UPDATE 3-Slowdown makes Thyssenkrupp targets tougher to reach

UPDATE 3-Slowdown makes Thyssenkrupp targets tougher to reach

Reuters  | Feb 12, 2019 16:25

UPDATE 3-Slowdown makes Thyssenkrupp targets tougher to reach

* Car markets in China, Europe weakening - CEO

* Q1 adj EBIT from continuing operations down 37 pct

* Keeps outlook for adj EBIT from continuing operations

* Shares down as much as 3.2 pct (Recasts, adds CEO quote, analyst, updates shares)

By Christoph Steitz and Tom Käckenhoff

FRANKFURT/DUESSELDORF, Feb 12 (Reuters) - German steel-to-elevators group Thyssenkrupp TKAG.DE on Tuesday warned of a darkening economic backdrop, including a weakening automotive market, signalling tough times for its capital goods business ahead of a planned separation.

Shares in the group fell as much as 3.2 percent and traded near three-year lows after analysts said it would be more challenging for the conglomerate to reach its operating profit target for the full year.

Thyssenkrupp is in the process of a major restructuring which includes a planned European joint venture with India's Tata Steel TISC.NS and a separate listing of its elevator, plant engineering and car parts unit. Executive Guido Kerkhoff, who is under pressure to revive the group's ailing shares, said that the Chinese car market was weakening somewhat, while car production in Europe was hit by stricter anti-pollution testing rules.

"We will have to see whether those trends will continue going forward," Kerkhoff said after the group released first-quarter results and pointed to growing economic and political uncertainties.

Fears of a global economic slowdown have increased in recent months, with euro zone businesses expanding at their weakest rate since mid-2013 at the start of the year as demand fell for the first time in four years. which said last year it would spin off its elevator, car parts and plant engineering unit, still expects adjusted operating profit (EBIT) from continuing operations to rise to more than 1 billion euros ($1.13 billion) in 2018/19.

Adjusted EBIT from continuing operations, which strips out Thyssenkrupp's steel activities, stood at just 168 million euros in the first quarter, down 37 percent, and will come in below 283 million in the second quarter, the company said.

"That means that Thyssenkrupp needs to double down in the second half of the year," DZ Bank analyst Dirk Schlamp said, keeping a "hold" rating but adding estimates would be reviewed.

Shares in Thyssenkrupp have lost about a third since the spin-off was announced in September, with investors anxious over a lack of transaction details Kerkhoff has provided so far. Shareholders will vote on the split only in about a year's time.

The remaining business after the spin off will be called Thyssenkrupp Materials and its activities will include

materials trading, shipbuilding, a 50 pct stake in the steel joint venture and two smaller units: forging and bearings.

Thyssenkrupp said corporate costs, which have been a major target of shareholder criticism, would fall to below 300 million euros in terms of operating profit by 2020/21 as a result of the new set-up, a decrease of more than a fifth from current levels. ($1 = 0.8862 euros) (Editing by Sherry Jacob-Phillips and Keith Weir)

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