Business in 2011 was clearly characterized by a substantial growth in revenue and earnings for the SKW Metallurgie Group. The most important operating driver for this positive growth was the increase in steel production, in particular on the sub-markets that are particularly important for the SKW Metallurgie Group.
In the Cored Wire segment, PapCal cored wire was successfully used by additional customers, after tests, which customers performed in particular in the economic and financial crisis, had proved this product innovation’s superiority in practical use. At the same time, this segment penetrated new customer industries: copper and foundry. These strategic activities are part of the stronger focus on higher-margin products that was introduced over the past few years. Additional strategic milestones in this segment were the increase in the number of cored wire production facilities from five to seven (new production facility in Russia for the CIS market and in Bhutan for the Indian market) and the vertical integration for part of the requirements for calcium silicon as a raw material (calcium silicon furnace in Bhutan), which will be completed during the course of 2012.
In the Powder and Granules segment, 2011 was also characterized by the SKW Metallurgie Group’s multi-technology competence in hot metal desulphurization. This attribute is due, in particular, to the fact that, compared to local competitors, the group holds a leading position on all of the key geo- graphic markets and with all of the key technologies employed in hot metal desulphurization. This is the case in particular since the acquisition of a calcium carbide plant in Sweden has opened up new perspectives for the intra-group supply of raw materials.
Demand for SKW Metallurgie’s products is essentially non-seasonal in the Cored Wire and Powder and Granules segments. Nonetheless, experience shows that there is a quarter every year (unidentifi- able in advance) in which key customers carry out maintenance work or reduce stock levels and thus require fewer products from SKW Metallurgie for a short period of time.
The SKW Metallurgie Group’s Quab facility mostly supplies industries which, in turn, rely on agricul- tural pre-products. As a result, demand for Quab is partly seasonal; this seasonal nature can be seen, in particular, in that the first quarter in particular is comparatively weak (winter in the northern hemisphere).
During the year under review, the second half of the year was impacted by a reduction in steel pro- duction in Europe (e.g. at the ArcelorMittal Group) and in Brazil.
In all other respects, during the year under review there were no significant differences between the quarters. Non-operating issues, such as unrealized currency translation effects may, however, occur irregularly and may lead to fluctuations in earnings.
A calcium carbide plant was acquired in Sweden with effect from February 1, 2011; further details can be found in Section C of the Notes to the Consolidated Financial Statements. This plant’s figures are included on a pro rata basis in the consolidated income statement for 2011 (i.e., for eleven months). Business year 2011 with
significant growth in revenues and earnings
In this connection, we must also note that the Swedish Group company has taken over revenues from a German group company in the low double-digit million euros region as part of improved customer orientation, with the result that only part of the revenues detailed in Section C of the Notes to the Consolidated Financial Statements for the Swedish company are additional revenues from a Group perspective.
The other changes in the group of consolidated companies currently exclusively relate to non-operat- ing companies and are thus of only little relevance when comparing the figures from 2011 and 2010. During the fiscal year, production at all of the established facilities was on schedule and successful. There are no obstructions to a further expansion of sales in the Cored Wire and Powder and Granules segments, as the group has set up (Cored Wire) or acquired (calcium carbide production in Sweden) additional plants. At the new locations (plant expansion in the USA and Brazil, new facilities in Russia and Bhutan), production will transition to regular operations in 2012, with the result that significant contributions to revenues are only expected from the second half of 2012. In the case of Bhutan, only the sales of cored wires to India will contribute to revenues from third parties, as the other transactions will all be performed within the group.
6.2. Revenues up by13%
During the year under review, the SKW Metallurgie Group recorded revenues in excess of EUR 428.9 million, which are thus up 13% year-on-year (EUR 380.8 million).
A key reason for this is the dynamic development of global steel production (without PR China). In 2011 this totaled 831 tons and was thus up significantly on the 2010 figure (787 million tons) and returned to around the level enjoyed before the economic and financial crisis (2008: 829 million tons). As a result, the steel production that is relevant for the SKW Metallurgie Group increased by almost 6%; in contrast, the increase in the SKW Stahl Metallurgie Group’s revenues was 13%. In geographic terms, in 2011 (in terms of the customer’s headquarters, and not the supplying unit) 21.7% (previous year: 20.2%) of external revenues (translated to euros)5 were recorded with custom- ers in EU countries. The USA and Canada accounted for 52.6% (previous year: 53.4%).
Other countries, mostly emerging and developing nations, accounted for 25.7% (previous year: 26.4%). The group’s strategy continues to be to increase the proportion of revenues it records in high-growth countries and emerging nations, without reducing its absolute revenues in other countries. Revenues in Europe increased again in 2011 due to the customers acquired together with the Swedish calcium carbide plant. However, over the medium term, the group’s target is to record at least one third of its revenues in high-growth countries and emerging nations.
Own work capitalized and changes in inventories were only of a minor amount in the year under review, as was also the case in the previous year, with the result that total operating revenue and revenues only differ to an immaterial extent.
5. Fluctuations in exchange rates must also be taken into account when interpreting geographic revenues; the proportion accounted for by NAFTA countries can also change as a result of fluctuations in the EUR/USD exchange rate. Further information: Consolidated Notes, Section C USA/Canada 52.6% EU27 21.7% GlOBAl RevenueS RoW 25.7%