Thyssenkrupp (OTCPK:TYEKF) (OTCPK:TKAMY) suffered a significant -9.1% decline in Frankfurt trading on Wednesday, hitting its lowest point in over a year. The sharp drop followed the company’s decision to lower its annual profit and sales outlook, along with an additional ~€200M in writedowns on its struggling steel business.
These impairments led to a net loss of €314M in FQ1, a stark contrast to the anticipated €33M profit. Revenues also dropped by 9% to €8.18B, falling short of the forecasted €8.64B.
The company revised its expectations, now projecting a break-even net profit for the current fiscal year. This is a significant shift from the previous forecast of a low-to-mid triple-digit million euro profit. Additionally, it anticipates flat sales of around €37.5B, compared to the previous year, after initially targeting a slight increase.
New orders saw a decline of 13% during the quarter, amounting to approximately €8B. This drop is primarily attributed to economic factors, leading to price and demand-induced declines at the company’s Materials Services and Steel Europe unit.
Assessing the situation, Citi analysts commented, “The rate of cash burn in the quarter has accelerated, part of which was expected as seasonal, while the acceleration ahead of consensus estimates is likely to be a key challenge for its full-year guidance.”
Barclays analysts pointed out that rising interest rates are a “double negative” for Thyssenkrupp (OTCPK:TYEKF) (OTCPK:TKAMY), triggering further impairments at the steel unit. The bank estimates significant pension liabilities above €6B, which it sees as “the main hurdle for a steel deal.”