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Thyssenkrupp Open to Selling Divisions, Cuts Profit Outlook

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Thyssenkrupp Open to Selling Divisions, Cuts Profit Outlook

  • CEO says units with no clear future can’t keep burning money
  • It’s studying options to sell businesses, including elevators
CEO Guido Kerkhoff discusses Thyssenkrupp’s turnaround plan and where he’s seeing an impact from the global slowdown.

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Thyssenkrupp AG, among the last of corporate Germany’s sprawling conglomerates, is finally considering a major breakup after Europe’s economic slowdown forced it to slash its profit outlook.

The firm said publicly for the first time that it would be open to selling a range of divisions, siding with investors who have long demanded management whittle down the steel-to-submarines behemoth. That’s after Thyssenkrupp’s financial results for the quarter revealed it’s continuing to spiral downward as trade disputes and weakening export demand damage Europe’s biggest economy. The stock rose as much as 3.2% in Frankfurt.

To stem a years-long decline, Chief Executive Officer Guido Kerkhoff is looking for ways to raise money and streamline a business that’s been hammered by falling auto sales and investor dissatisfaction with management.

“We will not allow a situation to continue where businesses with no clear prospects permanently burn money and destroy value,” the CEO said in an interview.

Headquartered in the smokestack Ruhr region, the embattled industrial icon is part of industrial Germany’s heartland. Breaking up its conglomerate structure has met fierce resistance from unions and its major shareholder, a foundation set up by descendants of the founders that’s been a guardian of the status quo. Now that united front is cracking in the face of a persistent slowdown.

The shares rose as much as 33 cents to 10.8 euros, and traded at 10.6 euros at 9:07 a.m. in Frankfurt. The stock has lost 29% this year, making it the worst performer on Germany’s benchmark DAX index.

Thyssenkrupp will press ahead with plans to list its elevator unit, the company’s most profitable unit as it rides the global mega-trend for urbanization, according to a statement released Thursday. Private equity firms including CVC Capital Partners and KKR & Co., as well as rival elevator maker Kone Oyj, have expressed interest in part or all of the division, according to people familiar with the matter. Analysts have estimated that the elevator division could be valued at about 15 billion euros.

"We have clearly received a lot of interest from external parties for our elevator business, which we are currently evaluating in case there are alternative options," Kerkhoff said in an interview with Bloomberg TV.

In addition, Thyssenkrupp listed three smaller businesses that will be considered for restructuring or disposal.

The units are:

  • Springs and stabilizers in the automotive components business
  • Systems engineering, which makes production lines for the car industry
  • Heavy plate that’s used in construction and shipbuilding

“We definitely see opportunities for their further development but not necessarily under the umbrella of Thyssenkrupp,” Kerkhoff said.

Company faring worse than Germany's bluechip DAX
Financial highlights:
  • Adjusted Ebit for fiscal 2018/2019 is forecast at 800 million euros ($900 million). That’s down from previous guidance of 1.1 billion to 1.2 billion euros.
  • Adjusted Ebit fell 32% to 226 million euros in the three months through June. That’s in line with the average analyst estimate tracked by Bloomberg.
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(Updates with share reaction.)