By Christopher Alessi
FRANKFURT--Steelmaker ThyssenKrupp AG on Friday said it turned a
profit in the first quarter of 2015, 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.
"With a weaker euro, our exports are rather stronger now," said
ThyssenKrupp Chief Financial Officer Guido Kerkhoff. "There is an
increasingly positive momentum," he said.
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 EUR318 million,
according to a recent poll by The Wall Street Journal.
The results underline a "positive trend" at ThyssenKrupp and
"came in without major surprises," said DZ Bank analyst Dirk
Schlamp. Even so, ThyssenKrupp shares were down more than 3% in
trading on Friday. Analysts attributed this to investor concerns
over a 30 percentage point rise in the company's net debt to equity
ratio from last quarter, which was 144.9% for this reporting
period.
The overall earnings 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 because of the sale of its 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.
ThyssenKrupp 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.
Write to Christopher Alessi at christopher.alessi@wsj.com
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