thyssenkrupp recorded a weaker business performance in the 3rd quarter of the current fiscal year 2023/2024 compared to the previous year in a persistently challenging market environment. The slower momentum in key customer industries such as the automotive industry, mechanical and plant engineering and the construction industry weighed on thyssenkrupp. In addition, energy costs remained high.
From April to June, the Group recorded incoming orders of 8.4 billion euro (previous year: 9.4 billion euro). Sales amounted to 9.0 billion euro (previous year: 9.6 billion euro). Adjusted EBIT amounted to 149 million euro (previous year: 243 million euro). Automotive Technology, Materials Services and Marine Systems were able to improve their earnings contribution compared to the previous year. In the steel business, which was characterized by a weak economy and structural challenges, adjusted EBIT almost halved due to demand and prices. In the Decarbon Technologies segment, thyssenkrupp recorded one-off effects in plant construction at Polysius (cement business), which were mainly due to additional costs of around 80 million euro for individual legacy projects. Positive effects from the APEX efficiency enhancement program supported earnings in all segments. Against this backdrop, thyssenkrupp confirms its forecast for the current financial year 2023/2024, which was already adjusted in July 2024.
“Strongly opposing market developments and one-off effects overshadowed the progress made in the transformation of thyssenkrupp in the third quarter. In a challenging environment, our businesses performed well and recorded successes with our performance improvement program. With the closing of the 20% stake in EP Corporate Group, we have also taken a major step forward on the path to an independent positioning of the steel business,” said CFO Jens Schulte, who took over responsibility for the Group-wide APEX efficiency program on the Executive Board of thyssenkrupp AG on July 1, 2024. “In view of the further weakening markets, we are continuing to develop APEX with all our strength. In order to best align ourselves to the changing markets, our businesses are also systematically tackling restructuring measures where necessary: This applies not only to the steel division, but also to individual business areas in the other segments. The aim of these measures is to make the Group and its segments more profitable and resilient in the long term.”
Business development in the segments in the 3rd quarter of 2023/2024
At Automotive Technology, both incoming orders of 1.9 billion euro (previous year: 2.1 billion euro) and sales of 1.9 billion euro (previous year: 2.0 billion euro) were down on the previous year. The segment’s adjusted EBIT improved to 78 million euro (previous year: 44 million euro). With declining sales figures in the construction machinery business, plant engineering and parts of the automotive series business, relief in material and transportation costs as well as positive one-off effects (mainly from the partial reversal of a provision for quality costs) had a positive impact on earnings. The measures bundled under APEX and the negotiation of new price conditions also had a positive effect.
Automotive Technology is also pressing ahead with its strategic development: thyssenkrupp is examining a realignment for Automotive Body Solutions, which – in addition to measures introduced to increase efficiency and optimize processes – envisages a reduction of up to 400 jobs in Germany. At the same time, capacities at other locations outside Germany are to be increased. Implementation is planned in stages until the end of the 2024/2025 financial year. thyssenkrupp is still in talks with potential buyers for the Springs & Stabilizers business unit. By contrast, the sales process for Automation Engineering has been terminated for the time being. For the Powertrain business unit at the Bremen site, thyssenkrupp is now examining various options, including in-depth structural measures. A decision is to be made by the end of the current financial year.
Decarbon Technologies recorded incoming orders totaling 0.8 billion euro in the third quarter of the 2023/2024 financial year (previous year: 1.1 billion euro). Increases were achieved by thyssenkrupp nucera, while Rothe Erde almost reached the previous year’s level. Project postponements on the part of customers meant that order intake in the remaining plant engineering business (Polysius and Uhde) was below the strong comparative basis of the previous year. The segment achieved a 10% increase in sales to 945 million euro due to several major projects in plant construction and at thyssenkrupp nucera. Rothe Erde was slightly below the previous year’s level due to a slowdown in demand in the Chinese wind market. Adjusted EBIT for the segment amounted to -59 million euro (previous year: -16 million euro). The main reason for the negative development was one-off effects in plant construction at Polysius (cement division), which were mainly due to additional costs of around 80 million euro for individual legacy projects. The segment was able to bolster its earnings through efficiency enhancement measures and purchasing optimization as part of APEX.
In the Materials Services segment, incoming orders amounted to 3.1 billion euro (previous year: 3.3 billion euro) and sales to 3.2 billion euro (previous year: 3.3 billion euro). This was mainly due to lower prices – particularly in the rolled steel area. The segment was able to increase adjusted EBIT to 58 million euro (previous year: 50 million euro). The international supply chain and drop shipment business as well as the North American distribution units and the service centers made a particular contribution to this development. The efficiency measures bundled under APEX, such as the renegotiation of contracts, the reduction of freight costs and the further consolidation of locations, had a positive impact on earnings.
Like the entire steel industry, Steel Europe is operating in a very challenging environment characterized by the weak economy and structural changes such as high energy costs and increasing import pressure: order intake amounted to 2.7 billion euro (previous year: 3.2 billion euro) and sales to 2.8 billion euro (previous year: 3.3 billion euro). Both a sharp fall in prices and a decline in volumes – particularly in the automotive sector – contributed to this. The segment’s adjusted EBIT amounted to 100 million euro, almost halving compared to the previous year (190 million euro). The result was supported by the sustainable restructuring and performance measures of Strategy 20-30 as well as extensive APEX measures – for example by increasing efficiency in production, energy and logistics.
Last week, the segment’s Executive Board presented the plans for the structural realignment of the steel business to the Supervisory Board of Steel Europe as part of the process of making Steel Europe independent. Essentially, the program provides for a market-related reduction in crude steel capacities in Duisburg. To this end, thyssenkrupp Steel is primarily planning to exit the Krupp Mannesmann steelworks. In order to validate the financing requirements for the repositioning of Steel Europe, thyssenkrupp and Steel Europe will jointly commission a going concern valuation.
Jens Schulte, CFO of thyssenkrupp AG: “Our common goal is and remains an independent positioning of the steel business, which is economically viable – from its own resources. We also want to make Steel Europe fit for the future with a view to the green transformation.”
In July, thyssenkrupp also successfully completed the acquisition of a 20% stake in the steel business from energy company EP Corporate Group. In addition, thyssenkrupp and EPCG are in talks about the second step: the acquisition of a further 30 percent of the shares in the steel business with the aim of forming an equal 50/50 joint venture.
Due to orders in the service business, Marine Systems reported order intake of 141 million euro, up on the previous year (117 million euro). Due to the typical fluctuations in the project business, sales of 438 million euro were below the previous year’s level (480 million euro). Improved margin effects in the order backlog and reduced distribution costs had a positive impact on earnings: Adjusted EBIT rose from 12 million euro to 30 million euro in the same period of the previous year. The APEX measures, including in the areas of materials, personnel and administration, made a positive contribution to earnings.
3rd quarter 2023/2024: Key figures thyssenkrupp Group
With positive operating earnings, restructuring expenses totaling 60 million euro at Materials Services (mainly thyssenkrupp Schulte) and Decarbon Technologies (mainly Polysius) in particular resulted in thyssenkrupp reporting a net loss for the period of 33 million euro in the third quarter of 2023/2024 (previous year: net income of 107 million euro). The deconsolidation of the 55% stake in thyssenkrupp Industries India (Decarbon Technologies segment) also had a negative impact. The investment was sold in May 2024 as part of the strategic portfolio streamlining in the mining business. After deducting minority interests, the net result was -54 million euro (previous year: 83 million euro); earnings per share amounted to -0.09 euro (previous year: 0.13 euro).
Equity remained constant compared to March 31, 2024 at 11.7 billion euro, while the equity ratio remained at a comfortable level of around 39%.
At -256 million euro, free cash flow before M&A was negative and below the previous year’s figure (347 million euro). This was influenced, among other things, by payments received after the reporting date in connection with the subsidy decision for the direct reduction plant at Steel Europe. In addition, fewer inventories were reduced compared to the previous year due to demand. Accordingly, the Group’s net financial assets decreased slightly to 3.2 billion euro as at June 30, 2024 (March 31, 2024: 3.5 billion euro). With cash and cash equivalents and available committed credit lines totaling 5.9 billion euro, thyssenkrupp continues to have a very good liquidity situation.
Adjusted forecast for financial year 2023/2024 confirmed
In light of the results for the 3rd quarter of the current fiscal year and the updated projection for the full year, thyssenkrupp had already adjusted its full-year forecast for fiscal year 2023/2024 on July 25, 2024. The main reason for this is the persistently challenging market environment, which is leading to a significant decline in sales in the current financial year, among other things. A short-term stabilization of the market in the current financial year is currently not foreseeable. The efficiency enhancement measures introduced as part of the APEX performance program are successfully counteracting the negative market developments described above, but cannot fully compensate for them.
The Group now anticipates a decline in sales of between 6% and 8% for the year as a whole compared to the previous year. A figure below that of the previous year had previously been forecast. For adjusted EBIT, thyssenkrupp now expects a decline to a value of more than 500 million euro. Previously, the Group had assumed an increase to a figure in the high three-digit million euro range. Free cash flow before M&A is now forecast to fall to a figure in the region of -100 million euro. Previously, the Group had expected a decline to a positive figure in the low three-digit million euro range.
The forecast for net income has also been adjusted: to an improvement to a negative figure in the mid to high three-digit million euro range (previously: increase to a negative figure in the low three-digit million euro range).
