Germany's Thyssenkrupp said March 16 it expects an impact on its business development as a result of direct and indirect effects of the war in Ukraine. Moreover, the war's economic consequences on the group's business development are also influencing the possible stand-alone solution for its steel business, it said in a statement.
"Thyssenkrupp AG remains convinced that the independent positioning of the steel business offers very good prospects for the future," the statement said. "Nevertheless, a statement on the feasibility is at present not possible due to the current economic conditions."
Just five weeks ago, on Feb. 10, the group had reported a good first quarter, with its turnaround "in full swing" despite some continued weakness in the automotive segment.
Thyssenkrupp CEO Martina Merz noted March 16 that the group had made progress in its restructuring -- which has involved several divestments -- evidenced by "substantial improvements in the current fiscal year up to the outbreak of the war. However, the consequences of the war will affect us and especially the steel business. Implementing the stand-alone solution in this current unstable environment is not possible at the moment."
Thyssenkrupp is Germany's biggest steelmaker.
Four restructuring transactions
Thyssenkrupp in recent times carried out four restructuring transactions, narrowing its portfolio. In 2021, it sold its mining business, its Carbon Components and Infrastructure businesses, and closed its heavy steel plate mill in Duisburg. In late January, it concluded the sale of its stainless steel plant (AST) in Terni, Italy, including the associated distribution organization, to Italy's Arvedi. The Elevator Technology business was divested in 2020.
The group has also suspended its forecast for the current fiscal year (2021-2022) with regard to free cash flow before M&A "due to present geopolitical and economic turmoil," it said, pointing to "limited forecasting ability with regard to free cash flow before M&A" because of the volatile environment.
"Although the group's sales from Russia and Ukraine are negligible at significantly less than 1 percent of total sales, the executive board estimates that the group's business performance will be impacted by the far-reaching macroeconomic and geopolitical consequences of the war in Ukraine," Thyssenkrupp said in the statement. "The executive board currently assumes that the global disruptions at various points in the supply chain will affect above all thyssenkrupp's steel and automotive supply businesses."
Materials trading benefits
Opposing developments in materials trading, which is benefiting from the current increase in raw material and material prices, and the countermeasures initiated will not be able to fully compensate for these impacts, the company continued.
"At the present time, the specific extent of the direct and indirect consequences of the war in Ukraine on the business development of thyssenkrupp is associated with high uncertainties," it said.
Until the start of the war, business development of thyssenkrupp in the first quarter and in the current second quarter of the fiscal year was going according to plan, the group's statement said.
However, "in March, initial negative effects occurred primarily in the steel and automotive supply businesses. At the present time, the executive board continues to assume that the adjusted EBIT for the second quarter will still be above the previous quarter. Free cash flow before M&A, on the other hand, will be more strongly impacted by negative price effects than previously expected."
Thyssenkrupp added that it remains committed to its decarbonization plans.
"This crisis also shows that the green transformation remains very important. The aim is to greatly reduce Europe's dependence on Russia and on fossil fuels overall, " Merz said in the statement. "We now expect a clear signal and concrete funding commitments from government for our plans to decarbonize the steel industry."
"The executive board of thyssenkrupp AG is appalled by the war in Ukraine," the statement said.