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(Bloomberg) — Thyssenkrupp AG reaffirmed its full-year guidance even as earnings slumped due to weak demand from automotive and industrial customers.
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The German steel and engineering group said it expects an improved — if challenging — economic backdrop in the second half of its fiscal year ending Sept. 30. That outlook underpins its forecast for between zero and €300 million (about $335.3 million) in free cash flow before mergers and acquisitions.
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The decision to maintain guidance comes despite a second-quarter free cash outflow of €569 million, which the company attributed largely to costs, including a tax payment, at its TKMS naval engineering unit. Thyssenkrupp said that, on a first-half basis, free cash flow was still ahead of the prior year.
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Adjusted earnings before interest and tax dropped to €19 million, from €184 million a year earlier, driven by lower sales, reduced shipments and a significant drop in capacity utilization due to maintenance work at its capital-intensive steel unit.
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Like other German industrial firms, Thyssenkrupp is grappling with sluggish demand in the European auto sector, where volumes have yet to return to pre-pandemic levels. Higher energy costs following Russia’s invasion of Ukraine continue to weigh on operations.
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Once a heavyweight conglomerate with units spanning steel, elevators and plant engineering, the company is steadily breaking itself up, aiming to shrink into a leaner portfolio of focused businesses.
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As part of that effort, Thyssenkrupp said it remains on track to spin off a minority stake in TKMS to shareholders potentially before year-end.
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TKMS, a key European submarine and warship builder, has long suffered from underinvestment and political hurdles to consolidation. Berlin has been reluctant to relinquish control over the unit’s strategic submarine technology, complicating past merger talks.
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