On Tuesday, Deutsche Bank (ETR:DBKGn) adjusted its outlook on Salzgitter (ETR:SZGG) AG (SZG:GR) (OTC: SZGPY), reducing the price target to €19.00 from the previous €20.00, while maintaining a Hold rating on the stock. The adjustment follows the company's third-quarter results, which were released without significant surprises after an earlier guidance cut and pre-release of key figures.
Salzgitter's third quarter showed a soft performance across its business units, but the results were largely in line with underlying expectations. The reduced earnings before interest, taxes, depreciation, and amortization (EBITDA) forecasts for the years 2024 to 2026 reflect adjustments for one-off items such as the write-down in the Materials Processing Technologies (MPT) division and restructuring in the Trading division.
The analyst noted that the current financial projections do not account for potential impacts from changes in Salzgitter's joint venture participation in HKM, which could lead to additional costs and impairments. Salzgitter's ambition to lead in the production of green steel has led to significant capital expenditure, resulting in a considerable increase in net debt, potentially surpassing €1.5 billion.
Despite the challenges and growing interest burden, Deutsche Bank believes that Salzgitter's management is taking appropriate measures to address the difficult market conditions and cash outflows. The possibility of asset monetization, including the sale of Salzgitter's 30% stake in Aurubis, its Technology business, or banked carbon dioxide certificates, was mentioned as a potential strategy to alleviate financial pressure.
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