Capital market-relevant press releases, 2014-11-20, 07:05 AM
ThyssenKrupp generates net profit again for the first time in three years
Milestone in the transformation of the ThyssenKrupp Group: For the first time in three years the Essen-based industrial and technology group has generated a net profit. In the 2013/2014 fiscal year ThyssenKrupp achieved net earnings of €195 million; net income attributable to the shareholders of ThyssenKrupp AG came to €210 million. This corresponds to earnings per share of €0.38. The year before a loss of around €1.6 billion was reported, of which €1.4 billion attributable to shareholders of ThyssenKrupp AG (€(2.79) per share).
"The 2013/2014 fiscal year represents a milestone in our earnings situation. We have demonstrated that we are making progress with our transformation into an efficient and profitable diversified industrial group on our Strategic Way Forward," said CEO Dr. Heinrich Hiesinger ahead of the Group's annual press conference. At the same time Hiesinger emphasized that the turnaround is not yet complete. For this the Group needs to generate not only a net profit for the year but also stable free cash flow before divestments. "And that’s why we will not let up in our efforts but will keep the pressure on. That applies to our efficiency program as well as our operating performance," continued Hiesinger.
Against the background of the net income and expectations of further improvements, the Executive Board and Supervisory Board are proposing to the Annual General Meeting the payment of a dividend of €0.11 per share (last dividend €0.45 in fiscal year 2010/2011). "We are aware that this proposal is no more than a signal to our shareholders," said Hiesinger: "We link the positioning of ThyssenKrupp as a diversified industrial group with the aim of generating much stronger and more stable earnings, cash and value."
The CEO underlined the importance of the Group's setup as an integrated network of businesses, regions and corporate headquarters. "The sum of the Group's parts generates more value than the individual businesses could ever do alone. As an integrated group organization we will continue to grow profitably if we combine our forces internally," said Hiesinger.
Performance in the fiscal year
Adjusted EBIT from continuing operations climbed from €586 million to €1.3 billion in the fiscal year and therefore more than doubled (+127 percent). The capital goods businesses – Components Technology, Elevator Technology and Industrial Solutions – increased their adjusted EBIT by 13 percent year-on-year from €1.555 billion to €1.758 billion. The materials businesses – Materials Services, Steel Europe and Steel Americas – generated €369 million in total, compared with a loss of €116 million in the 2012/2013 fiscal year. This is the first clearly positive contribution in two years – even including Steel Americas, VDM and AST, which were negative this year.
Order intake up by 7 percent
Order intake from continuing operations reached €41.4 billion, up 7 percent year-on-year in a continuing challenging economic climate (prior year €38.6 billion). On a comparable basis, i.e. excluding currency and portfolio effects, order intake likewise increased by 7 percent. At €18.7 billion order intake in the capital goods businesses improved significantly year-on-year. On a comparable basis new orders were 10 percent higher. In the materials activities, Materials Services and Steel Americas recorded order growth. Steel Europe was unable to increase its order intake mainly due to low steel prices.
Significant growth in sales
Sales from continuing operations at €41.3 billion (prior year €38.6 billion) were higher year-on-year in all business areas except Steel Europe, where sales fell due to disposals. On a comparable basis sales increased by 7 percent, profiting in particular from the strong growth and high orders in hand of the capital goods operations. Elevator Technology and Industrial Solutions achieved new record sales levels.
Stabilization of the balance sheet
The Group's net financial debt was reduced significantly by more than €1.5 billion from €5.0 billion at September 30, 2013 to €3.5 billion. Equity was increased from €2.5 billion to €3.2 billion. Accordingly the Group's gearing improved by around 92 percentage points to 109 percent.
Efficiency program taking effect
The positive trend in earnings in the reporting year mainly reflected the efficiency measures under the "impact 2015" program. At €1 billion, the original savings target of €850 million was significantly exceeded. Savings of €1.6 billion have therefore already been achieved in the past two fiscal years. On this basis, the overall target for September 2015 is now being raised to around €2.5 billion, around 8 percent or €200 million more than the €2.3 billion target set at the beginning of the fiscal year.
2014/2015 outlook for sales and EBIT up
Despite the growing uncertainty over the economic climate and limited visibility in the materials businesses, the Executive Board is confident about the prospects for ThyssenKrupp in the 2014/2015 fiscal year: On a comparable basis, the Group's sales are expected to grow year-on-year by a single-digit percentage rate.
The targeted measures under the efficiency program will continue to have a major effect and create additional savings of €850 million. The Group's adjusted EBIT is expected to improve to at least €1.5 billion, with all business areas except Steel Americas generating strong EBIT contributions. Steel Americas will at least make a clear improvement towards break-even EBIT. The aim is to achieve a significant improvement in the Group's net income. At the same time clear progress is expected in terms of cash generation, with at least break-even free cash flow before divestments.
ThyssenKrupp is working intensely to generate sustainable, strong free cash flow again to provide the funds needed to expand its growth businesses and be able to pay a solid dividend. This requires EBIT of at least €2 billion. The Executive Board is convinced that the earnings growth required for this minimum target and beyond can be achieved by strictly following the Strategic Way Forward in all business areas. “For this we have set individual performance targets for all business areas which are now being systematically implemented,” stated Hiesinger.
Performance of the business areas in fiscal 2013/2014
With the exception of Steel Americas all the continuing business areas contributed positive adjusted EBIT to earnings from continuing operations. This is true both cumulatively for the fiscal year and for all four quarters. At €1.8 billion, adjusted EBIT of the capital goods businesses was significantly higher than that of the materials businesses, which however even including Steel Americas generated a clear profit for the first time in two years at €0.4 billion.
Components Technology continued its good performance and profited from strong demand in the passenger car sector (above all in China and the USA) as well as increased orders for wind turbine components in China. Both order intake and sales increased by 8 percent to €6.2 billion in each case (prior year €5.7 billion in each case). On a comparable basis the growth was 10 percent in each case. Adjusted EBIT at €269 million was also higher than the prior-year figure of €240 million.
Elevator Technology continued to set new records in fiscal 2013/2014. Order intake and sales increased year-on-year by 5 and 4 percent to new record levels of €6.8 billion and €6.4 billion respectively (prior year €6.5 billion and €6.2 billion respectively); on a comparable basis the growth was 8 percent in each case and was driven mainly by pleasing demand for new installations China, the USA and South Korea. The positive performance was also reflected in an improvement in adjusted EBIT, which increased by 11 percent to €751 million (prior year €675 million).
The markets of Industrial Solutions performed mainly positively in fiscal 2013/2014. Thanks in particular to a major order at Marine Systems, order intake at €5.7 billion was 8 percent higher than the already high prior-year figure (prior year €5.3 billion). On a comparable basis order intake gained 13 percent. The high order backlog of €14.0 billion at September 30, 2014 secures long-term visibility and capacity utilization for the next two to three years. Sales by Industrial Solutions at €6.3 billion were 11 percent higher year-on-year (prior year €5.6 billion); on a comparable basis the growth was 15 percent. Adjusted EBIT increased by 15 percent to €738 million (prior year €640 million), reflecting order billings at Process Technologies and efficiency gains in all business units.
In a difficult price and competitive environment, Materials Services performed well in the reporting year thanks to higher volumes. The inclusion of the VDM and AST groups at March 1, 2014 influenced both sales and order intake to the amount of €1.9 billion and adjusted EBIT to the amount of €(24) million. Both order intake and sales increased by 17 percent to €13.7 billion (prior year €11.7 billion in each case), and on a comparable basis by 5 percent. As expected, adjusted EBIT at €213 million was lower year-on-year. Excluding VDM and AST, adjusted earnings were held at the prior-year level (prior year €236 million) thanks to intense sales initiatives and efficiency measures.
Steel Europe reported a drop in business in the past fiscal year due to disposals and prices. Shipments were largely unchanged year-on-year and increased on a comparable basis by 1 percent. However, a drop in production due to operational issues in the 3rd quarter and lengthy disruptions to production and shipping logistics due to storm Ela had a major impact. Order intake and sales decreased by 6 and 8 percent respectively to €8.9 billion in each case (prior year €9.5 billion and €9.6 billion respectively). Adjusted EBIT improved by €73 million to €216 million (prior year €143 million). The measures implemented under the "Best-in-Class Reloaded" program already had a significant positive impact on earnings. In addition there were reductions in raw material costs.
Order intake at Steel Americas increased by 8 percent to €2.2 billion (prior year €2.1 billion), while sales rose by 10 percent to €2.1 billion (prior year €1.9 billion). The figures include the contributions of ThyssenKrupp Steel USA until it was sold on February 26, 2014. On a comparable basis order intake increased by 20 percent and sales by 18 percent. With slab production of 4.1 million tons the Brazilian steel mill was 16 percent up on the prior year and is operating at over 80 percent capacity. Adjusted EBIT improved from €(495) million in the prior year to €(60) million. The main reasons for this significant improvement were not just higher and more efficient capacity utilization but also cost reductions and positive price effects on the North American flat steel market.