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Annual Report 2017/2018 thyssenkrupp at a glance ORDER INTAKE THYSSENKRUPP IN FIGURES (Group without Steel Americas) in € million 2017 / 2018 Change in % Order intake € million 42,754 0 Sales € million 42,745 3 Adjusted EBIT € million 1,551 – 10 Net income € million 60 – 78 Earnings per share € 0.01 – 96 42,754 Free cash flow before M & A € million – 134 84 Net financial debt 1 € million 2,364 21 tkVA 1 € million – 217 67 Market capitalization € million 13,534 – 13 Order intake in 2017/2018 at high prior-year level Dividend per share € 0.15 2) – 1 Full Group 2 Proposal to the Annual General Meeting ~ € 4 2 .7 billion 6 regional HQs 78 countries sales generated by thyssenkrupp in fiscal 2017 / 2018 ~ 1,900 locations BUSINESS AREAS Components Elevator Industrial 161,096 Technology Technology Solutions employees work every day to ensure thyssenkrupp Materials Steel can implement unique projects. Services Europe 1 (as at September 30, 2018) 1 Discontinued operation The more specific the targets, the better the performance. So let’s talk specifics. From thyssenkrupp in transition Guido Kerkhoff, Donatus Kaufmann and Oliver Burkhard have been out and about a lot in recent weeks. Around the world they been talking with employees, answering questions, and explaining the separation of thyssenkrupp and the next steps. Here they talk about current developments in the company – and why “best for both” also means the best for our shareholders. I.2 thyssenkrupp annual report 2017 / 2018 Magazine to thyssenkrupp on the rise. Looking back, last fiscal year was very business – and addressed the challenges. Donatus Kaufmann: In a year’s time eventful, and the past few weeks have In my personal experience, problems that thyssenkrupp Materials and thyssenkrupp been turbulent too. Is thyssenkrupp are put off get bigger over time. So we Industrials will have taken shape: They ever going to settle down again? are tackling the issues and have also set will be positioned as separate operating ourselves ambitious three-year targets. businesses with their own brand and Guido Kerkhoff: After last summer it their own strategy. Our plan is for our two was obvious that we need a clear decision What makes you optimistic? thyssenkrupps to then be ready for a future on which direction thyssenkrupp should in which they are both stronger, more take and agreement at the top on how to Guido Kerkhoff: In a year’s time when focused and faster. move the company forward. This clarity we report on the current fiscal year we has been achieved with the full support of should have already completed work on the Supervisory Board. We are deciding a number of problem areas and made thyssenkrupp’s future ourselves. For this significant progress on others. By then the we initiated the biggest transformation in steel joint venture should have long been the company’s history at the end of the past operating independently, the turnaround in fiscal year. plant engineering should be well on track, the quality problems in the components Also, over recent months we have provided business should be resolved, and the transparency into a number of problem elevator business should once again be areas in the Group – also in our operating focusing fully on improving its margin. I.3 thyssenkrupp annual report 2017 / 2018 Magazine We can only achieve our common goal, if everyone works on achieving it. when everything is going well. In the past fiscal year we increased our sales and order intake, and significantly reduced our G&A costs. Our materials businesses – particularly our steel business – profited from the positive cyclical upturn in the market. But Industrial Solutions was a serious cause for concern. We conducted should be. In this context we have decided an extensive analysis to reassess our to make a fresh start in terms of personnel. projects and create transparency. In plant At Materials Services we have started an Oliver Burkhard: We will approach all the engineering in particular we now need to orderly process to find a successor to Mr. issues with a basic attitude of confidence: deal carefully with the problems that have Limberg, who is entering retirement, to thyssenkrupp has undergone an incredible accumulated. We have also addressed reflect the new role of Materials Services transformation in recent years thanks to the operating issues at Elevator Technology against the background of the separation. hard work and motivation of all employees. and Components Technology. And for That’s something we can be proud of, thyssenkrupp AG as a whole we must Materials and Industrials – two new and we will continue to follow this path. achieve a breakthrough in adjusted EBIT companies: Why is that the right step We now have a strategy that meets both and free cash flow. That will be key to the for thyssenkrupp? the expectations of our customers and profitability of thyssenkrupp and to enabling shareholders and our responsibility towards us to build two strong companies. Guido Kerkhoff: We are creating two our employees. thyssenkrupp has huge companies each with a clear profile and potential, and I am convinced that with After the changes on the Board of a clear focus. These two companies will the path we are taking we will exploit this Industrial Solutions in summer, you be financially viable and build on joint potential significantly better than we have in announced two further changes in early strengths, but will have different success the past. November. factors: On the one hand we have the capital goods businesses characterized by Sounds good, but what specifically Oliver Burkhard: In recent years Elevator their engineering and service capabilities. needs tackling? Technology has improved in many areas. thyssenkrupp Industrials will consist Nevertheless there are still strategic of three units: Elevator Technology will Guido Kerkhoff: An honest assessment discussions about the direction of the remain unchanged in its current set- shows that we need to improve in several business. At the same time the earnings up. Components Technology will be areas. Forecasts don’t need to be adjusted situation at Elevator Technology is not as it focused on the automotive business. I.4 thyssenkrupp annual report 2017 / 2018 Magazine production, materials distribution and We have concluded a basic agreement steel-related processing. In the materials with the IG Metall trade union that provides distribution and steel businesses we hold security for everyone going forward. leading market positions in Europe, while People at thyssenkrupp traditionally have our forging and bearings businesses are a special bond with their company. Some among the world’s leading suppliers. In 160,000 women and men come to work the new set-up we can grow these market every morning and give their all. Our people positions and utilize opportunities for weren’t shell-shocked. Things didn’t grind consolidation from a position of strength. to a halt. Our company has been around for over 200 years – with many highs and So in the future there will be two strong also a few lows. We always carried on. And thyssenkrupps. We are convinced that this is not me trying to boost morale from this will open up new prospects for above, it’s what our people are telling me. thyssenkrupp and give all our businesses “Now more than ever” is something I hear better opportunities for development. very frequently. At thyssenkrupp we have After the separation our companies will be a culture of moving closer together in more less complex and able to operate faster difficult times. That’s pretty extraordinary, on the market. We regard our strategy and it’s a great source of motivation for us as a continuation of the Strategic Way on the Board. Bearings and Forged Technologies will be Forward we have been following for the transferred out of Industrials and integrated past seven years. We are confident that our How exactly will thyssenkrupp be into thyssenkrupp Materials. System shareholders will profit from our new set-up separated? Engineering, which for example develops – in particular through our greater financial production lines for the auto industry, will strength, clear growth and profitability Guido Kerkhoff: We will proceed very join Industrials from the current Industrial targets, a clear strategy with different carefully and responsibly, because we Solutions business area. As a result our industrial logic for the two companies, and attach great importance to giving both automotive capabilities will be combined in consequently clear profiles on the capital companies a good start and solid prospects one area, enabling us to offer all products market. for the future. And we will apply the and services from a single source and principle of “best for both” to everything we focus more strongly on the latest customer Are the employees supportive of these do. requirements and technology trends. The changes? Can you understand that some third pillar of the capital goods businesses of them are feeling uneasy? Donatus Kaufmann: Our aim is for the will be Plant Engineering, which in its new Annual General Meeting at the end of structure will be able to focus on its core Oliver Burkhard: Focusing our businesses January 2020 to be able to decide on the competencies. is something we have been pursuing for separation of our Group. For this we need The second company – thyssenkrupp years, in materials we divested our stainless to have already set up the two parts of the Materials – will comprise the following steel operations and the overseas steel company as separate stock corporations. units: Materials Services, the 50 percent mills, so this is a logical next step. But it So the aim is for thyssenkrupp Materials interest in the future steel joint venture with is also understandable that many people AG and thyssenkrupp Industrials AG to be Tata Steel, Bearings, Forged Technologies have been asking themselves in the past operational at the start of the next fiscal and Marine Systems.

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