--Profit above expectations due in part to gains from asset
sales
--Business challenged by weak European economy, but outlook
confirmed
--Responding to challenges with shorter work hours, reduced
capacity
--Net debt reduced nearly 11% since March helped by asset sales,
reduced inventories
--Seeks to sell more assets, in advanced talks on
construction-component unit
(Adds further detail and background.)
By Jan Hromadko
FRANKFURT--Industrial conglomerate ThyssenKrupp AG (TKA.XE)
Friday reiterated its full-year guidance as third-quarter earnings
beat expectations thanks to some asset sales, though Germany's
largest steelmaker by output warned that the weak European economy
remains a challenge to its business.
The company--whose products include steel, elevators, industrial
plants and naval vessels--said it expects adjusted earnings before
interest and taxes to amount to a, "medium three-digit million euro
sum," in fiscal 2012, ending Sept. 30. even as incoming orders fell
over 21% in the three months to June.
"The weak economic situation and in particular the general
uncertainty resulting from the unresolved sovereign debt crisis [in
the euro-zone] are increasingly impacting our markets," said Chief
Executive Heinrich Hiesinger.
ThyssenKrupp has responded to the challenging market environment
by temporarily idling one of its German blast furnaces and
introducing shorter working hours at its European steel business
from the beginning of August. It has said that it expects reduced
working hours to remain in place through the end of the year due to
muted demand, echoing comments made by other steel makers in recent
weeks.
Steel titan ArcelorMittal (MT) late last month said it wouldn't
rule out further temporary or permanent idling of European blast
furnaces as it realigns its production capacity to match poor
demand in the weak European economy. In total, ArcelorMittal has
already idled nine of its 25 blast furnaces in Europe.
ThyssenKrupp's net profit in the quarter ending June 30 was 212
million euros ($262.3 million), up from EUR109 million as gains on
a disposal and a robust capital goods business helped offset poor
pricing and demand in the European steel business. Excluding the
stainless-steel business Inoxum that will be sold to Finland's
Outokumpu Oyi (OUT1V.HE), profit was EUR238 million, up 16% from
EUR205 million in the same period a year earlier.
The figure considerably exceeded the net loss of EUR121 million
that 13 analysts forecast on average in a Dow Jones Newswires poll,
which the company attributed to gains on the recent sale of its
U.S. iron-casting business, Waupaca.
ThyssenKrupp's closely-watched adjusted earnings before interest
and taxes from continued operations, which exclude gains from asset
sales, fell over 78% on the year to EUR122 million, but was still
above forecasts.
The gain from the asset sale, as well as a reduction in
inventories, helped ThyssenKrupp to cut net debt by nearly 11%
since the end of the fiscal second-quarter in March to EUR5.8
billion , the company said.
Debt had spiraled higher in the past few years, mainly due to
huge cost overruns in the construction of new steel mills in Brazil
and the U.S., which ThyssenKrupp is now considering selling. The
high debt level had previously cost ThyssenKrupp its investment
grade rating from Standard & Poor's.
S&P currently rates ThyssenKrupp at BB+, one notch below
investment grade.
The company also said it is considering the sale of further
assets as it continues to implement a broad revamp to refocus its
business. It is in advanced talks to sell a unit which makes
components used in the construction industry and is considering
selling its Italian unit Berco, a supplier of undercarriages for
construction equipment.
Both units generated accumulated revenue of around EUR800
million in fiscal 2011, it added.
Third-quarter revenue from continuing operations was EUR10.71
billion, down 6.9% from the EUR11.51 billion due to low demand and
prices for its steel products as well as asset disposals. Analysts
had forecast EUR10.86 billion.
The better-than-expected earnings, and the lowered debt level in
particular, helped send ThyssenKrupp's shares higher. At 0739 GMT,
the shares were up 3.4% to EUR16.17, valuing the company at around
EUR8.2 billion.
Write to Jan Hromadko at jan.hromadko@dowjones.com
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