The thyssenkrupp group continued its robust performance in the 2nd quarter of fiscal 2022/2023. Among other factors, the continuing challenging environment with high energy prices and high inflation contributed to this. While sales overall were only slightly down from the prior-year quarter at €10.1 billion (prior year: €10.6 billion), order intake at €10.2 billion in total was as expected significantly lower than a year earlier (€13.6 billion). This was mainly due to a normalization of prices at Materials Services and transaction-related declines in the Multi Tracks segment. In line with expectations, adjusted EBIT was also lower year-on-year at €205 million (€802 million).
Continuing high raw material and energy costs
Significantly higher raw material and energy costs at Steel Europe and lower prices and associated lower margins at Materials Services were the main reasons for this. This was only partly offset by earnings improvements at Automotive Technology, Marine Systems and Multi Tracks - which made a positive contribution to earnings for the first time. Free cash flow before M&A improved significantly both year-on-year and quarter-on-quarter. The outlook for the further development in the current fiscal year has firmed up; the company is now aiming for a slightly positive figure for this indicator (previously: at least break-even). The forecast for the other key financial indicators (adjusted EBIT, net income) was confirmed.
"thyssenkrupp delivered a robust second quarter. The results show that we are now much stronger and more resilient. Our decentralized structure as a business group and the focusing of our portfolio are paying off. In all our businesses, we are systematically and specifically focusing on future issues that bring opportunities for value-creating development. This applies above all to the green transformation and in particular to the hydrogen economy. The task now is to continue to implement the course we have embarked on and further increase the pace. The personnel change at the top of the Executive Board will not slow the company down in this phase of implementing the transformation. The key strategic initiatives will continue to be systematically pursued," says Martina Merz, Chairman of the Executive Board of thyssenkrupp AG.
With sales volumes slightly higher overall, Materials Services recorded order intake of €3.9 billion in the 2nd quarter of fiscal 2022/2023 due to normalized material prices, compared with a high of €4.5 billion in the prior-year period. Sales were also lower year-on-year at €3.9 billion (€4.5 billion). This was reflected in particular in the European materials trading and service center businesses and in the drop shipment business, while the North American units reported a slight increase in sales. Adjusted EBIT was €85 million, compared with €336 million a year earlier. This was mainly due to declining margins as a result of lower material prices.
Industrial Components increased both order intake and sales year-on-year by 3 and 4 percent respectively to €0.7 billion. Adjusted EBIT in the segment came to €61 million (prior year: €65 million). Order intake in the slewing bearings business was slightly lower year-on-year due to weaker performance in the industrial application areas. By contrast, sales were level with the prior year. Significantly higher starting material and energy costs and lower prices in the wind energy sector in China resulted in a decline in earnings. The forging business improved its order intake and sales. With systematically continued cost-reduction measures, the business slightly exceeded its adjusted EBIT despite higher energy costs compared with the prior-year quarter.
Automotive Technology improved both order intake and sales by 21 percent to €1.4 billion. Increased customer demand was particularly noticeable in the automotive volume business. However, growth remained limited by the restricted availability of electronic semiconductors. The segment increased adjusted EBIT from €3 million to €89 million. This was due to operating earnings improvements and a positive nonrecurring effect from an agreement with a supplier on a quality case from previous years. Strict cost control, the negotiation of new price conditions and efficiency measures offset the cost increase, among other things in procurement costs.
Steel Europe increased its order intake by 9 percent to €3.7 billion thanks to significantly higher order volumes - in particular from the construction and auto sectors. Despite slightly higher shipments, sales were 2 percent lower than a year earlier at €3.3 billion. Lower spot market prices had a noticeable impact here, although longer-term contracts had a stabilizing effect. Significantly higher raw material and energy costs compared with the prior-year quarter resulted in adjusted EBIT of €(14) million (prior year: €479 million). Positive effects from the continuing restructuring measures and the ongoing performance measures as part of the implementation of the "Steel Strategy 20-30" mitigated this development.
Following a major subsea order in the comparative period, order intake at Marine Systems was significantly lower year-on-year at €135 million (€3.1 billion). Sales increased by 4 percent to €498 million. Adjusted EBIT improved significantly to €14 million (prior year: €3 million) due to performance measures introduced.
Following the disposals of the stainless steel and mining businesses at the end of January and August 2022, order intake and sales in the Multi Tracks segment were €1.0 billion (prior year: €1.3 billion) and €0.8 billion (prior year: €1.0 billion) respectively. Most of the continuing businesses recorded year-on-year growth in order intake. Sales at all businesses increased year-on-year. Both Plant Technology and thyssenkrupp nucera achieved a significant improvement in sales thanks to progress on major projects. Automation Engineering also profited in sales from growing new business from the previous quarters. At Springs & Stabilizers sales were significantly higher year-on-year due to the passing-on of material and energy price increases. Adjusted EBIT in the segment was positive for the first time at €7 million (prior year: €(33) million) following successful restructuring and improved project execution. All continuing businesses showed earnings improvements.
Adjusted EBIT at Corporate Headquarters was €(41) million (prior year: €(36) million).
thyssenkrupp Group in key figures
On balance thyssenkrupp reported a net loss of €(203) million in the 2nd quarter 2022/2023 (prior year: €587 million). This includes impairment charges of just under €350 million at Steel Europe which had to be recognized due to the significant rise in interest rates and the associated higher cost of capital. After deducting minority interest, net income in the 2nd quarter was €(223) million (prior year: €565 million); earnings per share were €(0.36) (prior year: €0.91).
As expected, free cash flow before M&A improved significantly compared with both the prior quarter (€(149) million) and the prior year (€(555) million) due to lower funds tied up in net working capital, but was still negative at €(216) million. Taking into account the dividend payment, the Group's net financial assets at March 31, 2023 decreased accordingly to €2.9 billion (December 31, 2022: €3.3 billion). After repayment of a €1.0 billion bond at the beginning of March 2023, thyssenkrupp continues to have a very good liquidity situation with cash and cash equivalents and unused committed credit lines totaling €7.4 billion.
"Thanks to our measures to restructure and improve performance we are well on track to achieve our free cash flow target before M&A in the current fiscal year. We continue to work at full speed to extract the full potential from the businesses and actively support the implementation of the respective future plans. Performance remains our top priority - we're staying on track," said Klaus Keysberg, CFO of thyssenkrupp AG.
Equity amounts to €14.0 billion (December 31, 2022: €14.5 billion). In addition to the net loss for the period, negative effects from currency translation had a reducing effect. The equity ratio remains a comfortable just under 40 percent.
Forecast for 2022/2023
Subject to the limited reliability of planning due to the macroeconomic and geopolitical uncertainties, thyssenkrupp has confirmed its 2022/2023 forecast for adjusted EBIT and net income: Adjusted EBIT is expected to be in the mid to high three-digit million euro range (prior year: €2.1 billion). The Group aims to achieve at least break-even in net income. This includes the impairment charges at Steel Europe, which in the 2nd quarter relate in particular to higher capital costs due to the recent further rise in interest rates.
For free cash flow before M&A, the estimate for the full year has firmed up. With further outflows for restructuring and capital expenditures higher than a year earlier, the Group now expects an increase to a slightly positive figure (prior year: €(476) million, previously: at least break-even).