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May 10, 2019, 6:52 a.m. EDT

Thyssenkrupp to spin off, list elevator unit

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By Nathan Allen

--Thyssenkrupp abandons planned split in favor of separate listing for elevator unit

--Group to reintegrate European steel business as EU set to block Tata Steel merger

--Net loss forecast for year; adjusted EBIT guidance cut

Thyssenkrupp AG (TKA.XE) has abandoned plans to split itself into two separate companies and will spin off and list its elevator unit, the company said Friday.

The German conglomerate said the separation as initially planned wasn't feasible given the economic downturn and the current capital-market environment.

Thyssenkrupp also said it expects the European Commission to block a proposed merger of its European steel business with that of Tata Steel Ltd. (500470.BY).

Instead, Thyssenkrupp will reintegrate the business back into the group in the third quarter of its fiscal year and won't book the expected capital gains from the merger.

The company said it now expects to post a net loss for the 2019 fiscal year and forecasts adjusted earnings before interest and taxes of between 1.1 billion euros and 1.2 billion euros ($1.23 billion to $1.34 billion).

The news marks yet another twist in what has been an exceptionally turbulent year for the conglomerate.

After losing its former chief executive and chairman in less than a month last summer, CEO Guido Kerkhoff presented a strategy based on splitting the group's materials operations into a separate company from its capital-goods businesses.

However, since then the company has issued two profit warnings and the company's shares have dropped more than 40%, forcing today's strategic U-turn.

The elevator division has long been Thyssenkrupp's most profitable and investors have previously pushed for it to be hived off as it should command a higher valuation as a separate enterprise.

In the last fiscal year, the division generated an adjusted margin on earnings before interest and taxes of 11.5%, compared with 2.5% at the components business and a negative margin of 5.1% at industrial solutions.

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