German steelmaker Thyssenkrupp is still running at “over 60%” capacity utilization, reiterating that there is no update on a steel joint venture or sale while talks with undisclosed partners are ongoing, CFO Klaus Keyberg said at a press call Aug. 13.
Thyssenkrupp remained vague on plans for the steel unit, only highlighting that the management would be talking to external partners. Keysberg also did not rule out a complete sale of the unit at during the call on the company’s fiscal third-quarter (April-June) earnings.
“Following weeks of a great deal of speculation, there is still no comment today. We are in talks, keeping our options open,” he said, responding to a question about Thyssenkrupp exiting the steel business entirely by saying: “the options are wide-ranging.”
The sale of the Elevator unit late July has improved Thyssenkrupp’s overall position, but Keysberg highlighted that the much needed cash injection of the sale worth Eur17.2 billion ($20.4 billion) would not last forever and that measures in steel in particular would be “rigorous.”
“Maybe that is a difference to the past — the measures are more detailed,” CFO Klaus Keysberg said.
“We have performed worse than our peers, you have to admit that. Restructuring has been overdue, it should have happened earlier,” Keysberg said.
Thyssenkrupp will carry on with its so-called “20-30” restructuring plan which entails staff cuts and investments to improve the product portfolio and quality.
Slow ramp up in line with customer demand
Current capacity utilization at the steelworks would be “over 60%” and slowly ramping up in line with the automotive industry. The blast furnace at semis producer HKM remains down, but will be restarted while other furnaces would then lower their output — although timing for this had not yet been determined.
Thyssenkrupp will continue to focus on the automotive industry, despite being one of the major reasons the steel unit underperformed, as there are “still long-term growth prospects.”
“Uncertainty is still high. We also don’t know what is going to happen to auto demand next year if buying incentives for consumers stop,” Keysberg said.
Keysberg hinted that a sale of the Materials Business into a JV would be off the table for now, and the unit remaining a core business for the group despite suffering from similar seasonal problems, high fixed costs and structural problems to the steel unit.
Production cuts become visible in Q3
Crude steel production at Thyssenkrupp decreased 26.11% year on year to 1.55 million mt in fiscal Q3, while HKM produced 24.2% less at 458,000 mt. Shipments of cold-rolled material dropped 30.1% to 1.16 million mt, hot-rolled production dipped 39.7% to 637,000 mt.
Italian special steel producer AS Terni produced 176,000 mt of steel in Q3, down from 222,000 mt a year earlier due to a temporary plant closure in April during the national lockdown in Italy.
Order intake in Q3 at the steel unit was down 57% year on year at Eur943,000 with significantly lower volumes across all industries, in particular the auto industry. Materials services also had a major drop in orders of 33% year on year to Eur2.24 million, although slightly mitigated by orders from the plastics industry.
The company expects a 10% increase in shipments for Q4, but also higher raw material prices, describing them as “still insufficient cost base.”
— Laura Varriale
