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ESSEN, Germany—ThyssenKrupp AG's painful restructuring from German steel dinosaur to a world-leading industrial manufacturer is finally starting to pay off.

Since taking the helm nearly five years ago, Chief Executive Heinrich Hiesinger has labored to reshape what was then a staid steel giant—one that has armed German troops for over 150 years.

ThyssenKrupp hired Mr. Hiesinger in 2011 from Siemens AG, where he had spent nearly two decades, and tasked him with cleaning house. The company was plagued by corruption scandals, internal divisions and inefficiency. It was hemorrhaging cash amid a global steel slump and suffering especially from its ill-timed expansion of steel operations in the Americas.

"The picture at the beginning was not a very nice one," Mr. Hiesinger said in a recent interview.

The 55-year-old engineer has since cut ThyssenKrupp's steel production to less than 30% of sales and transformed the company into a more diversified capital goods company. Its elevator and escalator business is a world leader.

He has sought synergies across business areas by centralizing controls and operating as an integrated group, rather than disparate enterprises, as in the past.

He also has striven to reform a corporate culture that discouraged whistleblowing about corruption and mismanagement. When Mr. Hiesinger took over, the company was plagued by accusations that some executives had paid bribes for contracts.

"How could it happen that our company was maneuvering itself in such a difficult situation and nobody raised a hand or corrected it beforehand?" Mr. Hiesinger said. "We wanted to build an organization where hierarchy is strongly reduced, so that truth has a chance to move up from bottom to top."

Last autumn, ThyssenKrupp posted its first annual net profit in four years and its first dividend in three years, figures that analysts expect to rise when the company reports its results for fiscal-year 2015 on Thursday.

Mr. Heisinger's first success was staunching the company's cash drain, said Christian Obst, director of equity research for steel and metals at Baader Bank AG. "The biggest challenge going forward is to increase free cash flow," which Mr. Obst said is "not very satisfying so far."

Analysts widely expect the company's free cash flow to have broken even during the fiscal year that ended Sept. 30. This is important for a company that borrows heavily and would like to raise its dividend payments, while increasing investments in its capital goods businesses, said Ingo Speich, a senior portfolio manager at Union Investment, a ThyssenKrupp investor.

Mr. Hiesinger said that when he took the reins, ThyssenKrupp was a "low-performance company." Now, he said, it is a "medium-performance" operation, adding: "We are definitely not completed in our transformation."

At the center of that transformation is the company's investment in its elevator business, which now runs even with world leader United Technologies Corp.' Otis Elevator Company unit on its home turf in the U.S.

"This is a business where we demonstrated now for already four years in a row that we have the capability to really improve it," Mr. Hiesinger said.

Also vital to the turnaround was selling ThyssenKrupp's Alabama-based steel-rolling and coating plant last year to a consortium of ArcelorMittal SA and Nippon Steel & Sumitomo Metal Corp. for $1.55 billion.

The sale improved ThyssenKrupp's balance sheet and let Mr. Heisinger shift investment to higher-margin and more stable capital goods businesses, said Seth Rosenfeld, an analyst at Jefferies International Ltd.

Aside from elevators, ThyssenKrupp's capital goods businesses include a unit that supplies the auto industry with parts such as electrical-steering systems and engine components. Another unit builds complex systems including production facilities for industrial customers and advanced submarines.

Some investors, including Union, have urged ThyssenKrupp to sell its marine business. Mr. Speich said that the unit was profitable but in a risky sector, so selling it would only improve the company's overall multiple.

Mr. Hiesinger said he still wants to sell the last part of ThyssenKrupp's U.S. steel operations, a plant in Brazil, when market conditions improve.

Unloading the company's storied European steel business, on which ThyssenKrupp was built, would be tougher.

"We don't deny there is a structural weakness in the European steel market," Mr. Hiesinger said. "But to be honest," he added, "it's unlikely that you can sell" the company's European steel unit. He noted that the division's earning grew over the past year and it was "cash contributing."

Despite Mr. Heisinger's efforts, ThyssenKrupp's stock price is little changed from one year ago and shareholders' patience is uncertain.

Swedish activist investor Cevian Capital Partners owns a 16% stake and since January has held one of the 20 seats on ThyssenKrupp's supervisory board. The Swedish investment fund is one of the few activist investors to sit on the board of a German company and analysts have long speculated the firm would like to engineer a breakup of ThyssenKrupp.

Such a move could set up a clash on the supervisory board with representatives of the Krupp family foundation, which holds 23% and two supervisory board seats. The foundation, which lost one board seat and veto power in 2013 after sitting out a capital increase, still abides by its charter to keep the company's structure intact.

Cevian and the foundation declined to comment. Cevian in the past has voiced public support for Mr. Hiesinger and his strategy.

Write to Christopher Alessi at christopher.alessi@wsj.com

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(END) Dow Jones Newswires

November 17, 2015 12:05 ET (17:05 GMT)

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