MT Arcelor Mittal New

Germany's two largest steelmakers Tuesday forecast sharp drops in full-year operating profits as a fragile economy continues to weigh on demand and prices for their products.

ThyssenKrupp AG (TKA.XE) and Salzgitter AG (SZG.XE) both warned that the sovereign debt crisis in the eurozone as well as rising prices for energy and raw materials still pose considerable threats for the global economy.

They added, however, that trading conditions are expected to improve in the remainder of the year, echoing comments from the world's largest steelmaker by output--ArcelorMittal (MT)--which last week said demand for its products is steadily improving.

"The widely feared escalation in Europe's debt crisis has not materialized so far," said Salzgitter, the smaller of the two companies. "This nonetheless poses a huge risk on a global scale, as does the sharp increase in the oil price and various political conflicts."

It added that it will "be a challenge" to achieve a pretax profit in 2012, following a difficult and unprofitable first quarter of the year. In 2011, pretax profit amounted to EUR202 million.

Rival ThyssenKrupp--Germany's largest steelmaker by output--forecast adjusted earnings before interest and taxes in its fiscal year ending Sept. 30 in the medium three-digit million euro range. The company recorded an adjusted EBIT of EUR1.76 billion in fiscal 2011. Market expectations for adjusted EBIT in fiscal 2012 are for EUR977 million, according to a Dow Jones Newswires poll of seven analysts.

ThyssenKrupp's cautious earnings guidance sent the company's shares lower early in Tuesday's trading session and at 0729 GMT the stock was down EUR0.66 or 4.1% at EUR15.12.

In contrast, Salzgitter shares were up EUR0.17 or 0.5% at EUR35.66. The company had previously indicated it could post a first-quarter loss due to the difficult market environment.

The steelmakers' bleak outlooks for the global economy come as both companies reported wider-than-expected net losses for the three months to March 31, citing depressed steel prices that couldn't be offset by strong performances in their technologies operations.

ThyssenKrupp said its second-quarter net loss--including a discontinued stainless-steel business that will be sold to Outokumpu Oyi (OUT1V.HE)--was EUR587 million, compared with a profit of EUR272 million in the same period a year-earlier. The loss was considerably wider than the EUR36 million loss eight analysts forecast in a Dow Jones poll.

Losses continued to be exacerbated by ThyssenKrupp's Steel Americas business unit, which posted a EUR230 million loss before interest and taxes due to the prolonged and costly ramp-up of new steel mills in Brazil and the U.S.

Salzgitter's first-quarter net loss amounted to EUR15.5 million, wider than the average EUR8.8 million expected by analysts polled by Dow Jones.

ThyssenKrupp attributed its loss to depressed steel prices and continuing losses at its new steel mills in the U.S. and Brazil, which are in the process of being ramped-up.

"Margins in the materials business are being impacted by intense competition and unsatisfactory prices," said ThyssenKrupp Chief Executive Heinrich Hiesinger.

However, he added that trading conditions should improve in the remainder of its fiscal year, with demand from emerging markets and a recovering U.S. economy expected to mitigate margin pressures in weak European markets.

"Overall we believe that we have passed the worst in terms of earnings," he said.

Both companies' strong exposure to export-oriented industries like automotives and machine engineering could help them record earnings improvements as the year progresses.

Germany's gross domestic product grew far more than expected in the first quarter of the year driven by a surge in net exports, said the Federal Statistics Office, or Destatis.

-By Jan Hromadko, Dow Jones Newswires; +49 69 29 725 503; jan.hromadko@dowjones.com

(Tom Fairless in Frankfurt contributed to this article.)

Grafico Azioni Arcelor Mittal (NYSE:MT)
Storico
Da Lug 2024 a Ago 2024

Grafico Azioni Arcelor Mittal (NYSE:MT)
Storico
Da Ago 2023 a Ago 2024