Thyssenkrupp Ag S/Adr

Hello, everyone. This is Andreas Troisch from Investor Relations, also on behalf of my entire team. I wish you a very warm welcome to our conference call on the nine-month results 24-25 of ThyssenKrupp. With me in the room are our CEO, Miguel Lopez, and our CFO, Axel Hamann, plus my colleagues from the Investor Relations team. I have some housekeeping before I hand over to the CEO and CFO for their presentations. 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 analysts. We again 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. Please stay on mute while we do the presentation. And with that, I would like to hand over to our CEO, Miguel Lopez.

Thank you, Andreas, and good morning, everyone. Welcome to our Q3 conference call, the first time today with our new CFO, Axel Amann, who will introduce himself in a couple of minutes. Let's dive straight into the management summary for quarter three, 24-25. As usual, first I will provide you with an overview of our latest achievements with regard to our strategic initiatives in the third quarter, followed by Axel who will present to you the financials in detail. Let's start with the first item, portfolio. You all know that we are working on shaping the future of ThyssenKrupp as a strategic holding company with independently managed business segments. The future independence of our current segments will increase their entrepreneurial flexibility, strengthen their investment plans and earnings responsibility, and improve transparency for investors. Ultimately, our goal is to unlock and crystallize value for our shareholders. A key milestone of that transformation, the spin-off of marine system is progressing exactly as planned and we are fully on track for the listing in calendar year 2025. I will give you more details in a minute. Regarding Steel Europe, I'm pleased to share that we have reached consensus this July on the collective restructuring agreement. This is a

Thank you.

sales assumptions. As a consequence, we specified our EBIT adjusted guidance to the lower end of the original range. But, and maybe this is the most important message, we confirmed the guidance for free cash flow before M&A. This will mark the third consecutive year of delivering positive free cash flow before M&A, a strong testament to our operational discipline. We are executing necessary restructuring measures effectively with positive effects already visible. A standout achievement. Marine systems achieved another record order backlog thanks to major submarine orders from Singapore and a service contract with Germany to modernize six submarines. And last but not least, I will give you some examples and proof points for our efforts to prepare Pissengrub for the future. green transformation. The partnership between UD and Uniper represents a pivotal step toward industrial-scale hydrogen production from imported ammonia. Moreover, at Steel Europe, we are committed to and remain on track with the DRI plant construction in Duisburg. The progress is becoming more and more visible at site. Last but not least, we are proud to have received approval from the Science-Based Targets Initiative for our updated climate goals, reinforcing our commitment to responsible and forward-looking leadership. Turning to the marine systems spin-off, we are happy and thankful to report strong shareholder support for the envisaged capital market listing. What is coming next is our capital market stay, followed by the listing on the prime standard on the Deutsche Börse Stock Exchange in Frankfurt later this calendar year. The spin-off will be structured as a minority spin. ThyssenKrupp AG will keep 51%. Therefore, marine systems will remain a fully consolidated entity in our financials. For existing ThyssenKrupp shareholders, the allocation ratio will be one TKMS share for every 20 TKAG shares held. This structure allows TKAG shareholders to benefit directly from TKMS growth, trajectory, and long-term value creation. And now, Axel, please go ahead with your financial section.

Thank you, Miguel, and good morning, everyone. After having joined the team on May 1st, I'm now happy to provide some color on the Q3 results for our fiscal year 2024-2025. What you're going to see is the usual format, highlights and challenges. So let me start with the highlights from the third quarter of 2024-2025. Miguel already mentioned the group guidance. We have only specified our EBIT adjusted guidance within the previous range, and we'll get to that in a bit into more detail. However, really important, one of our core KPIs, we are confirming our guidance for free cash flow before M&A. Our known APEX 2.0 program is helping us to increase and maintain the underlying business resilience. And therefore, we see an increase in EBIT adjusted despite 9% sales drop year over year. That is an indication for our ambitions, efforts, and for our resilience. We do also report a workforce reduction. We are 4,200 FTEs down year-to-date, and only 600 of the 4,200 is portfolio-driven. So you see a decent chunk of FTE reduction with regard to restructurings. We do have an ongoing strong balance sheet, 3.7 billion Euro net cash, and on top comes 1.1 billion available revolving credit facilities. Let me continue with our challenges. And Miguel, you've mentioned there are some weak demands as well as some overwhelming macro uncertainties across most of our customer groups. And these are in specific automotive construction machinery. And that is why there's a reason for more cautious top line assumptions. And then we'll get to the guidance at the end of the presentation. We do have some lack of clarity on the tariff development during the reporting period. That also gives some uncertainty to our customers, and the implications are to be closely monitored. It's important to understand that those tariff developments are of a more indirect impact on our business and not so much direct impacts as we are having a local-to-local business in the U.S., and we do not import much of steel into the U.S. Last but not least, cash flow volatility. You're aware that our cash flow profile is somewhat geared towards the end of the financial year, and that's something we are currently experiencing in the third quarter. Let me continue with the overview and our core KPIs, financial overview. Header is sound performance in ongoing challenging markets, and it's a mixed picture. So quarter three, we are 9% down in terms of sales year over year. First three quarters versus year over year, 6% down. EBIT adjusted, as mentioned, on the year over year from a quarter point of view, third quarter, we are 7 million above the quarter three in 2023 and 24. nine months slightly below the previous year's time frame with 365 million euro and we get to our even adjusted guidance at the end of the presentation and we'll provide you some comfort how to end up within the range of 600 million euro to 1 billion let me continue with net income Net income for the quarter is minus 255 compared to minus 222 compared to last quarter. What is important to realize here, that includes the devaluation of deferred tax assets resulting from the preparation of our TKMS spinoff. And as a quick explanation, that's more or less 150 million euro We had to terminate the profit and loss transfer agreement with TKMS in light of the upcoming listing. And the termination of the profit and loss transfer agreement is ending the tax consolidation. And therefore, in future, we will not be able to net our carry-loss forwards. And that is an impact on net income in the amount of circa €150 million. In addition to that, it's an impairment at steel, around about 100 million euro, and we do also see some restructuring provisions in automotive that is a two-digit million euro figure. Let me continue with free cash flow before M&A. In Q3, minus 227. It's 28 million euro better than Q3 of 23, 24. From a year-to-date perspective, we are at 817 million euro negative. you're well aware that our cash profile is geared towards the end of the financial year. Therefore, we still expect a positive free cash flow, but more details to come at the guidance part. Balance sheet highlights still, as mentioned, net cash 3.7 billion euro, pensions slightly down due to increased discount rates, and we're still having a very comfortable equity ratio of 34.9%. Let's turn the page and continue with sales and EBIT adjusted developments. I will only highlight a few effects with, let's say, major impact on the bridges. Again, sales from a quarter perspective down from 9 billion in Q3, 23, 24 to 8.2 billion in Q3, 24, 25. That's more or less 800 million down. The major, let's say, reasons are in our steel business, with around about 100 million euro decrease, followed by the materials business, 300 million, and automotive, 0.1 billion, 100 million. And for both steel and mix, it's mainly price and volume. For auto, it's more or less demand-driven and not so much price. the um let's continue with the ebit adjusted bridge for the third quarter um here you see the development from 149 to 155 slight increase for this year's quarter you see the carbon technologies um where we are benefiting from a one 101 100 million euro increase that's basically driven by a prior year negative one-time effect and we've given some transparency on the 80 million effect in our past calls. For steel, it's a top line development plus some underutilization. That's why you see the almost 70 million euro negative development from an EBIT adjusted point of view. So the EBIT adjusted, it's increased despite lower sales. And again, it's an indication from our point of view for an improved resilience and therefore also includes some contributions from our ongoing efficiency program, APEX 2.0. Let's move to the segment and start with automotive technology. There we see some solid earnings in an ongoing challenging market environment. Sales are, from a quality perspective, down by 7%. Year-to-date, nine months, minus 8%. I've mentioned the persistence of demand and some challenging market environments. However, although we do report a decrease year over year, we have Q3 versus Q2 stable, supported by some higher sales at Bilstein and Forge for their technologies. EBIT adjusted for auto quarter over quarter, 16 million down due to the reduced sales on a year-to-date basis, 174 to 98. That means a 77 million euro decrease. Again, lower volumes. and a negative one-time effect outweigh the decline in our personal expenses and we've already announced and we are running a restructuring program of around about 100 million euro savings and very recently we announced another transformation and that impact will come on top. So bottom line restructuring and extended cost cutting initiatives are on track at automotive. Correspondingly, business cash flow down from a quarterly basis, 44 million, 81 to 37, and on a year-to-date basis, minus 297, down to minus 182. And you will see here the impact from restructuring cash outs and also the earnings decline versus some lower invests that we have counter-steered starting over the past months. Let's continue with the carbon technologies. There we do see a step up in earnings despite a hesitant market environment. And so from a sales perspective, we do see a 10% decline. However, very important to note, organically, so if you would not consider the sale of TK Industries India last year, we would see two percent sales increase for the first nine months of the year 24-25. If we adjust it, it's important to note almost all businesses with an increased contribution. Nucera has reported earnings a couple of days ago. We would consider them as stable. And we do see some at Polyseos, we do see some a periodic higher cost versus prior year. APEX measures are in full swing at Decarbon Technologies and support with restructuring, efficiency gains, and some purchase optimization. Let me end decarbon with business cash flow. Here we do see some impacts by a temporary negative cash profile in the project business. We do have some projects where we are at a stage where usually the cash in is a little bit lower than at the start of the project. And the year-to-date development more or less follows the EBIT adjusted, compensated by some higher investments. Material services, sales down by 10% for the third quarter. From a year-to-date perspective, 6%, $9 billion to $8.6 billion. As mentioned, we do lower price levels in key product groups and a pretty weak demand across Europe. However, we do see some slight growth at our distribution business in North America. Our shipments are down year over year, and that is mainly impacted by our direct-to-customer business. Let me continue with EBIT adjusted. EBIT adjusted is down corresponding to our sales decrease by $30 million in the third quarter. From a year-to-date perspective, it's minus $71 million. However, all business units are profitable supply chain solutions business with the highest earnings contributions amongst the business units. Despite the top line, top line decrease, we do a sequential quarterly increase year to date. Comparable to the carbon, we do have continued support by our APEX measures. For example, we're still in the midst of restructuring in Germany. That gets me to the business cash flow for materials. From a quarterly perspective, following our sales decline, we have a decrease of minus 96. From a nine-month perspective, we have a decrease to minus 311. That is due to the network and capital increase, which is a decrease of payables and an earnings decline. And again, particularly for MX, you will see a cash flow profile that is geared towards the end of the fiscal year. So you can expect different numbers towards the end, towards September 2025. Let me continue with steel. Steel Europe, persistently in weak demand and lower price levels weigh on our performance. We do have a sales decline for the third quarter of 13%. Year-to-date, minus 11%. We do see market headwinds from lower price levels and also ongoing soft demands, and that is due also to the industry dynamics I've mentioned at the beginning of the presentations. Shipments are down by 8% year-over-year, and what particularly burdens us is the automotive and industrial businesses. We do see some better development at packaging steel. Leads me to the EBIT adjusted of steel. There, for the third quarter, we report a decrease from €100 million in the previous year to €31 million in the third quarter, 2024-2025. Year-to-date decrease by minus 61 from €238 million to €177 million. We do see a top line. That is due to the top line development, as mentioned. We have also some underutilization of plans, as we are currently, let's say, having some conversion shutdowns, particularly in May and June. This is to be improved over the remainder of the quarter. We do see some positive effects, though, from some favorable raw material prices. And as with the other two business segments, we do see the impact from APEX measures. Coming to business cash flow for steel, we do have an increase in business cash flow from minus 197 to 127 year-to-date. We are still negative at 350 due to the networking capital release and some lower investments versus the earnings decline. You will also see what we're going to guide for the rest of the year. We are applying some strict capital discipline, and that is why we have reduced capital investments, not only in steel, but also across other segments. Let me now continue with marine systems. Marine systems is... displaying a record order backlog and it is paving its way not only for future growth but also hopefully paving its way to the listing until the end of the calendar year 2025. so let me report on sales of marine systems from a quarterly perspective up 14 438 to 500 million Year-to-date, we are up in sales by 14%, 1.4%, with now 1.6 billion for the first nine months, 2024, 2025. We do see very nice progress in execution of new projects, both in service and marine electronics. We are enjoying a record order backlog of 18.5 billion euros. And we've just recently reported a new order for two submarines from Singapore. And we're also very happy to report the largest service contract ever for six submarines from Germany. Even adjusted, that's important to explain, and I'll get to that in a few seconds. Third quarter, down by 7 million from 30 to 23. Year-to-date, 72 to 85. um despite the progress in project execution and service we here have a negative one-time effect and we get to a bit more detail um during the part for for our guidance for the remainder of the year it's basically the um the application of IFRS 15. It's clarifying the allocation of contextual obligations for long-term orders. It's a so-called serious guidance. So IFRS 15 kind of flattens the EBIT. If you have, for example, four submarines in a row in the past, there was a different profile for EBIT adjusted. This is going to be flattened, and that's why you see the one-time effect. But from an operational point of view, nothing has changed and we'll get to that at the end of the presentation when it comes to our guidance for the marine segment. Business cash flow for marine systems is down by 126 million for the quarter to 160. It's still up for the first nine months of the year. to 582 million euro and the decrease is mainly due to project related cash outs. Let me now get to the bridge for the third quarter from EBIT adjusted to net income. Again, I will highlight only the major effects here. We're starting at 155 million EBIT adjusted. and the deduction of the special items. Here, as mentioned, around about 100 million Euro for the impairment at steel, comparable to the previous quarter. And we also do see some restructuring expenses at auto at the amount of almost 70 million Euro. Let me also highlight the tax column at the right of the chart. That is, again, as mentioned, the devaluation of the deferred tax assets resulting from the TKMS spinoff. As explained, we had to terminate the profit and loss transfer agreement, and therefore we will not be able to net losses on a group level. with the segments EBIT in future. And that is hitting the net income by more or less 150 million euro and gets us to minus 255 million euro net income. It's important to keep in mind that specific one-time effect. Continuing with the bridge on the next page, Net income to free cash flow before M&A, major chunk are here. Some negative net working capital effects. Obviously, we're also adding back the positive non-cash items, depreciation and amortizations, and again, the more or less 150 million euro of deferred taxes. The €260 million cash flow invest, around about 50% of the €260 million relate to Steel Europe, and a major part of that is also our DRA power plant at Steel. which gets us in the end at minus 227 free cash flow before M&A. Important to keep in mind. We'll spend some further comments on the guidance towards the end of the year now on the next page. So this is here the overview for our updated fiscal year 2024-2025 outlook. Let me start with sales. We are now expecting for the fiscal year 24-25, minus 7% to minus 5%. Previously, we've guided minus 3% to 0%. That is due to the headwinds we're experiencing in our main markets. EBIT adjusted, already mentioned, we are now guiding at the lower end of our previously guided range of 600 million to 1 billion euro. We cash flow before M&A on a group level, unchanged, 0 to 300 million euro, and we're comfortable to reach that until the end of the year. Let's now switch from the group level to the segment level. Auto, automotive technology sales, new guidance is minus 7% to minus 5%, previously minus 4% to 0%. The EBIT adjusted is now expected to come in at the lower end of our guidance of 200 million euros to 300 million euros. Decarbon technology, we do expect for the fiscal year 2025 sales development of minus 9% to minus 5%. Again, I've mentioned the impact from our sale of TK Industries in India. If you would consider that and net that out, we would be almost flat for fiscal year 2024-25. Continuing with material services, also experiencing some headwinds in its core markets, also particularly in Europe. New guidance range is minus 6% to minus 3% for sales, previously minus 2% to 1%. And EBIT adjusted is now 100 to 150 million euro, previously 150 to 250 million euro. Steel, minus 10% to 8%, minus 8% in terms of sales. Also lowered guidance from previously minus 6% to minus 3%. Important to note, EBIT adjusted still at 250 million euro to 500 million euro. Now, very important, the guidance for marine systems. I've mentioned the application of IFRS 15 already. And with the application of IFRS 15, we do expect a sales of minus 2% to 1%, previously 3% to 6%. What's really important is... From a segment view, marine system itself, nothing has changed in terms of operational performance. And if you will take a look at the listing perspectives and the combined financial statements, you will see the consistent application of IFRS 15 will lead to the previously guided sales growth of 3% to 6%. Even adjusted for marine, still 100 million to 150 million euros. So with that, in summary, we're experiencing some headwinds with regard to sales, but are really applying efforts and are keeping our guidance at the lower range for our adjusted EBIT. We are confident that we are still going to achieve the positive free cash flow before M&A. And with that message, I hand over back to you, Miguel.

Thank you, Axel. Before we close, I would like to share a few reflections. This chart looks very familiar to you and is basically unchanged. Let me shine a light on some key achievements from our strategic agenda. We are just about to finalize the business plan for Steel Europe on the back of the recently reached consensus on the collective restructuring agreement. I know many of you are eager for financial details. Once everything is finalized, we will have more information. And as already mentioned, we push ahead with a minority spinoff of the marine business in calendar year 2025. And this might serve as a blueprint for strategic steps ahead, such as the standalone options for the remaining segments to reach our vision of a strategic holding company. Additionally, leveraging opportunities from the green transformation and making necessary restructuring investments will be crucial for positioning Tussle Group for future success. And with that,

We wrap up today's presentation. Andreas, over to you. Thank you very much for your presentations. We are now coming to the Q&A session. Again, if you want to raise a question, please use on Teams your raise your hand icon in order to speak. And now we're coming to the question of the first analyst, which is Boris Baudet. Boris, please go ahead.

Hello, everyone. Thank you for taking my questions. I have two. The first one is on the EBIT guidance. So the group achieved an EBIT of €155 million in Q3. When we were looking at last year, the Q4 EBIT was pretty the same as Q3. So the implied number for Q4 to achieve your guidance this year is €235 million in Q4. So, can you share the bridge here to what would be the drivers to improve the performance from 155 to 235? That's the first question. And the second, it's obviously on Steel Europe. So, I would be curious to know what will be the next steps now that consensus has been reached. What are the next milestones to reach? What would be the contribution of this consensus agreement on restructuring in terms of casketing? Thank you.

Okay, Dominik, thank you. Let me provide some color on our way to go until the end of the year. You've mentioned the EBIT guidance, and you're right, there's still €235 million to go. And we do feel confident, backed by a couple of aspects. First of all, I've mentioned the reduction of around about 4,200 employees year-to-date. That will have an effect on the remainder of the year. We're still pushing hard our efficiency program, APEX. We will see some positive effects also from Automoto. We're talking here about claims management until the end of the fiscal year. and last but not least very importantly we do let's say anticipate also some personal cost improvements at steel. So we have some flexibility to also, let's say, reduce one or the other provision that has been part of the most recent negotiations. So overall, it's still some way to go, but we do believe and we are confident that we're going to make the €235 million to go. And with that, over to Miguel. Maybe you want to provide some color on the current situation at Steel.

Yes, thank you for the question, Boris. I believe it's, first of all, to say it's a big milestone that we could achieve here with this agreement. And you know the... the raw data that will now kick in in the next years, which is the number of job cuts and the number of outsourcing amounting overall to 11,000 in total over the next years. I think the next steps here to go, there are basically two things that we're going to do. From a union perspective, they are asking their... members for approval and this process is ongoing and there's a second very important thing is how to to secure the the financing overall and we are also working on that and this will be clear in the next couple of months so that everything can be executed as planned around the the cost contribution overall I would I would be taking this to the next quarter in order to make sure that everything is done really already planned for the subsequent years. So give us a little bit more of time to be more precise on this one.

Okay, thank you. And just as a follow-up on that, how would you describe the discussions at the moment with Daniel Krasinski?

Well, you know, we are in a very good relationship. He is a 20% shareholder, and we are getting now more and more certainty around the elements that we need to have in order to continue with our 50-50 discussions.

Very good. Thank you. Thank you, Boris. And the next in line is Tom Sain from Barclays Capital. Tom, please go ahead.

yeah hi thanks for taking your questions two from me as well please um first one just following up on the guidance and steel europe uh there's a very wide range right that you've kept the the 250 to 500 on on ebit could you just talk us through um what assumptions you might have you know to hit the bottom or the top end of that guidance and basically why that range wasn't narrowed and maybe you can if possible clarify just how many provisions are currently built in for those negotiations that you mentioned we might get some provision release maybe any color there and then the second question just around marine systems So you mentioned, you know, around IFAS 15 clarifying the allocation of contractual obligations. Could you just let us know, you know, one of these linked to some of the recent contracts you booked this year or are they from older contracts? And could you also just clarify that there's no actual change to your obligations? This is purely a sort of timing of revenue recognition issue. There's no actual change in your, you know, what the project actually entails. Thank you.

Thank you, Tom. You've mentioned the guidance around steel. And as mentioned, it's difficult to provide you with the bridge, but I've mentioned the provision that we may consider to release. And maybe you want to expect something between 50 and 100 million euro. This is, let's say, the ongoing assumption. And can you clarify your second question again?

Yeah, thank you. So it was just... The IFAS 15 adjustment that you made, could you just clarify, it's a purely timing of revenue recognitions as an accounting thing. There's no actual change to your obligations because when it says clarifying the contractual obligations, just wondering if there's something that's actually different with the project or it's a pure accounting issue?

It's a pure accounting issue, and thanks for asking the question, Tom. It's more or less flattening the pattern, but from a pure amount, there are no changes. As you said, it's pure accounting technique. And, unfortunately, we had to correct it in our TKAG reporting, but what you're going to see at the segment, at the listing perspective, will be, let's say, very much known to you because we're going to repeat the guidance of 3% to 6%. So, bottom line, it's only an accounting impact.

Okay, that's clear. Thank you. And then maybe if I could just follow up just on the steel segment. So, you know, I see there's this 550 to 100 million provision release, but I guess the 500 million full year number, you know, at the top end. would be over 300 million even Q4. Are there any other levers that we're missing that means that might actually be possible, or do you think towards the middle or the lower end of the steel Europe guidance is reasonable? Thank you.

I think the range kind of reflects the volatility we are seeing also until the end of the year, and that's why we need the remaining two months in order, let's say, to have the final result, and I ask for understanding that we cannot provide more color at this point in time.

Okay. Fair enough. Thank you.

Thank you. Thank you very much. And the next in line is Jason Fairclough from Bank of America. Jason, go ahead.

Yep. So, good morning, guys. Thanks a lot for the presentation. Congrats, I guess, on getting marine systems over the line. It's nice to see some progress on some of these levers. Just thinking about some of the other – levers you can pull, buttons you can push. You've got this elevator stake, and then I guess I'm also thinking a bit about material services. So for the elevator stake, could you just remind us what are you carrying that at on the balance sheets today, and how do you think about how that compares to the recent transaction that we saw in that business? So that's the first question.

Thank you, Jason. And so you've mentioned the TK e-stake. And as you've probably seen, we saw a transaction at the end of July closed by Allat. And we've also mentioned in our interim report that we are considering to provide some more transparency on the actual value of the TKAE stake. So that's most likely to crystallize until the end of the fiscal year.

So, and the carrying value today?

Could be more or less 1.1 billion.

But there's no sort of need or accounting requirement to sort of write that to a more appropriate value at the moment?

Well, it could happen. We may see an appreciation until the end of the year. It's kind of indicated in the interim report, and you may very well see the appreciation of that stake. Okay, thank you.

Look, my second question is on another business that we've spoken about before, which is material services. Last I checked, this business had capital employed north of €3 billion. I don't know how much that's changed lately. And really not much business cash flow at all. There was a news story earlier this year that suggested that you were considering your options here. As you progress with the other levers, as you progress marine, as you progress elevators, as you progress steel, is it time to start taking a harder look at material services?

Thank you, Jason. Of course, we are developing in detail the concepts for what we want to achieve in the long term, which is the strategic goals. And obviously, we are also looking to the material service businesses as we are also looking to the other businesses how to get them to play a significant role in the long run being participations in this strategic holding. So planning is ongoing here. And so we will certainly see at the moment in time that we consider to be ready then also to communicate the next steps here. But we are looking at it.

Could you just remind us the capital employed in this business these days? Is it still over 3 billion euros? And do you think this business achieves the cost of capital?

Yeah, well, I can provide you with a number for the networking capital, not with the capital employed. The networking capital is currently at 2.5 billion euro. And capital employed is most likely a bit higher.

Okay. And do you think it achieves a return in excess of its cost of capital?

Well, that is debatable, but our ambition is certainly to achieve that in the future. As Miguel said, we would consider next steps once any segment would be capital market ready. And let's say earning cost of capital may be one element of being capital market ready.

Okay. Thanks for the cover. Appreciate it.

Sure. Thank you, Jason. And the next in line is Bastian Zunagowicz from Deutsche Bank. Bastian, please.

Yeah, good morning. Thanks for taking my questions as well. My first one is starting off on decarbonization technologies. And I guess when we look at your performance, it has obviously improved a lot versus the last couple of years. But then at least when we look at your book-to-bill ratio, it's been just at 0.7 times this year, which does suggest some contraction into next year. So Could you maybe just briefly update us on what the various trends are there and the businesses which are being casted into that division, and then also whether you see any improvement or indication of improvement in your order pipeline, or whether you think you have to step up the restructuring in that business to basically counter the top-line trend? That's my first question.

Thank you, Bastian. Well, we can see that over the last two years, you know, you remember we started with T-Carbon Technologies. We formed it after me starting to be the CEO of TKAG. And at the time, the growth rates indicated for the green molecules business specifically were super, super positive and the growth rates were double digits at the time projected into the future. Right now, so over the last 24 months, we have seen because of known uncertainties, the interest rates developing as they did, but also regulations missing in different parts of the world, we have seen that many FIDs were not simply done. Nevertheless, and that was the reason for then book-to-bill ratio being as it is today. Nevertheless, if we look to the project pipelines, the project pipelines are very full so that from a perspective of further driving the green transformation in different parts of the world, we need to expect that at a certain point in time, I would think in the next two years we would see growth again here for sure. This is true for what we are doing around hydrogen and green hydrogen. This is true for what we are doing in the other green molecules like ammonia or e-fuels or e-methanols. And this is also true for our wind business. You know, a significant part of Rote Erde is wind business, and we are also seeing there the first signs of improvements, specifically in China. So overall, I think it's a temporary development. We will see growth rates, important growth rates in the next years to come.

Okay, sounds good. That does sound very confident, which is good to hear. And then my second question is coming back on your guidance, which obviously implies quite a significant improvement in the fourth quarter, pretty much against most market trends, I guess, which you're seeing in the materials business, maybe also in terms of general market seasonality. I know you mentioned, obviously, a lot of that is cost-cutting driven. You mentioned some other effects. Can I just clarify, I didn't catch that probably, the provision release in steel you're expecting in the fourth quarter, is that in the magnitude of 50 to 100 million? Did I capture that correctly?

That's correct, Pascal, 50 to 100 million. It's personal expenses, and that's something we will utilize to bolster the remainder of the year. It's one of the levers, and I've mentioned a couple of other levers, strong fourth quarter at auto, some claims management, the ongoing positive or the increasingly positive effects from the FTE reduction, ETC, but to your question, at the 50 to 100 million.

Understood. And the claims management you mentioned in Autos, is that like a year-of-the-end exercise event? And could you also quantify that by any chance?

Yeah. I can confirm that it's a typical pattern of the business towards the end of the year, settling some ongoing claims on demand and volumes. However, I cannot quantify it.

Okay, understood. Okay, great. And then maybe moving over to the steel business, just on, I guess, on the restructuring process, so did I understand correctly that you will provide us with an update on the restructuring provisions in the fourth quarter, so those will be booked in Q4, or may those be actually shifted into the first fiscal year quarter of the next year?

The latter could very well be. So as of now, we do expect a three-digit million euro number. But at this point in time, we would not expect to book it still in this fiscal year.

Okay, very clear. Then maybe moving over to the other aspects of your plans. So you've now determined the business plan, and I guess that means you should also have generally pretty good visibility on the starting balance sheet, which is required for the business as it's being separated, and hence the amount of cash you will be putting in there to facilitate the separation. Could you maybe give us at least an early update or broad guidance on where that number could be? Is there maybe at least a floor you could guide us towards, which people should be expecting for the capital markets? It's obviously an important number to keep in mind.

Thanks, Bastian. It's difficult to quantify, but I guess we can confirm that in whatever shape and whatever form the business is going to operate, it will have the required liquidity.

Okay, fair enough. But is that a number which you will be able to share with us as well by the year end?

Unfortunately, I would not expect to be ready at the end of the year. As soon as we have it, we're going to share it. If you ask me now, probably not until the end of the year.

Okay, got you. And then just maybe taking even a step higher, so I guess on the big picture, strategic future of the business, you clearly stated that you still aim for a separation and I guess that 50-50 JV structure with EPCG. Now, I guess at least when we look at the policy side, there's a a possible scenario out there where the EU may only do something in the next couple of months which could be very supportive to the steel sector. And I guess that will be moving, I guess, the NPV and value of the business quite considerably. And so depending on the outcome there, is there a chance that you may ultimately be ending up retaining the steel business? And also similar to the put option, which is held by EPCG, do we actually also have a call option, which would allow you to claim back 100% if you wanted to.

Well, Bastian, of course, these considerations on what will policymakers do is one of the elements that we are, of course, working on. You know, we are talking to Brussels, we are talking to Germany, to Berlin in this case, in order to get them to understand what we consider the important things that we need to establish in terms of tariffs or in terms of import regulations. You know that we have been always very clear that we are not happy with the current shape of CBAN and the like. This is something that is indeed one of the very significant elements in order to also get the business plan in shape. And we need to further work on those topics with Brussels and Berlin and then get certainty. And then we will see. So you will certainly hear as soon as this these regulations are established, you will hear about it, and then we can talk also about the impact on our end.

Okay, Katja, but I would say, depending on the outcome, that could be, at least in theory, very positive as well for the state business. Is there a scenario where you may just say, well, in this environment and with that new framework, you basically feel more comfortable to be retaining a majority?

I would not see any reason right now for changing our way that we defined. And so I would keep it here.

Okay. Thanks.

Thanks so much.

I just want to... Yeah, thank you very much. I just want to move on to the others so that they have a chance as well. So next question comes from Helen Gabriel.

Yes, thank you for taking my question. I just have one, which is on the restructuring costs. I appreciate you're still working out the details for Steel Europe. However, for the rest of the business, can you give us some color on the cash restructuring and then transaction costs that you are budgeting for? Q4 and then for fiscal 26, I would say mostly relating to APACs, the marine systems transaction costs, and any other material costs that you are budgeting for the business. Thank you.

Thanks, Alan. First of all, with regard to steel, we've touched upon the, let's say, the finalized negotiations. We've also talked about the provision that is most likely to be built next year. And what we've already indicated is that provision is going to be in the ballpark of roundabout three-digit million euro. So that is steel. There is also a new transformation for auto, where we have not yet finalized our quantifications on possible, let's say, provisions. But I can give you a number for the year 2024-2025. We would expect restructuring cash out in the amount of around about €250 million. So this year, €250 million. Next year, possible provisions for steel and the amount of a three-digit million euro number, plus potentially upon further, let's say, confirmation and then quantification, additional restructuring catch-out with auto due to the most recent announced transformation into four business units ETC. Hope that answers your question.

Thank you. And for the transaction costs for marine systems, any guidance you can give there? And for the other businesses, is there any other restructuring going on for everything else that you haven't really touched on?

Yeah. For marine or park number, I'd say 50 to 100 million euro. And let's check back, and then maybe we're going to provide you in the aftermath. But from the top of my head, separation of a segment, 50 to 100 million euro.

Thank you. Of course.

Thank you very much, Alan. And now the final question for today, coming from Christian Ulfsparabank. Christian, please.

Yes, thank you for taking it. Just one left. It's concerning the FX impact you have on your top line and your EBIT line so far and what you expect for the entire year. Maybe a little bit more specific when it comes to Russell Stein. the export in the U.S., how much of the share are you exporting in the U.S., and is that at risk currently? Thank you.

Sure. Thanks, Christian. First of all, FX currency impact, from the top of my mind, around about 300 million Euro decrease in light of the U.S. dollar development, and that's a major chunk. That's more than 100 million, somewhere between 100 and 125. Then the renminbi, and last but not least, the Brazilian real. That is more or less the impact from FX. So it is a considerable amount, but not really changing the overall picture. With regard to Rasselstein and import or exports into the U.S., it's a small amount of the business, so overall, we are, although we are experiencing the indirect effects, we are not, let's say, burdened by too much direct tariffs as the amount or the share of steel we are exporting to the EU. It is rather limited. On the exact amount of Rasselstein, I would need to look that up. Maybe we'll get back to you in the aftermath. I hope that it's okay for you.

The 300 million, this is a top-line impact, right? And what is on the EBIT? The impact on the operating of it?

The impact, I mean, is probably on EBIT is way below 50 million euro.

Okay. Thank you and all the best. Of course. Thank you. Thank you.

Thanks, Christian. And with that, we are concluding the Q&A session for today. Thank you very much. Have a great day, everyone, and speak soon. Thanks, everyone. Thank you. Bye-bye.