Thyssenkrupp writes down EUR 1bn from steel business

19th Nov 2024 09:39

(Sharecast News) - Thyssenkrupp announced a €1bn writedown on its steel division on Tuesday, as the company navigated a costly transition to low-carbon production.

The German industrial engineer and steelmaker said impairment contributed to a €1.4bn net loss for the financial year ended 30 September - an improvement on the €2bn loss recorded a year earlier.

It was its second writedown in as many years, following a €2.1bn hit in 2022.

The steel division had been battered by high energy costs, stiff competition from Chinese rivals, and the hefty investment required to shift to 'green steel' production.

Despite the challenges, Thyssenkrupp said it expected to return to profitability in the next financial year, forecasting net income between €100m and €500m.

Chief executive officer Miguel López described the current year as "a year of decisions", as Thyssenkrupp finalised plans for its steel and naval units.

Talks were ongoing with Czech billionaire Daniel Křetínský, who already owns 20% of the steel division and had expressed interest in raising his stake to 50%.

However, the negotiations were facing hurdles, including internal disputes over the cost of decarbonisation and the viability of the joint venture.

Křetínský retained the option to withdraw if an agreement could not be reached.

In its naval division, Thyssenkrupp said it was planning to pursue an initial public offering within a year after a proposed sale to private equity firm Carlyle Group fell through.

The Marine Systems unit, which had secured significant prepayments from customers, was a bright spot for the company, helping it achieve a positive free cash flow of €110m despite broader financial struggles.

Thyssenkrupp's efforts to overhaul its operations came amid broader economic headwinds in Germany, where manufacturing was grappling with high costs and sluggish growth.

The company had reduced its steelmaking capacity by 20% and cut jobs in the steel division as part of its restructuring.

German authorities had pledged €2bn to support the company's decarbonisation efforts.

Despite a 7% drop in annual sales to €35bn, Thyssenkrupp's stock was on the rise on Tuesday morning, buoyed by its decision to maintain a 15 euro cents-per-share dividend.

The company said it was aiming to build on its €567m in EBIT from last year, targeting €600m to €1bn in the current financial year.

López emphasised that ongoing cost-cutting measures and a recovery in industrial goods demand were expected to strengthen the firm's financial position.

At 0927 CET (0827 GMT), shares in ThyssenKrupp were up 7.88% in Frankfurt at €3.56.

Reporting by Josh White for Sharecast.com.