Thyssenkrupp cautious on profit as cost cuts remain key

German firm blames lower recovery in prices for raw materials, Industrial Solutions problems

Photograph: iStock

German steel-to-elevators group Thyssenkrupp forecast a smaller-than-expected rise in operating profit for its current fiscal year and said cost cuts would again be key to meeting its targets amid volatile raw material prices.

Thyssenkrupp is known for its conservative forecasts but its prediction of adjusted earnings before interest and tax (EBIT) of around €1.7 billion was well below the average estimate of €1.89 billion in a Reuters poll.

It broadly met expectations and easily met its own target for adjusted EBIT for the year to end-September, due to accelerated cost savings, despite sales declines at all its businesses except automotive components and elevators.

Adjusted EBIT fell 12 per cent to €1.47 billion, compared with the company’s target of at least €1.4 billion and Reuters analyst consensus of €1.48 billion.

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Thyssenkrupp blamed a slower-than-expected recovery in prices for raw materials as well as problems at its submarines-to-plant-engineering Industrial Solutions unit, whose chief executive was forced to resign over a bribery scandal this month amid a restructuring he had been leading.

“The Industrial Solutions business area also registered a weakening of the markets for chemical plants and mining equipment as well as an absence of major naval shipbuilding projects,” Thyssenkrupp said in a statement.

The group said it stuck to its long-term target of at least €2 billion in adjusted EBIT, which it has said will be necessary to pay a meaningful dividend. For 2015/16, it proposed an unchanged dividend of 0.15 euros, below expectations.

Free cash flow before mergers and acquisitions came in at €198 million for the year, compared with a negative €115 million a year ago and its own forecast for up to breakeven.

Reuters