Germany's Thyssenkrupp boosted by strong steel prices ahead of Tata Steel tie-up

 
Courtney Goldsmith
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Steel Production At ThyssenKrupp Duisburg
Thyssenkrupp is a German-based steelmaker (Source: Getty)

German industrial group Thyssenkrupp posted a rise in quarterly operating profit as its steel unit recovered ahead of a merger with Tata Steel's European operations.

The figures

The steelmaker's order intake and sales in the first quarter were up one per cent each year on year despite negative currency effects.

Operating profit at the firm's Steel Europe arm rose nearly sixfold compared with the previous year to €160m (£143m) thanks to stronger steel prices.

At the company's profitable elevator technology business, profits rose three per cent to €220m, but profits at its industrial solutions unit dropped by 71 per cent to €12m.

The firm is still targeting full-year adjusted earnings before interest and tax of between €1.8bn and €2bn.

Read more: Thyssenkrupp sets up a working group with unions over its Tata Steel merger

Why it's interesting

Last September, Thyssenkrupp and Tata Steel announced a long-awaited agreement to combine their European operations in a joint venture in order to tackle a challenging European steel industry and create the second-largest player on the continent.

Thyssenkrupp today said the market environment remains "extremely challenging structurally" in Europe, with continuing global overcapacities, risks from trade imbalances and highly volatile raw material prices.

The group made progress on the joint venture, with approval secured by Germany's largest union, IG Metall.

Analysts at Jefferies said today's update was unlikely to excite investors, but Thyssenkrupp was on the right path.

A note from Jefferies said: "We expect TKA [Thyssenkrupp] to continue to benefit from the current robust Euro steel cycle with unique leverage to attractive annual auto contracts.

"TKA notes that progress for the TKA-Tata JV remains on track with union approval recently secured. We expect deal confirmation during calendar first quarter to be a positive catalyst for TKA shares."

What Thyssenkrupp said

Chief executive Heinrich Hiesinger said:

The positive earnings development shows that our performance programmes are working. We’re continuing to make good progress with the transformation of Thyssenkrupp into a strong industrial group. We’re therefore well on track to achieving our targets for the full year.

Read more: Frank Field wants assurances over steelworker pensions in Tata Steel merger

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