ThyssenKrupp to Achieve Elevator Profit Targets Before 2020

  • Unit to keep business of making airplane boarding bridges
  • ThyssenKrupp presented magnetic levitation model last week

ThyssenKrupp AG is setting itself a 2020 deadline to reach profit goals at the elevator unit the German steelmaker is relying on to turn its fortunes around.

The company, based in the western city of Essen, expects to hit a 1 billion-euro ($1.1 billion) adjusted earnings before interest and tax target before it achieves its desired profit margin for the unit, Andreas Schierenbeck, chief executive officer of the elevators business, said in an interview in Gijon, Spain, in which he gave the first indication of a timeline for the goals.

“We want to achieve Ebit of 1 billion euros earlier than a 15 percent Ebit margin, which will take another few years,” Schierenbeck said on Thursday. He wants to improve the margin, a ratio of earnings to sales, by 0.5 percentage point to 0.7 percentage point each year from the 10.5 percent achieved in the 12 months through September 2014.

With adjusted Ebit of 557 million euros in the nine months through June, the four decades-old elevators unit now contributes almost half of group profit at ThyssenKrupp, which can trace its roots to 1811. Chief Executive Officer Heinrich Hiesinger, an outsider brought in in 2011 to clean up the company that had been roiled by a bribery scandal and a failed expansion in the Americas, is counting on next-generation elevators as he tries to turn the company into a more diversified industrial group.

Shares Climb

ThyssenKrupp shares rose 1.8 percent in Frankfurt trading, the biggest gain in Germany’s benchmark DAX index, to close at 18.97 euros, the highest in more than two months.

The profit goals aren’t without challenges, Schierenbeck said. The slowdown in China, which accounts for about two-thirds of new installations in the industry, poses potential risks. “If something happens there, it’s impossible to fully compensate for it,” he said.

The elevators unit has also lost several projects in Russia as a result of the drop in oil prices, which may also hamper contracts in Saudi Arabia, Schierenbeck said. While Brazil currently is “difficult” and his expectation for the Indian economy is weaker than previously anticipated, the Middle East is currently doing well and the U.S. even better, he said. “Construction in Manhattan isn’t finished yet.”

Elevator Business

ThyssenKrupp, which supplied elevators and moving stairs for New York’s One World Trade Center, competes with U.S.-based United Technologies Corp.’s Otis unit, the world’s largest elevator producer by revenue. European peers include Finland’s Kone Oyj and Switzerland’s Schindler Holding AG.

The 1 billion-euro Ebit goal compares with a target of 2 billion euros adjusted Ebit for the whole group, a target Chief Financial Officer Guido Kerkhoff said in a June interview is within reach although he declined to give a timeframe.

The company has abandoned last year’s plan to sell the business that makes the moveable hallways passengers use to board aircraft, Schierenbeck said. A disposal “is off the table” as prices offered were too low. “We can happily live with the business” that generates a low single-digit percentage of the unit’s sales, he said.

Magnetic Levitation

ThyssenKrupp on Thursday presented in public for the first time a 10 meter-high (32 feet) functioning elevator model that uses giant magnets to move cars in multiple directions, a technology that may offer great opportunities for the company. The system will be installed as soon as in three years, Schierenbeck said, adding that this is in line with the planning process of buildings with a height of 300 meters and more for which the technology is most suited.

Magnetic levitation, borrowed from high-speed trains, is also used for moving sidewalks accelerating to 7.2 kilometers per hour, that the company introduced last year, targeting a “market niche, existing for distances between 150 meters and 1,500 meters,” according to Schierenbeck.

ThyssenKrupp has about 50 expressions of interest for the system, including from metro operators, Schierenbeck said Thursday. “We will sign the sale of several Accel projects in the next 18 months.”

Last month, the company said it will implement Microsoft technology to cut by half the time elevators spend out of service as it seeks to improve customer loyalty.

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