There are only a few orders coming from the automotive industry. This has caused Swiss Steel’s sales to fall by a quarter. There is renewed turmoil in the board of directors of the crisis-ridden steel manufacturer.
The crisis in the German car industry is also a mystery for Frank Koch, the head of the steel company Swiss Steel. “None of us know exactly what is happening there. We only see the consequences,” said the manager contritely on Wednesday at the presentation of the half-year results.
Too few orders from mechanical engineering
Swiss Steel may have its headquarters in Emmenbrücke, but the company’s business is heavily dependent on the prosperity of industry and the automotive sector in Germany in particular. In the first half of the year, 37 percent of sales came from the northern neighbor. At the same time, revenue from business with customers in Germany fell by 18 percent to 510 million euros.
Swiss Steel was not only affected by weak demand from German car companies. Machine and plant manufacturers, who in turn are suffering from a lack of orders, also ordered significantly less than in the previous year.
Magdalena Martullo-Blocher, head of the Ems chemicals group, which also relies heavily on business with companies in the automotive sector for its plastic products, complained a month ago about how bad things are in the German automotive industry. “We are seeing extensive plant closures in German car factories this summer,” she said at the half-yearly conference at the company’s main plant in Domat/Ems. “The production interruptions will last four to five weeks. I have never seen anything like this before.”
What happens in the car factories after the summer break?
Martullo-Blocher also expressed some doubts as to whether some factories would even reopen after the holidays. Koch also has a queasy feeling. There is great uncertainty with regard to the German car industry. It is currently completely unclear which technology will prevail in automobile manufacturing. “Will electric cars make the breakthrough, or will carmakers continue to prefer vehicles with a combustion engine?” asks the manager from the steel industry, like many of his colleagues.
But one thing is clear to the head of Swiss Steel: “People can no longer afford electric cars after the end of government subsidies.” Due to the sharp rise in prices and the weak economic situation, new purchases are generally being postponed, says Koch. This is not only affecting the automotive sector, but also the manufacturers of various other consumer goods.
Loss-making engagement in France
Worldwide, Swiss Steel’s sales fell even more sharply in the first half of the year than in Germany, falling by a quarter to less than 1.4 billion euros.
In addition to lower sales volumes and falling average sales prices, this was also triggered by changes in the company’s consolidation group: the income of the former French subsidiary Ascometal was no longer included in the consolidated financial statements after its management had applied for state creditor protection. Koch announced that the French state had now succeeded in finding new owners for Ascometal’s assets.
One of Ascometal’s five previous sites, the steelworks in Fos-sur-Mer in southern France, is now owned by Italian competitor Marcegaglia, while the remaining four production sites, also located in France, were acquired by British private equity firm Greybull Capital. This is good news for the plant’s employees, as it means that at least some of them will be able to continue working. At the same time, production sites will be retained in a market in which there has been overcapacity in Europe and even worldwide for years.
During its six-year ownership, Swiss Steel was unable to make a profit with Ascometal. As the company openly admits, it injected around 400 million euros into the loss-making subsidiary during this time. This money, which was largely used to cover running costs, is now lost to the company.
Positive operating result only thanks to special revenues
Despite the weak sales development, Swiss Steel managed to generate a surplus in the first half of this year both in terms of operating cash flow (EBITDA) and operating profit (EBIT). However, this was only due to positive one-off effects of EUR 93 million, which mainly came from the sale of the former corporate headquarters in Düsseldorf and from proceeds from insurance claims. Without this contribution, EBITDA alone would have resulted in a loss of EUR 21 million.
Martin Haefner, existing majority shareholder of Swiss Steel.
In April, the company completed another capital increase. The transaction, which was financed almost exclusively by the previous major shareholder Martin Haefner, brought in almost 290 million euros. As the owner of the car importer Amag, Haefner has billions in assets. This strengthened the balance sheet, as expected. Net debt fell by 24 percent to 631 million euros compared to the previous year, which is still a high figure for a poorly performing company like Swiss Steel. The equity ratio rose from 12 to 27 percent.
Vague outlook
Unlike in the past, Swiss Steel no longer communicates a target value for the adjusted EBITDA margin, which many investors use to assess investment properties. When asked, the group justified this by saying that the key figure is an unreliable planning parameter for a company that is in the middle of a transformation.
In its outlook for the full year, the Group limits itself to vague information on the general business environment. Due to the subdued development in the sales markets, the expected growth will probably be postponed to 2025 compared to the 2023 figures.
Further resignation from the Board of Directors
There still seems to be no peace on the steel manufacturer’s board of directors. After the entrepreneur Peter Spuhler decided to withdraw as a major shareholder in the spring following a dispute with Haefner and his two representatives on the board of directors resigned with immediate effect, Michael Schwarzkopf has now also announced his imminent departure.
Peter Spuhler has withdrawn as a major shareholder.
The experienced Austrian, who was elected for another year at the Annual General Meeting (AGM) just three months ago, plans to leave the Board of Directors at the end of August. This means that the board will shrink to five members.
A sixth member, Martin Lindqvist, a Swedish manager who is also well-versed in the industry, is due to join the company on October 8th at the latest and will immediately take over the presidency as Jens Alder’s successor. Under Alder, who is considered Haefner’s confidant, the company took a zigzag course, but ending this will continue to be very difficult in the current environment.