Thyssenkrupp's Q2 Loss: Optimism for the Second Half and Plans for Marine Business Spin-off Remain Unchanged - IPO Penciled in for 2025
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Thyssenkrupp's Outcome Shows Signs of Fracture
This rough economic climate has put Thyssenkrupp in a tight spot. After a bleak Q2, their operating profit dipped a staggering 90%. The steel sector even ended up in the red. Yet, the Essen-based company remains bullish about its full-year projection. Their strategy for spinning off the marine business continues full steam ahead.
Despite a steep drop in Q2 earnings, Thyssenkrupp is holding firm to their full-year goal. CEO Miguel López labeled this fiscal year as a "transitional period." While hinting at brighter days in the second half, he seemed rather enigmatic, given the slow recuperation of the automotive industry, according to outgoing CFO Jens Schulte.
Profit Persists Beneath the Surface
In the face of this turbulence, López affirmed their projection. The company aims for an adjusted operating result (EBIT) of €600 million to €1 billion. For Q2, they generated only €19 million (-90%) in operating profit. For the first half of the year, adjusted EBIT amounted to €210 million, a decline of nearly a fifth. Only the marine division, destined for a spin-off, outperformed in Q2. Meanwhile, the steel, material services, and automotive technology segments faltered. Even so, the bottom line still showed a profit.
The bottom line stood at €167 million, a stark contrast to a loss of €72 million in the previous year. This was entirely due to special effects worth €375 million, including the sale of the Indian steel unit contributing a tax gain of €270 million and the appreciation of the elevator stake adding €1.1 billion, resulting in an added €105 million. However, impairments on property, plant, and equipment in the steel division amounted to €93 million.
Investors Show Signs of Displeasure
The lackluster financial results left investors cold. The MDax stock took a nose-dive by more than 16%. The marine division's IPO discussion had been bolstering the stock price since mid-February. Despite this setback, López remains steadfast in his plan to launch a minority of Thyssenkrupp Marine Systems via a spin-off this year. "The preparations are gathering momentum," he assured. Thyssenkrupp shareholders will have a stake in the new Marine Systems holding company, subject to approval at an extraordinary general meeting. López hasn't disclosed any specifics on the timeline.
According to López, a government stake is not an essential prerequisite for the spin-off; however, in the long run, it could provide a stabilizing influence in Europe. Thyssenkrupp aims to keep the majority share and continue consolidating Marine Systems.
In the steel division, Thyssenkrupp is contemplating opposing objectives. Ideally, Steel Europe should deconsolidate. A 50:50 joint venture with Czech billionaire Daniel Krétínský is on the table; however, Krétínský is still only holding a 20% stake. Nevertheless, the steel board and IG Metall have reached a fundamental agreement on Steel Europe's restructuring, with a collective bargaining agreement to be negotiated by summer, allowing them to develop the business plan.
Investors are expressing displeasure due to Thyssenkrupp's Q2 loss, with the marine business spin-off and potential Initial Public Offering (IPO) in 2025 remaining undeterred, despite the bleak results. The company's bullish approach to the full-year projection, despite a steep drop in Q2 earnings, is rooted in its focus on various business sectors, including the steel, marine, material services, and automotive technology industries, where the marine segment was the only one to outperform in Q2.
