Significant sales drop Swiss Steel Group reports lower results in a challenging environment

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Swiss Steel Holding AG

Swiss Steel Group's financial performance has been significantly impacted by the ongoing challenging geopolitical and economical market environment. Faced with declining demand from crucial end markets and reduced sales volume in the first half of 2023, together with sustained high sales prices and several cost-cutting efforts resulted in an adjusted Ebitda of 70 million euros.

Swiss Steel Group reported a -19 percent decrease in sales volume for the first half of 2023 to 756 kilotons, down from 937 kilotons in the first half of 2022. Revenue of 1,857.3 million euros was -13 percent lower compared to 2,144.6 million euros in the same period of the previous year. Adjusted Ebitda came to 70.0 million euros, versus 171.0 million euros in the first half of 2022. Net debt amounted to 942.0 million euros, an increase of 93.8 million euros from 848.2 million recorded at the end of 2022.

In the first half-year 2023, Swiss Steel Group’s business environment was shaped by numerous factors, including a slowdown of the global economy and rising interest rates as a counter measure to inflation. Its main customer segments, the automotive industry and the mechanical and plant engineering sector, continued to be negatively affected by the global distortions. On a positive note, a gradual easing was observed in supply chain issues.

As a result, both incoming orders and order backlog continued to decline in the first half of 2023. This was due to lower market demand combined with destocking behavior on the part of our customers, as well as the seasonal based hesitancy to place new orders before the summer break.

Sales volume decreased considerably, leading to lower revenue despite ongoing high sales prices. This resulted in a lower sales volume of 756 kilotons across all product groups versus 937 kilotons in the same period of last year. The sales volume decreased in all our divisions with the strongest decrease observable in the Tool Steel Division (– 32.0 percent). The sales volume of the Engineering Steel Division was also considerably below the prior half-year (-19.6 percent) on the back of a lower sales volume in the automotive industry.

After a prolonged period of price increases, the average sales price per ton of steel decreased in the first half of 2023. However at 2,460 euros per ton, the average sales price is still higher than the average price achieved in the same half of the previous year (H1 2022: 2,290 euros per ton). An improved product mix with a higher share of stainless steel in the product portfolio as well as higher alloy surcharges led to this effect.

Driven by lower sales volume, revenue declined to 1,857.3 million euros, down -13.4 percent compared to the prior half-year (H1 2022: 2,144.6 million euros). The decrease in revenue was spread across all divisions, with the strongest decline in the Engineering Steel Division (-21.9 percent). By region, revenue decreased in all our sales markets, except in the American market.

Despite the introduction of cost-cutting countermeasures, adjusted Ebitda of 70.0 million euros was considerably below the half-year result of the prior year, which came in at 171.0 million. One-time effects amounted to 11.5 million euros and included, among others, costs for the reorganisation program and losses from deconsolidation. In the first half-year 2023, the adjusted Ebitda margin decreased to 3.8 percent (H1 2022: 8.0 percent).

For the first half-year 2023, the Group achieved a result of -30.0 million euros, down on the previous year (2022: 74.0 million).

At the end of June 2023, shareholders’ equity had decreased by 32.2 million euros compared to December 31, 2022. This is mainly attributable to the negative Group result. The equity ratio of 20.6 percent was therefore lower compared to the end of the year at 22.2 percent.

Free cash flow for the year for the first six months was negative at -62.7 euros million, following the usual seasonality.

Net debt, comprising current and non-current financial liabilities less cash and cash equivalents, came to 942.0 million euros, a significant increase compared to December 31, 2022 (848.2 million euros). This is mainly due to the low operational profitability and ongoing net working capital funding.

In the wake of the economic slowdown, the group has experienced a weaker demand amplified by destocking from its customers leading to first half-year results below expectations. “While we foresee that volatility will persist, we would expect that business activity and the specific demand will improve towards the latter half of the year. On this basis, despite the challenging environment economically and politically, we for the time being maintain our full year guidance of an adjusted Ebitda in a range of 160 to 200 million euros”, said CEO Frank Koch

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