Salzgitter Ag Akt Shs

Ladies and gentlemen, welcome to our analyst conference for the first half of 2025. Before we start, two remarks from my side. First one, this analyst conference will be recorded and afterwards published on our website. The second one, this is an analyst conference. The press is very welcome to listen, but we will only allow questions from participants of the capital market And without further ado, I'd like to hand over to you, Gunnar.

Well, thank you very much, Markus. Good morning, everybody in this call. I'm very happy to have you all here and to report to you the first half of this year for the SAIS-GIPTA group. And as usually, we'd like to start with the occupational safety. You know that this is a very important topic for all of us. and I'm very pleased to report that we have started well into this year compared to previous years, hence we are well underway to further reduce the LTIF quota. The target remains to have zero accidents and also all activities ongoing that we also reported on the annual general meeting remain in place and remain under full focus to further reduce the LTAF also going forward. Now, looking at the market environment, We, of course, see that the U.S. tariff policy has further developed now with the overall quota of 50%, however, still remains at 15%. There is an open question still to be answered between the negotiating parties whether there is a quota, a tax-free quota to be implemented but to be seen. So certainly nothing that we are as industry very happy about. We at Salzgitter are not that much Hurt by this tariff, given that our export into the U.S. is limited. Also from the pipe business, there's limited risk, downside risk that we see in that area. But, however, of course, it adds to the overall uncertainty that we see in the market. China is of course still a topic for us. We see that the export industry is under massive pressure. We see also further inflows of Chinese steel into Europe. Actually, 2025 has been so far the record year in terms of export into Europe. Back since 1990 we haven't seen figures that high compared to that. Staying with Germany, of course, the trade disputes that I just talked about are hitting us in times where also the demand is very low. So we are sort of hit from both ends. Of course, we see with some positive notion the fiscal policy that should improve growth in the steel sector as of 2026. And certainly the budget discussion, the national budget discussion on September should also give some more clarity on potential cost reduction on the electricity side. Let's see where the German government will land that discussion. Looking at EU. Skill demand is low, same picture as in Germany, and the import remains high. We see more than 30% of the total volume being imported, not only China, but also other countries, but also here record high numbers. However, the Political and regulatory discussion we're seeing, and we get back to that in a later chart, is of course to some extent positive and should help us to reduce in-courts going forward. Stimulus through construction and defense is a bit the same like in Germany. We see there is a potential demand increase as of 26. We don't see this hitting the ground in 25. So we're waiting for this in 26 and from there Intensive discussions when it comes to the carbon board adjustment mechanism, the CBAM, given that it has to be implemented in 26, so a lot of work has to be done in Brussels in the second half, especially in Q4, 25. and also high debate right now on the trade instruments, the safeguards, which also needs to be replaced in 2026. So also here a lot of political debates we're having, both in Brussels but also in Berlin. Raw material energy prices. We have seen a recent increase on the iron ore side, which has fallen below $100 per ton, now being above. 100 and a bit north of that. Let's see where that stabilizes. Coca-Cola is still below 200, relatively stable there, with daily fluctuation, but that's more sort of At least from our read, this is not the physical trade but rather the financial trade that gives this kind of fluctuation structurally below 200. Energy price is relatively stable at 90 euros per megawatt hour in Germany. And so its natural gas has come down quite substantially after the winter increase and now relatively stable there as well. Also, of course, driven by the low industrial demands overall. Looking at steel, we have seen steel prices coming down. I'm looking at the left side, Northern Europe steel prices. Went up in 25 until late April, beginning of May, and then went down again. We've seen for 540, 535 euros per ton of hot water coil. Recently a pickup. Our read is this is already expectation in the market when it comes to safeguards and C-bomb, given that this will kick in as of beginning of 26. also reflecting the pickup that we have seen in China lately. If you look at the right side, the orange curve, China has had a steel price increase since July 25. Our read here is the impropriation of the two sessions of the NVC and the CBPCC. In March next year, there has been some guidance that China will look to overcapacity that they have themselves. and try to balance the overcapacity question with sustainability. So certainly at least a hint that overcapacity is addressed also then in March next year from the NTC. So that's certainly a positive trend, but further to be looked at whether that is stabilizing or not. So, zooming in on Salzgitter, first half 25, these are the first half of 24. Going through the numbers quickly, David will go through them in more detail. Kürzel production, of course, the low production due to low demand, but also maintenance work on our blast furnace C that has been carried out in the first half of 25, hence the difference of foreign demand. 1,000 tons, first half 25 vis-à-vis 24. External sales have come down quite considerably. This is predominantly due to prices. And then basically that debt trickles down also on the following numbers. We should be aware of that the results include our rubles at a level of 71 million euros. Slightly above last year's numbers, there were 70.5, if I recall correctly. So, slightly above. That is included here, of course. And also a big number, and Birgit will also elaborate further on that, is the reporting dates related valuation of derivatives, which is included here at roughly minus €80 million, vis-à-vis a plus €10 million in the first half of 2024, so also that is part of the numbers. What we should, it's not on that slide, but we should also mention is that our equity ratio remains very healthy at a level of 42.2%. So that is perhaps worth mentioning on that slide as well. Looking at the different business units in the first half, of course steel production has seen the low level of demand. Prices or revenues for flats, I should say, have stabilized in the second quarter slightly, but sales and earnings down due to the low prices, as I just mentioned. Steel processing is hit by weak demand on heavy plate. Very weak demand also in terms of shifting qualities down to the lower grades. And we have seen market price decline also now towards the middle of this year, so hard hits on heavy plates. Line pipe demand is stable. It has not dropped. Also, exports into the US have not been cancelled. So, of course at risk, but not cancelled yet. On the precision tube side, low demand from core segments, especially automotive. And we should not forget that here in the steel processing we have the deconsolidation of the stainless steel tubes. from first half of 24 to this first half 25. This is in terms of sales roughly 170 million euros reduction due to the deconsolidation. Trading. has recovered compared to last year, so the turnaround is well underway. We're achieving good results on the improvement measures that we have implemented, so on that end However, of course, we see an overall European weak demand on stock keeping trade, hence also there a decline. International trade has also recently come down with the uncertainty on the US tax discussion. however, stabilized otherwise. Technology, positive news from KHS. We foresee a record year for KHS again, so with an EBT well above 100 million euros for this year. Order intake is also significantly above last year. Our plus-max technology is really kicking off, especially in India, and now we're trying sort of to move that forward into Africa and the Americas. So good development here. Technology still includes KDS, our shoe machinery. You follow that we recently signed a deal to sell Desma shoe machines, but still included here. So taking all that together, we have sort of narrowed down our management guidance for the quarter remainder of this year, sales being between 9 and 9.5 billion euros, EBITDA between 300 and 400. The pre-tax results narrowed down from minus 100 million to zero. and a ROC that is slightly higher year on year, so compared to last year. So that is how we look upon, overall look upon the year for the Salzgitter Group. Going further down a bit more into details, again starting with the political framework we're looking at. Trade defense. There has been a lot of discussions on trade defense, especially in Brussels lately. The safeguard review is completed. I think that is good, however not sufficient yet. Same goes for the safeguard succession instruments. There is a proposal upcoming now in Q3. The consultation of the industry, the wider industry, is ongoing and the steel industry as such is invited, or not only the steel industry, but we are also invited to contribute to the sort of data collection that the EU is doing right now. So we expect then a proposal by Q3 of this year. And then we have Melvin Poole, which is part of the consultation. So should Melvin Poole be integrated into the safeguards? From our perspective, absolutely yes, in order to reduce circumvention options in the safeguards that we today see. And then also the last two points, which are more of a strict enforcement of existing TBI rules, both the threat of injury procedures as well as the lesser-duty rule. Those are existing TBI rules that should be enforced in a stricter way. However, as we've seen from the past, difficult to implement, so let's see how that then plays out in practice. Carbon motor adjustment mechanism is something we're going to see as of 26. Details regarding the export solution will be expected in Q4, as well as the expanding of the scope and the measurements against circumventions, so all in Q4-25, so heavy on that quarter. and hence a lot of focus from our end and Salzgitter, but the entire industry to get things right here and to also lobby the Commission early on to get also actionable, an actual set of rules for the SEBA. Last but not least, the energy bureaucracy key markets. It's good to see that the Sina Metals Action Plan includes those elements as well. Some of them are very known to us. If you take the label for CO2 intensity of a product, this is covered through our LESS label, and we're now in discussions with the Commission to integrate that into their view on the labeling. The lower grid fees is something that is discussed in Germany and should be included in the upcoming budget and hence we will see how that plays out for us in terms of cost reduction as of 26. Then scrap export is a reciprocity element that the EU is discussing there with other and then the reform of the research fund is just making available 1.5 billion euros that are still part in that research fund and have not been sort of called off and make them usable for the transformation. So you see this steel and metals action plan has a lot of elements that will and can support the steel industry going forward and can also address some of the challenges that we have here as an industry and also, of course, as Stahlskette. So how do we then approach the entire situation? As you recall, we have this holistic approach where we look at both growth, but also performance initiatives and performance measures. Looking at the growth to start with, I will not go through all of them. I think the ones in bold are the ones that have changed since we talked you through that last time. We have further increased partnerships around the green steel products Zalkos, especially on the commercial vehicle side. We have closed loop agreements with OEMs, but also with the construction industry first, and then we have construction industry on that end. And we are also increasing our activities on the commercial recycling of slag, hence making slag really a product, or the different types of slag a product and a revenue stream out of that going forward. On the seed processing side, we have been very vocal about the approval on the German Bundeswehr for Secure 500. Further approvals are expected in the second half of this year. They should come in slightly quicker than the first one, given that we are basically basing them on the existing approval. So we should be able to further perform here. Trading, interesting to see that Middle East is interested in green steel and international trading. Our trading house is expanding the trades for green steel in the Middle East, both on material but also third-party material. Same goes for scrap. Scrap becomes more and more relevant also on the trading side. Africa, Southeast Asia is here the key market. Heavy plate, there's high interest in heavy plate, high quality heavy plates. in and to Asia, interesting enough. Also, Asia is interested to import high-quality heavy plates from Germany, so supporting there. And on technology, I'll talk you through PLUSMAX and the successes we have there. I'll not go further into that unless you have a question in the Q&A. Now, looking at the initiatives and performance measures, let me start then with the portfolio. I talked about the shoe machinery. The sale is signed, has been signed last week with NMP. So the transfer is supposed to happen this year, so the closing is supposed to happen now in Q3. So next step in our portfolio management, so continuous work there. On the structure, We talked about the restructuring of the trading units and you have seen the numbers, so restructuring is progressing well. A social plan has been signed and is executed as we speak. We are reducing a triple-digit number of employees in the trading unit, and this is all going through quite smoothly, which I think is a success in the way we do restructuring in Salzgitter and here in particular. Same goes for the steel processing unit, restructuring ongoing on the NPT, the precision tubes group, which is one. the closure of our Helmond sites in the Netherlands, and we will sort of reshuffle the volume that has been processed on Helmond to other sites. And we're also talking here roughly 70 FTEs that will be reduced, as well as further focus on the Mexican site, where we also are progressing well in order to get performance up here. So initial success on those restructuring measures. Now talking performance in the economics measures, I hand over to you, Birgit, to guide us through here.

Sure. Thank you, Gunnar. Thanks. A warm welcome also from me to you out there. Pleasure to be here with you again today. So looking at performance, that is really a topic that is going quite well. As you know, as you are aware, we have expanded our performance program from the original performance 2026 program to a new program, a large program, performance 2028. And by this, we doubled our ambition coming from 250 million euros of savings to 500 million euros of total cost savings until 2028. And this year we have already realized 48 million euros out of the target 97. I will show you this in the next slide. That is our target for this year. So that is running precisely on track, which is really good. And as you have seen, we really need also these contributions. And next to the performance program, we are, of course, also focusing on cash measures, really tightly looking at investments, tightly looking at budgets and spendings, of course, and also tightly looking at our working capital management. And we will have a look at this also in the upcoming slides. So here some more details on our performance program 28. You find here again on the right side the 48 million euros I have mentioned already, which we have realized in the first six months. You see right of that the target of 97, so we are here perfectly online to realize this target. and we are very confident that we will be able to make it and we are targeting for 2026 an even higher amount and we are right now busy also caring already about the measures for next year. Also good to see the 48 million Euro in the first half of the year are already three quarter of what we have achieved last year for the total year. So really you can see that we are really expanding here and that we are also able to deliver here. So coming to the KPIs, as Gunnar has said already, we did not expect a pickup of the economy in the first half of the year. And in addition, we are also facing quite some price pressure in the steel segments, and we also have the deconsolidation of the MST group. And all this is summing up in our sales of 4.665 million euro, which is 11% below previous year. And if you take out the deconsolidation of the MST, it is 11%. It is 8% below previous year, and the main decrease is coming from the trade area here. And as a result, of course, EBITDA comes down. We realized €116.8 million in the first six months. Our earnings include, as shown, the positive contributions from our cost-saving program from our restructuring activities, especially trade, and from a sustainably strong performing technology segment, and from our Aruba shares. Mona has mentioned the more than 70 million euros here as well. However, we had to digest 80 million euros from the reporting date valuation of derivative positions. And in addition, we deferred 10 million euros impairment risk from planned portfolio streamlining. This means the earnings from our business activities plus our lobes were balanced. Our cash flow from operating activities was significantly stronger than last year. As you can see here, we reached 81 million euros. And this was strongly supported by the reduction in working capital. The figure you can also find here, almost 2.5 billion Euro compared to 3 billion Euro one year before. And also quite good to see is our net financial debt, not as an absolute figure, but concerning the development, because it was a lot better than originally anticipated, and despite ZIPO's investments, it was only slightly higher than one year ago. So what do we expect for the second half of the year? We expect that our financial debt will be around minus 1.2 billion Euro, which is significantly below our last prognosis we shared with you in our last meeting here, which was around minus 1.5 billion Euro. We expect only a very cautious economic recovery. And we expect also having a positive impact, reduced costs for raw materials, especially for those purchased in U.S. dollar. And we, of course, expect the other half of our Performance 28 cost-saving program, technology with a very strong fourth quarter, and, of course, ongoing Arubus contributions. All what we have discussed right now, we of course can also see here in our profit and loss statement, the sales decreased of minus 578 million euros, and due to changes in finished goods and work in progress, a decrease in total in the operating performance of minus 833.8 million euros. And we see here also, NICE, almost 85% of the operating performance can be compensated by the material cost reduction of minus 740 million Euro. And the changes in other operating income and expenses are almost balanced. They are mainly influenced here by exchange rate impacts and by reduced administration costs as well. Looking at our balance sheets, our non-current assets increased mainly in the area of the intangible assets, property, plant, and equipment by €51 million, and also investments accounted for using the equity methods, this is mainly our rubles, by €53.6 million. Looking at our current assets, the inventories decreased nicely by more than €220 million whilst we see the upswing in the trade receivables compared to the year-end closing. Assets held for sale here are, as Gunnar has mentioned, our DESNA show machine entity. So we are putting this now into this line here with 47.7 million Euro. And you see that our cash was reduced by 237 million Euro for investing activities. Looking at the other side of the balance sheet, we see here a decrease in the equity. This is in line with the reduced earnings. So the equity reduced here by 97 million euros. Looking at the non-current liabilities, we see here an overall increase by 90.8 million euros, and whilst provisions for pensions decreased due to a higher interest rate by 100 million euros, we see that the financial liabilities increased by 168.7 million euros. Looking at current liabilities, we see an overall decrease by 149.7 million euros, mainly driven by reduced financial liabilities of minus 201.9 million euros, and also trade payables, which were reduced by 122.8 million euros. And these two positions were partially compensated and other liabilities, which increased €112.8 million. Looking at our cash flow statement, we started at the beginning of the year with around €1 billion, and I have already presented to you the €81 million cash from operating activities that we can add up here. And then we spent for investing activities 243.5 million euro. And cash from financing cost us 47.3 million euro. So we have a cash and cash equivalence at the end of the first half of the year of 765 million euros, which is better than one year before. And that amount is 184.4 million euros. Working capital, you see here the quarterly development and the comparison compared to one year ago with a nice decrease of more than half a billion Euro down to around 2.5 billion Euro. And of course, here are reflected lower prices for raw materials and for steel products as well as our really strong focus on managing our working capital. Investments you see that we have spent in the first half of this year 241 million Euro. Our budget is also quite high for this year, however a little lower than last year. And it looks like, it may look like we will not be able to reach almost the level of last year. However, when we analyze last year, we see that the ratio between the first and the second half of the year were almost equally. So there is for us no need due to the figure of the first half to cut down on the total years figure. And with this, I hand over to you, Golan.

Well, thank you very much, Birgit. Let me just quickly conclude here and then open up for your questions. So first half has been a difficult one. Recovery has, as expected, not happened. And we see perhaps slight recovery, at least I'm looking at steel prices, as I've shown to you for the second half, but very limited recovery. So it will remain a difficult year. We counter that difficult year with the holistic approach that we both presented to you and updated you on. Maybe perhaps put it in three main messages. First of all, the cost and performance program continues rigorously, so we are focusing on really getting our performance stabilized and further improved, as well as the cost level down, including working capital, as Birgit has shown to you. Secondly, we're continuing our decarbonization program, so Zarcos I is not in question, however, We do this in a practical and a reliable and a rational way, embracing the outer world, embracing the current global and European market and regulatory developments. Hence, we make use of the modularity of Salkos, which allows us to take investment decisions if and when market conditions and the overall framework conditions are right. So, take the right decisions at the right time, I think is the term here. So, really making use of that modularity going forward. I think that's one of the very strong elements of the Sarkoz program as such. And thirdly, a very clear message to policymakers, both in Berlin and in Brussels, that they define steel as a strategic industry for Europe, ensuring Europe's resilience. So if that is their case, then I think this is underpinned with both the Steel and Metals Action Plan, as well as with the coalition agreement in Germany, then they also need to quickly create the environment in which the steel industry is able to proceed and to compete on equal terms with all our competitors around the globe. So making the level playing field a reality is what policymakers have to do and have to do quickly in order to really sort of underpin their own view on the steel industry. So that is what policymakers have to do, but again, I would like to emphasize we do what we need to do on our performance, on our cash management, on our cost management, as well as on the investments and transformation activities going forward. With that, I'd like to close and open up for questions. Thank you.

Thank you very much. We start with the first questions from Tristan, please.

Yes, can you hear me? Yeah, perfectly. all right perfect thank you for taking my questions uh the first one can you explain a little bit the uh the 80 million impact from derivative positions where it's come from uh is that just in ip or is that also hitting other divisions uh and also just a quick one on the trading division i think you mentioned a positive one off in q2 so i mean that was a strong performance should we expect trading to continue in this current earnings level into q3 q4 That's my first question, and then I have another.

Yeah, thank you, Tristan. So looking at our valuation of the derivatives and the minus 80 million euro, we are doing, as most companies do, of course, the major hedging on the AG level. and not down in the divisions. And the major portion is coming from the overall hedging on the AG level, and we are doing this hedging activities here mainly because of our purchase of raw materials in U.S. dollars. However, one-third of the derivatives is organized in the trading business, and that is very short-term because that is always in line with the deals trading is doing. So, yeah, let's put it this way. Two-thirds are for the overall company, mainly related to save the material cost, and one-third of the 18 million is related to trade. That was your first question. And the second question... On trading whether the performance were... On trading the performance. Ah, and thanks for putting that question into me, because I forgot to mention one thing when I showed the performance 28 program results and targets. And here I have to underline that this is not including restructuring activities. We keep restructuring completely outside the performance program. So you have seen only a minor figure for trade and you have to add a little more than 6 million euros sustainable improvement in trading coming from restructuring activities. And this is the start, and the contribution from restructuring will be increased over time even more. I hope I could answer your two questions, Tristan.

Yes, so just a quick follow-up. The 18 million negative valuation effect, so you're saying one-third is in trading?

Yes, roughly one-third, yes.

All right. And then my second question is not an easy question, but really, sorry, what is holding back UCL production performance in Q2? I mean, all peers we've looked at, you know, have shown improvement quarter on quarter and HRC went up to 650 euro at some point. So you must have seen some positive effects. So is that an issue of mix? Is that an issue of cost? Is that something else? And also when you look at you know, your outlook for that division into Q3, Q4. Can you discuss a little bit the trajectory in terms of shipments? I think you also mentioned lower raw material costs, so how should we think about the second half?

Thank you. If I may, for the first half, looking at steel production, you might recall we had operational issues with a fire in the in the mill. So that was certainly something that threw performance back. And secondly, also the major overall of the blast furnace C, where sort of production has come down. So I think those are effects that we have seen in the first half. We shouldn't, we're certainly not planning for them in the second half. So performance-wise, we should We should be back on track for the second half of this year. Yeah, I think that's how we look at our internal performance. When it comes to prices, price developments, I just mentioned that to a sense. So we see a certain pickup on prices due to political or to expectation of political developments. The carbon board adjustment mechanism kicking in in 26. And first shipments or reduce the reduction of shipments given that the risk of being hit by the carbon water adjustment mechanism. That price is slightly up and certainly something we want to also take part in.

Okay. And just maybe your last one. Would you expect a big bounce in imports into September, October as distributors, buyers kind of try to move ahead of the CBAM and the safeguards? And is that a risk that you baked into your new guidance?

We don't see that as a risk abating in our guidance, no. We, of course, observe how especially traders from Asia are acting right now, but we don't see this as a risk in our guidance, no.

Alright, thanks a lot. Thank you. Okay, thanks. Next questions are coming from Boris Boudin in Kepler.

You have to unmute yourself before.

Boris, please unmute your microphone.

Sorry, it was blocked, so I hope you can hear me now. Yes, hi Boris. Perfect, hi. A couple of questions, maybe. On trade policy, can you share with us what you, what you, the ideal scenario would be for you? What you have been asking when lobbying with the European Union and the German government? What are the chances for your request to be successfully implemented? What do you expect the outcome to be, basically? And a second question would be on disposals. You've made the sale of KDS. Where do you see it now in terms of further potential disposals? I think of Orbi Steak and KHS. That has been remote to be implemented. being discussed by the board. And just to follow up on Tristan's question on the FX impact, do you expect that FX impact to reverse at some point based on current prices you see on the market? Thank you.

Yeah, Boris, let me take the first two ones and then hand over to Birgit. So trade policy, what the ideal scenario would be, of course, is a clear acknowledgement that the inflow into Europe is unhealthy. We have seen a doubling of imports over the last ten years, so ideal scenario would be that we get back to a to trade inflows as we have seen them in 2015-16, which is a cut of 50% compared to today. So that is certainly what we lobby the Commission with. However, whether this is then something that the Commission will follow, that is to be seen. I think the sentiment, the general political sentiment in Brussels is moving into our favor. However, let's see what the rules ultimately look like. So, as I said in my conclusion statement, what we want is a level playing field to do business with our customers like our competitors from outside Europe. can do and at the same cost level that they can produce. And we see quite some disadvantages in Europe. Some of them are structural and we can handle them with improved performance. Some of them are regulatory and they need to be conquered and that's what we're asking for. On KDS of further disposal, as we have seen and said now since quite some time back, we have a much more active portfolio management going forward. So you should not expect KDS being the last portfolio company we are looking at in terms of portfolio management. But no news on our RUBIS and KHS. As you have seen, also presented by Birgit, KHS is delivering extraordinary results right now, very good results. We're very happy with the performance and the performance improvement that KHS has done over the last three, four years, and certainly something we are happy with as it stands. No further news on those two companies as of now. Well, that ethics for you.

Yeah, challenging topic. At the end of the quarter, the exchange rate, euros to US dollar, listed at 1.08. And I guess we were all surprised about that development in the first months of the year. And then we thought that that's already quite impressive. However, at the end of the second quarter, the exchange rate climbed up to 1.18. for what is to be expected for the upcoming months. There are some banks and institutes who are rather conservative, having a prognosis of 1.10. And the majority, however, is expecting this rate to stay at 1.18. And some even think that over the course of the beginning of next year, it may even further deteriorate towards 1.20. So it's quite difficult to really predict what this will bring, what the future will bring here. However, as you may very well imagine, we are constantly adapting our hedging activities according to the actual rate and to what is going to be expected. So that's all I can tell you about the expectations concerning the exchange rate.

Okay, so any move in the direction of 1.10 would be a positive on your H2 results, while any stability around the 1.18 or something would be something natural.

Yeah, right. And you have seen the exchange rate at the end of June was 118. So exactly like you summarized it. Against the 118, there will be the deviations. And, of course, don't forget also, of course, the volume, the hedged volume also has a major impact. That's also clear here.

Thank you. All right. Can we move on to Bastian, please?

Hi, good morning.

Hopefully you can hear me. Perfect, good morning all. So my first question is just coming up briefly on the effect of the relining. Could you maybe just share with us how much in absolute numbers the relining has been impacting your numbers? You've already been carving out the, I guess the 80 million of FX, which I think was for the first half, right? So I guess the effect for the second quarter was probably a little bit smaller, but if you could give us the effect of the relining, that would be great. That's my first question.

What do you mean by relining?

I'm happy to, but what effect are you looking at in terms of cost for the relining?

Yeah, exactly. I guess basically, if you would more or less strip that out, how would the steel business have performed in the second quarter? I guess usually there can be anywhere between typically, I don't know, I would say like 10 to 70 million. I don't think it's been at the larger end, but if you could give us maybe the overall impact on the earnings versus where you would have been if you wouldn't have had that effect.

What I can share with you is the capex, which is below 10 million euros for all the work that has been done on C. We don't have the numbers at hand here, sort of what that would mean in terms of if C would have performed as usually, Bastian. By the way, difficult to say because there's a market element in there as well.

Yeah, okay. Okay, fair enough. Okay, no problems. Then, just secondly on the outlook. So, I guess there's been a couple of, I would say, one-off items in the second quarter. Now, if we strip those out, I guess, particularly the FX effect, let's assume that's just going to be flat, it's going to bring you pretty much close to, I guess, break-even EBITDA. I think the underlying market doesn't really seem like it's going to improve, at least not in the third quarter, maybe not in the fourth quarter either. So what are the main drivers here? And do you need anything else other than a fix for you to play out in your favor to hit your guidance run rate?

So let me take this question. I will start and Gunnar, of course, will add. So when I presented the KPIs, I gave a short outlook for the second half of the year. So first of all, FX, you're right, like if the exchange rate will not exceed 118 and also based on volume, the development will be accordingly. And what do we expect for the second half? Let me repeat. We expect only a very cautious economic recovery, reduced cost for materials I have mentioned, yeah, that we purchase, and especially in U.S. dollars. And we expect technology with a strong fourth quarter. That's seasonally every year the case. And we expect good contributions from the AOBIS participation to be continued. Yeah, so... So all of these positive impacts and not an impact coming from the derivatives amounting again to 80 million euro, all this led us to put out the guidance from minus 100 to zero because before when we had the guidance open, even up to plus 100 million euro, we were expecting that the recovery of the economy would quick up a little bit more than we are seeing it right now.

Yeah, and then also some of the regulatory developments are clicking in later than expected. You might recall the discussion in Germany on the electricity prices, for example, and grid fees, they only now will click in in 26, and this will not help us in 25, as one of the examples, right?

Okay, understood. Great. And then just following up on the efficiency program, of course, the 500 million is a large number. It seems like, you know, basically having a bit more detail in terms of how you want to get to those numbers. What's the overall headcount and FTE reduction which you're aiming for until 2028? Is there already a number to it?

Look, the way we look at this improvement program is that we want to improve improve our efficiency and the cost level as such. Of course, FTEs and FTE reduction is a part of it. And I mentioned the number for the restructuring of trading, which is a triple-digit FTE number. However, it's not that we just lay out a number and then see how we fulfill that number, but we're coming from a bottom-up approach. How can we further improve? We have set a target, a financial target, not an FTE target. Hence, there will be FTE reduction. Those who will discuss with Works Council and get to agreements and then we will communicate those. But the overall target is to reach the 500 million euros and not to reach a certain FTE target. So we are a bit different here in the approach compared to some of our competitors. However, I think especially again mentioning trading, the results is as such positive as we sort of get to the measures first, then define what is the FTE impact, then negotiate and then communicate.

Okay, understood. Great. Then a very last question just on the recent announcement with regards to your certification for defense grades. And I guess the shares reacted obviously quite strongly to that. So last quarter you mentioned that you have established an internal task force for defense. Could you maybe share with us at least a broad corridor with absolute numbers or percentage numbers on how much sales potential in defense you would see, say, in the next three to five years? Is this something which can really make a material financial difference for you?

Well, first of all, yes, the task force is up and running and is very successful in the discussions with potential customers. So we're sort of really picking up on the interaction with the defense space as such. Given that we are sort of relative newcomers in that area, we had some activities with Universal, which is part of trading. however limited, so this interaction has intensified a lot and is very positive. It is still very difficult in early days to really look at the overall potential that this new investment cycle in the defense industry will give. But let me try to put it the other way around. We have a facility in Ilsenburg producing those plates. This is a capacity, if you take those plates, of roughly 150,000 tons a year. And ambition level should be that up to 50% of this capacity should be filled over time, should be filled by defense products or by products that are alike. secure 500, so also from a margin perspective alike. So that is what we see we should be able to contribute to the overall market. And then let's see sort of how the ramp up is, how successful we are with the ramp up. But this is at least something we could envisage to target at for the upcoming years. Secondly, perhaps coming back to the task force, we will now sort of transform a task force, which is more project-based, into a more line organization to make sure that also going forward we will have the right interaction with our customers also on that level.

Okay, very helpful. Thank you. Thank you, Bastian.

All right, next question comes from Ellen Gabriel. Please unmute yourself.

Thank you. Thank you for taking my question. Just my question is on HKM. Do you have any latest updates over the last quarter or last few months based on your discussions with your JV partners? We read that your key JV partner has terminated their slab agreement as of 2030. How would that impact your business? That's one. And then two, you may need to inject some cash into HKM for restructuring or potential closure. Can you give us a range of outcomes of that investment in HKM? Thank you.

Thank you, Alan. First of all, we are in constant discussions with both partners, Valorek and ThyssenKrupp Steel. By the way, ThyssenKrupp has terminated the agreement and it will last until 2032. Not 2030, but 2032. So they are obliged to offtake slabs from HTM until 2032, unless we jointly decide differently where As we have always said, we're exploring our options and we will take a decision, an informed decision in Q3 how to move forward with HKM. There are different options. We can jointly come to an agreement to close HKM and then you have different scenarios. So giving your cash figures on that is difficult, because it also will depend when closure will happen and how we will do that. I think it is fair to say it's going to be a triple digits million number total cash for a closure. If we would come to a view of further continuing HKM together with TKSE, given that they are still partners in there, and also Vitalik, who also has a delivery or an offtake obligation in 2018. Certainly cash profile would be very different, potentially much lower. But then you also have to have an idea what to do with HTM afterwards. So this is exactly what we're analyzing as we have said all the way through, and we'll take decisions in Q3, but too early to say right now.

Thank you. And a follow-up on HKM. Are you able to share the P&L and the cash flow statement impact of HKM during the first half or the second quarter so that we can see how the business is impacting your group? Thank you.

So we do not consolidate HKM in our figures. The interlink between HKM and us are the transfer prices that we are paying for the SLATs. So there is no cash injection from our side beyond paying the bills for the sleds that are delivered to us. And if at the end of the year the costs are higher or lower than what has been in the bills to us, then there is an adjustment payment made. That is the way we are linking the two companies together.

Okay. Thank you. Very clear. Thank you.

Okay. Christian, then it's up to you. And please also unmute yourself. Yeah.

Take some time always. I have three questions, one on heavy plate again. So normally strong customers are wind, pipeline industry and so on and so forth. So you mentioned it was very weak. Do you see any kind of comeback of orders there or do you expect some comeback of orders there? And where do you currently see the main weakness in the orders when it comes to heavy plates? This is the first question. I'll take them one by one. Thank you.

Okay, you're absolutely right. The wind industry, pipeline industry is a large partaker of heavy plates plus the yellow goods. All three have been very sort of reluctant and are waiting for sort of how the overall economy is developing. Wind, you have seen that even auctions on the offshore wind side in Germany have been called off due to lack of interest. So that, of course, puts the wind industry or the offtake from the wind industry further down. I think we're trying to conquer that at least. You might have thought of that as well, that we are offering our green plates also for the wind industry, but it is a slow pickup that we see there really waiting with the investments. Same goes for pipelines. The pipeline of projects when it comes to pipelines is quite filled. So there are a lot of projects out in the market. However, decision-making of those that are to be built or that want to build pipelines is relatively slow and hesitant. So also here we see that the market in principle is there, but the decision-making Also, of course, given that some of the projects are U.S. projects, hence they are waiting for sort of the whole trade conflict to settle at some point to make reasonable decisions there as well. And the yellow goods, given that the construction industry as such has been weak, also, of course, yellow good industry has been very hesitant to further invest, hence also low demand there. Good to read at least this morning in the German Handelsblatt that the construction market and the sale of houses and rents are going up. That will certainly also then over time impact the construction market and the yellow goods market. But to be seen, Christian, to be seen.

Thank you for that. So this means when we take your description of the entire market currency is that any new order you are taking is on a very low margin, is that right? And so there's some kind of a time lag before we see some kind of a margin recovery?

Well, the overall price level for heavy plate, I mentioned that in my presentation, the overall price level is low and that of course also hits us.

okay thank you then on trading as a second part was especially when it comes to overall sales uh quite strong on the same level like we have seen 24 almost so can you give us some kind of an indication was that on volume or prices our prices are not improving so it should have been volume and can we expect the same volume going forward so that we we'll see maybe some kind of the same development like we have seen in the second half of 24 and the second half of 25 for the trading business?

Well, that is difficult to predict these days what the volumes will be. I think what you see, Kirsten, is first of all that our cost reduction program is really sort of hitting the ground and improving our cost position overall. Also compared to the second half of last year, given that the major cost reduction program only started in Q1 this year, especially when it comes to the headcount reduction. And also it will be important to understand and to see how the international trading will develop for the second half. If the whole trade discussion settles, I think then also the confidence of our trading partners will increase and allow for more business on the international trading. Volumes and prices for domestic, local trading, our sort of is still low.

Okay. That's difficult to predict, of course. Going to net debt dimensions, it will come in below 1.5 billion. Is the sale of the shoe machines already included or would that give some kind of an additional

tailwind for that and so how far do you expect can it come down to 1.2 1.3 billion yeah i mentioned the figures in the beginning of my talk that is and we expected around 1.2 billion euro and we have the decimal shoe machines included in our cash forecast okay

and last question um so there is one decimal company left which makes no sense in this kind of portfolio do you also expect if you are selling it some kind of a positive impact or more on the negative side but first of all there is no decision taken and as i also mentioned to towards boris and

We are reviewing the portfolio constantly and yes, of course, we're also looking at KDE, but no decision taken. Hence, I can also not sort of properly answer your question, so we're not in a process. We don't have any price points and no decision taken yet. Okay.

Maybe one additional. Have you heard something else from your main investors so far after the AGM? So how are the talks ongoing with these guys?

Well, of course, we are in constant dialogue with our shareholders, including our two main shareholders, and we have very self-constructive talks when it comes to the operational performance of the company what to do and also the strategic further developments. So, of course, we talk and we are very intensively discussing the future of this company jointly.

And they are really supporting also the entire Salcos way so far, I would suppose.

Absolutely. All shareholders that I talked with are fully supportive when it comes to Xarcus Phase 1 and implementing it as planned. And as I mentioned, I think the beauty of Xarcus is the modularity and then we will take joint decisions when is the right time to then invest into Xarcus in the next Xarcus phase. Okay.

Thank you very much and all the best.

As well to you, Christian. Thanks. Thank you, Christian. Next question comes from Dominic. Okay, please.

Thank you, guys. Just one other question on cash flow. The guidance that you've given on net debt is really helpful. At the end of Q1, you talked about 800 million euros of capex for 2025. So you're still comfortable that 800 is the number? Or do you think there's some potential maybe downside given the run rate in H1? And then a similar question just on working capital. Could you just maybe help us with the bridge for working capital for Q3, Q4? Thank you.

Okay, so first CARPEX, we have seen different, if not different, similar spending behavior last year when it comes to CARPEX, that the spending in the first half of the year was significantly underproportional. and then towards the second half of the year we could still make it. Please keep in mind that especially our Zylkos investments are related to really big numbers. So that means if there is a shift like in one of these numbers, there could always be a bigger spill over to the next year. But that is only then a matter of time. That is not a matter of spending or not spending. And of course, our divisions and we ourselves, we are looking at all the other spendings as very careful, as I said. However, at this point in time, we think that we will still reach slightly above 800 million euros in capex by the end of the year. And if not, we expect that it will be then, if the figure would be like remarkably, how to say, less, then it would be rather a spillover to the next year than a sustainable decrease. And the second question was?

On cash flow. On cash flow. Working capital.

Working capital. You're referring to slide number?

Q3 and Q4.

Can we go back to the slide? Q3 and Q4. We have several impacts here, for sure, since it's also year-end closing, also devaluation or re-evaluation of inventories, for example. And as well, of course, a tight working capital management and our ambition, especially in the inventory level, but also in accounts receivables always is to try to move towards the optimum, which you mainly achieve towards the end of the year for the year-end closing, so we have managed by the second quarter of this year to be very close to the low year-end closing of the fourth quarter of last year. If your question also goes forward, to the end of this year, then I can tell you that our ambition is to have further reductions from working capital management compared to the second quarter of this year.

Thank you. Thanks very much. Thank you. So next question from Maxim, please.

Good morning. Can you hear me? Yes. Good. So just one question left on my side. So it's a general question around tariffs. So there was a non-paper initiative towards the commission from France, but supported by a majority of European states published last July asking for a series of measures providing for drastic cuts in import market share to Europe. just 15% for flats, even down to 5% for long products. And curiously enough, it was not supported by Germany. So why do you think Germany is standing against the measure or at least not supporting it? And don't you feel your major challenge is rather convincing the German government rather than the European Union to put in place better trade defence?

But first of all, we absolutely embrace the non-paper that has been issued by France, and yes, there is a lot of support for that non-paper from other European countries, which is good. It still has not been adopted in Brussels, so we still have some work to be done there as well. However, your comment is right. Germany has not officially supported that non-paper. However, there is a lot of support for elements of that paper, also from the German government. It is more of a sort of formal and regulatory reason why they don't embrace the full non-paper, but rather elements of it, which has to do with a different view on WTO rules than the French government has. So it is not that the German government does not support the content. They absolutely support the content. It is more, at least this is sort of what I get to know from talking to to policymakers in Berlin. It is rather the different view on WTO conformity and rules that brings the German government to not officially embrace that non-paper in its totality.

Okay, so you don't feel they are favoring the interests of downstream consumers such as carmakers rather than your interest and those of the filmmaking industry at large? This is not the...

Well, of course, as France, Germany has to balance the interests of different important industries and certainly car manufacturing and all the industries around are an important industry for Germany. However, it is also notably new that even other industries like the VDMA is now very clearly also supporting elements of what the non-paper includes when it comes to tariffs and to import barriers for not only steel but also steel-intensive goods. So you see that there is also a shift, an industrial shift in Germany with a view on how to look upon the elements of that non-paper.

Okay, that's good. Thank you. Thank you, Maxim.

Okay, then what I see from here, the last question from Milos, please.

Just one question. What is the current level of committed annual credit lines and where are their maturities?

use credit lines, I can tell you that our major credit line from our syndicated loan for the cash side as of today is undrawn. The maturity of the syndicated loan is mid of 2029 and we are expecting the final banks these days to give us the feedback on the last prolongation until mid of 2030.

Just one follow-up question, please. What is the volume of the syndicated facility?

It's altogether, it's slightly above €1 billion. And cash-wise, because we have the Avara side and we have the cash side, it's slightly below €700 million.

Thank you. Okay. If there are no further questions, then we'd like to thank you for your interest, for your participation. And okay, I see a question from Sebastian, please.

Yeah, hi, good morning. Just a quick one on the KHS technology business. You've got a very strong order in tech this quarter. Can you elaborate a little bit more? Is it one specific big order or is like a broad improvement in the demand and the vibe? Thanks.

Yeah, Sebastian, what I can disclose is it is predominantly on our Plus Max technology. So, as I mentioned earlier in the call, Plus Max is really taking off. So we are able to convince our customers that TASMAX is future technology for them, hence strong order intake on that technology.

Thank you.

Thank you for your participation. If there are any questions after the conference, please do not hesitate to call us. Otherwise, we talk to you in November at the latest, I would guess.

Thank you. Stay safe. Thank you.

Bye. Bye.