By Christoph Steitz and Edward Taylor
FRANKFURT (Reuters) - Thyssenkrupp (DE:TKAG) on Thursday cut its profit outlook for the second time this year, blaming provisions for an ongoing steel cartel probe and quality issues at its automotive unit, the latest in a string of bad news for the crisis-ridden group.
The warning is the second under the watch of Guido Kerkhoff, who became the group's permanent chief executive after a tumultuous summer that included the resignation of the group's chairman and former CEO following mounting shareholder pressure.
It is also expected to put further pressure on Kerkhoff, who is struggling to get markets excited about a landmark move to split the steel-to-submarines conglomerate via a spin off of its elevator, car parts and plant engineering units, as no part of the business is without issues.
The company, whose roots go back more than 200 years, on Thursday said it had decided to set aside risk provisions for an ongoing probe by the country's cartel office into alleged agreements relating to heavy plate and flat carbon steel products.
"We have taken this matter very seriously from the very beginning and, with the help of an external law firm, conducted our own internal investigation," board member Donatus Kaufmann said in a letter to employees that was obtained by Reuters.
"In the meantime, we have obtained information in the investigation which has led us to accrue a provision in the group financial statements."
As a result, net income in the financial year 2017/18 is expected to drop to 100 million euros (£87 million), down 63 percent from the 271 million last year. The group had previously expected a significant rise in net profit.
Frankfurt-listed shares in Thyssenkrupp (F:TKAG) fell 5.9 percent on the news.
Kaufmann said the provisions would have no impact on a planned 50-50 European joint venture with Tata Steel (NS:TISC) and that the cartel investigation relates to legacy cases.
"All persons involved are no longer working in their areas of responsibility or have left the company," Thyssen said.
In addition, the group set aside provisions for risks arising from unspecified quality issues at its automotive business, pointed to shipping restrictions at its steel unit and warned of lower-than-expected earnings at its elevator unit.
This partly challenges the logic behind Thyssenkrupp's plans to spin-off elevators and car parts into one division, separating them from other assets within the group.
The group now expects adjusted earnings before interest and tax (EBIT) to fall to 1.6 billion euros, down from a previous target of 1.8 billion. Thyssenkrupp will present full-year results on Nov. 21, 2018.