OREANDA-NEWS.  The industrial and technology group ThyssenKrupp is on track to meet its targets for the 2014/2015 fiscal year. The Executive Board expects a clear improvement in adjusted EBIT, net income and free cash flow before divestments. The full-year forecast has been confirmed on the basis of the Group's good operating performance in the first 9 months and in the 3rd quarter of the 2014/2015 fiscal year. Sales, adjusted EBIT and free cash flow before divestments increased again significantly in the reporting period. "The further earnings improvement reflects the progress we have made in implementing measures to increase efficiency. We are establishing a culture of increased performance enhancement in the Group," says ThyssenKrupp CEO Dr. Heinrich Hiesinger.

In a continuing challenging economic climate order intake came to ˆ31.1 billion in the first 9 months, up slightly from the prior year (ˆ31.0 billion), with the Group benefiting from positive exchange rate effects thanks to the global positioning of its capital goods businesses. On a comparable basis, i.e. excluding currency and portfolio effects, new orders declined by 6 percent. Besides lower material and steel prices, the reason for this decline was a major shipbuilding order in the 1st quarter of the prior year. Also, against the background of volatile and falling oil and raw material prices, customers of Industrial Solutions showed a reluctance to place orders. Orders at Components Technology and Elevator Technology increased year-on-year, with the elevator business again reporting record new orders.

Sales in the first 9 months increased year-on-year by 7 percent to a total ˆ32.2 billion (prior year ˆ30.1 billion). Positive exchange rate and portfolio effects and solid organic growth in the components and elevator businesses clearly outweighed the effects of steeply declining material and steel prices. On a comparable basis the increase was 1 percent.

Adjusted EBIT from continuing operations in the first 9 months increased significantly by 33 percent to ˆ1,261 million (prior year ˆ945 million). The 3rd quarter contributed ˆ539 million to this, improving by 33 percent compared with the 2nd quarter. The main driver of this improvement was the successful implementation of efficiency programs. Altogether the ThyssenKrupp Group generated net income of ˆ279 million in the first 9 months (prior year ˆ242 million). This includes the write-down taken in connection with the sale of the VDM group in the 2nd quarter 2014/2015. After deducting minority interest, net income for the period was ˆ297 million (prior year ˆ244 million); earnings per share came to ˆ0.52 (prior year ˆ0.44).

At ˆ(499) million, free cash flow before divestments in the first 9 months improved year-on-year by ˆ446 million (prior year ˆ(945) million), but as expected remained clearly negative. This was due mainly to a temporary increase in net working capital, payment deferrals, and lower order intake at Industrial Solutions. The 3rd quarter showed an improvement quarter-on-quarter and year-on-year and was already clearly positive at ˆ206 million.

Net financial debt of the full Group increased by almost ˆ0.7 billion to ˆ4.4 billion in the reporting period. The increase was due mainly to the negative free cash flow and currency effects. Quarter-on-quarter net financial debt was down by ˆ0.2 billion. Equity at June 30, 2015 came to ˆ3.5 billion, up by over ˆ0.3 billion from the end of fiscal 2013/2014.

The targets for the Group's key performance indicators for the full year 2014/2015 were confirmed: The Executive Board expects a clear increase in adjusted EBIT to ˆ1.6 -1.7 billion. With the exception of Steel Americas, all business areas will generate significant positive contributions. The Executive Board also expects a significant improvement in net income (prior year ˆ195 million). Rigorous efforts are also being made to secure a sustainable improvement in cash generation from operating activities: Despite continued reluctance by customers to award major projects, clear progress is expected compared with the prior year and the aim is to achieve at least break-even free cash flow before divestments (prior year ˆ(357) million). The Group's sales are expected to grow by a mid single-digit percentage rate (prior year ˆ41.2 billion): Organic growth at Elevator Technology and Components Technology and positive exchange rate effects outweigh the pressure on prices in the materials businesses caused by lower material prices at Materials Services and lower raw material prices at the steel operations. On a comparable basis the Group's sales are expected to be level year-on-year.

The sale of the VDM group was completed on July 31, 2015, providing a mid three-digit million euro positive effect on net financial debt and pension obligations. This will be reflected in the financial ratios at September 30, 2015. By reducing the share of volatile materials businesses, the sale supports ThyssenKrupp's positioning as a diversified industrial group.

Performance of the business areas in the first 9 months 2014/2015

The capital goods businesses contributed a total ˆ1,095 million to adjusted EBIT in the first 9 months, while the materials businesses delivered a significant positive contribution of ˆ453 million including Steel Americas and despite the strike in Italy in the 1st quarter.

Components Technology continued its good performance in the 3rd quarter, profiting from the ramp-up of new products and plants, increased demand for axle module assembly and in particular positive currency translation effects. Order intake and sales in the first 9 months were each 11 percent higher year-on-year at ˆ5.1 billion (prior year ˆ4.6 billion each). On a comparable basis the increases were 4 percent and 3 percent respectively. Adjusted EBIT at ˆ241 million was 16 percent higher year-on-year (prior year ˆ207 million). The good performance in industrial components, efficiency gains from the performance programs initiated and currency translation effects had a positive impact on earnings.

Elevator Technology again achieved new record levels of order intake and orders in hand. Order intake and sales grew year-on-year at double-digit rates both in the first 9 months and in the 3rd quarter. Mainly driven by increased demand for new installations, especially in the USA and South Korea, and by positive exchange rate effects, order intake in the first 9 months increased by 14 percent to ˆ5.8 billion (prior year ˆ5.1 billion). On a comparable basis the increase was 4 percent. Sales were also up, rising by 13 percent to ˆ5.2 billion (prior year ˆ4.6 billion), and on a comparable basis by 3 percent. The positive operating performance was also reflected in an improvement in adjusted EBIT, which increased by 18 percent to ˆ557 million (prior year ˆ472 million). The 3rd quarter, in which adjusted EBIT and margin increased year-on-year for the eleventh time in a row, contributed ˆ211 million.

Industrial Solutions’ order intake of ˆ3.2 billion in the first 9 months was as expected lower than in the same period a year earlier (ˆ4.5 billion), which was boosted by major orders at Marine Systems and Resource Technologies. Against a background of volatile and declining oil and raw material prices, customers were reluctant to place orders. However the projects continue to be pursued and remain part of a full project pipeline. The continuing high level of orders in hand of ˆ12.5 billion at June 30, 2015 secures long-term planning certainty and capacity utilization. Sales at ˆ4.6 billion were 3 percent up year-on-year (prior year ˆ4.5 billion); on a comparable basis the increase was 1 percent. Sales realizations from orders at Resource Technologies and System Engineering contributed to the rise. Adjusted EBIT at ˆ297 million in the first 9 months was lower year-on-year (prior year ˆ320 million).

Order intake and sales in the first 9 months at Materials Services increased by 9 and 12 percent to ˆ10.8 and ˆ11.0 billion respectively (prior year ˆ10.0 and ˆ9.8 billion respectively). On a comparable basis – excluding in particular the units VDM and AST – new orders were slightly lower and sales slightly higher year-on-year. Adjusted EBIT at ˆ140 million was down slightly from the prior-year figure of ˆ148 million. Earnings were impacted by strong competitive and price pressure and in particular the strike at AST in Italy in the 1st quarter. However, numerous efficiency measures and sales initiatives in connection with impact and the progress made in implementing the new business plans at AST and VDM had a clear stabilizing effect. Altogether Materials Services' earnings in the 3rd quarter were significantly higher year-on-year and quarter-on-quarter. The Special Materials business unit with VDM and AST contributed ˆ14 million to adjusted EBIT, of which ˆ34 million in the 3rd quarter.

Steel Europe reported a drop in business in the first 9 months, mainly due to lower prices. The sustained weakness of steel prices, mainly due to much lower raw material prices, continued to impact business, while volumes returned to normal after the turn of the year following the temporary bottlenecks in the 1st quarter. Order intake and sales in the first 9 months at ˆ6.5 billion each were 5 and 2 percent respectively lower than a year earlier (prior year order intake ˆ6.9 billion, sales ˆ6.7 billion); on a comparable basis the decreases were 6 and 3 percent respectively. Measures implemented under the "Best-in-Class Reloaded" program continued to have a significant positive impact on earnings. This includes the substantially reduced losses at Electrical Steel following restructuring measures. Adjusted EBIT in the first 9 months at ˆ358 million almost doubled compared with the prior-year period (ˆ185 million). The 3rd quarter contributed ˆ166 million, the highest adjusted EBIT for 15 quarters.

At Steel Americas order intake at ˆ1.4 billion and sales at ˆ1.4 billion were 11 and 8 percent respectively lower than a year earlier (prior year order intake ˆ1.6 billion, sales ˆ1.5 billion). In addition to the disposal of ThyssenKrupp Steel USA in the prior year this reflects mainly bottlenecks in production. Pressure on prices was also high from the 2nd quarter. The steel market in Brazil was characterized overall by a further decline in consumption. On a comparable basis new orders were 3 percent and sales 7 percent lower year-on-year. Adjusted EBIT in the first 9 months was negative at ˆ(45) million but improved in the first 6 months. It was only in the 3rd quarter, against a background of sharply increased price and margin pressure particularly in the North American and Brazilian markets and bottlenecks in production due to the water shortage in Brazil, that it fell below the prior-year figure, which included an insurance recovery.

ThyssenKrupp is a diversified industrial group with traditional strengths in materials and a growing share of capital goods and services businesses. Around 155,000 employees in nearly 80 countries work with passion and technological expertise to develop high-quality products and intelligent industrial processes and services for sustainable progress. Their skills and commitment are the basis of our success. In fiscal year 2013/2014 ThyssenKrupp generated sales of around ˆ41 billion.