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Capital market-relevant press releases, 2015-05-12, 07:05 AM

Positive performance in the first six months of fiscal 2014/2015: Operating targets achieved / Adjusted EBIT 31 percent higher / Net income €88 million / Full-year forecast raised

The industrial and technology group ThyssenKrupp achieved its operating targets in the 2nd quarter and in the 1st half of fiscal year 2014/2015 and has specified and raised its forecast for the full year. Sales, adjusted EBIT and free cash flow in the reporting period increased in part significantly. “Our measures to improve efficiency are working and we are moving forward with the transformation of the Group. The further earnings improvement reflects our stronger performance focus,” says ThyssenKrupp CEO Dr. Heinrich Hiesinger.

In a continuing challenging economic climate order intake came to €20.5 billion in the 1st half, down only slightly, by 2%, from the prior year (prior year €20.8 billion). Besides sharply falling steel prices, the main reason for this decline was a major order at Marine Systems recorded in the 1st quarter of the prior year. All the other capital goods businesses showed steady to sharply rising order intake compared with the prior year. The elevator business again reported record new orders.

1st-half sales increased year-on-year by 9 percent to a total €21 billion (prior year €19.4 billion), thanks to strong organic growth in the capital goods businesses as well as positive exchange rate and portfolio effects. On a comparable basis the increase was 2 percent.

Adjusted EBIT from continuing operations in the 1st half increased significantly by 31 percent to €722 million (prior year €551 million). The 2nd quarter contributed €405 million to this, improving by 28 percent compared with the 1st quarter. The main driver of this improvement was the successful implementation of efficiency programs. Altogether the ThyssenKrupp Group generated net income of €88 million in the 1st half (prior year €200 million). This already includes the write-down taken in connection with the sale of the VDM group, while the prior year included a book gain on the sale of the steel mill in the USA. After deducting minority interest, net income for the period was €98 million (prior year €204 million); earnings per share came to €0.17 (prior year €0.37).

At €(706) million, free cash flow before divestments in the 1st half improved year-on-year by €154 million (prior year €(860) million) but as expected remained clearly negative. This was due partly to a temporary increase in net working capital in the 1st quarter, caused among other things by the strike at AST in Italy and a major order at Materials Services. The 2nd quarter showed an improvement quarter-on-quarter and year-on-year of around €600 million and was almost break-even at €(55) million.

Net financial debt of the full Group increased by almost €1 billion to €4.6 billion in the 1st half. The increase was due mainly to the negative free cash flow as well as strong currency effects.

Against the background of the progress made in operating performance and the generally stabilizing economic conditions, management has specified and raised its forecast for the full year 2014/2015: Adjusted EBIT is now expected to increase significantly to €1.6 -1.7 billion. With the exception of Steel Americas, all business areas will generate significant positive contributions. At Steel Americas, ThyssenKrupp expects at least a significant improvement towards break-even EBIT based on operating progress. On a comparable basis, the Group’s sales are expected to grow by a single-digit percentage rate. Management likewise expects a significant improvement in net income (prior year €195 million). Significant progress is also expected in cash generation from operating activities: Free cash flow before divestments should be at least break-even.

Performance of the business areas in the 1st half 2014/2015

The capital goods businesses contributed a total €697 million to adjusted EBIT in the 1st half, while the materials businesses delivered a significant positive contribution of €223 million including Steel Americas and despite the strike in Italy in the 1st quarter.

Components Technology continued its good performance in the 2nd quarter, profiting from positive currency translation effects, the ramp-up of new products and plants, and increased demand for axle module assembly. 1st-half order intake and sales each increased year-on-year by 12 percent to €3.4 billion and €3.3 billion respectively (prior year €3.0 billion each). On a comparable basis the increases were 6 and 5 percent respectively. Adjusted EBIT at €150 million was €12 million higher year-on-year (prior year €138 million). The good operating performance and efficiency gains had a positive impact on earnings.

Elevator Technology again achieved new record levels of order intake and orders in hand. Order intake and sales grew year-on-year at double-digit rates both in the 1st half and in the 2nd quarter. Mainly driven by positive exchange rate effects and increased demand for new installations, especially in the USA, order intake increased in the 1st half by 11 percent to €3.8 billion (prior year €3.4 billion). On a comparable basis the increase was 3 percent. Sales were also up, rising by 12 percent to €3.4 billion (prior year €3.0 billion), and on a comparable basis by 4 percent. The positive operating performance was also reflected in an improvement in adjusted EBIT, which increased by 16 percent to €346 million (prior year €299 million). The 2nd quarter, in which adjusted EBIT and margin increased year-on-year for the tenth time in a row, contributed €168 million.

Industrial Solutions’ order intake of €1.8 billion in the 1st half was as expected lower than in the same period a year earlier (€3.5 billion), which was boosted by major orders at Marine Systems and Resource Technologies. The continuing high level of orders in hand of €12.8 billion at March 31, 2015 provides long-term planning certainty and secures capacity utilization for the next two to three years. Sales at €3.0 billion were 4 percent up year-on-year (prior year €2.9 billion); on a comparable basis the increase was likewise 4 percent. Sales realizations from orders at Resource Technologies and System Engineering contributed to the rise. Adjusted EBIT at €201 million in the 1st half was slightly lower year-on-year (prior year €208 million).

Order intake and sales in the 1st half at Materials Services increased by 16 and 19 percent respectively to €7.3 and €7.2 billion respectively (prior year €6.3 and €6.1 billion respectively). On a comparable basis – excluding in particular the units VDM and AST – both order intake and sales were 3 percent higher year-on-year. Adjusted EBIT at €51 million was down from the prior-year figure of €90 million. Earnings were impacted by intense competitive pressure, largely weak prices and in particular the strike at AST in Italy in the 1st quarter. The Special Materials business unit with the units VDM and AST weighed down earnings with an aggregate loss of €20 million, although both units made a positive contribution to adjusted EBIT in the 2nd quarter.

Steel Europe reported a drop in business in the 1st half, mainly due to lower prices. Persistent price pressure continued to weigh on business, whereas volumes returned to normal after the turn of the year following the temporary bottlenecks in the 1st quarter. Order intake in the 2nd quarter was significantly higher than in the 1st quarter. 1st-half order intake at €4.5 billion and sales at €4.2 billion were 5 and 4 percent respectively lower than a year earlier (prior year order intake €4.7 billion, sales €4.4 billion); on a comparable basis the decreases were 5 percent in each case. Measures implemented under the “Best-in-Class Reloaded” program had a significant positive impact on earnings. Adjusted EBIT in the 1st half at €192 million more than doubled compared with the prior-year period (€82 million). The 2nd quarter contributed €113 million, the highest adjusted EBIT for 14 quarters.

At Steel Americas 1st-half order intake at €0.9 billion and sales at €1.0 billion were 24 and 11 percent respectively lower than a year earlier (prior year order intake €1.2 billion, sales €1.1 billion). In addition to the disposal of ThyssenKrupp Steel USA in the prior year this reflects bottlenecks in production. Pressure on prices was also high, particularly in the 2nd quarter. On a comparable basis order intake was 5 percent and sales 9 percent lower year-on-year. Adjusted EBIT improved further year-on-year in both quarters, reaching €(20) million in the 1st half (prior year €(46) million). The main reasons for this improvement were positive price effects on the North American flat steel market, lower raw material prices, and efficiency measures. Adjusted EBIT fell slightly quarter-on-quarter mainly due to negative exchange rate effects.

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