Thyssenkrupp's 3rd Quarter 2023/2024: Challenging market conditions

Thyssenkrupp faced a challenging 3rd quarter in the 2023/2024 fiscal year, with both order intake and sales declining compared to the previous year. This decrease was driven by weaker market conditions, particularly in key industries such as automotive, machinery, and construction, coupled with ongoing high energy costs. The company reported an order intake of €8.4 billion, down from €9.4 billion the previous year, and sales of €9.0 billion, a decline from €9.6 billion. Adjusted EBIT also fell to €149 million from €243 million in the prior year.

Despite these challenges, certain segments, including Automotive Technology, Materials Services, and Marine Systems, saw improvements in earnings. However, the steel business struggled due to the weak economy and structural issues, resulting in adjusted EBIT nearly halving compared to the previous year. Additionally, the Decarbon Technologies segment was impacted by one-time costs, particularly in plant engineering at Polysius, where legacy projects incurred higher costs of around €80 million.

Thyssenkrupp's APEX performance program helped mitigate some of the negative impacts, providing support across various segments. The company confirmed its adjusted forecast for the fiscal year, anticipating continued challenges but maintaining efforts to enhance efficiency and resilience.

Segment Performance Overview

Automotive Technology: Both order intake and sales declined year-on-year, but adjusted EBIT improved to €78 million from €44 million. This was due to lower material and transportation costs and positive one-time effects, including the partial reversal of a provision for quality costs.

Decarbon Technologies: The segment recorded a drop in order intake but increased sales by 10%. Adjusted EBIT was negatively affected, primarily due to the aforementioned one-time costs at Polysius.

Materials Services: This segment saw a slight decline in both order intake and sales, mainly due to lower steel prices. However, adjusted EBIT increased to €58 million, supported by efficiency measures within the APEX program.

Steel Europe: Operating in a difficult environment, this segment experienced a significant drop in both order intake and sales. Adjusted EBIT was nearly halved to €100 million, with earnings supported by ongoing restructuring and performance measures.

Marine Systems: The segment reported higher order intake, although sales were slightly below the previous year. Adjusted EBIT improved to €30 million from €12 million, aided by margin improvements and efficiency measures.

Financial Indicators and Forecast

Thyssenkrupp ended the quarter with a net loss of €33 million, influenced by restructuring expenses and the sale of a stake in thyssenkrupp Industries India. Equity remained stable at €11.7 billion, with an equity ratio of 39%. Free cash flow before M&A was negative at €(256) million.

The company adjusted its full-year forecast in July 2024, citing the challenging market environment. Sales are now expected to decline by 6-8% compared to the previous year, with adjusted EBIT projected to be over €500 million. Free cash flow before M&A is anticipated to decrease to around €(100) million, and net income is expected to improve to a negative figure in the mid to high three-digit million euro range.

Thyssenkrupp continues to focus on efficiency improvements through its APEX program and is exploring strategic options, particularly within its steel business, as it seeks to navigate the ongoing market challenges.

Source and Photo: Thyssenkrupp