TKAMY Thyssenkrupp AG (PK)

By Christopher Alessi 

ESSEN, Germany-- Thyssenkrupp said Thursday that its full-year net profit fell as the German industrial conglomerate battled a continuing malaise in the steel industry.

Net profit for the fiscal year ended Sept. 30 fell 4% to EUR296 million ($312.2 million), compared with EUR309 million a year earlier, falling short of analysts' forecasts of EUR364 million in a poll by The Wall Street Journal.

The company's shares opened 2.9% lower following the results.

Annual sales fell 8%, to EUR39.29 billion, while orders dropped 9% to EUR37.42 billion, mainly because of high import and price pressure on its materials businesses. Those businesses include the company's steel operations and its materials services business, which sells products such as stainless steel and alloys.

Chief Executive Heinrich Hiesinger said that volatility in the materials markets meant the company needed to forge ahead with efforts to reshape its portfolio around its more consistently profitable capital goods businesses.

"We must continue with Thyssenkrupp's transformation," he said.

The company's closely watched adjusted earnings before interest and taxes for the full year fell 12% to EUR1.5 billion, weighed down by lower profitability its European steel, materials services and industrial solutions businesses.

Steel Europe reported a 36% plunge in annual adjusted EBIT to EUR315 million, due to declining European spot market prices through the first half of the fiscal year and a tighter competition.

Thyssenkrupp in July confirmed that it was in talks with Tata Steel Ltd. of India and other steel groups over a potential tie-up. The announcement came amid ongoing consolidation in the European steel industry, which has had to cope with a protracted steel-capacity glut and a wave of inexpensive steel imports from countries such as China.

The company's steel operations in the Americas again posted a loss, despite an improved operational performance due to efficiency measures. The Wall Street Journal reported late last month that Thyssenkrupp was in talks with Ternium SA to sell its steel plant in Brazil, the last asset of the company's unsuccessful venture in the Americas.

The industrial solutions unit, which builds a range of products from chemical plants to military submarines and ships, reported an adjusted EBIT loss of 16%, to EUR355 million, as a result of weaker markets for chemicals plants and mining equipment and a dearth of ship building contracts.

The company's capital goods businesses--including the high margin elevator division and a unit that produces high-tech components for the auto industry--were the only areas to post substantive earnings growth.

For fiscal year 2017, Thyssenkrupp said it expects adjusted earnings before interest and taxes to increase to around EUR1.7 billion, compared with EUR1.5 billion in fiscal 2016. The company also expects a "clear improvement" in net profit and a "slightly positive" free cash flow before mergers and acquisitions for fiscal 2017.

Free cash flow before M&A for fiscal 2016 was EUR198 million, compared with EUR115 million the year before.

Thyssenkrupp said it would propose an unchanged dividend of EUR0.15 a share for fiscal 2016.

Write to Christopher Alessi at christopher.alessi@wsj.com

(END) Dow Jones Newswires

November 24, 2016 03:46 ET (08:46 GMT)

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