Continuation of the transformation process
thyssenkrupp is continuing to drive forward its transformation in a challenging and rapidly changing macroeconomic environment. The aim is to realign thyssenkrupp as a sustainable and high-performing company with lean management structures and a clearly defined portfolio focused on profitable growth. The framework for this comprises our brand and our values.
To optimally develop the businesses of thyssenkrupp AG, the company is continuing to focus its transformation specifically on the opportunities for our technologies arising from future-oriented issues. We consider that the green transformation offers enormous potential for further profitable growth both now and, in particular, in the medium and long term, for example, in the areas of hydrogen, green chemicals, renewable energy, e-mobility and supply chains.
At the same time, we want to improve the performance of all our segments. The declared aims are for the segments to make a sustained positive value and cash flow contribution for the group and to pay a reliable dividend to our shareholders.
To achieve all these goals, thyssenkrupp will consistently pursue the route it has embarked on. The framework for this comprises three areas of action: portfolio, performance and green transformation.
A clear decision has been taken on the direction of thyssenkrupp: we want every individual business to develop in the best possible way and to achieve a sustainable competitive position – both economically and in terms of environmental and climate protection. Therefore, we continuously review and assess the development potential of all individual businesses to find the constellation that offers the best future prospects for them from the perspective of all stakeholders.
To ensure the best possible development of our businesses and focus our portfolio on high-growth markets, we are also continuing to pursue avenues that could involve a change in their ownership structure. Having completed the divestment of individual activities in the course of our transformation and closed the heavy plate business in the Multi Tracks segment, in July 2023 we successfully listed our electrolysis business, thyssenkrupp nucera, on the stock market. In this way, we have created new financial headroom for our hydrogen subsidiary so that it can continue to grow and expand its market leadership.
At the start of fiscal year 2023 / 2024 we took the next step in the sustainable realignment of our group: since October 1, 2023, the bearings business Rothe Erde (reported separately as the Bearings segment as of September 30, 2023) Uhde, Polysius and thyssenkrupp nucera (all three reported in the Multi Tracks segment until September 30, 2023) have been bundled in the new Decarbon Technologies segment. All four businesses have key technologies for the decarbonization of the industry. By establishing this new segment, thyssenkrupp is positioning itself as a technology leader for the energy transition and ensuring full visibility of its extensive expertise for the green transformation. The former Multi Tracks segment has been dissolved. The remaining businesses from the Multi Tracks segment – Automation Engineering and Springs & Stabilizers – are now part of the Automotive Technology segment. Forged Technologies (reported as a separate segment as of September 30, 2023) is now part of Automotive Technology as the end-customer structure is the same.
Consequently, thyssenkrupp’s activities are now organized in five segments: Automotive Technology, Decarbon Technologies, Materials Services, Steel Europe, and Marine Systems.
We will keep the Automotive Technology business within the group. However, in line with the industry trend for collaboration, alliances and development partnerships are also conceivable on a selective basis. We are continuing the disposal processes for Automation Engineering and Springs & Stabilizers initiated under the auspices of the Multi Tracks segment.
In the new Decarbon Technologies segment – our “green industry powerhouse” – we want to systematically access the enormous potential of the green transformation and translate it into valuecreating growth. Taking thyssenkrupp nucera as an example, the aim is a turnaround to sustainably profitable business models. This applies above all for Polysius and Uhde, which have successfully embarked on the technological transformation towards green products and services in recent years.
The next step is to drive forward the transformation of the business models – for example, through increased modularization and standardization of products and by extending the profitable service business. We also see scope for a common positioning and cross-selling potential because the businesses grouped at Decarbon Technologies have a number of common features: many years of experience, in-depth knowledge of international plant engineering, a successful installed base and close customer relationships.
On the basis of its market position and competitive strength, we still see good development potential for Materials Services. As well as working to improve its performance, we stepped up investment in the future.
We are continuing to drive forward the operational performance of Steel Europe by implementing the Strategy 20-30. Furthermore, at the end of July we received funding approval from the federal and state governments for the investment in the construction of the first direction reduction plant at our Duisburg site. The green transformation initiated by this opens up promising future prospects for the steel activities. It is also an important precondition for the goal of a stand-alone solution for Steel Europe.
At Marine Systems, both the cost-cutting and performance measures and the order situation show a positive trend. Additional growth opportunities for this segment come from rising global demand and long-term structural increases in defense budgets. In view of the specific market and sector situation, alongside further measures to enhance the performance capability of this business, we are continuing to explore options to place it on a stand-alone basis. We are convinced that the planned deconsolidation of this segment offers the best perspectives for its future development.
The overarching goal of the transformation process is still to boost the performance and competitiveness of all our businesses. This is not simply crucial for the ongoing strategic strengthening the group; it is also the necessary prerequisite for generating a sustained positive free cash flow before M&A for the group and ensuring reliable dividend payments.
Among other things, this requires the businesses to quickly and sustainably achieve the financial targets announced at the Capital Market Day in December 2021 – which have now been adjusted to reflect the new structure – despite the persistently challenging conditions. To support this and the long-term improvement in its performance, the group rolled out a holistic performance program in September 2023. The aim is for the businesses to raise their profitability to the competitive level and to make optimal use of their market opportunities. The program, which is called APEX (“peak”), focuses on optimizing net working capital, with a stricter alignment of all businesses to competitive levels, stricter return and value creation criteria for investment decisions, continued development of our business models and an improvement in performance culture.
The businesses remain responsible for the implementation of the measures and their success. To manage this program, we have also set up a Transformation Office at thyssenkrupp AG. This provides proven methodological expertise and process support, a platform for exchange and knowledge transfer, and extensive competitive analyses and best-practice comparisons. Experts from the businesses have now identified additional cash and performance measures at a range of workshops in the five areas of action: assets/CAPEX, business models and sales, material costs, net working capital and organization. Some of these are already being implemented at segment level.
The Executive Board of thyssenkrupp AG will track the progress of APEX using defined milestones. Where necessary, the program will be supplemented by additional measures to ensure that the objectives are achieved.
We have set ourselves the goal of being an enabler for the green transformation of our customers through our products and technologies. Thanks to our expertise in sustainable solutions in various sectors, we are excellently positioned to drive forward the decarbonization of industry and benefit from the associated business opportunities. The businesses in the new Decarbon Technologies segment in particular have innovative technologies that can reduce a large proportion of today’s CO2 emissions.
Our portfolio also includes other promising products and solutions that are essential for the success of the green transformation. Examples by our Automotive Technology segment are components for automotive engineering that are independent of the type of powertrain and thus enable sustainable mobility and benefit strongly from the electrification of cars and the use of digitalization by Materials Services to improve supply chains.
Alongside the products and solutions that we are driving forward for our customers and partners, we are working intensively on the decarbonization strategy for our own group. The release of the funding of around €2 billion we had applied for the “tkH2Steel” project is a key step: thyssenkrupp will become a pioneer of climate-neutral steel production. This 100% hydrogen-capable direct reduction plant with annual production capacity of 2.5 million tons direct reduced iron allows savings of up to 3.5 million tons CO2 a year, making thyssenkrupp a significant player in the European hydrogen economy, with the Duisburg site and the federal state of North Rhine-Westphalia as an anchor point for investments in the development of a cross-border hydrogen infrastructure.