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ThyssenKrupp Stops Dividend After $4.7 Billion Writedown

ThyssenKrupp Cancels Dividend After $4.7 Billion Writedown
The headquarters of ThyssenKrupp AG stands illuminated in Essen. Photographer: Ralph Orlowski/Bloomberg

ThyssenKrupp AG, Germany’s biggest steelmaker, canceled its dividend after posting a second straight annual loss, following a 3.6 billion-euro ($4.7 billion) writedown of its Americas unit.

The net loss widened to 4.7 billion euros in the fiscal year ended Sept. 30 from 1.29 billion euros the previous year, the Essen-based company said yesterday in a statement.

ThyssenKrupp jumped the most in three months in Frankfurt trading today after Chief Executive Officer Heinrich Hiesinger said the sale of Steel Americas is “fully on track” to be completed before the end of the current fiscal year. There are “more than five bidders” interested in one or both of the plants in Alabama and Rio de Janeiro state, Chief Financial Officer Guido Kerkhoff said.

Impairment charges were “lower than we had expected,” Ingo-Martin Schachel, an analyst at Commerzbank AG in Frankfurt, said in a note. “The new book value of Steel Americas (3.9 billion euros) signals that the transaction outcome could be broadly in line with our 3.5 billion-euro assumption.”

The company said it won’t pay a dividend for the first time since it was formed in the 1999 merger of Thyssen and Krupp. The steelmaker paid a dividend of 45 euro cents a share for the prior year.

Waning Demand

ThyssenKrupp is selling its Steel Americas and Inoxum units as it cuts the number of business units to five from eight while expanding non-steel operations. Waning demand from the auto and construction industries has pushed down steel prices and squeezed producers’ profit margins.

“We have a very solid financial basis,” Hiesinger said in an interview with Bloomberg Television, ruling out a capital increase or any additional asset sales.

ThyssenKrupp said last week it ousted three top executives following the ill-fated expansion in the Americas and corruption allegations. Olaf Berlien, Edwin Eichler and Juergen Claassen will leave at the end of the year, according to the company, which said yesterday the supervisory board had agreed to the changes.

“With the changes on the executive board, the supervisory board has sent out a clear signal for a fresh start,” Hiesinger said in the statement. The new executive board will have four to five members.

The shares jumped 5.6 percent, the most since Sept. 14, to 17.18 euros. The stock is down 7 percent this year.

In Line

Earnings before interest and tax excluding one-time items and results from Inoxum fell 77 percent to 399 million euros, the company said. The average of 22 analysts’ estimates compiled by Bloomberg was for 397.1 million euros. Sales from continuing operations fell 6 percent to 40.1 billion euros.

ThyssenKrupp projected adjusted Ebit of about 1 billion euros for the current fiscal year on sales of around 40 billion euros for continuing operations, which excludes Steel Americas. The company said cost cuts will improve Ebit by 2 billion euros in the next three years. Kerkhoff didn’t rule out compulsory redundancies.

Net debt rose to 5.8 billion euros from 3.6 billion euros a year earlier. The company said it has 6.7 billion euros of cash, cash equivalents and undrawn credit facilities, and its financing is “secure.”

ThyssenKrupp said Nov. 19 it asked bidders to submit binding offers for its U.S. and Brazilian plants. Cia. Siderurgica Nacional SA, Brazil’s third-largest steelmaker by output, offered about $3 billion to buy the two plants in the Americas, two people familiar with the matter said last month.

Book Value

“In connection with the classification of Steel Americas as a discontinued operation, a writedown to fair value” was necessary, ThyssenKrupp said. The book value now is 3.9 billion euros, Kerkhoff said.

Steel Americas’ adjusted loss before interest and tax narrowed to 1.01 billion euros, said Kilian Roetzer, a company spokesman. A year earlier, ThyssenKrupp posted a loss of 1.07 billion euros and took a 2.1 billion-euro writedown on the unit.

The sale of the Inoxum stainless steel unit to Finland’s Outokumpu Oyj will be completed before the end of 2012 and result in a “significant” reduction in debt, according to the steelmaker.

ThyssenKrupp’s equity decreased by 56 percent from a year earlier to 4.5 billion euros, according to the company’s annual report. At the same time, the equity ratio fell to 11.8 percent from 23.8 percent.

Other European steel companies have also reported mounting pressure on profit from the slump in demand and lower prices. Salzgitter AG, Germany’s second-largest steelmaker, cut its earnings forecast on Nov. 5, while Luxembourg-based ArcelorMittal, the world’s biggest producer, posted its lowest quarterly profit in almost three years on Oct. 31.

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