Blast furnace at a Thyssenkrupp plant in Germany
A blast furnace at a Thyssenkrupp plant. The company in the past year has promoted the potential of its green hydrogen electrolyser business © AFP via Getty Images

Like a phoenix rising from the ashes of its steel blast furnaces, Germany’s industrial conglomerate Thyssenkrupp has a hopeful future. That offers relief to long-suffering shareholders. The stock price has halved since 2017. In Thursday’s full-year results, a rebound in steel profitability deserves attention. But it is a proposed hydrogen spin out that catches the eye.

After a rough few years, even Thyssenkrupp’s small operating profit of €796m compared favourably to last year’s loss of €1.76bn. European steel provided much of that.

In Europe, commodity steel products have doubled in price in the past 12 months. Thyssenkrupp feels positive about the year ahead. It is targeting an operating profit of up to €1.8bn, to which steel should contribute more than half.

But Thyssenkrupp’s dependence on carbon-intense steel is unsustainable. In the past year, it has promoted the potential of its green hydrogen electrolyser business. Known un-zingily as Uhde Chlorine Engineers, this is a smallish unit within its lossmaking Multi Tracks division.

Thyssenkrupp should give more details about any initial public offering timeline at its January investor conference. Late last year, the company told analysts that UCE generates up to €300m in revenues.

That will grow if European plans for more than 40 gigawatts of hydrogen electrolyser capacity by 2030 are fulfilled. This year, only about 200 megawatts are in place according to Hydrogen Europe, almost all making grey hydrogen, made from polluting natural gas.

A valuation of €5bn has been mooted for UCE. Thyssenkrupp only owns about two-thirds of this business, so about €3.3bn of valuation would go to the conglomerate. That looks pretty good against the group’s market value of €6.7bn.

Bulls at Bank of America believe UCE can achieve a €500m to €1bn top line, which is at least achievable medium-term. Compared with ITM Power, a UK-listed electrolyser maker trading at 125 times its top line, UCE might just qualify for a €5bn valuation.

Thyssenkrupp, once deeply out of favour, has captured the market’s contradictory enthusiasms for a commodity rally today and an energy transition tomorrow. Judging from this week’s 22 per cent leap in its share price, the latter has made the biggest difference.

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