Thyssenkrupp Raises Profit Outlook After Brazil Plant Sale

  • Company forecasts 1.8 billion euros of adjusted Ebit this year
  • Charges from the Ternium deal resulted in quarterly net loss

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Thyssenkrupp AG, Germany’s biggest steelmaker, boosted its fiscal-year profit forecast after it improved its operating performance and agreed to sell a Brazilian steel plant.

Earnings before interest and taxes, excluding one-time items, will be 1.8 billion euros ($1.96 billion) in the fiscal year through September, the Essen, Germany-based company said Friday in a statement. That compares with a previous forecast of 1.7 billion euros. Excluding the facility in Rio de Janeiro state that’s set to be sold, Thyssenkrupp is forecasting adjusted EBIT of 1.7 billion euros this fiscal year.

Chief Executive Officer Heinrich Hiesinger has made a broad array of changes in an effort to transform the steelmaker into a diversified industrial group. The company expects to exit its Steel Americas unit this year and is in talks to transfer its European steel assets into a joint venture with Tata Steel Ltd.

Thyssenkrupp reported a net loss of 879 million euros in the fiscal second quarter, in which the company agreed to sell its Brazilian steel plant to Ternium SA. The transaction resulted in charges of about 900 million euros, the German company said. The quarterly loss compares with net income of 61 million euros a year earlier.

Among other results:

  • Adjusted EBIT from continuing operations in the fiscal second quarter rose 5.6 percent to 412 million euros, missing the 418.8 million-euro average estimate.
  • Negative free cash flow before mergers and acquisitions narrowed 42 percent to 212 million euros in the quarter. Thyssenkrupp sees it in negative “mid-three-digit million-euro range” in the fiscal year, compared with “slightly positive” previously.
  • Net financial debt widened 20 percent to 5.76 billion euros as of March 31, resulting in a debt-to-equity-ratio, or gearing, of 250 percent. Chief Financial Officer Guido Kerkhoff is “confident” of reaching annual gearing target, to which company is bound under agreement with banks, he said in interview with Bloomberg Television.
  • The European steel division’s adjusted EBIT increased 42 percent to 92 million euros, benefiting from price increases, while facing higher costs.
  • Companywide, revenue increased 12 percent to 11 billion euros.
  • Thyssenkrupp sees a turnaround of in its Industrial Solutions unit, which includes its engineering and submarine businesses. The unit had its highest order intake in three years in the quarter, while it was the only division in which adjusted EBIT fell.

(An earlier version of this story was corrected to show that projection in second bullet point is for negative free cash flow)

(Updates with CFO comment in third bullet point.)
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