ThyssenKrupp faced down criticism on Friday over the more than €2bn writedown at its Brazilian steel plant, as management hinted there were no immediate plans to exit the troublesome project.
Investors at the steel company’s annual general meeting took their first opportunity to express their anger with ThyssenKrupp’s board after the company in December revealed a €1.8bn net full-year loss, arising chiefly from cost-overruns and delays at the Brazilian steel mill.
Overseeing his first AGM since taking over as chief executive, Heinrich Hiesinger acknowledged there would be no quick fix to the losses in Brazil, which have hindered his plans to overhaul and rebalance the conglomerate via investments in less cyclical technology.
Mr Hiesinger’s bid to cut debt by hiving off businesses representing more than one-fifth of the company’s €49bn revenues has won investor support and his short tenure has also excused him from taking the blame for the losses in Brazil.
His long-serving predecessor, Ekkehard Schulz, who steered the Brazilian expansion, stood down from the company’s supervisory board last month. Mr Schulz acknowledged he had “made mistakes” and said he “took responsibility” for the problems in an interview published on Friday in Handelsblatt.
The cost of the steel mill near Rio Janeiro exploded under Mr Schulz’s tenure from €3bn to €5.2bn and the plant continues to generate losses as it is not yet operating at full capacity or with full energy and raw material efficiency, requiring ThyssenKrupp to buy additional electricity, gas and coke.
Mr Schulz insisted that he had trusted the wrong people and had received false information. An external review concluded this week that ThyssenKrupp’s management and supervisory boards had not breached their duty of care.
Still, several investors criticised Gerhard Cromme, ThyssenKrupp’s chairman and one of Germany’s most influential businessmen. Mr Cromme is also chairman of Siemens.
“The supervisory board must also take responsibility for its decisions. If it cannot, then we need another supervisory board,” said Hans-Martin Buhlmann, head of VIP, a German shareholder advisory group.
Mr Cromme said the board had carried out its supervisory function properly but conceded that responses to its inquiries about the Brazilian venture had in hindsight proved to be “too optimistic, incomplete and partly false”.
He sought to placate investors supportive of Mr Schulz, however, by praising the former chief executive’s service and noting that it was his sole decision to quit the board.
As a thunder and hail storm rattled the roof of an already stormy conference centre, Mr Hiesinger again declined to give a full-year outlook due to economic uncertainty stemming from the eurozone debt crisis.
ThyssenKrupp, which makes steel, automotive and engineering parts, plant technology and elevators, warned that steel customers had continued to reduce inventories during the first quarter, causing pressure on prices and volumes. However, demand for its technology products is expected to help offset some of the impact of the slowdown in materials.
ThyssenKrupp’s chief conceded that the Steel Americas division would again record a “significant” full-year loss. Nevertheless, he declined to entertain speculation that the company might sell its US and Brazilian steel mills, saying he remained convinced of the company’s prospects in the flat steel segment. “[The project] has a future,” he insisted.
ThyssenKrupp’s chief told analysts last month that he did not rule out a sale but said the essential precondition for any move was the full operation of the Brazilian plants.
The stock fell more than 4 per cent in early trading but later was flat at €21. ThyssenKrupp publishes first-quarter results on February 14.
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