By Ruth Bender 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (August 9, 2019).

German steel-to-elevators group Thyssenkrupp AG on Thursday lowered its full-year earnings target as price pressure in steel, slowing demand in the automotive sector and higher raw-material costs dragged down profits in the latest quarter.

Thyssenkrupp's warning is the latest example of a German export-reliant industrial group suffering from a worsening economy weighed down by global trade frictions. Siemens AG last week warned that a weakening global economic environment was dragging down its key industrial businesses, while chemicals maker BASF SE in July slashed its profit forecasts citing the ongoing Chinese-U.S. trade frictions and sluggish demand in the auto market.

For Thyssenkrupp, the warning comes at a delicate time as the company has for months been trying to come up with a plan to reinvent itself as a more profitable organization.

Under pressure from activist investors, the group, which makes steel, elevators and auto components, abandoned in May a previous plan to split the company into two separately-listed units. Now it is working on a plan to list its lucrative elevators business and is cutting costs drastically to improve its performance.

Additionally, Thyssenkrupp said Thursday that it placed under review three industrial business operations that it currently sees as uncompetitive and where market conditions are particularly tough: springs and stabilizers, which makes chassis components for auto component makers, system engineering, which makes production lines for auto companies, and heavy plate, part of the steels business.

Thyssenkrupp said these three businesses contribute 4% of the group's revenue but burn a lot of cash, accounting for a quarter of the company's expected negative cash flow this year.

While the company has been trying to overhaul itself, results have disappointed again and again. Last year, Thyssenkrupp issued two profit warnings.

When announcing the new strategic plan in May this year, Thyssenkrupp already warned of a net loss for the full year after integrating its steel division back into forecasts when it abandoned the split and a planned European joint venture with India's Tata Steel (500470.BY).

In the quarter to the end of June, Thyssenkrupp posted a net loss of 94 million euros ($105.3 million), a slight improvement on the EUR131 million posted the same quarter last year, while adjusted earnings before interest, a key number looked at by analysts, fell 32% to EUR226 million. Sales were flat at EUR10.78 billion.

Chief Executive Guido Kerkhoff said the group's performance so far this year was "not satisfying", but said that was why its plan was exactly the right one. For the full financial year Thyssenkrupp now expects adjusted EBIT to reach around EUR800 million, compared with a previous forecast of between EUR1.1 billion and EUR1.2 billion.

Write to Ruth Bender at ruth.bender@wsj.com

 

(END) Dow Jones Newswires

August 09, 2019 02:47 ET (06:47 GMT)

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