The 2017 / 2018 fiscal year was a year of major strategic decisions for thyssenkrupp. At the end of June we signed an agreement with Tata Steel to combine our European steel activities in a 50 / 50 joint venture. We expect several clear advantages from the joint venture:
- For our steel businesses we are creating a sustainable future in a challenging market environment.
- For the Group, key balance sheet ratios – particularly equity ratio and capital employed – will improve significantly with the launch of the joint venture; at the same time the transfer of pension obligations from existing or former steel activities will almost halve the Group’s pension provisions.
- The remaining businesses will gain more latitude to act flexibly and seize growth opportunities.
With the joint venture agreement we created the conditions to evolve the strategy the Group has pursued since 2011. On September 30, 2018, thyssenkrupp AG decided to divide the Group into two separate and much more focused companies: The capital goods and materials businesses are to be managed in the future as independent, listed companies with direct access to the capital markets. The separation combines industrial logic with the requirements of the capital market. The Executive Board is convinced that this new structure will allow the businesses to develop better and concentrate on their strengths. Both companies will continue to use the name thyssenkrupp, but will evolve their strategies separately and independently of each other.
- thyssenkrupp Industrials will consist of three units: the elevator business, the automotive components business, and plant engineering. Elevator Technology will remain unchanged in its current configuration. Components Technology will be focused on the automotive business. As materials-related activities, the Bearings and Forged Technologies units will be transferred to thyssenkrupp Materials. A new addition is System Engineering, which develops for example production lines for cars and is currently part of Industrial Solutions. This means our automotive expertise will be concentrated in one area. The third pillar of our industrials business will be focused plant engineering. thyssenkrupp Industrials will then be a pure capital goods company. Its globally positioned businesses will have attractive growth opportunities from megatrends such as urbanization, globalization, and digitization. We want to profit from this with our engineering expertise, service know-how, and digital innovations.
- thyssenkrupp Materials will consist of the following units: Materials Services, the 50% interest inthe future steel joint venture, Bearings, Forged Technologies, and Marine Systems. The result will be a materials group that combines steel and stainless steel production, materials distribution,and steel-related processing. In materials distribution and steel we hold leading market positions in Europe; in forgings, bearings, and naval shipbuilding we are among the leading suppliers worldwide. The new setup will allow us to expand these market positions and take advantage of consolidation opportunities from a position of strength.
The separation into two companies will take the form of a spin-off. After the separation, thyssenkrupp AG shareholders will hold shares in two companies: thyssenkrupp Materials AG (formerly thyssenkrupp AG) and thyssenkrupp Industrials AG. Existing shareholders will continue to hold 100% of thyssenkrupp Materials AG, and initially a clear majority of thyssenkrupp Industrials AG. The remaining interest will initially be held by thyssenkrupp Materials AG and will serve to strengthen thyssenkrupp Materials AG’s capital base. This will give both companies a good start.
Regardless of the planned separation, thyssenkrupp will carry on working continuously to improve the performance of all its businesses. The initiatives and measures to achieve this are combined in our Groupwide efficiency program “impact”. The growth and profitability targets issued for the individual business areas at the beginning of August 2018 remain valid and are to be achieved by the end of the 2020 / 2021 fiscal year (see section “Targets”). We are also adhering to the savings program for general and administrative costs we initiated in the 2016 / 2017 fiscal year. Successes are already being seen in particular at the Group’s headquarters, where costs were reduced by over €158 million to €377 million in the reporting year. Further significant savings are targeted by the end of fiscal 2020 / 2021.
Business opportunities are arising for thyssenkrupp from global mega trends that require more and better solutions: Demographic change, urbanization, the rapid growth of mega cities, and Globalization mean that global demand is rising (“more”). At the same time the requirements to be met by the solutions offered are increasing (“better”). The result is that we need to use resources efficiently, reduce the environmental impact of producing consumer and capital goods, and build more sustainable infrastructure. At the same time an increasingly connected world requires intelligent products and solutions.
We use our engineering expertise and materials capabilities to develop tailored technological and competitive solutions to meet the current and future requirements of our customers and markets and to satisfy the demand for “more” in a “better” way. We do this in many areas with our technologies, industrial processes, materials, and services, both in industrialized countries and in emerging markets. A key role is played by our brand and our brand promise summed up in our slogan “engineering.tomorrow.together.”
Source: Annual Report 2017/2018, p. 34-36