Thyssenkrupp Swings to Net Loss -- Update
12 February 2016 - 8:41PM
Dow Jones News
By Christopher Alessi
FRANKFURT--German industrial conglomerate Thyssenkrupp AG swung
to a first-quarter loss, hurt by weakness in the steel and
materials businesses as well as high tax expenses.
The company reported a net loss of EUR23 million ($26.1 million)
for the three months ended Dec. 31 compared with a net profit of
EUR54 million in the same period a year earlier. The result
significantly missed analysts' forecast for EUR40 million in net
profit.
Sales declined 5% to EUR9.55 billion, weighed down by volume and
price-related decreases in the steel and materials businesses.
The company's closely watched adjusted earnings before interest
and taxes fell by 26% to EUR234 million, reflecting price and
margin pressure in the steel and materials businesses.
Earnings at the Materials Services business were roughly level
with the year-earlier period at EUR3 million. Meanwhile, Steel
Europe's adjusted EBIT fell to EUR51 million from EUR79 million,
and Steel Americas posted a loss of EUR74 million.
However, the group reported continued earnings growth at its
capital goods businesses.
Components Technology, which supplies the auto industry with
parts such as electrical-steering systems and engine components,
posted adjusted EBIT of EUR71 million, up from EUR4 million a year
ago. At the Elevator Technology division adjusted EBIT rose to
EUR203 million from EUR25 million.
Since taking the helm in 2011 amid corruption scandals and
internal divisions, Chief Executive Heinrich Hiesinger has moved
the company away from its traditional steelmaking business and
transformed it into a diversified capital goods company. The
backbone of the capital goods segment is the world-leading elevator
and escalator business.
Mr. Hiesinger has succeeded in bringing the company back into
the black in the past two fiscal years, but has acknowledged that
significant challenges remain, including a high net debt. Net
financial debt increased to EUR4.4 billion in the first quarter
from a year-earlier EUR4.2 billion.
Analysts at Germany's DZ Bank called the first-quarter results a
"weak" start to the fiscal year, noting that the net result was
"worse than expected by both us and the market."
Thyssenkrupp's challenges have been further compounded by a
shaky global economy that has weighed on steel prices.
The company is "well positioned to benefit from incremental
protectionist policies against steel imports, but we fear that the
EU steel market may indeed remain under pressure for the
medium-term," according to analysts at Jefferies.
Many analysts and investors have long speculated that
ThyssenKrupp could move to separate its European steel business
from the group, amid expected consolidation in the industry.
However, Mr. Hiesinger has denied plans to do so at this time.
The company reiterated its guidance for fiscal 2016, saying it
still expects to achieve adjusted EBIT between EUR1.6 billion and
EUR1.9 billion. However, it cautioned that the outlook is
predicated on a "significant recovery" of the materials markets in
the second half of the fiscal year.
Thyssenkrupp will also have to continue to implement
cost-cutting measures--part of a comprehensive restructuring
engineered by Mr. Hiesinger--to meet its targets for fiscal 2016,
the company said. Thyssenkrupp said it had saved EUR250 million
through the program in the first quarter.
Write to Christopher Alessi at christopher.alessi@wsj.com
(END) Dow Jones Newswires
February 12, 2016 04:26 ET (09:26 GMT)
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