Thyssenkrupp AG

Good morning, everyone. This is Andreas Troesch from Investor Relations. Also on behalf of my entire team, I wish you a very warm welcome to our conference call on the first quarter results, 24-25 of ThyssenKrupp AG. With me in the room are our CEO, Miguel Lopez, and our CFO, Jens Schulte, and also my colleagues from the IR team. Before I hand over to the CEO and CFO for their presentations, I have some housekeeping. All the documents for this call are available in the IR section on the website. The call will be recorded and the replay will be available shortly after the call. After the presentations, there will be the usual Q&A session for our analysts. We use Microsoft Teams for the call. In order to ask a question, you have to push the raise your hand icon, and we will announce your name and open your line. If you are on mute, you must unmute yourself in addition. And with that, I would like to hand over to our CEO, Miguel Lopez.

Thank you, Andreas, and also a warm welcome from my side to our first conference call in this fiscal year, 2425. As usual, first, I will provide you with an overview of our latest achievements in the first quarter, followed by Jens, who will present to you the financials in detail. Let's start with the first item on our strategic agenda, which is portfolio. Regarding marine systems, we are pressing ahead with a minority spin-off that we want to finalize in the course of calendar year 2025. By that, we want to give our shareholders the chance to participate in the profitable growth path of the marine business. Regarding Steel Europe, we successfully closed the TK Electrical Steel deal and thus streamlined our portfolio and at the same time realized hidden values. In this case, a purchase price of approximately 440 million euros. The closing and payment of the purchase price happened at the end of January. You will see all effects in our Q2 reporting. Also at Steel Europe, following the presentation of the key points by the new Steel Executive Board in November, the preliminary business plan is now being drawn up on this basis. After that, the intended 50-50 GV with EPCG is the logical next step. And we are, of course, working on all this with full determination. Let's move on to performance. Overall, our quarter one figures look promising to us, especially in the light of the current market environment. Jens will give you all the details in a minute. With pleasure, I would like to underline one of my personal highlights in the recent quarter, the record-breaking new orders at Marine Systems. They comprise four new submarines for the German government, as well as one new order for a civil ice-breaking scientific research vessel, the Polarstern 2. This clearly underpins the competitive position and the growth potential of that high-performing business. On the back of the new orders, the order backlog is now with more than 16 billion euros at the record level. With regard to APEX, the rollout of the enhanced program played a substantial part in enabling us to achieve an improved quarter one result. We are satisfied with the progress and the positive effects will more and more be visible throughout the year. This is also true for our restructuring efforts that are necessary, but also pave the way for future profitability. Also here, we are on a good way. And last but not least, I will give you three examples for our effort to prepare ThyssenKrupp for the future in the green transformation. First of all, Steel Europe and Volkswagen signed a memorandum of understanding for the supply of CO2-reduced steel. With this memorandum, you can see that there is future demand for that kind of products. Secondly, Polyseus will supply state-of-the-art CO2 separation technology to Greek Titan Group to modernize its production facilities. Here, with our Oxifuel technology, 1.9 million tons of CO2 can be captured annually. This corresponds to approximately 12% of all greenhouse gas emissions of the Greek industry. Thirdly, Tristan Krupp, Nucera and Hydrom signed a memorandum of understanding to explore the potential for water electrolysis in the Middle East. Jens will now present to you the financial section of this conference call.

Jens, please go ahead. Thank you very much, Miguel. And good morning, everybody, also from my side. As always, we start with an overview of some of the highlights and challenges of the past quarter before we then dive into detail. So on the highlight side, As Miguel already outlined, we've had a solid Q1 in our perspective from a financial point of view, and we're overall on track with respect to performance and transformation initiatives. Most KPIs, as you could see, are above the prior year. We've made progress on the portfolio side, so good first quarter in that respect. With respect to outlook into the rest of the year, as you could see, we are confirming the EBIT adjusted guidance and we have been increasing our free cash flow before M&A guidance, you know, on the back of the net prepayments that we received from marine systems. On a side note, this would be, if we achieve that and we are fully working on that, would be the third consecutive year with positive free cash flows, which in turn would be the first time in 20 years for our company that we achieve positive free cash flows for three years in a row. So it would be a great fiscal year. With respect to APEX, I told you last time that we have, you know, further beefed it up. We are now talking about APEX 2.0. We are focusing on structural performance improvement projects and execution, you know, resilience, and APEX measures have actually helped us in backing up the results in Q1, and I will provide more details when we flip through the segments. Balance sheet, all good. It's still strong, largely unchanged, 4.3 billion in net cash. And last but not least, during our AGM two weeks ago, we received positive approval by investors for all of our points between 95% and 99%. And as you know, we also paid out the dividend. On the challenger side, no doubt markets don't help at the moment. Many industries remain muted. Many customer groups, and particularly the automotive industry, is under pressure. As everybody knows, we also face some geopolitical uncertainties that you're also very much aware of. All of these have been the trigger for us to be more cautious on top line. And for that, we have lowered our sales guidance. However, once again, to repeat, we keep our profit guidance and we increase our free cash flow. Tariffs are being discussed a lot these days. Overall, we estimate that the impact for the group from today's perspective from direct effects will be limited. We will see some impact on the automotive side once tariffs are more clear. But overall, for the complete group with all of the businesses that we have and some upsides that we see in some of those businesses that are completely local for local structured, we see the impact limited from today's perspective. And then last but not least, from a cash flow perspective, we received the MS payment. On the other hand, we had networking capital buildup in the first quarter. That was largely, apart from seasonal effects, was driven by pre-production. So, for example, on the steel side, as you know, we are currently investing heavily into a new hot strip mill, into a continuous casting plant. And we also have various crane repairs running, and we needed to pre-produce for that, and that also drove inventories up and similar things in the automotive segment. So these were some of the reasons why Network and Capital was coming up in the first quarter. Going from there to an overview of the numbers, sales, 7.8 billion, down 4% versus the prior year, particularly driven by automotive. And this has been the trigger for lowering our top line guidance for the rest of the year. EBIT adjusted 191 million, which is up 107 million versus the prior year. This does include one positive impact at SE that I will highlight in a minute. Even if you back out any of these effects, we would have been still significantly above the prior year. So good progress. Net income almost up by 300 million to minus 33 million euros. This does include another impairment at steel. Those impairments will stop once the new business plan is fully negotiated between the parties, between all steel management and the workers' representatives. Right now we are still building on the old business plan, and as long as that's the case, we may still face impairments. And I already alluded to that when we did the annual – closing announcements, so this is no surprise. And it will stop once we have finished negotiations. The cash flow before M&A are almost zero. This includes the gross prepayments from MS. Two remarks on that. One is that, as you can see here, corresponding project cash outs will follow over the next quarters. We will partly synchronize those cash outs with the cash in within this fiscal year to the degree possible. This is also why we did not simply add, you know, the $1 billion to our previous free cash flow guidance, but we tried to synchronize some of the cash outs within the fiscal year 2024-2025. And the second thing to be aware of already, why we don't guide on quarters, one thing to be aware of is that we have to pay out the sales tax on this prepayment of 150 million euros, and this will happen in Q2. But very nice start into the year for this year. Balance sheet, I think nothing unusual. Net cash unchanged, pensions unchanged, equity ratios to 35%, so very solid for our transformations. Going from there to an overview of the segments before I go into segment details. So top line development, I set 4% down. As you can see, this is primarily driven by automotive and by the materials businesses. And on the bottom line side, We have been increasing significantly of the 99 million increase for steel. 56 is attributable to a compensation for electricity prices. Now, without going into too much detail, this is basically a compensation for higher costs that we've actually had in the previous period. So in the period of 2023, and this only comes in with a time lag, which is why we see it right now here. But apart from that, in many businesses, we've seen profit improvements. AT and DT, AT is under pressure. I'll come to that in a second. Going from there through the segments quickly, automotive technology, now this is where we face significant market headwinds, as I alluded to initially. Top line is down 10%. This is a challenging market. We do have businesses that are growing. Bielstein is a notable business that is growing at the moment against this trend because we are also focusing, among other things, on aftermarket services, and that does help. most of the other businesses are actually down versus the prior year. And that is then also reflected on the EBIT side where lower volumes, underutilization, and some higher personnel costs leave their mark. On the other hand, we're working heavily against that with APEX. I'll come to that in a minute. And overall restructuring also in that context we believe is on track. BCF, business cash flow, is also down versus the prior year, partly driven by the earnings side and then also by networking capital buildups, which, as I said, are also attributable to pre-production. On the APEX side, to be a bit more specific here, three top topics that we focus on. First, in this segment, we do focus on restructuring in various businesses, automation engineering, automotive body solutions. and Forge Technologies and a few others, and that is well on track. Second one is we also work further on bundling materials procurement across the business units for five categories and also get some synergies here. And then lastly, on the growth side, we are also ramping up a business for Bierstein for one specific large European customer in Mexico. So these are some of the Apex highlights here. Decarbon Technologies, on the next slide, looks on the sales side flat versus the prior year. But please bear in mind that last year in May, we closed the sale of ThyssenKrupp Industries India. And if you would back that effect out, then organic growth would have been 10% versus the prior year. So this business is growing significantly. We've had support from, particularly from Neocera, water electrolyzers, and chloralkali businesses, as well as some businesses within Ude, chemical plants business, and this has, you know, brought Topline up. EBIT going up correspondingly, also including lower non-conformity costs, so we're working on better project execution there. And APEX also supports this development. And then on the BCF front, we are also positive in the first quarter. Apart from operational measures and networking capital performance, we've also received some milestone payments within the two plant engineering businesses, UDA and Polyseos. APEX, four highlights. The first one is on Rote Erde, our earrings business. We are focusing on operational excellence measures. including procurement, energy efficiency, workforce productivity, the whole spectrum, and also restructuring at one of our German plants. At UDA, the chemical plant engineering business, we are working on standardizing and modularizing basically our plant engineering capabilities. So this is coming closer to a quasi-serial business, and with that becoming more dependable. On Polyseus, we are also restructuring and at the same time boosting our services business. And last but not least, Nucera is basically in the growth ramp up to more hydrogen sales growth. Coming from there to the material side, material services, material services market volumes are also muted, particularly in Europe and particularly in Germany. You don't see that so much on the shipment side because here the direct trading business, which is the one with the lower margin within the businesses of material services, has been growing significantly. But if you add the price point to the equation, then top line has been coming down by 4%. And as a consequence of that, also EBIT has been coming down, particularly in the warehousing business where volumes were down and then EBIT was coming down. As you know, the strategy here is to further work on Northern American footprint and supply chain solutions business, and we are continuing the journey there. VCF business cash flow has had a swing. Here we have to note that the networking capital level in this business, which is, you know, basically shifting significantly throughout the fiscal year, has been extraordinarily positive in the previous reference periods. And so as a consequence of that, we have now a bit more normalized, seasonally normalized in the first quarter. And because of that, cash flow is significantly below the prior year. APEX initiatives, both restructuring and growth. So on the one side, restructuring, ThyssenKrupp-Schulte, This is very well underway. And on the other hand, investments into Northern American growth and the solutions business, these businesses, both the regional component as well as solutions, have significantly overproportional profitability. And so the key strategy at Materials Service is to increase the share of these businesses in the portfolio. From materials to steel Europe, steel Europe top line down by 11%. As you know, this business is also selling heavily into the automotive industry, so we do see this impact. We have some businesses that are either on prior year level or even slightly growing within packaging and electrical steel, but overall, you know, with a larger segment and with selling into automotive industry. This is down versus the prior year. Nevertheless, as you can see on bottom line, bottom line is significantly above the prior year. So we've, as I said, one effect in there was the compensation that has been coming in with a time lag versus cost that we've already had. Then we have lower raw materials cost at the moment. So that also does help. And then we are also working on IPEX measures. So overall good quarter here. It's fair to say that 7.7% RRS is not the new normal for this business in the very short term. We're working on this with a new business plan, but this has been going extraordinarily well in this quarter. And of course, we are happy with that. And then on the cash flow side, down 235 versus the prior year, two thirds of that is actually CapEx related. So higher CapEx and just, you know, because of the funding schedule, a little bit lower funding versus the quarter in the prior year. That explains two thirds of the swing. The other part is networking capital within that inventories. And that is, among other things, driven by pre-production for our current investments, as I already said. APEX, now the most important part here is, of course, the new industry concept and, you know, for the new industry concept, the business plan, which has been developed in cornerstones and is now subject to negotiations. or will become subject to negotiations between the steel board and the workers' representatives. That is the key topic around steel at the moment. And in addition to that, we are also working on some performance initiatives that are still coming out of Strategy 2030, including some of the investments that we believe will bring further productivity to production. Then last but not least, closing out with marine systems. Of course, that's a very nice business, you know, with a very nice trajectory at the moment, as you see. So top line is up. Not difficult to see why, right, because of new orders and new projects and ramp-ups and things like that. We have a record order backlog at the moment, 16.4 billion, and we are still working on sales initiatives here. So this business has a positive outlook into the future. On the EBIT side, we're also up. We're growing profitably. We're making progress in execution of all projects. So all green here, I would say. And then BCF is driven by the $1 billion cash in of the advance payment that has been coming in. Nevertheless, also here we work on APEX initiatives. The first one is what we call target operating model. That is essentially a new organizational structure centering around the projects that we have. And so we want to become more efficient on project execution. We've now started this and we expect that project execution will become even more dependable and efficient in the future. Second one is a growth initiative. Next gen, we're thinking about civil maritime applications, for example, in the area of wind energy converter platforms. If we still have capacity, you know, with all of the business coming in, we would also prepare for additional directions here. And then last but not least, we also try to reap additional synergies on the procurement front between the different projects that we have running. So wrapping this up, going from operational profit EBIT adjusted to the net income side, you know, 191 EBIT adjusted, you know, deducting the special items, the largest of which is the steel impairment that we have booked, as I already outlined. This leads us to EBIT reported of 100 million. Deduct from that the elevator accounting, essentially, you know, just remember we have We have three different financial instruments participating in Elevator. One is the ordinary shares. Basically, they need to reflect the net income development of Elevator. And since net income is always negative there because of the financing structure that leaves its mark in our equity result, this is no reflection of the operational development of this business, which is developing well, and is also no reflection of the evaluation of that business. It's just accounting, equity accounting. deduct from that financing items, tax items, then we come to net income, which is minus 33, excluding restructuring of 42 would be a small positive net income for the first quarter. And then from there, going to free cash flow, you know, from net income, reconciling to operational cash flows, which is, you know, the largest item being the prepayment that we received and all of the other ups and downs that you can see in the cash flow statement leads us to OCF of 300 from that investments. positive free cash flow, and then if you, apart from a small M&A component, if you deduct from that IFRS 16, as you know, we are fully including capitalized IFRS 16 in our cash flows at the moment. This would lead us to minus 21, almost balanced free cash flows in the first quarter. Okay, and then closing with an outlook into the fiscal year. So on our guidance side, with respect to the group level, as I said, we have been lowering the sales side, syncing it with the start into the year and generally subdued market environment, particularly on the automotive side. However, once again, we are confirming our EBIT guidance of $600 million to $1 billion, and we have been increasing our free cash flow guidance to $0 to $300 million. And as I said, initially would be the third consecutive year of positive free cash flows and a first timer over the last 20 years. And then on the segment side, we have lowered sales for all segments except for MS. EBIT has been confirmed, and as I stated before, when we talked about the annual closing, MS and MX will have a chance to achieve their target ranges this year of 6% and 2% RS respectively. So it would be a good, I think, next step in terms of achieving our roadmap. And with that, I hand over back to Miguel.