German steel and elevator maker ThyssenKrupp has turned the corner after some tough years. The conglomerate has returned to healthy profits after four years of restructuring - and has relaunched its brand.
On Thursday in the gritty west German manufacturing town of Essen in Northrhine-Westphalia, the giant Thyssenkrupp industrial conglomerate reported welcome financial results for the company's financial year, which closed at the end of September. Operating profits came to just under 1.7 billion euros ($1.8 billion), up by about a quarter on the previous year.
It was good news for shareholders, who have seen the company's fortunes improve in the wake of a change in corporate strategy that began in 2011 and a replacement of several key managers, initiated in late 2012. The changes corrected ThyssenKrupp's course after several difficult years which had threatened the company's survival.
A major restructuring in 2011 had hit the conglomerate's balance sheet with multi-billion euro losses ensuing from unsuccessful investments in new steel-making plants in Brazil and Alabama, USA. In the ensuing two years, the company sold off several divisions, including its stainless steel business.
Costs down, revenues up
The positive results reported Thursday were attributable in significant part to cost-cutting measures amounting to 1.1 billion euros. The company's elevator business added to the bottom line with strong sales growth. Net profits after all costs and taxes were deducted amounted to 309 million euros, a nearly 50 percent increase over the previous financial year. Shareholders will be paid a dividend of 15 euro cents per share, up from 11 cents the previous year.
Total sales rose to 42.8 billion euros - a four percent rise on the previous year. The catch was that analysts estimated sales would actually have declined by five percent, had it not been for the weak euro - which helped sales in overseas markets.
For CEO Heinrich Hiesinger, a former Siemens executive who has steered the company through a lot of turbulence since he took the reins five years ago, the most important number reported on Thursday was the positive net operating income. For the first time in nine years, ThyssenKrupp took in more revenues from product sales than it spent. That had been a key goal for Hiesinger in his campaign to restore the corporation's balance sheet.
The company still faces headwinds - perhaps less, now, from internal difficulties, and more from external factors. China's growth has been cooling off, the VW scandal puts a question mark over future sales to one of ThyssenKrupp's biggest steel customers, and the price of steel has recently declined. But giant, globally active corporations always face challenges - and whatever the shifting winds, it appears there's a steady hand on the corporate tiller.
Hiesinger faces pressure from a major shareholder, the Swedish investment group Cevian, which has bought into ThyssenKrupp over the past couple of years. Cevian is known as an active investor, and has obtained a seat on ThyssenKrupp's board. Some media reports have said Cevian, which owns about 15 percent of ThyssenKrupp's shares, is pressing for further reforms, including a possible spinoff of the conglomerate's steel-making division. Some analysts arguing that ThyssenKrupp's component businesses would be worth more to shareholders if the conglomerate were split up. But Heinrich Hiesinger doesn't see it that way.
ThyssenKrupp has sought to make the point that it has turned the corner using symbolic means as well as the hard evidence of its balance sheet. Alongside reporting its financial year's results, it has relaunched its logo - now with electric blue rather than darker Prussian blue, and more slender curves. The new logo is featured on mugs that formed part of a surprise goody bag that also included broschures and stickers, distributed to the firm's approximately 160,000 employees.
ThyssenKrupp is a company that has been a cornerstone of Germany's heavy industry since the beginnings of the country's industrialization in the 1890s. It emerged through the fusion, over the years, of three major corporate entities whose roots go back to the late 19th century, each bearing the family name of a renowned industrial pioneer: Thyssen, Krupp, and Hoesch. The fused company took on the name ThyssenKrupp in 1997.
Concerns in the late 2000s of the firm's viability after a number of major investments in building overseas steelworks went sideways had rattled German business, not just because of the company's large presence in the Ruhr valley - western Germany's industrial heartland - but because of fears that a failure of the company could be a harbinger of German de-industrialization, a fate that had befallen the United Kingdom decades earlier.
In that light, ThyssenKrupp's rebound under Heinrich Hiesinger has had wider more than saved the company and its thousands of production workers' jobs. The company's survival has reassured Germans who want to see their country remain amongst the world's leading industrial nations.
nz/uhe (DPA, Reuters)