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Company News, Capital market-relevant press releases, 2015-11-19, 07:02 AM

thyssenkrupp closes 2014/2015 fiscal year successfully

・ Adjusted EBIT up by 26 percent to around €1.7 billion
・ Net income of €268 million
・ Free cash flow before divestments positive again for first time since 2005/2006
thyssenkrupp further enhanced its performance in the 2014/2015 fiscal year and again achieved significant improvements in its main financial indicators. Adjusted EBIT from continuing operations climbed by 26 percent to around €1.7 billion and was thus at the top end of the company’s previously raised guidance. This clear earnings improvement was primarily due to extensive efficiency measures. The original target of €850 million for effects from these measures was significantly exceeded at €1.1 billion.

Net income improved by 37 percent to €268 million (prior year €195 million); the amount attributable to the shareholders of thyssenkrupp AG came to €309 million (prior year €212 million). The most important target for the past fiscal year was to achieve positive free cash flow (FCF) before divestments. For the first time since fiscal 2005/2006 thyssenkrupp achieved positive FCF before divestments of €65 million (prior year €(357) million). “That marks a further milestone in our transformation,” said Dr. Heinrich Hiesinger, CEO of thyssenkrupp, at the Annual Press Conference.

Hiesinger continued: “We have delivered on our promise. We have stabilized thyssenkrupp and further advanced the integration of the Group.” However, the CEO of the Essen-based industrial group also emphasized that the company must continue to work hard to improve its earnings and free cash flow. “Against the background of an increasingly uncertain environment we must concentrate on the things that are in our own hands,” said Hiesinger. The CEO announced further efficiency gains of €850 million for the current fiscal year.

Against the background of the net profit and in expectation of further improvements, the Executive Board and Supervisory Board will be proposing the payment of a dividend of €0.15 per share to the Annual General Meeting (prior year €0.11). “It is important for us that our shareholders participate appropriately in the continuous improvements in our earnings and balance sheet ratios. This cannot be a satisfactory dividend over the medium term. But it is a step in the right direction which also takes into account our balance sheet needs,” said Hiesinger.

Performance in the 2014/2015 fiscal year

Order intake level with prior year
In a continuing challenging economic climate order intake came to €41.3 billion, level with the prior year. On a comparable basis, i.e. excluding currency and portfolio effects, new orders declined by 5 percent. This decrease was due to lower material and steel prices and a major naval shipbuilding order booked in the 1st quarter of the prior year. In addition, plant engineering customers were reluctant to place orders in view of volatile and falling oil and raw material prices. The components businesses and the elevator division reported higher order intake year-on-year, with Elevator Technology once again achieving a new record.

Sales growth
Sales at €42.8 billion were level or higher year-on-year in almost all business areas (prior year €41.2 billion). The only exceptions were the steel businesses. The Group profited from solid market positions and the global reach of the capital goods businesses with corresponding positive exchange rate effects. On a comparable basis sales were down slightly from the prior year. This was mainly due to lower material prices at Materials Services and lower raw material prices at the steel businesses. The organic growth in the components and elevator businesses had a clear stabilizing effect, with Elevator Technology once again achieving record sales.

Balance sheet ratios improved
At September 30, 2015 the Group’s net financial debt stood at €3.4 billion, down from €3.7 billion a year earlier. Total equity rose slightly from €3.2 billion to €3.3 billion. As a result, gearing improved by around 11.7 percentage points to 103.2 percent.

Outlook 2015/2016
For the current fiscal year the Executive Board expects further progress on the Strategic Way Forward. Growing economic uncertainties and high import pressure on materials markets, above all from Asia, are a cause for concern. thyssenkrupp therefore feels the need to take a cautious view of the 2015/2016 fiscal year. The Executive Board nonetheless expects a clear improvement in net income and value added, free cash flow before M&A level with the prior year and adjusted EBIT of between €1.6 billion and €1.9 billion. Key to achieving these targets for fiscal 2015/2016, besides the performance of the material markets, will once again be efficiency measures, which are expected to achieve EBIT effects of €850 million.

Performance of the business areas in 2014/2015
With the exception of Steel Americas, all continuing business areas contributed positive adjusted EBIT to the earnings from continuing operations. All capital goods businesses improved their adjusted EBIT and EBIT margin year-on-year. Overall they generated earnings of €1.5 billion (prior year €1.4 billion). The materials businesses achieved earnings of €560 million, compared with €365 million in fiscal 2013/2014.

Components Technology performed well overall. Order intake and sales were up by 11 percent and 9 percent respectively to €6.8 billion in each case (prior year €6.2 billion in each case). In addition to production ramp-ups for new products, the ramp-up of new plants and an increase in demand for axle module assembly, the business area profited in particular from positive currency translation effects. On a comparable basis, order intake and sales were 4 percent and 2 percent higher year-on-year. Adjusted EBIT at €313 million was 17 percent higher than a year earlier (€268 million). In addition to the good performance, this was also attributable to extensive efficiency measures and cost reductions from completed restructuring measures.

Elevator Technology continued its success in fiscal 2014/2015. Order intake and sales were up 13 percent and 12 percent respectively to new record values of €7.7 billion and €7.2 billion (prior year €6.8 billion and €6.4 billion). On a comparable basis orders and sales each increased by 3 percent, benefiting in particular from the pleasing performance of the new installations business in the USA, South Korea and the Middle East. The positive performance was also reflected in an 18 percent improvement in adjusted EBIT to €794 million (prior year €674 million).

As expected, order intake at Industrial Solutions at €4.9 billion was down from the prior year (€5.7 billion), which profited strongly from major orders at Marine Systems and Resource Technologies. Against a background of volatile and declining oil and raw material prices, customers were reluctant to place new orders.

The continuing high order backlog of €12.3 billion at September 30, 2015 provides long-term planning certainty for the next two to three years. Despite the disposal of the Swedish operations of Marine Systems towards the end of the prior year, sales remained stable overall at €6.3 billion (prior year €6.3 billion), partly for currency-related reasons. On a comparable basis sales were 2 percent lower. Adjusted EBIT at €424 million was slightly higher year-on-year (prior year €420 million), partly thanks to extensive efficiency measures.

At Materials Services order intake came to €13.9 billion and sales to €14.3 billion, year-on-year gains of 2 percent and 4 percent respectively (prior year €13.7 billion in each case). On a comparable basis – in particular excluding the VDM and AST units – orders were 5 percent and sales 3 percent lower year-on-year. Adjusted EBIT at €206 million fell just short of the prior-year level of €212 million – despite the high competitive and price pressure and the impact of the strike at AST in Italy in the 1st quarter. Numerous efficiency measures and sales initiatives in connection with "impact" and progress in implementing the new business plans at AST and VDM had a clear stabilizing effect. The Special Materials business unit with the VDM and AST units contributed €30 million to adjusted earnings.

Steel Europe recorded a decline in business in the past fiscal year, mainly due to lower raw material prices. Order intake and sales were down 6 percent and 1 percent respectively year-on-year to €8.4 billion and €8.7 billion (prior year €8.9 billion and €8.8 billion). Adjusted EBIT improved significantly by €271 million to €492 million (prior year €221 million). The systematic implementation of measures under the "Best-in-Class Reloaded" program had positive effects on earnings, while lower raw material prices also contributed, even though these cost advantages were partly eroded by the weaker euro exchange rate.

At Steel Americas, order intake at €1.7 billion and sales at €1.8 billion were 22 percent and 14 percent respectively lower than a year earlier (prior year order intake €2.2 billion, sales €2.1 billion). In addition to the sale of thyssenkrupp Steel USA in the prior year, this mainly reflects bottlenecks in production due among other things to the water shortage in Brazil. In addition price pressure increased from the 2nd quarter. The steel market in Brazil was characterized overall by a further decline in consumption. On a comparable basis order intake and sales decreased by 21 percent and 18 percent respectively. Adjusted EBIT at €(138) million was lower than a year earlier (€(68) million). This was mainly due to negative exchange-rate effects on input tax credits. In operating terms, however, Steel Americas achieved a further improvement. This is also reflected in the business area’s cash flow: For the first time Steel Americas succeeded in achieving break-even business cash flow.

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