Thyssenkrupp’s unit drags down earnings

FRANKFURTThyssenkrupp AG, the German conglomerate facing pressure from activist investors, reported a loss at its industrial unit that helped lower fiscal third-quarter earnings amid a tumultuous 2018.

Adjusted earnings before interest and taxes (Ebit) dropped to €332 million (RM1.57 billion) in the three months through June, from €620 million a year earlier, the Essen-based company said yesterday in a statement. It said adjusted Ebit was affected by a €216 million loss at its industrial-solutions segment.

Thyssenkrupp warned last week its earnings would be lower than previously thought because of cost overruns and slower sales at the industrial unit.

The company also set profit-margin growth targets for its main divisions for 2022, and said it would aim to generate free cashflow before mergers and acquisitions of around €1 billion by then.

Thyssenkrupp has had a turbulent year, with CEO Heinrich Hiesinger and chairman Ulrich Lehner both resigning soon after the company signed a deal to form a steel joint venture with India’s Tata Steel Ltd. Executives had been under pressure from activist investors Cevian Capital and Elliott Management Corp who had grown impatient with what they saw as slow progress in streamlining the steel-to-submarine conglomerate.

The company said it posted negative free cashflow before merger and acquisition of €1.59 billion for the first nine months of the fiscal year.

Thyssenkrupp acting interim CEO Guido Kerkhoff said he wasn’t happy with the company’s bottom line.

“There no point in sugar-coating it,” Kerkhoff said in the statement. “The cashflow is unsatisfactory, and that is not a situation which can be sustained long term.”

In an interview on Bloomberg Television, Kerkhoff said he’s focused on turning the business around and focusing on a better cost structure. He declined to comment on whether he’s in the running for the permanent CEO role, and said talks on whether the company would change its business structure would be left for the next leader. — Bloomberg