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Company News, Capital market-relevant press releases, 2017-08-10, 07:00 AM

thyssenkrupp remains on growth track / Sales, order intake and adjusted EBIT up by double digit rates in 3rd quarter / earnings forecast for full year affirmed

The industrial and technology group thyssenkrupp continues its good operating performance: After a strong 1st half, order intake, sales and adjusted EBIT again increased significantly in the 3rd quarter of the current fiscal year 2016/2017. “In the first nine months we received new orders worth more than €32 billion. This is our best performance since the start of the Strategic Way Forward. Particularly pleasing is that all business areas contributed to it,” says thyssenkrupp CEO Dr. Heinrich Hiesinger.

The Group’s order intake in the first 9 months increased year-on-year by 16 percent. In the 3rd quarter the growth was 14 percent. Components Technology and Elevator Technology once again reported record figures in the first 9 months. The third capital goods division, Industrial Solutions, achieved the turnaround: After a strong 1st half, the business area almost doubled its 3rd-quarter order intake year-on-year. The materials businesses profited mainly from the recovery in prices. The Group’s sales increased year-on-year by 9 percent in the first 9 months and by 11 percent in the 3rd quarter.

The Group’s adjusted EBIT increased by 37 percent to €1,376 million in the first 9 months. The 3rd quarter improved by 41 percent to €620 million. On the basis of the continuing operations, i.e. excluding Steel Americas [1], earnings improved by 11 percent to €1,222 million in the 9-month period and by 29 percent to €519 million in the 3rd quarter. Earnings growth at Components Technology (9-month period: up 7 percent to €274 million) and Elevator Technology (9-month period: up 8 percent to €662 million) remained strong. The materials businesses also recorded a noticeable earnings improvement. The reason for this was the recovery in prices. Materials Services almost trebled its adjusted EBIT in the first 9 months (up 273 percent to €245 million). At Steel Europe, too, (9-month period: up 70 percent to €352 million) the positive price effects were reflected in a significantly improved margin. “We are pleased by the recovery in earnings at the materials businesses. We have achieved the minimum level necessary to cover the cost of capital. However, the large swings from one quarter to another show once again that the direction of our Strategic Way Forward is the right one.

We are stepping up the expansion of our capital goods and service businesses, we are investing in research & development, and we will continue to work on our costs across all our businesses. That way we will generate more stable earnings and grow profitably in the future,” says Hiesinger.

Thanks to a strong operating performance thyssenkrupp increased its 3rd-quarter net income year-on-year by 8 percent to €134 million. However, because of the previously communicated one-time impacts from the sale of CSA in the 2nd quarter the Group reported a net loss of €721 million for the first 9 months. After deducting minority interest the loss was €751 million; earnings per share came to €(1.33). On the basis of the continuing operations, i.e. excluding Steel Americas, thyssenkrupp generated after-tax earnings in the first 9 months of €326 million (3rd quarter €268 million).

As expected, free cash flow before M&A in the first 9 months was lower than a year earlier (€(1,007) million) at €(2,326) million. Above all, the dislocations on the raw materials markets and increased material prices resulted in temporarily higher capital employed. The Group’s net financial debt increased accordingly to €6.3 billion. In the 4th quarter thyssenkrupp expects a significant decrease due to a then clearly positive free cash flow before M&A. In addition the payment of the purchase price for CSA with the closing of the transaction will have a positive impact. Taking into account available liquidity of €6.0 billion and the balanced maturity structure, thyssenkrupp remains solidly financed.

For the fiscal year 2016/2017 thyssenkrupp affirms its growth targets for sales and earnings: The Executive Board continues to expect sales growth in a high single-digit percentage range and adjusted EBIT of €1.8 billion. The continuing operations are expected to contribute €1.7 billion to this. Due to the negative earnings effect from the sale of CSA, overall net income is expected to be clearly negative. Excluding this one-time effect, net income is expected to be significantly higher year-on-year.

The forecast for free cash flow before M&A has been revised in mathematical terms. The indicator is now expected to be negative in the mid to higher three-digit million euro range (previously: negative in the mid three-digit million euro range). It will be negatively impacted by the earlier than expected closing of the CSA transaction in the 4th quarter and the absence therefore of CSA’s expected cash inflow at the end of the fiscal year. This absence will result in a correspondingly higher purchase price, which however will not be reflected in FCF before M&A. For expected net financial debt and free cash flow as a whole the process is neutral.

[1] In the context of the Strategic Way Forward, thyssenkrupp reached agreement with Ternium on the sale of the Brazilian steel mill CSA and the signing took place in February 2017. The transfer is to take retroactive effect from September 30, 2016. The competent competition authorities have in the meantime given their approval. The approval of the Brazilian competition authority CADE is not yet final. The transaction meets the criteria of IFRS 5 for reporting the Steel Americas business area as a discontinued operation.

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