Salzgitter's results hit by subdued economic environment in Europe, tariff threat looms

By Bernadette Hogg and Isabel Demetz

(Reuters) -Salzgitter reported first-quarter results below analysts' expectations on Monday, as subdued economic developments in Europe, and especially Germany, weighed on its steel production and steel processing businesses.

"The economic environment was anything but supportive," Chief Financial Officer Birgit Potrafki said in a statement.

The German steelmaker's quarterly core profit fell 37.6% to 78.6 million euros ($88.16 million), missing analysts' average forecast of 90 million euros in a company-provided poll.

Its external sales of 2.33 billion euros were also lower than the 2.46 billion analysts had expected and the 2.7 billion euros it had reported last year.

Salzgitter said U.S. tariffs would hit individual business units through indirect steel imports from Germany into the United States.

"Discussions currently held about raising duties on steel and steel pipes imported into the U.S. in response to EU tariffs are likely to put EU exports in an even more difficult position in the global competitive arena," it added.

It sees a decline of between 2 million and 3 million tonnes in direct and indirect steel exports from Europe, or around 2% to 3% of demand, at current tariff levels. This figure is expected to double in the event of 25% and more tariffs levied on European goods.

Its import-oriented subsidiary KHS Group, which produces machinery for the beverage filling and packaging industry, would be particularly impacted by the U.S. tariff policy, Salzgitter said, although it expects to be able to pass on a large part of the tariff burdens to customers.

The group confirmed its annual guidance and said the first-quarter earnings were weighed down by 23 million euros in charges from the reporting-date-related valuation of derivative positions and a 10 million euro impairment risk from planned portfolio streamlining.

($1 = 0.8916 euros)

(Reporting by Bernadette Hogg and Isabel Demetz in Gdansk, editing by Milla Nissi-Prussak)