Monday 24 June 2013

Analysis of ThyssenKrupp

A German steel company

Company: ThyssenKrupp

Business: Steel industry mainly. Producing bearings for wind power plants, producing crushers for mining industry, plants for battery production, cement plants, pushing and focusing a lot on decreased CO2-emission. They are also surprisingly enough producing PLA polymer. All in all they have five groups : Components Technology, Elevator Technology, Industrial Solutions, Materials Services and Steel Europe. They claimed it to be six groups but I can only count it to being five so I wonder what the hidden group is doing but by the look of their financial statement one group must be burning money so I guess it is that one.

Active: German company so a large focus on Germany and Europe, presence all over the world and claim to be in 80 countries including China as well as North America and South America. Currently they are divesting steel plants in the USA as well as in Brazil which is costing money.

P/E: -1.6

The P/E is due to huge losses last year very, very bad. From what I can tell in the last five years they have had three years of losses, one moderate year and one good year. The biggest loss came last year. The P/B is also not impressive with 2.1 even though it could have been acceptable with a low P/E. According to Graham it is not a buy due to that they still do not show they are on the good direction. The earnings to sales is negative 12% so that is bad. The book to debt is 0.1 which is looking like a bank and it becomes almost a joke when thinking that the CEO was talking about the importance of having a low financial debt. Yes... it is indeed but then one should not look like a bank with the debt. In the last five years they have had negative growth of 5.5% which is a lot. The motivated P/E if one should give one at all should be around 8 maybe... max. Due to the losses they paid no dividends last year but they have been paying before.

Conclusion: I would not buy ThyssenKrupp today. They still have not managed to turn the boat around and they still have heavy costs from discontinued operations but even without these costs they are still not making enough sales. If the stock would drop down to book value so around 7 € then it could be worth to look into it again and especially if they then also make some money.

No comments: