* Expects 2013/14 net earnings at breakeven to slightly
* Now sees 2013/14 adjusted EBIT doubling
* Q3 adjusted EBIT 398 mln euros vs 357 mln forecast
* Shares up 1.2 percent, outperform German blue-chips
(Recasts, adds analyst comment, details)
FRANKFURT, Aug 14 German steel and industrial
group ThyssenKrupp said it could make its first net
profit in three years, as Chief Executive Heinrich Hiesinger's
recovery strategy begins to pay off.
ThyssenKrupp on Thursday raised the outlook for its
financial year ending in September to "breakeven to slightly
positive net income," after a turnaround at its steel mill in
Brazil, cost cuts and demand for elevators and chemicals plants
bolstered third-quarter earnings.
Hiesinger has been trying to turn ThyssenKrupp around after
a slump in the global steel sector and a failed foray into the
Americas caused losses and prevented the group paying
shareholders a dividend for two years in a row.
He has cut costs and sold non-core businesses to reduce the
company's exposure to the volatile steel sector and close a gap
with more profitable industrial peers.
Commerzbank analyst Ingo-Martin Schachel said the new profit
outlook was "a psychologically important milestone" and stuck
with his "buy" recommendation on ThyssenKrupp's stock.
Its shares were 1.2 percent higher on Thursday afternoon,
outperforming Germany's blue-chip DAX index, which was
up 0.5 percent.
ThyssenKrupp's previous forecast was for a significant
improvement in earnings after posting a net loss of 1.5 billion
euros ($2 billion) in 2013.
ThyssenKrupp generates more than 70 percent of sales from
industrial businesses making products such as car parts,
elevators, submarines and fertiliser plants, up from less than
60 percent when Hiesinger took the helm more than three years
ago. The rest still comes from its steel businesses.
ThyssenKrupp also raised its outlook for 2014 adjusted
earnings before interest and tax (EBIT), saying it expects the
figure to double this year from 586 million euros in 2012/2013,
which would put it just below analysts' average forecast of 1.18
RELIEF IN BRAZIL
ThyssenKrupp's improved outlook comes after a series of
frustrating setbacks for Hiesinger. The company's deteriorating
finances forced him to ask shareholders for cash late last year,
major deals have only been partially successful and compliance
issues emerged that were costly and embarrassing.
He tried to sell ThyssenKrupp's Steel Americas business but
was only able to find a buyer for half of it - a processing
plant in the U.S. state of Alabama - leaving it with a
loss-making mill in Brazil.
In ThyssenKrupp's third quarter ended June, however, the
Brazilian plant unexpectedly returned to underlying operating
profit, helping the group nearly triple its adjusted EBIT to 398
million euros, beating analysts' average forecast of 357
The results showed that restructuring in Brazil was making
progress, which could eventually allow ThyssenKrupp to make
another attempt to sell the plant.
Group earnings were also boosted by a jump in core earnings
at the European steel business - where ThyssenKrupp is cutting
more than 2,000 jobs - restructuring at the elevators business
and demand for fertiliser plants.
There was little support from markets, where rolled steel
prices fell further and recovery is expected to be slow and
fragile. European demand is still below pre-crisis levels, and
quarterly sales at ThyssenKrupp's European steel business
dropped 13 percent on low prices as well as disposals.
The businesses that make elevators and factories, which
together accounted for just over 25 percent of group sales in
the third quarter, are ThyssenKrupp's most profitable, with an
adjusted EBIT margin of 12 percent each.
"We are on track, net profits are recovering," finance chief
Guido Kerkhoff said on Thursday. But he said turnaround efforts
needed to continue and the next goal would be to reach positive
free cash flow.
The stock has gained about 20 percent so far this year as
the company slowly recovers, but it is still down almost 30
percent since Hiesinger took over in 2011.
($1 = 0.7483 euro)
(Reporting by Maria Sheahan; Editing by Erica Billingham)