UPDATE: ThyssenKrupp Soars On Revamp Plan, Stainless Steel Spinoff
06 Maggio 2011 - 1:09PM
Dow Jones News
Shares in ThyssenKrupp AG (TKA.XE) rose sharply Friday after
Germany's largest steelmaker by output late Thursday announced a
comprehensive reorganization of its business that includes the
divestment of large parts of its auto supplier business and a
spinoff of its stainless steel unit.
ThyssenKrupp shares gained more than 7% in early trading Friday
as analysts said they expect the announced measures should help
increase the company's profitability and reduce debt.
At 1012 GMT ThyssenKrupp shares traded EUR1.97 higher or 6.6% at
EUR31.80, outperforming a firmer broader market.
Credit Suisse analyst Michael Shillaker said in a note to
clients that the restructuring is "more revolution than the slow
evolution we expected", adding it "will unlock significant
shareholder value".
Shillaker has an outperform rating on ThyssenKrupp shares, which
are his top pick in the steel industry.
The strategic shift foresees the sale of assets with a total
revenue volume of around EUR10 billion ($14.8 billion) and some
35,000 employees.
In fiscal 2010 which ended Sept. 30, ThyssenKrupp recorded
revenue of EUR42.62 billion. At the end of its last fiscal year it
employed around 177,000 people.
Shillaker estimated that the flagged asset sales could reach
between EUR5 billion and EUR8 billion of proceeds, saying this
would be the largest single divestment program at ThyssenKrupp
since it considered an initial public offering of its steel
business in 1999/2000.
The proposed reorganization comes less than four months after
Chief Executive Heinrich Hiesinger took charge of Germany's largest
steelmaker by output.
Hiesinger is a former manager of engineering company Siemens AG
(SI). Observers had expected that he would shift emphasis more
toward ThyssenKrupp's non-steel business. The steelmaking
activities had been the company's main investment focus in the last
few years with billions of euros spent on new steel mills Brazil
and the U.S.
A spinoff of ThyssenKrupp's stainless steel business would
follow a similar move by ArcelorMittal (MT) earlier this year. The
world's largest steelmaker by output spun off its stainless
business named Aperam in January.
The global stainless steel industry has been facing considerable
structural headwinds with production overcapacities in the wake of
the global recession and pressure on base prices as well as alloy
surcharges.
So far any consolidation attempts have failed, but
ThyssenKrupp's comments that it would consider "potential strategic
partnerships" could refuel investor hopes that mergers might be
possible in future.
A spinoff of the stainless business would mark a shift from
November when company officials said they wanted to keep running
the business. ThyssenKrupp now said a spinoff would provide "the
opportunity to develop its competitive position with greater
flexibility" and reduce costs.
The company didn't say what form of spinoff it is considering,
but added that "all options regarding the continuation of its
business activities outside the group are to be investigated".
The Stainless Global division recorded sales of EUR5.9 billion
in fiscal 2010.
The steelmaker and industrial conglomerate also said the new set
of restructuring measures to be proposed to the company's
supervisory board next Friday aims at strengthening its engineering
business and seizing growth opportunities in emerging markets.
Its management intends to strengthen the focus of its automotive
businesses by selling some units that supply carmakers and merging
others.
Commerzbank analysts Ingo-Martin Schachel--who recommends buying
ThyssenKrupp shares--said that the plan to revamp the automotive
supplier business should help turn ThyssenKrupp's Components
Technologies business area into a higher margin business.
"A potential deconsolidation of all the mentioned units would
likely lead to an improvement of the group margin by around 50
basis points," Schachel said.
-By Jan Hromadko, Dow Jones Newswires; +49 69 29 725 503;
jan.hromadko@dowjones.com
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