ThyssenKrupp Review: we invest in German steel

Обзор ThyssenKrupp: инвестируем в немецкую сталь

ThyssenKrupp AG (FROM: TKA) - Legendary German industrial conglomerate. The company seems clumsy and inefficient, but it has both good potential, and some obstacles.

When creating the material, sources were used, inaccessible to users from the Russian Federation. Hopefully, you know, what to do.

What do they make money on

It is an industrial conglomerate, which is engaged in the production of goods and provides related services. The company appeared in its current form in 1999 after the merger of Thyssen and Krupp - both companies arose during the Hohenzollern times, and their history is inextricably linked with the history of Germany in the 19th and 20th centuries.

The company's revenue by segment

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 factories 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 storage of industrial raw materials to stainless steel production 31,88% −0,98%
European steel Carbon steel production 17,45% −13%

Company sales by 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%.

Revenue of the company by type of contract:

  • 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 a project, — 17,49%.

Revenue by country and region:

  • German-speaking countries: Germany, Austria, Switzerland, Liechtenstein - 33,33%;
  • other countries of Western Europe - 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 the PRC with Hong Kong, Macau and Taiwan - 7%;
  • India - 1,45%;
  • Middle East and Africa - 6,51%.
  term structure of the US government debt

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.

Обзор ThyssenKrupp: инвестируем в немецкую сталь

Обзор ThyssenKrupp: инвестируем в немецкую сталь

Обзор ThyssenKrupp: инвестируем в немецкую сталь

Company asset value by region, million

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 boom in eurozone favors company. maybe, in this quarter, or even throughout the year its financial performance will improve.

Purely German scandal. It is a very old and well-known company in very difficult circumstances - it suffers greatly 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 a share in ThyssenKrupp will be bought by an activist investor 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.

The company plans to list its steel division as a separate company next spring - ThyssenKrupp shareholders will receive a proportional number of shares in the new company, and, possibly, 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 fundraising campaign, ThyssenKrupp made big cuts and made profit last quarter.

I 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 be connected to this, which will require the acceleration of these processes, which can lead to a tangible increase in stocks.

“And the Germans?» In Germany, a very small percentage of the population invests in the stock market. Low deposit rates are helping to change that - and I would expect, that stocks of well-known and well-established brands like ThyssenKrupp will be in demand on the stock exchange: they are familiar to every German.

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Обзор ThyssenKrupp: инвестируем в немецкую сталь

Обзор ThyssenKrupp: инвестируем в немецкую сталь

What can get in the way

No payments to you. The company does not pay dividends - so here you cannot hope for the growth of shares due to the influx of payment lovers. This will also neutralize the positive effect of the arrival of retail investors from among German burghers in these shares.: passive profitability at a sufficient level for the German inhabitants is a significant factor.

Industrial breakdown. Growth in the cost of industrial raw materials and logistics in the EU countries, and all over the world, will negatively affect the business of the company. Given the international reach of its operations, you should be mentally prepared for, that her reporting will suffer.

Обзор ThyssenKrupp: инвестируем в немецкую сталь

Обзор ThyssenKrupp: инвестируем в немецкую сталь

Обзор ThyssenKrupp: инвестируем в немецкую сталь

Debts. According to the company's latest report, she has 25.805 billion euros in arrears, of which 12.926 billion needs to be paid off within a year. ThyssenKrupp has a lot of money at its disposal: 9,408 bln in accounts plus 5.4 bln counterparties in arrears. Considering the importance of the conglomerate to the German economy, the company is unlikely to have difficulties in obtaining loans. But in general, a large amount of debt can scare off some investors from these shares..

Without activism there. Investor activists have limited potential in the case of ThyssenKrupp. Firstly, due to the size of the transaction for the sale of divisions, they will inevitably fall under the gun of the antitrust authorities. So, EU regulators blocked at one time the sale of the company's steel business to the Indians from Tata Steel. Secondly, ThyssenKrupp's systemic importance to the German economy limits the potential for cuts and other “efficiency gains” to please shareholders. The German government could make life very difficult for the company in this case..

Resume

Initially, it was supposed to be an investment idea., but after a careful analysis of the company, I am afraid, that logistical difficulties and an increase in the cost of raw materials may have a negative effect on its reporting. This will negatively affect quotes., because the profitability of ThyssenKrupp's business is constantly under attack.

But at the same time, this 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 investor activists will lead to positive shifts for quotes in this business.

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