Photo: Reuters
Photo: Reuters

Thyssenkrupp profits fall as restructuring looms

The group reported net profit of 60 million euros ($68.4 million) for its 2017-18 financial year to September

Essen, Germany: German industrial conglomerate Thyssenkrupp reported a sharp fall in annual profits Wednesday after months of boardroom turmoil and a cartel probe, as it prepares to tackle a massive restructuring.

The group reported net profit of 60 million euros ($68.4 million) for its 2017-18 financial year to September, down 78 percent after taking into account the sell-off of its Americas steel business.

Sales at Thyssenkrupp, which makes products from steel to submarines, elevators and car parts, rose 3.0 percent to 42.7 billion euros.

“This will be a year of rebuilding for Thyssenkrupp, so welcome to our big building site," chief executive Guido Kerkhoff said as he opened a press conference at its Essen headquarters.

“Every construction project begins with taking stock of the situation and ours is extremely complex," he added.

With German authorities investigating possible collusion between firms on prices for certain types of steel, Thyssenkrupp said it had set aside “a provision for antitrust risks" that impacted on its bottom line.

It did not reveal the amount, but said there was a “more than 50 percent" chance it would be slapped with a fine.

Meanwhile on the operational side, the industrial plant making division suffered from higher-than-expected costs on some contracts and made a 255-million-euro operating loss.

Higher raw materials costs also weighed on the annual result as the low level of the Rhine river following a hot and dry summer in Germany slowed deliveries.

Meanwhile, the group finally agreed in September to a split into two separate groups -- “Industry" and “Materials" -- long demanded by activist shareholders who in summer drove out both the chairman and chief executive.

While the initial division will entail costs of more than 500 million euros, executives expect a payoff in the shape of “a positive impact on equity and the balance sheet" once the move is completed by late next year.

Additionally, the merger of Thyssenkrupp’s European steel business with India’s Tata is expected to help the group stem the challenge from a flood of cheap Chinese steel.

The European Commission is carrying out an in-depth probe into the tie-up, while US authorities have already given their green light.

Looking ahead, executives expect net profits “significantly higher" in 2018-19 than the previous financial year.

Investors appeared unconvinced by the plans, with Thyssenkrupp shares shedding 1.4 percent to trade at 15.54 euros by 10:45 am in Frankfurt (0945 GMT) -- making it the worst performer on the DAX index of blue-chip German companies.

Bosses offered no detail on the impact of the planned split on the firm’s 159,000 employees worldwide, although unions fear the restructuring could bring job losses.

(This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.)