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ThyssenKrupp Reports Third Quarter Results
08/17/2009 - ThyssenKrupp reports a pretax loss of €(772) million on sales of €9.3 billion for the third quarter, and a pretax loss of €(987) million on sales of €30.7 billion for the first nine months of its fiscal year 2008/2009.
Against the backdrop of continued deterioration in the overall economic environment, ThyssenKrupp reported a pretax loss of €(772) million on sales of €9.3 billion for the third quarter, and a pretax loss of €(987) million on sales of €30.7 billion for the first nine months of its fiscal year 2008/2009.
The Group said its materials and materials services business was impacted by sharply declining volumes and prices, although restocking had led to some hope for the beginning of stabilization toward the end of the reporting period. In the capital goods business, underutilization in the international automotive, construction equipment and civil shipbuilding businesses had a severe impact, with the impacted partially offset by relatively strong business in plant technology, slewing bearings for the energy sector, and elevators and escalators.
Third Quarter Results— Order intake totaled €7.9 billion, a 44% year-on-year decrease, and sales were down by 34% to €9.3 billion. 3rd-quarter earnings before taxes came to €(772) million, or €(452) million without nonrecurring items. EBITDA came to €(180) million, compared with €1,366 million a year earlier, while earnings per share fell from €1.21 to €(1.38).
Earnings were heavily impacted by inventory write-downs and lower revenues caused by the sharp price falls, as well as nonrecurring items including restructuring expense, impairment charges and project costs.
Nine Month Results—Order intake totaled €28.5 billion in the first nine months, a 31% decrease compared with the first 9 months of the previous fiscal year. Sales decreased to €30.7 billion, a 23% decrease compared to sales of €39.7 billion in the prior year.
Earnings before taxes fell to €(987) million, as compared to €2,297 million in the prior year. EBITDA came to €726 million, compared with €3,646 million in the prior year, while earnings per share dropped from €3.06 to €(1.73). Results were significantly impacted by nonrecurring items including restructuring expense, impairment charges and project costs. Excluding nonrecurring items, earnings before taxes amounted to €(402) million.
To manage the crisis, the Group introduced cost-reduction measures that have already led to cost savings of more than €750 million in the first 9 months of the current fiscal year. Stringent measures to reduce net working capital allowed the Group to improve its operating cash flow over the 9-month period to €1,954 million, as compared to €1,509 million in the prior year.
In the 3rd quarter, operating cash flow amounted to €1,331 million, which compares to €676 million in the prior year. The Group's financial latitude was also significantly increased in the 3rd quarter by the positive free cash flow and the successful bond transactions. At June 30, 2009 the Group had altogether €8.8 billion in cash, cash equivalents and available credit lines.
Net financial debt at June 30, 2009 was €3,122 million, an increase of €1,538 million compared with September 30, 2008. Compared with March 31, 2009 net financial debt decreased by €565 million.
Management Comments—“We are using the crisis as an opportunity,” stated Executive Board Chairman Ekkehard Schulz. “The measures we have introduced to improve efficiency and optimize our portfolio are now taking full effect. Over the next 15 months we will reduce the Group's cost base by well over €1 billion on a sustainable basis. Annual cost savings of €500 million from the reorganization of our Group will play a part in this.
“With regard to our transatlantic steel strategy, we welcome our partner Vale's decision to increase its stake in our Brazilian steel plant to around 27%,” added Schulz. “As well as clearly underlining the value of our investment, this move also confirms our industrial strategy.”
Outlook—ThyssenKrupp said that it expects a significant drop in order intake and sales for full fiscal year 2008/2009. Price and volume declines will be only partly offset by falling input material prices and sustained efforts to enhance efficiency. However, the Group is taking targeted steps that are to significantly reduce net working capital. In addition, measures are being carried out to reduce or postpone the investment program and portfolio optimizations are being implemented.
"We expect to end the current fiscal year with a loss before taxes and major nonrecurring items – in particular restructuring costs, impairment charges and project costs – in the upper three-digit million euro range,” said Executive Board Chairman Schulz. “Earnings before taxes will be considerably impacted by restructuring expense for our cost-reduction programs and the reorganization. Impairment charges and project costs for the new steel plants will also have a major impact on earnings before taxes."
"We expect to end the current fiscal year with a loss before taxes and major nonrecurring items – in particular restructuring costs, impairment charges and project costs – in the upper three-digit million euro range,” said Executive Board Chairman Schulz. “Earnings before taxes will be considerably impacted by restructuring expense for our cost-reduction programs and the reorganization. Impairment charges and project costs for the new steel plants will also have a major impact on earnings before taxes."
With sales of 53.4 billion euros and 199,374 employees in over 70 countries, ThyssenKrupp is one of the world's major technology groups and occupies excellent positions on the international markets. The three main business areas of steel, capital goods and services, organized in five segments — Steel, Stainless, Technologies, Elevator and Services — mark out the Group's areas of competence.
