The Comeback and Continued Struggles of Thyssenkrupp's Steel Division
Steel giant Thyssenkrupp reports a return to profitability, yet its steel division encounters persistent hurdles. - Steel industry giant, Thyssenkrupp, reclaims financial success amidst ongoing turmoil in the steel sector.
It's about time! Thyssenkrupp's recent earnings reveal a net profit after six consecutive quarters of losses, primarily thanks to the sale of Thyssenkrupp Electrical Steel India, ringing in a post-tax profit of approximately 270 million euros. However, the steel division, called Steel Europe, remains on shaky ground, losing €23 million.
Thyssenkrupp hasn't veered from its projected operating profit of 600 to 1 billion euros. Yet, the second quarter's earnings clocked in at a mere 19 million euros, a steep drop compared to the previous year's 184 million euros. This decline is attributed to weaker earnings and reduced production capacity utilization. Revenue also took a hit, dropping to €8.6 billion from last year's €9.1 billion.
The steel business woes weighed down the overall earnings, resulting in a red figure from this sector—a sharp contrast to the operating profit of €68 million it reaped last year.
Thyssenkrupp's steel division restructuring has been moving forward, even with the planned shedding of 11,000 jobs. The EP Group, spearheaded by Czech businessman Daniel Kretinsky, has already grabbed a 20% stake in Thyssenkrupp Steel, with another 30% still to follow.
"We're still playing catch-up economically," CEO Miguel López explained, "but strategically, we're making the moves we need." López foresees a more balanced market situation in the second half and expects positive effects from the measures they've initiated.
Related: Thyssenkrupp, Crisis, Industrial Conglomerate, India, Steel Division, Business Year, Net Profit
Insights
- Thyssenkrupp's steel division is recovering, but it remains a challenge due to the high energy costs and economic conditions[1].
- The company is undergoing a significant restructuring phase, aiming to restore competitiveness, with job cuts and production capacity reductions a part of the plan[1][5].
- Thyssenkrupp is likely considering selling its materials trading business for up to €2 billion and potentially selling more stakes in the steel business to investors[2].
- The company is in negotiations with IG Metall, the trade union representing steelworkers, to finalize a restructuring plan that minimizes layoffs[2].
- Despite a challenging global economic climate, Thyssenkrupp anticipates a stable market environment in the second half of the year[1][3].
- To bolster its steel division's competitiveness, Thyssenkrupp could consider integrating community policies that support vocational training programs for its employees in the industry, particularly focusing on finance and business.
- As part of Thyssenkrupp's restructuring strategy, encouraging partnerships with local businesses for vocational training in the steel industry could help equip its workforce with the necessary skills to navigate potential economic challenges and contribute to the long-term success of the steel division.
