Financial position

Analysis of the statement of cash flows

The amounts taken into account in the statement of cash flows correspond to the item "Cash and cash equivalents" as reported in the statement of financial position.

At €138 million, the cash outflow from operating activities in the 1st quarter 2009/2010 was €722 million lower than a year earlier. This was mainly due to an overall working capital release of €33 million in trade accounts receivable and payable in the reporting quarter as a result of tighter net working capital management, compared with corresponding working capital investment of €528 million in the prior-year quarter. In addition, working capital in inventories was reduced by €57 million year-onyear.

The cash outflow from investing activities was down €540 million from the corresponding prior-year quarter at €459 million. This was due to a €364 million reduction in capital expenditure on property, plant and equipment to €686 million, and a €217 million increase in proceeds from the sale of non-current assets relating in particular to the disposals of ThyssenKrupp Industrieservice and ThyssenKrupp Safway.

As in the prior-year quarter, free cash flow – i.e. the sum of operating cash flows and cash flows from investing activities – was negative. Compared with the corresponding prior-year period, however, there was a significant reduction in the negative free cash flow in the 1st quarter 2009/2010 by €1,262 million to €(597) million.

There was a cash inflow from financing activities of €247 million in the reporting period, compared with a cash inflow of €2,507 million in the year-earlier period. The €2,260 million net reduction in cash inflows was mainly due to the repayment in the reporting quarter of financial debt in the amount of €393 million, compared with borrowings of €2,555 million in the prior-year period. Running counter to this was a €500 million rise in proceeds from non-controlling interest to equity through the increase in the share held by Vale S.A. in ThyssenKrupp CSA Siderúrgica do Atlántico Ltda.

Analysis of the statement of financial position

Compared with September 30, 2009 the total assets decreased by €524 million to €40,843 million.

Non-current assets increased by €812 million. This was mainly due to the €655 million increase in property, plant and equipment, relating in particular to construction progress on the two major projects in Brazil and the USA.

Current assets decreased by €1,336 million. The decline was mainly due to a further reduction in trade accounts receivable and a reduction in cash and cash equivalents, reinforced by a significant reduction in other financial assets and assets held for sale. Running counter to this was an increase in inventories and non-financial assets.

The €190 million increase in inventories related in the amount of €193 million to the Steel Europe business area, resulting in particular from production adjustments and inventory increases as a consequence of the recovery in demand on the steel markets.

Trade accounts receivable were €345 million lower. Of this, €131 million related to the Plant Technology business area and €65 million to the Marine Systems business area, due in particular to an increase in advance payments from customers for construction contracts. In addition, the Materials Services business area recorded a €125 million decrease, mainly due to lower sales.

Other financial assets reported under current assets decreased by €730 million, mainly due to capital contributions at ThyssenKrupp CSA Siderúrgica do Atlántico Ltda. made in the reporting period by co-shareholder Vale S.A. The €335 million increase in other current non-financial assets related mainly to higher tax refund entitlements (€157 million) and higher advance payments (€53 million).

The €282 million decrease in cash and cash equivalents to €5,067 million resulted in part from the repayment of financial debt in the amount of €393 million and in part from the negative free cash flow of €(597) million in the reporting period. Running counter to this were in particular the €500 million capital contribution at ThyssenKrupp CSA Siderúrgica do Atlántico Ltda. made in the reporting period by co-shareholder Vale S.A. and proceeds of €168 million from the sale of current securities held in connection with financing activities.

Assets held for sale decreased by €491 million. At September 30, 2009 assets were recognized here in connection with the disposals – initiated in fiscal 2008/2009 – of ThyssenKrupp Industrieservice and ThyssenKrupp Safway in the Materials Services business area; these initiated disposals were completed in the reporting period.

The €345 million increase in total equity to €10,041 million was due mainly to the net income for the reporting period of €195 million and to net unrealized gains recognized in other comprehensive income from foreign currency translation (€126 million) and from derivative financial instruments (€32 million after taxes). Running counter to this were in particular profit distributions to non-controlling interests (€13 million).

Non-current liabilities decreased by a total of €558 million; this was almost exclusively due to the €539 million decrease in financial debt.

Current liabilities decreased by €311 million. Included in this was a €219 million decrease in other provisions, relating mainly to a reduction in provisions for warranties, in particular in the Elevator Technology business area, lower provisions as a result of the initiated implementation of the restructuring measures, in particular in the Marine Systems and Components Technology business areas, as well as declining provisions for onerous contracts, in particular in the Steel Europe and Steel Americas business areas. All business areas with the exception of Steel Americas contributed to the €321 million reduction in trade accounts payable. Running counter to this was a €277 million increase in current financial debt and a €224 million increase in other current financial liabilities, mainly relating to higher payment obligations from the purchase of property, plant and equipment for the major projects in Brazil and the USA.

Liabilities associated with assets held for sale decreased by €288 million. The decrease related to the disposals of ThyssenKrupp Industrieservice and ThyssenKrupp Safway in the Materials Services business area, which were initiated in fiscal 2008/2009 and completed in the reporting period.