Thyssenkrupp posted a net loss in the third quarter but said that with sales and orders each growing by 7 per cent it could "unlock" potential in the years ahead.
The German maker of elevators, submarines and car components posted a net loss of €131m last quarter, versus a gain of €254m one year earlier. Its Industrial Solutions unit recorded a loss of €213m, versus a gain of €6m a year before.
Adjusted EBIT, the main focus for analysts, fell 36 per cent from a year earlier to €332m. Operating margins were 3 per cent, down 2 percentage points from a year ago.
The two-century old group, facing heavy criticism from activist investors Cevian Capital and Elliott, lost both its CEO and chairman last month, just after signing a deal to carve out and spin off its steel-making division.
It had already issued a profit warning on July 31, citing cost overruns in its Industrial Solutions unit. It said adjusted EBIT this year would be around €1.8bn, versus a prior range of €1.8bn to €2bn. Analysts had been expecting about €2bn, following a figure of €1.72bn a year ago.
"We see a mixed picture," said Guido Kerkhoff, finance head and interim CEO. "The bottom line is, that we are not satisfied with the current results. There’s no point in sugar-coating it. Notably the cash flow is unsatisfactory, and that is not a situation which can be sustained long term. We have to improve significantly across all our businesses. And that is what we are now working hard to deliver.”
Free cash flow before M&A remains negative. In nine months the company burned through €1.6bn, citing "lower order intake and large expenditures from the order backlog at Industrial Solutions.”
The group said it is targeting higher margins in each of its units. Components Technology margins are targeted to grow from 5 per cent last year to 7 per cent by 2020. Elevator Technology margins are planned to rise from 12 per cent to 13 per cent. Industrial Solutions margins are targeted to triple from 2 per cent last year to 6 per cent by 2020. Materials Services margins are planned to grow to around 3 per cent, from 2.3 per cent last year.
“We now have to focus on what we have in our own hands,” Mr Kerkhoff said. “There is huge potential in Thyssenkrupp’s businesses. It is our job to unlock that potential. If we work hard at it, we will be able to generate an annual cash flow of at least €1 billion from fiscal year 2020/2021. That’s a worthwhile goal. And that is what we are now setting out to achieve.”
Net sales last quarter rose 7 per cent to €11.1bn. Order intake also rose 7 per cent to €10.9bn.
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