Negative impacts of coronavirus pandemic already in the 1st half 2019/2020

The performance in the 1st half of the current fiscal year was significantly impacted by the initial effects of the coronavirus pandemic. In addition, the weak automotive market in particular as well as price and volume losses in the materials businesses had a negative impact on performance. Progress is being made with the transformation. The steel strategy and restructuring measures are being implemented. The Elevator transaction is proceeding on schedule and closing is expected by the end of the 2019/2020 fiscal year.

Unless otherwise stated, all figures relate to the continuing operations, i.e. excluding the Elevator Technology business area and individual units from Corporate Headquarters reported as discontinued operations.

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Order intake: €15.0 billion

Order intake in the 1st half decreased significantly by 8 percent year-on-year. The decline at the materials businesses was due to lower volumes and prices and the impacts of the pandemic. But the capital goods businesses were also down from a year earlier, in part due to a pandemic-related drop in demand, for example on the global automobile markets.

Prior year: €16.3 billion

Order intake is the total amount for all customer orders yet to be fulfilled. This amount is an important metric for assessing how well a company is doing. It provides an insight into future developments concerning production, shipping, and sales.

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Sales: €15.9 billion

The consequences of the pandemic are also reflected in sales, which were 4 percent lower year-on-year. Unlike in the first three months of the fiscal year, the robust capital goods businesses were unable to offset the sharp decreases at the materials businesses.

Prior year: €16.6 billion

Sales are the total value of all products and services that have been sold in a fiscal year. Increased sales do not necessarily indicate that the company is doing well. The benchmark for a company’s health is its profit (earnings after taxes).

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Adjusted EBIT: €(443) million

Adjusted EBIT was down significantly from the prior year. In the capital goods businesses, Automotive Technology and Industrial Components recorded declines, mainly due to a pandemic-related demand shortage. At Automotive Technology this resulted in production stoppages and plant shutdowns. At Industrial Components the continued strong earnings of the bearings business were unable to offset the decline in the forgings business. Plant Technology reported earnings that were negative but better year-on-year, while Marine Systems ended the 1st half with a small profit. The materials businesses continued the negative trend of the 1st quarter. Earnings at Steel Europe continued to suffer from significant margin and cost pressure. In addition, shipments to the automotive industry were lower due to the coronavirus pandemic.

Prior year: €55 million

Adjusted EBIT is short for earnings before interest, taxes, and special effects. Adjusted EBIT expresses the earning power of the company. It is similar to the operating result.

CEO Martina Merz:

“The coronavirus pandemic presents us with enormous challenges. The full impact of the crisis on our businesses is not yet foreseeable. But it is already clear that the economic disruptions will leave very deep marks.

We have made a lot of progress with our transformation in the last few months. The company has delivered. We have sold the elevator business and negotiated and begun implementing the steel strategy. We have also found solutions for all our businesses under review. The initiated restructurings are well on track. So things are moving forward. Coronavirus is slowing things down but we are keeping our foot on the gas.

We have developed a clear plan for the future and will be presenting the key elements to the Supervisory Board in the coming week. We will use the proceeds from the elevator transaction in the best possible way for the company. But it’s already clear now that the coronavirus will significantly reduce our leeway”.

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Net loss for the period: €(1.3) billion

The full Group ended the 1st half with a substantial loss, significantly down from the prior-year figure. This was due to our negative operating performance and restructuring expenses in connection with “newtk”.

Prior year: €(93) million

The net loss for the period is the balance of all income and expense of a company for the respective period – in this case the first six months of the fiscal year. Specifically, net loss is a result after interest and taxes. A positive balance is defined as net income.

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Free cash flow before M&A: €(2.7) billion (full Group)

Free cash flow before M&A remained significantly negative and was down €0.2 billion from the prior year. The main reasons for this were the operating performance of the businesses and the payment of the fine in the heavy plate cartel case in the amount of the recognized provisions of €370 million.

Prior year: €(2.5) billion

Free cash flow is an expression of a company’s financial strength and indicates whether the company can reduce debt on its own and make the necessary capital expenditures in the future. Free cash flow before M&A excludes deposits and withdrawals resulting from acquisitions and disposals of businesses.

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Net financial debt: €7.5 billion

Net financial debt increased to €7.5 billion at March 31. This was due to the significantly negative free cash flow before M&A and the adoption of the new accounting standard IFRS 16 (lease obligations). At March 31 thyssenkrupp had available liquidity of €4.5 billion.

On May 8, 2020 the company concluded a credit line of €1 billion from the KfW special program with a consortium of KfW and other banks. The credit line will additionally secure liquidity during the coronavirus pandemic until the cash inflow from the Elevator transaction.

September 30, 2019: €3.7 billion

Net Financial Debt is the portion of a company’s overall debt not covered by available cash and current financial assets.

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Total equity: €1.2 billion

Total equity at March 31 was around €1 billion lower than at September 30, 2019. This was mainly due to the net loss in the 1st half.

September 30, 2019: €2.2 billion

Total equity is defined as the share of assets available when all debts, liabilities, and debt capital are subtracted. The higher a company’s total equity is, the better. This increases the confidence of banks and investors, as potential losses can be more easily absorbed.

Forecast 2019/2020

Against the background of the coronavirus pandemic and the associated impacts on the economy as a whole, the sales and earnings performance of thyssenkrupp’s businesses for the remaining months of the fiscal year cannot currently be predicted in full. It was for this reason that the company withdrew its forecast for the current fiscal year at the end of March.

It is already foreseeable that due to the temporary plant closures and production cutbacks by customers in the automotive industry, sales from continuing operations will decline significantly, above all in the 2nd half (prior year, continuing operations: €34.0 billion). As a result, adjusted EBIT from continuing operations is expected to be strongly negative (prior year, continuing operations: €(110) million). In the 3rd quarter a loss in the high three-digit million € range is likely and up to a good €1 billion cannot be ruled out.

Due to the cash inflow from the Elevator transaction the Group’s free cash flow is expected to be significantly positive in the current fiscal year. The closing of the Elevator transaction will also have a significant positive effect on net income, with a corresponding positive effect on equity and on the full Group’s net financial debt.