Steady Profit Recovery at Thyssenkrupp - Steel Division's Progress and Challenges
Steel manufacturing giant, Thyssenkrupp, reports earnings again after losses; however, their steel division remains in turmoil. - Steel Sector Remains in Turmoil as Thyssenkrupp Announces Profit Recovery
After six quarters of loss, Thyssenkrupp bounces back with a profit, largely due to the sale of Thyssenkrupp Electrical Steel India, churning a post-tax profit of about 270 million euros. The company remains optimistic, maintaining its forecast of an operating profit between 600 million and 1 billion euros.
However, the second quarter profit plummeted to 19 million euros, a stark contrast to the 184 million euros of the previous year. The decline is attributed to weaker earnings and lower production utilization. The company's revenue also took a hit, coming in at 8.6 billion euros, compared to the previous year's 9.1 billion euros.
The ailing steel business continued to struggle, slipping into the red with a loss of 23 million euros, compared to an operating profit of 68 million euros the year prior.
Thyssenkrupp has been aggressively restructuring its steel division, aiming to boost competitiveness and future viability. Last year, the company revealed plans to trim 11,000 jobs. Daniel Kretinsky's firm EP Group has already secured a 20 percent stake in Thyssenkrupp Steel, with an additional 30 percent up for grabs.
CEO Miguel López describes the current business year as one of "decisions" and a "transition". He anticipates a more stable market environment and positive effects from the measures taken for the second half.
A Shift in Tactics: No Layoffs Ahead?
In a significant development, Thyssenkrupp has reached an agreement in principle with IG Metall, the powerful German metalworkers' union, aiming to prevent layoffs for operational reasons despite the planned job cuts or outsourcing of up to 11,000 jobs. The parties are currently engaged in intensive negotiations, with expectations of a collective bargaining agreement by summer 2025.
Looking Ahead: Kreuztal-Eichen Plant and Beyond
Thyssenkrupp's long-term plan for the Kreuztal-Eichen plant, currently under consideration, does not involve immediate closure. Instead, a location optimization concept is under scrutiny, with a decision on the plant's future expected by 2027 or 2028.
Financial Implications
The restructuring initiatives aim to improve financial performance by streamlining operations and enhancing competitiveness. Nevertheless, the European steel market poses challenges. Key financial repercussions include:
- Job Security: The no-layoff agreement could foster workforce confidence and stabilize financial outcomes.
- Investment Opportunities: Resolving wage agreements is essential for attracting potential investors, such as Daniel Kretinsky, bringing potential significant financial benefits.
- Divestment Opportunities: Thyssenkrupp is contemplating selling its materials trading business, which could net up to 2 billion euros, bolstering financial stability.
In sum, while Thyssenkrupp's steel division is on the road to restructuring, hurdles remain, particularly in the tumultuous European steel market. The financial performance is expected to improve through strategic maneuvers and potential divestments. Stay tuned for more updates!
To enhance its financial stability, Thyssenkrupp is considering selling its materials trading business, which may generate up to 2 billion euros. Additionally, by reaching an agreement with IG Metall to prevent layoffs, the company aims to foster workforce confidence and stabilize financial outcomes.
In light of the restructuring initiatives, Thyssenkrupp plans to boost competitiveness through vocational training programs, honing employee skills for the steel industry. These trainings are pivotal in fostering a more agile and adaptable workforce, crucial for thriving in the dynamic business environment.
