ESSEN (dpa-AFX) - Falling steel prices in the trading business caused a drop in earnings for industrial group thyssenkrupp in the first quarter. Improvements in other areas such as the classic steel business, automotive supplies or Marine Systems were unable to offset the declines. Thyssenkrupp remains cautious for the second quarter, partly because customer contracts in the steel business were renegotiated. Thyssenkrupp reaffirmed its full-year forecast and expects significantly lower earnings in 2022/23 (as of the end of September).

Despite better-than-feared earnings overall, the stock lost more than eight percent in late morning trading on Tuesday. The stock was thus the biggest loser in the MDax mid-cap segment. Analyst Christian Obst from Baader Bank described the start to the year as "solid". However, the Group expects weaker earnings and a further negative cash flow in the second quarter. By contrast, thyssenkrupp expects a strong recovery in the second half of the year. Analyst Dominic O'Kane of JPMorgan also criticized that operating earnings in the second quarter are likely to fall compared with the first three months. Cash flow is expected to remain roughly at the level of the previous quarter.

Adjusted operating earnings (Ebit) fell by a third to 254 million euros in the three months to the end of December, the company said in Essen on Tuesday. That was significantly more than analysts had expected. At 75 million euros, Thyssen's bottom line was 29 percent lower. In addition to weaker earnings in the trading business, the sale of peripheral businesses such as the mining business had an impact.

For example, thyssenkrupp's steel trading business earned significantly less than a year earlier, when thanks to the price boom it had contributed the lion's share to operating earnings. Customers had initially reduced inventories, explained CFO Klaus Keysberg in a conference call. Since the beginning of the year, the company has seen spot prices rising again, which points to the first signs of a renewed build-up of inventories. Sharply higher costs also led to weaker results in the industrial components business.

By contrast, the traditional steel business improved its earnings despite significantly higher raw material and energy costs and record low shipments. Longer-term contracts still had a positive impact here, so the business was only slightly affected by lower spot market prices. However, this is expected to change in the second quarter as contracts have been renegotiated but costs remain high. Thyssenkrupp therefore expects the second quarter to be negatively impacted by the price renegotiations.

In addition, the steel division benefited from a special effect - the revaluation of CO2 allowances, which contributed 80 million euros to steel earnings. If this were factored out, the Steel division's earnings would be below analysts' consensus expectations, said JPMorgan expert O'Kane, putting the division's earnings performance into perspective.

At nine billion euros, Group sales in the first fiscal quarter were on a par with the previous year. Order intake decreased by twelve percent to just under 9.2 billion euros. By contrast, cash flow before mergers and acquisitions, which receives a lot of attention from analysts, improved significantly but remained negative.

Thyssenkrupp reaffirmed its forecast for fiscal 2022/23 and continues to expect adjusted operating earnings in the mid to high three-digit million euro range - compared with 2.1 billion euros a year earlier. Management continues to see net income at "at least" break-even. "And we are doing everything we can to achieve our cash flow target in the current fiscal year," said CFO Keysberg. This is also expected to be "at least" break-even before mergers and acquisitions./nas/lew/jha/