Lower costs help Thyssenkrupp offset Industrial Solutions loss

By Christoph Steitz

FRANKFURT (Reuters) - Higher cost savings and lower IT spending masked a surprise loss at Thyssenkrupp's struggling Industrial Solutions business, which engineers plants and builds ships and has suffered from slowing demand and low-margin orders.

The steel-to-submarines group posted adjusted operating profit of 500 million euros ($596 million) for the second quarter, in line with analyst forecasts. Its Industrial Solutions unit swung to a 23 million euro loss, while analysts expected a 20 million profit.

Lower corporate costs, which has been a key issue for some of Thyssenkrupp's shareholders, helped offset that effect. They decreased by 34 percent to 81 million euros on an adjusted EBIT level in the quarter, while analysts expected 117 million.

Investors, most notably Thyssenkrupp's second-largest shareholder Cevian, have repeatedly pointed to Thyssenkrupp's overly complex conglomerate structure and the high costs related to it, calling for a simpler set-up to slash spending.

A restructuring programme at Industrial Solutions initiated last year and including up to 1,500 additional job cuts, "is expected to provide a significant earnings improvement in the second fiscal half", Thyssenkrupp said.

The shares traded 3.5 percent lower at 0710 GMT.

Profit at the company's Steel Europe division, to be merged with the European steel unit of Indian peer Tata Steel, more than doubled to 198 million euros, driven by a sharp recovery in prices so far this year.

ArcelorMittal, the world's largest steelmaker, last week said the outlook for this year had improved, expecting higher demand for steel in machinery and construction amid solid expansion in the United States and Europe.

The steel joint venture with Tata Steel forms the core of Thyssenkrupp Chief Executive Heinrich Hiesinger's plan to move the company away from the volatile steel sector and strengthen its focus on industrial goods, such as elevators and car parts.

($1 = 0.8388 euros)

(Editing by Keith Weir)