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UPDATE 1-Kloeckner CEO says parts of Thyssenkrupp Materials would be good fit
October 25, 2017 / 12:53 PM / 2 months ago

UPDATE 1-Kloeckner CEO says parts of Thyssenkrupp Materials would be good fit

* Analysts expect Thyssenkrupp might put unit up for sale

* Unit is twice as large as Kloeckner & Co

* Kloeckner shares down 5.5 pct after Q3 results (Adds CEO quote, details on M&A, Thyssenkrupp, shares)

FRANKFURT/DUESSELDORF, Oct 25 (Reuters) - German steel distributor Kloeckner & Co sees parts of Thyssenkrupp’s Materials Services unit as a good strategic fit, but has not been approached about buying some of its assets, its chief executive said.

Analysts expect that Thyssenkrupp could at some point decide to sell its Materials Services business, which made 11.9 billion euros ($14 billion) of sales in its 2015/2016 fiscal year, more than twice the 5.7 billion Kloeckner generated in 2016.

“The unit is twice as big compared to our company,” Kloeckner CEO Gisbert Ruehl told journalists after presenting third-quarter results on Wednesday. “But it’s certainly clear that it could be interesting for us in some way.”

About two thirds of Materials Services’ sales, or 7.7 billion euros, come from Thyssenkrupp’s materials distribution business, whose rivals include Kloeckner, Salzgitter and U.S.-listed Reliance Steel & Aluminum.

Thyssenkrupp declined to comment on Ruehl’s remarks.

Analysts expect that as Thyssenkrupp plans to merge its European steel operations with those of Tata Steel, Materials Services will no longer be part of Thyssen’s core business and might be put up for sale at some point.

Last month, Thyssenkrupp CEO Heinrich Hiesinger said the group was in no hurry to make any strategic decisions with regard to its Materials Services unit, adding it was currently focused on the steel tie-up with Tata Steel.

Both groups, which are also Kloeckner & Co’s two biggest suppliers of flat steel, last month announced plans to merge their European steel operations to create the continent’s second-largest player after ArcelorMittal.

Ruehl said that any form of consolidation was good for the sector. “We expect our good working relationship to continue going forward,” he said.

Shares in Kloeckner were down 5.5 percent, the biggest decliners among German smallcaps, after its results on Wednesday, with analysts pointing to the prospect of weak fourth-quarter core earnings after the group kept its outlook.

The firm still expects earnings before interest, tax, depreciation and amortisation (EBITDA) to grow by at least 10 percent in 2017, which would bring it to at least 216 million euros.

After nine months, EBITDA already stood at 187 million euros, suggesting the group might earn less than 30 million in the last three months of 2017, far below the 44 million Thomson Reuters I/B/E/S estimate.

$1 = 0.8496 euros Reporting by Christoph Steitz and Tom Kaeckenhoff; Editing by Susan Fenton

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