Order intake declines – Sales at previous year’s level – Cost-cutting steps in implementation – Restructuring expenses depress result – Further expansion of growth fields modernization, electrical and automation systems, service, energy and green technology – Increased spending on innovation – Future uniform global image under roof brand SMS group
Order intake by the SMS group in the last business year declined to EUR 3.167 billion, (2013: EUR 3.309 billion). Sales, at EUR 3.406 billion, remained at the same level as the previous year
(2013: EUR 3.495 billion).
In business year 2014, the SMS group pre-tax result declined to EUR 31 million (2013: EUR 178 million). The expenses for restructuring the SMS group depressed the result achieved in 2014.
In Business Area SMS Siemag (including Paul Wurth), order intake decreased by EUR 92 million to EUR 1.952 billion (2013: EUR 2.044 billion).
Business Area SMS Meer generated an order intake of EUR 1.050 billion, also hovering below the previous year’s figure (2013: EUR 1.104 billion).
Finally, the elexis group contributed EUR 175 million (2013: EUR 181 million) to the order intake.
This is how order intake broke down according to global regions: Europe (including Russia and Ukraine) 31 percent (2013: 29 percent), Asia 24 percent (2013: 45 percent), North and South America 43 percent (2013: 25 percent), Africa 2 percent (2013: 1 percent).
Due to the lower order intake, the order backlog of EUR 4.613 billion also fell short of the previous year’s value (2013: EUR 4.997 billion).
The year’s average number of employees in the SMS group including apprentices totaled 14,003 (2013: 13,856). Primarily responsible for the increase is the expansion of service business and an increase in manpower abroad. That contrasts with a reduction in staff in Germany.
Despite cost-cutting programs, the SMS group will adhere to its policy of training more than the average number of young talents. This is how the company continues to meet its social responsibilities in this important area. Furthermore, in view of demographic change, the SMS group ensures it will be able to draw on a pool of adequately qualified personnel in the future.
Burkhard Dahmen, Spokesman of the Managing Board of SMS Holding GmbH, says: “Up until the beginning of this year, our customers’ hopes of a bottoming-out of the steel market led us to expect positive impacts on our business. However, due to the global overcapacities, our customers remain reluctant to invest in new plants. What’s more, the enduring political uncertainty in our important sales markets of Russia and Ukraine is depressing our business even more.
We continue to see a large potential in the area of modernizations toward green, energy-efficient plant technology as well as in the entire field of services. Yet, looking at the overall market situation, consolidation and capacity reductions are necessary.
In view of this, we expect order intake in the current business year of 2015 to only match last year’s level.
There’ll likely be an increase in pre-tax profits – due to a drop in restructuring expenses.
Already being implemented is a wide-ranging cost-cutting program involving further process improvements. We’ll also continue to expand our growth areas of modernization, electrical and automation systems, service, and energy and green technology.
Looking at sales, we anticipate a similar level as in 2014 seeing that we’ll be able to work through the order backlog still on our books.”
Future uniform global presence under roof brand SMS group
After the takeover of Mannesmann Demag’s metallurgy division in 1999 and the formation of the SMS group in 2000, the Business Areas SMS Siemag and SMS Meer grew ever closer together. As from August this year, the ranges of metallurgical and rolling mill technology as well as tube & pipe, long products, and forging technology will be united under the single SMS group brand name. The two management companies SMS Siemag AG and SMS Meer GmbH will merge to create SMS group GmbH. In its future positioning, the new company will emerge with a joint Managing Board and ten globally operating divisions. They will receive effective support from internal central departments. Around half of the employees work in Germany, the others abroad, including more than 1,000 each in India and China.
Just like the previous year, the market situation for metallurgical plant and machinery construction was difficult and displayed a low willingness of steel producers to invest. Competition for the few major projects up for bidding was intense and led to noticeable price pressure on plant builders. There had been hopes for a market recovery, but this failed to materialize.
Positive dynamics came mainly from North America. Available there is investment potential that results from a catch-up demand for modernization of outdated plants and a general “reindustrialization” trend.
Consolidation activities on the Chinese market are leading to reduced growth in production. That’s why the SMS group is expecting a decline in demand for new plants in China. After the change of government in India, the SMS group anticipates the release of the projected high investments aimed at expanding the Indian steel industry.
Steps for cost reduction and restructuring
Implementation of the restructuring and efficiency-boosting program launched in 2014 is designed to transform the SMS group in the coming years into an even more competitive and market-compliant company perfectly adapted to changed market conditions.
Securing quality – cutting costs
To ensure high quality, the SMS group remains committed to producing selected components of its machinery and plants in Germany. This is why the company invested heavily in modernizing its production locations in Hilchenbach and Mönchengladbach in recent years. However, it also expanded its workshop capacities in China. Important there is above all providing better customer services on the ground and producing machines specially geared to the Chinese market. That also applies to the Indian market, where in late 2014 a new workshop went into operation in Bhubaneswar, Orissa state, after an investment of EUR 25 million.
Overall, the company is working on cutting costs across the board. This is possible because the SMS group is focusing on designs that optimize manufacturing as well as on higher efficiency in engineering, production, and logistics.
Currently, the major technological activities focus on
- Intensification of the innovation strategy
- Development of technologies for manufacturing new products
- Development of flexible and resource-saving plant designs (energy, alloying elements) to cut production costs
- Development of further intelligent machine elements and process stages required for greater networking of process stages
For some years, the SMS group has been successfully supplying products for process-spanning quality assurance systems and energy monitoring. Right now, it is developing and implementing more solutions to offer customers, for example models that cover multiple service and production stages (Industry 4.0).
Together with Salzgitter Flachstahl AG and Clausthal University, the SMS group developed the BCT (Belt Casting Technology) process for the production of high-manganese steels that feature high strength and top ductility. The first plant has already been successfully commissioned – a technology that opens up new application possibilities for steel as a material. That’s why it was nominated for the German Future Award 2014.
CSP® thin slab technology is an SMS group development, with 27 plants in operation around the globe so far. Now, the group is going even further in the direction of extreme final measurements (e.g. ultra-thin, soft hot strip, thick API qualities) to boost the competitiveness of steel producers yet more. A special feature of this technology is that it can produce optionally in continuous or batch operation depending on the end product. The SMS group is marketing it jointly with South Korean steel producer POSCO under the name CEM (Compact Endless Cast & Rolling Mill).
Apart from the classic markets in the steel, aluminum, and copper industries, the companies in the SMS group are also examining new growth fields in other metals processing industries, such as pyrometallurgy and hydrometallurgy.
SMS Siemag AG and SMS Meer GmbH are both companies of SMS group which, under the roof of SMS Holding GmbH, consists of a group of companies internationally active in plant construction and mechanical engineering for the steel and nonferrous metals industry.