TKAMY Thyssenkrupp AG (PK)

   By Nathan Allen 
 

Germany's Thyssenkrupp AG (TKA.XE) reported an almost tenfold increase in net profit for the first quarter of its fiscal year as stronger steel prices buoyed its materials business, the company said Wednesday.

Net income for the October-December period was 78 million euros ($95.7 million), up from EUR8 million a year earlier. The profit figure includes an EUR87 million hit from the U.S. tax reforms, the company said.

Despite the rise, earnings failed to meet a FactSet-compiled consensus of EUR194 million.

Net sales fell 3% on year to EUR9.82 billion, the company said, narrowly missing the consensus estimate of EUR10.16 billion.

Under Chief Executive Heinrich Hiesinger, Thyssenkrupp has been divesting from its historical business of steel production and pivoting toward higher-margin capital-goods manufacturing, but a recent recovery in steel prices has made the traditional industry far more profitable.

Adjusted earnings before interest and taxes, or Ebit, at Steel Europe was EUR160 million, the company said, equivalent to around 36% of the company's total, compared with just over 10% a year earlier.

However, the company said the market environment for steel remains "extremely challenging structurally--with continuing global overcapacities, risks from trade imbalances and highly volatile raw material prices."

In capital goods, both the elevator technology and components technology units reported slightly higher earnings. However, adjusted Ebit at the industrial solutions unit fell to EUR12 million from EUR42 million a year earlier.

Thyssenkrupp attributed the fall to an unfavorable comparison effect, as the company booked a large order in the first quarter of the previous year. It added that improvements from restructuring are yet to take effect.

The company confirmed its guidance for the fiscal year of clearly positive net income and adjusted EBIT of between EUR1.8 billion and EUR2 billion.

It also said it expects positive free cash flow for the fiscal year, which UBS says is "increasingly challenging," given Thyssen's rising net debt.

Write to Nathan Allen at nathan.allen@dowjones.com

(END) Dow Jones Newswires

February 14, 2018 04:51 ET (09:51 GMT)

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