Kloeckner & Co Ag

Hello everyone, this is Fabian Neuse from Investor Relations. Also on behalf of my entire team, I wish you a very warm welcome to our Q1 26 conference call. With me today are our CEO Guido Kerkhoff and our CEO Americas John Gannon. They will guide you through the presentation and afterwards we're happy to take your questions. In order to ask a question, you have to press the live Q&A button and we will then open your mind. With that, I'd like to hand over to you Guido. Yeah, thank you. Welcome to our Q1 26. I'll now begin with the financial highlights of the core of our strategic progress and the voluntary public takeover of Worthington Steel. Before we look at our KPIs, I'd like to make a final remark. As you know, we sold eight U.S. distribution sites at the end of 25. In order to enable a year-over-year comparison on a like-for-like basis, we've also included the DELSA for a divestment-adjusted baseline. Shipments decreased considerably year-over-year, mainly due to the divestment of these eight U.S. distribution sites. Excluding the divestment of the eight distribution sites, shipments increased by 2.1% year-over-year, supported by positive momentum in Europe. Sales came in considerably below the previous year's quarter as a result of a lower reported shipment. However, on a adjusted basis, excluding the divestment, sales increased slightly, also by 2.1%. Gross profit decreased considerably year-over-year due to lower sales volumes. However, gross profit margin remained constant compared to prior years. We achieved a considerable increase in FEDA before material special effects, also driven by a positive contribution from our government of 0.2%. We'll take a closer look at that on the next slide. Rating cash flow was at minus $270 million, mainly due to seasonal networking capital build-up at the beginning of the year. As a result, financial debt increased to $1.9 billion at the end of the first quarter of 2016. Let's have a look at our performance in Q1 2016 by segment. Now, if we look at the Metals America segment, shipments decreased considerably year-over-year in Q1, but just due to the aforementioned divestments of the eight U.S. distributions. Consequently, sales in Q1 came in considerably below the previous year's quarter as well, due to the same reason. Adjusted for the divestment of these eight sites, shipments in the segments were constant compared to the prior year quarter, while sales decreased only slightly. To put the like-to-like comparison into perspective, I would like to highlight that March 25 was largely driven by restructuring activity, providing a temporary uplift in volumes. EBITDA before material special effects came in at 37 million Q1 2016. In our second quarter, Europe's shipments increased slightly, while sales increased considerably compared to previous year's quarter due to a higher average price level. This development was supported by the continued and effective implementation of our optimization measures. As a result, EBITDA before materials, especially in France, increased considerably to €10 million, reaching its highest level since the first quarter of 2023. Now let's have a look at our strategic progress in the recent past. We continue to reduce underlying volatility by focusing on higher value-added products and services. We further strengthened and sharpened our portfolio through targeted acquisitions and divestments, including Ambo Steel, Haley Tool & Stamping, Simplock, and Loja de Rio. At the same time, we divested distribution business in the U.S. and Brazil in order to enhance strategic focus. We broke ground on a new aluminum flatware processing facility in Columbus, Mississippi, and launched a new heavy fabrication operation at the former Barber's Manufacturing Site in Payton, Iowa. Our strategic progress also includes targeted capacity and technology investments, such as increasing electrical steel capabilities and installing a new Coltec Shuler laser flanking line in Querétaro, Mexico. As you can see on this slide, our efforts are clearly visible. We grew our HVAC and service center sales from 63% in four years from now to 87% in Q126, a strong development. The higher test exposure for HPEP and service center, our underlying volatility continues to decrease, while we increase our profitability. Let me now give a brief and important update regarding the voluntary public takeover by working in steel. As you know, working in steel and truck and co-sign business combination agreement on January 15th, after which Worthing Steel submitted a voluntary public takeover offer for all outstanding shares of Gluckman Co. After successfully reaching the minimum acceptance threshold, Worthing Steel was able to secure in total approximately 61.87% of Gluckman Co.' 's outstanding shares by the end of the additional acceptance period. Furthermore, on March 27th, 26th, Worthing and Steele informed the management board of Plattmanco that it intends to enter into a domination, profit and loss transfer agreement between Worthing, Steele, GMEH, the controlling company and Plattmanco SE as the control company. Strategically, this takeover marks a new chapter in Plattmanco's corporate history and fully aligns with our strategic focus on higher value-added products and services across North America and Europe. Closing of the transaction remains subject to regulatory approvals and is currently expected to take place in the second half of 2020. With that, let's have a closer look at the financials. Overall, we experienced a favourable pricing environment in the first quarter of 2016 after the pronounced volatility of the previous year's quarter. Prices continue to rise in the first quarter of 2016 in both the US and Europe supporting our operating income. The U.S., unlike previous cycles, the increase has generally been slow but steady, which results in a rather limited positive windfall effect. We achieved an average year A before material special effects of 46 million in Q1. Considerable increase both for and in the early years. Due to the seasonal network and capital buildup at the beginning of the year, operating cash flow came in negative at $217 million. Looking ahead, we're confident that we'll continue to convert The currently positive pricing momentum to strong operating results in the second quarter of 26 and beyond. In addition, we continue to leverage our digitalization automation initiatives. The number of digital quotes increased by around 7% year over year in the first quarter of 26. With that, we continue to relieve salespeople from manual work related to products. Let's take a look at the development of our shipment sales, gross profit, and gross profit margin in the first quarter of 26. We're also providing the figures for the group excluding the eight US distribution sites, enabling a like-for-like comparison. Shipments decreased considerably year-over-year, mainly due to the divestment of eight US distribution sites at the end of 25. Sales decreased considerably year-over-year, mainly due to the lower shipments in the Pluckman Metals America segment. As already stated on a like-for-like basis, both shipments and sales slightly increased by 2.1%. This is true, but our growth strategy is intact and remains intact like last year's. Gross profit came in at $298 million in Q1 after $370 million in Q1-25. a considerable decrease year-over-year due to the negative development of sales. Meanwhile, gross profit margin remained constant year-over-year at 19%. On a like-for-like basis, gross profit increased slightly, while the gross profit margin was also increasing. We will now focus on the MTA development in the first quarter of 2016. for Q125 for the divestment of the eight U.S. distribution sites to enable a life-to-life comparison, therefore starting with the NBDA before materials specially picked for Q125 of 34 million. All year-over-year effects visible here have also been adjusted to enable the life-to-life comparison. In Q1, the VTA before material special effects came in at 46, a considerable increase year-over-year. In the first quarter of 26, we had a positive volume effect of 6 million positive price effects, 20 million supporting our operating results. OPEC, however, was slightly higher at 9 million year-over-year, mainly due to high personal expenses, and high expenses for shipments and operating supplies. Further, we had negative forex effects of $4 million, mainly resulting from the U.S. dollar. Lastly, we recorded negative material special effects totaling $6 million, mainly related to expenses resulting from share-based payments due to the gains in the share price since the beginning of the year. Now coming to the cash flow and net app development. The first quarter of 26 with seasonal networking capital build-up of $279 million. I would like to stress that this build-up is temporary and is expected to reverse over the course of the year, ultimately resulting in a positive operating cash flow. Taking into consideration interest tax payments and other items totaling $32 million, our cash flow from operating activities came in negative at $270 million Q1. negative 306. Let's look at the net financial debt. Additional negative impact will be visible for foreign leasing and other items totaling 77 million. Consequently, our net debt increased from 709 to 1,092 million in the first quarter of 26. I'll now hand over to John to have a closer look at our in-market in North America.

Thank you, Guido. While some extremely challenging weather disruptions impacted our shipments early in 2026, we continue to expect a decent recovery this year with North American real steel demand increasing between 1% and 2% compared to the prior year. Of course, there remains significant uncertainty and some downside risks related to the current conflict in the Middle East and the continued unpredictable trade policy shifts that can negatively impact the outlook. Now, turning to the expected development in specific market segments. Looking first at construction activity, building starts for both residential and non-residential investments are expected to be generally flat to slightly higher versus prior year. While underlying long-term demands should remain strong, affordability remains a significant growth constraint. Lower mortgage rates would certainly provide further upside potential to the output. Non-building and infrastructure investments should continue to grow in 2026, albeit more moderately than last year. Data centers as well as grid expansion and modernization will continue to lead the way for the next several years. Turning to manufacturing, activity as indicated by the ISM Manufacturing Index has expanded during the first four months of 2026. This is a very positive development considering the index indicated contraction for almost all of 2025. In line with this indication, we expect overall new orders for industrial and off-highway equipment to increase modestly by between 2% and 3% in 2026, with some variation depending on the specific segment. Some larger OEM customers forecast in these sectors continue to indicate even substantially stronger growth rates heading into the second quarter and second half of 2026. Trade policy clarity and lower interest rates could also help these key consuming segments regain even more positive momentum as they progress. Turning to transportation, the automotive segment has been the most impacted by changing trade policy as well as the removal of the EV tax credit. For 2026, current forecasts indicate stable auto production in both the U.S. and Mexico. Subdued consumer confidence, higher for longer interest rates, and the recent spike in gas prices will likely limit growth prospects in the near term for auto. On a more positive note, and after a significant pullback in 2025, we now expect a solid recovery of more than 5% in the heavy truck and trailer segment. On the defense shipbuilding front, activity remains very robust. Glockner has been recently awarded a number of large multi-year programs, and we remain extremely well positioned to take advantage of what's expected to be a very significant increase in defense shipbuilding investments over the next decade. Appliance HVAC and electrical, which are key segments for KMC Americas, are expected to remain challenging in 2026 as OEMs work to rebalance supply chains to be better aligned with forward demand. After a slow start in Q1, we do see signs of a modest recovery in the second quarter, but we don't expect these segments to deliver material growth in 2026. Energy, on the other hand, will continue to be the strongest steel-consuming segment this year. Power transmission will remain extremely strong in 2026, generating growth of greater than 15% year-over-year after achieving a similar result last year. Modernizing and expanding the North American transmission infrastructure is imperative in order to support the significant forecasted increase in demand for electricity across North America. This is especially critical for data-centered investments. While renewable energy growth was expected to come under pressure after last year's changes in government policy, We are now expecting a strong growth of almost 10% in 2026, as both wind and solar continue to be the most immediate solution to help bridge the growing deficit between surging demand for electricity and constrained supply. With that, I will quickly summarize the North American outlook as follows. While the current variance in growth expectations between industry segments is nothing short of unprecedented, and despite potential downside risks that still need to be navigated, we remain firmly optimistic when it comes to the overall North American outlook for 2026. Additionally, the significant reduction in imports resulting from the Section 232 tariffs has clearly created better balance between U.S. supply and demand, which is likely to result in a higher for longer and potentially more stable pricing cycle. With these positive market dynamics at our back and with our continued focus on higher value-added products and services, we are very confident Cochran America's continuing operation will once again deliver strong year-over-year growth, record market share gains, and further improve financial results in 2026. With that, I will turn it back over to Guido to provide an update on your

Thanks, Ron. In total, we continue to expect a real steel demand in Europe to increase, as well as in North America, by 1% to 2% in 2020, which is, in this case, unchanged compared to our last conference call in March. However, it is important to acknowledge key geopolitical risks could weigh on our outlook, and escalating tensions in the Iran conflict could trigger sustained oil price spikes, negative implications for the macroeconomy, inflation, and ultimately adverse effects for our whole customer industries. Coming now to our sectors, starting with the construction industry. No major change compared to our previous conference call. We continue to expect the construction industry in 26 to grow slightly, structural drivers intact, and tend up demand, providing growth. Manufacturing, machinery, and mechanical engineering, a sector in which we continue to expect a slight growth in Europe, driven by the emerging effect of past monetary policy loosening and rising defense However, uncertainties in trade policy and competition from Asia will dampen the use of domestic mechanical engineering. Transportation, first focus on automotive, also a sector where we see no major change compared to our last conference call. The industry association still expects a slight increase of 2% in 26, though absolute volumes will remain far below 2019 record levels. Demand is expected to remain on rather low levels for as long as there is no significant improvement in the broader economic outlook, including global trade and consumer sentiment. Now coming to shipbuilding, we continue to expect increased pressure from the commercial shipbuilding segments due to economic uncertainty, while remaining well-positioned in the great ship sector to benefit from upcoming demand. Household and commercial appliances, segments of marginal impact on our European business. We still expect a constant development in 26, with increasing pressure from the U.S. and China, resulting in a negative impact on the competitiveness of the EU sector. Energy industry, no major change compared to our previous conference call. Slight growth expected in the energy industry, driven by the continued electrification of Let's now come to the financial outlook for the second quarter this year and the full year 26. As John and I pointed out, we expect a macroeconomic environment to remain challenging, especially due to geopolitical uncertainty. For the current quarter, we expect a slight increase in shipment and a considerable increase in sales each quarter over quarter. Every year before material special effects in year 226, it's expected to come in between $40 and $80 million. For the full year 26, we're now forecasting a shipments for the full year 26, mainly due to the before-mentioned divestment of a US distribution fund. Sales are now expected to increase slightly year-over-year. We still expect the FDTA before material special effects in the full year 26 to considerably increase year-over-year. Moreover, we also expect operating cash flow to come in positive, although below previous year's figures. We're now happy to take your questions. Once again, if you would like to ask a question, you have to press the live Q&A button and we will open your line. Our first question comes from Boris Boudet, Kepler-Chevreul. Boris, your line should be open now.

Thank you. Do you hear me? Yes, we can hear you. Very good. Thank you for taking my questions. Yeah, I would be interested in getting your... your view on the potential change in customer behavior in Europe, and that might be related to your inventory buildup. How much is linked to the price increase? How much is linked to some pre-stocking ahead of the new TRQ in Europe that might require some volume availability? And maybe also connected to that, What are the reasons for the slight downgrade in your opposite cash flow outlook? Is that also related to this potential increase in demand? And maybe I will have a last one on Baker Group. You point in the press release that you are in a due division space with some non-binding offers. What kind of... price are you looking for for this asset, and what would be the profile of those acquirers? Thank you.

Thanks, Boris. The customer behavior that we expect is a bit more cautious going forward. Customer sentiment has declined a bit here in Europe. We've seen some price and price blocking developments that underlie, honestly, the year started more positive than we expected beforehand. So although we see a decline from or slight decline to what we've seen in the beginning of the year, we remain positive that it's going to be an increase throughout the year. The price increase, stocking behavior was there, but not that big and not that... Now, the cash flow, yes, it's slightly reduced. You see higher price levels and a bit more increase in volumes and shipments that we expect for the year that will require a little bit more of working capital buildup. That's mainly reflected in this cash flow. And going forward. Becca, I can understand your question, but you will understand my answer as well. We're in the due diligence phase, and we have a couple of good offers. that we're continuing to elaborate on, and then we'll see what will come out and how the pricing will look like. But the process is running very well, and there is more interest than we originally expected.

Okay. And maybe then related to that, we know that is working on the potential IPO of business. would be interested in getting your thoughts on the potential for consolidation in that space in Europe.

I can't take a look into and I don't know what they're doing. I think currently they're busy with preparing their kind of decoupling from the group and we'll have to see how that works. Once again, if you would like to ask a question, you have to press the live Q&A button, and we will then open your line. There seem to be no further questions at this time, so I would like to hand over to Igor for some final remarks. Yeah, thank you all very much for joining the call, and if there are any outstanding questions you'd like to raise, you know, Fabian and his team are just waiting for it. So call us. Thank you very much.