ThyssenKrupp swings to profit, sees slow recovery

12. February. 2010

* Steelmaker keeps full-year outlook but remains cautious.
* Subdued picture echoes mkt leader ArcelorMittal.
* Shares up 4.2 percent.

FRANKFURT - ThyssenKrupp Germany's biggest steelmaker, said its markets would be slow to recover from last year's slump after it pared back costs and pushed through price hikes to record its first profit in four quarters.

Profit in the three months to December easily beat forecasts, sending ThyssenKrupp's shares up 4 percent, but it cautioned that, with the global economic recovery fragile, its customers were still buying mainly to restock inventory rather than in response to rising demand.

The cautious outlook echoed the view of the world's top steelmaker, ArcelorMittal and reflected a blip in the post-recession upturn of Germany, the euro zone biggest economy and ThyssenKrupp's largest market by far, where growth unexpectedly stagnated in the final months of 2009.

ArcelorMittal, a bellwether for heavy industry, said on Wednesday its markets would improve only slowly with higher shipments but lower prices in early 2010 as it issued a profit forecast that fell short of expectations.

ThyssenKrupp said on Friday that underlying pretax profit in its first quarter fell to 237 million euros ($324 million) from a year-ago 249 million, easily beating an average analyst forecast of 56 million in a Reuters poll.

"We think that the ongoing cost savings are the most important driver of the strong results," brokerage Merck Finck said in a note to clients.

ThyssenKrupp said the global steel market's prospects remained subdued.

"In Europe, the NAFTA region and Japan, demand will be higher than in 2009 mainly due to restocking, but there will not yet be any return to the production and demand levels of previous years," it said.

"Not least due to further capacity expansions worldwide, there is a renewed risk - above all in Europe - of rising imports from third countries."

NEW ORDERS, SALES DOWN

The company also felt the impact of economic weakness in Germany, where it generates nearly a third of revenues, with new orders and sales falling by 28 percent and 19 percent, respectively.

German growth stagnated in the final quarter of 2009, statistics office data showed on Friday, following expansions in the two previous quarters that ended a year-long recession.

ThyssenKrupp, which generates 62 percent of revenues in the euro zone, said the European carbon steel flat-rolled market took a turn for the better from the autumn of 2009.

But "this was more a case of gap-filling than a sign of a stronger stockbuilding trend. End-user demand remained slow on the whole, with steel customers still purchasing very cautiously."

Steel prices rallied in the second half of last year on restocking while carmakers, appliance makers and some engineering sectors limped back toward a gradual recovery amidst indications of an uptick in Germany, the world's seventh largest steelmaking nation.

Steel body Eurofer said earlier this month the European steel sector was recovering slowly despite a continued slump in construction, buoyed by an improving outlook for the car and engineering industries.
Among steelmaking peers across the Atlantic, Nucor (NUE.N), U.S. Steel  and AK Steel ) expect a gradual recovery from the recession and still face rising raw material costs and other headwinds.
At 1005 GMT ThyssenKrupp shares were up 4.2 percent, outpacing a 0.5 percent rise in the DJ Stoxx basic resources index .SXPP. ArcelorMittal shares rose 0.2 percent.
[Reuters]