ThyssenKrupp Defends Ambitious Earnings Goals

German steel and engineering group ThyssenKrupp AG aims over the next three years to lift its operating earnings from 500 million euros in 2001 to 1.5 billion euros, Chief Executive Ekkehard Schulz said at the annual general meeting of shareholders on Friday.

During a distinctly matter-of-fact discussion of the group's outlook, doubts were raised as to the realizability of what was judged to be a rather ambitious mid-term goal.

Hansgeorg Martius of SdK, an association representing the interests of small shareholders, pointed out that the group had narrowly missed incurring a loss in the October–December 2001 period, the first quarter of its 2001/2002 business year, which ends on Sept. 30.

But despite the weak first quarter, ThyssenKrupp upheld its forecast that operating earnings excluding non-recurring items in the full 2001/2002 year would equal the 2000/2001 figure of 500 million euros.

Chief Executive Schulz admitted that the group's mid-term targets are ambitious.

Alongside a 200 percent rise in operating earnings, it is also hoping to raise earnings before interest, taxes and write-downs to more than 4 billion euros from 3.3 billion euros. But he said the group expects to reach its goals through a three-pronged strategy.

Three prongs to profit

First, it will use carefully chosen acquisitions and investments to pursue the global expansion of its activities in its three core areas. ThyssenKrupp is the world's fourth-largest flat carbon steel maker and a major producer of automotive parts and elevators.

Second, it will raise its productivity by 2–3 percent annually. Third, it will implement a new group-wide program involving several hundred improvement projects to strengthen earnings power.

In this connection, shareholders were critical of the portfolio strategy that the group has pursued since it was created from the 1999 merger of Thyssen and Krupp.

Thomas Hechtfischer, the managing director of DSW, another small shareholders' association, accused the management of focusing on low-margin, low-growth segments. In 2001, he charged, most areas had been shown to be value-eroding. He added that the group lacks a clear strategy. Similarly, Henning Gebhardt of DWS Investment GmbH – Germany's largest public funds company, with 95 billion euros under management – said the task of portfolio optimization must urgently be addressed.

"Apart from lifts, no business segment last year managed to cover its capital costs," he argued. ThyssenKrupp defended its steel business, saying even though it had actually incurred a loss in the first quarter of the current business year, it would break even over the full year.

Over the past few years, ThyssenKrupp shares have underperformed the average of the blue-chip Dax-30 index, Gerbhardt pointed out. The share price currently stands 9 percent lower than at the time of the merger, whereas the Dax has gained 5 percent during that period. Most analysts continue to issue Hold recommendations.

Some 5,500 people representing a total of 59.5 percent of the group's capital attended Friday's meeting. After a debate lasting some seven hours, all of the management board's proposals were carried by over 99 percent of those present.