Thyssenkrupp AG, the German steelmaker in the midst of a corporate transformation, dropped the most in three months after reporting negative free cash flow widened in the first quarter.
While the company posted better-than-expected fiscal first-quarter profit as steel prices recovered, negative free cash flow before mergers and acquisitions doubled to 1.74 billion euros ($1.86 billion) due to a temporary increase in net working capital, it said in a statement Thursday.
The â€œalarmingâ€ free cash flow figure is worse than expected, Christian Obst, an analyst at Baader-Helvea Equity Research, said by phone from Unterschleissheim, near Munich. â€œIt shows that the companyâ€™s structure is hardly able to generate a positive free cash flow.â€
The shares fell as much as 4.8 percent and were down 3.6 percent at 22.425 euros by 10:51 a.m. in Frankfurt, the biggest decline in Germanyâ€™s benchmark DAX Index. The drop cut the stockâ€™s gain to 74 percent over the past year.
The free cash flow figure â€œdisappointed,â€ Seth Rosenfeld, an analyst at Jefferies International Ltd. in London, said in a note. Thyssenkrupp said it still sees â€œslightly positiveâ€ annual free cash flow before M&A this fiscal year. Earnings before interest and taxes, excluding one-time items, rose 40 percent to 329 million euros in the three months to Dec. 31 from a year earlier, the Essen-based company said. That beat the 318.1 million euro average of seven analystsâ€™ estimates compiled by Bloomberg.
Steel prices rebounded in 2016 as stimulus in China, the biggest consumer of the alloy, helped stabilize the countryâ€™s economy. While Chief Financial Officer Guido Kerkhoff said that the increase will be reflected in second and third quarter profit, the company reiterated its forecast for full-year Ebit, excluding one-time items, to reach about 1.7 billion euros.
Chief Executive Officer Heinrich Hiesinger is trying to transform Germanyâ€™s largest steelmaker, which gets more than half its profit from its elevator unit, into a more diversified industrial group and raise annual earnings to at least 2 billion euros. Adjusted Ebit in the elevator business rose 5.9 percent to 215 million euros in the latest quarter.
Higher steel prices helped the Steel Americas unit swing to a 37 million euro profit and the Materials Services trading unit boost adjusted Ebit 17-fold.