By Christoph Steitz
FRANKFURT (Reuters) - Thyssenkrupp AG (DE:TKAG) will drop out of Germany's benchmark stock index later this month, stock market operator Deutsche Boerse (DE:DB1Gn) said on Wednesday, the latest setback in the ailing conglomerate's turnaround efforts.
Thyssenkrupp will leave the DAX (GDAXI) on Sept. 23 and be replaced by aircraft engine maker MTU Aero Engines AG (DE:MTXGn), making it the second founding member to exit the 30-member index in a year.
Hit by four profit warnings and two botched restructuring attempts, shares in Thyssenkrupp have fallen 45% over the past 12 months, compared with a flat DAX. The stock will become a constituent of Germany's midcap MDAX index (MDAXI).
"We have to be honest: our performance was too weak and that's why our relegation to the MDAX is the logical consequence," Thyssenkrupp Chief Executive Guido Kerkhoff said in a statement on Wednesday.
"What's important is that we're now setting up the group in a new and more profitable way in order to win back investor trust."
For Kerkhoff, exclusion from the DAX marks another defeat in his efforts to overhaul the sprawling group by selling all or part of its prized elevators unit.
The index departure means exchange-traded funds (ETFs) tracking the DAX will have to sell the stock. It will also be no longer an investment option for actively managed mutual funds restricted to blue chips as defined by the DAX.
Thyssen, which merged with Krupp two decades ago, has been a member of the DAX since its inception in 1988. Last year, founding member Commerzbank (DE:CBKG) dropped out and was replaced by payments company Wirecard (DE:WDIG).
"The DAX should reflect Germany's industry. The most recent changes are a sign of the times. Thyssenkrupp's drop into the MDAX could change the its investor base," said Tobias Adler, index analyst at Oddo Seydler.
That is not necessarily a bad thing as smaller indices have outperformed the DAX in recent years, he added. The MDAX has gained about a quarter since January 2016, compared with a 12% rise of the DAX. The smallcap SDAX index (SDAXI) is up 19%.
Kerkhoff last month said that being a member of a specific index was far less important than tasks including finding new ownership structures for its other businesses such as car parts and plant engineering.
That was echoed by Thyssenkrupp's largest shareholder, the Alfried Krupp von Bohlen und Halbach foundation, on Wednesday:
"It is the wellbeing of the company that counts for the foundation, not which index it is listed in."
(Additional Reporting by Ludwig Burger; Editing by Cynthia Osterman and Lisa Shumaker)