Thyssenkrupp finds steel the most difficult sale in business dissolution
“This is a very complex business characterized by economic challenges and a large number of uncertainties,” CFO Klaus Keysberg said on Thursday, adding that the company needed more time to develop a concrete plan for the company. âNevertheless, we are convinced that a stand-alone solution offers the best prospects for the future.
CEO Martina Merz is leading a deep restructuring of the conglomerate, which was struggling to survive even before the pandemic struck. Once synonymous with German industrial prowess, Thyssenkrupp suffered from a cash drain as a global steel glut exacerbated the company’s deep structural problems.
After selling its prized elevator unit for 17.2 billion euros ($ 19.5 billion) last year, the manufacturer struck deals over the summer to offload small mining companies and d infrastructure and continues to rationalize.
The redesign is starting to bear fruit. Thyssenkrupp said he expects cash flow to break even this year – which would end a four-year cash drain – and profits to double as the effects of the turnaround begin. to be felt. Activist investor Cevian Capital AB, Thyssenkrupp’s second largest shareholder, said he was “satisfied” with the progress of the company’s streamlining.
“We believe the forecast, while free cash flow was not yet firmly set to be positive, should be well received,” Jefferies analyst Alan Spence said in a report.
Thyssenkrupp gained 6.7% at 1:23 p.m. in Frankfurt. Shares have climbed about a third this year.
Thyssenkrupp’s plans come against a backdrop of renewed focus on lightening industrial conglomerate structures – sparked by the high-profile ruptures of General Electric Co., Johnson & Johnson and Japanese Toshiba Corp. Siemens AG said last week that it expects profit margins plus benefits from a multi-year downsizing which its big rival GE is starting to embark on.
Thyssenkrupp said on Thursday that its restructuring would continue with plans to separate the Uhde Chlorine Engineers unit, confirming a previous report from Bloomberg News. The division, estimated at 5 billion euros, produces power plants that produce hydrogen from renewable electricity, an activity that requires investment to take advantage of the global shift to clean energy.
The company said it preferred an initial public offering and was looking to retain a controlling stake in the company.
The challenges of steel
The spinning of the steel unit may be more difficult. While the division was profitable in the fiscal year ended in September amid rising steel prices, its capital-intensive factories need around â¬ 10 billion in investment to convert to a low emission production.
An attempt by Thyssenkrupp to merge the company with the European unit of India’s Tata Steel Ltd. was dropped due to European Union antitrust concerns and an offer from British tycoon Sanjeev Gupta failed earlier this year due to a lack of funding.
In its earnings report released Thursday, the industrial machinery, auto parts and submarine maker said it was benefiting from the global economic recovery and its restructuring measures. Thyssenkrupp’s adjusted profit before interest and taxes last year was 796 million euros on sales of 34 billion euros.
Yet the company is grappling with pervasive supply chain issues disrupting production in many industries.
âHuge challenges remain, especially given the semiconductor shortage and uncertainties surrounding the coronavirus pandemic,â Merz said.
(By William Wilkes, with assistance from Christoph Rauwald)