4 Min Read
ESSEN, Germany (Reuters) - ThyssenKrupp's (TKAG.DE) chief executive Heinrich Hiesinger vowed to fix problems at Germany's biggest steelmaker, after a disastrous overseas foray and corruption allegations that led him to oust half its management board.
The former Siemens (SIEGn.DE) manager, who last year became the first Thyssen boss from outside the steel industry, has faced an uphill battle to turn the sprawling steel giant into a leaner company focused less on slabs and more on technology, plant parts and elevators.
He told investors on Tuesday a "great deal" had gone wrong at Thyssen, which has been hampered by a downturn in Europe and ballooning losses at its plants in Brazil and the United States.
The ill-fated Steel Americas project cost the company billions of euros and will be sold in the next year, the company said, as it continues to shift investment into higher margin products like elevators, plant components and submarines.
"If we now just continue with business as usual, we will be making a great mistake," Hiesinger said on Tuesday, the day after reporting a 4.7 billion euro ($6.08 billion) full-year loss mainly due to a hefty writedown on the U.S. and Brazilian steel mills, its second in two years.
It was also forced to scrap its full-year dividend for the first time in its history.
Thyssen shares fell at the open then bounced back, trading 6.9 percent higher at 17.4 euros by 1430 GMT and making them the biggest gainer on Germany's blue-chip DAX .GDAXI index.
"Although the initial reaction may be negative, our conviction is that this will be the entrance into a new era," Westend Brokers analyst Eerik Budarz said.
Others were less positive, doubting Thyssen's pledge to save 2 billion euros over three years.
"For years, strategic mistakes were made at ThyssenKrupp, and now there are consequences," Henning Gebhardt, head of DWS's European equity fund business. "There are a number of corporate governance issues that we pointed out time and again. Now the company has its back to the wall."
Thyssen said it had sufficient finances for the coming years but was "close to the line" in terms of a credit rating downgrade to junk.
Pleasing investors, Thyssen said it would complete the long-awaited disposal of its U.S. and Brazilian steel mills in the coming financial year, with a sale possible by May.
The Steel Americas project, which cost Hiesinger's predecessor Ekkehard Schulz and the company's steel chief Edwin Eichler their jobs, had been meant to carve out new markets.
But it was blighted by cost overruns, poor project management and demand which fell short of expectations.
"The disaster with Steel Americas shows that our leadership culture has failed in many areas of the company," Hiesinger said, adding "old boys' networks" and blind loyalty were more important to management in the past than business success.
Thyssen wrote down the value of the mills, which lost about 1 billion euros in the financial year ended September 2012, by almost half to 3.9 billion euros.
Analysts said the move brought the book value of the mills, bundled into the Steel Americas business, closer to a more realistic figure. Cash from the sale will be used to slash Thyssen's 5.9 billion euro debt burden and invest in growth businesses like elevators.
Thyssen said last week that three management board members would step down, citing the losses at Steel Americas, corruption allegations and a cartel probe.
None of the three executives has been linked personally to the corruption and cartel allegations, which relate to areas of business they oversaw.
Thyssen's finance chief Guido Kerkhoff said there were still "more than a handful" of bidders for Steel Americas and said there were offers for the individual mills as well as the business as a whole.
($1 = 0.7736 euro)
Additional reporting by Clara Ferreira Marques and Kathrin Jones; Editing by Erica Billingham and David Cowell