Thyssenkrupp flags $1.8 billion cash gap as restructuring drags on

A crane operator lifts up a finished steel coil at the storage and distribution facility of the German steel maker in Duisburg, Germany

Thyssenkrupp (TKAG.DE) on Wednesday flagged a negative free cash flow of up to 1.5 billion euros ($1.8 billion) in its current fiscal year, citing restructuring costs as the German conglomerate tries to simplify its sprawling set-up.

Shares of the steel-to-submarines group fell as much as 7.4% on the outlook for free cash flow before mergers and acquisitions (M&A), which is now expected to be a negative 1.2-1.5 billion euros in the year to September.

It had previously forecast the measure to narrow towards negative 1 billion euros from negative 5.5 billion last year.

Thyssenkrupp is trying to streamline its structure after years of underperformance. It sold its elevators division, its most profitable business, to private equity last year in a bid to survive, and more recently disposed of two smaller units.

The cash flow outlook overshadowed operational improvements, which showed Thyssenkrupp swung to an operating profit in its third-quarter on the back of high materials prices and automotive demand.

In the April-June period, adjusted earnings before interest and tax (EBIT) came in at 266 million euros, compared with a 693 million loss last year when the pandemic took its toll on the group.

At Thyssenkrupp’s steel division, which could be spun off next year, adjusted EBIT was 19 million euros in the quarter, compared with a 309 million loss a year earlier.

“This is a good thing, but our long-term contract structures mean there is a delay in increased raw material and steel prices feeding through to our revenues and earnings,” finance chief Klaus Keysberg said.

Long-term steel contracts mean market developments take about half a year before showing up in Thyssenkrupp’s accounts, separating it from peers such as Salzgitter (SZGG.DE), which on Wednesday posted its highest first-half pre-tax profit in 13 years.

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