Voestalpine Ag Unsp/Adr

Ladies and gentlemen, welcome to the Bristol-Pina AG Publications full year 2024-2025 conference call. I am Sandra, the call school operator. I would like to remind you that all participants have been listened only mode and the conference has been recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and 1 on your telephone. For operator assistance, please press star and 0. The content does not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Peter Fleischer. Please go ahead, sir.

Good afternoon, ladies and gentlemen, and a warm welcome to today's results presentation of our business year 2024-2025. We've got the complete management board today available for the presentation. Ms. Richter and the gentlemen will give you an overview of what has happened in the last business year, but also on what the current situation is looking like, and also how we see the world today and what we expect for the near future. Afterwards, after the presentation, this will take around 30 minutes, I guess. We are very happy to answer your questions. Thank you very much from this side, and, Herbert, please go ahead.

Good afternoon, ladies and gentlemen. Please let me start with what makes We are a global special metals steel and industrial group. And as you know, we can combine this steel and metal production with processing and engineering competence. And this in one hand. And I think it's... With this expertise, we focus on innovative solutions that offer a competitive advantage to our customers, and this all makes us a leading partner for high-tech industries with relatively high entry barriers such as aerospace, automotive, industry and also railway systems. We are a stock listed company since 1995 and we are committed to value creation for our customers and shareholders. So let's come to the highlights of last business year. You know that we all are in a very challenging environment. Despite this environment, we achieved solid results. Where does this come from? Particularly from railway systems running very good worldwide, good order intakes, long-term contracts. Aviation was very good, and hybrid warehouse is still growing business for us with very good results. On the other hand, we saw a ailing demand in automotive components and also in mechanical engineering. and construction, and this was the reason why we as a management, we clearly focus on free cash flow generation. The figures will be presented by Gerald Meyer afterwards. What's very important that we have a stable low debt situation and, you know, when you look at this, automotive components, mechanical engineering, and construction market, it was necessary that we started reorganization projects in two divisions, in metal forming and in high-performance metals, and we are in the middle of the implementation of all the measures in this year that the results, the negative results last year. We have not forgotten of our growth project, so all these projects will be further developed in the course of this year, and also the next years, and our green textile project is well on track, and we have one-third, that means 500 million of this 1.5 billion already invested. What was the global environment we were in? Europe was our biggest market, was very weak, and especially Germany was particularly hit very, very hard. In North America, positive development in the course of the year. At the end of the year, we see a reduced investment in the rest coming from the new policy of the president in Asia, in China. We have a good industrial growth, I would say, in our activities Also, we see and know, and I'm sure you are as well, that the real estate market in China is still very weak, and the problems there are not solved so far. In South America, Brazil, a growing market for us, but in the course of the year, after a good start, we see a certain slowdown because of the year and coming from a higher competition from Chinese input, but more from higher interest rates. So, I said before, we have not forgotten of our growth projects. I'll give you some examples. Good orders, long-term contracts with two truck manufacturers for the North America market. We have started the investment and it's roughly 70 million euros for that, and we think we can start with production in the next one and a half year. And we have also moved or implemented a production in the U.S. for hyper warehouses. You know, the demand is very high, so it's worth to invest in machines for this business. And also our production facility in Brazil after a big second step is now a third step. in new facilities be done and also when you look at railway infrastructure, a good example is that we have a joint venture in Egypt and the first turnouts are delivered to the customers, the first of 260 turnouts for the next coming months and years. So, fifth example is the expansion of our welding consumable, you know, a business which is very stable over years now and we increased our capacity in India. And now I would hand over to my colleagues in the different divisions, and start with the Steel Division.

Yeah, good afternoon, ladies and gentlemen. My name is Hubert Seitschek, and I'm responsible for the First Albina Steel Division within our group. And today, I'm honored to talk about the development of this division of the past fiscal year. So, as we already heard, we experienced a lot of headwind and still having a lot of headwind in our market segments, but we could show a strong performance despite this fact. weak demand from most of our customer segments like construction industry or mechanical engineering industry and white goods industry. But we also saw a stable demand from automotive customers and also from the energy segment, the energy business. So we could perform quite well because we are concentrating our strategy. We're concentrating on producing and delivering steel sheets and heavy plate and also cast iron in the highest quality segment. And that gives us some kind, a little bit of pricing power when it comes to our negotiations. And in those two respective segments, like automotive and energy business, We were able to gain additional orders because we are a very reliable partner and we're also including in our supply the respective logistics or supply chain services. I do expect on this level we are facing right now more or less stable development. So I can say that automotive is doing and forecasting quite well. Also energy business is doing well. White goods industry is improving a little bit, but the other segments are staying at that level we are seeing right now in my opinion. So we are running our facilities here in Linz close to full load, so our utilization rate is very good, and that will stay that way until fall at least. So I do expect a stable business year, an actual business year, because we could manage to concentrate on our high-quality steel sheets and also the heavy plate, and the sheets for that are some kind of high-tech plates we are delivering to the energy business. Herbert Eigenstern mentioned already we're in the middle of our decarbonization project called Green Textile. So we are erecting electric arc furnace on this site here in Linz, and we are quite on track with this project budget-wise and also time-wise. We're very, very, very good on track. And what I wanted to add is that we're not only concentrating on decarbonization. We're also investing and could finish some investments in quality. What is the modernization of our hot dip galvanizing lines, for example, or our new cold rolling pickling tandoor mill is online now, and that is very important when it comes to improving our quality. Yeah, that was it more or less in a nutshell, how the First Albion Steel Division was performing and a little bit of outlook. Thank you very much.

Good afternoon, ladies and gentlemen. My name is Reinhard Neubauer, and I will have the honor to walk you through the development of the high-performance metals division in the last business year. Overall, we faced low demand and the low utilization of our steel plants. And regarding the business development, tool steel is mirroring the global economic environment Herbert Eibensteiner presented. In Europe, they were confronted with a stagnating environment, especially in Germany, where we had decreasing demands. North America was starting quite well and was then very hesitant and hesitant in investing, and this also was felt by our organization there. South America also started quite good and had this low demand in the second half of the year, and China, Asia, was quite stable and quite positive due to the production of new energy vehicles and microelectronics so we had good market opportunities and we could gain them. In the special materials market, we had a strong demand from the aerospace industry globally and we could satisfy it quite well. and we had a stable but lower demand in the energy sector. The current situation and the outlook is that we do not expect a major tailwind from the tool steel market. Therefore, we focus on efficiency programs and also realigning our strategy and approaching the markets. The tariff announcement will create additional uncertainties on the customer side, and this is what we have to tackle with. And the aerospace industry, we see that the upward trend continues and it's a quite good outlook for that industry. What is done in the strategic development, we had one big project and could successfully sell Buderos Edelstahl as per 31st of January this year. This was strengthening our overall product portfolio and high-performance metals division. And the other big project we have started last year and implemented to a big degree was the reorganization of the company structure. This means we are increasing the resilience of our division and working on that with the concentration and the structuring of the sales organization, meaning that we are serving customer-specific industry segments. We are bundling logistic activities worldwide, and we are focusing on a production network to utilize our capacities in the melting plants in an optimum way. And we also had to redesign our structure in terms of manpower, and we decreased the manpower year on year by close to 1,600 FTEs. Big part, 1,130 coming from the sale of Poderos, another 500 in the division where the main part was 250 in Austria, in Katzenberg. and the other 250 were widely spread over the network we have worldwide. And for the upcoming year, we have scheduled another close to 300 FTEs. We will dismiss due to the reorganization and to the resilience program we have initiated. Thank you.

Good afternoon, ladies and gentlemen. My name is Franz Keinerstorfer, and I'm glad to present to you the developments in the business year 2024-25 of the metal engineering division. As you know, we have two major areas within metal engineering, which is the railway systems segment and the industrial systems segment. And in the last business year, we had a good market environment for railway infrastructure globally. with good performance in railway infrastructure and with the railway systems. In comparison to that within the industrial business segment, we also could see, especially because of the global setup, a good performance and a stable performance on the welding business segment. And differently to that, a first good quarter on the seamless tube side, but then a more deteriorating situation because of the upcoming elections in the U.S. and the uncertainty of the further market developments on the seamless tube side. And as our wire business is very much related to the European market and because of the very moderate situation of the European market. We could not really see any really good recovery in the wire business segment, even if you can say that in the second half year, the market stabilized, especially in the automotive segment, so that we could see a little bit of improvement there. What's the current situation and the outlook regarding railway infrastructure? We are still very positive. Generally and globally, we have still very good demand from our various customers in the different market and customer segments which we are supplying. So we will see a stable and good performance of railway infrastructure and the railway systems. Regarding the industrial business segment, I would assume that on the railing side, we prolong the actual stable situation, especially again because of the global setup of the railing business. And with the seamless side, just because of also the last executive order of the U.S. administration from yesterday. We're in a little bit uncertainty how the new tariffs and the increase from 25% to 50% will weigh on the tubular segment now at least for the next three to four weeks, and then we will see how the negotiations between the U.S. and the European Union are going to develop and the outcome of that, of course, will very much determine how the tubular segment will proceed further. On the wire business side, we will see to our expectation a little bit better performance because also of the big programs in Germany, but of course, more in the second half of the business year than in the first half. On the strategic side, we are further developing our railway systems segment within the railway infrastructure business. We are focusing on a completion of all the components within the system. Actually, we more or less have everything in-house and we are very much focusing further on the digitalization of our systems approach and also regarding the necessary but well on track implementation of artificial intelligence supported diagnostic and monitoring systems, which will bring further good insight of the actual and maintenance demand of our systems towards our customers. You also know that with our steel production in Donovitz, we are undergoing in a comparable way has just mentioned regarding the flat steel division that they're also undergoing this green deck steel transformation, and we are well on track, too. The project is in good progress on time, and we are looking forward to ramp up the electric arc furnace facility in spring 2027.

Thank you very much.

Good afternoon. My name is Karola Richter, and it's a pleasure to report about the metal forming division. Let me talk and start with an update on the business development. I will also look into the current situation and will give you an update on the outlook. And let me do that business unit by business unit. If you start with automotive components, we still do see that Europe has not fully recovered to pre-COVID levels, and the domestic production is still on a low level. In China, we see the transformation to electric vehicles ongoing very strongly. But at the same time, we see that our customers, European OEMs, lose market share, which does have an effect on our business as well. And talking about the U.S., of course, there is tariff discussions ongoing. And for many of our customers, of course, it is an important decision whether they increase their local production in the U.S. Many of them are there already. but some have very large productions in Mexico still. Talking about cubes and sections, if I look at the last year, actually, we saw a relatively weak market in Europe in almost all segments, while all the other regions performed well, especially in North America. If you look at what's going on right now, we see a trend change. Europe is significantly recovering. We do see that already in our order books in the first numbers also of this year, while at the same time North America gets a little bit weaker. Looking a bit into segments, we are sure that the rock bottom is reached for trucks and trailers. Actually here we do see a very nice order intake. with improvements, which is usually an early indicator for a positive outlook. Also stable order intakes for cabins, and here the segments are agro and construction. And also good news here, we see some more activities also coming out of Germany. Britain's construction remains weak also this year, but we do see very positive order entry for photovoltaics and warehouses, which really stabilizes our business. US is just the opposite. This is now weaker, especially if you look at off-road vehicles and photovoltaics. South America, well-performing last year. Business is still solid, and we also stay optimistic for this year. In precision strip, we had a very weak last year, especially if you look at the economic situation. For example, again, the construction industry did not help us if you look at our sales business. That was very weak. And on top of that, also some of our major customers faced tough competition in Europe out of Asia Pacific. Now, what are we going to do on the strategic development side? And, of course, the main topic for us was our reorganization of the automotive components business. We call this project Restart, and the target here was to improve by a high double-digit number in terms of EBIT. And the main focus, and we already communicated that last year, was the reorganization of the German sites. So going from five to four sites. That did include press relocations, and we are still ongoing doing this. And it also does include a site closure, which we have communicated as well, Birkenfeld. Discussions with works council and unions went well. And also the same thing, we did a reorganization in Dettingen. We will not do any press parts there anymore. We will just focus on assemblies. And also there we had fruitful discussions with works council and unions. And with both together, we will reduce our headcount by 450 FTEs. If I look at Germany altogether, we will reduce, and actually starting from March 24, from a level of 2,630, we will reduce our headcount to less than 2,000 within the project of restarts. But not only Europe and Germany is our focus, also we are focusing on improvement programs in our North American side in Cartersville, where we also reduced headcount already, and we are concentrating on the cost and efficiency program. Just to give you a little picture, while we were running our automotive components business with 5,600 FTEs altogether, we will do that in future with less than 4,000. So all these measures are in implementation. We are exactly according to plan, and we do hope to already see improvements in our EBIT this year. Why is that? First of all, from the personnel reduction, and secondly, with the press relocations, we will be sure that we have the structure adapted to the lower levels of demand, especially in Germany. With that, I hand over to my colleague.

Thank you, Carolin. Yeah, my colleagues explained now what was really the challenges of last year that we were focusing on. And from a numbers perspective, financial perspective, I would say the main impact we saw, for example, the disposal of business was also that we, of course, focused on restructuring. We had impact here, which you will see shortly here in my presentation. Yeah, and of course, that we also focused, all of us, the six of us and the first Alpina team as a whole, in optimizing working capital and streamlining also capital expenditures. So let me translate or summarize to you how the impact was here on our main KPIs. So in terms of revenue, on my first slide here, you see that it was reduced. It came down from $16.7 billion to 15.7 billion, so minus 1 billion euros roughly. 60% out of that is referring to lower prices and 40% to less shipment. So big impact there from lower prices. We saw reductions in revenue in all four divisions and, yeah, and, of course, this also translated into the development of our profitability in terms of EBTA. We are down from 1.7 billion to 1.3 billion. Of course, there's a big impact in there from non-recurring items. I will talk about this then a little bit later on the next slide. But one thing is interesting, and I would like to mention it here, that these lower sales prices I mentioned before were more or less compensated by also declining raw material prices and raw material costs. So what was left was lower volume sales. in particular there, and as I mentioned, I will talk about the non-recurring items in a moment. In terms of EBIT, I have to mention here that we also got rid and cleared house and cleaned house in terms of goodwill, so we impaired 170 million, referring one part to automotive components. Karola was just talking about that, and the other one to our high-performance metal division. where we impaired in total 100 roughly 20 million euros. Between EBIT and profit before tax, of course, you see the financial result, which was exactly at the level of the prior year. So I will also talk in some moments about our debt position and so on. So everything is stable there. Of course, What is interesting is that our tax rate, which is not mentioned here, is at 34%, and the expectation would be perhaps some 25% for an Austrian company, an Austrian headquartered group. So the main reason is that the impairment of goodwill, I was just talking before, are not tax deductible. This brings up in both years, by the way, in 23, 24, and 24, 25, the tax rate, and this should normalize then next year. Last line here, earnings per share, last year 60 cents, this year 90 cents. If you compare that with our profit after tax, of course, you see that last year in the comparing period, the stake of minority was way higher than this year. Therefore, we saw an increase in earnings per share to 90 cents. I mentioned that I would talk about one-off effects in our balance sheet or in our P&L, and I would like to focus there on the second column here, EBIT. So, the reported number was 455, and you see there that 177 of negative one-offs were included there. So, 80 roughly are referring to the sale of Puterbus Edelstahl. Roughly 80, again, to impairments of HPM production. Goodwill, cash generating unit. And we also had reorganization or restructuring expenses included there of 16. And metal forming division, reorganization, restructuring of automotive components business unit account for 50 million of non-recurring items there. And impairment of automotive component Goodwill added up to 39 million euros. Then there's something left, adding up to 52 million euros, and you definitely have in mind that we were talking also last year about the valuation of our gas storage facility. This is included there with an amount of roughly 45 million. So if I would then talk about an adjusted EBIT number instead of this 455 of reported EBIT, we would end up at 770 EBIT adjusted or 1.5 billion EBITDA as adjusted EBITDA for Fuerstalpine Group last year. I have prepared a bridge there. So how do we come from 1.7 billion to 1.4, 1.3 once again there? You see in the first two columns, our gross margin is slightly up. There is one reason behind there, that in particular in steel division, raw material prices compensated or more than compensated lower prices we got for our products. In terms of volume and mix, we see a minus of 135 million. Here it was not possible to compensate in full lower volumes with a higher margin mix. But, yeah, we managed there to optimize at least. and compensated a little bit. And last but not least, miscellaneous, 900 minus 300 million, what is included there? First of all, there's included, of course, cost inflation, which was not able to compensate in full by continuous improvement programs, for example. And, of course, there also included some higher than in the comparing period non-recurring items As I mentioned before, in particular, the sale of , for example, and restructuring expenses as mentioned in the previous slide. I prepared a second bridge where you see the deviations for the respective divisions of . You see in steel division, we performed even better than in the comparing period by 60 million, so excellent performance there. In a difficult environment and difficult here, And I mentioned here once again, lower volumes and prices, which were actually overcompensated by lower raw material prices. And the mix was definitely better, in particular heavy plate business, which supported their performance. High performance metal, 100 million down compared to 23, 24 million. Lower volumes, I would say, is in particular the main reason there. Price is a little bit, but in particular, lower volume, non-recurring items in EBITDA roughly in the same magnitude as in prior year. Metal engineering division, very strong performance, as my colleague explained in railway systems. It was stable in particular in welding, difficult environment, but also stable in wire. Seamless tubes definitely weaker after a record period in 23, 24. Metal forming division is down by 132 million. We talked about restructuring. We talked about the difficulties and the challenges we are facing in automotive components in particular. This is the main reason why we are down. was also down but on a very high level. And in warehouse and racks, we are doing very good and very well. So we saw an improvement there which compensated again a part of this reduced result. Yeah, and this is how we end up at 1.3 billion in EBITDA. In terms of free cash flow, I think we managed this part very well last year. You see cash flow from results is down, of course. It is down like EBITDA is down, EBIT is down. And so one main target of all of us here in front of you was to improve on the one side working capital, on the other side streamlining investing activities, CapEx management. And in both sides, I think the performance was really good. For example, in changes in working capital plus 300 million This mainly refers to lower inventories. Of course, the question could be, and what is the effect of lower prices? Not even half of it comes from lower prices. It's lower volume. So it's real improvement there from everyone contributed here on the table. So we ended up in an operating cash flow at the level of the prior year despite this lower profitability. Cash flow from investing activities at 1.1 billion, my colleagues explained to you, our main projects there with Green Tech Steel, but it's also lower than I think than expected. And as we also guided last, during our Q3 call, so it's still unchanged outlook for this year. at 1.50 or roughly at this magnitude is what we can explain or what we can expect from the year 25, 26 in terms of investing activities. So we ended up in a free cash flow of 309 million euros after 394 million euros prior year. My last slide simply gives you our status here financially. So we have a very solid equity base, $7.5 billion, fairly stable there. Equity ratio is 47%. Debt exactly at the same level as prior year, $1,650 after $1,651 is net debt. Gearing exactly at the same level of 22%. And also for you, so there are no major redemptions. which we have to prepare now for this year, 25, 26, as $1 billion will refinance in prior year. And so there's a fairly stable year to be expected also from this perspective in 25, 26. And I would like now to hand over to Herod again for the outlook.

So let me finish with the outlook I think it's clear to everybody that we got a bit more uncertainty after the Liberation Day in the U.S. And it's unchanged more or less. But as you know, the U.S. is not our only market in our worldwide market. business and I think you will get asked anyway we try to calculate or forecast what 25% of this tariffs could affect and we come to the conclusion that it's more or less a a mid-double-digit million euro amount. And when you ask me for the 50% tariffs, when they last longer, I would say maybe we have an additional effect of lower demand from the U.S. because the economy will come down because the US have to import at least a quarter of its demand in steel 25 million 25 million tons and this would switch to paying not tariffs anymore but to have to fight with underutilized activities at first opinion, especially in tubulars or maybe in high-performance metals in Kapselberg in the new plant. So maybe it's a bit higher, but there is no reason to change the forecast so far. negotiating and we will see in a couple of weeks what is the outcome. But the message is it's a manageable activity to handle 25% or even 50%. The market trends in general haven't changed materially. Construction, mechanical engineering, consumer goods, remain at the same level as Hubert mentioned before. We see here and there some improvements, especially coming from Germany, and automotive industries also expected mostly stable on current levels also in the next months to come, knowing that Hubert Sajac with his D division has gained market share also in automotive and railway systems will perform very well. Aerospace will perform very well. And also warehouse business, where we are more or less fully booked for this year, will continue as expected. And this leads to an EBITDA forecast in the range of $1.4 billion to 1.55 billion for this business year 25 or 26. So this was a brief presentation about our business year and the outlook, and we are happy to answer your questions.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and 2. Questioners on the phone are requested to disable the loudspeaker mode while asking a question. Anyone with a question may press star and 1 at this time. Our first question comes from Tristan Gresser from BMP Paribas. Please go ahead.

Taking my questions, I have two, and I'm sorry, but it's a follow-up on U.S. tariffs. Could you share a little bit of what happened with your sales to the U.S. with the 25% tariffs put in place over the past couple of months? Have you been able to share the tariff cost with customers, or are you burying the full costs? And then when we think about this 50% tariff, maybe I'm reading between the lines, but it would not be fair to just double it if I understand you correctly. If they stay, the impact could be greater because you could actually lose orders and you need to cut production. Is that fair?

Absolutely, yes, that's a very good summary. You know what we see when the US imposed this tariff, this 25% tariff, that immediately the steel price was rising, so it was possible to import into the US. On the other hand, with a relatively high percentage of of longer-term contracts where we have negotiated higher tariffs in this contract so we can hand it on to the customers. And, you know, this 50-double-digit figure is there will be some tariffs remaining for first albine, and this was the idea behind this figure, and this is the right conclusion from you that you cannot double the effect of 25%, but there will be some products which are not produced in the U.S., that we can hand on these tariffs, but there are some products we cannot, and this would lead to reduced orders coming from the U.S., because when you look at seamless tubes, OCDG tubes, with these higher prices, I'm not even sure that the recounts will stay on the same level with this lower price. So I think there will be a reduction in demand in the U.S. as well. And this is an effect which is for sure in our books, but not one-to-one because its tariffs will move to underutilized costs in our books. I hope it's clear what I mean with this explanation.

No, it's very clear. Thank you for that. And my second question is more on European trade policy. I think in your comments, you mentioned the potential, what you're looking for is an extension of the free allocation path 2034. it doesn't look like it is part of the steel action plan, or is it something that the European Commission is actually considering? So could you confirm, is that, you know, your position and what you're trying to get heard with the Commission, or is it actually, you think, something that the Commission is evaluating as part of the steel action plan? And yeah, I'll leave it there.

I think we are lobbying for that because we are of the opinion that we invest in CO2 reduction and why we are spending a lot of money and there is at the same time a reduction in free allocation. So that means we We would lose additional money at the wrong time. And I think more politicians are considering that, but I'm not sure that we succeed finally. I think there are a couple of other issues we should look at. It's also the safeguard measures, the new safeguard measures will be implemented. next year, which are positive, I would say, for our industry. I think we have not finally discussed CPAM, because I think the Commission is well aware that we have no solution for exports. So I think there are a couple of of positive things in this clean industrial deal, but I'm sure that we won't get everything we want to have.

Do you think the new safeguards could come already in 2025, or do you think we'll have to wait 2026?

Normally, I would say it's 2026. you know, when there is no final conclusion on tariffs in the course of the next month, I think that the EU has something to do to prevent, how should I say, more imports into the EU coming from other countries. They are not delivered, they cannot deliver delivering goods to the U.S. So I think that maybe this is an intermediate activity, but for sure the U.S. then look at the European border to protect our industry.

Okay. Thank you very much.

The next question comes from Bastian Siganovich from Deutsche Bank. Please go ahead.

Yes, good afternoon all, and thanks for taking my questions. My first one is actually just on the steel cycle and actually the price cycle specifically, and I appreciate that's probably a difficult question to answer given, I guess, all of the moving parts out there. But I was wondering, what is your base case scenario for the steel price cycle from between now and the end of the year? Prices obviously have been very strong in the first half so far, but has been only fading a little bit in the last couple of weeks. I guess now we have a bit more uncertainty here from, I guess, the higher U.S. tariffs and the possible flowback of material over T-ROUPE. There's also weaker seasonality. Is there any rationale which, I guess, tells you here is a certain floor for steel prices? So that's my first question. Maybe if you could help us with your views.

Yeah, thank you very much for your question. And you're right, there's a lot of uncertainty around now, just having been talking about the tariff situation. But what we think and what we expect is that there will be not a lot of movement in the steel prices. So what we, on the one hand, we have is that we have a a good portion of yearly contracts, and we saw that when we negotiated the yearly contracts, they were at that level we estimated, so there was not a big change. It depends on when you negotiate that, because the The time of the yearly contract is not all of the contracts starting in January, but some in April, in July, and in October, for example. And the first negotiations we had do reflect more or less what the MEPS or other institutions are saying. We see during the summer, we see the upturn we saw in the first couple of months in this calendar year was good and more or less that what the predictions were saying. And we see now that a slight upturn came to a halt more or less. And during the summer, we expect steel prices at that level. And that will not much change till the end of our fiscal year. So more or less, we do not expect the rising steel prices. We see some differences when we negotiate the yearly contracts or half-yearly contracts. We also have quarterly contracts. We hardly have a spot business. But what we do see, for example, in the quarterly contracts, There was a bit movement in the better direction for us in the now running quarter. We see for the next quarter more or less stable prices when it comes to quarterly perspective, and we see a slight increase. We expect a slight increase again when it comes to fall, but over the year, more or less with some ups and downs, we see a more stable or we expect a stable price level for our steel products.

Okay, understood. Then my next question is on metal engineering, and here I'm wondering whether maybe you could share with us the profit contribution from the railways business to the division. which has not been, from my understanding, carving out for us for some time. But maybe if you could provide a bit more color, how actually that the earnings number splits between particularly railways and the others, I guess seamless is probably not doing as well at the moment.

I would say what I can share with you, you know that we do not publish business unit numbers there in principle, but railway system is roughly or more than, let's say, 50% of the volume of our overall business in terms of revenues in this group. And in terms of profitability, it also outperforms also in terms of the margin. It outperforms more or less the rest of the division. This is what I can share with you here.

Okay, thank you. And then the last question, again, probably one for you again, Mr. Meyer. So just on the CapEx side, we've come in well below your earlier guidance, not just this year, I guess, also in the previous year. So I'm wondering how much of the 1.15 billion CapEx number you're guiding for is for decarbonization. Where have you cut versus the, I would say, the earlier communicated soft guidances? I think it was roughly 1.2, which you mentioned before, for 2026. So where have you cut back? And I know we obviously just started 26, but maybe you could also give us a working assumption for 27 and 28, just in the context of decarbonization and what you still have to spend there.

Yeah, first of all, unchanged total number of 1.5 billion. In terms of cutbacks, one-third is done. In terms of cash flow of investing activities, we are between, I would say, 25% and 30% through, roughly. So what we expect is being part of this $1.15 billion. I guided in my presentation, I would say roughly $350 should be cutbacks for this year. in terms of guidance for the periods coming, it's our clear target not to exceed 1.15. So we want to stay there and not exceed this number also in the periods to come. And as I just mentioned, that roughly 25, 30% is done already in terms of cash out that I expect another 25, 30% to be done this year. Then you can calculate what is left from this 1.5 billion. and the decision how we continue with our upcoming projects has to be done in the next period. So we are not in a stress situation there.

Understood. And then, like, so if we work that back, or if we take the $350 million away from the $1.15 million, which you said you're not going to exceed, Are you running the rest pretty much at maintenance level, or is there still bits and pieces for some strategic investments? I guess you mentioned the truck plant, you mentioned investments into warehousing, so my impression is you're actually still investing basically into quality and growth, despite having cutback, but maybe you could just talk about that.

Yeah, there is still capex remaining for for profitable growth in our downstream business. And I think, you know, that's, how should I say, it's not so capex heavy than steel industry. So I think there is also room to one or the other additional capital expenditure for growth as well.

Okay, thanks for taking my questions.

As a reminder, if you wish to register for a question, please press star followed by one. The next question comes from Christian from Baden Bank. Please go ahead.

Yes, good afternoon. First question is concerning administrative expenses. So over the last four years, almost, you increased sales by approximately 6%, while the administrative expenses increased by 30%, and again, 8% this year, reaching more than 900 million. Can you give us some kind of an explanation why this is the case, and how do you expect the development going forward? So this is the first question, and I'll take them one by one.

Yeah, Christian, just one hint from my side there. In terms of sales, we also include, of course, logistics. And logistics, there are two elements. The one is the volume, which was down. Prices were up. So this is there at the case. In addition, we have, of course, sales. We have personal expenses in there, which are normally inflated as the rest of our gang. In terms of administrative expenses, you are right. This is, in particular, if you compare them with the sales expenses, They are up, but this also includes, for example, some part of our restructuring expenses, and this is the main reason why we are up there. The second part is simply IT costs. So in terms of cybersecurity, in terms of SAP HANA investments, this is also part of administration of expenses, and this is the reason. We invested quite heavily in this part, and this is why this is up. It's not that we built up, let's say, a big... headquarter here and, as we say, so it is definitely a project behind that and good reasons.

Okay. And is there any idea that we're going down to some kind of a, I would say, close to sales increase or even lower?

I would say we will continue definitely to invest in SAP transformation. As for HANA, everyone has to do that. We have some divisions which are focusing on that more in the upcoming period, like metal forming or periods. On the other side, I would say it's fair to assume that we do not expect additional restructuring expenses, which will be a burden on our admin expenses like it was last year. Of course, they will come down. And also for you, roughly 20 million were part of simply restructuring was part of admin last year.

So this goes directly to my next question. So there is the idea to go from transforming down to lessen 4,000 FTEs and also to reduce the FTEs in HPM. Do we or should we expect any kind of additional restructuring cost in the current business year or not? So if I understood you right, you said there's nothing to come.

Maybe to comment on the headcount number, this number I mentioned, 4,000 is for the automotive components, which is just one part. Also together the division is larger. On the restructuring side, as I mentioned, the automotive components restart project is the major restructuring project. All the other parts of the division are performing much better. We heard very, very well. So, and the number we are planning for this coming year is only €20 million for still the automotive restructuring part. Still has to do with the press relocations. But that should be it. And after that, we assume that automotive components is, yeah, ready for a profitable future.

Okay. So for the entire group, this also means that we do not expect or have to expect any further meaningful restructuring costs. This is in principle correct, yeah. Okay. This is of the day, our view. Then when it comes, the next session is concerning inventories. So very impressive to wind down inventories and increase working capital or increase the cap release from working capital. We are now at well below 30%, if I understood it right, the first time since 2019. Are there any special items in there in divestment from Buderus maybe? And what should we expect going forward? So if there's some increase in activity, should we then expect also a meaningful increase in working capital again? Or is that kind of level something you can deal with also in the coming quarters and even years?

Let me answer and take this question as well. For us, we managed to reduce working capital by roughly 400 million last year. Out of that, and this was your one-off question, Budero's sale contributed to that by roughly 50 million. So if we exclude that, 350 is roughly left in terms of reduction of inventories. Out of that, Roughly 200 million, once again, we're referring to volume decreases, and the rest was referring to lower prices. So in a stable environment, what I would expect, again, deductions and reductions in terms of inventory mainly coming from restructuring optimization programs in HPM division, where we have really a tough project up and running and implemented, so we expect further reductions there also for the coming period. And this is mainly it, I would say. So let's assume. So we came down last year from 2.7 roughly to 2.34 billion all in all in terms of working capital. And there is still room to improve there in particular coming from HPM and some minor stuff from the other divisions. But we are focusing on that, all of us.

Yeah, of course. One can see that. The last question is concerning capital employed. The interesting part here is it went down magnificently over the last years, minus 40% over the last four years or five years, approximately. But I don't find a number, and especially I don't find a number per segment in the entire report. So, and this is interesting because it is also part of the management remuneration. So why do you not show the capital employed and the development of the capital employed in your report?

I think it should be somewhere at least. But, you know, there's a main impact. There are one main impact also is, of course, also what we saw in the last year. Secondly, we had to impair in the last three, four years quite significant goodwill. And, of course, our working capital improvements also show improvements there. So, therefore, we had roughly 10 billion. Yeah. So, this is true. But, yeah. Part of our, again.

Okay. It would be interesting also for someone from the outside looking at these. You gave them, I think, some years ago. It was in the reports. It's also the couple of segment and the development there. And now I searched it, but I haven't found even the entire number for the group. This is just a reminder, something like that.

We will consider that.

Okay. Thank you very much, and all the best.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Peter Fleischer for any closing remarks.

Thank you very much for your attention, and thank you very much for the interesting discussion. If there are any questions left, please feel free to give either Jared or myself a call. Our management team will be on Roto now for the next two weeks, so maybe we can meet each other in person as well. And as mentioned, if there are any questions left, please feel free to drop us a line. Thank you very much.

Thank you. Bye-bye.

Ladies and gentlemen, the conference is now over. Thank you for choosing ColorSchool and thank you for participating in the conference. You may now disconnect the lines. Goodbye.