Thyssenkrupp cautious on profit; says cost cuts key

Thyssenkrupp cautious on profit; says cost cuts key

German steel-to-elevators group Thyssenkrupp forecast a smaller-than-expected rise in operating profit for its current fiscal year and said on Thursday cost cuts would again be key to meeting its targets amid volatile raw material prices.

Thyssenkrupp is known for its conservative forecasts but its prediction of adjusted earnings before interest and tax (EBIT) of around 1.7 billion euros ($1.8 billion) was well below the average estimate of 1.89 billion euros in a Reuters poll.

It broadly met expectations and easily met its own target for adjusted EBIT for the year to end-September, due to accelerated cost savings, despite sales declines at all its businesses except automotive components and elevators.

Adjusted EBIT fell 12 percent to 1.47 billion euros, compared with the company's target of at least 1.4 billion euros and Reuters analyst consensus of 1.48 billion euros.

Thyssenkrupp blamed a slower-than-expected recovery in prices for raw materials as well as problems at its submarines-to-plant-engineering Industrial Solutions unit, whose chief executive was forced to resign over a bribery scandal this month amid a restructuring he had been leading.

"The Industrial Solutions business area also registered a weakening of the markets for chemical plants and mining equipment as well as an absence of major naval shipbuilding projects," Thyssenkrupp said in a statement.

The group said it stuck to its long-term target of at least 2 billion euros in adjusted EBIT, which it has said will be necessary to pay a meaningful dividend. For 2015/16, it proposed an unchanged dividend of 0.15 euros, below expectations.

Free cash flow before mergers and acquisitions came in at 198 million euros for the year, compared with a negative 115 million euros a year ago and its own forecast for up to breakeven.

Workers at the Zhong Tian (Zenith) Steel Group factory in Changzhou, Jiangsu.
Kevin Frayer | Getty Images

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