ThyssenKrupp AG (FROM: TKA) - Legendary German industrial conglomerate. The company seems clumsy and inefficient, but it has both good potential, and some obstacles.
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What do they earn
It is an industrial conglomerate, which is engaged in the production of goods and provides related services. In its present form, the company appeared in 1999 after the merger of Thyssen and Krupp - both companies originated under the Hohenzollerns, and their history is inextricably linked with the history of Germany in the 19th and 20th centuries.
Company revenue by segments
| Segment description or note | Share in total revenue | Adjusted pre-tax profit margin | |
|---|---|---|---|
| Automotive components | — | 13,26% | −5,52% |
| Industrial components | — | 5,92% | 6,57% |
| Elevator technology | Segment sold | 18,46% | 10,58% |
| Factory technology | Construction of plants in the chemical industry, cement production and mining | 8,17% | −8,11% |
| Marine systems | Supply of systems and electronics for submarines and ships | 4,93% | 1,02% |
| Services and materials | From logistics services in the field of storage of industrial raw materials to the production of stainless steel | 31,88% | −0,98% |
| European steel | Carbon steel production | 17,45% | −13% |
Sales of the company to the final destination:
- automotive industry 30%;
- engineering business 14%;
- steel processing 12%;
- sale of steel to resellers — 11%;
- state - 6%;
- package - 4%;
- construction - 2%;
- energy and housing and communal services — 1%;
- other industries - 19%.
Company revenue by types of contracts:
- sale of finished goods to companies for further resale or use in their production - 47,91%;
- sale of goods to end consumers — 30,38%;
- services - 4,22%;
- orders, where the company works as a contractor on some project, — 17,49%.
Revenue by country and region:
- German-speaking countries: Germany, Austria, Switzerland, Liechtenstein — 33,33%;
- other Western European countries 18,65%;
- countries of Central and Eastern Europe — 9,3%;
- CIS countries - 0,98%;
- North America - 15,69%;
- South America - 1,88%;
- Asian-Pacific area - 5,21%;
- Greater China: all territories of China with Hong Kong, Macau and Taiwan 7%;
- India — 1,45%;
- Middle East and Africa - 6,51%.
More than half of the company's employees and production facilities are concentrated in Germany, but the scope of its international operations is very wide. The company has been unprofitable for the last few years.
The value of the company's assets by region, million euros
| Germany | USA | China | Outside Germany | Generally | |
|---|---|---|---|---|---|
| 30.09.2019 | 7272 | 1578 | 909 | 3654 | 13 413 |
| 30.09.2020 | 5323 | 379 | 525 | 2398 | 8624 |
Arguments in favor of the company
Mood - German steel. Industrial recovery in the eurozone countries favors the company. Maybe, in this quarter, and even throughout the year, its financial performance will improve.
Purely German scandal. This is a very old and well-known company in very difficult circumstances - it suffers heavily from losses and low profitability.. This is partly due to the company's complex design.: in fact, it is a lot of very different businesses.
I see a very likely scenario, in which an activist investor will buy a stake in ThyssenKrupp and will put pressure on the company's management in order to optimize management.
This has already happened in the history of the company: Swedes from Cevian and Americans from Elliott put pressure on the company's management, to disassemble the conglomerate into parts and bring its finances into better shape - thus increasing the investment attractiveness of the company as a whole. Actually, part of this plan has already been implemented: the elevator unit was sold.
Next spring, the company plans to list the steel division as a separate company - ThyssenKrupp shareholders will receive a proportional number of shares in the new company, And, maybe, they will grow faster, than ThyssenKrupp shares. By and large, the dismantling of the company in the interests of shareholders is already taking place.: so, after fund pressure campaign ThyssenKrupp made big cuts and turned a profit in the last quarter.
Think, that it is not pointless to invest in these shares with an eye to 3-4 years precisely in anticipation of changes, caused by the actions of investor activists. May be, other funds will join this, which will require the acceleration of these processes, which can lead to a significant increase in shares.
"But the Germans?» In Germany, a very small percentage of the population invests in the stock market.. Low deposit rates help change that - and I would expect, that stocks of well-known and established brands like ThyssenKrupp will be in demand on the stock exchange: they are familiar to every German.
What can get in the way
No payments to you. The company does not pay dividends - so here you can not hope for the growth of shares due to the influx of payout lovers. This also cancels out the positive effect of the arrival of retail investors from among the German burghers in these shares.: passive income at a sufficient level for the German inhabitants is a significant factor.
Industrial breakdown. Rising cost of industrial raw materials and logistics in EU countries, yes and around the world, will have a negative impact on the company's business.. Given the international scope of its operations, should be mentally prepared for, that her reporting would suffer.
Debts. According to the company's latest report, it has 25.805 billion euros of debt, of which 12.926 billion must be repaid during the year. ThyssenKrupp has a lot of money at its disposal: 9,408 billion in accounts plus 5.4 billion debts of counterparties. Considering the importance of the conglomerate to the German economy, the company is unlikely to have difficulty obtaining loans. But in general, a large amount of debt can scare away some investors from these shares..
Without activism there. Activist investors have limited potential in the case of ThyssenKrupp. Firstly, due to the size of the transaction for the sale of divisions will inevitably fall under the scope of the antitrust authorities. So, EU regulators blocked the sale of the company's steel business to Indians from Tata Steel. Secondly, ThyssenKrupp's systemic importance to the German economy limits the potential for cutbacks and other "efficiency improvement" actions to please shareholders. The German government can greatly complicate the life of the company in this case..
Resume
Initially, it was supposed to be an investment idea., but after careful analysis of the company, I'm afraid, that logistical difficulties and rising raw material costs could have a negative effect on its reporting. This will negatively affect prices., because the profitability of ThyssenKrupp's business is constantly under attack.
But at the same time it is a very interesting company., and if you're willing to take the risk, then you can invest in its shares in the calculation, that activist investors will lead to positive shifts in this business for quotes.
