Voestalpine Ag Unsp/Adr

Good day, everyone, and welcome to the West Alpine AG first half by 2023-24 conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to your host, Mr. Peter Fleischer. Please go ahead, sir.

Thank you very much, and good afternoon, and a warm welcome to today's WebEx conference call about the first half of our business year 23-24. Before we start, a quick technical remark. If you can see us, you are in the WebEx. If you want to ask a question, you have to dial into the telephone conference call as well, as the WebEx is a one-way communication line, of course. Regarding the procedure today, right next to me is our CEO, Herbert Eimsteiner, and our CFO, Robert Otto, who will give you a quick overview of the highlights, what has happened in the first half and the short outlook on how far and what we expect for the remaining business year, which will last around 15 minutes, I guess. And afterwards, we are happy to answer your questions. Let me now turn over to Mr. Ebensteiner.

Good afternoon. Very warm welcome to our conference call of our first half year. Let me start with the highlights. I think you're well aware that the measures of the central banks affected European economy in the course of this first half of our business year. So the result were declining industry investments, lower consumer spendings, and we saw also a decline in the service sector. We see a lower demand in the first half of the year from the construction industry, from the mechanical engineering sector, and also from the consumer goods sectors. On the other hand, we see compared to last year improved automotive production growth due to the better supply chains. And what's very positive was the demand from the energy sector and also from the aerospace sector and railway systems was performing very well. So compared to Europe, the North American economy was a bit more resilient, and we saw satisfactory demand for most of our first alpinist sites in the U.S. MCA, and also a smaller market for us. But despite all this demand, environment there in high inflation and high interest rates, we saw a very solid development and those sites benefited from the boom in the photovoltaic sector and also from a strong demand in the energy sector. Asia in particular, in China, we see after the positive reopening effects a loss of momentum. But all in all, we have to say that first alpina sites in Asia and also in China have more or less a stable development. Let me come to the four divisions. I would like to start with steel. Very solid performance, I would say, in the first half of the year, although the steel environment was all in all very complex and difficult. As I mentioned before, especially building and construction, mechanical engineering and white goods in particular were suffering from the economic slowdown. On the other hand, we see positive stable demand from the automotive sector, which is a very important part of our business in the steel division and also in the heavy plate, heavy plate mill, we see a very good landscape coming from the energy sector and we can say that the order book for this special cladded material for the energy sector is very good. When it comes to high performance metals division, we see or saw a weakening situation in the course of the first half year, and especially in tool steel business, and here in particular in Europe. And on the other hand, we see these positive trends in special materials and also in aerospace business. Our best division, I would say, or best performing division was metal engineering, as I mentioned before. And I touched it also in the course of last year that we see a very positive development in our railway systems business for the first half of this year. And seamless business, which was very, very good and booming last year is I would say back to normal levels and also welding performed relatively stable on a good solid level and only wire is really weakening in due to the slowdown of mechanical engineering consumer goods business and also in the building industry. Metal forming benefited also from the improvement in the automotive components business compared to last year and and sections after a very good development in the last year shows again solid development. Also, we see a declining demand in some areas. And weaker is precision strip. And we see there are challenging market conditions, especially in the in the material for saw steel weaker than last year. Ongoing positive is the project business in warehouse and rack solution and also here we have good order books also for the remainder of the year and also for next year. So after the short presentation of the divisions, I will hand over to Robert Otto for the figures.

Yeah, ladies and gentlemen, thank you for taking part on that presentation. I will guide you through the figures of the first half of this business year in comparison to the last business year. You see that the last business year was an extraordinarily good one. and in comparison to that, that normalization of the business has shown a decrease in the revenue figure, which is two-thirds volume-driven and one-third price-driven. If you go down further, the profit and loss you see at the EBITDA and EBIT figure, that there has also been a decline in the economy. Roughly, one could say it's three reasons for that decline in the profit figures. It's one-third is the lower gross margin, one-third is lower volume sold, and one-third is real cost inflation, which we have been facing throughout the last 12 months. Please be aware in comparison of those figures, if you compare EBITDA of both half years and EBIT, there's a difference in the last half year. We have had an impairment loss booked on the high-performance metals division in last year. Therefore, the difference between EBIT is bigger than in – no, it's vice versa – because of that impairment loss of 173 million in last year. What we also can see is in the comparison the increased interest rate we have been faced. The interest burden last year was approximately 50 million, and this year 90 million for the half year. So that's not because of the increased net debt, because we have decreased. because it's the interest rate mainly on the factoring volume and the bills of exchange. For the full year, I would expect to be the interest burden the half year of this year times two. Tax rate, quite normally between 23%, 24%. Also for the full year, I would expect the tax rate to be 24%. If one looks at the walk between these two half years, you can see the price decrease and the raw materials getting cheaper. So in total, the gross margin worsened by 153 million. And that is not only mainly, but more than that is within the steel division. Steel division from the gross margin decreased has had a minus of 330 million. But that was balanced, in fact, by already mentioned, very well business in the metal engineering division, especially in the oil country tubular goods and also in the railway systems. The metal engineering had an increase of gross margin by 166 million. The big hit in the volume is within the high performance metals division. 170 million out of that 182 have been in the high performance metals division. And the miscellaneous is what I already mentioned, a big bunch of cost inflation at a lot of points in the group. Also the Cash flow development in comparison is a bit difficult to explain. Last half year was marked on the one hand by the Ukraine war, the energy crisis. So big efforts of my colleagues, operational colleagues to ensure production. So we had to invest in working capital in the last year on the one hand. On the other hand, Also, obviously, it was price and volume driven. On the other hand, we had the sale of the stake in the taxes. Therefore, the cash flow from investing was positive. So coming to this year's cash flow statement from the half year, obviously, the profits coming down also reduced the cash flow from results. We had only... a investment in working capital in the first half year of 280. That is quite low. Normally, we have a counter effect to the year end, which is higher. So we already decreased working capital. But nevertheless, there is that effect remaining. In the investing activities, almost 500 million, I think, For the full year, that figure will be more than doubled. So I would guess we will end up at somewhere around 1.1 billion of investing. And so for working capital, I think for the second half year, we will see quite a release of working capital. So for full year, we will have a positive figure from working capital, although That depends a little bit on how strong the demand, especially in the fourth quarter, will be from our customers and how much we will pull from our stocks. So for the full year, personally, I would guess somewhere around 400 to 500 million, dependent on customer demand. So coming to the last chart, is the development of the gearing ratio over, let's say, the last 20 years. So it also marks a little bit the timeframe of my appointment at Fustalpine. What you can see in the right hand side on the gray column is that we already have in the half year figure, although we had a dividend and a share buyback totaled almost $300 million on dividend and share buyback for our shareholders. We have a record figure in equity of $7.8 million. And always it's in the first half of the year paying dividends. So second half of the year we'll further increase that equity figure. And the same accounts for the gearing. I think we will end up somewhere around 20%. So let me add some personal remarks over the 20 years because today is the last time we will see on this occasion. So these 20 years you see on the job, they have been challenging, successful, and also joyful for me. One can see the big China-driven economy on the first part of that period, then our acquisition of Perla Udehon, the increase, the steep increase in leverage, then during Lehman, the takeout financing and the refinancing, then some up and downs, the projects in Romania and Texas for the steel and so on. So, during that time, First Opinion has quadrupled the equity and has quadrupled sales, so quite a successful time. And I think it's the companies with that financial health well positioned for the future growth and also for the challenges of the transition. I also want to express my gratitude and say goodbye to you, investors and analysts, It has been an incredible journey, those 20 years. And I'm honored to have shared that with you. But first and foremost, I want to thank each and every one of you for your unwavering support and trust in our company. Your investments, your investment insights have been instrumental in our growth and success over those 20 years. Your valuable perspectives has guided us in making informed decisions, hopefully most informed decisions. Now I'm confident that the new leadership will continue to rely on your expertise. So please share also in the future these expertise. I bid farewell to this chapter of my life. I do so with optimism for the future. First, I've been as well positioned to continue its growth and transition And I have no doubt that you will all witness even greater success in the coming years without me. I look forward to seeing our company prosper under new leadership, and I will always cherish the memories and relationships built during this incredible journey. So thank you once again for your trust, support, and collaboration. Farewell and best wishes for the future.

Thank you. Thank you, Robert.

I will come to the outlook for the remainder of the year. I think it's clear that this forecasted slowdown finally arrived in some of our business segments. And I would say that the second half of the year is according to this previous forecast, and we think that we will see this continuation of the actual trends. That means that we expect an ongoing lower demand from the building and construction industry, from the mechanical engineering sector, and also from the consumer goods industry. We expect that automotive industry will stay more or less on current levels. And the demand from the conventional energy sector should stay on good levels. Also, we see a normalization coming from very excellent figures and renewable energy will stay on very good levels and will show a very strong performance. Railway systems is Good also, I would say, also in the next business year, what we can expect is a normal seasonal pattern over the winter season, but that's normal. But again, demand is very good, order book is also very good. and also aerospace industry will continue with the very positive trends. That means all in all, our assumption for the coming quarters are more or less in line with the expectation at the beginning of the year. However, from today's perspective, we see the development in Europe is somewhat weaker and this is the reason why our forecast is now on the lower end of the expected range from 1.7 to 1.9 billion. So around, we expect around 1.7 billion euros in EBITDA So, ladies and gentlemen, this was a very brief presentation about the figures, the first half of the year, the different sectors, and also our forecast. And we are happy to answer your questions.

Thank you. If you would like to ask a question, please signal by pressing star 1 in your telephone keypad. Again, that is the star key if you have a question or comment. If you are joining us using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that is the star key followed by the digit 1.

We'll pause for just a moment.

If you have your first caller in the queue, we'll hear from Elaine Gabriel from Morgan Stanley. Please go ahead.

Yes, good afternoon, gentlemen. I have two questions, and I'll ask them one at a time. So, firstly, on the automotive end markets, the automotive is one of your most important end markets, and contract negotiations are in full swing. How do you see demand evolving into calendar year 2024, if you don't mind elaborating a bit more? And what are you budgeting in terms of volume growth or contraction? And how are the contract negotiations looking into, well, as you head into the negotiating period?

That's my first question. Thank you.

As I mentioned before, we do not see an improvement in the automotive industry. sector, but also no decline. So we are on a better level than the last year, but far away from the pre-COVID figures. I think that it will be a stable development also into next year. What we see is that some of our customers are more optimistic, some are less optimistic. So it depends on the models they are working on. But when they look at the steel division and also the other divisions, we are very proud. We have a very broad market view delivering from the steel division to all European markets. producers in this market. For us, we would say we expect a relatively stable development on the existing level. To your second question, it's a bit early to talk about negotiations for the next year. What we see at the moment is there is an improving sentiment in the spot market. When you look at the U.S., it's more demand-driven. In Europe at the moment, I would say sentiment-driven. We see the first signs that there is a restocking in some areas, but this can be positive. But on the other hand, as I mentioned before, it's a bit early for these negotiations for the 1st January.

Thank you. And my second question is around your de-carbonization plans. Can you remind us how much you are spending on de-carb this year and next business year out of your total capex budget? And generally speaking, how is the progress going on the ground with your construction works?

Thank you.

I think this year we spent... roughly 200 million of capex and you know that the figure till 2027 is around 1.5 billion so you can divide this figure by another five years so that's roughly the figure with In average, I would say, in average, what is the additional capex for this decarbonization project. And so far, we do the preparation works for the start of the project. We have placed orders for equipment in Donovitz, and we are working on the final negotiations in Leeds.

I could add some flavor to that. I think if you look at the investment figures of the next years and you take, let's say, the $1 billion we have as depreciation level, approximately, you will see, and that's coming from that EIF investments, you will see a peak in the investments most probably in the coming business year, so 2024-2025 and 2025-2026, and then again decreasing towards that level when the EIFs are normal level of $1 billion when the EIFs are finished. So it's It's really a peak of investment for 24, 25, and 25, 26, where we reach most probably a $350 million to $400 million in every of that year for the EFs.

Great to hear. Thank you. And next, Patrick Mann from Bank of America.

Thank you very much and good day, folks.

I wanted to ask, just in terms of the guidance being loaded, well, you know, tightened towards the bottom end of your previous range, is there any specific end market or products that you've lowered your expectations for or is across the board? And then is it price or volume driven or both? That's the first question. And then the second question I just wanted to ask, if there's no agreement between the EU and the U.S. on Section 232 tariffs coming back into play by the end of the year, is there an impact on Rostopin's business and what would that be?

Thank you.

As I mentioned before in the forecast and in the guidance is that we see that Europe is a bit weaker than originally expected and also there are no really positive effects in the very difficult segments in building, mechanical engineering, and also in consumer goods, white goods, and so on. I think that was the reason that we see more the actual forecast is that it's more on the lower end of the original guidance. And I think it's It's both, as your question is, it's volume-driven in some areas, high-performance metals, but also price-driven in some areas. And we think that we can remain with the very positive segments on a very solid level, but we see no improvement in the weaker segments. I think that so far is the actual agreement with the U.S. positive for us and if there is no agreement, we hope we can maintain the actual situation. what we do in between, it allows to apply for exemptions of our products. This is what we are still doing. And so far, we think that we can keep the actual situation when it comes to a to a change. Its OCTG business is mostly affected. And as far as I can remember, the former cost of the import duties were around 30 million per year.

Thank you very much.

I have to add that the former situation in the OCTG business was that we mainly exported to North America, so a big portion of our exports, especially to US, have been affected by that tariffs, and we are now shifting more and more, and also due to the economic situation in the drilling away from North America, more towards Middle East, so the effect would be lower than in the last time.

Thanks. That's very clear. Thank you. We'll hear next from Tristan Brusser from PMB Publix.

Yes. Hi. Thank you for taking my questions. Maybe a quick follow-up on the contracts. I understand that the annual negotiation, it's a little bit early, but I do remember that a small portion of your contracts are actually reset in September, October.

And for those one, have you been able to keep them stable on a sequential basis?

If not, how much you kind of had to concede on price? That'd be my first question. Yes, there have been negotiations in the last weeks.

Obviously, when you have a year contract, you have to decrease the price of your products, although I think we never opened that up to the public how much that was because it would also hurt the negotiations with other customers following in the autumn. But I would say one can guess. that we cannot avoid the market situation. But due to our contract situation, the volatility of pricing and of profits are lower. So in a downturn, we have a better profit margin and better profits than competitors who are more spot market driven. And in the upturn, we are lagging behind. So you can... derived from stock market development of the last year, something around where we have negotiation at the moment.

All right. That's very clear and helpful.

My other question is on China. You flagged a negative impact from higher Chinese exports, notably for your tool business.

We've seen key exports quite often. up quite a bit this year as well. I would like to have your thoughts. How do you believe this current situation is different in any way from what we saw in 2015-16?

Is China becoming a more significant threat for your businesses as they no longer just export steel but also machine, etc.?

And I'm notably referring, for instance, to the auto trade case initiated in Europe.

We'd love to have your thoughts there.

I think that, yes, we have this negative impact from the tool steel business in Europe, but what we see is the competition in Europe very high. This is not only imported, it's also in the EU a high competition. On the other hand, we see that although the Chinese economy is weaker compared to the production of steel. And these export efforts China is doing at the moment is affecting the whole Asian markets and also the European markets. What I can say that we have in Europe is safeguarded. measures implemented and with an upper limit what steel imports are concerned. And I think we are used to this situation also with lower demand and lower production in Europe. It's not positive so far, but there is no systematic change in this actual import situation because of this safeguard measures. And yes, you mentioned the situation in automotive. I think we saw that in the past also with Toyota, Nissan, and and other Korean OEMs in Europe. I think for us is automotive business for the next years, clear we produce for our customers in the US and also follow them and also in China. But on the long run, we will see if We see production here in Europe, and the latest announcement is that EYT is planning a production site in Hungary. So I think we will see the same model as 10, 20 years ago when the Asian countries Asian companies, OEMs coming to the EU.

All right. That's very clear and helpful. And that's it for me. And, of course, I just wanted to wish Mr. Otto all the best for the future. Thank you. Thank you.

We'll hear next from Bastian from Deutsche Bank. Please go ahead.

So my first question is on steel, please. And you mentioned that Planet Plate keeps doing very well. I guess if we look at your shipment number for Plate, though, I think the numbers you reported were well below your total capacity. So maybe you can update us on how you expect both volumes and also the earnings contribution in Plate to trend over the next couple of quarters.

That is my first question.

Yes, you are right that we produce below our full capacity. So we concentrate on this high-quality part of this plate business. And especially for the mechanical engineering business, we see a decline in demand. And this was the reason why we see the shipments numbers are lower than the quotas before. But I think that's normal that we follow the demand in those sectors. But what we can say that especially this credit business is very strong and will also contribute to our margins most also in the rest of this business year and also for the next years.

And if you look at your order book and that run rate, is the contribution going to be stable or is it going to be up or is it going to be down or is it going to trend?

I would say we are a bit down compared to last year, but our I think with this good order book in gladed material, we think that we are around the actual, we can expect roughly stable figure from this actual number. When it comes to gladed material, what we see is that heavy plate in other segments will be a bit lower. But the higher margin will mostly compensate that lower volume.

May I add a little bit of flavor with figures to the trade business? So if you compare the contribution in profit of the heavy plate business this half year with the last half year, It has come down. That is because of the lower volume in normal plate. And that, although the cladded plate is doing well, and if you jump off this half year to the future, it will be more or less the same. So we have a decrease in the contribution of the heavy plate in the last half year. So first half of the year, 22, 23, of 80 million, and this year it's approximately 14 million lower. And that will be the run rate for the profit for the next quarters and half years. So ongoing weakness on normal plate, but ongoing strong development in credit plate, and that contribution margin we're missing from the normal plate, that is will be missing also in the next quarters. Okay, thank you. Then probably one more for you.

Can you please confirm whether the 400 to 500 million working capital release which you mentioned earlier, is that what you expect for the second half or do you expect that for the full year?

Just to be 100% clear on that.

So it's expected for the second half of the year. So for the full year, I would expect a working capital release of approximately 200 million because we have invested 280 or something in the first half of the year. So it's the second half is approximately 500 release. But the 400 to 500, what you mentioned, was the free cash flow, what I would personally expect for the full year. Was that clear enough, or was it more complicated than... No, you at least confused me a little bit versus what I think is stated in your Q&A summary on the web, because I think there it says that you expect a pre-cash flow of 300 million, but you in fact expect a pre-cash flow of more like 400 to 500? Yeah, that's why I stated it as a personal opinion, because I was in the call And, you know, it's after 20 years of experience, I developed a personal opinion. But I also stated that that will be dependent on market conditions, especially also in the high-performance metals, because they are building up stock due to the run-up of the new steel mill. And then the question is how strong the demand in the tool steel is. to pull off that stock in the first calendar quarter. So that is what I'm not sure about because that is a special situation. But personally, I would expect that 400 to 500 million. Got you. Okay, now let's look at the conservative. Yeah, definitely. The conservative version and the 400 to 500 is the, the one which we'll get if the market maybe turns the way you benefit from it. You know, I haven't got to deliver that figure because I'm off the company then.

Yeah, of course. I appreciate that. And in that context, I will give all the best for your next steps as well from my end.

Yeah, thank you. We'll move next to Andrew Jones from UBS.

Hi gents and thanks for taking questions I've just got a couple basically what's factored into that low end of guidance for 1.7 billion because are you assuming that we're going to see a continued price recovery from here to get to that point or you know if you stop price for steel stay around these levels and and raw material costs stay elevated and spread, stay around where they are now in the spot market. Is that, are they likely to come in below that without a price recovery? And then just on a sort of simulated question, you talked about auto demand being probably stable going forward. We've seen the OEM order books contracting pretty sharply year to date. I wouldn't have thought that would have fed through fully into steel demand at this point so yeah I mean what's your assessment of that I mean how at what point do those order books lower order books translate into weaker steel demand is that already in your second quarter numbers which to be fair were pretty strong in steel or should we see that hit you on a lag in the coming quarters I'll leave it there thanks

When it comes to the auto demand, what we hear from our customers, as I mentioned before, is that they do not expect an improvement, but most of them and most of the customers we are delivered to is their opinion that their appliance on the actual level. When it comes to a collapse in the automotive industry in the next business year, then I would say a time lag is always, I would say, We are directly delivering to the OAMs in components. That's relatively quickly in our books. And when we look at the consignment stocks, we don't expect to stop. This will take longer.

Okay. And on the guidance and if we need to see a steel price recovery?

No, I would say that we, as I mentioned before, the lowering of the guidance is mostly coming from the European market and we do not really... I think you mean steel? Yes.

Yeah, I'm basically asking, do steel prices need to rise to hit that 1.7 billion? Or could you do that with spot prices for both steel and raw materials? Maybe I'll try and answer to your question. I think from starting from where we are, I think in the forecast, there's no recovery included. Even the other side, if you look at especially in the flat steel, The contribution in the first half of the year compared to the second half of the year, there will be also a contraction even. So there is no increase in steel price or price recovery included. It's vice versa. We have some increase in profitability in the high-performance metals because they have been hit in the second quarter. But in the flat steel, I think you're talking about there's no price recovery included in the forecast. It's even a contraction, which is due to the fact of our long-term contract having that time lag. So it's not a market contraction, but it's a contractual situation where we see that contraction in these margins. Does that answer your question a little bit?

Yeah, that's clear.

Actually, I don't have questions from your personal opinion. price recovery we've seen in the last week.

Is this the start of a restocking cycle in your view and how do you assess the inventory levels that you're seeing at your direct customers and do you think they really need to restock now or is it likely to be a bit more muted effect?

Yeah, I think that's a very new situation. What we see is the better demand and higher prices in the U.S. I think it's quite new that in the European market, also for us, what we see is that we think that some of our customers think that the price levels are bottomed out. and it won't get cheaper. We know that in some areas, we are at the end of the destocking effect, and there is a need for restocking in some areas, and maybe it's also driven speculation a little bit thinking that the prices won't get cheaper and this is at the moment our assessment because this increase is more sentiment driven and also cost driven from the production plants and you know a lot of capacity is idled in Europe, so we have a situation that we won't see lower steel prices in the next month, and this is the reason why we see an improvement or a recovery in prices in the last weeks.

May I add two thoughts about that? I think what we also see is a little bit an increase in raw material prices, and on the other hand, a decrease in imports to Europe. And that are also two effects which could lead also to a rethinking of the traders that they are, like already mentioned, building their stock again or not speculating on a further downturn. but it's not clear to ourselves whether that will be structural or just a short-time effect. It could turn out to be both of that. We are not sure about it. That makes sense.

Yeah, thanks very much, and best of luck for the future, Robert, and enjoy your return.

Thank you.

We'll hear next from Moses Ola from JP Morgan.

Hi, everyone. Thank you very much for taking my questions. I have two questions, if I may. The first is a quickfire one. So, firstly, just on capacity curtailment that you just mentioned, there have been reports that you had plans to delay the restart of your blast furnace number five at Linz. Could you please confirm if to the restart of that blast furnace?

Are you sufficiently stocked on the slabs, or do you have to build any additional inventories into 2024?

Our blast furnace is up and running and on time. We have, we had no delays of the restart. And the second question is next, for next year. I didn't really get the second part of your question.

I think it was known. I think, I don't know the reports about delays of the restart of the blast furnace. So we haven't had any problems. Any delays, so it's up and running. So that is misinformation. Sorry.

Okay. Thank you very much for that. The other quick fire one, so net financial cost guidance has increased.

What is a reasonable assumption here in the coming financial years, especially higher for longer interest rates? Like I already mentioned, I think the interest burden will be approximately double the figure we have in this year for the full year, and that will more or less be the same for the next years because the increase of the interest burden is not due to the long-term financing of the group because that is really long-term, so that has no effect, but it's more on the one hand on social, burdens and on so IFRS effect on the one hand and the other hand it's the interest burden on the factoring and the bills of exchange which has already been increased so that is the guidance also for the next year second half like the first half next year like this year Depending on where the ECP is taking the interest, the short term. But under the assumption it would stay on that level, it would be the next. If it decreases, then it would decrease. Understood? Was that clear or too complicated?

No, that's clear. Thank you. And then just finally, so on phase one, of green tech steel. Could you please give reminders on what's currently secured for the production of green steel at those sites, including the requirements for HDI scrap as well as green electricity being secured for phase one at that site currently?

Yes, I think we have this long-term contract concerning HBI with our 20% share of the Texas plant. And in Austria, there is a high percentage of green energy available. I think that's very positive. And scrap... is in development I would say we have secured a high percentage of our scrap demand and you know because we have our automotive business we have created closed loops with our customers and we deliver the coils and get back the scrap so this is ongoing ongoing ongoing So, from today's perspective, I think we have mostly secured all our needs for this first step of green texting.

Okay, great. Thank you very much. We'll move next to Marcus Ramos from RBI.

Yeah, good afternoon.

A question related to the situation in Kappchenberg, and I'd be interested to get a sense of the cost impact of the rent up and, say, the power of production in the two plants. If you could really shed some light on the H1 impact and also give us an idea of what to expect for the second half.

That would be the first one.

I haven't a clear figure of the cost, but it's clear that it's more expensive to run two sites. What we can say that we closed the old factory at the end of September, so we will only see in the third quarter the additional costs and see in the first quarter, the last quarter of the business year, no additional costs from the old factory.

It's the real double costs which will go away again. It's approximately 10 million for the full year, 10 to 15 million. What is staying is the higher depreciation level. Yeah, sure. Okay, thank you. That's very And then to cartridge will, can you provide a status quo update on how the operating performance of the client is? Can you indicate the utilization rate?

So, yeah, from the issues in the past, is everything fully on track and targeted in the

Yeah, return profile.

Automotive components business is positive. Carter's value is still negative so far. We are running on a normal utilization rate, and we have to negotiate all contracts with our customer, with our customers. So this is not finished, not finished yet. But without this price increase, we are negative.

All right.

So it's kind of a legacy effect of old contracts. And you would say that the operating efficiency is generally okay and in line with what you

The utilization rate has improved, performance also a bit better, but we see that because of the increased costs we have in inflation Inflation costs. So this is what we have to renegotiate with our customers. And as I mentioned before, Scott finished it.

Okay. All right. Thank you very much.

And at this time, there are no additional callers in the queue. Let's turn the conference back over to your host for any additional closing comments.

Thank you very much, ladies and gentlemen, for the very interesting discussion and for your time today. I wish you a wonderful rest of the day, and if there come up any questions, please feel free to give the lecturer or myself a call. Thank you very much, and goodbye.

That does conclude today's teleconference. We thank you all for your participation. You may now disconnect.