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A Group Management Report and Management Report on Salzgitter AG I. Business and the Environment 64 65
The thorough and consistent pursuit of clearly defined, quantifiable and sustainable measures as part
of the groupwide Profitability Improvement Program is aimed at enhancing our cost and performance
structure on a long-term basis. It includes, for instance, plans to reduce external services, raising
productivity and output, improving energy efficiency as well as capital expenditure to reduce the
amount of input material sourced outside the Group.
Synergy management supplements and builds on activities for releasing additional profit potential
through the wider use of opportunities for cooperation between the individual divisions and companies
of the Salzgitter Group.
This work continued successfully in the financial year 2007. Many projects have already progressed
from the analysis to the realization stage, enabling us to reap the benefits of intensified cooperation
and to further the sound development of the company. At the end of 2007, we identified synergies
which were worth more than € 50 million in profit potential. These synergies are to be found in the
various links in the value chain of the Salzgitter Group such as, for instance, in purchasing or in the
cooperation between the Trading Division and steel and tubes producers, but also in the support
processes in shared services located in payroll accounting and the reorganization of transport networks
within the Group.
We will forge ahead with our synergy management by transferring the initially centrally managed
initiative to the various areas of responsibility of the management companies. In doing so, we are
putting in place a broader basis in our daily business for releasing additional synergy potential and
exploiting those already identified.
Management and Control System applied within the Group
The primary objective of our company remains the aforementioned preservation of our independence
through profitability and growth. As a quantitative, performance-related target, the Group has set
itself the goal of achieving a return on capital employed (ROCE) of at least 15% over an economic
cycle.
In view of the performance delivered in recent years, which was consistently positive and above
average in a peer comparison, the Executive Board of Salzgitter AG has decided to raise the Group’s
return on capital employed (ROCE) target from the former 12% to 15% above the average of the
steel cycle. At the same time, the target for consolidated sales has been set between € 13 and € 15
billion.
ROCE shows the relationship of EBIT to capital employed and measures the return on capital employed:
EBIT € 1,351 million
ROCE (in %) = x 100 = x 100 = 28.0%
Capital employed € 4,829 million
EBIT (earnings before interest and tax) is the result before tax and interest expenses, adjusted for the
interest portion of transfers to pension provisions.
Interest income remains part of EBIT as it is considered to be part of the result of ordinary activities
and thus contributes to ROCE.
Business and
the Environment