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.

In the 1st half of fiscal 2009/2010 there was a cash outflow from operating activities of €124 million compared with a cash inflow of €623 million in the corresponding prior-year period. The main reason for this was a €1,196 million deterioration in funds tied up in operating assets and operating liabilities. Whereas a release of funds of €377 million was achieved in the corresponding prior-year period, there was an €819 million increase in operating assets and operating liabilities in the reporting period, mainly due to the recovery in demand. This was partly offset by the significant €602 million improvement in net income before impairment losses/reversals and deferred tax income.

The cash outflow from investing activities was down €894 million from the corresponding prior-year period at €1,010 million. This was due to a €519 million reduction in capital expenditures for property, plant and equipment to €1,518 million, and a €378 million increase in proceeds from the disposal of consolidated companies and non-current assets, mainly due to the disposals of ThyssenKrupp Industrieservice and ThyssenKrupp Safway.

As in the prior-year period, free cash flow, i.e. the sum of operating cash flows and cash flows from investing activities, was negative. Compared with the prior-year period, there was a decrease in the negative free cash flow by €147 million to €(1,134) million in the 1st half of fiscal 2009/2010.

The cash inflow from financing activities in the reporting period came to €248 million, compared with a cash inflow of €2,253 million in the corresponding prior-year period. The €2,005 million net cash outflow was mainly due to repayments of financial debt of €356 million in the reporting period, compared with borrowings of €3,105 million in the corresponding prior-year period. This was partly offset by a €500 million increase in proceeds to equity in connection with the increase of the shareholding of Vale S.A. in ThyssenKrupp CSA Siderúrgica do Atlántico Ltda. In addition, compared with the prior-year period there were increased cash inflows from the sale of current securities held in connection with financing activities (€220 million), reduced dividend payments (€482 million) and lower expenditures for the acquisition of shares in already consolidated companies (€147 million).

Analysis of the statement of financial position

Compared with September 30, 2009, total assets increased by €1,292 million to €42,659 million. This increase was influenced by currency translation effects of €959 million, mainly due to the fall in the US dollar exchange rate in the reporting period.

Non-current assets increased in total by €1,469 million, which included a €1,390 million increase in property, plant and equipment. As well as exchange-rate effects, which caused an increase of €319 million, the two major projects in Brazil and the USA played a major part in the increase. The overall slight decrease in intangible assets was mainly influenced by reclassifications of €139 million to assets held for sale, which were partly offset by an increase due to exchange-rate effects. The €123 million decrease in other non-financial assets related in particular to advance payments to suppliers, which were reclassified to property, plant and equipment in connection with further construction progress on the steel mill in Brazil. The €182 million increase in deferred tax assets includes exchange-rate effects of €69 million.

Current assets decreased in total by €177 million. The decrease was due to a significant reduction in cash and cash equivalents and other financial assets, which was partly offset by increases in inventories, trade accounts receivable, and non-financial assets.

The €417 million increase in inventories included €151 million exchange-rate effects. In addition, due to the recovery in demand, there were increases mainly in the business areas Steel Europe (€113 million), Stainless Global (€125 million) and Materials Services (€48 million). Reclassifications to assets held for sale resulted in a reduction of €56 million.

Trade accounts receivable were €699 million higher. In addition to a €163 million increase for exchange-rate reasons, the rest of the increase mainly came from the business areas Steel Europe (€193 million), Stainless Global (€104 million), Components Technology (€125 million) and Material Services (€117 million) due to the recovery in demand during the reporting period. Reclassifications to assets held for sale resulted in a reduction of €43 million.

Other financial assets reported under current assets decreased by €676 million, mainly due to the capital contributions at ThyssenKrupp CSA Siderúrgica do Atlántico Ltda. made in the reporting period by co-shareholder Vale S.A.

The €119 million increase in other current non-financial assets included in particular higher tax refund entitlements and claims for compensation against suppliers in connection with the major project in Brazil. Reclassifications to assets held for sale resulted in a reduction of €187 million.

The €1,019 million decrease in cash and cash equivalents to €4,330 million was due in particular to the negative free cash flow in the reporting period of €(1,134) million, the repayment of financial debt in the amount of €356 million, and dividend payments of €158 million. Reclassifications to assets held for sale resulted in an additional decrease of €278 million. This was partly offset by exchange-rate effects in the amount of €119 million, proceeds of €174 million from the sale of current securities held in connection with financing activities, and in particular the €500 million capital contribution made in the reporting period at ThyssenKrupp CSA Siderúrgica do Atlántico Ltda. in connection with the increase in the shareholding of co-shareholder Vale S.A.

Assets held for sale increased by €287 million. At September 30, 2009 assets of €491 million were recognized here in connection with the disposals – initiated in October 2009 – of ThyssenKrupp Industrieservice and ThyssenKrupp Safway in the Materials Services business area; these disposals were completed by mid December 2009. As part of the ongoing portfolio optimization measures, the disposal of parts of the Marine Systems business area was initiated in April 2010. This resulted in the recognition of assets held for sale of €778 million at March 31, 2010; overall, non-current assets of €200 million and current assets of €578 million were reclassified.

The €693 million increase in total equity to €10,389 million was attributable mainly to the net income for the reporting period of €429 million and to net unrealized gains recognized in other comprehensive income from foreign currency translation (€401 million) and from derivative financial instruments (€137 million after taxes). This was partly offset by profit distributions (€158 million) and actuarial losses recognized in other comprehensive income (€164 million after taxes).

Non-current liabilities decreased in total by €1,087 million. This included a €1,210 million decrease in financial debt, which related in the amount of €749 million to the reclassification of a bond to current financial debt. This was partly offset by a €167 million increase in provisions for pension and similar obligations, €140 million of which was due to currency translation effects. In addition there was an increase of €227 million due to the updated interest rates used for the revaluation of pension and healthcare obligations at March 31, 2010. Reclassifications to liabilities associated with assets held for sale resulted in a decrease of €119 million.

Current liabilities increased overall by €1,686 million. This was due to a €1,001 million increase in current financial debt and the aforementioned €749 million reclassification of a bond from non-current financial debt.

The €322 million decrease in other current provisions was mainly due to the use of provisions for the restructuring measures initiated in the Group in fiscal 2008/2009, and to €49 million reclassifications to liabilities associated with assets held for sale.

The €154 million increase in trade accounts payable included €76 million currency translation effects. Improved demand in the reporting period also contributed to the rise. The increase was partly offset by the reclassification of €43 million to liabilities associated with assets held for sale.

The €266 million increase in other current financial liabilities was mainly caused by higher payment obligations from the purchase of property, plant and equipment for the major project in the USA. Current non-financial liabilities increased by €353 million, of which €129 million was attributable to exchange-rate effects. In addition there was a €280 million increase in liabilities from construction contracts and a €102 million rise in liabilities from annual maintenance contracts. Reclassifications to liabilities associated with assets held for sale resulted in a decrease of €298 million.

Liabilities associated with assets held for sale were €270 million higher. This includes a decrease of €288 million relating to the disposals of ThyssenKrupp Industrieservice and ThyssenKrupp Safway in the Materials Services business area which were initiated in October 2009 and completed in the reporting period. The disposal of parts of the Marine Systems business area initiated in April 2010 resulted in a €558 million increase in liabilities associated with assets held for sale at March 31, 2010. Overall, non-current liabilities of €132 million and current liabilities of €426 million were reclassified.