Thyssenkrupp : held its ground in a challenging environment – positive free cash flow before M&A and progress with the transformation in fiscal year 2022/2023

• Free cash flow before M&A of €363 million greatly improved compared with the prior year

• Dividend continuity: Distribution of €0.15 per share proposed

• Order intake (€37.1 billion), sales (€37.5 billion) and adjusted EBIT (€703 million) below the prior year as expected

• Overall, net loss of €2.0 billion primarily due to impairment losses to be made at Steel Europe

• Forecast for current fiscal year: Adjusted EBIT in the high three-digit million euro range, net income in the low to mid three-digit million euro range and free cash flow before M&A in the low three-digit million euro range expected

• CEO Miguel López: "We are making thyssenkrupp an enabler of the green transformation and raising the performance of all our businesses through our 'APEX' program."

In fiscal year 2022/2023, thyssenkrupp performed robustly in an increasingly challenging environment and achieved the targets it had set for the key financial indicators of adjusted EBIT and free cash flow before M&A. Order intake totaled €37.1 billion after €44.3 billion a year earlier. Alongside mainly transaction-related declines at Multi Tracks, this was principally due to the substantial reduction in material prices at Materials Services and a major order at Marine Systems posted in the previous year. Sales came to €37.5 billion (prior year: €41.1 billion). The sales growth at Automotive Technology could not offset the decline in sales at Materials Services and Steel Europe resulting from lower material and spot market prices. Added to this was the transaction-related decline in sales at Multi Tracks. Adjusted EBIT amounted to €703 million (prior year: €2,062 million). Tangible effects came from the pressure on margins at Materials Services resulting from the drop in material prices and from the additionally high raw material and energy costs and lower revenues at Steel Europe. This development was only partly offset by the improvement in earnings at Automotive Technology, Marine Systems and Multi Tracks. Free cash flow before M&A improved greatly from the prior-year level of €(476) million and was positive at €363 million.

Miguel López, CEO of thyssenkrupp AG: "The figures show that we have made progress with the transformation of thyssenkrupp, despite the difficult environment, but also that we must continue to work hard at raising the performance of our businesses. We have therefore launched our 'APEX' program to speed up improvements to our businesses' performance. At the same time, we are systematically focusing our businesses on future areas in order to leverage our full potential there, especially in connection with the enormous opportunities that the decarbonization of industry offers us. We are positioning thyssenkrupp as an enabler of the green transformation, thereby supporting the transformation of many industries worldwide. In addition, we are seeking to ensure the future of climate-neutral steel in Germany, thus making an important contribution to the resilience and sovereignty of industrial value chains in Germany and Europe."

Overall, thyssenkrupp posted a net loss of €2.0 billion in the past fiscal year (prior year: net income of €1.2 billion). One factor in this development was the largely market-related decline in operating performance. Moreover, the figure includes impairment losses on assets, primarily in the amount of €2.1 billion at Steel Europe. These resulted from the higher cost of capital and the implications of the increasingly gloomy earnings expectations for the short, medium and long terms against the backdrop of the economic situation and the structural changes specific to the steel industry.

The Executive Board and Supervisory Board will propose to the Annual General Meeting on February 2, 2024, that a dividend of €0.15 per no-par share should be paid for fiscal year 2022/2023. In this way, thyssenkrupp is ensuring dividend continuity following the prior-year distribution. The proposal reflects the significant improvement in free cash flow before M&A in particular.

Portfolio realignment and focus on future areas

thyssenkrupp continued to advance its strategic transformation and focus its businesses on future areas by way of the restructuring that was decided in the fourth quarter of the past fiscal year and implemented as of October 1. With its new focus on technologies for the green transformation, the Group is making key contributions to achieving climate targets and sees great opportunities for using its world-leading technologies to benefit from the economic opportunities associated with the green transformation.

To give full visibility to its key technologies for the decarbonization of industry, the Group consolidated its innovative green transformation technologies in the Decarbon Technologies segment at the start of the 2023/2024 fiscal year. The new segment includes Rothe Erde (until September 30: Bearings), Uhde, Polysius and thyssenkrupp nucera. In fiscal year 2022/2023, the some 15,000 employees of the segment posted pro forma sales of €3.4 billion. The medium-term target is to raise this value to more than €5.0 billion per year. One part of the new segment is thyssenkrupp nucera, the hydrogen subsidiary that thyssenkrupp successfully floated on the stock exchange in July 2023, despite the challenging capital market environment. This gave the electrolysis business adequate financial headroom for further growth.

Automotive Technology and Materials Services are also focusing on the green transformation. Already today, Automotive Technology in its new structure generates around 70 percent of its sales with products that can be used for all drive types and will continue to expand its activities in e-mobility. With its "Materials as a Service" strategy, Materials Services is positioned as a smart and sustainable supply chain manager that facilitates the optimal use of resources, making the business an enabler of the circular economy.

In the course of launching its Decarbon Technologies segment, thyssenkrupp has streamlined its portfolio. In the future, it will report the Automotive Technology, Decarbon Technologies and Materials Services segments as well as the Steel Europe and Marine Systems units that are being spun off.

Steel Europe advances green transformation and explores energy partnership

Steel Europe has also started successfully on the path toward a climate-neutral future. At the end of July, with the receipt of final approval for the requested funding of €2 billion for the tkH2Steel project, the segment achieved a key milestone in its activities to achieve climate-neutral steel production. Even before it received the funding decision, Steel Europe had placed orders for the engineering, delivery and construction of the first hydrogen-powered direct reduction plant at the Duisburg site. This marks the start of the world's largest industrial decarbonization project which will make it possible to avoid emissions of more than 3.5 million tons of CO₂ each year. It is also an important first step in the production of climate-neutral steel in Germany and thus in protecting industrial value chains in the country's steel-processing industry.

With the construction of the direct reduction plant, Steel Europe is reinforcing its position as a technology leader in sustainable steel production. However, the success of carbon-neutral steel production is largely dependent on the secure provision of large quantities of green energy at competitive prices. For this reason, thyssenkrupp is talking with potential strategic partners in the energy industry. It is in constructive and open-ended negotiations with energy company EPH regarding a potential joint venture with Steel Europe that EPH could support with its energy expertise. The specific form of a potential joint venture is the focus of the ongoing negotiations.

Oliver Burkhard, CHRO and Labor Director of thyssenkrupp AG: "The green transformation of steel is a major challenge that also harbors great opportunities. If we take the right approach, we could greatly improve the competitiveness of Steel Europe and ensure the business's viability in the green markets of the future. Codetermination is playing a major role in this transformation and, in the customary manner, the employee representatives are closely involved in the spin-off discussions."

"APEX" performance program aimed at improving the businesses' performance

Alongside the portfolio measures and the focus on the opportunities presented by the green transformation, thyssenkrupp is systematically concentrating on improving the performance of all its businesses by way of its holistic "APEX" performance program. Despite a challenging environment, the goal of the program is to sustainably achieve the medium-term financial targets communicated at the Capital Markets Day in December 2021. By 2024/2025, thyssenkrupp aims to achieve an adjusted EBIT margin of 4 to 6 percent at Group level, a significantly positive free cash flow figure before M&A and a reliable dividend payment. Here, "APEX" is intended to have a positive effect of as much as €2.0 billion on adjusted EBIT and to mitigate negative market effects. On its path toward these goals, thyssenkrupp is supporting its businesses in applying the "APEX" methodology to meet their needs and is systematically monitoring the program's progress in a very frequent review process.

Business development in the segments in fiscal year 2022/2023

Materials Services posted order intake of €13.7 billion (prior year: €16.0 billion) and sales of €13.6 billion (prior year: €16.4 billion), which were below the record levels of a year earlier. This was due to a decline in material prices in almost all product groups. With adjusted EBIT of €178 million, the segment again achieved positive earnings but was unable to match the high prior-year level of €837 million. This was mainly attributable to margin pressure resulting from the lower material prices. The segment saw positive earnings effects from the continuing systematic transformation, the ongoing efficiency programs and the valuation of inventories.

In the Bearings business (from October 1, 2023, Rothe Erde; reported as an independent segment until September 30, 2023; allocated to the Decarbon Technologies segment as of October 1, 2023), declines in demand from the wind energy sector in China and from the construction machinery sector resulted overall in lower order intake (down 7 percent to €1.2 billion) and sales (down 2 percent to €1.1 billion). Significantly higher energy and personnel costs led to a decline in earnings to €101 million (prior year: €120 million). Cost-cutting and efficiency enhancement measures only partly offset this trend.

The Forged Technologies business (reported as an independent segment until September 30, 2023; allocated to the Automotive Technology segment as of October 1, 2023) improved both order intake and sales to €1.6 billion by passing on higher factor costs to customers, supported by positive currency effects. The adjusted EBIT of €102 million was below the prior-year figure of €113 million due to lower order call-offs for powertrain components for passenger cars, production stoppages and maintenance measures. This was partly offset by ongoing cost-cutting measures accompanied by optimization of the personnel cost ratio.

Thanks to increased customer demand in virtually all business units, Automotive Technology significantly improved order intake to €5.4 billion (+12 percent) and sales to €5.5 billion (+14 percent). However, growth continued to be constrained by the limited availability of electronic semiconductors in the automotive industry. At €223 million, adjusted EBIT of the segment was significantly above the prior-year level of €108 million. This was due to higher volumes, price and efficiency measures, cost reductions in transport and production inputs and positive one-time effects overall. Countereffects came from increased factor costs, especially for purchased components, personnel and energy.

Steel Europe increased order intake to €12.2 billion from €11.8 billion a year earlier. The main driver here was an increase in demand from the automotive industry and the construction sector. Whereas shipment volumes saw stable development year-on-year, the decline in spot market prices resulted in slightly lower sales of €12.4 billion (-6 percent). The large proportion of long-term contracts had a stabilizing effect and prevented a sharper drop in earnings. At €320 million, adjusted EBIT was below the record prior-year level of €1.2 billion. The high raw material and energy costs impacted earnings in the first half of the year especially. Positive effects from progressive restructurings and the ongoing performance program in connection with implementing the Steel Strategy 20-30 continued to support this trend.

As expected, order intake of just under €1.0 billion at Marine Systems was significantly below the prior-year figure of €4.2 billion, which had also included a major order. At €1.8 billion, sales were on a par with the prior year (€1.8 billion). Among the factors contributing to this were the final invoices for two frigates and one submarine. In addition, the service and marine electronics units posted a slight improvement. This and the effects of the performance measures initiated resulted in a significant improvement in adjusted EBIT to €80 million from €32 million a year earlier. Thanks to the strong order intake in previous years, the segment has an order backlog of €12.6 billion, which is a solid basis for growth.

Following the divestment of the stainless steel and mining businesses, order intake and sales of the Multi Tracks segment saw a mainly transaction-related decline year-on-year to €3.7 billion (-43 percent) and €3.2 billion (-23 percent), respectively. As expected, order intake at both Uhde and thyssenkrupp nucera was down on the previous year which had been characterized by a major order for the construction of an ammonia plant and the receipt of orders for larger hydrogen projects. By contrast, Polysius increased order intake year-on-year by extending the service business and winning a major order in the USA. Springs & Stabilizers also performed above the prior-year level. Automation Engineering posted a good order intake, although it fell short of the previous year's very good level. After adjustment for disposals, the segment's sales were significantly above the prior-year figure as a result of the higher order intake in previous periods. Even in the absence of the strongly positive earnings contributions from the stainless steel and mining businesses, the segment's adjusted EBIT of €(132) million was far less negative than the prior-year figure of €(173) million. This was principally attributable to the positive development of Plant Engineering, thyssenkrupp nucera and Springs & Stabilizers.

At €(169) million, the adjusted EBIT of Corporate Headquarters was below the prior-year figure of €(154) million. This was mainly attributable to higher expenses as a result provisions for share-based compensation.

Fiscal year 2022/2023: Key performance indicators of the thyssenkrupp Group

In line with the net loss of €2.0 billion, net income after deducting minority interest was €(2.1) billion (prior year: €1.1 billion); earnings per share came to €(3.33) (prior year: €1.82). Compared with a year earlier, equity therefore decreased from €14.7 billion to €12.7 billion. The equity ratio is 38 percent (prior year: 39 percent).

Thanks to the strong improvement in net working capital and the corresponding increase in free cash flow before M&A to €363 million, the Group's net financial assets as of the reporting date rose to €4.3 billion (September 30, 2022: €3.7 billion). This figure includes positive effects of €0.6 billion from the successful IPO of thyssenkrupp nucera. With cash and cash equivalents and undrawn committed credit lines totaling €8.8 billion on the reporting date, thyssenkrupp retained a very good liquidity position.

Forecast 2023/2024: Increase in adjusted EBIT to a value in the high three-digit million euro range

In a challenging market environment shaped by geopolitical and trade conflicts, high inflation and rising interest rates, thyssenkrupp expects macroeconomic development in the present fiscal year to be difficult overall. Moreover, the company expects further price volatility on the sales and procurement markets and for raw materials and energy. This may result in fluctuations in the development of sales and earnings.

Despite declines at Steel Europe, thyssenkrupp expects sales in fiscal year 2023/2024 to increase slightly (prior year: €37.5 billion). Contributions will come above all from significant growth at Decarbon Technologies and Marine Systems. In addition, slight sales growth is expected at Automotive Technology.

For adjusted EBIT, thyssenkrupp is anticipating an increase to a figure in the high three-digit million euro range (prior year: €703 million), with Steel Europe expected to make a contribution in the mid three-digit million euro range (prior year: €320 million). The development of the individual business will be supported especially by measures implemented as part of the "APEX" performance program.

With "APEX" expected to contribute to further improvements in working capital, the Group is aiming to achieve free cash flow before M&A in the low three-digit million euro range (prior year: €363 million). Moreover, the economic environment at Steel Europe and the payments profiles in the project businesses - especially prepayments at Marine Systems - have a major influence on this development.

thyssenkrupp expects net income to increase to a positive figure in the low to mid three-digit million euro range from the prior-year figure of €(2.0) billion.

Klaus Keysberg, CFO of thyssenkrupp AG: "We are continuing to work consistently on improving the performance of all our businesses. This will create the conditions for achieving our medium-term goals, even in a challenging environment. This means that we are seeking to achieve an adjusted EBIT margin of 4 to 6 percent at Group level, a significantly positive value for free cash flow before M&A and reliable dividend payments for our shareholders."