ThyssenKrupp AG, Germany’s largest steelmaker, may say this week first-quarter profit plummeted 69 percent as demand for the metal slumped at the fastest rate since World War II.
Net income dropped to 135 million euros ($174 million) in the three months through December from 435 million euros a year earlier, according to the median estimate of seven analysts surveyed by Bloomberg. Sales fell 6.5 percent to 11.5 billion euros, the survey shows.
German steelmakers are slashing production as carmakers and builders, their main clients, reduce orders because of tightened credit markets and consumer reluctance to spend in a recession. Dusseldorf, Germany-based ThyssenKrupp is shelving investments to preserve cash and has joined industry leader ArcelorMittal in firing employees to cut costs.
“In my career of over 40 years, I have never witnessed such an abrupt slump as we have had in the last few months,” Chief Executive Officer Ekkehard Schulz told shareholders at the Jan. 23 annual meeting. “This is a new experience which makes the situation difficult to assess.”
Schulz declined to give a specific profit forecast for the current year, saying only that sales will fall “significantly,” with a corresponding effect on earnings.
“The demand outlook may remain rather vague” when the company releases the figures, Exane BNP Paribas analysts Vincent Lepine and Sylvain Brunet wrote in a Feb. 5 note. “Considerable uncertainty remains regarding real demand trends.”
Fewer Orders
Clients are opting to use up inventories instead of buying more steel. German steelmakers’ orders totaled 5.68 million tons in the quarter, down 47 percent from a year earlier and the steepest decline since 1945, the country’s steel industry association said Feb. 6.
The price of European hot-rolled coil steel, a benchmark product used in cars and construction, has dropped 41 percent since reaching a record in September, according to data compiled by Steel Business Briefing.
German steelmakers cut raw steel slab output by 20 percent last quarter and by 30 percent in January, the industry group said. ThyssenKrupp has slashed production by allotting fewer shifts to its steel unit’s 20,000 employees and halting slab purchases from rivals. The company also has fired temporary workers and will no longer use contractors at its German sites.
Demand should recover “step by step” in the second half as metal traders and processors reduce stockpiles, according to the industry association.
ThyssenKrupp, which traces its history to the 19th century, is scheduled to publish the figures on Feb. 13. Following is a table of analysts’ estimates, with all figures in euros. Nine analysts gave estimates for sales, eight for pretax profit and seven for net income.
First Qtr 2008-09 First Qtr 2007-08
Estimated Reported
Sales
Median 11.5 billion 12.3 billion
Average 11.3 billion
Highest 11.7 billion
Lowest 10.5 billion
Pretax profit*
Median 264 million 715 million
Average 275.9 million
Highest 330 million
Lowest 230 million
Pretax profit**
Median 203 million 646 million
Average 209.5 million
Highest 249 million
Lowest 170 million
Net income
Median 135 million 435 million
Average 136 million
Highest 152 million
Lowest 114 million
*Before one-time items.
**After one-time items.
http://www.bloomberg.com/apps/news?pid=20601100&sid=aj.PCJ0tcseE&refer=germany
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