By Christoph Steitz and Tom Käckenhoff
FRANKFURT (Reuters) - Thyssenkrupp (ETR:TKAG) cut its annual sales and net profit forecasts on Wednesday due to impairment losses and softening demand at its steel division, the latest setback in the group's efforts to win back confidence among investors.
The disclosure drove the embattled conglomerate's shares to their lowest level in more than 15 months, laying bare the structural challenges of a business that is battling high raw materials and energy costs, cheaper Asian rivals and weak demand from the automotive sector.
The issues have triggered a far-reaching performance programme, dubbed APEX, which aims to boost adjusted operating profit by 2 billion euros ($2.1 billion) at a time when the group's market value has dropped below its net financial assets of 3.8 billion euros.
"So there's a giant valuation disconnect here ... which to me suggests either that the market doesn't trust you or ... something else," analyst Jason Fairclough of Bank of America said during a conference call with the company.
In a bid to restore trust, Thyssenkrupp Chief Executive Miguel Lopez said the group was confident it would reach its annual forecast for adjusted EBIT and free cash flow before mergers and acquisitions, having confirmed both targets.
The group's stock fell as much as 10.6% following the news, which came alongside weaker-than-expected first-quarter results, the lowest level since Nov. 7, 2022. They were still down 8.6% at 1218 GMT.
Thyssenkrupp said its steel business, half of which it is trying to sell to Czech billionaire Daniel Kretinsky, was the main contributing factor behind 200 million euros in impairment losses.
CEO Lopez said "ongoing weakness of the global economy and geopolitical conflicts" showed the APEX performance programme was necessary.
The impairments triggered a first-quarter net loss of 314 million euros, compared with an LSEG estimate for a 33 million profit. Sales fell 9% to 8.18 billion euros, also below the 8.64 LSEG forecast.
Thyssenkrupp now expects to break even on a net profit basis in fiscal 2023/24, having previously forecast a low-to-mid triple digit million euro profit. Analysts on average expected net profit of 472 million euros, according to LSEG data.
The company, which is trying to divest its marine divisions, also cut its sales outlook. It now expects revenue to be at last year's level of 37.5 billion euros after initially forecasting a slight increase.
($1 = 0.9340 euros)