Results

2020 / 20212020 / 212020 / 212020 / 21
Group
Results
Group
Forecast
Forecast
Steelmaking
Forecast
Plantmaking
Revenue
2,786.33,200 / 3,3001,200 / 1,3002,000 / 2,200
EBITDA
250310 / 340140 / 160170 / 190
Order book
3,3543,500 / 3,800600 / 8002,900 / 3,000
millions of €

Dear Shareholders,
Customer and Colleagues

MARKET FORECAST

Last year we predicted strong growth in steel consumption for 2022 and that in 2020/21 it would return to the levels recorded at the end of 2019. As a matter of fact, we are seeing steel consumption in the second part of 2021 already rising to a more than excellent level.
Steel producers report good production volumes and margins despite a sharp rise in the cost of raw materials. Most probably in the next two years steel consumption will be positively influenced by investments scheduled in numerous countries under their respective recovery plans, which also will require steelmakers to implement more sustainable production methods and lower emissions towards zero. This scenario will impact our two principal operating segments—Plantmaking and Steelmaking—at different times. Over the next two years the Plantmaking sector will benefit from the large profits that our customers are accumulating now, and that they will be investing in order to become more competitive and to reduce CO2 emissions, in line with the principles of the European Fit for 55 (Green Steel) program. On the other hand, the Steelmaking sector will immediately benefit from this positive trend.

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Danieli Plantmaking 

 

The effect of Covid-19 on our results was contained in spite of the problems related to fluctuations in the costs of transport and raw materials and to lead times, which will continue throughout the Danieli 2021/22 fiscal year.
Here is a summary of Plantmaking achievements registered during 2020/21:

— Leadership
Danieli continues to maintain world leadership in supplying direct and non-direct rolling mills for long products, and for 2021/22 has set a goal of definitively securing a leading position in the flat-product sector as well, thanks primarily to the innovative, patented technology of Danieli’s continuous casters.
Octocaster technology allows operational casting speed of 8 m/min for long products, with the target of 10 m/min. This makes it possible to produce - as of now - more than one million tpy on a single continuous casting strand and in endless direct rolling mode.
Likewise in the case of flat products, a casting speed of 6 m/min and our thin slab caster enable us to produce up to 4/4.5 million tpy on just one strand thanks to Dysencaster technology.
Let us emphasize that because of the direct rolling process a reheating furnace is not required, so CO2 emissions are significantly decreased.

— DUE – Danieli Universal Endless for flat products
Thanks to the remarkable results by the DUE plant at SGJT, China, the first plant of this new generation to obtain a Final Acceptance Certificate, Danieli has an excellent chance to become a leader in direct rolling for flat products as well.

— Innovaction
The fully sealed Digimelter –with its innovative melting system and close-to-zero emissions– is stirring considerable interest worldwide, and with the start-up of a green Digimelter at CMC Steel in the USA and one in Europe, which also uses alternative energy generated by solar panels, it will become a benchmark for steelmakers, and gradually replace the traditional electric arc furnace.

— QWRM - Quality WireRod Mill
During the last fiscal year we started up our first QWRM plant equipped with world-class technology for the production of high-quality wirerod in small lots, at ABS.
And this is also the first plant in operation with I-4.0 and artificial intelligence functions.

— Front Running Projects
The erection of the DUE thin-slab rolling mill and the plate mill at Nucor Steel, USA, is progressing. The DUE project is expected to go on stream at the beginning of 2022. The plate mill, which will produce material for demanding applications, including plates for energy-producing wind towers, will be the most modern in the USA, and not only there.
In addition, we are consolidating our leadership in the supply of PLTCM Pickling Line/Tandem Cold Mills, and after the successful start-ups at Yildiz and Tatmetal in Turkey, Metinvest also has confirmed its trust in Danieli by ordering a complete cold-mill complex in Ukraine, which will include a tandem mill and processing lines.

— Green Steel
We have developed in-house Green Steel technology that includes, in collaboration with Tenova, the Energiron direct-reduction plants. These can be powered by hydrogen also, with almost zero emissions, proceeding to a system that hot-charges DRI into the Digimelter, followed by direct rolling. Danieli MIDA plants produce Green Steel with a 90% decrease in CO2 emissions compared to current integrated plants, and a 35% reduction over conventional minimills.

We also are studying how to recover the CO2 that is still generated by steelmaking. At ABS, for example, we have the first prototype producing microalgae food by using, thus reducing, the CO2 emissions generated by the gas-fired reheating furnace.
And finally, again at ABS, the slag recovery and processing system has been in operation for some time now and the concept will be extended to include other residues with the goal of creating a total circular-economy steelmaking plant.
More generally, the theme of the CO2 tax will have an impact on the competition between integrated steel mills using coke and electric steel mills using recycled scrap steel.
Electric minimills produce 20-25 times lower CO2 emissions than coke-based integrated steel mills, and with the new DigiMelter technologies their emissions are close to zero.
For integrated steelmaking we will develop technologies aimed at reducing the CO2 emissions of blast furnaces by 25 to 50%.
Some of the integrated steel mills may use up to 30% scrap charge, with a resulting proportional decrease in emissions, but this will depend on the cost incidence of the CO2 taxation.
It should be noted that using scrap in the converters will drastically reduce the availability of scrap as raw material for electric steelmaking.

To control the price of scrap, which will tend to rise because of its limited availability, DRI will be used wherever possible. Therefore, an increase in the number of direct reduction plants is expected in those countries where gas is available at low cost, while waiting for green hydrogen - produced by using the wind and solar energies - to be available at competitive costs.
At the moment it is difficult to determine the trends according to which the steelmaking industry will reorganize itself, as this will depend significantly on local conditions and resources, as well as on the impact of the CO2 taxation. However, in addition to a foreseeable competition between coke-based integrated steel plants, which are at a disadvantage due to high CO2 emissions, and electric steelmaking, we can expect that a number of integrated steel mills will be practically converted to the use of electric arc furnaces.
The approach of Danieli to the issue of CO2 emissions consists of innovating the technology of blast furnaces to reduce the use of coke, while the target for electric steelmaking is near-zero emissions. An additional alternative is the use of hot-charged DRI (600 °C) into the Danieli DigiMelter, or a mix of hot metal coming from blast furnace and electrical melting.
In the next 15 years we therefore expect a 20-30% decrease in the production of steel from coke, which will be replaced by the use of hydrogen-based DRI and scrap.

In conclusion, considering the innovactions we are pursuing, we can affirm that also for 2020/21 we have again honoured our motto: Danieli, the innovative and reliable partner to be front runners in CapEx, OpEx ¬–adding now– in low carbon taxes.

 

ABS / STEELMAKING

As already mentioned, the scenario for ABS at this moment is splendid, although the splendour is mitigated by the high cost of raw materials.
However, as we know, this optimal period will be temporary and it is difficult to say whether it will last for one or two years, or even a little more, after which it will return to normal.
It follows that today we have to prepare for tomorrow and make significant investments to continuously improve our competitiveness, quality and range of products, so that we can cover various sectors of consumer goods: automotive, mechanics, oil and gas, wind energy, drawn products, etc. This is an advantage that allows us to compensate for market highs and lows in the various areas of utilization where consumption cycles never coincide, and therefore, we have to optimize plant utilization.
And it is with and because of this concept that we have invested in ABS, allowing us to produce quality steel long products ranging from 5.5 to 500 mm dia, as well as forgings and continuously cast blooms up to 850 mm dia and ingots up to 1400 mm dia, in more than 600 steel grades. We believe that today this is the only quality steelmaking plant in Europe that covers such a vast range of products.
To realize this vision, in the last 15 years we have invested 980 M Euro and plan to invest some 200 M Euro more in the next two/three years.
In addition to the start-up of the Quality WireRod Mill producing steel in coils from 5.5 to 26 mm dia, in October 2021 we will begin to produce high-quality ore-grinding balls.
Finally, ABS has initiated Vision 2000, which also has been made possible by our latest investments, a vision that aims to produce 2 million tpy of quality liquid steel in a green way.

 

Group Vision

 

The excellent results achieved with the start-up of innovative plants open new prospects for growth in both Plantmaking and Steelmaking.

— The service department will be expanded further, not only at Danieli but also at ABS which has set up ABS Service Systems.

— We are committed to reduce the CO2 emissions costs in all steelmaking phases by proposing technological solutions that make it possible, both for integrated and electric steelmaking.

— The Danieli Plantmaking target is to achieve a 15% increase in sales thanks to innovative products, and particularly with the MIDA and Digimelter plants, which are unique and perfect for producing green steel. In fact, we underline again that, going forward, competitiveness per ton will be calculated as CapEx + OpEx + CO2 tax/ton.

— Based on these considerations, the targets for the Danieli fiscal year 2021/22 are:
Revenue 3,200-3,300 M Euro,
EBITDA 310-340 M Euro,
Order Book 3,500-3,800 M Euro.

SOCIAL ASPECTS AND EDUCATION/EMPLOYMENT

 

Socially, we continue to support the restoration of works of art in the Friuli Venezia Giulia region and to promote cultural events for the community.
In terms of schooling, based on the belief that education and employment are a single word, we have expanded the ZEROTREDICI school complex while maintaining a pronounced orientation towards technological culture combined with humanistic and international studies, and continuing to provide a useful service for families with both parents working. Currently, there are about 300 students enrolled in the school complex.
And, we are contributing to the expansion of MITS Academy (Higher Technological Institute), which aims to establish a diploma in mechatronics engineering, automation, Industry 4.0, and other specialties, by teaming up with the University of Udine and the manufacturing sector of Friuli Venezia Giulia.

Before concluding, we wish to thank our shareholders who have allowed us to invest 85-90% of our profits back into the company. This is perceived as an expression of the shareholders’ trust and esteem for the Danieli team, which we intend to honour to the best of our abilities.
It is a trust which, in any case, has been repaid by the fact that the acquisition of Danieli shares has been confirmed to be a good, long-term investment.

On behalf of the Board of Directors and of the shareholders, special thanks go to the Danieli Group Team who, with passion and professionalism, are strongly committed to achieving the agreed objectives for our company’s continuing improvement, and to honour the motto “Danieli, the reliable and innovative partner to be a step ahead in CapEx and OpEx”, for the satisfaction of our business partners. And last, but not least, we express thanks for their efforts in bringing about the cultural change that today’s technological and social trends call for, which is essential to maintaining market shares and competitiveness in a highly challenging global economy with constantly evolving quality requirements.

 

Gianpietro Benedetti

Chairman of the Board of Directors

 

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