Thyssenkrupp rallies as it agrees sale of Brazil steel plant
Thyssenkrupp has agreed to sell its steel plant in Brazil, CSA Siderúrgica do Atlântico, to Ternium SA for €1.5bn.
Thyssen Krupp AG
€4.51
17:30 24/04/24
Xetra DAX
18,088.70
17:00 24/04/24
The German industrial and technology group said a writedown of around €900m on CSA will be necessary with the signing, but the company’s gearing, i.e. the ratio of net financial debt to equity, will improve on completion of the transaction.
The sale of the steel business brings to end Thyssenkrupp’s loss-making steel operations in the Americas.
The company had planned to produce slabs at low cost in Brazil and process and sell them in the USA and Europe, but that plan didn’t work out.
Following a significant increase in construction costs for the facilities in Brazil and Alabama in the USA, as well as technical problems with the ramp-up of the plants and high start-up losses, Thyssenkrupp placed the entire project under review immediately after Heinrich Hiesinger took over as chief executive officer.
Hiesinger said on Wednesday: “With the sale of CSA we are parting fully with Steel Americas. This is an important milestone in the transformation of Thyssenkrupp into a strong industrial group.
“We now generate over 75% of our sales with our profitable capital goods and services businesses.”
RBC Capital Markets said the sale was positive.
It said the agreed sale at €1.5bn compares with its valuation at €1.3bn and consensus expectations likely in the broad range of around €1.0-1.5bn. In addition, the bank said the divestment is a further step towards repositioning the group, as it will increase the sales share from capital goods to 75%+.
“We therefore view the deal as a re-rating catalyst for Thyssenkrupp which is trading at a 17% discount to our sum-of-the-parts valuation.
“Despite the €900m impairment, FY17 gearing should fall from 103% (RBC base case) to 83% (pro forma basis). We would therefore expect a positive response for the shares today. The major re-rating catalyst remains the exit from Steel Europe for which we continue to expect progress over the course of 2017.”
At 1106 GMT, the shares were up 5% to €24.32.