Thyssenkrupp Lifts Guidance as Rising Sales Eases Cash Drain
Thyssenkrupp sees sales gains limiting cash burn to $1.2 billion.
(Bloomberg) -- Thyssenkrupp AG issued improved forecasts for sales, earnings and cash flow as the long-struggling German conglomerate benefits from improving demand for steel and car components.
Cash burn should ease to about 1 billion euros ($1.2 billion) this financial year, less than the 1.5 billion euros expected previously, Thyssenkrupp said in a statement Wednesday. That’s a big stride from the 5.5 billion-euro drain in the period that ended in September.
Thyssenkrupp has been fighting for survival after the pandemic-induced downturn intensified pressure on a company that often posted losses even during boom years. It has announced plans to cut 11,000 jobs -- roughly 10% of its workforce -- and held talks with potential buyers and merger partners for its steel unit facing severe problems with yawning pension deficits, overcapacity and cheap imports from Asia.
“We’re noticing signs of an economic recovery and our measures are starting to bear fruit,” Chief Executive Officer Martina Merz said, pointing to higher earnings at Thyssenkrupp’s steel, naval and components businesses. “But we’re not out of the woods yet.”
Thyssenkrupp shares rose more than 7% at the open in Frankfurt. The stock has more than doubled since the end of October, helped by an economic recovery and rising steel prices.
“The new guidance looks conservative to us,” said Ingo Schachel, an analyst at Commerzbank AG. Rising earnings from steel and material-services businesses could offset a slowdown in the pace of the auto sector’s recovery, he said.
Thyssenkrupp now sees sales growing in the high single-digit percentage range, up from the low- to mid-single digits. Its net loss should be in the high three-digit million euro range, better than its earlier expectation for more than 1 billion euros. Demand in China for car equipment and bearings used by the wind-energy sector there and in Germany are boosting the company’s automotive and industrial components divisions.
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Coming off a 5.5 billion-euro net loss in the previous financial year, Thyssenkrupp posted 239 million euros of net income from continuing operations in the three months ended in December.
Adjusted earnings before interest and taxes at Thyssenkrupp’s steel division swung to 20 million euros for the quarter from a loss of 127 million euros a year ago. Prices for the metal have increased after pandemic-related shutdowns reduced supply and demand improved in the second half of 2020. Still, the rising cost of permits to emit carbon dioxide weighed on profits.
What Bloomberg Intelligence Says
While ThyssenKrupp’s initial guidance of a mid-three-digit million Ebit loss had looked conservative, given the sharp recovery in its end markets, new guidance of an adjusted Ebit almost at breakeven points to consensus upgrades and highlights the company’s early success in driving performance improvements in a number of its business divisions.
--Grant Sporre, BI metals and mining analyst
Thyssenkrupp didn’t give an update in its statement on talks about a potential sale of its steel division to Liberty Steel Group. Bloomberg News reported last week that Liberty Steel’s offer for the unit gave it a negative equity value of at least 1.5 billion euros, increasing the chances the German company will decide to keep the business.
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