Thyssenkrupp CEO Under Pressure as Analysts Expect Profit Warning
Supervisory board wants Kerkhoff to pursue reorganisation.
(Bloomberg) -- Thyssenkrupp AG Chief Executive Officer Guido Kerkhoff is facing mounting internal pressure to whittle down and restructure the company’s sprawling business portfolio as the supervisory board grows impatient at the slow pace of change at the crisis-hit conglomerate.
Some members of the supervisory board are frustrated at the pace of restructuring efforts for several divisions, including components technology, steel and industrial plant-building, according to people familiar with the matter. Martina Merz, who chairs the oversight committee, has discussed incoming offers with Kerkhoff, they said.
Several supervisory board members informally discussed a potential replacement for Kerkhoff some weeks ago because the company’s predicament may require an executive with restructuring experience, the people added. They decided against forcing him out for now. A Thyssenkrupp spokeswoman declined to comment.
Societe Generale SA analyst Christian Georges said that board was wise to retain Kerkhoff to lead the restructuring.
"He has deep understanding of all the operations and, to us, remains the more likely person to finalize this lengthy breakup," Georges said via email.
Thyssenkrupp shares rallied on Wednesday as traders speculated on the likelihood that the company will take bigger steps to overhaul or sell its underpeforming divisions. The stock rose as much as 5% and traded at 11.98 euros as of 1:47 p.m. in Frankfurt.
The company’s operating and financial problems are likely to be highlighted when it publishes quarterly earnings on Aug. 8. Thyssenkrupp will struggle to avoid a profit warning given the company’s exposure to a slowing global economy and Germany’s troubled automotive sector, according to analysts.
Daimler AG is stepping up a cost-cutting drive in a bid to counter flagging demand that has led to four profit warnings in just over a year, while BASF SE, the world’s biggest chemicals firm, has said slowing markets and trade tensions are hurting earnings.
“Over 10% of the shares, excluding key holders, are shorted at present, which suggests that many investors also expect a profit warning and associated poor quarterly results,” Georges, the Societe Generale analyst wrote in a research note published Monday.
Thyssenkrupp in May shelved a plan to break itself up into a steel and materials-trading company and a separate engineering unit comprised of its elevator, plant-building and automotive operations. Kerkhoff instead plans a listing of the firm’s prized elevator unit and is considering strategic options for the remaining engineering operations.
Since then, Finnish elevator maker Kone Oyj, private equity firms including Bain Capital, KKR & Co., and Advent International, as well as other investors, have contacted Thyssenkrupp about a potential acquisition of all or parts of the elevator unit, people familiar with the matter said. Thyssenkrupp is poised to open a data room for potential buyers in September, they added, asking not to be identified by name as the matter is private.
Kone is working on an offer. The Finnish company is considering several plans, including one that would that would divest combined elevator operations with revenue of more than 1 billion euros ($1.1 billion) to create another strong competitor and thereby allay antitrust concerns, some of the people said.
Japan’s Hitachi Ltd. is deemed an appropriate buyer for Thyssenkrupp’s elevator unit but also for snapping up parts that Kone is considering divesting, people familiar with the matter said. A Kone spokeswoman declined to comment.
Additionally, private equity firms have signaled interest in Thyssenkrupp’s components-technology unit that makes advanced products for the automotive and machinery sectors, some of the people said.
--With assistance from Kati Pohjanpalo.
To contact the reporters on this story: William Wilkes in Frankfurt at wwilkes1@bloomberg.net;Eyk Henning in Frankfurt at ehenning1@bloomberg.net
To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net, Iain Rogers
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