German industrial giant Thyssenkrupp delivered a mixed financial update on Thursday, reporting lower sales but improved earnings, as cost-cutting measures began to take effect. The company also highlighted strong growth in its defense sector, benefiting from rising military spending.
Earnings Improve Despite Falling Sales
The firm posted a net loss of €33 million in the first fiscal quarter from October to December, a significant improvement from the €305 million loss recorded in the same period last year.
Sales declined to €7.8 billion from €8.2 billion, driven by weak demand and lower prices. However, adjusted earnings before interest and tax (EBIT) rose to €191 million, up from €151 million a year earlier.
Chief Financial Officer Jens Schulte credited the increase to the company’s focus on efficiency.
“The increase in EBIT is evidence that our structural measures to improve efficiency and reduce costs are delivering initial successes,” Schulte said in a statement.
Thyssenkrupp also saw an improvement in cash flow, reporting a free cash flow loss of €21 million, compared to a €531 million loss in the previous year. The company attributed the improvement to advance payments for a major marine project.
Defense Division Sees Strong Demand
One of Thyssenkrupp’s standout performers was its military shipbuilding unit, which benefited from increased defense budgets amid rising global security concerns.
The company reported a 50% increase in order intake, reaching €12.5 billion in the quarter.
As part of its restructuring efforts, Thyssenkrupp plans to spin off its marine division while retaining a stake, allowing it to capitalize on continued defense investment.
“Due to geostrategic developments, the segment expects that demand will keep rising in the future,” the company said.
Restructuring Efforts Continue
Thyssenkrupp CEO Miguel López reaffirmed the company’s commitment to restructuring, aiming to boost competitiveness and ensure long-term job security.
The firm is moving forward with plans to spin off its European steel business, which has struggled with volatility in commodity prices and demand.
López said the company’s transformation is driven by an ambition to create sustainable growth and strengthen its core businesses.
2024/2025 Forecasts Adjusted
Looking ahead, Thyssenkrupp adjusted its outlook for the 2024/2025 fiscal year.
- Sales are expected to decline by up to 3% or remain stable, compared to a previous forecast of up to 3% growth.
- Adjusted EBIT is projected between €600 million and €1 billion.
- The company expects to return to profitability, forecasting a net profit between €100 million and €500 million.
- Free cash flow is now expected to be between €0 and €300 million, a sharp improvement from previous estimates of a €200 million to €400 million loss.
Thyssenkrupp’s decarbonization technologies unit also showed promise, with strong year-over-year sales growth and significant long-term potential.
As Thyssenkrupp navigates market challenges, its restructuring, defense contracts, and strategic shifts will be key factors in determining its financial trajectory in the coming years.
