Salzgitter Ag Akt Shs

Hello and welcome to the Sal's Gitter nine-month results conference call. For the first part of the call, participant will be in listen-only mode. During the question and answer session, participants will be able to ask questions by dialing pound key five on their telephone keypad. I would now like to hand the call over to Birgit Petrovsky, CFO of Sal's Gitter AG and Marcus Heidler, Head of Investor Relations. Please go ahead.

Yes, good morning, ladies and gentlemen. Welcome to our nine-month conference call. We have quite some nice information to deliver to you. Since we last met in August, a lot has happened in our industry. The most impactful news is definitely the new trade defense instrument proposed by the EU Commission just a few weeks ago. If it were to be implemented as presented, It would bring imports back to levels from a decade ago and thus strengthen the long-term viability of the steel production in the EU. International trade uncertainty has persisted over the summer and in some areas new trade turmoil arose. Last Thursday, there was a steel summit in Berlin to discuss ways to improve the competitiveness of steel production in Germany. it is very encouraging that there was broad agreement between federal government, industry, and unions on three main areas that have to be addressed quickly. First, trade protection. Second, an industrial electricity price. And third, green lead markets. We are particularly pleased With that now, the German federal government also supports the trade defense measures recently proposed by the EU Commission. What has not changed is that general economic conditions have hardly improved since the beginning of the year. Against this background, let us look at the results of the first nine months of 2025. Unsurprisingly, sales are markedly lower than the previous year's level. There are three reasons for this. First, following the divestment of Salzgitter-Manessmann Stainless Tubes Group, its sales are no longer included in the current figures. This stands for roughly 240 million euros. Second, The average selling prices are still lower than last year. And third, our trading business unit recorded lower volumes and sales, also in part due to the restructuring of this operation. Despite the negative nine-month pre-tax result, the performance in the first nine months of 2025 can be considered however positive overall in light of the effectiveness of the programs. This is demonstrated by the slightly positive quarterly pre-tax results achieved. By the way, the first since the first quarter of 2024. In addition to the Arubus contribution, and a steady strong performance of our KHS group, the main drivers for this encouraging development were the results of the Earnings Improvement Program. The Trade and Business Unit was able to consolidate the turnaround initiated in the second quarter, thanks to cost adjustments and restructuring measures. We are also pleased to see that the steel production segment achieved a balanced quarterly result. The net financial position was virtually unchanged versus the end of the first half and even 78 million euro better than one year ago. This was mainly due to the release of working capital and the restrictive approval of investments. We therefore anticipate now to arrive at a net financial debt of slightly above €1 billion at year-end. This is a significant improvement against our initial estimates from the beginning of the year and even slightly better what we communicated last quarter. This reflects the effectiveness of our self-help measures. Concerning financing, on October 2022, we have successfully placed a 500 million euro bond exchangeable into shares of Aurobis AG to diversify our financing structure. As you have seen from today's earnings release, we have narrowed previously guided ranges for 2025. We now guide for sales slightly above 9 billion euro, an EBITDA of 300 to 350 million euro, and a pre-tax result between minus 100 and minus 50 million euro. And this exactly in line with your forecast. I am now looking forward to your questions.

Ladies and gentlemen, if you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Tristan Gresser from BNP Paribas Exane. Please go ahead.

Yes, hi, good morning, and thank you for taking my questions. I have two. The first one is on the Arubis convertible. If you can talk a little bit about the strategy behind the move, and it does feel like you're trying to monetize that stake, but now that you have done that particular offering, should we consider that, okay, Arubis is done, nothing to see there for the coming years, or would you still be looking at it as a way to monetize it further?

Tristan, you said you had two questions?

Yes, so if you want my second question, then the second question will be on the free cash flow. Look, I think you got it for net debt, but given that we're only going to hear from you for the guidance next year in late March, could you give us a sense already of your spending expectation for next year, you know, any sense of gross capex, but also how much subsidy do you expect? And lastly, tied to that question, you put on hold the cycles phase two. What do you need to see to be comfortable moving forward with the second phase? And would you say there is a high probability of you going for the DRI plant, or do you feel like it's likely just going to be an electric arch furnace?

Thank you.

Okay, thank you Tristan for asking your questions and for being the first one this morning. Concerning the Arubus convertible, first of all, we still believe that Arubus is a valuable part of our business. As we have seen also in the first nine months and also in the third quarter, it's bringing valuable EBITDA to the table. So it's not our strategy to step out of our rubles. However, that was a very good amount. Let's put it this way. When comparing all possible options we are having to further finance ourselves and looking at all those options, this was the best option to organize cash flow. And that is also a means that was taken already in 2010 for the years 2010 until 2017. So that in addition is also a financial instrument the company is used to. And it was very well perceived by the market. We can say and it organized and I would call it a recognizable amount of cash. So that were the main drivers why we decided to go this way. Second, when it comes to free cash flow and CARPEX spending for next year. So next year, we expect to be the last peak spending year concerning Zylkos phase one. And we are expecting to spend net around plus, minus, 10, 15%, 500 million Euro here for Zycos. So it will be the last peak spending year for Zycos phase one until that will drop significantly by 2027 and with no further Zycos spending in 2028. And then of course we have the basic spending for the other business as the figures are quite known if you look at them historically. So bringing all this together, we are expecting net financial position next year, which will range between minus 1.5 billion euro and minus 2 billion euro. This is what I can disclose as of today. And the other part of that dipos question is how could phase two look like and what would be like the decision criteria? So let me first underline that our overall strategy remains unchanged. We are still planning to go for the total transformation to green steel. We have now postponed the next steps by three years, and the main levers, they remain unchanged, which are, of course, what are the customer's willing to pay for the green steel? How would the cost of hydrogen develop? And how about the economic environment and the regulatory impacts we are facing? Thinking about phase two, we are rather thinking about an additional electric arc furnace, not so much of an additional DRI. Tristan, I hope I could answer your questions. the way you expected them? Is there anything open?

Yeah, just maybe one follow-up on the net capex. I just want to make sure I have the right numbers. So the net capex for SELCOs for next year, if you could repeat that, and just the net financial debt guidance, would that incorporate the positive impact the potential positive impact from the steel action plan being trade measures, measures for green steel support, et cetera, or that would be a base case without those support measures?

So the net investment for SIACOS 2026, so gross investment minus subsidies, would be around half a billion euro. Next year and concerning the net financial position for next year, it will be most likely developing towards minus 1.5 and minus 2 billion euro by the end of the year. And concerning the impacts of the steel action plan, That will more or less decide about this range of the net financial position to be rather on the left or rather on the right side. As you may be aware from former years, we are right now in the process of finalizing our business planning for next year and getting that through our supervisory board beginning of December. And so we are still evaluating the chances that will occur. that we will be able to realize coming from these measures.

Okay, that's very clear.

Thank you.

Thank you, Tristan.

The next question comes from Boris Bordet from Kepler Shoebrew. Please go ahead.

Good morning. Can you hear me?

Yes, we can hear you. The line is not of the best quality. However, I think we will be able to manage.

Okay. Okay. Sorry about that. The last question is on the measures you mentioned, the new set of measures.

I was wondering what's your... Sorry, Boris. Sorry for interrupting. This we could not grasp at all. Is it better now? Yeah, a lot better, yeah.

Okay, that's my headphones. Sorry. Yes, regarding the segward measures coming next year, first, what are the chances for that to be, in your view, voted in the current state? Or do you see any risk of dilution? And if that is voted in the current state, what would be interesting Getting your view on what's your ability to capture the additional volumes you would be entitled to get or another way to put it is what's your current capacity utilization rate. And the second question will be on HKM. Do you have any further discussions with this group going in one direction that would help us assess what would be the cost of or what is your visibility on the utilization of HKM?

Thank you. So starting with your first question, the safeguard measures would have, of course, two impacts if they become effective. First impact would be an increased price level in the EU. And we have already seen very, very slight improvement on the price side. And of course, as I mentioned in my text earlier, The measures, if they would be effective, would have the potential to reduce the imports to the levels of one decade ago. That means, of course, there would be also quantity impacts. And we believe that according to our market share, we would be benefiting accordingly. So that is what I can disclose concerning this. Concerning capacity utilization rate, We still have capacity in the heavy plates. We still have capacity in the tubes areas, in all areas. We are fully booked normally in our flat steel area. However, if prices rise and new orders would be on the market, we, of course, would adjust our customer and product portfolio accordingly to impact the margin positively. That is how we would react here. And concerning HKM, I have really nothing new to announce. The process is still ongoing and we are still evaluating and deciding about various options that are on the table. So nothing really new compared to our previous meeting. And once we are ready to have something to disclose, we will let you know as soon as that is possible.

Thank you.

Thank you, Boris.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Bastian Sinigowitz from Deutsche Bank. Please go ahead.

Yeah, hi, good morning, and thanks for taking my question. So my first one is on the technology business. So can you maybe give us a quick update on the margin quality in your order book and whether you think you can keep the current decent margin levels also to next year, just in the context of, I guess, also the trade frictions, which at least may be impacting parts of your business. I think so far you still keep doing very well, but can you give us maybe at least an early outlook in this business where your visibility is probably a little bit better than in the shorter term cycle businesses like steel.

Technology business is performing very well also this year and our expectations for next year are not changed. So we do not see any downturn here. If you look also at our order intakes, they are on a very good level. We are very strong this year in selling plus marks, our technology plus marks, especially to the Indian market. The U.S. is rather, I would say, cautious. So once there is more stability, definitely also chances, more chances for us in the U.S. market. So we expect quite a stable performance next year as well.

Okay, great. Thanks for that. Then my next one is actually on your beams business, i.e. long steel. Can you maybe explain how you expect CBAM and then also the new trade defense instrument to impact that business? I guess in flat steel it's pretty well discussed, but what are the dynamics you do expect on the beams business from those two different instruments that would be great?

First of all, beans are not having such a good time right now. We are even conducting short-time work sometimes now in the recent weeks. And I do not expect CBAM and the trade instruments to have a specific impact here. It's quite different compared, as you said, to the flat steel business. However, if the overall market price will develop, of course, we always see that then also the steel prices for beams somehow also develop in line with the other prices. So rather a more indirect impact, how we see these two measures having an impact on our beams business.

Great. Great. Maybe a quick follow-up then on that one. Just with regards to the German infrastructure spending, I guess, BreedBeams is obviously a construction and infrastructure product. Is there anything you can see, even if just very, very early stage, that there is something happening that maybe demand is picking up, or is it just really not visible at this point?

As I said, Bastian, we are even conducting short-time work in some weeks in the beam business right now. And the order intake time frame is a very short time frame, like ranking from four to eight weeks only. And concerning the infrastructure payments, we expect a rather mid-term impact, ranging even up to the years of 28, 29. So in the order books, as we can see, see right now, like for the next four to eight weeks, combined with the rather low order intake situation, we do not yet see a positive impact here.

Okay, very clear. And then maybe just lastly, also on, I guess, on the flat steel business and on plate, you've been lobbying hard to have Russian and Ukrainian slabs also captured by the new trade defense tool. My understanding is that that hasn't actually been captured in the way the, at least the proposal has been made. But can you maybe briefly clarify what the situation is now and whether that loophole can still be fixed and are these also captured by CBAM so that you will still have a positive impact on that instrument?

So the CBAM, of course, also should be applied to Russian slabs. However, Russian slabs are really of super low price and mainly taken from the Italian and Belgian market. And once they would be banned from the European Union, of course, that price breaker would be out of the total price generating process, right? Which should have a positive impact. So let's see whether the EU will be, how to say, will be strict enough on going forward with import restrictions on Russian slabs.

Okay, thank you.

Thank you, Bastian. As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Tomaso Costello from Jefferies. Please go ahead.

Yes. Hi, Tommaso, we can hear you. Tommaso, are you still there?

There are no further questions at this time. I would now like to call back over to Birgit Petrovsky for any closing remarks.

Yeah, before I come to my closing remarks, I wonder, it looks like Tomaso lost the contact to this call, whether Tomaso is back. Tomaso, are you in the line? Do you still want to place a question? Okay, so we have Ulf to ask one more question.

The next question comes from Ulf Hughes from HCAP, as please go ahead.

Hi. Thanks for taking my question. I just had a quick one regarding the emission certificates. I was wondering if you could elaborate on the value of the certificate holdings.

Thank you. Sorry, Ulf. I could not completely understand your question. Can you please ask it again?

You report that you have right north of one billion in financial liabilities, and you say that it's mainly in connection with short-term lending of emissions certificates. Can you elaborate on the asset side of that post? Oh, yeah.

Yeah, yeah, of course. I know I understand too. Thank you for repeating your question. So we have, that's absolutely right. We have short-term liabilities on a portion of our CO2 certificates amounting up to around 1 billion euros. And yeah, the underlying instrument are, as I said, CO2 certificates that we purchased many years ago and that we do not need right now and also not in the upcoming years. Does this answer your question, Ulf?

Yeah, I was wondering about the value as well and where I would possibly find it in the balance sheet.

It's intangible. You will find it intangible as it's for the purchase price.

Okay. And that's approximately one billion?

No, that's a lot lower because the purchase price of the CO2 certificates many years ago was a lot lower than today's market price.

Okay, but if you would mark to mark that today, would that be close to the financial liability or would it be more or less?

No, it would be close to the liability. The liability is according to market prices.

Okay, amazing. Thank you.

Thank you, Ulf.

The next question comes from Boris Borde from Kepler Shoebrew. Please go ahead.

Boris, are you there?

Yeah. Sorry, I was muted. No, I wanted to take advantage of this problem with Tomaso and to ask a follow-up question on the guidance. You have guidance for the current year of minus 100 to minus 50 for the earnings before tax. I was wondering whether that includes any non-recurring charges like impairments or restructuring. Yeah, just goes. Mm-hmm.

Thank you both for asking this question. That guidance does not include any impairments or restructuring charges since we do not see them as of today.

Okay, so that points to a limited result in Q4. I was wondering if there is any... Because in Q3, we've seen a positive impact from FX. You had a very strong negative in H1. Is there any reason to believe there will be some further positive impact, some tailwinds from FX in Q4?

At least tailwinds, I would not say at least no larger big risk compared also to the first half of the year. What is going to happen in Q4? In Q4, we seasonally have a week December, nothing really new. And also seasonally in our flat steel area, we are having a higher maintenance impact. on the hot rolling mill. However, this will not have a negative impact on the sales because we have enough inventories to fulfill the orders, but it will have an impact on higher maintenance costs for the hot rolling mill. So these are two major impacts that will have an impact on the fourth quarter. FX, you rather... we rather see as overseable what's going to happen in the remaining three months.

Okay, thank you.

Thank you, Boris. And now let's see whether Tommaso is back in the line.

Does not look like it.

Okay, then I'm coming to my closing remarks. Please allow me to have a few closing remarks to you. In summary, we do see grounds for cautious optimism in 2026. What are those grounds? One major driver will certainly be our own Performance 28 performance program, which is already supporting our return on profitability. As a reminder, the program delivered most of its planned full-year earnings already in the first nine months. Performance 28 is one proof that at Salzgitter, we are actively shaping our competitive position. For the quarter just ended, we recorded our first positive pre-tax results since the first quarter of 2024. That performance was supported by positive contributions from our technology division and our Arubus stake. as well as the turnaround at our trading division. Steel production also achieved balanced results in the third quarter. It also has to be said that there are finally some encouraging external signs that underpin our cautious optimism for 2026. Although we are not counting our chickens, it does look like proposed EU measures with support the long-term viability of European steel production. And there are growing hopes for improved economic conditions next year. That's why we say we are cautiously optimistic for improved results in 2026. And of course, we would be very happy if economic conditions would allow us to meet your expectations again next year. I'm looking forward to update you at our next meeting. Thank you very much for participating for your questions.

Thank you. Bye.