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ThyssenKrupp Reports 1st Quarter Results
02/16/2009 - ThyssenKrupp reports EBITDA of €764 million on sales of €11.5 billion for the first quarter of 2008/2009, reflecting the influence of the global recession.
ThyssenKrupp reported EBITDA of €764 million on sales of €11.5 billion for the first quarter of 2008/2009, reflecting the influence of the global recession, particularly the drastic drop in demand for carbon and stainless steel and in materials trading combined with sharply falling prices. The company noted that its activities in capital goods, elevators and industrial services, by contrast, were primarily robust. The €764 million EBITDA compares with €1,083 million for the year-ago quarter.
Despite the current economic circumstances, order intake was €12.9 billion, down only 3% from the prior-year quarter. Sales, €11.5 billion, reflect a 6% decrease over the same period. Although the drop in profits was much steeper, the company said this was influenced significantly by €250 million of writedowns on inventories.
Group earnings before taxes decreased from €646 million in the prior year to €240 million, while earnings per share dropped from €0.85 to €0.36 over the same period. As in previous periods, earnings were again impacted by substantial pre-operating costs (€83 million for this quarter) for the new plants in Brazil and the USA. Operating earnings before these pre-operating costs and restructuring measures (at Metal Forming and Elevator) were €333 million.
Steel and Technologies made a very solid contribution to the Group’s earnings before taxes. Elevator reported record quarterly profits. Income at Stainless and Services was depressed by inventory write-downs. Despite this, Services reported positive earnings.
The company’s net financial debt at December 31, 2008 was €3,514 million, an increase of €1,930 million compared with net financial debt of €1,584 million at September 30, 2008. The company said the increase is due to capital expenditure — in particular for its major investment projects — and also to the effects of the economic downturn on the company’s operating business. At the end of the quarter, the Group had cash funds and committed, undrawn credit facilities in the total amount of over €5 billion. The equity ratio is around 26%.
Outlook—ThyssenKrupp said it expects a significant drop in sales in fiscal 2008/2009 that will naturally be reflected in earnings. Price and volume risks will only be partly offset by declining input material prices and an extensive additional action program to increase efficiency. The company said it is taking measures to significantly reduce net working capital.
The company also said that it expects the 2nd quarter to be more difficult than the 1st. In particular, in the 2nd quarter, the company expects its Steel segment to experience further production cuts and underutilization of core units, stabilization of shipments, largely unchanged costs for raw materials and declining prices for shorter-term deals.
For its Stainless segment, the company also expects continued production cuts and underutilization, continuing weak sales markets. He company also said it cannot rule out further inventory writedowns for this segment.
For its Technologies segment, the company has a high level of planning confidence for revenues and earnings in project business due to high order backlog with good earnings quality. The company said that only the automotive business would be impacted by production cuts by OEMs.
For its Elevator segment, the company anticipates higher year-on-year earnings due to the sustained effect of performance programs.
For its Services segment, the company anticipates predominantly weak demand and continued price falls in materials business at Materials Services and Special Products, as well as for metallurgical raw materials and coke. The company said that Industrial Services would be predominantly stable, with construction and rail equipment activities profiting from high infrastructure spending.
For the second half of the fiscal year, ThyssenKrupp expects business and earnings to be at the level of a normal recession. The company also expects that the earnings contributions from the materials-related businesses in the Stainless and Services segments will improve. The company said that its Steel segment would face continuing price pressure and inadequate volumes but expects lower raw material costs and positive effects from ongoing cost-reduction measures. The company expects that its Technologies segment will maintain its strong earnings despite a continuing difficult market environment. For the Elevator segment the Group expects the good earnings picture to continue.
Management Comments—“I will not be able to give you a concrete forecast for the 2008/2009 fiscal year today,” said Executive Board Chairman Ekkehard Schulz. “I stick by what I have already said: A serious business forecast for the coming months is not yet possible. But our first quarter shows that as a balanced and value-based conglomerate we are well equipped to meet the crisis.
“In addition we have initiated various measures,” continued Schulz. “Under our Groupwide ThyssenKrupp PLUS program, we will reduce costs by €1 billion year-on-year and significantly reduce our net working capital to produce a positive effect of €2.3 billion. Due to market conditions in the USA we have also introduced greater flexibility to our capital expenditure program. Among other things, this will mean that our new stainless steel mill will not start production until early 2012.”
Longer-Term Outlook—ThyssenKrupp expects sales and earnings to stabilize again in 2009/2010. In the longer term—particularly after completion of the major investments of Steel and Stainless in North and South America and those of the other segments in other regions—the Group forecasts earnings before taxes and major nonrecurring items of €4.0 to 5.0 billion and sales of around €65 billion.
With sales of 53.4 billion euros and 199,374 employees in over 70 countries, ThyssenKrupp is one of the world's major technology groups and occupies excellent positions on the international markets. The three main business areas of steel, capital goods and services, organized in five segments — Steel, Stainless, Technologies, Elevator and Services — mark out the Group's areas of competence.
