Thyssenkrupp Lifts Operating Profit Beyond Expectations as Steel Cost Savings Kick In

Thyssenkrupp's Q2 operating profit of €198M beats estimates, but net loss and sales decline persist. Steel unit rebounds on cost cuts; strategic moves include Materials Services separation and TK Elevator stake.

Thyssenkrupp delivered a second-quarter earnings surprise that left analysts scrambling to update their models. The German industrial conglomerate posted adjusted operating profit of €198 million, well ahead of the consensus estimate of around €132 million — and the biggest contribution came from its most troubled division, Steel Europe.

Yet the headline figure tells only part of the story. Despite the operational turnaround, Thyssenkrupp slipped to a net loss of €11 million, weighed down by hefty restructuring charges and the absence of one-off gains from past asset sales. Revenue fell 2 percent to €8.4 billion, prompting management to trim its full-year sales forecast to a decline of between 0 and 3 percent from earlier projections.

The profit jump in steel came despite sliding prices, as lower costs for raw materials and energy helped offset the topline weakness. First effects from the headcount reduction programme are also beginning to show through. That cost discipline, combined with a surge in large naval contracts, drove order intake up 32 percent to €10.6 billion, further swelling Marine Systems’ order backlog to €20 billion.

Strategic bets take shape beyond the P&L

The steel division’s turnaround is now being managed without external help. Talks with Indian rival Jindal Steel International over a majority stake have been paused, leaving Thyssenkrupp to proceed alone. A smaller piece of the steel puzzle — the planned sale of its HKM stake to Salzgitter — is still expected to close by 1 June, a move viewed as crucial for restoring competitiveness.

Meanwhile, the next big corporate reshuffle is coalescing around Materials Services, the group’s multibillion-euro trading arm. Insiders say a separation could happen later this year, with options ranging from a carve-out to a full sale or an autumn IPO. The legal structure of a Kommanditgesellschaft auf Aktien (KGaA) is being considered to retain control in the event of a stake sale. The division’s recent earnings improvement, fuelled by a strong North American business, provides convenient momentum for such a move.

On the elevator front, Thyssenkrupp’s remaining 16 percent stake in TK Elevator is set to become a major source of value, though not for a while. The planned combination with Kone values the liftmaker at €29.4 billion, and Thyssenkrupp expects to receive €810 million in cash plus new Kone shares worth up to €2.46 billion, giving it a stake in the merged group. The deal still requires regulatory approval, with completion not anticipated before the second quarter of 2027 — meaning the holding remains a valuation lever for now rather than a near-term cash injection.

Analyst divergences and market reaction

The mixed signals have produced a split among analysts. JPMorgan raised its price target from €10.10 to €11.80 while keeping a "Neutral" rating, citing the higher implied value of the TK Elevator stake. Jefferies remains more bullish with a €13 target, and Citigroup’s Ephrem Ravi points to potential catalysts from the planned Materials Services spin-off and eventual monetisation of the elevator holding. He also notes that the steel market is turning at just the right time for Thyssenkrupp’s restructuring, which should make the business more valuable over the medium term.

Investors took a more cautious view on Friday, with the stock slipping 3.5 percent to €10.38 as some profits were taken. Over the past month, however, shares have still gained a solid 22 percent, and the year-to-date advance stands at roughly 26 percent. The management has left its full-year adjusted EBIT guidance unchanged at between €500 million and €900 million, while cautioning that free cash flow before M&A will remain negative — up to €600 million — through the end of fiscal 2026, a reminder of how costly the group’s transformation remains.