Thyssenkrupp Cuts Net Profit Outlook After Steel Unit Woes
Thyssenkrupp Faces Sales and Net Profit Forecast Cuts
Thyssenkrupp (ETR:) has revised its annual sales and net profit forecasts, citing impairment losses and weakening demand at its steel division. This move comes as the conglomerate seeks to regain investor confidence, with shares plummeting to their lowest level in over 15 months.
Challenges in the Steel Industry
The challenges faced by Thyssenkrupp’s steel division include high raw materials and energy costs, competition from cheaper Asian rivals, and subdued demand from the automotive sector. In response, the company has launched a performance program, APEX, aimed at boosting adjusted operating profit by 2 billion euros.
Analyst’s Concerns
Analysts have expressed concerns about the disconnect between Thyssenkrupp’s market value and its net financial assets, highlighting a lack of trust from the market. This sentiment was echoed during a conference call with the company, where questions were raised about the company’s credibility.
CEO’s Confidence and Market Response
Thyssenkrupp’s Chief Executive, Miguel Lopez, expressed confidence in the group’s ability to achieve its annual forecast for adjusted EBIT and free cash flow. However, the company’s stock fell by as much as 10.6% following the announcement, marking its lowest level since November 7, 2022.
Steel Business Challenges
Thyssenkrupp attributed 200 million euros in impairment losses to its steel business, a sector in which it is seeking to sell a stake to Czech billionaire Daniel Kretinsky. CEO Lopez emphasized the necessity of the APEX performance program in light of ongoing global economic weakness and geopolitical conflicts.
Financial Impact and Revised Outlook
The impairments resulted in a first-quarter net loss of 314 million euros, significantly deviating from analyst estimates. As a result, Thyssenkrupp now expects to break even on a net profit basis in fiscal 2023/24, down from its previous forecast of a low-to-mid triple digit million euro profit. The company also revised its sales outlook, anticipating revenue to remain at last year’s level of 37.5 billion euros.
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