Kloeckner & Co Ag

Joseph from Investor Relations. On behalf of my entire team, I would like to welcome you to our Q3 2025 conference call. Joining me today are our CEO, Ido Kerkhoff, our CFO, Oliver Falk, and our CEO, America, John Gannon. They will guide you through the presentation, and afterwards, we're happy to answer your questions. To ask a question, please press the live Q&A button, and we will then open your live.

With that, I'd like to hand over to you, Ido. Yes, thank you, and welcome to our Q3 25 conference call. We're looking back at a quarter characterized by persistently challenging market involvement and decreasing steer prices in the U.S. Despite these developments, we delivered another solid performance. This confirms our strategic path and our successful development. I will now begin with the financial highlights of the quarter. Shipments came in at 1.144,000 tons, showing a slight year-over-year improvement. This development was mainly driven by the continued positive performance of our segment Plutner Metals in Americas, but still supported by shipments in our segment Plutner Metals Europe, which increased slightly, which is pretty different to what the market outcome overall is in Europe, but we could increase slightly after a couple of quarters where we were shrinking. Sales came in at 1.6 billion, which is a slight decrease year over year, despite the positive level compared to the same quarter last year. We achieved a considerable year-over-year increase in gross profit, whereas gross profit of last year's quarter was particularly affected by windfall losses due to the significant steel price correction in Q3-24. Gross profit margin also improved considerably compared to the previous year's quarter. EBITDA, therefore, before material special effects, came in at $43 million, a considerable increase year-over-year and results in line with our guidance. Despite the ongoing challenging market environment in Europe, our segment Platinum Metals Europe generated a positive EBITDA contribution for the first time since 2023. We'll take a closer look at the segment's performance afterwards. Due to temporary networking capital increase, especially at our segment Platinum Metals Americas, Operating cash flow came in negative at $118 million in the third quarter. I would like to highlight that this negative OCF is driven neither by weak operating business nor by higher inventories. This development is rather driven by trade payables and trade receivables to some degree, which we expect to reverse in Q4. It was largely driven by orders on material end of Q2 where the payables and the cash outflow came in in Q3. So Q2, was comparatively a bit overstated in Q3, is weaker. So you should look at the quarters rather together than just look on Q3. And you'll see in our guidance for Q4, it will reverse and we'll be on a track like in our guidance so far. Consequently, our net debt, financial net debt increased compared to a level in Q3, but will come down then in Q4 again. Let's have a look at our performance in Q3, 25 by segment. Now, segment of Collections Metals America's shipments increased slightly year over year in Q3. After reaching a record level in Q2, shipments decreased slightly quarter over quarter, which is largely attributable to seasonality. Nevertheless, the volume was the highest we've ever achieved in the third quarter and would be even stronger if we excluded shipments from our divested Brazilian entity in Q3 24. We're moving on a constant high level, demonstrating that our North American growth strategy really works. However, due to the lower average price level year over year, sales Q3 came in slightly below previous year's quarter. Prices have decreased significantly compared to the temporary repeats in Q2 and remain volatile. EBITDA before the material special effects came in at $44 million in Q3, which is a considerable increase compared to last year's pool. In our segment, Klugner Metals Europe, shipments came in slightly increased, sales slightly down compared to previous year's quarter. For the first time since 23, our Klugner Metals Europe segment achieved a positive EBITDA contribution despite the persistently weak demand and increased economic uncertainty. This clearly demonstrates that our consistent strategy implementation and optimization efforts are really paying off, strongly in the US, but even to see in Europe. We're on a better track and can our self-help measures help us to get out of it? Now, let's have a look at our strategy implementation during third quarter. We further intensified our focus on higher value added and service center business as becoming the leading metal processor and the leading service center company in North America and Europe by 2030 is our strategic goal. First, let's have a look at our second Plutner Metals Americas. In the United States, we announced divestments of eight distribution sites of Plutner Metals, seven of which we intend to sell to Russell Metals and one to Service Steel Warehouse. For the seven sites, Intended to be sold to Russell, we agreed on a purchase price of approximately 119 million US dollars based on a networking capital as of June 30th, 25, which would result in a book profit of over 20 million. The final purchase price remains subject to closing, networking capital and other normal cost adjustment. Mutually agreed not to disclose details, the sale of service to your warehouse. The fact that we are able to sell business at a premium that are on group level, on the lower end of profitability, demonstrates the underlying value of our assets. In the fiscal years 23 and 24, the seven sites contributed an average annual FABA before material special effects of around 9 million per year to our consolidated financial statements. As this number roughly matches the future EBITDA contribution planned internally for these sites, we believe this should represent a performance indicator for them as well. Investment not only allows us to reduce our group debt level, but also creates the opportunity to reallocate capital towards our higher value-added and service-centered businesses. We expect to close the deals in December of this year. In our segment, Climate Metals Europe, we further expanded our defense and infrastructure footprint. We received an official certification for processing armor materials for the German Federal Armed Forces at our site in Kassel, Germany. By doing so, we complete our existing approval for Ambrose Steel, successfully integrating the company after its acquisition earlier this year. With that, we're preparing for upcoming large-scale defense orders in Europe by leveraging our capabilities and also our financial strength, providing a clear advantage over smaller competitors. Now let's have a closer look at our improved earnings profile following the closure of eight U.S. distribution sites. Following recent successes, the U.S. divestments marked the next step in our transformation to the leading service center company and metals processor in North America and Europe. positioning us for higher profitability and sustainable growth. Over the past years, we have strengthened our higher value added and service center business to lower our exposure to steer price developments and thereby reduce the volatility of our results while increasing our underlying profitability. We improved our earnings profile by increasing the share for our higher value added and service center business. The acquisition of specialized North American companies, such as NMM, IMS, Soul Components and AmeriNuts enhances our capabilities and precision metal processing, component supply and service center operations, making them strategically valuable additions. NMM complimented our already existing footprint within the automotive industry in North America and also gave us access to electrical steel. With IMS, we significantly expanded our metal fabrication business in the U.S. Sol Components is a U.S. market leader in integrated structural solutions for solar installations. The acquisition positions Glockner Metals to play a bigger role in North America's transition towards renewable energy. Further, we extended our service portfolio with a marionettes and polishing and high gloss finishing in order to support the development of more competitive global supply chains. Also, we divested part of our European distribution business, which by the time of the divestment accounted for 10% of group sales, but 20% of RFTs. Our latest achievement on our way was the aforementioned divestment of the eight sites in the US, with which we focused on selling distribution sites with a low EBITDA contribution throughout the cycle. Our portfolio optimization is complemented by organic initiatives. To targeted investments, we have developed selected sites from sole focus on distribution to high-quality processing and metalworking. Our strategic shift towards higher value-added and service center business is clearly reflected in the numbers. In 2019, 63% of our sales came from these businesses, and as of the first nine months of 2025, the share has increased to $81. If we exclude the sites in the U.S. that we agreed to sell, the sales share of higher value added and service center business would be at 87%, an increase of 24 percentage points compared to the starting base in 2019. These businesses offer higher profitability while significantly reducing our exposure to steep price developments together with the volatility of our results. With that, over to you, Oliver, for further financial insights.

Yes, thank you. As Guido said at the beginning, steel prices in the U.S. were subject to a considerable decrease during the quarter, as illustrated in the upper part of the slide. At the beginning of the year, hot oil coal prices in the U.S. increased significantly following the introduction of new tariffs. After reaching a temporary peak in the second quarter, they started decreasing due to weak underlying demand. In Europe, new tariffs are currently awaiting approval by the European Commission. The measures would pass the tariff-free import quotas and double tariff rates for quantity exceeding these quotas. Prices could therefore continue to increase. As part of our Local for Local business model, we do not import significant volumes from third countries. Therefore, We do not expect direct effects from those tariffs. Coming to our EBITDA before material special effects, we achieved a considerable increase year over year. In total, we generated 43 million euros in the third quarter. In the first nine months of 2025, EBITDA before material special effects came in at 150 million euros, which also represents a considerable increase year over year. As Guido mentioned beforehand, our strategy continues to focus on higher value added and service center business with increased profitability and reduced dependence on the volatile steel prices as demonstrated by our latest divestment. Our networking capital came in elevated quarter over quarter. According to IFRS 5, Positions linked to the planned sale of eight distribution sites in the U.S. amounting to 68 million euros are already excluded. The temporary high net working capital, especially in the segment Cocteau Metals Americas, is the main driver for our negative OCF of 118 million euros in the third quarter of 2025. Nevertheless, we expect a significantly positive operating cash flow for the full year 25, driven by a strong cash flow in quarter four of this year. As part of our operational excellence pillar within the Klöckner & Co. leveraging strengths step-up 2030 strategy, we continue to leverage our extensive expertise in automation and digitalization. With our efforts, we have been able to increase the number of our digital quotes by 8.9% year-over-year in the first nine months of 2025. Let's take a look at our shipment sales, gross profit and gross profit margin for the third quarter of 2025. Shipments came in slightly above previous year's quarter, mainly driven by our segment Procna Methods Americas. Sales decreased slightly year-over-year, due to the overall lower average price level and came in at 1.6 billion euros in Q3. Gross profit came in at 295 million in Q3, up to 262 million in Q3 2024, a considerable increase year over year. Also, gross profit margin increased considerably year over year from 15.9 to 18.3%. We will now turn to the EBITDA development in quarter three. The volume effect was positive, contributing 5 million euros in the third quarter as shipments increased slightly year over year. We also benefited from a positive price effect of 36 million euros compared to the same quarter last year. which contributed significantly to the result, as negative windfall effects of last year's quarter have not recurred. OPEX increased by 16 million year-over-year, mainly driven by higher personal and transportation costs. We experienced negative APEX effects of 3 million euros year-over-year, mainly driven by the weaker US dollar, which impacted the translation of earnings from our US operations. Consequently, EBITDA before material special effects came in at 43 million euros. Material special effects of minus 7 million euros mainly relate to restructuring initiatives. Therefore, EBITDA after material special effects came in at 36 million euros. We are now coming to cash flow and net development. In the third quarter of 25, we had a networking capital increase of 144 million euros year over year, mainly due to the trade payables and trade receivables in our America segment. I would like to highlight again that this networking capital build up is temporary and will reverse in quarter four. Taking into consideration interest, tax payments and other items, totaling to 10 million euros Our cash flow from operating activities came in negative at €118 million in quarter three. Including net capex of €23 million, free cash flow was negative at €141 million. Let's have a look at our net financial debt. Positive effects were visible for leasing and FX translation. Taking our negative free cash flow into account, our net debt consequently increased from 870 million at the end of the second quarter to 1 billion and 3 million in quarter three. Nevertheless, we continue to process a diversified financial portfolio with a total volume of 1.3 billion euros, excluding leases, with more than 0.4 billion euros unused lines available. In July 25, we renewed the European ABS program ahead of schedule, extending it until 2028 with improved terms and an adjusted volume reflecting the sale of parts of the European distribution business. This improved our maturity profile further. Additionally, we expect a significantly positive operating cash flow for the full year 2025, which will be further supported by the proceeds from the sale of the eight U.S. distribution sites, leading to a reduction in net debt. I now hand over to John to have a closer look at our markets in North America.