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Thyssenkrupp cuts forecasts on materials prices

German industrial group Thyssenkrupp cut its full-year forecasts on Tuesday on a drop in prices for materials including steel that it said were sharper and longer-lasting than it had expected.

In a development likely to increase momentum for the company to shed its steelmaking operations, Thyssenkrupp posted a drop by a fifth in quarterly adjusted operating profit as declines in materials outweighed improvements at its capital goods units.

Thyssenkrupp said it now expected full-year adjusted EBIT (earnings before interest and tax) of at least 1.4 billion euros ($1.6 billion), versus its previous forecast for 1.6-1.9 billion and the Reuters poll average of 1.49 billion.

"While we are now seeing a recovery in material prices, it is coming later than we originally expected and from a lower level and will also be reflected in our figures with a time lag," Chief Executive Heinrich Hiesinger said in a statement.

Thyssenkrupp, which is 15 percent owned by activist investor Cevian, has said repeatedly it wants to play a role in any consolidation of the imports-battered European steel industry but is not prepared to put cash on the table.

Its second-quarter results will increase both the pressure and the difficulty of doing so, as a profit at Steel Europe was cancelled out by a loss at the company's Brazilian steel mill, and pension revaluations weighed on its gearing.

Thyssenkrupp also cut its full-year forecasts on Tuesday for net profit and free cash flow before mergers and acquisitions, saying it now expected stable profit instead of a clear improvement, and breakeven free cash flow at best.

It said its materials businesses - which include materials distribution as well as steel - would improve significantly in its fiscal second half to end-September, provided the Brazilian real remained largely stable.