Strategy

Continuing the transformation process

thyssenkrupp is continuing to drive forward its transformation in a challenging and rapidly changing macroeconomic environment. The aim is to realign thyssenkrupp as a sustainable and high-performing company with lean management structures and a portfolio focused on the profitable growth of our segments. The framework for this comprises our brand and our values.

To optimally develop the businesses of thyssenkrupp AG, the company is continuing to focus its transformation specifically on the opportunities for our technologies arising from future-oriented issues. We consider that the green transformation offers potential for further profitable growth both now and, in particular, in the medium and long term, for example, in the areas of hydrogen, green chemicals, renewable energy, e-mobility and supply chains.

At the same time, we want to improve the performance of all our businesses. The declared aims are for the segments to make a sustained positive value and cash flow contribution for the group and to pay a reliable dividend to our shareholders.

To achieve all these goals, thyssenkrupp will continue to consistently pursue the route it has embarked on. The framework for this comprises three areas of action: portfolio, performance and green transformation.

Portfolio

A clear decision has been taken on the direction of thyssenkrupp: we want every individual business to develop in the best possible way and to achieve a sustainable competitive position – both economically and in terms of environmental and climate protection. Therefore, we continuously review and assess the development potential of all individual businesses to find the constellation that offers the best future prospects for them from the perspective of all stakeholders.

To ensure the best possible development of our businesses and focus our portfolio on high-growth markets, we are also continuing to pursue avenues that could involve a change in their ownership structure. Having completed the divestment of individual activities in the course of our transformation and closed the heavy plate business in the Multi Tracks segment, in July 2023 we successfully listed our electrolysis business, thyssenkrupp nucera, on the stock market. In this way, we have created new financial headroom for our hydrogen subsidiary so that it can continue to grow and expand its market leadership.

At the start of fiscal year 2023 / 2024 we took the next step in the sustainable realignment of our group: since October 1, 2023, the bearings business Rothe Erde (reported separately as the Bearings segment as of September 30, 2023) Uhde, Polysius and thyssenkrupp nucera (all three reported in the Multi Tracks segment until September 30, 2023) have been bundled in the new Decarbon Technologies segment. All four businesses have key technologies for the decarbonization of the industry. By establishing this new segment, thyssenkrupp is positioning itself as a technology leader for the energy transition and ensuring full visibility of its extensive expertise for the green transformation. The former Multi Tracks segment has been dissolved. The remaining businesses from the Multi Tracks segment – Automation Engineering and Springs & Stabilizers – are now part of the Automotive Technology segment. Forged Technologies (reported as a separate segment as of September 30, 2023) is now part of Automotive Technology as the end-customer structure is the same.

Consequently, thyssenkrupp’s activities are now organized in five segments: Automotive Technology, Decarbon Technologies, Materials Services, Steel Europe, and Marine Systems.

To ensure the best possible development of our businesses and focus our portfolio on high-growth markets, we are also continuing to pursue avenues that could involve a change in ownership structure. At the start of May 2024, we sold the 55% interest in thyssenkrupp Industries India (Decarbon Technologies segment) to a consortium of former co-owners, thus making further progress in the strategic adjustment of the industrial engineering portfolio.

We are exploring various avenues of development for the individual segments in our portfolio.

We have kept the Automotive Technology business within the group. However, in line with the industry trend for collaboration, alliances and development partnerships are also conceivable on a selective basis. We are continuing the disposal process for Springs & Stabilizers initiated under the auspices of the Multi Tracks segment. By contrast, the divestment process for Automation Engineering was halted. To ensure the long-term stability and competitiveness of the business unit as a whole, it was decided to gradually shut down the powertrain activities at the Bremen site by 2026.

In the Decarbon Technologies segment, we want to systematically access the potential of the green transformation and translate it into value-creating growth. We aim to achieve a turnaround resulting in sustainably profitable business models. This applies above all for Polysius and Uhde, which have embarked on the technological transformation towards green products and services in recent years. The next step is to drive forward the transformation of the business models – for example, through increased modularization and standardization of products and by extending the profitable service business.

On the basis of its market position and competitive strength, we still see good development potential for Materials Services. As well as working to improve its performance, we also invested in the future. The segment is relying especially on the implementation of its “Materials as a Service” strategy, which is aimed at increasing the share of services and expanding the high-margin supply chain business. The company is also pursuing growth opportunities on the North American market especially, continuing to further consolidate its European activities in order to strengthen its leadership positions and developing new customer solutions in the areas of digitalization and sustainability in particular.

Steel Europe operates in a very challenging environment that is characterized by the persistently weak economy and, especially, medium- and long-term structural changes in the European steel market and in key customer and target markets. To ensure its long-term competitiveness, the segment is working on a structural realignment. This is aimed in particular at optimizing the production network and reducing production capacities to increase the segment’s competitiveness and profitability. In parallel, we will continue to implement the existing Strategy 20-30 to improve the segment’s operating performance. The company is also seeking a stand-alone solution for Steel Europe because we remain convinced that a stronger focus and greater strategic flexibility offer the steel business the best perspectives for the future. In July 2024, thyssenkrupp successfully completed the first step in this process by selling a 20% stake in the steel business to energy company EP Corporate Group (EPCG). thyssenkrupp and EPCG are also in discussions concerning the second step: the acquisition of a further 30% stake in the steel business to establish an equal 50:50 joint venture. One key aspect of this is a financeable and competitive business plan. If a 50:50 joint venture does not materialize, we have agreed a mutual right of rescission with EPCG for the 20% stake that has already been sold.

Marine Systems is seeing a positive trend in terms of both the cost-cutting and performance measures and the order situation. The global increase in demand for submarines, naval vessels and surface and submarine technologies is delivering additional growth opportunities. To enable us to better leverage these opportunities, alongside further measures to enhance the performance capability of this business, we are continuing to explore options to place it on a stand-alone basis.

Performance

The overarching goal of the transformation process is still to boost the performance and competitiveness of all our businesses. This is not simply crucial for the ongoing strategic strengthening the group; it is also the necessary prerequisite for generating a sustained positive free cash flow before M&A for the group and ensuring reliable dividend payments. A further prerequisite is that the businesses quickly and sustainably achieve their financial targets, despite the persistently challenging environment.

To enable us to respond at short notice to weakening markets and to support a long-term improvement in the performance of our businesses, we launched a groupwide holistic performance program named APEX (Latin for “peak”) in September 2023. The aim is for the businesses to raise their profitability to the competitive level and to make optimal use of their market opportunities.

APEX is managed by a Transformation Office at thyssenkrupp AG which provides methodological expertise and process support, a platform for exchange and knowledge transfer, and extensive competitive analyses and best-practice comparisons. In a first phase, experts from the businesses identified cash and performance measures to relieve the pressure on earnings from a weak market environment in the following five areas of action: assets/CAPEX, business models and sales, material costs, net working capital and organization. The measures identified are either being implemented, have already been completed or are still to be addressed. In the second phase, in order to provide long-term support for the performance targets of the individual businesses, we are focusing more on structural topics. As part of this process, the businesses are defining individual measures for further increasing their efficiency and optimizing their respective business models or adapting them to changing markets. Wherever necessary, we consistently implement restructuring measures. With the ramp-up of the second phase, the aforementioned areas of action will be dissolved from a central perspective. The Transformation Office will closely monitor the businesses’ individual projects and provide support if necessary. The businesses remain responsible for the implementation of the ongoing development measures and their success.

Green transformation

We have set ourselves the goal of using our innovative products and state-of-the-art digital technologies to support our customers in the green transformation and achieving their sustainability targets. Thanks to our expertise in sustainable solutions in various sectors, we are able to drive forward the decarbonization of industry and benefit from the associated business opportunities.

The businesses in the new Decarbon Technologies segment in particular have innovative technologies that can reduce a large proportion of today’s CO2 emissions, especially in heavy and energy-intensive industries:

  • Rothe Erde is a leading provider of bearings and solutions that play a key role in wind, solar and tidal power plants, thus contributing substantially to improving the efficiency and reliability of renewables. Plans for the global expansion of wind power in particular harbor potential for future growth at Rothe Erde.

  • In the future, green hydrogen will be produced mainly in regions of the world where green electricity is available cheaply. Ammonia can be used as a transport medium to bring it to where it is needed. Uhde is one of the world’s leading technology providers for ammonia supply chains. It is characterized in particular by its focus on the development and implementation of industrial-scale plants for innovative technologies in the sustainable production of ammonia.

  • Cement production ranks alongside the steel and chemical industries as one of the main levers for achieving a significant reduction in global CO2 emissions. With its green technologies, including its patented pure oxyfuel plants, Polysius is a pioneer of the climate-neutral transformation of the cement industry. Market potential is high because cement producers are under enormous pressure to reduce their CO2 emissions.

  • Our majority investment thyssenkrupp nucera can already offer technologies for the industrial-scale production of green hydrogen worldwide. As a long-term anchor shareholder, thyssenkrupp AG will continue to support the development of thyssenkrupp nucera and benefit from its growth opportunities. With more than 600 completed projects, this company is a market leader in the chlor-alkali business.

Our portfolio also includes other products and solutions that are essential for the success of the green transformation. Examples are components for automotive engineering that are independent of the type of powertrain and thus enable sustainable mobility and benefit strongly from the electrification of cars and the use of digitalization by Materials Services to improve supply chains.

Alongside the products and solutions whose development we are driving forward for our customers and partners, we are working on the decarbonization strategy of our own group. A significant step has been taken with the direct reduction plant for Steel Europe that is currently under construction. This 100% hydrogen-capable plant with an annual production capacity of 2.5 million tons of direct reduced iron allows savings of up to 3.5 million tons CO2 a year, making thyssenkrupp a significant player in the European hydrogen economy, with the Duisburg site and the federal state of North Rhine-Westphalia as an anchor point for investments in the development of an inter-regional hydrogen infrastructure. Without preference for a specific technology or outcome, we are constantly reviewing the best and most economically viable solutions under the prevailing circumstances to make the steel business climate-neutral in the long term.