Thyssenkrupp takes $1 billion impairment on steel unit as outlook worsens
5:37 am Tuesday, November 19th, 2024
By Christoph Steitz and Tom Käckenhoff
ESSEN, Germany (Reuters) -Thyssenkrupp took a fresh 1 billion euro ($1.06 billion) impairment on its struggling steel division, blaming the sector’s worsening outlook as weak demand and Asian competition hurt Germany’s industry.
The latest impairment on steel, the second in as many years, comes as talks with Czech billionaire Daniel Kretinsky, who owns 20% in the division, continue over whether that stake could be raised to 50%.
Like its German industrial peers, Thyssenkrupp has been struggling with a weakening global economy, rising competition from China and high costs, forcing it to seek new owners for its iconic steel business as well as its warship division.
Steelmaking, one of the most energy-intensive industries, has battled high power costs and cheaper Asian rivals for years while facing billions of euros in investment to cut emissions and produce steel via renewable sources.
“In respect of our main strategic issues, the current fiscal year will be a year of decisions – especially for Steel Europe and Marine Systems,” CEO Miguel Lopez said.
Kretinsky, via his energy holding EPCG, can step back from a deal with Thyssenkrupp if talks for a 50:50 stake fail, Thyssenkrupp said, adding discussions now depend on a new business plan for the unit which is currently being drawn up.
Thyssenkrupp’s finance chief told Reuters in October that the company would seek talks with other steelmakers about possible partnerships and tie-ups if a deal does not materialise.
While the impairments caused a 1.5 billion euro net loss for the group in 2024, Thyssenkrupp turned an unexpected positive free cash flow before mergers and acquisitions of 110 million euros, thanks to prepayments by customers of its Marine Systems division.
Thyssenkrupp shares, which have lost 41% year-to-date, were 8.4% higher in morning trading, the biggest gainer among German midcap stocks.
The group, which makes products as varied as submarines and car parts, had expected negative free cash flow before M&A – a gauge for investors of the conglomerate’s operational health – of around 100 million euros.
Shares in Thyssenkrupp Nucera, in which Thyssenkrupp holds a majority, were also 8.2% higher after the group released an upbeat trading statement late on Monday.
($1 = 0.9438 euros)
(Reporting by Christoph Steitz and Tom Kaeckenhoff; Editing by Friederike Heine, Saad Sayeed and Bernadette Baum)
