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All articles and backgrounds08/30/2019
Decline of the industrial icon Thyssenkrupp ovens are also burning investor money
By Christoph Rottwilm
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Oliver Berg / DPA
Steel workers at Thyssenkrupp in Duisburg: The company is in crisis, the stock is rushing downhill.
With the ThyssenKrupp Group, another founding member threatens to fly out of the leading Dax index. For the shareholders of the company another of many bad news in the recent past.
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Thyssenkrupp, the name stands for a double misery for some time: The company is in crisis, and the shareholders must suffer. The latter is likely next week before the next stroke of the neck: Most likely, Thyssenkrupp stock market chart will then show from the German index Dax stock market chart show. After the Commerzbank stock market chart show last year, it would be within a short time already the second founding member to leave Germany's first stock exchange league. Including the predecessor company Thyssen, the group has belonged to the index since its launch in 1988.
And not in the future? It would just be the consistent continuation of the miserable development the company has been through in recent months. The waning economic slowdown and above all the already present slack in the auto industry have significantly reduced the demand for steel. On the other hand, however, raw material costs have risen for ThyssenKrupp and other players in the industry. For example, the price of iron ore has recently reached its highest level in five years.
Add to this: the failure of the planned steel merger with its Indian competitor Tata Steel, which was banned by the EU, high levels of debt, as well as external disruptive fires such as the US-China trade war and unregulated Brexit, which weigh on business throughout the world economy ,
The consequences can be seen from the business figures that the Group has recently presented for the past third quarter. Profits declined so sharply that Thyssenkrupp CEO Guido Kerkhoff once again had to downsize the forecast for the full year. Instead of previously 1.1 to 1.2 billion euros, the Essenes expect the operating profit now only 800 million euros in the 2018/2019 financial year. It is therefore not surprising that Kerkhoff soberly states that one can not be satisfied with the overall business development in the first nine months.
Dax expulsion threatens to put new pressure on the stock price
It is clear that all this can not be ignored on the company's share price. Thyssenkrupp lost almost half of its value in the past twelve months on the stock market. For comparison, the Dax fell in the same period by a comparatively moderate 5 percent. The ThyssenKrupp stock was even back for less than 10 euros recently - this was the case most recently in 2003.
The upcoming Dax expulsion appears only logical. The stock market value of a company is one of the decisive criteria for the index affiliation. The value of Thyssenkrupp has meanwhile dropped to less than seven billion euros. Subsequent candidates such as the real estate group Deutsche Wohnen Börsen-Chart show from the MDax stock market chart show already come to more than ten billion euros. At the engine manufacturer MTU Aero Engines stock market chart show, which is also traded as a possible Dax-Nachrücker, the stock market value is currently even around 13 billion euros.
So bleak prospects for Thyssenkrupp shareholders. Should the company actually be taken out of the DAX - the decision is to be announced in the middle of next week - so should bring the additional pressure on the share price. Numerous index funds (ETFs) that replicate the Dax one to one would be forced to sell the paper. As the news service Bloomberg reports, the well-known Dax ETFs together have a total volume of more than 14 billion euros. Although Thyssenkrupp only has a share of less than 1 percent in Dax. Nevertheless, the selling pressure that would result from the removal, investors can almost calculate with the calculator.
Weak consolation: Thyssenkrupp would probably switch to the MDax after the Dax farewell. ETFs accompanying this index would therefore be forced to take the paper into custody. However, relevant fund databases rarely contain more than half a dozen MDax index funds, with a total volume of less than three billion euros.
The hoped-for price increase for the ThyssenKrupp stock must therefore come from other sources. For example, CEO Kerkhoff hopes for a radical reorganization of the entire company, with a clearer distinction between individual divisions and a significantly leaner holding company. Also savings are planned including a considerable job reduction. The capital required to help with the conversion, Kerkhoff wants to take over the sale of the elevator division - which he would separate from just one of the most profitable parts of the ThyssenKrupp conglomerate.
Christoph Rottwilm on Twitter
Whether the ThyssenKrupp management will satisfy the shareholders? Major shareholders such as Swedish financial investor Cevian have been under pressure for a long time in the face of disastrous developments. And even small investors who have participated in the free float of ThyssenKrupp stock should gradually lose patience at the latest in view of the upcoming Dax ejection.
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- Crash of a traditional company: ThyssenKrupp threatens after 31 years expulsion from the Dax
- On a steel trip with an industrial giant: What Plan B means for ThyssenKrupp
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