Posted on 12 Feb 2016
Thyssenkrupp AG, Germany’s largest steelmaker, swung to a net loss in the fiscal first quarter as the steel industry tries to weather a drop in prices wrought by record Chinese exports.
The net loss was 23 million euros ($26 million) in the three months through December compared with net income of 50 million euros a year earlier, the Essen-based company said Friday in a statement. Adjusted earnings before interest and taxes declined 26 percent to 234 million euros, missing the 239.6 million euro average of 11 estimates compiled by Bloomberg. The company reiterated a full-year profit target of 1.6 billion to 1.9 billion euros.
Chief Executive Officer Heinrich Hiesinger, who took the role in 2011 after the company had been roiled by a bribery scandal and a failed expansion in the Americas, is trying to turn the steelmaker into a more diversified industrial group. He wants adjusted annual Ebit to increase to at least 2 billion euros to help cut debt, pay dividends and regain an investment-grade credit rating. The group, which traces its roots to 1811, gets almost half its profit from its elevator unit.
At last month’s annual general meeting, an investor called upon the company to sell one of its technology units.
“The solid performance of the capital goods businesses confirms that the path we are taking to become a diversified industrial group is right,” Hiesinger said in the statement.
Thyssenkrupp said it had cut costs by 250 million euros.
“The materials business continues to cause us concern,” Hiesinger said in Friday’s statement. The company said it needs “a significant recovery of the materials markets in the second fiscal half” to achieve its profit and free-cash-flow targets.
First-quarter sales fell 4.9 percent to 9.55 billion euros. Negative free cash flow before mergers and acquisitions widened by 38 percent to 847 million euros, mainly caused by a temporary increase in net working capital.
Adjusted Ebit at the company’s European steel business decreased 35 percent to 51 million euros in the quarter. Steel America, the only unit to report an adjusted loss before interest and taxes both for the first quarter and last fiscal year, reported a quarterly loss of 74 million euros compared to break-even a year earlier.
The world’s largest steel companies are suffering from China’s slowdown which is sapping demand and fueling a global glut. The flood of cheap exports from the nation has drawn unfair-trade complaints from Europe and the U.S. Top producer ArcelorMittal, whose full-year net loss swelled to $7.95 billion after taking $4.8 billion in writedowns, said last week it plans to raise $3 billion from investors.
Global exports from China rose by a fifth to a record 112 million metric tons in 2015. European hot-rolled coil, a benchmark for steel prices, this month sank to the lowest since at least 2007.
