Steel Mills

ThyssenKrupp Edging Toward Stability

Written by Sandy Williams

ThyssenKrupp AG finances are beginning to improve. Earnings before interest and tax (EBIT) more than doubled to €247 million ($338 million) in the first quarter FY 2013-2014 (ending Dec. 31, 2013).

Net debt dropped to €4.6 billion ($6.3 billion) from €5 billion ($6.8 billion) the previous quarter. ThyssenKrupp’s gearing ratio (net debt to equity) was 136.2 percent at the end of December, a drop of 64 percentage points from the end of the previous quarter primarily due to the capital increase in early December.

ThyssenKrupp has received all the regulatory approvals for the $1.5 billion cash sale of Steel USA said Heinrich Hiesinger in the ThyssenKrupp conference call and closing is expected in ThyssenKrupp’s second quarter. The divestment of Steel USA is expected to significantly reduce ThyssenKrupp’s debt and gearing ratio.

Orders and volume mix improved at Steel Americas during the first quarter (which ended at the end of December) after suffering delivery constraints from a blast furnace outage last year. Orders for Steel Americas in the first quarter were up 24 percent on a quarter-to-quarter basis and 9 percent year-on-year. Improvement was weighted heavier for Steel USA as opposed to CSA.

CSA slab production increased to 1.0 million tonnes in the first quarter (1.1 million tons), up 17 percent year-on-year. Of that production, 0.7 million tonnes of slabs were sent to the Alabama plant for processing while 0.3 million tonnes were sold to customers in North and South America. Alabama sold 0.7 million tonnes during the quarter.

The order book at CSA in Brazil is well loaded, said Hiesinger, with 20 percent of the orders from outside of the Alabama plant. On completion of the sale of the Alabama mill, shipments from CSA to Alabama will be reduced from 700,000 tonnes to 500,000 tonnes/quarter as agreed in the Consortium agreement. Hiesinger says the strong order book for Brazil and the 700,000 tonnes it sells to California Steel Industries per year will help until the 200,000 ton gap can be bridged.

CSA needs 3.4 million to 3.5 million tonnes of production (3.7-3.85 million tons) annually to keep both blast furnaces operational said Hiesinger. “Today we have a strong confidence that we have really secured enough orders in local markets, in addition to the 2 million which we have agreed to the consortium, to at least minimally achieve that level.”

Commenting on currency turmoil and demand in emerging markets Hiesinger said, “We do not see any consequences of the foreign exchange turmoil term which we have seen in emerging markets. On the contrary the momentum in China and others are moving up. We see only one market where we see a reduction in customer demand, which is Brazil, both in automotive and infrastructure, but we do not relate this to any financial turmoil.”

Hiesinger attributed some of the weaker demand in Brazil to the end of the infrastructure boom related to the soccer world championships scheduled for this summer. Softening in the automotive market is also evident, possibly related to the uncertainty over coming elections in the second half of 2014. “Going forward, all emerging markets are on track with gross momentum,” said Hiesinger with a “flatter to weaker situation for Brazil, which we believe will come back next year.”

Latest in Steel Mills