Danieli & C. Officine Meccaniche S.p.A. Headquarters in Buttrio (Udine) Italy Share Capital: Euro 81,304,556 fully-paid The data in this publication refer to the period 01.07.2006 / 30.06.2007 2 DANIELI GROUP AT A GLANCE 12 LETTER TO THE SHAREHOLDERS 16 MAIN EVENTS OF THE YEAR
34 REPORT OF THE BOARD OF DIRECTORS
ANNEXES
2 DANIELI YEAR 2007
DANIELI TEAM
Danieli Team mission is to serve Customers with competitive plant and process technology/automation to produce quality at the lowest depreciation and production cash costs and offer friendly after-sale service involving top-specialized engineers. The technology spectrum -from ore to finished product- and relevant process know-how provided by our Product Lines, the well-known tendency towards innovation and high reliability are the best guarantees in reaching this target.
Danieli Engineering Since 1964 Italy Turnkey Plants and Systems Engineering Danieli Corus Since 1977 The Netherlands Integrated Steelmaking Plants
Danieli Centro Metallics Since 1987 Italy Ore Processing and Direct Reduction Plants Danieli Centro Met Since 1914 Italy, Sweden Steelmaking Plants
Danieli Davy Distington Since 1951 UK, Italy Slab Casters
Danieli Wean United Since 1901 Italy, USA Flat Product Casting, Rolling and Processing Danieli Kohler Since 1959 USA Air Wiping Equipment for Metal Coating Danieli Fröhling Since 1947 Germany Speciality Mills and Strip Finishing Lines Danieli Morgårdshammar Since 1856 Italy, Sweden Long Product Rolling Mills
Danieli Centro Tube Since 2004 Italy Tube Processing Plants Danieli Automation Since 1969 Italy, Sweden, USA Process Control Systems
Danieli Centro Maskin Since 1953 Italy, Sweden Conditioning, Drawing, Finishing Lines Danieli Rotelec Since 1977 France EMS and Induction Heating Systems Danieli Breda Since 1950 Italy Extrusion and Forging Plants Danieli Centro Combustion Since 1981 Italy Reheating Systems Danieli Environment Since 1973 Italy Ecological Systems
THE RELIABLE INNOVATIVE TEAM
IN THE METALS INDUSTRY
ITALY FRANCE SPAIN AMERICA ASIA USA CANADA CHINA THAILAND INDIA JAPAN SWEDEN POLAND UKRAINE RUSSIA EUROPE THE NETHERLANDS UK GERMANY AUSTRIA Danieli International SA LUXEMBOURG Danieli Engineering Danieli Centro Metallics Danieli Centro Met Danieli Wean United Danieli Morgårdshammar Danieli Centro Tube Danieli Centro Maskin Danieli Breda Danieli Environment Danieli Service Danieli Construction SpA Danieli Automation SpA Danieli Centro Combustion SpA Stem Srl Inde SpA More Srl Rotelec SA Danieli Morgårdshammar Iberica SA Procome SA
Danieli Corporation Inc Danieli Technology Inc Morgårdshammar Inc Danieli Canada Inc
Danieli Metallurgical Equipment Beijing Co Ltd Danieli Metallurgical Equipment Changshu Co Ltd Danieli Far East Co Ltd Danieli Engineering India Ltd
Danieli Engineering Japan
Danieli Centro Met Danieli Centro Maskin Morgårdshammar AB Sund Birsta AB
Danieli Polska Engineering Danieli Heavy Machinery Danieli Russia Engineering
Danieli Corus TS Danieli Davy Distington Ltd Danieli Fröhling GmbH W+K Industrie Technik GmbH Danieli Engineering & Services GmbH DANIELI ITALY Industrielle Beteiligung SA LUXEMBOURG Investment Holding Companies
Product Lines Industrial Companies
Technical Offices
The development plan which provided for the acquisition of leading companies in the supply of equipment for the steel industry has been completed. Since 2000, our product lines have been expanded to cover blast furnaces, DR plants, seamless and welded pipe mills and now cover the whole spectrum of ironmaking and steelmaking plants, from iron ore to any steel finished products as well as those for non-ferrous metals.
6 DANIELI YEAR 2007
Danieli ranks amongst the three largest suppliers of plants and equipment to the metals industry, worldwide. We are leaders in minimills, in long product casting and rolling plants, and amongst the front runners in the flat product sector and integrated steel plants. Our product lines cover the whole technology spectrum from ore to flat and long steel finished-product processing.
Market is worldwide
Mining and ironmaking plants; pelletizing and DRI plants; electric steelmaking and steel refining plants; long and flat product casting, rolling and finishing lines; seamless tube processing lines and forging shops. Rolling, slitting and extrusion lines for nonferrous metals are also part of our product porfolio.
Competitiveness
There’s just one word to express Danieli’s design philosophy and overall mentality. We strive to develop processes that reduce production costs while improving product quality.
Strategic approach
Continuously improve design, manufacturing and process know-how. Maintain our leadership in the field of minimill design. Supply integrated steel plants with the same competitive approach we developed for minimills. Engage personnel in a creative and motivating atmosphere that rewards merit, professionalism and ability to achieve business objectives.
Steel culture
Danieli’s global expertise benefits from steel cultures and know-how stemming from notable industrial centers in Italy, Germany, Sweden, UK,
The Netherlands, USA and France. Thanks to our process and production know-how we provide not only high-tech equipment, but performance, too.
Social responsibility
We see ourselves not only as a valuable part of our regional economy but also as a contributor to a positive professional and international body of progressive young engineers, including through our own Industrial Design educational
center. We have a strong sense of responsibility towards society.
Earnings
We aim to generate the highest possible earnings in order to ensure the Company's future
investments in research and development, as well as to increase the shareholders' investment value.
Product quality and reliability
We don’t shop around for noble equipment, we build it in our own state-of-the-art workshops. In-house manufacturing, including heat treating, assembly and functional testing, allows constant and precise quality control through the whole process, from engineering to shipment of the equipment.
8 DANIELI YEAR 2007
10 DANIELI YEAR 2007
Order backlog 1,162,028 1,191,466 989,699 835,457 1,141,000 1,455,549 1,981,534 2,148,918 3,098,132
Sales revenue 832,328 936,440 966,777 999,938 729,843 1,149,940 1,495,020 2,002,319 2,456,624
Net income 27,687 21,898 10,419 10,052 10,483 12,110 35,001 46,750 73,284
Total net worth 360,765 402,205 401,417 427,556 431,555 438,700 507,887 553,647 597,896
Research 29,375 36,668 46,000 32,000 35,000 40,000 45,000 69,700 120,500
and development
Employees 3,007 3,175 3,026 2,945 2,756 3,492 3,797 4,881 6,816
Consolidated net 0.38 0.27 0.13 0.12 0.13 0.15 0.43 0.57 0.91
income per share (Euro)
No. of ordinary shares 36,361 40,879 40,879 40,879 40,879 40,879 40,879 40,879 40,879
No. of non convertible 36,361 40,424 40,424 40,424 40,425 40,425 40,425 40,425 40,425
saving shares
Dividends distribution 6,764 6,637 4,558 3,276 3,277 4,567 5,652 7,263 11,820
Net income per ordinary 0.08 0.07 0.05 0.03 0.03 0.05 0.06 0.08 0.14
share (Euro)
Net income 0.10 0.09 0.07 0.05 0.05 0.07 0.08 0.1007 0.1607
per non convertible saving share (Euro)
Danieli Group: Net Income (millions of Euro)
Danieli Group: Net Worth (millions of Euro)
Danieli Group: Sales Revenue(millions of Euro)
FINANCE
The positive results continuously scored in the last decades -including those characterized by steel market difficulties-give Danieli customers the certainty of dealing with a reliable partner. This is thanks to Company’s continuous pursuit of technological innovation and entrepreneurial spirit.
12 DANIELI YEAR 2007 12 DANIELI YEAR 2007
LETTER
TO THE SHAREHOLDERS
The results of the fiscal year 2006/2007
The company’s results for fiscal year 2006-2007 are:
(million of Euro) Forecast Actual
Sales 2,100/2,200 2,456.6
EBITDA 185/200 231.5
Order book 2,200/2,300 3,098.0
For 2007-2008 the targets are:
(million of Euro)
Sales 2,500/2,600 EBITDA 255/265
Order book 3,000/3,200
Last but not least, our innovative spirit has been rewarded by Tokyo Steel in Japan, which has ordered the largest electric furnace in the world with a remarkable 420 tons of liquid steel, and by Dongbu in Korea, which has ordered not one but two thin slab casters for a QSP (Quality Steel Production) plant. It has been a year of achievements, then, especially for technology and innovation, which honor our motto "Danieli, the innovative and reliable team in the steel industry". In this respect, we thank the Danieli team who with heart as well as intellect, and with commitment, enthusiasm and skill, has made all of this possible.
We thank the shareholders for your confidence in our work, and share with you our pleasure and our thrill in working, planning, building, and innovating for a stronger competitive edge. All of us at Danieli reaffirm our commitment to honoring your faith in us to the best of our ability.
Gianpietro Benedetti Chairman
Some comments on the general situation:
The commodities super cycle supported the consumption of “old economy” products such as steel, energy, minerals, and transport, against the usual backdrop for such conditions, i.e. a low dollar and high energy prices.
The situation is likely to continue for the next three to four years, thanks to the growth in consumption and infrastructures in the “next billion” countries: Brazil, Russia, India, Eastern Europe and the Middle East.
This scenario, of course, bars any unexpected events that might disrupt the current cycle of growth. To boost our competitiveness and prepare for a reversal of trend, we have continued to invest heavily in product research and innovation (Euro 120 million) and acquired some leading firms in certain segments of our industry. On the innovation front, we are planning to start up the largest quality steel bloom caster in the world, installed at ABS to produce 700 mm rounds, and acquired the high-tech German company W+K IndustrieTechnik with its technology for large welded pipe production plants.
We have opened our new factory in Thailand, which currently employs 1,300 people, and have started building a second Chinese factory in Shanghai. The first seamless pipe plants in Kazakhstan and China are now in the start-up phase, and the first direct reduction plant operated by Danieli Centro Metallics will be opened during the first half of next year.
14 DANIELI YEAR 2007 Danieli Construction International:
Main orders acquired
Minimills, ironmaking and steelmaking plants
AmericasOrder for a 220 kg/thm PCI System for a 1,500 m3
Blast furnace, including engineering, supply, site services, and personnel training.
AmericasOrder for 70 water-cooled coke plant standpipe caps, following successful engineering of the replacements during Phase 1 of the project.
AmericasOrder for a 800,000-tpy SBQ minimill, based on a 90-t FastArc™ single-charge EAF, LMF station, twin-tank VD station, three-strand FastCast™ bloom
conticaster, a rolling mill with a reversing breakdown stand and eight-stand intermediate/finishing mill, and complete facilities for the cold finishing of the SBQ products. AmericasOrder for a 100-t integrated vacuum degassing / ladle furnace facility for a 2.5-Mtpy steelworks producing wide-flange beams, H-piling, sheet piling, standard I-beams, channels, and other structural shapes. EuropeOrder for the design and supply of a greenfield blast furnace installation. The furnace will have 4,450 m3inner volume and will
be designed for a 20-year uninterrupted campaign. EuropeOrder for the design, supply, installation, and
commissioning of a back pressure valve system for two Blast Furnaces. This will enable the customer to run their stoves on a higher BF gas pressure, resulting in NG cost savings. EuropeOrder for basic and detail engineering, supervision and services for a BF revamp project, according to "Hoogovens" furnace design concept, for a 15 year, uninterrupted campaign. EuropeOrder for the greenfield supply of a new minimill complex to process scrap into 550,000 tpy of special steel long products for the automotive industry. EuropeOrder for a 1.2-Mtpy steel refining and slab casting complex, made up of a state-of-the-art 140-t LF-VD refining facility and a
single-stainless (AISI 300 and 400 series); and silicon OG and NOG grades.
EuropeOrder for a 2.5-Mtpy jumbo minimill, one of the largest integrated plants ever built in the world for production of long products, to be supplied on a turnkey basis. The new plant will be made up of a steelmaking plant -with two 130-t EAFs, Lfs and twin-tank VD; two seven-stand conticasters for billets, blooms, and beam blanks; a medium-section mill for production of up to 400-mm beams and large-size profiles; and a superflexible mill for production of round bars and wire rod coils.
EuropeOrder for a 1.3-Mtpy electric steelmaking plant made up of a 160-t FastArc™ AC EAF, a twin-station Ladle Furnace, a double-tank VD unit and two FastCast™ continuous casting machines, to cover a wide range of round billets and blooms for pipe and rail wheels production. Far EastRepeat orders for two and three sublances and SDM systems for 120-t converters. Far EastRepeat orders for four sublance systems complete with SDM model, waste gas analysis system and three smart lances for prediction of the slag level in the converter.
Far EastOrder for a Pulverized Coal Injection (PCI) system for a 2-Mtpy new blast furnace. Far EastRepeat order for a hot metal desulphurization facilities, including three injection stations with four skimming stations. Far EastRepeat order for two hot metal De-S facilities for a 150-t converter project.
Far EastRepeat order for a hot blast stove to be added to the three previously supplied to keep pace with the BF’s inner volume enlargement from 2,650 m3to 3,200 m3
inner volume.
Far EastOrder for a three-station
18 DANIELI YEAR 2007
Far EastOrder for a newly-designed cyclone deduster system to be installed at a 5,500 m3Blast
Furnace. A second order received covers two sublance systems, waste gas analysis systems and a Level 2 BOF converter automation system with the SDM model. Far EastOrder for six ceramic burners for the hot blast systems at two 3,200 m3blast furnaces
and four ceramic burners for a 3,800 m3blast furnace.
Far EastOrder for a 300,000-tpy steelmaking and hot rolling facilities for special steel long products, based on a 50-t FastArcAC EAF, 50/60t AOD and 50-t LF, 50-t double-tank VD/VOD unit, a 3-strand, FastCast bloom caster, a 22-stand continuous mill. Far EastOrder for a 500,000-tpy melting and refining plant for special steel ingots, based on a 70-t AC FastArc™ EAF, ladle furnace, and a 70-t vacuum degasser.
Far EastOrder for a 1-Mtpy complete steelmaking plant for special steel blooms, based on a 150-t AC EAF, LF, twin-tank VD/VOD unit, and a four-strand 14-m-radius FastCast™ large-size bloom caster.
Far EastOrder for an electric steelmaking plant, based on a 420-t twin-electrode DC EAF -the largest EAF ever built, worldwide-, a ladle furnace, and a twin-tank vacuum degasser, to produce up to 2.6 Mtpy of ULC and Al-killed grades for flat products. Far EastOrder for a 2-Mtpy Hot Mill Complex for automotive and pipe applications, based on two 160-t AC EAFs, two twin-station ladle furnaces, a double-tank vacuum degasser, and two single-line thin slab casters for 70 to 85 mm thick slabs (after dynamic soft reduction), 800 to 1650 mm in width.
Far EastOrder for a 800,000-tpy complete steel meltshop, based on 100-t AC FastArc™ EAF; 100-t ladle furnace; and a 5-strand billet conticaster.
Main orders acquired
Flat product casting, rolling and strip processing lines
AmericasOrder for a tandem cold mill modernization to enable fully continuous operation to reach a capacity of 1.3 Mtpy.
EuropeOrder for a state-of the-art single-strand thick slab caster capable of producing up to 0.8 Mtpy of stainless steels including AISI 200, 300, and 400 families. EuropeOrder for revamping of a 3.5-Mtpy hot strip mill, including a new roughing mill with attached edging stand.
EuropeOrder for the revamping of a complete 2300-mm-wide plate mill. The supply also includes a state-of-the-art electrical, instrumentation, automation, and process control system in order to cope with performance requirements.
EuropeOrder for the supply of the exit section of a new hot strip mill, including a high-speed shear and three downcoilers that will be the heart of the new plant for the endless rolling technology. EuropeRepeat order for a hot dip galvanizing line for 450,000 tpy of top-quality products, including those intended for further polymer coating.
EuropeOrder for a complete new cold mill complex, including a 0.65-Mtpy Push-pull pickling line for heavy gauges; a 1.7-Mtpy continuous pickling line coupled with a 3-stand, 6-high tandem mill; two 0.35-Mtpy each hot dip galvanizing lines.
EuropeOrder for a greenfield cold mill complex including a two-stand 4-high reversing mill, a 0.35-Mtpy combined galvanizing and painting line and a 0.6-Mtpy hot-dip galvanizing line for pickled coils and heavy-gauge CR coils. EuropeOrder for the third and final stage of the modernization project which included the complete reconstruction of three two-strand slab casters for automotive steels.
Far EastRepeat order for a two-strand slab caster capable of
Far EastRepeat order for a 1,780-mm semicontinuous hot strip mill capable of producing up to 3.3 Mtpy.
Far EastOrder for a 3.5-Mtpy HR coil complex made up of two 2-strand state-of-the-art slab casters for and a 1,780-mm
semicontinuous hot strip mill. The product mix includes IF, LC, PC, MC, HSLA, and API grades. Far EastOrder for a 7-Mtpy slab casting complex, made up of two 2-strand state-of-the-art slab casters for a wide product mix for both HR and CR coil
applications, covering IF, DDQ, LC, MC, HC, Dual Phase, Trip, HSLA, and API grades.
Far EastOrder for a 5-Mtpy state-of-the-art slab casting complex, made up of a single-strand and a two-strand slab casters. The customer already successfully operates since 2005 two single-strand Danieli Thin Slab Casters.
20 DANIELI YEAR 2007
Main orders acquired
Long product casting and rolling plants. Seamless pipe mills
EuropeRepeat order for a 0.5-Mtpy superflexible bar and rod mill to be directly connected to a six-strand Danieli conticaster for billet hot charging operation.
EuropeOrder for the major upgrade of a 6-strand bloom caster for high-quality piping grades and a super-flexible ultra-high capacity 1.2-Mtpy bar ,section and wire rod mill. EuropeOrder for the
reconstruction of a 4-strand bloom caster aimed at increasing the casting range, to improve product quality, and to reach up to 800,000 t of total productivity. EuropeOrder for the upgrade of a four-strand bloom caster to produce Beam Blank sections of 520x400x150 mm at rates of up to 160 tph.
EuropeOrder for a state-of-the-art four-strand FastCast bloom caster for automotive and stainless steels. Far EastOrder for a 18-mps Spooler line for quenched round bars from 12 to 50 mm. Far EastOrder for the core equipment for two 800,000-tpy rolling mills for medium sections and H-beams, including SHS Universal finishing stands and heavy-duty straighteners. Far EastOrder for the key technological equipment (Piercing mill, cross roll cone-type with guiding discs; retained mandrel rack & pinion box; 5 stands Fine Quality Mill) for a new 350,000-tpy seamless pipe plant.
AmericasOrder for the upgrade of a 90-tph bar and section mill, through the installation of automatic cold finishing services (multiline straightening and cut-to-length, stacking, bundling, and strapping services). Africa and Middle EastOrder for the modernization of the finishing services for a bar mill to increase productivity up to 130 tph. Africa and Middle East Order for a 400,000-tpy light section mill equipped with EWR®billet
welding system.
EuropeOrder for a 35-mps Spooler line for a 70-tph bar mill. EuropeOrder for a 750,000-tpy superflexible, multi-line rolling mill and cold finishing services for sections and SBQ bars in an extremely wide range of product types and sizes.
EuropeOrder for the modernization of a 110-tph bar mill through the installation of a 9-stand rougher with ESS cantilever stands.
EuropeOrder for the modernization of a wire rod mill for stainless and specialty steels to improve product quality and to increase finishing speed up to 90 mps.
EuropeOrder fro a 0.7-Mtpy high-speed rolling mill for bars and sections, complete with automatic cold finishing services.
EuropeOrder for the third modernization step of a 150-tph bar and rod mill, which now includes HSS shears and laying heads on oil-film bearings, a new high-speed bar finishing services, new single-strand rougher and a Spooler line for up to 3.5-t coils. EuropeOrder for the
modernization of a 90-tph bar mill through the installation of a 10-stand roughing/intermediate mill with ESS cantilever stands and a QTB quenching and tempering line for rebars. EuropeOrder for 35-mps Spooler line for a 70-tph bar mill equipped with EWR billet welding system.
Main orders acquired
Extrusion and forging presses. Inspection, conditioning
and cold finishing lines
AmericasOrder for a 70,000-tpy greenfield plant for copper tubes based on the innovative ECT™ endless production technology (melting furnace, continuous casting, surface milling, high-reduction cross-roll planetary rolling mill, chain-track-type breakdown drawing, tube finishing and packing lines). AmericasOrder for an automatic bar finishing line including a RLL 150 two-roll straightener and chamfering facilities.
AmericasOrder for a 45-MN push-down type forging press for heavy forgings with stringent mechanical property requirements.
EuropeOrder for two billet/rolled bar inspection and conditioning lines for a 550,000-tpy greenfield minimill to be supplied on a complete turnkey basis. EuropeOrder for an inspection and finishing line for 30 to 120-mm-dia SBQ bars, made up of straightening machine, chamfering station and a NDT system for a 750,000-tpy superflexible bar mill. EuropeOrder for a peeling machine for round bars of up to 160 mm, capable of producing tolerances up to ISO h7. EuropeOrder for a 30-MN push-down type forging press with two prestressed columns.
EuropeOrder for a 45-MN push-down type forging press with four prestressed columns for open-die forgings for a variety of automotive, construction, power, engineering, and aerospace applications. EuropeOrder for a 75-MN push-down type forging press with four prestressed columns for an integrated forging plant including an electrically-driven mobile forging manipulator.
Far EastTwo consecutive orders in less than two months, totalling three billet/bloom grinders for engineering steels. Far EastOrder for four 200-kW bloom grinders for automotive
22 DANIELI YEAR 2007
24 DANIELI YEAR 2007
Melting and refining facilities in a 450,000-tpy electric steel meltshop for special engineering steels. RH-type Vacuum Degassing station. The Danieli-Inteco team offers the widest range of services to build any new and customized RH or VCP degasser system.
26 DANIELI YEAR 2007
Startup and commissioning of new plants
Minimills, ironmaking and steelmaking plants
AmericasStartup of a 350,000-tpy steelmaking plant for specialty steels, including a 75-t EAF, LF, VD, and a 4-strand bloom consticaster.
AmericasStartup of a 100-t EAF that reached a pace of 24 heats/day in less than a month from the first heat.
Africa and Middle East Startup of a 75-t ladle furnace.
Africa and Middle EastStartup of a 850,000-tpy electric steel meltshop supplied on a turnkey basis, mainly based on a 100-t EAF, ladle furnace, and a 5/6-strand FastCast™ billet caster. EuropeStartup of a 80-t EAF for specialty steels, as part of the complete 700,000-tpy meltshop reconstruction project, including LF, VD, and FTP.
EuropeStartup of a 70-t ladle furnace to complete the 400,000-tpy Danieli steelmaking plant for engineering steels for the automotive industry. Far EastBlow-in of two greenfield blast furnaces having 8.4 m hearth diameter and are equipped with the revolutionary rotating charging unit.
Far EastStartup of a 80-t EAF and a 2-strand conticaster for 390x510-mm blooms, supplied in a record-time of 11 months. Far EastStartup of a 120-t ladle furnace to complete the 2.5-Mtpy Danieli refining station which include a second ladle furnace and a VD unit.
Far EastFast blow-in of a reconstructed Blast Furnace that reached 3,000 thm/day in 7 days. Far EastStartup of two 180-t ladle furnaces designed to process up to 76 heats per day coming from two BOF converters.
Far EastStartup of a 120-t ladle furnace that, together with the Danieli ladle furnace and VD station supplied in a previous step, makes ot possible the treatment of 1.7 Mtpy of liquid steel.
Direct Reduction Plants. Energiron technology from the Tenova HYL and Danieli alliance is the most advanced and flexible way for high-quality, added-value steelmaking. Danieli Corus 1,874-m3
28 DANIELI YEAR 2007
Startup and commissioning of new plants
Flat product casting, rolling and strip processing lines
AmericasStartup and
commissioning of a hot strip mill revamped to increase mill productivity and coil PIW, to widen the product mix and to improve product quality
Africa and Middle East Commissioning of a 250,000-tpy cold mill complex for pre-painted and unpainted flat galvanized products.
EuropeStartup of a state-of-the art two-strand slab caster that was able to cast 24 haets per day just 10 days after startup and brilliantly overcame the most optimistic productivity and quality expectations.
EuropeStartup of a reconstructed single-strand slab caster that quickly reached peaks of 25 heats/day.
EuropeCommissioning of a plate leveler for high-quality and ultra-high strength steel production featuring the MultiMoTor-Multi More Torque innovative driving system. EuropeCommissioning of an advanced strip slitting line designed to cut at high speed up to 120 strips simultaneously. Far EastStartup of a two-strand slab caster four months ahead of schedule. The machine was able to cast 14 heats (295 tons each) in 12 hours after only eight days of operation. Max sequence length of 70 heats (with peaks of 36 heat/day) and the casting speed of 2.2 mpm were reached soon afterwards.
Far EastStartup of a hot skinpass mill -third order in a row that included two high-performance hot strip mills- for processing up to 650,000 tpy of high-quality carbon and HSLA steel strip. Far EastStartup of one of the world fastest trimming lines (1,500 mpm) for aluminium strip from 0.15 to 2.0 mm. Far EastCommissioning of a plate/steckel mill that largely surpassed the target production levels in less than a year from startup, processing steel grades that included automotive
cross beam grades and pipeline grades up to API X80.
Far EastCommissioning of a 450,000-tpy cold mill complex (Push-pull pickling line, cold reversing mill, cold reversing/ temper mill, batch annealing furnaces, recoiling line), that shown the ability on both cold mills of rolling 0.15 mm gauges at speeds of up to 1,380 mpm. Far EastStartup and
commissioning of a 400,000-tpy complete hot dip galvanizing line for CQ, DQ, DDQ, HSLA steel grades with thicknesses ranging from 0.3 to 1.6 mm. It is the fourth strip processing line supplied to the same customer site in two years.
Far EastFast and successful startup and commissioning in a two-week-time of a single-strand slab caster equipped with Danieli Technological Packages for the core plant areas (INMO mould, integrated hydraulic oscillator, breakout prevention system, and the relevant automation control packages.
AmericasStartup of a 0.6-Mtpy bar mill featuring high-speed (35 mps) bar discharging system. AmericasStartup of a 300,000 tpy wire rod mill for carbon and low alloyed steels.
AmericasStartup of revamped automatic finishing services for two medium section mills with capacities of 120 and 140 shtph, respectively.
AmericasStartup of a last phase of a 2-Mtpy minimill for long products, including the meltshop No. 2 and the wire rod mill No. 3 that will bring the complex to an annual capacity of 2.8 Mtpy of bars and wire rod.
AmericasStartup of a 400,000-tpy minimill revamped in order to widen the product mix and to increase productivity up to 0.5 Mtpy.
EuropeStartup of a new finishing line for a 50-tph rolling mill for stainless steel bars.
EuropeStartup of a 6-strand billet caster, added to a first similar Danieli plant that reached over 90,000 tons per month since its startup
EuropeStartup of a 320,000-tpy bar-in-coil line for specialty and stainless steels.
EuropeStartup of an upgraded billet caster and a new wire rod line as part of a modernization project aimed at increasing plant efficiency and productivity. EuropeStartup of a 0.5-Mtpy superflexible mill for straight bars, spooled bars and wire rod, as the first startup step of the 1.2-Mtpy minimill. EuropeStartup of a 110-mps state-of-the-art wire rod line equipped with LTR, HSS and oil-film bearing laying head technologies.
EuropeStartup of a LTSK steelworks modernization project that involved a new 6-strand bloom caster, and the upgrade
EuropeStartup of the tubing finishing lines in a 270,000-tpy complete seamless pipe plant. EuropeStartup of a revolutionary super-compact bar finishing line in a 0.5-Mtpy rebar mill. EuropeStartup of a revolutionary system to handle high-speed rolled bars already cut in final commercial lengths in a ultra-compact high-speed rebar mill. Far EastStartup of the meltshop and casting sections to complete the commissioning of a 0.5-Mtpy minimill for long products. Far EastStartup of two rolling mill for large-size SBQ products for automotive applications with capacities of 0.5 and 0.8 Mtpy, respectively.
Far EastStartup of 0.5-Mtpy high-speed (100 mps) wire rod line. Far EastStartup of a high-productivity (up to 30 tph/strand) 6-strand billet caster for engineering steels.
Far EastStartup of a 0.8-Mtpy, 4-strand FastCast conticaster for large-size (350X470 mm) blooms in engineering specialty steels. Far EastStartup of a 1.2-Mtpy, six-strand FastCast conticaster for large-size round blooms (up to 500 mm) in engineering specialty steels.
Far EastStartup of 0.75-Mtpy 4-strand bloom conticaster supplied on a turnkey basis. Far EastStartup of a 350,000-tpy plant for seamless pipes for the oil industry and mechanical applications.
Far EastStartup of a LPP rolling mill for ultra-light profiles (15x3 to 20x6 mm flat bars).
Startup and commissioning of new plants
Long product casting and rolling plants
30 DANIELI YEAR 2007
Startup and commissioning of new plants
Extrusion and forging presses.
Inspection, conditioning and cold finishing lines
AmericasCommissioning of a 120,000-tpy straightening and inspection line for SBQ bars. AmericasStartup of a conditioning line for hot billets (300 °C) supplied on a turnkey basis. AmericasStartup of a 45-MN push-down type forging press for heavy forgings with stringent mechanical property requirements. Africa and Middle EastStartup of 2,000-t revamped direct press for aluminium.
EuropeStartup of a 6-t chain-track machine for finishing drawing of copper tubes for sanitary applications at 200 mpm. EuropeStartup of a 1,400-t direct press “front loader-type” for aluminium.
EuropeStartup of an integrated forging plant made up of a 20/60-t manipulator and a 30-MN 2-column push-down press. EuropeStartup of an integrated forging plant made up of a 20/125-t manipulator and a 75-MN 4-column push-down press. EuropeStartup of a 45-MN push-down type forging press for open-die forgings for automotive, construction, power, engineering, and aerospace applications. EuropeStartup of two 2,200-t revamped direct presses for aluminium.
EuropeStartup of two 1,600-t revamped direct presses for aluminium.
Far EastStartup of a peeling machine for stainless steel bars, granting a surface roughness below 1.6 µm, destined for extruding hi-techseamless pipes. Far EastStartup of a 0.5-Mtpy inspection and conditioning line for engineering steel billets. Far EastCommissioning of an innovative extrusion line for 55,000-tpy of stainless steel pipes. Far EastStartup of a Casttgrind plant for cold or hot (up to 1,000 °C) stainless steel slabs.
Danieli Breda has started up and commissioned five forging plants equipped with push-down presses of up to 75 MN and an innovative plant for the extrusion of 55,000-tpy of stainless steel pipes
Research and development
IRONMAKING AND STEELMAKING PLANTS
> Further developments in the field of electric arc furnace technology with the aim of consolidating the fastest melting cycle on the market. > Design, construction and successful startup of the biggest-size continuous casting machine for long products, for sizes up to 700 mm round.
> Further developments in the Endless Casting Rolling technology.
ROLLING MILLS FOR LONG PRODUCTS
> Startup of two new revolutionary systems to handle high-speed rolled bars already cut in final commercial lengths and relevant tuning and proper modifications to make them industrially reliable. > Successful startup of a new pipeless laying machine for high-speed wire rod production, aimed at improving final product quality. > Development of new sizing technologies for improved tolerances in wire rod production. > Development and complete testing of a new concept forming press to produce high quality up-set pipe end.
> Development and complete testing of a new concept billet loader for extrusion press. > Design of a Smart Motor management system for extrusion presses to maximise energy saving. > Study, development and testing of a prototype machine for copper tube drawing with better perfromances related to drawing speed and set-up time.
> Study, development, and testing of a new size of grinding machine (Super Grinder), with double performances compared to previous series.
> Development of the 3-roll FQM-Fine Quality Mill technology for the production of seamless pipes with OD up to 14”.
HOT AND COLD STRIP MILLS AND PROCESSING LINES > Development of an innovative model for metallurgical prediction to be applied on Hot Strip Mill and Plate Mill control, either in
possible to predict the metallurgical characteristics of the outcoming coil or plate. In closed loop, according to the feedback signals coming from the process, is possible to adapt the plant set-up in order to achieve the required quality.
> Study, development, and testing of an innovative process to obtain Ultra Fine Grain in hot rolled sheets, to produce a new family of high strength steels which characteristics are obtained starting by a less expensive chemical analysis.
> Study, development, testing and patenting of a new system -named Confined Jet Dryer- to dry the strip at the exit of a cold rolling mill. > Study, development and testing of an innovative process to produce CR stainless steel strip with a surface quality close to the BA finishing, in terms of mirror properties, but with a higher productivity and lower production costs. The industrial plant has an encumbrance similar to that for the production of 2B finishing coils. Moreover, the new process is expected to give a strong reduction of acid consumption.
32 DANIELI YEAR 2007
Installation of the 380-m3
DIRECTORS’ REPORT
GIANPIETRO BENEDETTI Chairman
CARLA DE COLLE Vice Chairman
FRANCO ALZETTA Executive Director
CLAUDIO ANGELI Executive Director
DARIO FABRO Executive Director
GERARDO BROGGINI Director
LUIGI CAPPUGI Director
AUGUSTO CLERICI BAGOZZI Director
ANTONIO DARIO MARTEGANI Director
RENATO VENTURINI President
GUIDO CROCI Auditor
GAETANO TERRIN Auditor
GIULIANO RAVASIO Deputy Auditor
PIERO VIDONI Deputy Auditor
GIANPIETRO BENEDETTI Chairman
CARLA DE COLLE Vice Chairman
FRANCO ALZETTA, ENZO RUSCIO, Steelmaking, Continuous Casting, Rolling Mills and Cold UGO TOSO, ERICH GROSSMANN, Finishing Plants for Long Products, Seamless and Welded GIOVANNI NIGRIS, STEFANO DEPLANO Pipe Mills, Heating and Thermal Treatment systems,
Extrusion and Forging Presses
DARIO FABRO, ROBERTO BORSI Slab Casters, Rolling Mills for Flat Products and Strip Processing Lines
PAOLO IURI, FABRIZIO VICARIO, Danieli Engineering FRANCO LUSURIELLO
LUIGI BARBANTE, GIANCARLO LAVARONI Danieli Centro Metallics
CLAUDIO ANGELI, PIER GIORGIO BOZZETTO Purchasing, Manufacturing, Planning
MARCO DI GIACOMO Danieli Service
CARLO DI PAOLO, SERGIO BOTTO Plant Erection, Startup and Commissioning FERRUCCIO DELLA VEDOVA Automation Process Control Systems, IT
LUCA FERRARESI, ALESSANDRO BRUSSI Administration, Finance and Internal Auditing, KPI LUCINA FILIPUT
GIANPIETRO BENEDETTI Research and Development
36 DANIELI YEAR 2007
The market and order book
Since company activities are directly influenced by the steel market, we provide below some indications of the current market situation and its possible future developments.
The steel market
During the first six months of 2007, the world steel market showed a growth trend in line with that in 2006. China, Japan and the United States were leaders in a market which maintained very high production levels, good profitability in nearly all product ranges and positive production and consumption trends for the next 12 to 18 months at least. Even though selling prices reached values not believed possible in the past, it is believed that these levels will also be maintained in the future, particularly because of the ever greater impact of certain production costs such as energy and transport, and identical trends in exchange and interest rates; profitability remains good, however, especially in absolute terms.
The market for steelmaking plants
Awareness of the strategic and economic importance of the iron and steel industry and the good prospects for future steel consumption has led to renewed interest in the construction of new plants by both the major world steel groups and smaller players with the aim of strengthening their market position. During 2007, the plant market has continued its positive trend, with satisfactory order levels in terms of both type and margin.
Globalization of the economy and the continuance of significant growth in the economies of emerging countries have ensured a positive outlook for the steel plant market, also backed up by significant current negotiations and negotiations in prospect.
Danieli Group activities
The Danieli Group is involved in the design, construction and sale of plant for the iron and steel industry, offering a complete range of machines from primary process management to manufacture of the finished product (practically from ore to finished product), as well as the production and sale of special steels for the long products market, through subsidiary company Acciaierie Bertoli Safau S.p.A.
Construction and sale of plant for the steel industry The Danieli Group designs and builds plants for all process areas, such as:
> Mines;
> Pellet production plants; > Blast furnaces; > Direct reduction;
> Steelworks for production of liquid steel; > Continuous casting for:
> Blooms and billets; > Slabs;
> Thin slabs.
> Rolling mills for long products: > Rolling mills for seamless tubes; > Lines for welded tubes;
> Hot and cold rolling mills for flat products; > Process lines for flat products;
> Complete plants for Dimensional Checking and for non-destructive quality control, and Conditioning Plants;
> Plants for secondary processing, such as Peeling, Straightening, 2-Roll Reeling and Drawing machines > Forging Presses and Manipulators and complete forging plants; > Extrusion presses for ferrous and non-ferrous materials;
> Plants for longitudinal cutting and for transversal cutting to size of sheet and plate in all non-ferrous metals and stainless steel;
> Level 1, 2, 3 and 4 Plant Automation Systems In the long product rolling plant sector, the Danieli Group is world market leader, in terms of both the number of plants in use and annual sales and, in particular, is the undisputed technological leader for level of automation as well as plant reliability, productivity and achievable product quality.
Market conditions
and operating results
This report accompanies the financial statements for the year to June 30, 2007 of the company Danieli & C. Officine Meccaniche S.p.A., which operates in the sector for the design, construction and sale of machinery and plant for the iron and steel industry, including on a “turnkey” basis.
We refer you to the notes on the financial statements for more detailed information concerning the values in the balance sheet and profit and loss account. In this report, we review company operations with reference to both the financial year just ended and future prospects, in compliance with the provisions of Article 2428 of the Italian Civil Code.
Dear Shareholders,
Group structure
Activities relating to the construction and sale of plant for the steel industry are structured with eleven design centres:
Danieli Italy
Danieli Holdings USA
Danieli Morgårdshammar Sweden
Danieli Rotelec France
Danieli Davy Distington UK
Danieli Hi Tech Germany
Danieli Fröhling Germany
Danieli Polska Engineering Poland Danieli Heavy Machinery Ukraine Danieli Metallurgical Equipment China
Danieli Far East Thailand
There are four production units:
Danieli Italy
Danieli Fröhling Germany
Danieli Far East Thailand
Danieli Metallurgical Equipment China
The product lines are as follows: > Danieli Engineering, Italy
Turn-key plants and plant engineering > Danieli Centro Metallics, Italy Pelletizing and Direct Reduction > Danieli Centro Met, Italy, Sweden Steelworks and casting machines > Danieli Wean United, Italy, USA, UK DaNews: the quarterly
magazine of Danieli Group provides readers with thorough information about the activities and the technology developments carried out by Danieli Product Lines.
> Danieli Morgårdshammar, Italy, Sweden Rolling mills and finishing plants for long products > Danieli Automation, Italy, USA, UK
Equipment and lines for process, plant and machinery automation > Danieli Rotele, France Electromagnetic systems and induction reheating systems
> Danieli Centro Combustion, Italy, USA Reheating and heat treatment furnaces, furnaces for process lines
> Danieli Breda, Italy Extrusion presses
> Danieli Fröhling, Germany Non-ferrous rolling
> Danieli Centro Maskin, Italy, Sweden Secondary processing machines, grinding, drawing, straightening and peeling machines > Danieli Service, Italy, USA, UK
Installation, start-up, after-sales service Spare parts
> Danieli Centro Tube, Italy
Seamless and welded tube production plants > Danieli Construction International, Italy Large construction projects management. The operating result for the plant sector was evenly spread over the main product lines (steelworks, long products and flat products) ensuring essentially uniform profitability in all related geographical areas.
Production and sale of special steels
This activity is carried out by our subsidiary Acciaierie Bertoli Safau S.p.A., leader at a European level in the special steels for the manufacturing sector, with production to order of top-level products for the most-demanding uses, in the form of ingots, blooms, rolled and forged products with thicknesses from 15 to 800 mm.
38 DANIELI YEAR 2007
The Group
The Parent Company Danieli & C. Officine Meccaniche S.p.A. directly owns the following companies:
> Industrielle Beteilungung S.A., which is the holding company for other group companies which perform production activities; > Danieli International S.A., whose activity is the investment of liquidity in international financial markets;
The company’s sales and other income amounted to 1,361.0 million euro (1,235.9 million euro in 2006) with EBITDA of 91.1 million euro (84.3 million euro in 2006) and net profit of 19.4 million euro (28.0 million euro in 2006).
The company continued its planned capital expenditure programme to optimise production, updating operating machinery more than fifteen years old.
Continuous research activity was maintained for the design of new machines and development of new techniques, consuming substantial company resources but making it possible to innovate plants offered, aligning their technology to the current state of the art. The company worked to ensure maximum efficiency of treasury management with satisfactory net liquidity and orders taken in line with the budget forecast; this volume is also such as to ensure a profit for 2007/08.
Sales and other income amounted to 137.8 million euro (113.3 million euro in 2006), in line with budget forecasts.
The net profit for the financial year was 12.1 million euro (6.6 million euro in 2006) confirming the company’s ability to generate profit due to the high level of reliability and functionality of systems sold, to initiatives undertaken to strengthen awareness of its technological processes and to the new electronic and computer technologies available. The company has its own technologies, which are the result of applied research in the field of opto-electronics and electro-magnetism, which enable it to create special sensor systems for steel plants. The principal research activities in the period were mainly directed towards applications relating to new devices, such as:
> stereoscopic instruments for measuring the width, thickness and shape of strip and plate, working in real time on both cold and hot products on exit from the roughing and finishing mills;
> process control software for electric steelworks, secondary metallurgy and continuous casting;
> models and algorithms for operational control of process lines and hot and cold rolling mills in order to optimise production quality and times. The company’s order book at June 30, 2007 reached a total value of 276 million euro (212 million euro at June 30, 2006) and was such as to lead to a forecast result for the 2007/2008 financial year in line with that for the financial year just closed.
DANIELI AUTOMATION S.P.A. DANIELI CENTRO COMBUSTION S.P.A.
Sales and other income were 87.5 million euro (59.0 million euro in 2006) with a profit before tax of euro 4.6 million (euro 3.6 million in 2006). The company’s order book was 109 million euro, with 114 million euro of orders taken in the period, exceeding the original budget forecast; this is because the position of our products has strengthened in the market due to their achieved performance and reliability. Achievements include the new furnace for the Corus Group in Great Britain as well as furnaces for the Romanian company Dunaferr and the Belgian company Duferco currently in course of completion.
Regarding acquisition of orders, special mention should be made of the large 350 tph slab reheating furnace for the Ilva company in Taranto and new slab and beam reheating furnaces for Dunaferr in Romania and Nucor in the United States respectively.
1 Control pulpit of a 5-strand FastCast billet caster in a 650,000-tpy minimill for bars and sections. 2 280-tph walking beam reheating furnace for slabs. 3 Danieli Morgårdshammar 8-pass DWB high-speed block for special steel wire rod finishing rolling.
4 Automatic pressing and tying machine for wire rod coils. 5 Revolutionary high-speed
system for rebars cooling, cut-to-length, bundling and collecting. 6 Automatic finishing
services for cold drawn and bars in special engineering steels for automotive applications.
MORGÅRDSHAMMAR AB
SUND BIRSTA AB
DANIELI MORGÅRDSHAMMAR IBERICA SA
The company’s sales and other income were 536.9 million SEK (400.9 million SEK in 2006), with a net income of 12.9 million SEK (loss of 23.3 million SEK in 2006). The company continued to be in profit due to its actions to reduce organisation costs and to complete orders acquired in an efficient way. Orders taken during the year to June 30, 2007 generated an order book of 306 million SEK and the margins expected on job orders indicate a profit for the next financial year too.
The company closed the financial year with sales and other income of 26.7 million euro (2006: 25.4 million euro), maintaining a positive result with net profit for the year of 1.4 million euro (2006: 1.1 million euro). It is anticipated that the operating performance will also make it possible to ensure a profit for the next financial year in line with previous results.
Sales and other income of 582 million SEK improved compared with the previous financial year (423 million SEK), while profit before tax was 58.1 million SEK (2006: 49.7 million SEK).
During the year, the company strengthened its position as world leader in the long product packaging sector, continuing development of innovative plants for handling flat product coils and for service and packaging plant used with lines which cut product to size for packs of both steel sheet and coils. The level of orders taken was good and resulted in an order book at June 30, 2007 of 246 million SEK (2006: 269 million SEK) which already ensures sufficient sales to guarantee a good level of profit for the next financial year.
The company, with registered office in Bilbao, Spain, was purchased at the beginning of 2007 and operates in the long product finishing machine sector, achieving sales for the six months of 4.4 million euro with net profit of 0.4 million euro. It is expected that the profitability will also continue in the next financial year.
40 DANIELI YEAR 2007
The Group
ROTELEC S.A.
DANIELI ENGINEERING INDIA LTD.
The company is active in the secondary metallurgy plant sector, supplying furnaces and continuous casting machines and, in addition, designing, manufacturing and selling induction hardening plants for heat treatment in general, together with other plant in the “out of furnace” area. The company operates mainly in the Indian steel market and achieved sales of 853.4 million Indian rupees in the year to June 30, 2007 (2006: 1,115.7 million Indian rupees) with a loss of 125 million Indian rupees compared with a profit of 21.5 million Indian rupees in the previous financial year. A return to profit is already forecast for the next financial year. The financial year showed sales and other income of 20.6 million euro (2006: 14.8 million euro) and net profit of 4.1 million euro (2006: 2.5 million euro). Orders taken in the financial year were in line with the previous year, generating an order book of 16.3 million euro at June 30, 2007 (2006: 13.8 million euro).
Rotelec strengthened its leadership position in the market for electromagnetic stirrers and plants for heating strip edges during the rolling of coils, enabling it to improve on the results achieved in the previous financial year in terms of both sales and orders acquired, also with positive prospects for the next financial year. Rotelec is continuing its research activities to develop new improvements in systems for electro-dynamic control of the flow of liquid steel for continuous casting of both long and flat products.
3
DANIELI HOLDING INC. GROUP
The consolidated financial statements of the United States Group, which consists of Danieli Holdings Inc. (the USA holding company), Danieli Corporation (U.S.A.), Danieli Technology Inc. (U.S.A), Danieli Canada Inc. (Canada), Morgardshammar Inc. (U.S.A.) and Danieli Property Holdings LLC (U.S.A.) showed sales and other income of 93.6 million USD (2006: 62.7 million USD) and a net profit of 10.7 million USD (2006: profit of 8.5 million USD).
The profit for the period reflected income from the execution of orders taken up to now, due to the good recovery in the North American market which brought new orders to our United States’ subsidiaries for machinery and equipment, mostly with technologies developed locally.
DANIELI CORPORATION INC.
Company activities, which essentially cover the North American market, are divided into the following product lines:
> DWU USA has developed sales, design, supply and project management business activities for flat product plants;
> DMH USA and DCM USA handle sales, design, supply and project management of plant and machinery for long product rolling mills, steelworks and casting machines;
> DA USA handles development and sale in the North American market of products for the Danieli Automation line;
> Danieli Service handles sale and supply of service and spare parts for all product lines in the North American market.
The company obtained new orders for projects with local customers and a profit is forecast in the current financial year as well. DANIELI TECHNOLOGY INC.
The company was formed in 2000 with the objective of managing patents and know-how associated with Wean and United technologies, developing know-how and designs for rolling mills and strip process plants. DANIELI CANADA
The company operates in the Canadian market and is currently managing some new local projects for plants of significant technological interest. It is anticipated that the current financial year will also close with a profit. MORGÅRDSHAMMAR INC.
The company is active in the North American market for long product plant spare parts and operates efficiently with a good reputation in the market and satisfactory profitability.
DANIELI PROPERTY HOLDINGS LLC.
The company, formed during the financial year, is concerned with the management of the real estate assets of the North American group.
1 Dual temper mill and double reduction cold mill for tin-free steel strip. 2 Continuous casting
mould for 700 mm round blooms equipped with Danieli Rotelec EMS. 3 90-t ladle furnace
equipped with inert-roof to prevent liquid steel oxidation in the ladle
Metallurgical Equipment. 5 Computer rendering of
the new facilities under construction at Danieli Changshu, P.R. of China. 6 High-speed slitting of
copper alloys strip in a Danieli Fröhling high-tech line.
7 In 2006-2007 Danieli Hi Tech continued to
DANIELI CHANGSHU METALLURGICAL EQUIPMENT & SERVICE CO. LTD.
DANIELI METALLURGICAL EQUIPMENT
(BEIJING) CO LTD.
FRÖHLING GROUP
DANIELI HI TECH GMBH The company operates mainly in the Chinese market, providing local
customers with plants which are accessory and complementary to the “noble” plant supplied by other Danieli Group companies.
Planned capital expenditure being complete, the company was able to generate sales of 303 million CNY (2006: 141 million CNY), with a profit of 8.2 million CNY (2006: 2.2 million CNY). It is considered that the company, establishing its technological leadership in the market for competitively-priced quality products, can further improve its results from next financial year.
The Fröhling Group (consisting of Josef Fröhling GmbH and Fröhling Verwaltungs GmbH) closed the year to June 30, 2007 with sales and other income of 27.2 million euro (2006: 21.3 million euro) and a profit of 1.4 million euro (2006: 0.8 million euro). The reorganisation completed in the previous financial year enabled the Fröhling Group to return competitively to the non-ferrous flat rolled product production plant and slitting line sectors, making maximum use of technological synergies present in the Danieli Group. Orders taken in the financial year (with an order book of 28.7 million euro at June 30, 2007), availability from September of the new 20,000 sq. m. operating premises at Meinerzhagen and important sales negotiations in progress lead to expectations of a profitable result also in the next financial year, with strong possibilities of repositioning the company as the technological market leader.
Work to build the new factories of the subsidiary Danieli Changshu started during the first six months of 2007, with the objective of starting initial operations in the next financial year. The company, which is located in Shanghai province, currently has 87 employees and, when in full operation, will produce machines and spare parts for the local and world markets.
The Company, with registered office in Mülheim, Germany, operates in the engineering and project management sector, having a modern design and computer centre. The company, with sales of 3.7 million euro (2006: 3.7 million euro) and a profit of 1.8 million euro, continues its commercial and design activities for Group Product Lines with the objective of improving results achieved, even in the next financial year.
DIRECTORS’ REPORT
5
4 6
42 DANIELI YEAR 2007
DANIELI
DAVY DISTINGTON LTD
DANIELI FAR EAST CO. LTD. DANIELI ENGINEERING
& SERVICES GMBH
DANIELI CONSTRUCTION INTERNATIONAL S.P.A.
The Group
In the 2006/2007 financial year, the company had sales and other income of 26.3 million GBP (2006: 11.6 million GBP) and made a loss of 9.8 million GBP (2006: 4.3 million GBP), mainly due to exceptional and non-recurring expenses relating to completion of a large locally supplied order. The company, with its recognised technological know-how, designs and sells continuous casting machines for slabs, within the DWU product line, direct to the worldwide market; it is expected to return to profit in the next financial year.
Work is starting on construction of the new factory in Völkermarkt, in Austria, with production start-up planned for the first half of 2008; the company will provide Service to our customers, in order to ensure greater efficiency in the worldwide supply of machines and spare parts.
The company substantially completed capital expenditure on the new Rayong site, in Thailand, starting up production within the scheduled time and complying with the originally planned quality and competitiveness. The company is now able to both manufacture complete machines in-house (providing the Group with increased production capacity, previously performed by outside suppliers), and to design, produce and sell complete machines using its own technology on a worldwide basis, direct to international markets.
The company closed the financial year with sales and other income of 2,097 million baht and a loss of 86.2 million baht (2006: 84.7 million baht) resulting from initial start-up costs and has the objective of already achieving a profit next year.
The company, with registered office in Italy, specialises in plant installation and start-up; it operates on a worldwide basis and is equipped with a suitable operating structure for managing large construction sites. Sales and other income were 16.9 million euro (2006: 16.4 million euro), substantially breaking even for the financial year; the intention is to continue future development of the company until it reaches its optimum size, with profitable results as from the current financial year.
1 Computer rendering of the 40,000 square meters facility under construction at Danieli Engineering and Services, Austria. 2 Two-strand slab caster that
cast 24 heats (270 t each) just 10 days after startup. 3 Danieli Construction
continued to provide
quality services in large-size construction sites worldwide.
4 Danieli Far East completed capital expenditure on the Rayong site, and is now producing within schedule, with the planned quality and competitiveness.
2 4
MORE S.R.L.
DANIELI
INTERNATIONAL S.A. DANIELI
CORUS GROUP
ACCIAIERIE BERTOLI SAFAU (ABS) S.P.A.
The Group, consisting of the parent company Danieli Corus Technical Services BV and a few of its subsidiaries, operates in the sector for blast furnaces and associated auxiliary plant and is 50% owned by the Danieli Group and 50% by the Tata Corus Group, one of the world's largest steel producers. The joint venture, with registered office in Holland, closed the period July 1, 2006 to June 30, 2007 with sales of 48 million euro (94.2 million euro in the previous period) and profit of 5.7 million euro, compared with a loss of 0.4 million euro in the previous period. Results to date and the good prospects of obtaining new orders make it possible for the management to guarantee a profit in the current financial year too.
Management of liquidity continued in accordance with traditional principles of prudence which, in a period characterised by lower volatility of the financial markets, favoured low risk investments and the liquidity of these investments. Average portfolio profitability was maintained substantially in line with that of previous financial years and enabled the 2006/2007 period to be closed with net profit of 21.6 million euro, mostly associated with the management of cash and of the bonds portfolio and, to a limited extent, of the shares portfolio.
The company, which operates in the field of technological components for steelworks, achieved sales and other income of 15.1 million euro (2006: 13.8 million euro) with net profit for the year of 3 million euro (2006: 2.6 million euro) and an order book of euro 8.0 million (2006: 7.5 million euro); due to the good technological level of products sold, it is believed that the company will produce good results in the 2007/2008 financial year.
The IAS/IFRS financial statements for the 2006/2007 period of the company ABS show sales and other income of 792.8 million euro (529.4 million euro in 2005/2006) with net profit of 36.9 million euro (2006: 13.2 million euro). Company production performance was good throughout the 2006/2007 financial year, enabling it to clear orders for around 959 thousand tonnes against 803 thousand in 2005/2006, an increase of 19% compared with the previous period.
Raw material price pressures and buoyant demand caused selling prices to be generally maintained, producing attractive results for the company, which continued with its initiatives to penetrate new market segments, improving its profitability and the quality of products sold.
The order book at June 30, 2007 amounted to around 420 thousand tonnes and has made it possible for the company to program production efficiently for the half year in progress. Due to completion of substantial capital expenditure and encouraged by the good name gained in the market, the company strategy, directed towards achievement of a satisfactory profit for the next financial year, through a policy of selecting higher margin products and initiatives to ensure further increases in internal efficiency and reduced product verticalisation, is confirmed.
5 Oxy-carbon injection for an optimal exploitation of the chemical energy in EAF steelmaking. 6 In 2006-2007 Danieli Corus continued to provide tailor-made Corus’ state-of-the-art integrated mills. 7 100-t ingot cast in ABS
44 DANIELI YEAR 2007
Danieli Group Results
In the financial year to June 30, 2007, the Danieli Group achieved (in the market situation described above) a net profit of 73.3 million euro compared with that of 46.8 million euro in the last financial year. For the year to June 30, 2007, the principal income and financial numbers were:
> sales: 2,456.6 million euro with an increase of 23% compared with the amount of 2,002.3 million euro in the year to June 30, 2006;
> profit before tax: 141.4 million euro with an increase of 93% compared with the amount of 73.3 million euro in the year to June 30, 2006;
> shareholders’ equity: 597.9 million euro with an increase of 8% compared with the amount of 553.6 million euro in the year to June 30, 2006;
> net financial position: 402.7 million euro, down by 57.4 million euro compared with the amount of 460.1 million euro at June 30, 2006.
The Group order book at June 30, 2007 amounted to 3,098 million euro, including 362 million euro in the special steel production sector, compared with 2,149 million euro at June 30, 2006 (including 283 million euro for special steels); the order book is well diversified over the product lines and is positioned in a market environment with a positive outlook for the next 24 months.
Sales and operating results
The 23% increase in sales compared with the previous financial year reflects processing of the greater volume of orders taken during the previous period by the plant sector and greater production efficiency in the steel sector, with no significant changes in the consolidation and without any significant impact from euro-USD exchange rate movements. The substantial volume of research costs, and the accruals necessary to cover potential charges on completion of large orders and for outstanding disputes, limited growth in the gross operating margin, but profit improved in spite of this due to satisfactory group financial management. Due to capital expenditure on production facilities in Thailand, China, India and the Ukraine, concrete programmes to transform and internationalise the Group are being put into effect to ensure quality and satisfaction to company customers, while protecting margins by precision of production planning and optimisation of company processes.
In the steel sector, a strategy was followed that gave preference to the sale of products which competitors found it difficult to make due to size or type of steel, resulting in attractive margins in a market receptive to quality products; this strategy required revision of some operating procedures, with the need for significant capital expenditure which will be completed during the next financial year.
ABS production reached a volume of 959 thousand tonnes in the period, up 19% on the last financial year, exporting over 40% of production with quality standards and delivery times, competitive with the best producers at a world level.
Sales by geographical area
The analysis of Group consolidated sales by geographical area, calculated on the basis of the composition of the order book, was as follows. The gross operating margin of 190.8 million euro for the year to June 30, 2007 was 40% higher than that for the financial year ended June 30, 2006, reflecting a substantially unchanged trend in the plant construction sector, accompanied by a significant improvement in the steel production sector profit. Net financial and extraordinary income, amounting to 2.9 million euro for the year to June 30, 2007, represented a change of 117% compared with the negative amount of 17.5 million euro for the year to June 30, 2006, due to optimal liquidity management during the financial year, ensuring cover for capital expenditure made and also maintaining a satisfactory net financial position.