By Georgina Prodhan
FRANKFURT (Reuters) - German industrial group ThyssenKrupp (DE:TKAG) reported a jump of more than a third in its quarterly operating profit driven by its elevators and European steel units, and said it was likely to reach the upper end of its full-year profit guidance.
The result bore out the Essen-based company's turnaround from steelmaker to diversified industrial goods group, and was helped by streamlining and cost-cutting that saw Steel Europe produce its best result in almost four years.
"The further earnings improvement reflects the progress we have made in implementing measures to increase efficiency," Chief Executive Heinrich Hiesinger said on Thursday.
Elevator Technology held its own in the important Chinese market despite a slowdown in residential property demand, while Steel Europe overcame falling prices with higher volumes helped by a recovering European car market, as well as cost cuts.
Group adjusted earnings before interest and tax (EBIT) rose 37 percent to 539 million euros ($602 million) in ThyssenKrupp's third quarter, above the highest estimate in a Reuters poll and easily beating the average of 491 million euros.
ThyssenKrupp shares jumped more than 5 percent in early trading but by 0915 GMT had pared gains and were up 1.8 percent at 22.65 euros, outperforming a 1.4 percent-higher DAX (GDAXI).
"ThyssenKrupp continues to steadily execute, and the stock should gradually re-rate as investor concerns are assuaged," wrote Jefferies steel analyst Seth Rosenfeld, who rates ThyssenKrupp "buy".
CHINA DEMAND
Elevator technology, the most profitable of the group's six units, had a jump of 22 percent in adjusted EBIT to 211 million euros -- accounting for more than a third of group profit - while Steel Europe's adjusted EBIT leapt 61 percent to 166 million.
Chief Financial Officer Guido Kerkhoff said he was confident about ThyssenKrupp's future in China, where the group makes 6 percent of its sales, despite slowing growth and this week's devaluation of the yuan.
"I note that China is acting to stimulate demand. I find this in itself positive and it underlines our view of China's promising prospects," he told journalists on a conference call.
Although elevator demand was driven primarily by the United States and South Korea, Kerkhoff said demand in the world's biggest elevator market was still strong and Chinese order intake would be better in the second half than the first.
He acknowledged that China may push out more cheap steel on to the world market as a result of the yuan devaluation but said the necessity for steelmakers to buy raw materials in dollars, and high transport costs, would limit the effect.
ThyssenKrupp stuck to its target of adjusted EBIT of 1.6-1.7 billion euros for the year to end-September, up from 1.33 billion a year earlier, but Kerkhoff said the company would probably reach the upper end of the range.
He urged employees in an email to do their bit to help the company reach its goal of annual EBIT of 2 billion euros as fast as possible to enable it to resume paying dividends. When asked, he declined to predict when the target may be reached.