ELG posts higher revenue and lower earnings in difficult market environment

11.04.2019 − 

ELG Haniel fell well short of its earnings forecast in 2018. The stainless steel recycler, which operates at 53 locations worldwide, saw sales revenues rise by 7 per cent €1.81bn due to higher average commodity prices. However, the operating profit shrank from €49m in the previous year to €33m. ELG had entered the year with expectations of a more than proportionate increase in profits. For 2019, the concern is now predicting markedly lower revenues, working on the assumption that key commodity prices will remain low.

Throughout 2018, ELG faced an "increasingly difficult" market environment, reported its parent company Franz Haniel & Cie. in its annual report which was published Wednesday. The introduction of tariffs on steel and stainless steel imports to the US created higher import pressure in the EU. As a result, European stainless steel production increased only marginally, despite more substantial growth in all other regions of the globe. Haniel said that the tariffs had produced “a more positive environment in the stainless steel segment” in the US. In both Europe and the US, however, there had been a “surprisingly significant decline in the demand for commodities by major stainless steel producers” late in the year.

ELG attributes the substantial decline in its 2018 earnings primarily to “negative one-off effects” that were not explained in any further detail. In 2017, one-off income had supported earnings. Lower margins in stainless steel scrap trading also weighed on earnings, as did negative valuation effects on inventory items at the end of the year.

For the middle and long term, ELG expects the worldwide demand for stainless steel products to continue to climb. Moreover, it expects the super alloys business to take on greater importance. Accordingly, ELG is planning to expand with the objective of optimising its international presence.

The complete report on ELG's annual results will appear in EUWID Recycling & Waste Management 8/2019 – out next week.

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