By Christoph Steitz and Tom Käckenhoff

FRANKFURT/DUESSELDORF (Reuters) – Thyssenkrupp on Thursday flagged a new cost-cutting programme to raise its performance and improve returns for shareholders, and said it now expects to hit the upper end of its profit outlook following solid third-quarter results.

The company has been making strides in its turnaround in the past few months, successfully listing its hydrogen business Nucera and getting Brussels’ ok for 2 billion euros ($2.2 billion) in steel subsidies.

Details of the new cost cut plans are to be unveiled later this year and new CEO Miguel Lopez, who has been in the job a little over two months, refrained from ruling out potential layoffs when repeatedly asked by journalists.

“I think I can say that there has not been a comprehensive performance programme in recent years,” he said after presenting third-quarter results that showed a better-than-expected outcome at its materials and steel businesses.

“We have to overcome our cash generation legacy and close the gap to our financial targets. This impacted our shareholders as well because the returns we generated have not been sufficient enough.”

The engineering and steel production conglomerate now expects adjusted earnings before interest and tax (EBIT) in the high triple-digit million euro range, having previously forecast it to be in the mid to high triple-digit million range.

Shares in the company were 4.1% higher at 1103 GMT.

Thyssenkrupp confirmed that it was still targeting a spin-off for both its steel division as well as its defence business Thyssenkrupp Marine Systems, and that work on both projects was being done, without providing further details.

The company said third-quarter adjusted EBIT fell by two thirds, and that free cash flow before M&A, a key indicator for Thyssenkrupp’s ability to generate cash, turned positive in the quarter to 347 million euros, up from a negative 412 million last year.

($1 = 0.9075 euros)

(Reporting by Christoph Steitz and Tom Kaeckenhoff; Editing by Jane Merriman, Rachel More and Nivedita Bhattacharjee)

By John Revill

ZURICH (Reuters) -Siemens missed profit forecasts in its latest quarter, the German engineering company reported on Thursday, noting weakening demand in several markets including China.

The trains-to-factory-automation manufacturer said China, long a driver for global manufacturing and its third largest market, had seen only a tepid recovery after its zero-COVID shutdown last year.

Siemens said it was now seeing a “normalisation of demand” after customers pre-bought last year to avoid shortages. Orders increased by 10% during the three months to the end of June, down from the 13% increase in the previous three months.

Customers globally were running down their stocks of components, Siemens added, a trend expected to continue in the next few quarters.

“In Q3 the normalisation of demand was clearly visible in orders at our short-cycle businesses, most notably in China, but also in Europe,” CEO Roland Busch told reporters.

“Recovery in China’s manufacturing sector has been slower than anticipated,” he added. “As a result, we expect the trend to stay flat.”

For the three months to the end of June, Siemens’ industrial profit – covering its mobility, smart infrastructure and factory automation businesses – fell 4% to 2.75 billion euros ($3.02 billion), missing the 2.90 billion euro expected by analysts in a company-compiled consensus.

The company’s shares were down 3.6% in premarket activity.

Siemens kept its group-level outlook for the year to September-end but lowered expectations for its digital industries business which supplies factories with controllers.

The division, seen by analysts as the jewel in Siemens’s crown, now expects comparable revenue growth of 13% to 15%, lower than its previous outlook of 17% to 20%.

Order intake in digital industries plunged 37% during the quarter, particularly in the short-cycle factory automation business, Siemens said.

Still, the division increased revenue and profit as it worked through its huge order book, and benefited from higher capacity utilisation at its own factories and the sale of more profitable products.

The fortunes of Siemens, whose products are used to automate factories and equip transport networks, give an insight into the health of the global economy.

Manufacturing activity has been slowing in recent months with weakening purchasing manager data in Europe and China.

During its third quarter, Siemens orders rose 10% to 24.24 billion euros, beating forecasts of 22.19 billion euros.

Revenue rose 6% to 18.89 billion, missing forecasts for 19.27 billion euros. Net profit of 1.44 billion euros also missed forecasts.

Siemens maintained its guidance at group level. It expects comparable revenue growth of 9% to 11% for the 12 months to end-September and earnings per share of 9.60 to 9.90 euros.

($1 = 0.9106 euros)

(Reporting by John Revill; editing by Christopher Cushing and Jason Neely)

(Drops reference to tax authorities in paragraph 1)

(Reuters) -British gambling firm Entain said on Thursday it had set aside 585 million pounds ($744.5 million) for a potential settlement with British authorities in relation to an investigation into potential bribery offences at its former Turkish business.

The investigation by the UK’s tax authority, HMRC, included a review of the gambling firm’s former Turkey-facing business, where Entain said historical misconduct involving former third-party suppliers and ex-employees of the group may have occurred.

The owner of Ladbrokes and Coral betting shops has been in talks over a deferred prosecution agreement with the Crown Prosecution Service and said it was likely to be able to agree on a resolution.

The settlement, which would be paid over four years will impact the company’s bottom line across the periods, Chief Finance Officer Rob Wood said.

Entain expects judicial approval in the fourth quarter.

Shares in the company had fallen as much as 3% in morning trade.

HMRC in 2019 started investigating a number of former third-party suppliers relating to the processing of payments for online betting and gaming in Turkey. Entain, formerly known as GVC, sold the business in 2017.

The investigation had also caused troubles for bookmaker 888, whose licence to operate in the UK was under review by the GB Gambling Commission (GBGC) after shareholder FS Gaming proposed to appoint candidates who previously held top roles at GVC to the executive management of 888.

The candidates held senior positions during the time which is under investigation by the authorities.

Separately, Entain, which also operates online brands bwin and partypoker said it expects core profit for the year to be in the range of 1 billion pounds to 1.05 billion pounds.

Analysts on average had expected core profit to be about 1.03 billion pounds, according to a company compiled consensus.

The gambling firm reported a 14% rise in net gaming revenue for the six months through June helped by record level of online active customers.

($1 = 0.7857 pounds)

(Reporting by Radhika Anilkumar in Bengaluru; Editing by Milla Nissi and David Evans)

By Nevzat Devranoglu and Orhan Coskun

ANKARA (Reuters) – Turks will get little reprieve from a soaring cost of living this summer as economists expect prices to jump by as much as 8.5% in August, underlining Ankara’s challenge as it embarks on a painful path toward more orthodox policies.

The sustained inflationary pressure, driven by a lira drop and tax hikes, comes as President Tayyip Erdogan’s new finance minister and central bank chief orchestrate a policy U-turn including interest rate hikes that are expected to slow domestic demand.

The monetary tightening – after years of aggressive rate cuts – is meant to cool inflation by mid-2024. But in the meantime the U-turn has hammered the currency and left authorities asking already-stretched households for patience.

In July, consumer prices soared nearly 10% sequentially due to tax hikes and a lira crash. This month, forecasts by five economists show them rising between 5.5% and 8.5%, with fallout from mid-July tax hikes lagging into August.

The economists told Reuters that food prices would jump this month due to a July 16 fuel tax hike, which was meant to help fund a 1.12 trillion lira ($42.2 billion) rise in the budget after February’s earthquakes and May elections boosted spending.

The tax rise sent petrol prices up 45% to 36 lira per litre. Separately this week, public transportation and taxi fares were raised by 51% in Istanbul, Turkey’s largest city, with short-distance taxi fares up 75%.

Erdogan’s previous drive to slash interest rates sent annual inflation soaring to a 25-year high above 85% last year and left the lira heavily state managed.

Yet after he was re-elected in May, Erdogan, facing an unstable economy and depleted reserves, named a new cabinet to reverse policy. The central bank under new Governor Hafize Gaye Erkan has since hiked rates by 900 basis points and the lira, freer to float, has plunged 26%.

ERDOGAN’S SUPPORT

Despite Erdogan’s outspoken opposition to high rates in the past, Erkan has vowed to continue her gradual tightening.

Yet partly due to currency depreciation, the central bank expects annual inflation to rise until the second quarter of 2024 when it peaks above 60%, spelling more cost-of-living strains for Turks.

Erdogan publicly backs the goal of lowering inflation to single digits but said on Monday the government will at the same time “never compromise” on employment and economic growth.

Some analysts have questioned how far he will allow rates to rise and growth to slow, especially given nationwide local elections set for March, prompting Finance Minister Mehmet Simsek to stress that he has Erdogan’s full support.

A Turkish official familiar with the matter said the gradual tightening aimed to preserve growth and avoid shocks to employment and the economy.

Moody’s said it could raise Turkey’s credit ratings if the shift to orthodoxy is sustained. Yet because it will slow growth, it said the “key challenge is to balance the need for decisive action…with the political imperative for continued robust economic growth.”

BETTER DATA

Since Simsek and Erkan took the reins two months ago, economists say the Turkish Statistical Institute (TUIK) has published data with higher-quality price measurements.

The 9.5% monthly inflation reading in July “fully reflected the tax and fuel changes, marking a clear difference between the quality of June and July readings compared to those at the start of the year,” said an economist who requested anonymity due to the sensitivity of the issue.

Since 2018, some economists and opposition politicians have criticised TUIK’s data on grounds it did not match street prices.

After years of divergence with market expectations, the central bank matched those last month when it raised its end-2023 annual inflation forecast to 58.0% from a previous 22.3%.

(Writing by Daren Butler; Editing by Jonathan Spicer and Toby Chopra)

By Kane Wu and Michael Martina

HONG KONG/WASHINGTON (Reuters) -President Joe Biden’s move to prohibit some U.S. technology investments in China is expected to keep investors on the sidelines, concerned that tougher measures are ahead as tensions simmer between the world’s two biggest economies.

U.S. private equity and venture capital investors have already hit the brakes on sensitive technologies in China as relations have worsened since the administration of Biden’s predecessor, Donald Trump, over issues from tech to China’s industrial policies to national security.

Aiming to keep U.S. capital and expertise from helping China’s military modernisation and harming U.S. national security, Biden’s executive order on Wednesday was limited, for example by applying only to new investments.

But it will not be the end of measures to tighten scrutiny of American investments in China, which is struggling to get back on its feet since the COVID-19 pandemic, dealmakers and analysts say.

The order authorises the Treasury secretary to prohibit or restrict U.S. investments in Chinese firms in semiconductors and microelectronics, quantum information technologies and certain artificial intelligence systems.

Congress may introduce legislation expanding on Biden’s restrictions, said Weiheng Chen, senior partner and head of Greater China practice at law firm Wilson Sonsini.

Indeed, congressional Republicans immediately criticised the order by Democrat Biden as not going far enough.

“Certain U.S. investors may just choose to wait for the implementation rules before making investment decisions in these covered sectors,” Chen said.

SHIFT TO YUAN

Acquisitions of Chinese companies by U.S. firms have sunk almost 60% so far this year to $3.5 billion from $8.8 billion for the same period last year, according to Dealogic data, while deal value in the tech sector has plunged to $815 from $6.1 billion.

China-U.S. tensions and Beijing’s regulatory crackdown on its private enterprises have prompted many fund managers to pivot from the country or shift to local-currency investments.

“The situation is already very bad for dollar-based funds to invest in China’s tech sector. There isn’t much room for things to get worse,” said Beijing-based China Growth Capital partner Wayne Shiong.

Biden’s move will likely make China-focussed venture capital firms feel more urgency to raise yuan funds from Chinese investors, he said.

The executive order and the prospects of a pause in private equity investments in China across the board come as Beijing seeks to attract capital to revive its slowing economy.

Pan Yuan, a researcher at the Chinese Academy of Social Sciences, a top government think tank, said despite Biden’s restrictions, China will maintain an open policy to attract foreign capital.

To counter the U.S. curbs, China must focus on improving its domestic technology capabilities, Pan said.

TECH DISPUTES

China hawks in Washington blame American investors for transferring capital and valuable know-how to Chinese technology companies that could help advance Beijing’s military capabilities. Beijing, for its part, has been seeking self-sufficiency in the escalating tech disputes.

On Monday, Hua Hong Semiconductor, China’s number two chip foundry, made its Shanghai market debut, raising $3 billion and joining a long queue of local chipmakers to tap the stock market to fund expansion.

In response to Biden’s executive order, China’s commerce ministry said it was “gravely concerned” and reserved the right to take countermeasures.

Analysts said, however, Beijing’s retaliation options are limited and would unlikely escalate the matter, especially given tight scrutiny since the Trump era.

“The main Chinese reaction will be to discourage other countries from copying American actions,” said Derek Scissors, senior fellow and expert on U.S.-China economic relations at the pro-business American Enterprise Institute.

“China could act in non-reciprocal fashion, retaliating somewhere other than on the investment side. But the executive order is barely going to do anything, and China escalating would risk turning a molehill into a mountain.”

(Reporting by Kane Wu in Hong Kong and Michael Martina in Washington; Additional reporting by Roxanne Liu and Ziyi Tang in Beijing, Yantoultra Ngui in Singapore and Vineet Sachdev in Bengaluru; Editing by Sumeet Chatterjee and William Mallard)