Thyssenkrupp's €1 Billion Impairment in Steel Division

By Christoph Steitz and Tom Käckenhoff
ESSEN, Germany (Reuters)

Thyssenkrupp has announced a new €1 billion ($1.06 billion) impairment on its struggling steel division, citing a deteriorating industry outlook marked by weak demand and increased competition from Asia.

This marks the second impairment in two years for Thyssenkrupp’s steel sector. Ongoing negotiations are underway with Czech billionaire Daniel Kretinsky, who currently owns a 20% stake in this division, to possibly increase his stake to 50%.

Similar to other German industrial firms, Thyssenkrupp is grappling with a slowing global economy, rising competition from China, and escalating costs. Consequently, the company is actively seeking new investors for both its steel and warship divisions.

Steel production is known for being highly energy-intensive, facing challenges from high power costs and inexpensive Asian competitors. Moreover, it requires considerable investment—billions of euros—to reduce emissions and shift toward renewable energy sources in steelmaking.

CEO Miguel Lopez stated, "In respect of our main strategic issues, the current fiscal year will be a year of decisions – especially for Steel Europe and Marine Systems."

If negotiations for a 50:50 stake with Kretinsky do not succeed, he can withdraw from the deal through his energy holding EPCG. Discussions are contingent upon a new business plan for the unit, currently in development.

Despite the impairments leading to a €1.5 billion net loss for 2024, Thyssenkrupp reported unexpected free cash flow of €110 million before mergers and acquisitions, mainly due to advanced payments from clients in its Marine Systems division.

Thyssenkrupp shares, which have plummeted 41% year-to-date, rose by 8.4% in morning trading, marking the most significant increase among German midcap stocks. The conglomerate, which produces everything from submarines to car parts, had anticipated a negative free cash flow of around €100 million before M&A—an indicator of the company's operational performance.

Shares of Thyssenkrupp Nucera, which is majority-owned by Thyssenkrupp, also saw an 8.2% increase after the group issued a positive trading statement on Monday.

($1 = 0.9438 euros)