Overhaul At German Behemoth Pays Off
November 20 2015 - 3:02AM
Dow Jones News
(FROM THE WALL STREET JOURNAL 11/20/15)
By Christopher Alessi
ESSEN, Germany -- ThyssenKrupp AG reported a 46% rise in yearly
profit and generated cash, before asset sales, for the first time
since 2006, in a further sign that the heavy equipment and
steelmaker's corporate overhaul is working.
At the same time, the company issued a cautious outlook for its
new fiscal year, citing "growing economic uncertainties and high
import pressure on materials markets."
ThyssenKrupp, one of the mainstays of German industry, said on
Thursday that net profit rose to 309 million euros ($329.5 million)
in the year ended in September from 212 million euros in the
previous fiscal year.
The figure was short of analysts' average forecast of net profit
of 405 million euros.
Free cash flow before divestments came to 65 million euros at
year-end, a turnaround from a cash drain of 357 million euros a
year earlier.
"That marks a further milestone in our transformation," said
Chief Executive Heinrich Hiesinger, who has engineered a difficult
restructuring at the company since first taking the helm nearly
five years ago.
ThyssenKrupp's shares rose 2.6% on Thursday.
Mr. Hiesinger has cleaned up Thyssenkrupp's corporate culture --
the company had been riddled with accusations of corruption and
bribery when he started as CEO -- while bolstering the group's
balance sheet, and shifting Thyssenkrupp's strategic focus toward
its higher-margin capital-goods businesses and away from steel
making.
ThyssenKrupp proposed an increased dividend of 0.15 euros a
share, compared with 0.11 euros a share in fiscal year 2014. Last
year's dividend was the company's first in the three preceding
years.
"This cannot be a satisfactory dividend over the medium term for
our shareholders or for us. But it is a step in the right
direction, which also takes into account our balance-sheet needs,"
Mr. Hiesinger said.
While the dividend is "nothing to get excited about," it is
"moving in the right direction," according to analysts at
Jefferies. "We expect further growth in the years to come as free
cash flow turns more solidly positive," the analysts wrote in a
note on Thursday.
Mr. Hiesinger also said that the company had succeeded in
further strengthening the balance sheet, including a reduction in
net financial debt, down at 3.41 billion euros at year-end from
3.68 billion euros a year earlier.
In the latest fiscal year, the company's closely watched
adjusted earnings before tax rose by 26% to 1.68 billion euros,
largely a result of efficiency and cost saving measures, on a 4%
rise in revenue to 42.79 billion euros, helped by the capital-goods
businesses and favorable exchange rates.
The group's Steel Americas unit, which consists only of a
Brazilian steel plant, reported an adjusted loss of 138 million
euros, reflecting slack demand in Brazil and the Brazilian real's
loss in value against the euro.
Mr. Hiesinger has said he would like to sell the plant in Brazil
as soon as market conditions allow. ThyssenKrupp last year sold its
other Americas asset, a steel-rolling and coating plant for $1.55
billion.
Analysts have speculated that ThyssenKrupp could eventually sell
its Steel Europe business, solidifying the company's transformation
from steel giant to diversified capital-goods group.
But Mr. Hiesinger has said its "unlikely" the company could find
a buyer for the steel business.
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(END) Dow Jones Newswires
November 20, 2015 02:47 ET (07:47 GMT)
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