Thyssenkrupp cuts outlook for capital goods, shares fall

By Christoph Steitz

FRANKFURT (Reuters) - German industrial and technology conglomerate Thyssenkrupp cut the profit margin forecast for its key capital goods business on Tuesday, blaming a stronger euro and higher material costs.

Shares in the group, which makes everything from submarines and chemical plants to steel and car parts, fell as much as 4.6 percent to the bottom of Germany's blue-chip index.

While Thyssenkrupp confirmed its full-year profit guidance at a group level, the cut in capital goods - which includes elevators, car parts and the struggling industrial solutions unit - is a setback for boss Heinrich Hiesinger.

Those businesses are expected to form the core of the company once a planned steel joint venture with Tata Steel is signed next month and following an expected sale of its Materials Services trading unit.

The adjusted operating profit margin for the elevators unit is now expected to be at least stable this year, compared with a previous forecast for a rise of 0.5-0.7 percentage points.

At Components Technology, which supplies the automotive industry, margins are also tipped to stagnate, compared with a previous forecast for a rise. At Industrial Solutions, sales are no longer expected to rise but are seen stable year-on-year.

At a group level, Thyssenkrupp made adjusted operating profit of 500 million euros ($596 million) in the second quarter, in line with analyst forecasts and masking a surprise 23 million euros loss at Industrial Solutions, which builds plants and ships.

Lower corporate costs, which have been a key issue for some of Thyssenkrupp's shareholders, helped offset that. They fell 34 percent to 81 million euros on an adjusted operating profit level in the quarter, whereas analysts had 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.

Profit at the company's Steel Europe division more than doubled to 198 million euros, driven by a sharp recovery in prices so far this year, chiming with bullish remarks from sector-leader ArcelorMittal last week.

($1 = 0.8388 euros)

(Editing by Keith Weir and Mark Potter)