Ailing German industrial group Thyssenkrupp may be forced to give away a core part of its business as part of efforts to plug a multibillion-euro hole in its finances.
Thyssenkrupp is hoping to dispose of all or part of its lossmaking factory-building division after it has sold or floated its profitable lift-making business, leaving it to focus on the turnround of the remainder of the company — primarily steel, materials and auto components.
Chinese state-owned enterprises are among those that have been sounded out by bankers on behalf of Thyssenkrupp over a possible purchase of part or all of the factory business, which builds and services chemical, cement and mining facilities.
It was never likely to attract large offers, according to people close to the company: the vast majority of its revenues come from new contracts, and it has only a small services business.
But in phone conference with analysts on Thursday, Johannes Dietsch, chief financial officer, raised the possibility that the unit, which employs more than 11,000 people, may not raise any cash at all.
In response to a question about the value of the unit’s assets, Mr Dietsch said: “Of course, if we are not able to achieve a positive purchase price, then there might be an impact on our share of equity [from the factory division] to come in negative”, suggesting that there could be no injection of funds as a result of a disposal.
Earlier in the call, Mr Dietsch said there had been “decent interest from high-quality partners” in the business.
The group’s lifts and escalator business, which is the most profitable part of the group, has already attracted bids from three private equity consortiums, as well as rival Kone, which has offered €17bn in conjunction with CVC.
Thyssenkrupp is due to make a decision by the end of the month.
On Thursday, it reported that net losses for the past three months of 2019 had widened to €364m, compared with profits of €68m in the same period a year before.
Its steel business was hardest hit, registering a double-digit decline in sales, while net debt ballooned to more than €7bn.
Although the factory business almost halved its pre-tax losses to €19m, Alan Spence, an analyst at Jefferies, said he ascribed no formal value to it, but disposing of the unit would remove a cash-consuming company from the balance sheet.
The unit, he added, “generated a cumulative €1bn of positive business cash flow between 2012 and 2014, and has since lost a cumulative €2.4bn in the following four financial years”.
In its quarterly report, Thyssenkrupp said a “disposal process/assessment of alliances” for the business was under way.
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February 17, 2020 at 11:01AM
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Thyssenkrupp raises possibility of having to give away factory unit - Financial Times
"Factory" - Google News
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