Thyssenkrupp Drops After Losing $39 Billion Australian Subs Deal

  • French bid best met Australia's `unique needs,' Turnbull said
  • Thyssenkrupp pledged to create thousands of Australian jobs

Thyssenkrupp AG slid in Frankfurt trading after the German industrial company lost out to French competitor DCNS Group on a A$50 billion ($39 billion) contract by the Australian government to build and service 12 submarines.

The stock fell as much as 5.1 percent, bringing up the rear on the benchmark DAX Index. The shares, which have gained 11 percent this year, traded down 2.5 percent at 20.30 euros as of 9:39 a.m.

“It may be disappointing at first sight, but those big orders always entail major risks,” Bjoern Voss, a Hamburg-based analyst at Warburg Research GmbH, said by phone. “I am not that sad about it actually. Thyssenkrupp still has a solid order book for the next four to five years.”

ThyssenKrupp’s marine services unit has built 160 submarines since the 1960s, with more than 50 built on site in the country of the respective buyers, according to the company, which claims to be the market leader for non-nuclear-powered submarines. So far, it hasn’t constructed one to the size Australia requires.

The French offer represented the capabilities “best able to meet Australia’s unique needs,” Australia’s Prime Minister Malcolm Turnbull told reporters in Adelaide on Tuesday.

‘Respect Decision’

“We respect the decision of the Australian government to choose DCNS as its
preferred partner for the procurement of new submarines and wish Australia and all involved every success in the realization of this demanding program,” said Torben Beckman, a spokesman for Thyssenkrupp. “Thyssenkrupp Marine Systems has high capacity utilization for submarines and solid order books enabling us to plan reliably for the years ahead.”

Australia’s order was “so important” for the Kiel-based marine unit that company executive Hans Christoph Atzpodien dedicated himself to the project, Thyssenkrupp’s Chief Executive Officer Heinrich Hiesinger said in November. Thyssenkrupp “sold the most conventional submarines by far in the last decades” globally, Hiesinger said at the time.

The German company had pledged to create thousands of jobs in Australia as part of its bid, which entailed a stretched version similar to the “Dolphin” submarine it supplied to Israel.

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