Frankfurt: Germany’s Thyssenkrupp AG joined rivals in reporting a strong recovery of its steel business, just weeks before it plans to ink a deal to merge the unit with the European operations of India’s Tata Steel Ltd.
The planned joint venture, agreed in principle in September, is a bid to tackle excess capacity in the sector and further reduces Thyssenkrupp’s ties to its steel-making roots after last year’s sale of its Brazilian steel mill.
“The market environment remains extremely challenging structurally, with continuing global overcapacities, risks from trade imbalances and highly volatile raw material prices,” Thyssenkrupp said in its quarterly report.
Chief executive officer (CEO) Heinrich Hiesinger, in the job since 2011, is trying to transform the group, which makes everything from elevators and submarines to car parts and chemical plants, and shift its focus to technology and away from volatile steel.
First-quarter operating profit at its Steel Europe unit rose nearly sixfold to €160 million ($198 million) due to an improvement in prices that also led Tata Steel and market leader ArcelorMittal to post strong results in recent weeks.
On a group level, operating profits reached €444 million, beating the 436 million average forecast in a Reuters poll but shares fell as much as 2% as analysts pointed to negative free cash flow of €1.55 billion. The company was the only faller on Germany’s Dax share index
“A sobering report missing a trigger to buy for a rebound,” a local trader said, also pointing to fresh remarks from US President Donald Trump about potential steel import tariffs.
Thyssenkrupp’s shares have shed almost 10% since the steel venture was announced, compared with a 1% drop in the STOXX Europe 600 Industrial Goods and Services index . Rival ArcelorMittal’s shares are up nearly a quarter.
Once approved by the boards and regulators, investors expect a flotation of the combined steel business as well as a potential sale of Materials Services, Thyssenkrupp’s materials distribution and trading division.livemint