ESSEN (dpa-AFX) - Steel and industrial group Thyssenkrupp slipped into the red in the second quarter. The reason was impairment charges in the steel division due to higher interest rates. Higher raw material and energy costs and lower steel prices led to a significant drop in operating earnings, although the decline was not as severe as analysts had feared. The company confirmed its earnings forecast for fiscal 2022/23 (ending September).

The bottom line was a loss of 223 million euros in the months January to March, as the company announced in Essen on Thursday. In the prior year the company reported a net profit of 565 million euros. Thyssenkrupp had to write down its steel business by almost 350 million euros. The write-downs were made due to higher interest rates and an associated increase in the cost of capital, the company explained.

Higher costs and lower steel prices meant that adjusted earnings before interest and taxes (EBIT) came in at 205 million euros, well below the prior-year level of 802 million euros. Analysts had expected a larger decline in advance. The trading business and the steel operations reported significant losses. Steel Europe was surprisingly in the red; analysts had expected a significant drop in earnings but still expected a profit. By contrast, the automotive supply business and the marine business performed positively.

The Group's sales decreased slightly from 10.6 billion to 10.1 billion euros and were also higher than market expectations. By contrast, order intake decreased significantly from 13.6 billion to 10.2 billion euros. This was due to falling prices in the trading business and disposals of businesses. The picture was positive in the steel business, which recorded higher order volumes, particularly from the construction and auto industries, and increased its order intake by nine percent.

Outgoing Group CEO Martina Merz expressed her satisfaction in view of the difficult environment. "The results show that we are now much stronger and more resilient," she said. "The decentralized setup as a group of companies and the focusing of the portfolio are paying off." Merz had asked the Supervisory Board's Personnel Committee at the end of April to dissolve her contract as soon as possible. The committee has already proposed a successor to the Supervisory Board. According to the proposal, Miguel Ángel López Borrego (58), the current interim head of automotive supplier Norma, is to become the new CEO on June 1.

Merz, 60, has been CEO of thyssenkrupp since October 2019. A mechanical engineer by training, she took over the Group in a difficult situation. Only last year her contract was extended to 2028. However, the most important project, the future of the steel business, continues to hang in the balance. In addition, she had the IG Metall union against her, which recently criticized the structure of thyssenkrupp as a group of largely independent companies pushed by Merz and complained about a lack of an overall concept.

Merz sees the management of thyssenkrupp in good hands. "The personnel change at the top of the Executive Board will not slow the company down in this phase of implementing the transformation," she said. The task now, she said, is to continue to implement the course we have embarked on and increase the pace. "The key strategic initiatives will continue to be systematically pursued."

Thyssenkrupp confirmed its earnings forecast for fiscal year 2022/23 (ending September) and continues to expect adjusted operating earnings in the mid to high three-digit million euro range - compared with 2.1 billion euros a year earlier. Management continues to see net income at "at least" break-even. By contrast, free cash flow before mergers and acquisitions is expected to be slightly positive - previously Thyssenkrupp had advised "at least" break-even./nas/he