Thyssenkrupp Sees Negative Cash Flow During Transition Year

Thyssenkrupp AG expects to post cash losses this fiscal year on rising restructuring and investment costs, highlighting the difficulty of overhauling the conglomerate as Germany’s industrial economy sputters.

Author of the article:

Bloomberg News

William Wilkes

Published Nov 19, 2024  •  2 minute read

The Thyssenkrupp AG corporate headquarters in Essen, Germany. Photographer: Sarah Pabst/Bloomberg Photo by Sarah Pabst /Bloomberg

(Bloomberg) — Thyssenkrupp AG expects to post cash losses this fiscal year on rising restructuring and investment costs, highlighting the difficulty of overhauling the conglomerate as Germany’s industrial economy sputters. 

The engineering company sees free cash outflow, excluding the impact of mergers and acquisitions, of €200 million to €400 million ($212 million to $424 million) in the fiscal year through next September, according to an earnings statement. That’s despite a projected rise in demand for the company’s industrial goods in the second half of next year.

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Thyssenkrupp is spending heavily to both overhaul its ailing steel division, which is pressing ahead with a joint venture, and to prepare its naval engineering unit for an initial public offering.

“The current fiscal year is a year of transition on our path to achieving our medium-term financial targets, even in a challenging environment,” Thyssenkrupp Chief Executive Officer Miguel López said in the statement. He added the period will be “a year of decisions” — especially for the company’s Steel Europe and Marine Systems units. 

Germany’s ongoing weakness in manufacturing, which has been weighed down by high energy and labor costs, contributed to a decision by an independent panel of experts to cut their outlook for the country’s economic growth next year. 

Thyssenkrupp reported a €1.4 billion net loss for the year ended Sept. 30, while free cash flow before mergers and acquisitions was positive at €110 million. Thyssenkrupp sees earnings before interest and taxes rising to a range of €600 million to €1 billion this year, up from the €567 million in the year that just ended.

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In April, Thyssenkrupp said it would reduce steelmaking capacity by about a fifth, alongside substantial job cuts to the division’s 26,000 workers. The decision, pushed through despite opposition from labor representatives, was part of a plan to offload a stake in the division to Czech billionaire Daniel Kretinsky’s EP Corporate Group. 

Thyssenkrupp is also targeting an IPO of its naval shipbuilding unit, which manufactures submarines, surface vessels and naval electronics, within a year. Earlier plans to sell a majority stake to private equity firm Carlyle Group Inc. collapsed last month. 

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