thyssenkrupp posts fiscal results

Adjusted EBITDA came to €1.6 billion, which was below the revised forecast made at the end of July. Net income was also down, at €60 million compared to €271 million the year before. Free cash flow (FCF) before M&A showed a clear year-on-year improvement, but the full year figure remained negative at €134 million, as was expected.

The executive board has presented the roadmap for the announced separation of the group, following the decision in September 2018 to divide the group into two more focused and efficient companies: thyssenkrupp materials AG and thyssenkrupp industrials AG. The materials and capital goods businesses are to be managed as independent listed companies with direct access to the capital markets. This separation aims to reduce complexity and enable the two companies to operate independently of each other, responding to their respective customers and markets faster and more efficiently, as well as addressing investors with different interests.

The company aims to have the separation approved by its annual general meeting in January 2020, meaning that the companies must be largely separate enterprises by October 2019.

“We are convinced that in this new setup the business will be able to develop better and concentrate their strengths,” said Guido Kerkhoff, CEO of thyssenkrupp AG. “With the roadmap in place, we will now press on with the separation of the group: a year from now our two thyssenkrupps will be ready for a future in which they are stronger, more focused, and faster.”

In addition, preparations for the launch of the company’s 50/50 joint venture to combine its European steel activities with Tata Steel are progressing on schedule.

Adjusted for currency and portfolio effects, the company’s orders grew by 2% in the fiscal year 2017/18. Sales were reported to increase by 3% to €42.7 billion (up from €41.4 billion the previous year). On a comparable basis, sales were also 5% higher. The group’s adjusted EBIT was down, at €1551 million compared to €1772 million the previous year. Corporate costs are reported to have improved to below €400 million (down 29%, adjusted EBIT €377 million).

Among capital goods business, components technology performed positively, among other elements in car components and components for heavy trucks in Western Europe and China. It has been reported that order intake reached a new high. Elevator technology also continued its positive performance, particularly in North America, building on its high prior-year level. Due to a slowdown in major project awards, orders in the largely project-based business of industrial solutions were down.

As for the materials business, both Materials Services and Steel Europe profited from continued stable and high prices on the materials market.

The efficiency programme ‘impact’ made a significant contribution to earnings, with EBIT effects of €890 million and savings exceeding the group’s target of €750 million.

Net income, at €60 million, was below the prior year level of €271 million. The company has stated that this, alongside the group’s operating performance, reflects a provision for antitrust risks.

FCF before M&A improved year-on-year, while the full-year figure remained negative (€134 million). It is thought that this is mainly due to the lower order intake and high expenditures from orders in hand at Industrial Solutions.

The group’s net financial debt of €2.4 billion was higher than the previous year figure of €2 billion. Taking into account the balanced maturity structure and available liquidity, the company has stated that it remains solidly financed.

The group’s equity decreased year-on-year from €3.4 billion to €3.3 billion. Positive effects particularly included the net income achieved. Negative effects came from currency translation losses and lower interest rate level, which required a remeasurement of pension obligations.

In terms of forecast for 2018/19, the company has stated that it remains cautiously optimistic with regard to the current fiscal year 2018/19. The group has stated that it aims to achieve adjusted EBIT of over €1 billion, with support from the programmes initiated to improve performance in all business areas. It is expected that FCF before M&A, as a result of the earnings improvement, should improve year-on-year, though it will remain negative overall. The company has stated that progress will mainly depend on order intake and payment profiles of individual major projects at Marine Systems.

Furthermore, the group’s net income is forecast to increase year-on-year. It is predicted that the expenses from preparations to separate the group will be clearly outweighed by earnings improvements at the continuing operations and the positive effects associated with the closing of the steel joint venture.

“The past fiscal year was a turbulent and challenging one for thyssenkrupp,” said Kerkhoff, “We initiated one of the biggest realignments in the history of the company. At the same time, we identified potential for further improvements in all business which we are now systematically addressing. We are fully committed to our performance targets. Measures to achieve them have been agreed with the business areas. This will raise the performance of thyssenkrupp as a whole.”

Read the article online at: https://www.worldcement.com/europe-cis/26112018/thyssenkrupp-posts-fiscal-results/