FRANKFURT, Aug 14 (Reuters) - Germany's ThyssenKrupp said on Thursday its third-quarter pre-tax profit fell 30 percent, hit by weak demand for steel and costs for a Chinese magnetic train project, and said it saw no quick relief from the economic gloom.
The world's biggest stainless steel producer, which also supplies parts for automakers and builds elevators, said demand from the automobile and construction industries and the engineering sector had all weakened.
"Due to declining orders in key sectors, a rapid improvement in the situation is not expected," Thyssen said in a statement. "Should the weakening trends continue in the coming months, we will review our plan of achieving 1.5 billion euros ($1.7 billion) earnings before tax in fiscal 2003/2004."
Those gloomy comments chimed with data from Germany's Federal Statistics Office which showed that Europe's largest economy had entered a recession.
Thyssen has said in the past that its goal for next year was "tough and challenging" and hinted it may have to revise it, a sentiment echoed by credit rating agencies who have cut its debt ratings.
Some investors said the target was now damaging the company's credibility.
"It's somewhat negative that they haven't actually pulled back from their pre-tax target for 2003/2004, because everyone is expecting them to do so at some point," said Helaba Trust analyst Fabian Kania.
Pre-tax profit dropped to 221 million euros in the three months to the end of June, which it blamed partly on the cost of replacing cables on a new high-speed magnetic levitation train line which links Shanghai's financial district with its airport.
Thyssen had been expected to post pre-tax earnings in the three-month period of 227 million euros on sales of 9.5 billion, according to a Reuters poll of 17 analysts.
The company said it was aiming for pre-tax profit of 700 million euros in its fiscal year to the end of September.
It said its order intake had fallen 4 percent in the third quarter to 9.1 billion euros, while sales fell 8 percent to 8.9 billion euros.
Profits in the core steel segment were broadly in line with last year, although the company said it was no longer running all of its factories at full capacity, and said sagging demand and rising imports had increased supply and pricing pressure in Germany and western Europe.
Its auto division -- which supplies carmakers including DaimlerChrysler and BMW -- saw earnings drop by about a quarter due to weak car demand on both sides of the Atlantic, while revenue also was hit by the strong euro.
The firm said it was on course with a restructuring program aimed at cutting debt and increasing profitability. It has vowed to sell non-core units with sales totalling seven billion euros while making acquisitions to help lift revenue by a quarter.
Capital expenditure rose 10 percent in the quarter, due partly to small acquisitions, while net debt was 4.9 billion euros at the end of June, down 1.4 billion from a year earlier, even after it bought back 406 million euros of shares in May.
Thyssen was forced to pay almost three times market prices to buy back stock owned by Iran. A source familiar with the situation said the company had been warned by Washington that it would be placed on a "black list," compromising its chances of winning business in the United States, unless Iran reduced its stake.
The company said the purchase cost had no impact on pre-tax profit.