In the Wake of Successful 2008 Fiscal Year, ThyssenKrupp Braces for a Slower 2009
ThyssenKrupp AG (Dusseldorf, Germany) recently released its earnings report for both the final quarter and fiscal year of 2008, reports Industrial Info Resources (Sugar Land, TX). While sales amounts for the company were up from 2007, moving from $69.5 billion ($1 = 0.7859 euros) to $70.2 billion in the 2008 fiscal year, earnings before tax were slightly down, from $4.2 billion in 2007 to $4.0 billion in 2008.
ThyssenKrupp operates in five industrial segments: steel, stainless, technologies, elevators and services. While earnings for ThyssenKrupp’s steel and stainless segments were down compared to the previous year, earnings for the company’s other divisions were up:
? Steel: $1.96 billion, down from $2.11 billion in FY07
? Stainless: $160.2 million, down from $987.9 million
? Technologies: $741 million, up from $691 million
? Elevator: $564.4 million, up from a loss of $143.6 million
? Services: $953.2 million, up from $894.7 million
In the wake of this successful fiscal year, the company is bracing for a slower immediate future. “In the uncertain environment of the financial crisis we have reviewed our plans and targets for the current fiscal year 08-09,” said Ekkehard D. Schulz, Chief of the Executive Board, at the company’s recent Analysts’ and Investors’ Conference. “The downturn in the auto, machinery and construction industries will leave its marks on ThyssenKrupp. We therefore face a significant drop in sales in 2008-2009, the extent of which cannot yet be predicted. This will have a corresponding effect on earnings. Increasing uncertainty on the global financial and real markets makes it impossible to provide a quantifiable forecast at this time.”
Schulz additionally warned of the increasing growth of stainless imports from China. “In recent years,” he said, “China has built up capacities which exceed national and international demand now and in the medium term. This has had a massive impact on the entire world stainless market. Both here and in the carbon steel sector, unprofitable mills that meet neither environmental nor health and safety regulations are not disappearing from the market. …By building the new plant complex in the U.S. state of Alabama in conjunction with the existing cold rolling mill in Mexico, we aim to achieve cost and quality leadership in the North American stainless market.”
The steel complex spoken of by Dr. Schulz is located in Mount Vernon, AL and is scheduled to begin operation in 2010. The facility will consist of both a stainless steel mill and carbon steel mill. Although on schedule for completion, the project has suffered a budget overrun of about 30 percent in the stainless segment and 10 percent in the steel segment. Although anticipating decreased sales and earnings, Schulz nevertheless voiced a note of confidence in the future of the company. “In general it can be said that we have confidence in the future and in the systematic expansion of our competitive positions and growth areas. Nevertheless, our sales market in Western and Eastern Europe, North America, and Asia are in the grips of an economic recession. Our major customers, in particular the international auto makers, have already introduced massive production cutbacks. In other important sectors too, such as mechanical engineering, the signs are pointing to a downturn. With its global presence, innovative products high share of services, stable customer relationships and technology-based portfolio, ThyssenKrupp is well positioned.”
About the Author: "J. J." Johnson John
