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Capital market-relevant press releases, Company News, 2016-11-24, 07:00 AM

thyssenkrupp stable despite price falls in materials business / revised targets for 2015/16 achieved / cash flow significantly higher than expected

  • Adjusted EBIT: around €1.5 billion
  • Net income: €261 million
  • Savings well above target at almost €1 billion
  • Earnings and cash flow in fourth quarter higher year-on-year

Despite difficult market conditions, the industrial and technology group thyssenkrupp achieved and in some cases exceeded its revised targets for the 2015/2016 fiscal year. Net income was stable at €261 million (prior year €268 million); net income attributable to the shareholders of thyssenkrupp AG came to €296 million (prior year €309 million). The cash flow target was significantly exceeded. Free cash flow before M&A came to €198 million (prior year €115 million). A negative to breakeven figure had been forecast.

Overall the fiscal year was marked by high import and price pressure in the materials businesses. Especially in Europe, the recovery in prices came later than originally expected and from a lower level. These effects overshadowed the progress in the capital goods businesses and were also the reason for revising the forecast mid-year. “The volatility on the materials markets shows that we must continue with thyssenkrupp’s transformation into a strong industrial group. The Strategic Way Forward is our plan for transforming thyssenkrupp and the appropriate response to an increasingly volatile world,” said Dr. Heinrich Hiesinger, CEO of thyssenkrupp. “We aim to increase our share of capital goods and service businesses and achieve profitable growth. Our minimum long-term target of at least €2.0 billion adjusted EBIT remains unchanged.”

Hiesinger stressed that programs to increase earning power are under way in all business areas. “We’re not waiting around, we’re concentrating on the things that are in our own hands,” said the CEO. In parallel with this thyssenkrupp continues to invest systematically in research and development and building new production facilities. Hiesinger: “Innovations are the key to our company’s future. That’s why we have now increased our spending on them for five years in a row”.

Since the 2011/2012 fiscal year more than €3.5 billion has been invested in research and development, €778 million in the past fiscal year alone. These investments are paying off more and more, said Hiesinger. As an example he pointed up the change in steering systems technology. This technology is the basis for driver assist systems and autonomous driving. After years of intensive development work, thyssenkrupp is now building factories around the world for the volume production of these systems. The automobile industry has already placed orders worth more than €7 billion.

In the past fiscal year the Group’s order intake and sales were lower year-on-year by 9 percent and 8 percent respectively. On a comparable basis too, i.e. excluding currency and portfolio effects, the figures were down by 8 percent and 7 percent respectively. The main reason was the high import and price pressure on the materials businesses in the 1st half of the fiscal year. The price falls alone caused a drop of 5 percent. The Industrial Solutions business area also registered a weakening of the markets for chemical plants and mining equipment as well as an absence of major naval shipbuilding projects. A stabilizing effect came from Components Technology and Elevator Technology, with orders and sales level or higher year-on-year.

Despite the difficult market environment, thyssenkrupp increased its operating earning power from quarter to quarter over the past fiscal year. In the final quarter earnings and cash flow were higher than a year earlier. Nevertheless adjusted EBIT for the full year was lower at €1.5 billion (prior year €1.7 billion). Once again the elevator and automotive components businesses performed particularly positively. Elevator Technology increased its adjusted EBIT by 8 percent to €860 million (prior year €794 million). Its margin climbed to 11.5 percent (prior year 11 percent). Components Technology improved its adjusted EBIT by 7 percent to €335 million (prior year €313 million) and its margin to 4.9 percent (prior year 4.6 percent). Steel Americas also achieved a strong operating improvement. However, the earnings contributions of the Industrial Solutions, Materials Services and Steel Europe business areas were lower year-on-year.

The efficiency program “impact” once again played a significant role in stabilizing the company in the past fiscal year: With EBIT effects of almost €1 billion, savings were again well above the Group’s target of €850 million.

The Executive Board and Supervisory Board will be proposing the payment of an unchanged dividend of €0.15 per share to the Annual General Meeting. The dividend proposal takes into account the exceptionally weak materials environment in the 1st half, the significantly stronger performance in the 2nd half, expectations of a clear improvement in earnings in the current fiscal year, and balance sheet needs.

At September 30, 2016 the Group’s net financial debt stood at €3.5 billion (prior year €3.4 billion). Taking into account the Group’s available liquidity of €8 billion and balanced maturity profile, thyssenkrupp is solidly financed.

Equity decreased year-on-year from €3.3 billion to €2.6 billion. This is mainly the result of continued low interest rates, which necessitated the remeasurement of pension commitments. This is purely an accounting effect and not a cash outflow. Accordingly gearing increased by around 31 percentage points to 134 percent. Without the interest rate effect, gearing would have been 100 percent at the reporting date.

For the current fiscal year 2016/2017 thyssenkrupp is cautiously optimistic. The Executive Board expects further progress on the Strategic Way Forward. Adjusted EBIT is forecast to increase to around €1.7 billion. The company expects a clear improvement in net income. Slightly positive free cash flow before M&A is forecast. With positive EBIT effects of €850 million, the efficiency program “impact” will once more be key to meeting the targets.

To the annual report.

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Company blog: https://engineered.thyssenkrupp.com

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