ThyssenKrupp takes another writedown on its Steel Americas business
Reuters reported that German steelmaker ThyssenKrupp took another writedown on the value its Steel Americas business, driving it to an unexpected quarterly loss but raising hopes it is closer to selling the troubled asset.
The firm said that it was cutting the book value of Steel Americas, which comprises a mill in Brazil and another in the United States, to EUR 3.4 billion from 3.9 billion, it was ready to accept a lower price and could be nearing a long anticipated deal.
Mr Heino Ruland analyst of Ruland Research said that "The precise figure of EUR 683 million indicates that the deal is imminent."
However, ThyssenKrupp shares were up 4% at EUR 15.715, among the biggest rises by a European blue chip stock.
Steel Americas has been a thorn in ThyssenKrupp's side for years, as the project cost more than expected to set up and then racked up losses as steel prices and demand were weakened by a faltering global economy.
Sources familiar with the matter said that ThyssenKrupp was in talks with Brazilian steelmaker CSN, as well as a consortium of ArcelorMittal, the world's biggest steelmaker and Japan's Nippon Steel over a potential sale of Steel Americas.
The sources said that both sets of bidders have offered more than USD 3 billion, but less than the book value at the time. US Steel and Nucor have put in bids just for the US mill.
Mr Heinrich Hiesinger CEO of ThyssenKrupp has been trying to offload the mills as he shifts investments to higher margin products and services, such as elevators, submarines and parts for manufacturing plants.
The writedown pushed ThyssenKrupp to an unexpected net loss of EUR 656 million for the fiscal second quarter through the end of March. Analysts had on average expected a profit of EUR 25.5 million.
Even excluding Steel Americas and other units up for sale, ThyssenKrupp remained in the red, posting a net loss that narrowed to EUR 89 million from EUR 164 million.
The operating margin of its continuing businesses shrank to zero from 3% a year earlier on a slump in steel prices, weak demand for car and wind turbine components and provisions it set aside to cover fines and claims related to a rail cartel.
ThyssenKrupp is nearing the end of a push to sell assets with a total of EUR 10 billion in annual revenue, and is also cutting costs and changing management structures in an attempt to return the company to growth and pay down debt.
It said that it would cut 3,000 of 15,000 administrative jobs as part of its savings plan.
Mr Hiesinger still faces an uphill battle as the global economy remains weak and after a series of setbacks and scandals caused him to axe half his management board late last year.
Meanwhile, ArcelorMittal posted a smaller than expected 26% drop in Q1 core earnings last week, cushioned by cost cutting.
Source - Reuters