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No longer an eternal crisis group - why the steel giant is now earning billions

Oliver Burkhard sends an apology in advance.

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No longer an eternal crisis group - why the steel giant is now earning billions

Oliver Burkhard sends an apology in advance. "I don't want that to sound cynical," says the Chief Human Resources Officer of the steel and technology group ThyssenKrupp. "And it's not meant to be a mockery either. But Thyssenkrupp can handle crises – we have proven that for ten years.”

Burkhard is alluding to the almost endless plight of the traditional company from the Ruhr area, which has mainly attracted attention with negative headlines in recent years and was sometimes on the verge of bankruptcy. At the same time, he also explains the good figures that Thyssenkrupp presented for the 2021/2022 fiscal year, which ended at the end of September, despite the war, pandemic and disrupted supply chains.

Above all, the steel division and the materials trading business gave Thyssenkrupp a jump in sales of 21 percent to a good 41 billion euros and at the same time an adjusted operating result (EBIT) increased by almost a third to the amount of 2.1 billion euros and thus the highest operating profit since 2008.

Around 1.2 billion euros remain as annual surplus - in the previous year there were still losses, as was so often the case in the past crisis decade. For the first time in years, Thyssenkrupp is paying a dividend again, the plan is 15 cents per share. "The figures show that we have made good progress in restructuring Thyssenkrupp and have been able to significantly increase the operational performance of the businesses," comments CEO Martina Merz.

Although the Swabian also has to admit that the transformation has recently stalled. "The external shocks have meant that we haven't made as much progress as we had planned on some issues."

What is meant by this is above all the future of the steel division. It is still unclear how Thyssenkrupp Steel Europe will continue. The aim is to make the business independent – ​​in whatever form. But that has been the case for a year and a half. The only thing that is certain is that there are “no red lines”, as Merz emphasizes. And that the state will not step in, as IG Metall, for example, would like to see.

But North Rhine-Westphalia's Economics Minister Mona Neubaur (Greens) recently ruled that out before the Dusseldorf Business Journalists' Association (WPV). However, the state will help the group with important investments in climate protection by giving a mid three-digit million amount for the planned direct reduction plant in Duisburg. "Investments yes, but don't become owners."

The direct reduction plant with which Thyssenkrupp is introducing the green transformation of its steel production costs around two billion euros. Production will then no longer take place using the classic blast furnace route with coke and coal, as was the case in the past 200 years. Instead, so-called reducing gases release the oxygen from the iron ore.

"This enables a CO2 reduction of 95 to 97 percent," says the think tank Agora Energiewende, which specializes in the electricity sector. Ideally, green hydrogen is used. Because the planned start of production in 2026 will not be available in the huge quantities required, as Thyssenkrupp CFO Klaus Keysberg has already announced, natural gas will initially be used as an interim solution.

Thyssenkrupp can partly influence itself to ensure that the necessary hydrogen capacities are built up more quickly. Because the subsidiary Nucera plans and builds so-called electrolysers, i.e. plants for the production of “green hydrogen”.

CEO Merz expects a lot from this business. "In the next few years, we expect the world's largest industrial renewal program since the industrial revolution," she says of the green transformation of the economy, in which hydrogen will play a key role. IPO plans for Nucera have been postponed indefinitely given the volatile and shaky capital market environment. This is also what is meant by the “topics that have not progressed as desired”.

And it won't get any better any time soon. In any case, Thyssenkrupp is preparing for difficult times in the foreseeable future and expects business to cool down significantly. Financier Keysberg predicts that rising costs for raw materials and energy coupled with falling steel prices would reduce sales and profits in the new 2022/2023 financial year.

Significantly reduced revenues are expected, an operating result in the mid to high three-digit million range and, at most, a black zero for the annual surplus. Thyssenkrupp is therefore planning improvements in productivity and a "temporary, situation-related reduction in investments in plants". Funds are only released in a restrictive and gradual manner.

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