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Capital market-relevant press releases, 2015-08-13, 07:20 AM

ThyssenKrupp on track to meet full-year targets: Positive performance in the first 9 months and in the 3rd quarter of the 2014/2015 fiscal year: Operating targets achieved / Adjusted EBIT 33 percent higher / Clearly positive free cash flow in the 3rd quart

The industrial and technology group ThyssenKrupp is on track to meet its targets for the 2014/2015 fiscal year. The Executive Board expects a clear improvement in adjusted EBIT, net income and free cash flow before divestments. The full-year forecast has been confirmed on the basis of the Group's good operating performance in the first 9 months and in the 3rd quarter of the 2014/2015 fiscal year. Sales, adjusted EBIT and free cash flow before divestments increased again significantly in the reporting period. "The further earnings improvement reflects the progress we have made in implementing measures to increase efficiency. We are establishing a culture of increased performance enhancement in the Group," says ThyssenKrupp CEO Dr. Heinrich Hiesinger.

In a continuing challenging economic climate order intake came to €31.1 billion in the first 9 months, up slightly from the prior year (€31.0 billion), with the Group benefiting from positive exchange rate effects thanks to the global positioning of its capital goods businesses. On a comparable basis, i.e. excluding currency and portfolio effects, new orders declined by 6 percent. Besides lower material and steel prices, the reason for this decline was a major shipbuilding order in the 1st quarter of the prior year. Also, against the background of volatile and falling oil and raw material prices, customers of Industrial Solutions showed a reluctance to place orders. Orders at Components Technology and Elevator Technology increased year-on-year, with the elevator business again reporting record new orders.

Sales in the first 9 months increased year-on-year by 7 percent to a total €32.2 billion (prior year €30.1 billion). Positive exchange rate and portfolio effects and solid organic growth in the components and elevator businesses clearly outweighed the effects of steeply declining material and steel prices. On a comparable basis the increase was 1 percent.

Adjusted EBIT from continuing operations in the first 9 months increased significantly by 33 percent to €1,261 million (prior year €945 million). The 3rd quarter contributed €539 million to this, improving by 33 percent compared with the 2nd quarter. The main driver of this improvement was the successful implementation of efficiency programs. Altogether the ThyssenKrupp Group generated net income of €279 million in the first 9 months (prior year €242 million). This includes the write-down taken in connection with the sale of the VDM group in the 2nd quarter 2014/2015. After deducting minority interest, net income for the period was €297 million (prior year €244 million); earnings per share came to €0.52 (prior year €0.44).

At €(499) million, free cash flow before divestments in the first 9 months improved year-on-year by €446 million (prior year €(945) million), but as expected remained clearly negative. This was due mainly to a temporary increase in net working capital, payment deferrals, and lower order intake at Industrial Solutions. The 3rd quarter showed an improvement quarter-on-quarter and year-on-year and was already clearly positive at €206 million.

Net financial debt of the full Group increased by almost €0.7 billion to €4.4 billion in the reporting period. The increase was due mainly to the negative free cash flow and currency effects. Quarter-on-quarter net financial debt was down by €0.2 billion. Equity at June 30, 2015 came to €3.5 billion, up by over €0.3 billion from the end of fiscal 2013/2014.

The targets for the Group's key performance indicators for the full year 2014/2015 were confirmed: The Executive Board expects a clear increase in adjusted EBIT to €1.6 -1.7 billion. With the exception of Steel Americas, all business areas will generate significant positive contributions. The Executive Board also expects a significant improvement in net income (prior year €195 million). Rigorous efforts are also being made to secure a sustainable improvement in cash generation from operating activities: Despite continued reluctance by customers to award major projects, clear progress is expected compared with the prior year and the aim is to achieve at least break-even free cash flow before divestments (prior year €(357) million). The Group's sales are expected to grow by a mid single-digit percentage rate (prior year €41.2 billion): Organic growth at Elevator Technology and Components Technology and positive exchange rate effects outweigh the pressure on prices in the materials businesses caused by lower material prices at Materials Services and lower raw material prices at the steel operations. On a comparable basis the Group's sales are expected to be level year-on-year.

The sale of the VDM group was completed on July 31, 2015, providing a mid three-digit million euro positive effect on net financial debt and pension obligations. This will be reflected in the financial ratios at September 30, 2015. By reducing the share of volatile materials businesses, the sale supports ThyssenKrupp's positioning as a diversified industrial group.

Performance of the business areas in the first 9 months 2014/2015

The capital goods businesses contributed a total €1,095 million to adjusted EBIT in the first 9 months, while the materials businesses delivered a significant positive contribution of €453 million including Steel Americas and despite the strike in Italy in the 1st quarter.

Components Technology continued its good performance in the 3rd quarter, profiting from the ramp-up of new products and plants, increased demand for axle module assembly and in particular positive currency translation effects. Order intake and sales in the first 9 months were each 11 percent higher year-on-year at €5.1 billion (prior year €4.6 billion each). On a comparable basis the increases were 4 percent and 3 percent respectively. Adjusted EBIT at €241 million was 16 percent higher year-on-year (prior year €207 million). The good performance in industrial components, efficiency gains from the performance programs initiated and currency translation effects 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 first 9 months and in the 3rd quarter. Mainly driven by increased demand for new installations, especially in the USA and South Korea, and by positive exchange rate effects, order intake in the first 9 months increased by 14 percent to €5.8 billion (prior year €5.1 billion). On a comparable basis the increase was 4 percent. Sales were also up, rising by 13 percent to €5.2 billion (prior year €4.6 billion), and on a comparable basis by 3 percent. The positive operating performance was also reflected in an improvement in adjusted EBIT, which increased by 18 percent to €557 million (prior year €472 million). The 3rd quarter, in which adjusted EBIT and margin increased year-on-year for the eleventh time in a row, contributed €211 million.

Industrial Solutions’ order intake of €3.2 billion in the first 9 months was as expected lower than in the same period a year earlier (€4.5 billion), which was boosted by 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 orders. However the projects continue to be pursued and remain part of a full project pipeline. The continuing high level of orders in hand of €12.5 billion at June 30, 2015 secures long-term planning certainty and capacity utilization. Sales at €4.6 billion were 3 percent up year-on-year (prior year €4.5 billion); on a comparable basis the increase was 1 percent. Sales realizations from orders at Resource Technologies and System Engineering contributed to the rise. Adjusted EBIT at €297 million in the first 9 months was lower year-on-year (prior year €320 million).

Order intake and sales in the first 9 months at Materials Services increased by 9 and 12 percent to €10.8 and €11.0 billion respectively (prior year €10.0 and €9.8 billion respectively). On a comparable basis – excluding in particular the units VDM and AST – new orders were slightly lower and sales slightly higher year-on-year. Adjusted EBIT at €140 million was down slightly from the prior-year figure of €148 million. Earnings were impacted by strong competitive and price pressure and in particular the strike at AST in Italy in the 1st quarter. However, numerous efficiency measures and sales initiatives in connection with impact and the progress made in implementing the new business plans at AST and VDM had a clear stabilizing effect. Altogether Materials Services' earnings in the 3rd quarter were significantly higher year-on-year and quarter-on-quarter. The Special Materials business unit with VDM and AST contributed €14 million to adjusted EBIT, of which €34 million in the 3rd quarter.

Steel Europe reported a drop in business in the first 9 months, mainly due to lower prices. The sustained weakness of steel prices, mainly due to much lower raw material prices, continued to impact business, while volumes returned to normal after the turn of the year following the temporary bottlenecks in the 1st quarter. Order intake and sales in the first 9 months at €6.5 billion each were 5 and 2 percent respectively lower than a year earlier (prior year order intake €6.9 billion, sales €6.7 billion); on a comparable basis the decreases were 6 and 3 percent respectively. Measures implemented under the "Best-in-Class Reloaded" program continued to have a significant positive impact on earnings. This includes the substantially reduced losses at Electrical Steel following restructuring measures. Adjusted EBIT in the first 9 months at €358 million almost doubled compared with the prior-year period (€185 million). The 3rd quarter contributed €166 million, the highest adjusted EBIT for 15 quarters.

At Steel Americas order intake at €1.4 billion and sales at €1.4 billion were 11 and 8 percent respectively lower than a year earlier (prior year order intake €1.6 billion, sales €1.5 billion). In addition to the disposal of ThyssenKrupp Steel USA in the prior year this reflects mainly bottlenecks in production. Pressure on prices was also high from the 2nd quarter. The steel market in Brazil was characterized overall by a further decline in consumption. On a comparable basis new orders were 3 percent and sales 7 percent lower year-on-year. Adjusted EBIT in the first 9 months was negative at €(45) million but improved in the first 6 months. It was only in the 3rd quarter, against a background of sharply increased price and margin pressure particularly in the North American and Brazilian markets and bottlenecks in production due to the water shortage in Brazil, that it fell below the prior-year figure, which included an insurance recovery.

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