Thyssenkrupp unit to cut costs

Thyssenkrupp’s elevator unit, which has been put up for sale by the ailing conglomerate, aims to improve its profitability through cost cuts, more efficient factories and a higher share of lucrative service contracts, it said on Wednesday.

Apart from administrative cost cuts totalling 80 million euros ($88 million) over the next three years, the division, which could fetch up to 17 billion euros in a sale, also sees potential to improve production sites in North America and Europe.

The division targets an adjusted operating profit margin of 11.5-13.0% in the 2020/21 fiscal year, compared with 11.4% in 2018/19.

“The global market for elevators and escalators is highly attractive,” Peter Walker, the head of the unit, said in a statement ahead of a capital markets day that will provide investors with a deeper look at the business.

“We have defined specific levers how to drive the profitability of our business. Now it’s on us to execute on this plan,” he said.

Thyssenkrupp is the world’s fourth-largest maker of elevators behind United Technologies Corporation’s Otis, Switzerland’s Schindler and Finland’s Kone, which is bidding for the unit.

Thyssenkrupp, which needs the proceeds from a divestment to fix its balance sheet, confirmed that it plans both a listing and a sale of the division, adding a decision on whether it will be sold or floated would be made by March 31, 2020.

Thyssenkrupp, whose attempt to merge its steel operations with a rival was thwarted by regulators earlier this year, now plans to transform the business into its biggest profit engine, according to an internal memo seen by Reuters.

Reuters