Contacts Technology (ET) business, which would help ... · turnaround in profitability and FCF...

CORPORATES

CREDIT OPINION19 February 2020

Update

RATINGS

thyssenkrupp AGDomicile Germany

Long Term Rating B1

Type LT Corporate FamilyRatings

Outlook Developing

Please see the ratings section at the end of this reportfor more information. The ratings and outlook shownreflect information as of the publication date.

Contacts

Goetz Grossmann,CFA

+49.69.70730.728

[email protected]

Christian Hendker,CFA

+49.69.70730.735

Associate Managing [email protected]

thyssenkrupp AGUpdate following downgrade to B1 with a developing outlook

SummaryOn 17 February 2020, we downgraded thyssenkrupp AG's (tk) corporate family rating (CFR)to B1 from Ba3 and changed the outlook to developing from negative. The downgradereflected a further weakening of tk's operating performance and its highly negative free cashflow (FCF) during the first quarter of financial year 2019-20 (ending 30 September 2020),with reduced likelihood of a material short-term recovery. The developing outlook balancesthe expected positive impact of a timely execution of planned asset disposal and relatedcash inflow over the next few quarters with the existing challenges of ensuring a sustainableturnaround in profitability and FCF generation for tk’s residual businesses.

The main challenges incorporated into the rating include (1) the persistently weakmacroeconomic environment and the sluggish demand from key end-markets, such as theautomotive sector; (2) increased raw material costs, and high general, administrative andrestructuring costs, which weigh on tk's profitability (Moody's-adjusted EBIT margin of 1.2%in fiscal 2019); (3) tk's very high leverage, with Moody's-adjusted debt/EBITDA of 8.4x infiscal 2019; and (4) its highly negative FCF.

The rating positively reflects (1) the group's significant scale and diversified global revenuestreams; (2) cost reductions delivered so far through restructuring and additional measurescurrently underway; (3) the group's adequate liquidity, underpinned by a high cash balance andavailable funds under committed credit lines; and (4) a strategy that is focused on improvingprofitability in each business area and the planned partial or complete sale of the ElevatorTechnology (ET) business, which would help accelerate deleveraging.

Exhibit 1

tk's Moody's-adjusted gross debt and leverage

4.0x

6.0x

8.0x

10.0x

5

7

9

11

13

15

17

19

2014 2015 2016 2017 2018 2019 Next 12-18 months

€bill

ion

Gross Debt (LHS) Gross Debt/ EBITDA (RHS) Max Leverage for B1 (RHS)

Source: Moody's Investors Service

http://www.surveygizmo.com/s3/1133212/Rate-this-research?pubid=PBC_1214873

https://www.moodys.com/credit-ratings/thyssenkrupp-AG-credit-rating-749080

MOODY'S INVESTORS SERVICE CORPORATES

Credit strengths

» Large size and a solid business profile, with a diversified product portfolio

» Healthy liquidity, underpinned by a high cash position and available credit lines

» Proposed partial or complete sale of the ET business, which would bolster tk's financial flexibility, help address restructuring andstrengthen its balance sheet

Credit challenges

» Weak profitability, with a Moody's-adjusted EBIT margin of 1.2% in fiscal 2019

» Slowing operating performance because of weaker economic growth and a sluggish automotive industry

» Highly negative FCF

Rating outlookThe developing outlook balances the potential for a substantial strengthening of the balance sheet from a full disposal of ET, which couldbe credit positive, and the risk that scenarios not leading to a material deleveraging could create further negative rating pressure, whilethe B1 rating is very weakly positioned at this time.

Factors that could lead to an upgradeWe could upgrade the rating if tk's:

» profitability improves on a sustained basis, especially in the group’s non-ET businesses

» leverage decreases significantly from the current levels, with Moody’s-adjusted debt/EBITDA falling well below 6.0x and retainedcash flow (RCF)/net debt improving above 15% on a sustained basis following the ET transaction

» FCF is positive on a sustained basis, with a good liquidity profile

Factors that could lead to a downgradeWe could downgrade the rating if tk's:

» profitability does not improve above a Moody’s-adjusted EBIT margin of 2% in the medium term because of continuous adversemarket conditions or ineffective restructuring

» leverage remains above 6.0x Moody’s-adjusted debt/EBITDA and RCF/net debt is below 10% for a prolonged period following theET transaction

» FCF remains negative until after financial year 2021-22

» the ET transaction is not executed in a timely manner

» liquidity continues to deteriorate

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page onwww.moodys.com for the most updated credit rating action information and rating history.

2 19 February 2020 thyssenkrupp AG: Update following downgrade to B1 with a developing outlook


Key indicators

Exhibit 2

thyssenkrupp AG [1] Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19

Revenue (USD billion) $ 55.9 $ 49.1 $ 42.2 $ 45.8 $ 49.4 $ 47.4

EBITA Margin % 2.7% 3.7% 3.5% 3.6% 2.8% 1.2%

EBITA / Interest Expense 1.4x 2.0x 1.9x 2.5x 2.2x 0.9x

Debt / EBITDA 5.6x 4.8x 5.4x 4.7x 5.2x 8.4x

RCF / Net Debt 10.4% 16.8% 14.1% 25.9% 14.8% 8.0%

FCF / Debt -4.4% -0.2% -0.4% -6.1% -2.6% -8.9%

[1] All ratios are based on 'Adjusted' financial data and incorporate Moody's Global Standard Adjustments for Non-Financial Corporations.Source: Moody's Financial Metrics™

ProfileGermany-based thyssenkrupp AG (tk) is a diversified industrial conglomerate operating in around 79 countries. In fiscal 2019 (ended 30September 2019), tk reported revenue of €42 billion and company-adjusted EBIT of €802 million (1.9% margin).

The group is engaged in capital goods manufacturing through Elevator Technology (ET), Plant Technology (PT), Marine Systems (MS),Automotive Technology (AT) and Industrial Components (IC) divisions, as well as steel manufacturing and steel-related services throughSteel Europe (SE) and Materials Services (MX).

In 2019, steel manufacturing and steel-related services represented around 51% of the group's total sales, and the capital goods businessesrepresented 49%.

Exhibit 3

Net sales by business areaLTM as of 31 December 2019

Exhibit 4

Adjusted EBIT by business area [1]LTM as of 31 December 2019

Materials Services

31%

Steel Europe20%

Materials Services

31%

Steel Europe20%

Elevator Technology

19%

Automotive Technology

13%

Plant Technology

7%

Industrial Components

6%

Marine Systems4%

Source: Company's filings

99%

25%

10%

0%

-1%

-14%-18%-30%

-10%

10%

30%

50%

70%

90%

110%

ElevatorTechnology

IndustrialComponents

MaterialsServices

MarineSystems

AutomotiveTechnology

PlantTechnology

SteelEurope

[1] Before accounting for corporate consolidation.Source: Company's filings

tk's shareholder structure has been relatively stable over the last six years. The group’s largest shareholders are the Alfried Krupp vonBohlen und Halbach Foundation, which holds around 21% of the voting rights, and Cevian Capital, which has a stake of more than 15%.As of 17 February 2020, tk had a market capitalisation of around €7 billion.

Detailed credit considerationsFurther deterioration in performance and cash flow in Q1 2020 prompted rating downgrade to B1; developing outlookunderpinned by expected asset disposalsWe downgraded tk's CFR to B1 on 17 February 2020 following a further weakening of its operating performance in Q1 2020 amidpersistent demand weakness, especially from the automotive sector, combined with adverse price effects in the steel and metaldistribution businesses. While the company-adjusted EBIT in Q1 2020 declined to €50 million (-77% year over year), tk’s FCF beforeM&A of negative €2.5 billion was at the previous year's level, including a €370 million cartel fine payment. Reported net debt, as a



result, and including a leasing liability of around €1 billion following the first-time application of IFRS 16, increased to €7.1 billion as of31 December 2019 (€3.7 billion in fiscal 2019).

The strong decline in profit in Q1 2020 was predominantly driven by the group's steel and metal distribution businesses because ofweaker capacity utilisation on lower volumes, depressed steel prices and higher raw material costs. In particular, EBIT, as adjusted bythe company in the Steel Europe (SE) business area, reached negative €164 million from €38 million a year earlier. This more thanoffset the continued earnings growth at the ET business because of positive price effects and performance improvements.

Although we take into consideration the fact that the group maintained the guidance for fiscal 2020 in terms of stable company-adjusted EBIT (€802 million in fiscal 2019) and more negative FCF before M&A than a year earlier (€1.1 billion negative), we believethese targets have become increasingly difficult to achieve in light of the persistently negative demand trend and a fragile economicenvironment.

tk's credit metrics are currently weaker than required for the B1 rating, but they are likely to be materially strengthened by the timelyexecution of the upcoming asset disposals. The assigned developing outlook balances the potential for a substantial strengtheningof the balance sheet from a full disposal of ET, which could be credit positive, with the risk that scenarios not leading to a materialdeleveraging could create further downward rating pressure. Key aspects of such an assessment include (1) the group's final decisionregarding the ET transaction (that is, full or partial sale), which management expects to communicate by the end of February 2020; (2)the amount and timing of related cash proceeds; (3) the use of such proceeds; (4) other strategic measures currently being evaluatedby management, if and when initiated; and (5) further development of tk’s operating performance and free cash flow generation,especially in its non-ET businesses.

Persistently high leverage, while the proposed sale of the elevator business could help reduce debtIncluding our debt adjustments for pensions of €7.4 billion, and operating leases and factored receivables of around €1.3 billion as of theend of September 2019, we expect tk's leverage to remain above our 6.0x maximum guidance for the B1 rating over the next two years in astatus quo scenario. Although tk continues to benefit from an ample cash position, also on a net debt basis, its Moody’s-adjusted leverageincreased to around 6.5x in fiscal 2019 from 3.9x on average over the last five years. In light of the deteriorated macro environmentand increased geopolitical tensions, the forecast trajectory of tk's leverage remains contingent on various preconditions, including thesuccessful execution of the initiated restructuring measures.

Nonetheless, we take into consideration the fact that the proposed partial or full sale of the elevator business, including a possible IPO,could result in substantial cash proceeds for tk, available for debt reduction and restructuring of its other businesses. Although this wouldclearly accelerate deleveraging over 2020-21, numerous variables are still missing for us to reasonably estimate the final impact on tk'scredit profile. These include (1) the final valuation of ET in a partial- or full-sale scenario and associated costs; (2) the portion of cashproceeds used for debt repayment; and (3) the group's reduced access to the profit and positive cash flow generated by ET, which it wouldneed to share with minority shareholders or lose entirely after a partial or full sale, respectively.

We also take into consideration the fact that tk's management is evaluating further actions to strengthen its profitability and cash flowgeneration, including the disposal, closure or restructuring of three loss-making and high-cash-burning businesses, such as springs andstabilisers, heavy plate, and systems engineering. However, if these plans cannot be executed successfully, including the proposed ETtransaction, tk's elevated leverage and consistent high cash burn would strain the rating further.



Low margins squeezed by weaker demand, adverse market conditions and a still-high administrative cost burdentk's profitability has been weak for several years, reflected by an average Moody's-adjusted EBIT margin of 2.9% over the last five years,before it shrank to 1.2% in fiscal 2019. While the capital goods activities ET and IC remain the key contributors to tk's operating profit,representing 124% of the company-adjusted EBIT (before corporate costs and consolidation effects) for 2019, the other businesses'margins are either shrinking or remaining negative. In particular, the EBIT margins at SE and MX have been weakened by the slowingdemand from the automotive sector in 2019, besides strong negative effects from lower steel prices and higher raw material costs. Forinstance, the company-adjusted EBIT at SE plunged to -€164 million in Q1 2020 from €38 million a year earlier and the margin at MXdecreased to 0.4% from 0.7% over the same period. At the same time, the consistent negative profitability at PT was because of lowermargins in billing and the slowing demand in certain end-markets. PT's profitability remains negative, although slightly improved in Q12020 to a -2.3% adjusted EBIT margin versus -4.9% a year earlier because of some recovery in chemical and cement plant engineering.

In addition, tk's still-significant administrative cost base continues to weigh on its profitability, while cost-cutting measures related tovarious efficiency programmes have been insufficient to mitigate the operational underperformance so far.

More positively, the group was able to maintain strong profitability at ET, with an increased company-adjusted EBIT margin of 11.1% inQ1 2020 (+0.5 percentage point year over year), despite persistent price pressure. The improvements were mainly driven by the positiveeffects from implemented performance measures, a stable new installation segment and positive market developments in both themodernisation and maintenance segments.

Exhibit 5

Historical profitability by business area (company-adjusted)

8.9%

7.2% 7.6% 7.7%6.8%

4.2%4.7% 4.8%

1.8% 1.9%

3.0%2.3%

3.8% 4.2%

0.6%

-0.3%-2%

0%

2%

4%

6%

8%

10%

2013 2014 2015 2016 2017 2018 2019 LTM Dec-2019

AT, IC, ET, PT & MS Adjusted EBIT margin*

SE & MX Adjusted EBIT margin

*As per new organisational structure “newtk” since 1 October 2019.Sources: Company's filings and Moody's Investors Service

We expect the recovery in tk's margins to take longer than previously expected. This expectation also takes into account more extensiverestructuring measures considered by management, including the layoff of around 6,000 people, of which two-thirds in Germany. Weunderstand that management plans to use the proceeds from the planned ET transaction to support its costly restructuring and envisagedperformance improvements at its other business areas, which are lagging the profitability of industry peers. The still-uncertain scope,costs and future benefits associated with the restructuring significantly limit the forecasting ability at this stage.

FCF generation will remain negative until fiscal 2021The group's persistently negative Moody's-adjusted FCF reached a seven-year negative record in fiscal 2019, with a €1.4 billion cash burn.During the last few years, FCF was particularly burdened by the group's weakening profitability, significant working capital consumptionand high capital spending; the cash burn has recently accelerated materially. In fiscal 2019, tk's FCF was limited by the considerable declinein earnings, which led to an almost €480 million erosion of funds from operations compared with that a year earlier. The significant cashdrain resulted in a €1.3 billion increase in tk's reported net financial debt in just one year to €3.7 billion as of the end of September 2019. InQ1 2020, tk's rapid cash burn continued with reported FCF before M&A of negative €2.5 billion, matching the year-earlier level, althoughincluding a recent €370 million payment for a cartel fine.



Exhibit 6

Historical evolution of FCF

-592

-29-52

-815

-343

-1,444

-3,100

-2,100

-1,100

-100

900

1,900

2014 2015 2016 2017 2018 2019

€ m

illio

n

FFO (Funds from Operations) WC Capex Dividends FCF (Free Cash Flow)

Sources: Company's filings and Moody's Financial Metrics™

We expect FCF to remain negative over the next 12-18 months, including planned restructuring cash payments, which managementforecasts in the mid three digit million euro range in the current fiscal year. This means a downward revision of our previous forecastof slightly positive FCF in fiscal 2021 and also takes into account higher cash needs for restructuring. However, the scope and timelineof such efforts remain difficult to predict, including the still-pending decision on how and when to proceed with the — so far three —identified underperforming and highly cash-burning businesses, which could be either restructured internally, disposed or shut down. Aturnaround of the negative FCF would be a key driver for a rating improvement in the medium term.

Environmental, social and governance considerationsAs one of the leading steelmakers in Europe, tk faces elevated environmental risks, mainly related to air pollution and carbon dioxide(CO2) emissions. As we expect emission allowances in Europe to tighten over the next few years, for instance, with phase four of theEuropean Union Emissions Trading System coming into force in 2021, companies with an insufficient coverage of free allowanceswill likely see their carbon costs increase. We believe tk is sufficiently covered with CO2 emission rights, although the group does notdisclose any detailed information on this.

With its Carbon2Chem project (German state funded), tk plans to chemically convert CO2 from steel mill gases into ammonia, whichis used in the production of artificial fertilisers. The group is further developing cleaner steel production by replacing coking coal withhydrogen at one blast furnace in Duisburg. This and the ambition to reduce its combined greenhouse gas emissions by 30% by 2030reflect tk's high awareness of the increasing relevance of environmental matters.

The key governance aspects for tk include its diverse shareholder base, including the Alfried Krupp von Bohlen und Halbach Foundation(21% of voting rights) and the Swedish investment firm Cevian Capital (over 15%). The partly diverging strategic interests of theseparties had created an environment of difficult and lengthy decision-making in the past, although we believe this risk will be mitigatedin the future by the group's current portfolio reassessment, including the planned ET transaction.

In our view, social considerations most prevalent for tk are (1) health and safety, to which we understand the group pays high attention,while its accident frequency (number of accidents per one million hours worked) just reached a record low in fiscal 2019; and (2) highrisk of strikes, with most of tk's German workforce being organised into unions, which are particularly relevant these days as extensiveorganisational changes are being implemented.

Liquidity analysisWe assess tk’s liquidity as adequate, based on the expectation of an at least partial sale of ET, which will result in a multibillion eurocash injection during 2020. The group had around €2 billion of cash on the balance sheet and €3 billion available under committedcredit facilities as of 31 December 2019, which is sufficient to accommodate the projected negative FCF and debt maturities over thenext 12 months. Our assessment also incorporates a successful near-term refinancing of the upcoming debt maturities, including therenegotiation of the gearing covenant well ahead of the next testing date at 30 September 2020, to mitigate any risk of a potential breach.



Methodology and scorecard

The principal methodology used in rating tk is our Global Manufacturing Companies rating methodology (June 2017), which can be foundat www.moodys.com. The scorecard-indicated outcome of Ba2 is two notches above the assigned B1 rating, driven by tk's currently veryweak credit metrics and its highly negative FCF.

Exhibit 7

Rating factorsthyssenkrupp AG

Manufacturing Industry Scorecard [1][2]

Factor 1 : Business Profile (20%) Measure Score Measure Score

a) Business Profile Baa Baa Baa Baa

Factor 2 : Scale (20%)

a) Revenue (USD Billion) $47.4 Aaa $48 - $50 Aaa

Factor 3 : Profitability (10%)

a) EBITA Margin 1.2% Caa 1.5% - 2% Caa

Factor 4 : Coverage and Leverage (40%)

a) EBITA / Interest Expense 0.9x Caa 1.5x - 2x B

b) Debt / EBITDA 8.4x Ca 6x - 6.5x Caa

c) Retained Cash Flow / Net Debt 8.0% B 5% - 10% B

d) Free Cash Flow / Debt -8.9% Ca -10%-5% Ca

Factor 5 : Financial Policy (10%)

a) Financial Policy Ba Ba Ba Ba

Rating:

a) Indicated Outcome from Scorecard Ba2 Ba2

b) Actual Rating Assigned B1

Current

FY 09/30/2019

Moody's 12-18 Month Forward View

As of 02/17/2020 [3]

[1] All ratios are based on 'Adjusted' financial data and incorporate Moody's Global Standard Adjustments for Non-Financial Corporations.[2] As of fiscal 2019.[3] This represents Moody's forward view, not the view of the issuer.Source: Moody’s Financial Metrics™



Appendix

Exhibit 8

Peer comparison [1]

(in USD millions)FYE

Sep-17

FYE

Sep-18

FYE

Sep-19

FYE

Dec-17

FYE

Dec-18

LTM

Sep-19

FYE

Dec-17

FYE

Dec-18

LTM

Sep-19

FYE

Dec-17

FYE

Dec-18

LTM

Sep-19

Revenue $45,800 $49,430 $47,372 $25,769 $27,831 $26,673 $12,960 $14,014 $14,263 $68,679 $76,033 $73,428

EBITDA $3,124 $3,011 $2,163 $1,978 $2,736 $2,552 $2,228 $2,076 $2,280 $8,577 $10,573 $6,464

Total Debt $15,738 $15,203 $17,658 $7,332 $6,948 $7,119 $10,429 $9,653 $9,210 $24,186 $24,555 $24,685

Cash & Cash Equiv. $6,263 $3,498 $4,048 $4,901 $4,553 $2,956 $2,150 $2,277 $1,321 $2,574 $2,172 $3,647

EBITA Margin 3.6% 2.8% 1.2% 3.8% 5.8% 5.8% 12.8% 10.4% 11.8% 7.9% 9.7% 4.7%

EBITA / Int. Exp. 2.5x 2.2x 0.9x 1.6x 3.2x 3.8x 2.9x 2.6x 3.3x 4.6x 7.3x 3.7x

Debt / EBITDA 4.7x 5.2x 8.4x 3.7x 2.5x 2.8x 4.7x 4.6x 4.0x 2.8x 2.3x 3.8x

RCF / Net Debt 25.9% 14.8% 8.0% 65.5% 89.2% 51.4% 22.6% 20.5% 21.6% 33.1% 38.3% 22.5%

FCF / Debt -6.1% -2.6% -8.9% 14.5% 5.7% -5.3% -2.5% 6.2% 8.3% 5.8% 3.0% 3.4%

thyssenkrupp AG CNH Industrial N.V. Arconic Inc. ArcelorMittal

B1 Developing Baa3 Stable Ba2 Negative Baa3 Negative

[1] All figures and ratios are calculated using Moody’s estimates and standard adjustments. FYE = Financial year-end. LTM = Last 12 months. RUR* = Ratings under review, where UPG = forupgrade and DNG = for downgrade.Source: Moody’s Financial Metrics™

Exhibit 9

Historical Moody's-adjusted debt breakdown [1]thyssenkrupp AG

(in EUR Millions)FYE

Sep-14

FYE

Sep-15

FYE

Sep-16

FYE

Sep-17

FYE

Sep-18

FYE

Sep-19

As Reported Debt 7,722 7,955 7,612 7,256 5,376 7,415

Pensions 4,494 4,700 5,408 4,808 6,523 7,426

Operating Leases 966 1,008 1,062 1,020 924 1,093

Securitizations 260 226 237 212 248 246

Non-Standard Adjustments 20 14 15 16 18 17

Moody's-Adjusted Debt 13,462 13,903 14,334 13,312 13,089 16,197


Exhibit 10

Historical Moody's-adjusted EBITDA breakdown [1]thyssenkrupp AG

(in EUR Millions)FYE

Sep-14

FYE

Sep-15

FYE

Sep-16

FYE

Sep-17

FYE

Sep-18

FYE

Sep-19

As Reported EBITDA 2,171 2,525 2,332 2,255 2,030 1,468

Pensions - (8) 9 (11) 1 15

Operating Leases 322 336 354 340 307 311

Securitizations 2 2 2 2 2 2

Unusual (80) 103 (16) 256 205 130

Non-Standard Adjustments (4) (33) (46) (15) (15) (9)

Moody's-Adjusted EBITDA 2,411 2,925 2,635 2,827 2,530 1,917




Exhibit 11

Historical Moody's-adjusted financial datathyssenkrupp AG

FYE FYE FYE FYE FYE FYE

EUR million 2014 2015 2016 2017 2018 2019

INCOME STATEMENT

Revenue 41,212 42,778 38,000 41,447 41,534 41,996

EBITDA 2,411 2,925 2,635 2,827 2,530 1,917

EBIT 987 1,469 1,312 1,473 1,182 503

Interest Expense 804 806 689 581 545 575

BALANCE SHEET

Cash & Cash Equivalents 4,046 4,540 4,111 5,298 3,012 3,713

Total Debt 13,462 13,903 14,334 13,312 13,089 16,197

Net Debt 9,416 9,363 10,223 8,014 10,077 12,484

CASH FLOW

Funds from Operations (FFO) 1,009 1,700 1,566 2,197 1,617.7 1,140.6

Cash Flow From Operations (CFO)979 1,634 1,610 1,135 1,419.7 353.6

Capital Expenditures (1,538) (1,538) (1,542) (1,828) (1,631.7) (1,649.6)

Dividends (33) (125) (120) (122) (131.0) (148.0)

Free Cash Flow (FCF) (592) (29) (52) (815) (343.0) (1,444.0)

Retained Cash Flow (RCF) 976 1,575 1,446 2,075 1,486.7 992.6

RCF / Debt 7.2% 11.3% 10.1% 15.6% 11.4% 6.1%

FCF / Debt -4.4% -0.2% -0.4% -6.1% -2.6% -8.9%

PROFITABILITY

EBIT margin % 2.4% 3.4% 3.5% 3.6% 2.8% 1.2%

EBITDA margin % 5.8% 6.8% 6.9% 6.8% 6.1% 4.6%

INTEREST COVERAGE

EBIT / Interest Expense 1.2x 1.8x 1.9x 2.5x 2.2x 0.9x

EBITDA / Interest Expense 3.0x 3.6x 3.8x 4.9x 4.6x 3.3x

(EBITDA - CAPEX) / Interest Expense1.1x 1.7x 1.6x 1.7x 1.7x 0.5x

LEVERAGE

Debt / EBITDA 5.6x 4.8x 5.4x 4.7x 5.2x 8.4x

Net Debt / EBITDA 3.9x 3.2x 3.9x 2.8x 4.0x 6.5x

Source: Moody’s Financial Metrics™



Ratings

Exhibit 12

Category Moody's RatingTHYSSENKRUPP AG

Outlook DevelopingCorporate Family Rating B1Senior Unsecured B1/LGD4Commercial Paper -Dom Curr NPOther Short Term -Dom Curr (P)NP

Source: Moody's Investors Service



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MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM ISDEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.

All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as wellas other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information ituses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However,MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for anyindirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use anysuch information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses ordamages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of aparticular credit rating assigned by MOODY’S.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatorylosses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for theavoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents,representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDITRATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.

Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (includingcorporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any credit rating,agreed to pay to Moody’s Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and Moody’sinvestors Service also maintain policies and procedures to address the independence of Moody’s Investors Service credit ratings and credit rating processes. Information regardingcertain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody’s Investors Service and have also publiclyreported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance —Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s InvestorsService Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intendedto be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, yourepresent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly orindirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as tothe creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’sOverseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a NationallyRecognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by anentity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registeredwith the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferredstock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and servicesrendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

REPORT NUMBER 1214873


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