ThyssenKrupp Sees Slow Demand Amid Companywide Overhaul in First Half of 2012-13 Fiscal Year

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Researched by Industrial Info Resources (Sugar Land, Texas)--International steel giant ThyssenKrupp AG (OTC:TYEKF) (Duesseldorf, Germany) saw a drop in orders for the first half of the company's 2012-13 fiscal year, following the disposal of key assets and a tumultuous crisis in the eurozone. The company reported an overall net loss of €44 million ($56.57 million) for the first half of the year, compared with a net loss of €84 million ($108 million) in the first half of fiscal 2011-12.

Net sales totaled €17.94 billion ($23.07 billion), a 9.36% decrease from the same period last year. The Components Technology segment suffered from a slowdown in the Western European automotive market and weak demand for wind energy services, as well as startup costs in China and India. The Material Services segment was affected by economic slowdowns in every geographic segment except North America. The Industrial Solutions segment, however, benefited from an increase in chemical plant construction and now boasts a backlog of €16.4 billion ($21.09 billion).

Capital expenditures for the first half were reported to be €719 million ($924.35 million), more than half of which went to the capital goods businesses, particularly the Components Technology segment. The total is €336 million ($431.96 million) less than the same period last year, largely due to lower spending as a result of the disposition of the Stainless Global segment and less spending at the Steel Americas segment, which the company plans to sell off in the near future.

ThyssenKrupp executives have identified about €250 million ($321.4 million) in savings opportunities that will involve eliminating about 3,000 employees from of the current 15,000 or so administrative-related positions. The company plans to eliminate about 2,000 employees in its Steel Europe segment by 2015 to save €524.25 million ($674 million). For more information, see February 12, 2013, article - Germany's Steelmaker ThyssenKrupp Plans to Lay Off 2,000 to Cut Costs.

Industrial Info is tracking more than $6.8 billion in active projects involving ThyssenKrupp, including the $13 million construction of a steel and aluminum coil plant for processing and distribution near Woodstock, Alabama. The project involves constructing a 100,000-square-foot facility that will receive rolled steel and aluminum coils, which will be cut to customer specification. The plant will be located at Scott G. Davis Industrial Park in Bibb County. It is expected to be completed in the third quarter of this year.

"Since the start of our strategic way forward, 25% of sales and 50% of capital employed have already been divested, or marked for sale, and the result is that the exposure to the steel production is significantly reduced to less than 40% today, and it will be less than 40% after the sale of Steel Americas," said Heinrich Hiesinger, the chief executive officer of ThyssenKrupp, in a conference call. "We have now reduced the number of business areas down from around eight to five."

ThyssenKrupp executives expect sales in the second half of the fiscal year to exceed those in the first half, but believe full-year 2012-13 sales will be lower than last year's €40.1 billion ($51.56 billion). Executives expect the global economic recovery to be weak or non-existent; although some growth is expected in North America, growth in emerging countries is expected to slow and the debt crisis in the eurozone is expected to remain unresolved. Still, the elevator businesses are expected to see stronger earnings, while profits in the industrial solutions businesses are to stay steady. The components businesses are likely to be affected by continued startup costs in China and India, as well as stronger competition for wind turbine production.

The company's capital expenditure budget for the full year remains at a maximum of €1.4 billion ($1.8 billion). The sale of the Steel Americas business, which has been treated as a discontinued operation since September 30, 2012, is expected to improve the earnings and overall financial condition of the company.

"We are working toward a leaner--and much more effective and efficient--global infrastructure," Hiesinger said in the conference call. "We strongly believe that this will shape and sharpen, over time, our perception as a diversified industrial group."

Looking toward the 2013-14 fiscal year, sales are projected to increase with economic growth, although this assumes the eurozone debt crisis will end by then.

For more information, visit Industrial Info's International Metals & Minerals Project Database. The offices of ThyssenKrupp and two other large European steelmakers recently were raided by Germany's Federal Cartel Office as part of an antitrust investigation into steel supplies to the automotive industry; for more information, see March 13, 2013, article - European Steelmakers Face Antitrust Investigation.

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