With the spin-off of its marine division, Thyssenkrupp has given the green light for the restructuring of the group into a financial holding company. The first day of trading in the TKMS share has whetted the appetite for more. As a result, the materials trading division Material Services (MX) is slowly warming up for its debut on the trading floor, even though the label „crown jewel“ given by analysts to Thyssenkrupp's portfolio is likely to remain reserved for TKMS.

In order for the IPO to go ahead, visibility on the capital market must first be increased, as Thyssenkrupp is all too often equated with its ailing steel division. It is the task of the divisional board to focus more attention on the asset, admits CFO Daniel Wodera in an interview with Börsen-Zeitung. He declined to comment on the timetable for the presumed IPO.

The business model is exciting and profitable, he said. „We are able to report positive cash flow in every market phase,“ Wodera said, listing the advantages. This includes the fact that capital requirements are highest during booms and more money is released during downturns. This allows MX to finance itself. However, „in order to be ready for the capital market, we need to continue driving forward the transformation of the business model and prepare the organization. We have not yet established all the necessary departments,“ says the CFO.

Ilse Henne, head of the division, does not see MX's lack of return on capital over the past two years as a problem: „We always look at capital costs over the cycle. This is also how competitors and investors view this key figure. And over the cycles, we have always earned our capital costs.“

The restructuring initiated in Germany last year, which resulted in 450 job cuts and the closure of seven locations, has been completed. In the long term, MX wants to position itself as a supply chain service provider. „We outperform our competition because our „Material as a Service“ strategy enables us to successfully transform ourselves from a pure material seller to a material processor and full-fledged supply chain manager,“ says Henne. In the US, which accounts for almost 37% of sales, MX has already made considerable progress with the restructuring. „Now we need to continue to make progress with the implementation of the strategy here as well,“ explains Henne.

There is still a long way to go, as 60% of the division's sales of 12.5 billion euros in the previous fiscal year were generated by the low-margin Distribution & Trading segment, 24% by Processing, and only 16% by the future-oriented Solutions business. This is also reflected in the meager operating margin, which stood at 1.7% in fiscal year 2023/24 (September 30). „Our return target of a 2 to 3% EBIT margin, which is the medium-term target Thyssenkrupp has set for this segment for 2021, remains unchanged. But we also see that we have higher margin expectations in the course of transforming the business model,“ says Wodera.

The management has no doubt that the transformation will be successful. „The momentum we currently have is good for entering the capital market,“ the CFO is convinced. This is surprising insofar as Material Services is also facing economic headwinds. „In the US, we are seeing companies bringing production processes back home. For Europe, we are confident that the tide will turn here too – also through public investment and special funds, for example for infrastructure,“ says Wodera. Added to this is the shift from a global to a multipolar world, Henne adds. ”Growth for us also results from companies that are under pressure to adapt trying to make their costs more flexible. That's where we come in.“

In recent years, all customers have experienced how fragile supply chains are. As a result, customer needs are changing. „Our greatest asset is the customer relationships we have built up through materials trading. Building on this, we can then serve new and different customer needs,“ explains Wodera. If a customer with a European network is considering relocating production to the US today, Material Services is ready to help thanks to its broad positioning on both sides of the Atlantic. By expanding its service business, MX is also deepening customer loyalty and becoming less replaceable.

However, spinning off the individual businesses from the Thyssenkrupp portfolio is not an end in itself, but rather a means of unleashing their potential. „Each segment should leverage its potential, even if that means rethinking the corporate structure and, over time, turning Thyssenkrupp into a financial holding company,“ says Henne, who has also been a member of the Group Executive Board since 2024. Looking back, she sums up that the entire setup of the group was not very advantageous for the individual businesses, pointing out that „there were never any real synergies (between the group companies)“.

MX felt the painful effects of this, as cash flow was used year after year to plug liquidity gaps in other businesses. „We have paid a good dividend to our shareholders in recent years,“ says Wodera, describing this situation and concluding: "The way we manage our business model will enable us to continue paying dividends in the future. At the same time, there is enough left over to take advantage of growth opportunities.“ Acquisitions are by no means out of the question, even if they are still a long way off.“Partnerships may be an option after the spin-off. We believe that consolidation in this business is possible, if not even necessary, especially in the US,” says the CEO.

As in the marine division, the IPO is also intended to open up more creative freedom in materials trading, even if Henne and Wodera prefer not to use that term. This is understandable, given that Thyssenkrupp has a reputation for making big announcements but delivering little. With the spin-off of TKMS, at least a first step has now been taken. The takeover of the steel division by India's Jindal Steel could be the next milestone. After that, it would probably be the turn of the materials trading division, as the automotive units and green technology businesses still have a long way to go before they are ready for the capital market.

Whether MX will end up with a spin-off like TKMS or an IPO like Thyssenkrupp Nucera remains to be seen. „Ultimately, the question of what exactly a step toward the capital market might look like is part of the bigger picture on the way to becoming a financial holding company,“ says Henne. Wodera adds that the preparatory work for both options is not very different.