales are expected to increase in the future to EUR16 to 19 billion, in Capital Goods to EUR19 to 21 billion and in Services to EUR13 to 14 billion. "But that will not be the end. In ten years we are aiming for EUR55 billion. As sales increase, earnings will also continue to improve," continued Dr. Schulz. With ThyssenKrupp having already achieved its medium-term target of EUR2.5 billion in this fiscal year (ending September 30, 2006), the aim for the coming fiscal year is to reach a comparable magnitude. "Assuming that the world economy remains stable and oil prices stay within manageable limits, we are confident that we can achieve this target," said Dr. Schulz.
Over the next five years, ThyssenKrupp will be making investments of EUR17 to 20 billion. Of this, EUR10 billion will be invested in maintaining existing operations and EUR10 billion in organic growth and acquisitions. "This ambitious investment program is founded on a solid basis and will take ThyssenKrupp to a new dimension," said Dr. Schulz.
All segments will contribute to this growth: ThyssenKrupp Technologies, an international supplier of leading-edge technology in machinery, engineering and shipbuilding and - from October 1 - a renowned supplier of high-quality automotive components and systems, will continue to strengthen its in part leading world market positions through international investments and acquisitions.
In addition to organic growth, ThyssenKrupp Elevator will continue to actively pursue strategic acquisitions, above all in Japan. The segment is now also present on the Italian market and has acquired further companies in India and Spain. This strategy will be systematically continued.
The growth of the ThyssenKrupp Services segment will be achieved in part through strategic acquisitions and in part by the implementation of its Eastern Europe concept. As the markets in Eastern Europe expand, demand will grow for comprehensive and professional material supplies. In Brazil, the segment has acquired a 51% interest in the industrial services business of RIP. RIP is market leader in its sector and has activities at all major industrial locations in Brazil.
ThyssenKrupp Stainless is world market leader with a share of 17% and already has an international setup: Acciai Speciali Terni (AST) in Italy, Shanghai Krupp Stainless in China and Mexinox in Mexico. This position will be expanded.
Steel mill in Brazil an important step to new dimension
"A key step on the path to a new dimension are our plans for the flat carbon steel business," said Dr. Schulz. The steel mill, to be operated by CSA Companhia Siderùrgica do Atlantico, is scheduled to start production in early 2009. The roughly EUR3 billion investment in this steel mill includes a dock, power station, coke plant, sinter plant, two blast furnaces, a BOF shop and two continuous casters. It will have a capacity of 5 million metric tons of slabs, of which 2 million tons are intended for processing in Germany and 3 million tons for the NAFTA region. The steel mill itself will employ more than 3,000 people and will indirectly create a further 10,000 jobs in the region.
ThyssenKrupp Steel intends to share in the positive performance of the steel market, which is expected to continue in the coming years according to all forecasts. "Our goals are clearly defined: as a core business of the ThyssenKrupp Group we want to remain among the world's leading producers of high-quality carbon steel flat products," said Dr. Karl-Ulrich Köhler, Chairman of the Executive Board of ThyssenKrupp Steel AG and member of the Executive Board of ThyssenKrupp AG in Brazil ahead of the annual conference of the IISI (International Iron and Steel Institute/October 1 to 4, 2006 in Buenos Aires). He emphasized that the company's forward strategy was based not only on tonnage but also on further developing its high-quality product mix, which is in demand around the world. The supply of high-quality, low-cost slabs from Brazil would allow Steel to utilize growth opportunities in its core European market and the NAFTA region.
ThyssenKrupp Steel is well positioned with its customer and product portfolio - only 6% of its sales are on the spot market, and almost half are secured by annual contracts. In fiscal 2004/2005 and 2005/2006 the company was unable to meet all its customers' requirements due to production bottlenecks. These bottlenecks will be eliminated by the supply of low-cost slabs from Brazil and the EUR700 million investments in Germany. ThyssenKrupp Steel then aims to achieve a 13% share of the European market.
In the North American growth market, which is characterized by strong demand for high-quality flat steel products, ThyssenKrupp aims to achieve a market share of at least 5%. The acquisition of the Canadian steel producer Dofasco would allow this objective to be reached quickly. It is still unclear whether this solution can be realized.
As an alternative to this, ThyssenKrupp Steel and ThyssenKrupp Stainless are planning to build a joint plant in the USA. In the coming years, the North American market is expected to show above-average growth not only for high-grade flat carbon steel but also for stainless steel flat products. Central to the plans for the greenfield project is the construction of a hot strip mill which will be used primarily to process slabs from the new steel mill in Brazil. The new plant will also feature cold rolling and hot-dip coating capacities for high-quality end products of flat carbon steel. The investment in the plant, which will have an annual capacity of 4.5 million metric tons, is estimated at EUR1.8 billion.
In addition, ThyssenKrupp Stainless plans to build a melt shop with an annual capacity of up to 1 million metric tons of slabs, which will also be processed on the hot strip mill. A cold rolling facility is also to be built which will be designed initially to produce 325,000 tons of cold strip and 100,000 tons of pickled hot strip. The Mexican stainless steel plant ThyssenKrupp Mexinox will then also be supplied with hot strip from the USA as starting material. The volume of investment by Stainless is expected to be EUR500 million.
Profitable growth is key to ThyssenKrupp Steel's forward strategy
"In our strategy, profitable growth is the number one priority," Köhler continued. ThyssenKrupp Steel has already proved this in recent years with excellent figures. In the fiscal year ending September 30, 2005, sales increased 11% to EUR9.3 billion, and earnings before taxes and minority interest (EBT) rose from EUR608 million to EUR1 billion. In the first nine months of the current fiscal year, sales increased by 12% to EUR8 billion and EBT by 22% to EUR1.1 billion against the prior-year period. "The fiscal year just ending will definitely present much higher records, but it is too early to talk in terms of absolute figures," said Köhler. Subsidiaries such as Rasselstein, Hoesch-Hohenlimburg, ThyssenKrupp Electrical Steel and ThyssenKrupp Tailored Blanks will also contribute positively to the good results.
Steel market boom to continue - world crude steel output well over 1.2 billion tons