Thyssenkrupp Ag (OTC) ((TKAMY)) has held its Q1 earnings call. Read on for the main highlights of the call.
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Thyssenkrupp AG’s recent earnings call displayed a mixed sentiment, highlighting the company’s strong performance in Marine Systems and promising restructuring efforts. However, this was tempered by challenges in the automotive sector and a lowered sales guidance due to market uncertainties.
Marine Systems New Orders
Thyssenkrupp’s Marine Systems division reported record-breaking new orders, securing four new submarines for the German government and a civil icebreaking scientific research vessel, Polarstern II. This achievement has pushed the order backlog to over €16 billion, underscoring the division’s competitive edge and growth potential.
Positive Free Cash Flow Trajectory
For the third consecutive year, Thyssenkrupp anticipates achieving positive free cash flows, marking a significant milestone not seen in the past 20 years. This expectation is bolstered by net prepayments received from Marine Systems, confirming the EBIT adjusted guidance and increasing the free cash flow outlook.
APEX 2.0 and Restructuring Success
The launch of the enhanced APEX program has led to improved Q1 results, focusing on structural performance improvement and execution resilience. These restructuring efforts are laying the foundation for future profitability.
Steel Europe Profitability
Despite facing sales challenges, the Steel Europe segment reported a significantly improved EBIT, supported by compensation for electricity prices and lower raw material costs, suggesting a favorable financial outlook.
Decarbon Technologies Growth
Thyssenkrupp’s Decarbon Technologies segment is experiencing a 10% organic growth, driven by advances in water electrolyzers and chlor-alkali businesses. Enhanced project execution has also contributed to a reduction in nonconformity costs.
Sales Decline in Automotive Technology
Sales in the Automotive Technology division declined by 10%, primarily due to difficult market conditions affecting volumes, leading to underutilization and increased personnel costs.
Lowering of Sales Guidance
In response to muted market conditions, particularly in the automotive sector, Thyssenkrupp has revised its sales guidance downward, reflecting a cautious approach to top-line growth while maintaining profit guidance.
Geopolitical and Market Uncertainties
The company continues to face geopolitical uncertainties and market challenges, particularly impacting the automotive industry, which remain a concern for future performance.
Working Capital Challenges
Thyssenkrupp is experiencing cash flow pressures due to increases in net working capital driven by pre-production investments and seasonal effects, especially in the Steel and Automotive segments.
Forward-Looking Guidance
For the fiscal year ’24/’25, Thyssenkrupp AG confirmed its EBIT adjusted guidance between €600 million and €1 billion, and raised its free cash flow before M&A guidance to between €0 and €300 million. This optimistic outlook is supported by a strong Q1 performance, despite a 4% year-over-year sales decline. The company maintains a strong balance sheet with a net cash position of €4.3 billion and an equity ratio of 35%. However, the outlook remains cautious, particularly due to challenges in the automotive sector and geopolitical uncertainties.
In summary, Thyssenkrupp AG’s earnings call reflected a balanced sentiment. While the Marine Systems division shows robust growth potential, challenges in the automotive sector and market uncertainties lead to a conservative sales outlook. The company’s restructuring efforts and positive cash flow trajectory provide a promising path forward amidst these challenges.
