(Bloomberg) -- Thyssenkrupp AG expects to swing to profit in the current fiscal year, indicating that a turnaround plan that includes restructuring its ailing steel division is making progress.
The German manufacturer sees net income of at least €100 million ($106 million) in the year through next September, up from a €1.4 billion net loss for the period that just ended. It’s also projecting rising operating earnings, even though cash burn will increase due to higher investments and restructuring costs.
The results look positive “at a first glance,” Baader Helvea analyst Christian Obst said in a note. The company’s proposal for a dividend of 0.15 euros per share represents a “slight positive surprise.”
Thyssenkrupp shares rose as much as 9.7% in Frankfurt. The stock is still down around 42% this year.
Thyssenkrupp is spending heavily to overhaul its ailing steel division, which is pressing ahead with a joint venture. It’s also preparing its naval engineering unit for an initial public offering. Costs involved with the push include a €1 billion writedown of the steel unit, the manufacturer said Tuesday.
The higher cash burn — Thyssenkrupp sees free cash outflow of as much as €400 million in the current fiscal year — highlights the challenges of overhauling the conglomerate as Europe’s biggest economy sputters. Germany is seeing a weakness in manufacturing, with industrial firms struggling with high energy and labor costs.
“The current fiscal year is a year of transition on our path to achieving our medium-term financial targets, even in a challenging environment,” Thyssenkrupp Chief Executive Officer Miguel López said.
In April, Thyssenkrupp announced it would reduce steelmaking capacity by about a fifth, alongside substantial job cuts to the division’s 26,000 workers. The decision, pushed through despite opposition from labor representatives, was part of a plan to offload a stake in the division to Czech billionaire Daniel Kretinsky’s EP Corporate Group.
Thyssenkrupp is still seeking an IPO of the naval unit, which manufactures submarines, surface vessels and naval electronics. Earlier plans to sell a majority stake to private equity firm Carlyle Group Inc. collapsed last month.
(Updates with analyst comment in third paragraph.)
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