Salzgitter Ag Akt Shs

Ladies and gentlemen, welcome to our annual analyst conference. My name is Markus Heitler. I'm the head of Salzgitter AG's investor relations department. I'm here today with Gunnar Gröbler, our CEO, and Birgit Potrafki, our CFO. They will give you insights into the economical and political environment we are facing, as well as in the business development of the group and the strategy. And finally, we will dive into finance. After that, we will have the usual Q&A session. Just for transparency reason and as a last remark, the whole web conference will be shown on our website. So, just that you know what question to ask or not to ask. And with that, I'd like to hand over to you, Gunnar. Thank you very much, Markus.

Warm welcome from our side to the annual analyst conference with the full year numbers of 2024. Prior to diving into the details, which Birgit will do, let me perhaps kick it off with some remarks on the overall environment and how we have performed through the year. Let me start with something that is very close to our heart as members of the board, but also to everybody in the company. which is occupational safety. As you can see, the long-term trend since 2018 is intact. We're reducing our LTIF. We're reducing or improving our operational and occupational safety. And we have again improved in 2024 vis-à-vis 2023. So that is a good sign. Our target, of course, remains zero accident. This is something we stand for. This is something that we also ask the team, the entire team to stand for and support both our colleagues, but also third parties working on site to really get to that target. So that remains an ambition that we have that remains a clear focus on our day-to-day work. So from there to the political and economic environment that we have, we have seen quite some political development over the last couple of weeks, I should say, which I would like to highlight in short. So on the upper part, you see the European development. On the lower part, the U.S. development. Let me start with the U.S., We have seen quite a number of discussions on tariffs in the US. There's still a bit of an unclear picture. What I clearly support is that EU keeps the door open for further negotiations, for further discussions to really get back to a to a stable system that we all can work with because this lack of stability, this unclarity is certainly not good for business. For us at Salzgitter, the direct exposure is relatively limited. We are not exporting a lot of material into the US. We are rather looking at material that will be diverged from formerly moving into the US, now moving into other geographical regions, one of that being Europe. Hence, we are very happy with the political discussion and measures taken by EU on safeguards and on anti-dumping measures. So safeguards, the review is completed and will be put in force as of April 1st. This will cover roughly 4 million tons of steel that is flowing into Europe today. This is approximately 20% of all the imports and approximately 6% of the overall market in Europe. So a substantial tonnage that is newly covered with the safeguards. And secondly, on the anti-dumping measures, we're looking at Japan, Vietnam, Egypt. Roughly 10% of the hot-rolled strip market is covered here, so also substantial move and protection of the European steel market that you can see here through those two measures. Thirdly, it's good that EU continues the dialogue on duties on Russian semi-finished products It is still hard to understand why Russian slabs are entering Europe. We've seen an increase in market share for Russian slabs since the Ukrainian war started of 4%, certainly something that is not intended by EU, I assume. So, hence, I fully appreciate the ongoing discussion there introducing duties on Russian products. EU underwent a quite intensive discussion from the European Green Deal to the European Clean Industrial Deal and with a clear focus on base industry. It's very good to see that you have three key industries that are covered by EU. Specifically, it's the automotive industry, it's the chemicals industry and steel. Chemicals and steel being base industries and hence also strategic industries in Europe. And they are also now claimed as strategic industries in Europe. And the steel metals and action plan is a very good signal and sign of the EU that steel is seen as strategic. The steel methods action plan covers a couple of elements as you can see on that slide. I think it's very good to see the safeguard measures as I just laid out, but also acknowledging that the carbon border adjustment mechanism, CBAM, needs improvements, and those improvements are named in that action plan and are to be resolved within this year prior to CBAM coming in action as of next year. It is also very good to see that EU looks into lead markets for green products, lead markets for green steel, something that the industry clearly supports, something where we also see that the transformation towards the green steel is supported by the clean industrial deal and where also our low-emission steel standard that we have implemented in Germany last year and that is now becoming European, it can be a very good basis for that discussion going forward. What is obviously relatively weak in the steel metals action plan is energy, given that EU is now setting the sort of legislative boundaries for energy, hence... Despite that, there is a clear signal towards the member states to reduce energy costs and to help the strategic industry to get that burden lowered. I think that is a clear signal that EU sets to all member states and for us certainly a good signal going forward. That's Brussels looking at Berlin. I think what we have seen over the last couple of days, I should say, is that there is a very clear move towards investment funds for infrastructure. and additional investment funds for defense. Let's talk infrastructure here for a second. The special fund is set to be around 500 billion euros. Of course, once that is decided, which is supposed to happen today, In the Bundesrat, this will need some time to trickle down to actually orders in the industry. But we see clearly an impact on the German economic output, approximately 1% next year, starting hopefully already in the second half of this year. and then increasing to 2% in 27, and the peak in that investment would be then in the late 2020s, beginning 2030s. So you see this is a long-lasting element that clearly supports us as steel industry, given that infrastructure depends on steel, be it infrastructure for logistics, roads, trains, rails, what have you, but also infrastructure for energy in the context of, for example, hydrogen pipelines, but also electricity grids, offshore wind or onshore wind turbines, et cetera, et cetera. a clear focus on steel-intensive products through that special fund for infrastructure. And we at Saskita clearly want to participate in that and we are well set through the wide variety of products that we have to also participate in that. We are strong in infrastructure already today, so we have all the context to our counterparts, to our customers, and we'll intensify that. Having a look at the market environment more in general, let me pick a couple of points of that. The special fund, as I just said, will kick in the second half of this year. But to do that, it needs to be implemented very quickly and forcefully. So I urge the German government to be very clear on this special fund and help also industry to make use of that. But it cannot be all that the German government, the new government will have to look at. It's still a need for structural reforms. There's still a need to really review bureaucracy. review sort of the social security system, review tax systems that cannot be replaced by these special funds, by the focus on infrastructure and defense. So clear urge also to the new government and it's at least comforting to understand that the current discussions in Berlin are covering those aspects as well. On the European steel market side, it is an increase or we expect an increase in 2025. But a long and strong recovery is not really foreseeable. It's not that we see sort of a dramatic pickup in 25. I think we're moving into 25 as we left 24 with a bit of an indifferent market behavior from different sides. So here also. Clear signals from Brussels like the trade defense measures are expected and need to come into force to support the steel industry, support us in our strategic value that we have to the European Union. Next to the political and market side, looking at raw materials and energy prices, well, On the raw material side, we have seen quite a fluctuation in 2024. As you can see from the graph, iron ore from almost 150 down to something like 80, so cutting in half and now being a bit around 100. Let's see how that develops over the next couple of months. Same on the coking coal side, starting north of 300, now being below 200, so it's really something that we observe very closely to make sure that also from the hedging perspective, we are making good trades here and secure our cost base on the raw material side. Energy, while you could say electricity is a bit of a flat development, relatively high still, but coming from much higher numbers in 2023, however, What we all should keep in mind, grid costs are not included here. So we're looking at the electricity prices as of EEX, Grid costs are not included and you all know that grid costs have increased quite significantly in the last years in Germany. Hence also the plea to the German government to look into energy costs, to really look into infrastructure costs for electricity and make that affordable for an industry that is active on the global market. Natural gas has picked up through the year 2024, peaking north of 50 euros, also due to the gas storages sort of coming to, which isn't quite normal through the winter, but emptying through the last couple of months. Let's see how that now develops also with the warmer weather kicking in as we speak. Looking at steel prices, well, on the left-hand side, spot prices in Northern Europe, as you see, in 2024, we have seen a further decline in prices coming from still relatively good prices in 2023, and we're going to see that in the numbers as well. Through the year 24, especially the sections and plate has been somewhat stable and the hot rod coil prices picking up as of beginning of this year. So let's see how that now further develops. Looking at HRC prices internationally, you see that pick up on the blue line as we see it left. Black line is US market has picked up given all the turmoil around trade measures since January this year. So this has been reflected directly in the prices on the orange line on the bottom. This is China. You see the uplift through the year, which is a fiscal package that China has launched after the summer break. which led to this price increasing, but since then relatively flat. So no major impact foreseeable for us as of now coming from prices. Now, looking at Salzgitter specifically, and starting with the financial year 2024. Of course, Birgit will go into all the details, so I will spare that for you, but perhaps two, three highlights. As you see, crude steel production went up. This is because of the realigning of blast furnace A in 2023. Hence, we have been up to full production in 2024 again. This is what you see in the delta of 680. But we also see external sales went down by 880. This is the price development I just highlighted. This is what you see here. Prices have come down compared to 23. And that's the effect that sales also went down to just above 10 billion euros. All in all, we're looking at earnings before taxes minus 296, almost 300. What is comforting, though, is that the operational performance has been strong. We're looking at an operational result of just shy of 110. So from that angle, I think we have positive signals from our own operational performance in 2024. Looking at the different businesses, steel production, see the numbers won't go into details. But just as I said, sales and earnings lower mainly due to prices. This is exactly the story that I just told. Outlook. Demand is sufficient, so we see a stable and sufficient demand to utilize the capacity that we have. Of course, we're still waiting for further pickup on prices. 5.30, it has been this morning, so there's still headroom for us to ask for sections. We see a gradual, but only a gradual recovery, especially in the product mix. There's still room also for us to further improve through the year 2025, and here, Fiscal packages like the one on infrastructure could certainly help as soon as it kicks in. Looking at steel processing, certainly more of a... Problem child, if you want to say so. In 24, you see a lot of minus numbers there, especially on the Delta side. Heavy plate demand declined. Prices went down. We have seen postponement in projects when it comes to line pipe, especially this H2 backbone that Germany has decided upon. Precision tubes, same story. Stainless, we sold. It is deconsolidated as of fourth quarter 24 because that's when we closed the deal. The outlook, again, also here we are... Looking at headroom or room to further improve in the plate mix, we certainly see infrastructure being an important part here. There is at least on the pipeline side a bit of an uplift visible. We have booked roughly 100,000 tonnes over the last two weeks in different projects. By the way, also a project in the US, so customers in the US are betting on our pipes, are betting on or appreciate our products, I should rather say. And they also take the tax risk given all the uncertainty. So our products are still highly valued in the US. So markets there are picking up slightly. Let's see how that continues over the course of this year. Trading. I think we have seen a strong international trading over the last year, so that has covered a bit our difficulties we had on stockholding steel trade. Stock prices went down and notably down, so that put some pressure on the stockholding trading. Again, the international trading was good. International trading, For this year, however, given all the uncertainties we have on the trade barriers is certainly under pressure. Let's see how that develops over here. As soon as we create or policymakers create more stability here, it will certainly help the international trading again. Stockholding trade, we have made improvements. We are in a restructuring here and certainly expect to see results of that in the course of this year. And Birgit will talk you through the numbers there as well. Last but not least, technology has been high-performing, good development through the entire year, especially in KHS. I've seen a record all-time high in result in KHS. So that is certainly good and something we will also carry through through this year with a good order backlog for 2025 and also good traction on sales expected for this year. So, stabilization on a very high level despite the special effects that are mentioned at the bottom. With all of that, we're looking at a management guidance which looks at sales between 9.5 and 10 billion, EBITDA 350 to 550 million euros, pre-tax, with all the uncertainty that we see in those markets is still relatively wide, minus 100 to plus 100 million euros, and ROSI should be improved vis-à-vis last year. Let's look a bit at the strategic directions that we have set up in our strategy 2030. We're covering circular economy, profitability and growth and customer-oriented solutions. Looking at circular economy, we have further worked on specific projects that are covering the circular economy. Closed loops as one example, we mentioned already last year, we have intensified our work there. but also work with yellow goods customers where we launched CO2 reduced yellow goods that will be now shown on the Bauma, the fair that starts a couple of days from now and then will be set up and operate on our site here in Salzgitter. Profitability, the performance program Birgit will walk you through, has been intensified. Measures take effect. We already see in 2024 that this performance in 2026 is taking measures and we have further intensified our work here and it's good to see that we had traction there. On the growth and customer side, the energy transition is certainly something where we see ourselves well positioned with CO2 reduced steel for hydrogen pipes with heavy plate for the wind industry and others. So that is certainly something that we will continue to monitor and to focus and to be active on those markets. We take a holistic approach. That's part of the strategy. Let me dive into organic growth for a second. Field production, closed value streams, circular economy is what we focus on here with a closed loop strategy. products where we take the scrap from certain customers, turn the scrap into high quality steel and then return that steel, sell that steel to the same customer again. We're expanding that business with the competence that we have on the scrap side and on the steelmaking side. I think we are perfectly positioned here to play exactly that market. Processing, I talked about the H2 ready pipes, which we're going to continue there. And we certainly focus on the sustainable energy market, as mentioned before. Trading, let me mention here Defense, our company Universal, which is part of the trading unit. is already active on the defense side, but not only Universal. The entire suite of products is usable and will be used in the defense sector, so certainly a growth area that we see. And Universal is one of the key elements in-house already today that will help us to also broaden our footprint here, both in pipes, both, and this will be then precision tubes on the heavy plate side, secure as our product family for defense products will be a growing market going forward. Technology, there's a high interest in our PlusMax business, in our PlusMax technology, especially in India and Africa. So that we will focus on that and we will certainly strengthen our international network of production hubs across the globe to really cover the different markets with their respective and specific needs. Sarkos, reliable, flexible, sustainable is exactly sort of how we look at it. We are in full swing with building Salkos on site. All the major components are under construction. We're halfway through in really building the entire site. If you have the opportunity to visit us, it's impressive to see the size of it and the complexity of what's going on right now. whilst we're still in full production on that very site. So that's really impressive, and I'm very proud of the team that is working on that and delivering on this each and every day. What is important, the funding for Salkos Stage 1 is fully secured. We are in full sort of swing here and will not reduce speed or reduce scope in Salkos Stage 1. Hence, we will be able to deliver roughly 2 million tons of steel, green steel, to our customers as soon as we are operational. We have launched our product brand Zalkos last year and sort of have created that Zalkos product family. Also very active and successful in the market. The low emission steel standard less is something that the industry has developed over the last year. So we are now able to certify our steel and be clear on what it means to have green steel. What is green steel and we can identify that now. and get it standardized and certified by a neutral certifier so that we also can support green lead markets with our products. Last thing is energy. There's always a discussion around hydrogen. Will hydrogen be available? Will it be sort of at the right cost level? As I mentioned also in the years before, we have a lot of flexibility here. The technical setup that we chose allows us to start with a mixture of natural gas and hydrogen. That will already deliver a 60% reduction on the CO2 side. And then we're moving on to 95% as soon as we have hydrogen through the pipeline available. Zarcos, I talked about the site, 602,000 additional people on site right now, so that is really a complex exercise we're undergoing right now, but well underway. On the energy side, I talked about hydrogen. Let me perhaps mention us being among the top 10 signers of PPA. last year in Germany with a total of 1.7 terawatt hours now signed in renewable electricity. So also here on the green side, we are well underway. Coming back to product defense, Unfortunately, I have to say, defence has become a very intense discussion, not only in Germany, but in the whole of Europe. Last night, I think, in the discussions there, we are well set up with a suite of different products, as I just mentioned, and we will, through a task force defence, now leverage defence. this portfolio vis-à-vis our customers and help them to ramp up their production, help them to deliver on the targets that EU has set up here. And the notion that one hears from Brussels that this Investments should be covered by European companies predominantly is certainly another sort of hint or more than a hint that it will support the steel industry, will support this strategic industry in Europe. With that, I'd like to hand over to you, Birgit, and you're going to guide us through the financials, please.

Yes, of course I will. A warm welcome also from me to you out there. And, yeah, Gunnar has already addressed it, and I would like to stress it again. 2024. was a year with really strong headwind, especially in the steel areas. And we used that year, this very, very difficult year, we used that to significantly reduce our potential risks in our balance sheet, and also we have used that year, Gunnar has already teasered it, to extend our performance program, and I will lay this out in the course over my presentation. So the very strong wind we find back in our sales, €10 billion compared to last year reduced. However, EBITDA was not too bad, it was €445. And that was even stronger than we announced to you in autumn last year. So quite nicely stronger performance here. The overall EBT, Guna has mentioned already, highly negative, minus 296. However, mainly driven by one-time effects of total 400 million euro negative. And out of this 400 million euro, 280 million euro were one-time write-offs. I will give some more details in the next slide. and around €120 million we have foreseen in order to restructure our businesses. So that was putting a heavy burden on our results last year. However, if we take that burden away, we see this very nice number on the upper right side, €109 million. And this is our performance without these one-time effects. And this is mainly driven, Gunnar has mentioned it already, from our KHS group out of the technology sector. And, of course, Aurobis was performing also very nicely. Our also very nice development we see in our cash position, in the cash flow, was more than 400 million euros. And this was mainly positively influenced by our working capital level, which was brought down, which we could bring down. due to stringent management below 2.5 billion euro by the end of the year. And all these impacts also positively impacted our net financial position. That's negative and that's planned negative because we are investing in our transformation and that's costing quite some pre-investments. So this trend going more a little bit down the negative line a little bit more is planned And with our management, especially on the cash side, we could limit the downtrend by the end of the year also significantly. So we were reaching slightly below minus 600. Continuing the history of a stable dividend payment policy, we are suggesting to pay 20 cents per share to our owners in order to honor their trust in us. Income statement. The headwind we find back in our sales. Gulnar has mentioned the number already, minus 780 million almost. And we have another figure that saw quite a huge movement, and this is the depreciation here. So there are two major assets where we decided to have depreciation down to zero. The first one is our MPT group, our precision tubes group, and we depreciated the whole group from €130 million down to zero. We took the same decision for our HKM participation. That was in our books worth 110 million euro and we also depreciated that down to zero. And that of course will ease the income statement on the depreciation side this year and the following year and all these kind of depreciations we did will have less burden worth around 30 million euro in the upcoming years. And of course, what we see here, the result from investment accounting for using the equity method. Here we find back also the nice result from our Arubus share. looking at the balance sheet of course we are oh sorry wrong side looking at our balance sheet we find back of course the increase in our assets mainly driven again by cycles and we also find back an increase in our share in our how to say yeah in our participation in our rubles accounted here in the balance sheet was 140, I have to look at this, 9.6. And what we also see here, I have already said we could nicely reduce our inventories as well as our trade receivables. not only against the third quarter but also against the previous year. We find this back here in this very positive reduced numbers. And the last line I would like to lay out, this is assets hold for sale and that was our MST group, stainless steel group. which we sold at the beginning of November. Gunnar has already mentioned this already before, so that is now also out of our books. If we look at our equity side, our equity was reduced in line with our financial results coming from the profit and loss side. And this was more or less compensated by a similarly amount of higher bank landings. That was mainly driving the equity side here. Cash flow statement. We started into the year with cash equivalents of 939.7 million euros. And we had a nice cash flow from operating activities. I already mentioned that nice number, 408 million euros. And the last time when we spoke at the end of the third quarter, this number was negative. And it was around minus 95 million euros. So by really working very strong on the working capital, we managed to improve that by 550 million euros within the fourth quarter of last year. The cash flow from investment activities, investments, but also cash in from selling the MST Group, amounted up to 677 million euros. And cash flow that we received from financial activities were worth 331.9 million euros. So the overall changes in cash, quite foreseeable, 62.5 million euros. So the end value or starting value of this year, 1 billion euros. Working capital, I have already mentioned that our cash was mainly driven by the movements in our working capital. You see here the comparison to the third quarter where we were still slightly above 3 billion euro and now slightly below 2.5 billion euro and also the decrease compared to the year before with minus 285. Investments planned, we invested quite an impressive number in 2020 for €899 million. Also a big portion here for our Xycos. You can see again the construction site on the right side. And I really love to see Gunnar smile whenever he talks about Xycos. That's the engineer, right?