June 22, 2017 / 11:35 AM / a month ago

Thyssenkrupp plans more cost cuts in industrial solutions

3 Min Read

FILE PHOTO: The logo of ThyssenKrupp is seen at the headquarters of the steel maker and multinational conglomerate in Essen, Germany, April 20, 2016.Wolfgang Rattay/File Photo

DUESSELDORF, Germany (Reuters) - Germany's Thyssenkrupp said it planned cost cuts worth at least 100 million euros ($112 million) to meet financial targets at its troubled unit that engineers industrial plants and builds ships, despite early signs of improvement.

The industrial solutions unit is suffering from low oil prices that have discouraged investments in new plants. It has also missed out on a large Australian submarine order and is already undergoing an extensive reorganisation.

The business got a new chief executive in May after the previous incumbent stepped down after accepting an inappropriate gift from a business partner.

"In addition to the measures already initiated, cost cuts are planned in a triple-digit million euro range," a spokesman said on Thursday, confirming an earlier report in Germany's Manager Magazin. He did not give a specific figure.

"The positive effects of the changes already initiated will only become visible after a time lag due to the long-term nature of plant engineering projects," he said.

The new cost cuts will come on top of 450 million euros ($502 million) over a three-year period that were announced in December, the spokesman said.

Thyssenkrupp shares jumped to a two-year high and were trading up 2.7 percent at 24.84 euros by 1120 GMT, at the top of a flat German blue-chip index.

The unit, whose revenues of 5.74 billion euros were about 15 percent of the group's last fiscal year, is Thyssenkrupp's second-most profitable after elevators - ahead of the steel business from which it is trying to distance itself.

Thyssenkrupp has been trying to put its steel business into a joint venture with Tata Steel's British and Dutch activities for over a year but negotiations have been hampered by Britain's vote to leave the European Union.

Industrial Solutions reported its highest order intake in three years last quarter, and an operating profit margin of 1.8 percent, compared with 5.8 percent last fiscal year and its long-term target of 6-7 percent.

($1 = 0.8957 euros)

Reporting by Tom Kaeckenhoff; Writing by Georgina Prodhan; Editing by Maria Sheahan and Edmund Blair

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