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Capital market-relevant press releases, 2013-08-13, 05:45 PM

ThyssenKrupp meets operating targets in first 9 months 2012/2013

In the first 9 months of the 2012/2013 fiscal year (October 1, 2012 – June 30, 2013) ThyssenKrupp achieved order intake from continuing operations of €28.3 billion, down 8% year-on-year. There were once more significant gains at Elevator Technology and Industrial Solutions. At Components Technology new orders were down year-on-year in the first 9 months due to lower demand and disposals, but in the 3rd quarter were higher again quarter-on-quarter. Low volumes and prices weighed on business at Steel Europe and Materials Services. The order backlog from continuing operations at the end of the period was 11% higher year-on-year at around €24 billion and secures a high level of capacity utilization and planning certainty in project business. Sales from continuing operations in the first 9 months 2012/2013 decreased year-on-year by 9% to €27.4 billion.

Adjusted EBIT from continuing operations came to €802 million in the first 9 months of the current fiscal year, compared with €1,117 million in the prior-year period. The 3rd quarter contributed €332 million to this, significantly higher than the €241 million of the previous quarter and fully in line with the full-year forecast. All business areas made strong positive contributions to adjusted EBIT both over the first 9 months and in the 3rd quarter. With the exception of Industrial Solutions all business areas improved their earnings quarter-on-quarter. The share of the capital goods operations in the first 9 months was €1,149 million, significantly higher than the €261 million contributed by the materials operations. Earnings net of taxes amounted to €(262) million, of which €(298) million attributable to the shareholders of ThyssenKrupp AG.

Free cash flow, i.e. the sum of operating cash flows and cash flows from investing activities, in the continuing operations improved by around €1.4 billion to €1,126 million in the first 9 months. Even without the cash inflows from divestments, free cash flow increased by around €1.1 billion to a positive value of €97 million. The 3rd quarter contributed €375 million to this, a further quarter-on-quarter improvement. Free cash flow for the full Group improved by around €2.1 billion to €510 million. As a result, ThyssenKrupp also made progress with reducing its net financial debt. While remaining virtually unchanged quarter-on-quarter, net financial debt decreased year-on-year by around €0.5 billion to €5,326 million (June 30, 2012: €5,800 million) and was therefore also lower than at September 30, 2012 (€5,800 million).

Dr. Heinrich Hiesinger, Executive Board Chairman of ThyssenKrupp AG: "Operating income and free cash flow show a clearly positive trend. The strong gains in order intake in our capital goods businesses – with new records at Elevator Technology – prove that we are succeeding with the implementation of the Strategic Way Forward. The measures under the corporate program "impact 2015" and the processes we have initiated to change our corporate culture will further improve our performance."

ThyssenKrupp is engaged in very advanced negotiations with a leading bidder on the sale of the two Steel Americas plants. The negotiations include shareholder partner Vale, the Brazilian development bank BNDES and Brazilian government agencies. The aim remains to sign a deal promptly. In addition, the Group is also in talks with other interested parties.

Dr. Heinrich Hiesinger, Executive Board Chairman of ThyssenKrupp AG: "The sale process for Steel Americas is taking longer than originally expected. That's understandable because the bidders expect a full ramp-up of blast furnace 2 in Brazil. This has been hampered by process instabilities from May this year. In addition, the negotiations are highly complex and are further complicated by the contract structures chosen years ago. We too would have liked to reach a deal more quickly; but the interests of the company and diligence are our top priorities. For this reason we will not make our decisions dependent on reporting deadlines."

In connection with the disposal process for Steel Americas, an impairment loss of €683 million on property, plant and equipment was recognized at March 31, 2013. This book loss was the main reason for the net loss of €(1,205) million for the full Group in the first 9 months (net loss attributable to shareholders of ThyssenKrupp AG: €(983) million), for the decline in the equity ratio to 8.0% and for the temporary increase in the gearing ratio (net debt to equity) to 185.7%. Taking into account the current status of negotiations there was no need for any further adjustment at June 30, 2013. With cash, cash equivalents and committed undrawn credit lines totaling €7.2 billion at June 30, 2013 and with its balanced maturity structure, ThyssenKrupp is solidly financed. The cash inflow from the sale of Steel Americas will significantly reduce our temporarily increased gearing again.

Focus on compliance
Against the background of repeated compliance violations and the suspicion of price fixing by ThyssenKrupp Steel Europe raised by the Federal Cartel Office at the end of February 2013, the Executive Board of ThyssenKrupp AG decided to intensify the Group's compliance efforts still further, also with support from external law firms. As well as establishing an ombudsman, the Group carried out an amnesty program from April 15 to June 15, 2013. ThyssenKrupp promised employees who disclosed compliance matters voluntarily and fully that it would not assert/enforce damage claims against them and that it would not terminate their employment. The amnesty program led to more than twenty leads. However, no serious or structural compliance infringements were identified. The relevant information received under the amnesty program related mainly to individual misconduct in dealings with customers and suppliers in Germany and abroad. This conduct was stopped following internal measures. The amnesty program produced no leads regarding the ongoing investigations by the Federal Cartel Office into possible price fixing in the delivery of certain steel products to the German automotive industry and its suppliers. Acting on an anonymous tip, the Federal Cartel Office searched the business premises of ThyssenKrupp Steel Europe AG among others at the end of February this year. The official investigations by the Federal Cartel Office and the internal investigation initiated on this are ongoing. Significant risks for the Group’s asset, financial and earnings situation cannot be ruled out at present.

ThyssenKrupp has agreed with Deutsche Schutzvereinigung für Wertpapierbesitz e.V. and the shareholder Christian Strenger, whose motions for a special audit were rejected by the Annual General Meeting in January 2013, to carry out a voluntary special audit. In particular the auditors will examine the structure of the internal control system for its appropriateness in preventing compliance infringements in the future, and the process of investment control for future large investment projects. ThyssenKrupp will make the audit report available to all shareholders at the Annual General Meeting in January 2014.

Performance of the business areas
The performance of the five continuing business areas in the first 9 months 2012/2013 was as follows:
・ At Components Technology the disposals of the previous year under the strategic development program resulted in a structurally lower volume of business in the first 9 months 2012/2013. Order intake and sales each decreased year-on-year by 23% to €4.2 billion, though a significant improvement was seen in the 3rd quarter compared with the weak prior quarters. Excluding the disposals, order intake and sales fell by around 5% in the first 9 months. Adjusted EBIT in the reporting period was down year-on-year from €365 million to €186 million. Key factors were the absence of the operating profits of Waupaca, the slowdown in the western European market for car and heavy truck components, and increasing competitive and price pressure in the wind energy sector. In addition there were startup costs for new plants in China and India. These were partly offset by positive earnings effects from the implementation of the restructuring program at ThyssenKrupp Federn & Stabilisatoren. EBIT amounted to €152 million, which includes asset impairment charges of €37 million in the wind turbine component business on account of the structural changes on the US energy market. At the Berco group the negotiations on restructuring are making good progress.

・ Elevator Technology continued its positive performance in the first 9 months 2012/2013 with order intake of €4.9 billion (up 8%) and sales of €4.5 billion (up 9%) and achieved new record highs in the 3rd quarter. Adjusted EBIT came to €487 million (prior year: €421 million). This improvement was mainly the result of the positive market situation in Asia and positive effects from the restructuring measures initiated in the last fiscal year.
・ Industrial Solutions held up well particularly in chemical plant construction at Process Technologies. Order intake was 8% higher year-on-year at €4.4 billion despite weaker order activity in the 3rd quarter on account of project deferrals. The high order backlog of €15.8 billion at June 30, 2013 continues to secure a good workload. Sales were 5% higher than a year earlier at €4.0 billion. At €476 million adjusted EBIT was down from the high prior-year figure (€520 million), which profited above all from the reversal of project-related risk provisions in shipbuilding.
・ With very weak demand and falling materials prices, Materials Services gave a satisfactory performance and held up very well against competitors. At €8.8 billion each, order intake was down by 12%, while sales fell 11%. However, business with the aerospace industry remained positive. Despite all the performance measures, the general market weakness still impacted earnings. Adjusted EBIT came to €160 million (prior year: €222 million). After special items of €230 million, mainly the €207 million provision recognized in the 2nd quarter for the rail cartel case, and restructurings, EBIT in the first 9 months came to €(70) million. The sale process initiated in the previous quarter for the "Railway/Construction" operations is being prepared and is proceeding on schedule.

・ At Steel Europe orders were 11% and sales 12% lower year-on-year (each at €7.3 billion) in the first 9 months 2012/2013 mainly due to lower prices. Adjusted EBIT decreased to €101 million (prior year: €184 million), reflecting the continuing difficult market environment with lower selling prices year-on-year; however in the 3rd quarter it was higher both year-on-year and quarter-on-quarter. Against the background of the inadequate earnings situation, work continues intensively on implementing the optimization program "Best in Class – reloaded". Overall it is planned to reduce the workforce in a socially acceptable way by 2,000 employees from its current level of 27,600. Also the grain-oriented electrical steel business with plants in Gelsenkirchen, Germany, and Isbergues, France, as well as the electrical steel operation in Nashik, India, with altogether around 1,800 employees are to be sold under a best owner solution. EBIT amounted to €33 million, which includes negative special items of €68 million, mainly provisions in connection with the optimization program. The sale of ThyssenKrupp Tailored Blanks to the Chinese steel producer Wuhan Iron and Steel Corporation (WISCO) was successfully completed. Following the approval of the competent government authorities the closing took place on July 31, 2013.
Outlook fiscal 2012/2013
For 2012/13 ThyssenKrupp expects the Group's sales to come in higher in the 4th quarter than the 3rd quarter, but full-year sales will be down year-on-year (sales 2011/2012: €40.1 billion). Sales lost due to portfolio measures, in particular at Steel Europe and Components Technology, will not be fully offset by organic growth in the capital goods businesses.

Adjusted EBIT from the Group's continuing operations should come to around €1 billion in 2012/2013.

The full interim report is available in German and English for downloading and as an interactive online version at

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