By Christopher Alessi
FRANKFURT--Steelmaker ThyssenKrupp AG said on Friday that it
turned a profit in its first quarter, in the latest sign that the
heavy restructuring undertaken by Chief Executive Heinrich
Hiesinger is starting to pay off.
The German industrial conglomerate said net profit for the
period ended Dec. 31 was EUR50 million ($57.18 million), compared
with a loss of EUR65 million a year earlier, boosted by a weaker
euro. Net profit for continuing operations was EUR54 million,
missing analyst expectations. Analysts had forecast a net profit
from continuing operations of EUR63 million, according to a recent
poll by The Wall Street Journal.
The company reported an 11% increase in sales to EUR10.04
billion, compared with EUR9.09 billion last year, driven by strong
growth in its capital goods businesses. Orders fell by 5% to
EUR10.09 billion from EUR10.66 billion year-over-year, mainly
attributable to a large order in the naval ships business that
inflated sales in the first quarter of last year, the company
said.
ThyssenKrupp's closely watched adjusted earnings before interest
and taxes jumped by 29% to EUR317 million, helped by improved
earnings in the European steel business and in line with analyst
predictions. Analysts had forecast adjusted EBIT of 318 million,
according to the Journal poll.
The group reiterated its outlook for the current fiscal year,
forecasting adjusted EBIT to rise to EUR1.5 billion and sales to
grow by a single-digit percentage rate.
The results underline a "positive trend" at ThyssenKrupp and
"came in without major surprises," said DZ Bank analyst Dirk
Schlamp.
The upswing comes on the heels of a comprehensive cost
efficiency and savings plan which has included thousands of job
cuts, implemented by Mr. Hiesinger over the past few years.
A former Siemens executive, Mr. Hiesinger was appointed to the
top job at ThyssenKrupp in 2011 and quickly found himself
responding to a series of crises, including write-downs at the
company's Americas steel business and corruption and bribery
allegations involving board members.
Mr. Hiesinger sold off ThyssenKrupp's loss-making steel plant in
Alabama in February 2014, while shifting the company's focus away
from steel and more onto capital goods such as elevators and
electronic components.
The capital goods businesses posted an adjusted EBIT of EUR337
million in the first quarter, helped by new elevator installations
in the U.S., China and South Korea, and an upswing in demand for
car components in Europe.
But the company saw weak growth in its material services
business, which makes carbon and stainless steels, as adjusted EBIT
fell 94% to EUR2 million from EUR34 million last year. Earnings at
the division were weighed down by a strike at Italian stainless
steel mill Terni over job cuts. The Italian operation is one of two
special materials businesses, along with alloys unit VDM, that Mr.
Hiesinger has said he would like to resell. The company was forced
to take back the flailing divisions from Finland's Outokumpu in
2013.
Restructuring measures and lower raw material prices boosted
adjusted EBIT in the European steel business by almost 3.4 times to
EUR79 million, despite a decline in orders and sales, a result of
lower prices and volumes.
Orders and sales were also down at the Americas steel division,
mainly due to the sale of the U.S. steel operations, while earnings
broke even.
Analysts say the materials and steel businesses face earnings
risks for later this year, due to a weakening global steel market.
The risk is most urgent in the company's Brazil steel operations
and in the materials services division, according to Credit Suisse.
"Later in the year this risk could move to the Steel Europe
business as contracts get impacted by the falling spot and
quarterly prices," Credit Suisse analysts noted.
Write to Christopher Alessi at christopher.alessi@wsj.com
Access Investor Kit for ThyssenKrupp AG
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=DE0007500001