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Thyssenkrupp cuts 11,000 jobs as steel woes worsen cash burn
[FRANKFURT] Thyssenkrupp will cut almost twice as many jobs as planned as the conglomerate's beleaguered steel business haemorrhages cash and Germany's government bickers over a possible rescue.
The company will eliminate a total of 11,000 positions over the course of several years, according to a statement on Thursday. It's forecasting a more than one billion euro (S$1.59 billion) full-year net loss after registering a 5.5 billion euro deficit for the fiscal period that ended in September.
"We will have to move further into the 'red zone' before we have made Thyssenkrupp fit for the future," chief executive officer Martina Merz said. "The next steps could be more painful than the previous ones. But we will have to take them."
Thyssenkrupp shares fell 6 per cent before the open on Germany's Tradegate exchange. The stock has fallen almost 60 per cent since the start of the year.
Once synonymous with German industrial prowess, Thyssenkrupp is now fighting for survival. The pandemic exposed and worsened deep-seated issues at the company. Its steel division faces severe problems with yawning pension deficits and cheap imports from Asia.
Management has held talks with potential buyers and merger partners for the steel unit in order to address chronic market overcapacity. They're also in discussions with the German government over an aid package that could be worth at least five billion euros, people familiar with the negotiations said last week.
With a workforce of more than 100,000, Thyssenkrupp remains a systemically important employer to politicians in its home state of North Rhine-Westphalia. It's endured a tumultuous few years marked by a string of management departures and clashes with activist investors Cevian Capital and Paul Singer's Elliott Management Corp.
The conglomerate sold its prized elevator division earlier this year for 17.2 billion euros in a bid to buy time to restructure other parts of the business. It now has about 13.2 billion euros of cash and undrawn credit lines.
Excluding proceeds from the elevator sale, Thyssenkrupp burned through 5.5 billion euros in the last fiscal period, triple its prior-year outflow. It's forecasting another 1.5 billion euros of negative free cash flow over the next 12 months.
"The outlook for next year is still pretty dire," said Ingo Schachel, senior analyst at Commerzbank.
The Essen-based company said it needs to cut more than the 6,000 jobs planned in May 2019 because of long-term market developments and effects of the coronavirus pandemic.
Thyssenkrupp expects to make a "fundamental" decision in the spring on a solution for its steel business, which swung to a 946 million euro loss in the last fiscal year. The full group's adjusted deficit before interest and taxes was 1.6 billion euros.
Although the company expects sales growth in the low to mid-single-digit range after a 15 per cent contraction last year, it expects an adjusted Ebit (earnings before interest and taxes) loss in the mid-three-digit million-euro range.