|Bid||11.45 x 142800|
|Ask||11.47 x 10700|
|Day's Range||11.42 - 11.82|
|52 Week Range||9.25 - 16.31|
|Beta (5Y Monthly)||1.74|
|PE Ratio (TTM)||N/A|
|Earnings Date||Feb. 13, 2020|
|Forward Dividend & Yield||0.15 (1.25%)|
|Ex-Dividend Date||Feb. 04, 2019|
|1y Target Est||22.24|
(Bloomberg Opinion) -- Canadian transportation champion Bombardier Inc. is running out of road. Its shares lost more than one-third of their already much diminished value last week after another disastrous profit warning.The trains and private jet manufacturer may be forced to exit its commercial aerospace joint venture with Airbus SE because of a shortage of cash; a writedown looms when the group reports 2019 results next month. In the meantime, it’s looking at ways to accelerate repayment of its $10 billion debt pile, which suggests a breakup might be on the cards. Bombardier has held talks about a combination of its rail businesses with French rival Alstom SA, Bloomberg reported on Tuesday, adding that this is one of several options being considered.On the other side of the Atlantic another storied industrial conglomerate, ThyssenKrupp AG, is suffering a comparable crisis. The German steel and car-parts maker has put its prized elevator division up for sale to help with its massive debt and pension liabilities.When their respective restructurings are completed, these vast and politically important employers will be shadows of their former selves. ThyssenKrupp has already been booted from Germany’s benchmark Dax index, while Bombardier’s on the cusp of becoming a penny stock (again).So how did they get into such a mess and why haven’t they managed to extricate themselves, despite years of restructuring and several false dawns? In both cases, hubris, shoddy governance and poor project management have played a role in their downfall. The fate of the two companies was sealed around a decade ago when they bet the farm on high-risk growth strategies — and lost. Bombardier signed off on the C-Series, an ambitious attempt to break Airbus and Boeing Co.’s lock on the commercial aerospace market. The small, fuel-efficient jet won rave reviews but orders were disappointing and delays caused costs to balloon to about $6 billion and debt to pile up. Bombardier made things worse by trying to bring several new business jets to market at the same time. Weak sales forced it to abandon development of the Learjet 85 — resulting in a $2.5 billion writedown — and to cede control of the C-Series to Airbus for the humiliating sum of one Canadian dollar.ThyssenKrupp’s original sin was sinking about 12 billion euros ($13.3 billion) into a pair of steel plants in Brazil and the U.S. to try to keep pace with the acquisitive ArcelorMittal SA. Poor construction work and a faulty business plan led to massive losses from which ThyssenKrupp has never really recovered.Woeful governance had a hand in both corporate disasters. Bombardier has a dual-share structure that gives the founding Bombardier-Beaudoin families majority voting control even though they own a much smaller fraction of the share capital. Pierre Beaudoin served as chief executive officer from 2008 until 2015 — during which time his father, Laurent, remained chairman — but he didn’t do a very good job. Pierre is now the chairman.ThyssenKrupp’s anchor shareholder, the Krupp Foundation, presided over a management culture that prized fealty and the preservation of corporate perks, including the company’s hunting grounds, but failed to prevent compliance breaches. Recent boardroom fireworks at the German giant (two chief executives and a chairman have departed in quick succession) suggest it remains dysfunctional.In their attempt to stop the rot, ThyssenKrupp and Bombardier have followed a similar script. Scrap the dividend, sell underperforming assets, slash thousands of jobs and cut costs. But the cash flow needed to cut debt has never consistently materialized and things have got worse.In 2019 ThyssenKrupp burned through 1.1 billion euros of cash and it expects to consume even more in 2020, risking a breach of banking covenants. Bombardier burned about $1.2 billion in cash last year, far in excess of the roughly break-even target it set at the start of the year.A problem for both companies has been estimating the cost and completion date of large projects. It’s one reason why ThyssenKrupp’s industrial plant construction unit — once a decent source of cash flow from large customer prepayments — has become a bottomless money pit (the unit is now up for sale). At Bombardier, several high-profile train projects have run late and over budget. Bombardier must pay penalties for late delivery.Judging by their balance sheets, both companies appear to be in trouble. ThyssenKrupp has just 2.2 billion euros in net assets, while Bombardier’s liabilities far exceed its reported assets.However, unlike Bombardier’s, ThyssenKrupp’s bonds still trade well above par and its 7.4 billion euros market capitalization is almost four times that of the Canadian company. That’s because ThyssenKrupp still has something of value to sell: The elevators unit could fetch more than 15 billion euros if management decides to part with all of it (the sale process is ongoing and ThyssenKrupp might opt to keep a majority stake).Bombardier doesn’t face an immediate cash crunch thanks to the proceeds of recent asset sales and no big debt maturities this year. But having already offloaded its ageing Q400 turboprop aircraft line and its Belfast wing factory, it’s not exactly overburdened with stuff to sell to meet future liabilities.Neither of Bombardier’s two remaining core divisions, trains and private jets, is worth as much as ThyssenKrupp’s elevators. In 2015 Bombardier sold a 30% stake in its rail division to the Quebec public pension fund, valuing the whole unit at $5 billion. The business aviation division would probably fetch more.For both businesses, the difficulty with flogging more silverware is that what’s left over probably won’t generate much profit.The moral of these twin corporate calamities is simple: If tens of thousands of people depend on you for employment, don’t bite off more than you can chew. And make sure the higher-ups know what’s going on.To contact the author of this story: Chris Bryant at firstname.lastname@example.orgTo contact the editor responsible for this story: James Boxell at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Thyssenkrupp is hoping to win contracts for a planned factory Tesla plans to build near Berlin, a board member of the German conglomerate told a business daily. "We are in talks over carrying out certain services," Klaus Keysberg, board member in charge of steel and materials services at Thyssenkrupp, told Handelsblatt, declining to be more specific. Thyssenkrupp makes everything from elevators and submarines to car parts, steel and fertilizers plants.
Much-needed funds for Thyssenkrupp's steel division, which could be turned into the conglomerate's profit engine, have not yet been approved by management, a leading labour representative said. "The management of Thyssenkrupp needs to earn that money first," Tekin Nasikkol, who heads the works council of Thyssenkrupp Steel Europe, said on Thursday, adding some members of the board were saying the unit needs too much money. Under plans revealed a day earlier, Thyssenkrupp's steel unit could become the company's new core profit driver following an expected sale of its elevator division.
Thyssenkrupp , whose attempt to merge its steel operations with a rival was thwarted by regulators earlier this year, now plans to transform the business into its biggest profit engine, according to an internal memo seen by Reuters. The German group told staff it aimed to boost earnings before interest and tax (EBIT) at Steel Europe by an average of up to 600 million euros (£515.45 million) over the coming years, helped by job cuts and selling more to the autos industry. On Wednesday, thousands of workers at Thyssenkrupp's elevator division staged protests at the group's headquarters in Essen, asking management for job protection.
DUISBURG/FRANKFURT (Reuters) - Ailing conglomerate Thyssenkrupp has worked out a new strategy for the group's steel business, a leading labour representative said on Tuesday, adding the roadmap included significant investments but also restructuring steps. The strategy paper was presented to the supervisory board of Thyssenkrupp Steel Europe on Tuesday, following labour protests at the division's headquarters in Duisburg, in the heart of the Ruhr area, Germany's industrial heartland. The unit's future hangs in the balance after a deal to combine it with the European division of Tata Steel collapsed earlier this year, forcing management to announce the reduction of 2,000 out of the unit's total 27,000 jobs.
Thyssenkrupp steel workers have demanded major investments and criticised management for delaying a presentation about its plans for the steel business. The steel business, whose roots go back more than 200 years, has suffered a sharp fall in profits and Thyssenkrupp is planning about 2,000 job cuts. "We demand a clear commitment from Thyssenkrupp with regard to steel," Detlef Wetzel, vice supervisory board chairman of Thyssenkrupp Steel Europe, told Reuters on Monday.
(Bloomberg Opinion) -- Europe’s steel industry is in crisis again and there’s no shortage of reasons for all the financial losses and job cuts. Stagnating demand, surplus production capacity, higher iron ore prices and a surge in imports caused by trade conflicts are just some of them.But when Tata Steel Ltd. announced 3,000 job losses at its European arm this week, the company also pointed to a “significant increase” in the cost of carbon emission permits.Blaming the CO2 price has become a common yet questionable refrain in the industry. ArcelorMittal offered a similar excuse when it announced big production cuts in May. British Steel Ltd.’s collapse that same month was also linked to its obligation to purchase expensive carbon credits.The reality looks rather different. Steel is responsible for about 7% of global emissions but even today the sector is mostly shielded from having to buy carbon pollution permits in Europe. Steelmakers are in a tight spot but they shouldn’t grumble about a policy that’s been lucrative for them in the past and whose purpose is to help them clean up their act.To recap, the EU’s emission trading system was created more than a decade ago to help mitigate the climate crisis by making polluters pay. Utilities, industrial plants and airlines are required to obtain permits to match how much they pollute. The reason for the industry’s complaints now is that the cost of those allowances has more than trebled in the past two years after the European Union tweaked the system.That’s theoretically difficult for steelmakers because they emit almost two metric tons of CO2 for every ton of steel produced. A roughly 50-euro ($55) CO2 price for each marginal ton of output is significant because the spread between steel prices and the cost of the raw materials needed to make it has fallen to about 250 euros a metric ton. “Considering that steel makers are barely profitable the pressure from CO2 prices is substantial,” says Benjamin Jones of CRU, a metals and mining consultancy. Yet all the steelmakers’ complaints ignore an important financial safety net for the industry. Because of the perceived threat of so-called “carbon leakage” (where companies decamp to places with cheaper pollution costs) the least polluting steelmakers still receive free allowances that cover 100% of their emissions.(1)“Given how generous free allocation has been, steel should be among the industries hurting the least from the carbon price,” says Jahn Olsen, a carbon analyst at BloombergNEF.Furthermore, the production cuts after the 2008-2009 recession left steelmakers with large surpluses of emission permits which they were free to keep or sell at a profit. While the extent of the industry’s windfall profit from this is disputed, one study found it could be 8 billion euros ($8.8 billion). Some steelmakers are still benefiting today.Tata Steel’s European arm generated 211 million pounds ($273 million) of income from selling surplus allowances in the fiscal year to March, its annual accounts show. It’s pretty bold of the steelmaker to call out the rising cost of pollution permits when it’s just booked a big profit from them. There are echoes here of what happened to British Steel,(2) which sold emission permits only to discover later that it needed them.(3) “The European steel sector is in a tough spot but to blame carbon pricing is disingenuous,” says Sam Van den plas, policy director at Carbon Market Watch. For now the largest and most technically advanced steelmakers probably aren’t having to fork out much for allowances.This will change gradually after 2021 when the so-called fourth phase of emissions trading begins. But the EU still expects to hand out 6.3 billion free permits to polluters during that period, worth more than 150 billion euros at current prices. For now ThyssenKrupp says the impact from carbon pricing is “marginal” and will probably remain so next year. It warns though of “considerable risks” in the post-2021 period.Tata says it expects to spend more than last year’s 211 million-pound gain on permits in coming years, but didn’t provide more detail.ArcelorMittal says it might have to pay out 5 billion euros between 2021 and 2030 at the current CO2 price. On an annual basis that’s about one-eighth of its analyst-estimated operating profit for 2021. This sounds a lot but it assumes the company makes no improvements in cutting pollution.Emission cuts by companies bound by the EU trading system have been fairly impressive but recent progress has come mostly from the power sector. That makes the bloc’s task of reaching climate neutrality by 2050 — something ThyssenKrupp and others have signed up to — more difficult. Excluding power plants, the largest individual sources of carbon pollution in Europe are all steelworks. In fairness, there’s an absence of carbon-cutting technologies in sectors like steel and cement. Techniques such as replacing coal with hydrogen in steel production show promise but most are still being trialed. Making them viable commercially would require a higher carbon price and massive investments, including on huge new sources of renewable electricity. Yet the free carbon allowances for steel companies probably didn’t motivate them enough to find more sustainable production methods. In her resolve to redouble the EU’s pollution-cutting efforts, European Commission President Ursula Von der Leyen has floated the idea of a carbon border tax on imports into the bloc to make sure domestic producers aren’t unfairly penalized.The feasibility of such a tax is unproven: Measuring the carbon content of manufactured good is tricky and the levy would have to reflect the fluctuating price of allowances. Even if it complies with World Trade Organization rules, a carbon tax might inflame trade tensions with the U.S.Naturally the steelmakers think a border tax is a great idea as it would expose them to less competition by deflecting “dirty” imports. Astonishingly, they’re lobbying to keep their free pollution allowances even if non-EU steelmakers are forced to pay the bloc’s carbon price. The local industry argues that its non-EU exports would become uncompetitive if it had to pay the full cost of permits while investing in emission-cutting innovations. Its lobbying sounds dangerously like an industry trying to have its cake and eat it.(1) The data show ArcelorMittal and Tata Steel receive allowances that exceedtheir emissions. However some of these must be handed to the power sector to account for the waste gases they process.(2) A company formed of assets sold by Tata Steel to Greybull Capital in 2016(3) Tata Steel sold the permits ahead of a planned merger with ThyssenKrupp's steel business which was then blocked on anti-trust grounds.To contact the author of this story: Chris Bryant at firstname.lastname@example.orgTo contact the editor responsible for this story: James Boxell at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
FRANKFURT/DUESSELDORF, Germany (Reuters) - Finland's Kone has proposed paying a multi-billion euro break-up fee to Thyssenkrupp in an effort to improve its chances in an auction for the German conglomerate's elevator business, three people familiar with the matter said. Kone, in a partnership with private equity firm CVC, is among suitors for Elevator Technology (ET), which Thyssenkrupp has put up for sale in a bid to pay down pensions and debt, and invest in restructuring its other struggling businesses. Under the plans, Kone would pay the break-up free - which one source put at 3 billion euros (£2.6 billion) - upfront, making it easier for Thyssenkrupp to accept a deal with the firm, which could face an antitrust review lasting more than a year.
FRANKFURT/DUESSELDORF (Reuters) - Thyssenkrupp will receive first bids for its elevator division this week, three people familiar with the matter said, as major stakeholders differ over whether the conglomerate should sell a majority stake in its most profitable asset. Finnish rival Kone will submit an indicative bid for Elevator Technology by Friday, teaming up with private equity firm CVC, which is poised to buy assets that may have to be divested for antitrust reasons, the people said. This plan would help Kone to realise its ambition of becoming the world's largest elevator maker, overtaking Switzerland's Schindler and United Technology Corp's Otis.
Thyssenkrupp will remain committed to its Steel Europe division, which faces 2,000 layoffs, a board member said on Thursday, just weeks before the conglomerate presents a new strategy for the division. Steel and materials trading will form the core of Thyssenkrupp after the planned full or partial sale or listing of its prized elevator unit, and divestment of the majority of its car parts, plant engineering and shipbuilding divisions. "Together with the team at Steel Europe we will build a good future for steel," Klaus Keysberg, who is in charge of Thyssenkrupp's steel and materials trading units, said at an event in Dortmund in the Ruhr region, Germany's industrial heartland.
Thyssenkrupp is slashing some administrative jobs to cut down on the more than 2 billion euros (1.8 billion pounds) of costs it incurs in that field each year, two people familiar with the matter told Reuters on Monday. A majority of the 300 administrative roles at Thyssenkrupp's car parts and plant engineering divisions will be cut, the sources said. Thyssenkrupp declined to comment.
Thyssenkrupp's new chief executive Martina Merz will brief top managers about the steel-to-submarines conglomerate's organisational structure on Tuesday, three sources familiar with the matter told Reuters. The German group announced in May it was open to new ownership structures for its car parts, plant engineering, marine systems and elevators units, but investors criticised a lack of progress leading to the dismissal of CEO Guido Kerkhoff. Merz will address managers as the company reviews takeover offers for its elevators division and as investors question the viability of its steel and materials trading divisions in the long run.
Swedish fund Cevian, which holds an 18% stake in Thyssenkrupp , has never demanded a special dividend from the ailing conglomerate, a spokesman told Reuters, squashing speculation about such a move. The spokesman said that Cevian, Thyssenkrupp's second-largest shareholder, had previously participated in two capital increases and voted against proposals to pay a dividend in 2017 to improve the group's balance sheet. Cevian, which first disclosed a stake in Thyssenkrupp six years ago, has long criticised the group's complex structure, which spans capital goods ranging from elevators to submarines, arguing that individual units could thrive better on their own.
FRANKFURT/DUESSELDORF, Germany (Reuters) - Thyssenkrupp will weed out some potential suitors for its elevator unit within the next two weeks, two people familiar with the matter said, as the closely-watched auction gathers pace regardless of the planned ousting of CEO Guido Kerkhoff. Bidders invited to the next round will likely include private equity groups KKR , Blackstone , CVC [CVC.UL] and Clayton Dubilier & Rice as well as strategic firms Kone and Hitachi , one of the sources said. A consortium consisting of private equity firms Advent and Cinven and the Abu Dhabi Investment Authority, the world's third-biggest sovereign wealth fund, is also expected to be included, the people said.
Troubled times continue at Thyssenkrupp. The German conglomerate has scrapped its dividend, it said on Thursday. For the first time in six years. A turnaround for the ailing giant: still elusive, according to new boss Martina Merz. SOUNDBITE (German) MARTINA MERZ, CHAIR OF THYSSENKRUPP'S EXECUTIVE COMMITTEE: "The group is in a difficult position, that's not something which we can gloss over. The current situation requires sober consideration, a thorough look at the facts and dealing with several different options. For that reason we're not able to announce a clear plan for the future of Thyssenkrupp today." Merz took over from Guido Kerkhoff at the start of October. He'd been at the helm for only 14 months ... And struggled to halt Thyssen's decline. Latest results show a five-fold increase in its full-year net loss - to 304 million euros. The last 18 months have seen four profit warnings and two failed attempts to restructure. SOUNDBITE (German) MARTINA MERZ, CHAIR OF THYSSENKRUPP'S EXECUTIVE COMMITTEE: "We will address our performance, pushing forward with our elevator negotiations, giving the steel business a future and continuing to develop our organisation." The sprawling conglomerate does everything from make steel to build industrial plants. Hope for relieving pressure on its balance sheet centres on a sale of its prized elevators division. That could raise 17 billion euros - and there are potential buyers, Thyssen said. But in the meantime, the pressure on its share price ramps up: it lost ten per cent in morning trade. Thyssen workers are next in the firing line: 6,000 job cuts are already planned. And more still, a board member said, can't be ruled out.