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 first 9 months of fiscal 2009/2010 there was a cash outflow from operating activities of €147 million compared with a cash inflow of €1,954 million in the corresponding prior-year period. The main reason for this was a €3,720 million deterioration in funds tied up in inventories and trade receivables and payables. Whereas a release of funds of €2,156 million was achieved in the corresponding prior-year period, there was a €1,564 million increase in funds tied up in the reporting period, mainly due to the recovery in demand. This was partly offset by the significant improvement in net income before impairment losses/reversals and deferred tax income, which was up by €1,483 million to €1,474 million.

The cash outflow from investing activities was down €808 million from the corresponding prior-year period at €1,937 million. This was due to a €417 million reduction in capital expenditures for property, plant and equipment (including advance payments and investment property) to €2,316 million, and a €473 million increase in proceeds from the disposal of consolidated companies, mainly due to the disposals of ThyssenKrupp Industrieservice and ThyssenKrupp Safway. This was partly offset by a €73 million reduction in proceeds from disposals of property, plant and equipment and investment property.

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 significant increase in the negative free cash flow by €1,293 million to €(2,084) million, which was mainly due to the substantial cash outflow from operating activities compared with the prior year.

The cash inflow from financing activities in the reporting period came to €367 million, compared with a cash inflow of €3,163 million in the corresponding prior-year period. The €2,796 million net cash outflow was mainly due to low repayments of financial debt of €19 million in the reporting period, compared with borrowings of €3,971 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 Atlântico Ltda. In addition, compared with the prior-year period there were reduced dividend payments (€470 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 €3,774 million to €45,141 million. This increase was influenced by currency translation effects of €1,980 million, mainly due to the fall in the US dollar exchange rate in the reporting period.

Non-current assets increased in total by €2,687 million, which included a €2,291 million increase in property, plant and equipment. As well as exchange-rate effects, which caused an increase of €718 million, the two major projects in Brazil and the USA played a major part in the increase. This was partly offset by reclassifications of €120 million to assets held for sale. The increase in intangible assets was due to exchange-rate effects of €301 million; this was also partly offset by reclassifications of €140 million to assets held for sale. The €151 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 €328 million increase in deferred tax assets includes exchange-rate effects of €152 million.

Current assets increased in total by €1,087 million. The increase was due in particular to significant increases in inventories and trade accounts receivable, which were partly offset by a substantial reduction in cash and cash equivalents.

The €1,357 million increase in inventories included €307 million exchange-rate effects. In addition, due to the marked improvement in the business situation in the reporting period, there were increases mainly in the business areas Steel Europe (€313 million) and Materials Services (€165 million). The increase in the Steel Americas business area (€181 million) was connected with the planned start of production of the Brazilian steel mill. The large increase in inventories in the Stainless Global business area (€457 million) was due to price and volume increases. Reclassifications to assets held for sale resulted in a reduction of €50 million.

Trade accounts receivable were €1,429 million higher. In addition to a €323 million increase for exchange-rate reasons, there were increases in the business areas Steel Europe (€356 million), Materials Services (€313 million) and Components Technology (€188 million) due to the recovery in demand during the reporting period. The increase in the Stainless Global business area (€210 million) was due to both volume increases and raw material price rises in the reporting period. The increase in the Plant Technology business area (€84 million) was due in particular to the increase in receivables from construction contracts. Reclassifications to assets held for sale resulted in a reduction of €82 million.

Other financial assets reported under current assets decreased by €448 million, mainly due to the capital contributions at ThyssenKrupp CSA Siderúrgica do Atlântico Ltda. made in the reporting period by co-shareholder Vale S.A.

The €226 million increase in other current non-financial assets included, besides exchange-rate effects (€95 million), in particular higher tax refund entitlements. Reclassifications to assets held for sale resulted in a reduction of €87 million.

The €1,686 million decrease in cash and cash equivalents to €3,663 million was due mainly to the negative free cash flow in the reporting period of €(2,084) million and dividend payments of €173 million. Reclassifications to assets held for sale resulted in an additional decrease of €245 million. This was partly offset by exchange-rate effects of €249 million and in particular the €500 million capital contribution made in the reporting period at ThyssenKrupp CSA Siderúrgica do Atlântico Ltda. in connection with the increase in the shareholding of co-shareholder Vale S.A.

Assets held for sale increased by €260 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 €681 million at June 30, 2010; overall, non-current assets of €202 million and current assets of €479 million were reclassified in this connection. In addition, assets held for sale at June 30, 2010 included €70 million property, plant and equipment in the Steel Americas business area.

The €1,245 million increase in total equity to €10,941 million was attributable mainly to the net income for the reporting period of €727 million and to net unrealized gains recognized in other comprehensive income from foreign currency translation (€804 million) and from derivative financial instruments (€224 million after taxes). This was partly offset by profit distributions (€173 million) and actuarial losses on pensions and similar obligations recognized in other comprehensive income (€437 million after taxes). The €190 million increase in non-controlling interests contained in the increase in total equity includes €85 million net income attributable to non-controlling interests. The remaining increase was mainly due to unrealized gains from foreign currency translation attributable to non-controlling interests (€50 million) and to derivative financial instruments (€82 million after taxes); this was partly offset by profit distributions (€34 million).

Non-current liabilities decreased in total by €164 million. This included an €873 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 €668 million increase in provisions for pension and similar obligations, €312 million of which was due to currency translation effects. In addition there was an increase of €601 million due to the updated interest rates used for the revaluation of pension and healthcare obligations at June 30, 2010. Reclassifications to liabilities associated with assets held for sale resulted in a decrease of €121 million.

Current liabilities increased overall by €2,693 million. This includes a €1,063 million increase in current financial debt mainly due to the aforementioned reclassification of a bond from non-current financial debt.

The €288 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 €48 million reclassifications to liabilities associated with assets held for sale.

The significant €843 million increase in trade accounts payable included €159 million currency translation effects. In addition there were increases in the Stainless Global business area (€404 million), mainly due to significant payment term extensions with raw material suppliers and higher purchasing prices, as well as in the business areas Components Technology (€150 million) and Materials Services (€123 million) as a result of the demand improvement in the reporting period. The increase was partly offset by the reclassification of €56 million to liabilities associated with assets held for sale.

The €184 million increase in other current financial liabilities was mainly caused by €227 million higher payment obligations from the purchase of property, plant and equipment, particularly for the major project in the USA. This was partly offset by reclassifications of €21 million to liabilities associated with assets held for sale. Current non-financial liabilities increased by €768 million, of which €287 million was attributable to exchange-rate effects. In addition there was a €351 million increase in liabilities from construction contracts in the Plant Technology business area and increases in advance payments received in the business areas Elevator Technology (€152 million) and Plant Technology (€48 million). Reclassifications to liabilities associated with assets held for sale resulted in a decrease of €197 million.

Liabilities associated with assets held for sale were €183 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 €471 million increase in liabilities associated with assets held for sale at June 30, 2010. Overall, non-current liabilities of €134 million and current liabilities of €337 million were reclassified.