Voestalpine Ag Unsp/Adr

So I would like to jump into the presentation of this first quarter, 25-26. So I think you are well aware that we are all in a very challenging environment, but Despite of that, we can present a solid result in this quota. We have a very strong financial basis, and our strategy is very robust with this global footprint and this diversified product portfolio worldwide, and we And I'm happy that I can present a good, high free cash flow in this first quarter. And we will discuss afterwards what the outlook for that is. We have reduced our net debt further to the lowest level in the last decade, and that means that we are working on basis of a very strong balance sheet. And when you look at the at the market where we are in and was positive in this first quarter, and I think that we will also see in the forecast that this will be very stable, is this upward trend in railway systems, also a good demand in aerospace, and also Very, very good and still and we are already fully booked for this year and we are working on the order book next year is this hybrid warehouse business with very good demand. Stable is automotive components in mechanical engineering and building industry that on a actual but low labor, and that's the reason why we decided to reorganize some businesses. Most affected is automotive components and high-performance metals, but we do also efficiency programs in the other. in the other divisions and this is what we can do to have the plan that we take the opportunity to adapt to a new situation and gain efficiency in all our businesses. Number of employees dropped to 49,600. And let me give you some example what was happened in this quarter. You may remember when we talk about railway systems in the past, we produce rails. We are world market leader in turnouts, and we have decided five, six years ago to go into this digital monitor systems, and we developed this system Centric And we got now a very good and major contract for this part of our business from the Dutch railway system company, ProRail. And I think that's a clear indication that we are seen as a full system supplier in the automotive industry. in the railway system components business. We have a contract signed for high-quality steel with BYD in their Hungary company, where they want to start up a production for cars. And I think that's not unlogic because we are delivering to all automotive OEMs in Europe. And that's a logic step that also incoming new producers part of our customer base. Recently, we tried to prove that it's possible to produce a green rail from hydrogen-based steel production together with the Austrian State Railways, a very interesting R&D project, I would say, here you see this rail is produced with HIFOR, which is a hydrogen-based I would say, and it's CO2 zero, and as I mentioned before, it's an R&D project, but these rails are implemented in the normal railway system, and it's close to our facility. And a boom in warehouse and rack solution is still ongoing. And also the development of our customers are ongoing. So we see more robotic applications and we react and develop new rack systems also for those applications will be good products also for the next years to come. So what was the economic environment we were in in the first quarter? US still relatively robust. And we saw that, or we think that this positive, very positive economic effect was also due to advanced purchasing. Europe relatively weak with certain improvements, but ongoing uncertainty due to the U.S. tariff policy. Relatively stable and good economic development in China, although they haven't overcome the real estate crisis. And in Brazil, our biggest South American market is a bit affected from high interests at the moment. And some of our customers are also affected from strong competition from Chinese imports. So a lot of uncertainty you can imagine, and we have adapted this with different plans. Let me start with the Steel Division. Fösslbini Steel Division performed in this very difficult European environment very good because we decided last year with a marketing program to create more market share with positive outcome. So we see that especially automotive and energy increased in this year. And we see a very solid utilization of the steel plant, more than 90%. And they gained also efficiency improvements with clear programs. And what's relatively new, we think that the steel prices in Europe have now bottomed out. You know, there was a certain reduction at the spot market, but now it seems to be down. that we have found ground and we can expect a certain improvement in the months to come. In high-performance battles, I said before, was relatively affected by this uncertain environment, huge competition in Europe, and we started a reorganization. This reorganization is on track, and we see the first improvements. You know we have sold Poderos last year. This was a strategic A strategic decision we see in our segments we are in is interesting that tooling is globally relatively low with one exemption and that's China. This is our best market in that context. And when you look in industrial segment automotive week, you know this division is living from new models, which are – The number is relatively low, but mining, medical technique, food and beverage is doing quite well. And aerospace, as I've mentioned before, has unchanged. Very good market environment. And oil and gas is relatively low. Metal engineering, you know, biggest big portion of metal engineering is railway systems, you know, unchanged strong demand globally. Seamless tubes business slowed down in quarter one due to a lower demand in the US and is also the area where we are most affected by tariffs. And welding business, international business, is surprisingly stable also over the last years and months. And still challenging is the market, which is more focused on Europe is wire technology. But here we do also some efficiency and improvement programs that we improve our efficiency here and get more volumes in-house. Metal forming division, you know, automotive components is hit quite hard. quite heavy. So this reorganization is really well on track. So we reduce people. We close companies. We put machines together so we rebuild or reorganize this area substantially and we will see the first positive effects at the end of this business here. The market for automotive components is stable on that actual lower level. And in tubes and sections, it's a very solid development. It's a business of around a billion turnover. And We see here and there some improvements in demand, but all in all, a very solid-running business. And as mentioned before, we are also in rec solution, fully booked this year and nearly fully booked also next year. So I would hand over to Gerald to present the figures.

Thank you. My pleasure to inform you how this challenging environment Herbert was talking about, how this ongoing trade barrier discussions and also how our optimization initiatives translated into our Q1 numbers. I would like to start with this slide, number nine, where you see on top line revenue is down by 6% or 240 million roughly. Roughly two-thirds of it refer to lower prices, market prices. 80 million out of this 240 reduction refer to the sale of puteros. You know that we sold it off in the last quarter of our pandemic. last business year or beginning of this calendar year. Talking about profitability, EBITDA, and you will see two bridges a little bit later. But for this overview, in EBITDA, of course, on the one side, we had these lower prices, which were not compensated by the cheaper raw materials. We did have just a minor impact from volume deviations. So on the one side, in steel division, volumes were up. Herbert explained our initiatives there. The capacity utilization on our side is quite high. On the other side, we have lower volumes in HBM, but it's a wash if you add them up. And for the rest, I would say, of the divisions, all the divisions except HPM division are below prior year level, given the market environment in HPM. We are above prior year level, and this has to do with one-off effects, which we saw with regard to the sale of Putiavus last year. Depreciation exactly at the same level as last year. So this means also in EBIT as in EBITDA, we are 56 million behind the first quarter of 2024-25. Profit before taxes, 50 million. What you see there is that financial result means the difference between EBIT and profit before tax is improved compared to last year. The main reason is simply lower interest rates and reduced net debt. And the outcome is what we see there. And this means a financial result of roughly 33 million, minus 33 million. Tax rate, I would say, also no surprise, at 23% for the first quarter of of this business here. First bridge I would like to present, as you know, so the first two columns means our gross margin prices are down, partly compensated by lower raw materials, lower energy prices. The difference of 110 million miners has been mainly allocated to our steel division. where we saw this and it was expected lower prices also from beginning of this calendar year and also of first quarter of this business year. Mix and volume, just plus $8 million. Going into a little bit more detail there, volume is positive in steel division. I mentioned it here, but mentioned it, capacity utilization in particular in steel was high. Also, mix was positive in steel division. On the other side, we saw lower volumes in HBM rest more or less stable. Miscellaneous, plus $46 million. In this column, you see... In particular, the valuation of puteros, a little bit less than 30 million, a negative one of last year when we prepared and we were preparing ourselves for the sale of puteros. And, of course, there are also our cost efficiency measures in there. So we are working on all the divisions in improving our cost position and optimizing. And this is, of course, also part there. or included there. Next bridge is how we developed by divisions from first quarter 24-25 to our first quarter 25-26. EBTA in steel division is down 40 million by 40 million roughly. It is with 109 million euros still very strong I would say. The high capacity utilization, as I mentioned at various times, really supported this solid outcome on first quarter. And it was actually above our internal expectations from some months ago. So they did a very good job, I would say, there. And so minus 40 is still very strong. High performance metal plus 25. I mentioned the one-offs of prior year with roughly 28 million. We also have it there in our comment. A clean year-on-year comparison would be an outcome in a largely or more or less stable development of HPM division. And stability there resulted more or less because of, I would say, two items. Number one, volume is lower. It means we have a burden there on the one side. On the other side, we have our organization restructuring program in place. We have a strong aerospace business in there. And so if you put this together, add this up, operationally I would say stable, and it's plus 25 because one off from prior year is not in anymore. So metal engineering division, minus $30 million. First of all, we have to understand that last year was very strong with regard to metal engineering, in particular from our seamless tubes and tubulars business. So it was after two record years, we had a very last, very strong quarter. And this was our first quarter, 24, 25. This quarter was, of course, affected, was affected. economically more difficult. Oil prices are definitely lower. On the other side, this is the business unit where we are highly affected also by these trade barrier discussions and U.S. tariff discussions. So this is weaker. Also, wire is weaker. But in wire, we think that we saw the bottom and we should improve. Railway, weaker year on year. We had extraordinary positive contracts in there in the first quarter last year, so it's a little bit weaker, but it is strong and it will stay strong. So this is what I can add here and inform here. Welding, as Herbert mentioned, largely stable geographically. We have different spots where we are stronger than we were last year, but this is also one advantage in particular from this business unit that we have a global setup there. And if one is weak, the other is strong, and therefore stability. Metal forming. You see here minus of 16. This has to be largely allocated to automotive components, which is weaker compared to prior year. You know that we are restructuring there. We all know and understand that in particular in Germany, automotive industry is weak. And this is the result out of that component. all the other business units are fairly stable and strong. So going there and talking about tubes and sections, for example, strong at high level, perhaps a little bit weaker than last year, but still stable, strong, and we expect another good year for tubes and sections. Warehouse and Rex was mentioned by Herbert, absolutely strong and stable, and also Precision Strip, which was improving compared to last year, and where we also see an improvement for the rest of So if we add up everything there, so EBITDA is down from 417 to 361, but I would consider it as a very solid number given the environment where we are in. Next slide, cash flow statement, very strong performance in cash flows in this first quarter. So we had a reduced result, but the cash flow from results is at the level of prior year. And where we really stand out in this first quarter was the change of net working capital compared to last first quarter. where we increased working capital by 150 million. Now we reduced it by 81 million. And this comes from reduced inventories. And talking about reduced inventories, 40% is allocated there to lower volumes, means the volume reduced and not just prices. So we're really working on that really tough. in improving our, let's say, networking capital position. And you definitely followed our performance there. Also, the last nine months, which were very strong there, we saw a very good second half of last business year and also a very strong first quarter. And this stands out compared to the first quarters of, let's say, I would say, historically in First Alpena. So very strong one this year. What do we expect in the next month there? Of course, we cannot calculate here four times 80. This wouldn't work out. This is not possible. But we will see some more improvements which should come in particular from HPM division where we have some optimization projects up and running. And so we expect some additional improvements there until end of this business year. So, if we add up changes in networking capital, cash flow from operating results, cash flow from operation is 444 plus 230 roughly compared to prior year. Cash flow from investing activities, I would say a little bit below the expected run rate at 256 million. In there is 80 million roughly of our transformation green textile projects. And normally the expectation would have been perhaps 290, 300. We will catch up until end of the year. So means our guidance regarding cash reform investing activities stays unchanged at 1,150. So this is our clear expectation there. We had a cash flow, positive free cash of 190 million roughly in this first quarter. And I would say, yeah, very happy with that. My last slide talking about our gearing level, net financial debt level, also about a strong balance sheet. And my thoughts there, first of all, 50% equity ratio, 7.5 billion, which is stable. I would say a strong position in an uncertain environment and volatile environment. Low debt level also reflects... I would say also our strategy when we talk about uncertainty. So we add net debt to EBITDA 1.1 and have a gearing ratio of 19 pre-dividend payment. If I would deduct the dividend payments which happened beginning of second quarter, the gearing ratio would be 21%. So you know our targets there. So you also can read it in our annual report. We said we do not want to exceed two times net debt EBITDA or 50% of gearing ratio in a normal environment. Of course, now we include in our thoughts that we need more stability for our investors. You know our capital allocation policy, which we published beginning of this quarter. And that one part is key. And this means stability. We want to secure investment grade profile and so on and so forth. We want to optimize also our capital structure policy. with regard to a very low weighted average cost of capital. So these are our thoughts there. And so I would say it's a decent and healthy status which we have there in terms of net debt position and capital structure.

Let me come to the outlook here. There is further uncertainty, especially coming from these global trade discussions and all its regional economic effects, which are not clear at the moment. What we can do is focus on that, what we can influence. And, you know, Gerald mentioned that we focus on free cash flow. We focus on efficiency gain. We reorganize weak currencies. weak businesses. We look at our debt positions. We are disciplined in capital spent. This all together is that we can rely on that what we see in the market. We think that the automotive industry is expected to stay on this current levels. I would say same in building mechanical engineering and also consumer goods also on that actual level in general. The energy sector, and here we are talking about OCTG business. We lost momentum in Q1, and this is expected to remain at this lower level in the next months. and also no tailwind from the tooling market so far on that level. But all those businesses, I would say, have so far bottomed out, but no tailwind, unfortunately. But we see these big markets in railway infrastructure, in aerospace, and also in warehouse technology that we – We'll have a positive outlook, a very positive outlook, and all those other businesses I have mentioned, all this reorganization work we are doing is well on track, and also the The tariff threats also in this guidance, I would say we can confirm our guidance. And this is the EBITDA between 1.4 billion and 1.55 billion euros. So that was the presentation in brief, and I'm sure you have a lot of questions. Thank you.

Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question from the webinar may click the Q&A button on the left side of the screen and then click the raise your hand button. After being announced, you have the option to activate your camera and appear on screen personally. If you are connected via phone, please press star followed by one on your telephone keypad. 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 the lower your hand button from the webinar or press star and two on your telephone. Anyone who has a question may queue up now. We have the first question coming from the line of Alan Gabriel from Morgan Stanley. Please go ahead.

Yes, thank you for taking my questions. I have two questions, firstly on railways and secondly on restructuring. So on railways, this is becoming a big focus by the market. Are you looking to increase your disclosures to give more visibility to the market on the attractiveness of this business? And also you stated that your order books are extending now to next year. What is the quantum of the year-on-year change in earnings that we should be expecting from the railway business year-on-year? That's my first question.

So as Gerald mentioned before, he's looking in the figures. We had an excellent year last year and with some windfalls and will be a bit lower. But so far we have orders also into next year. So I think when you ask from this year to next year, we are relatively stable at that high level. And I think the difference between last year and this year, Gerald, do you have a figure?

This year, we expect to be a little bit below the prior year in railway systems, as Herbert mentioned. And regarding your question, what we think about disclosing more in future for railway systems, we are actually thinking about it to perhaps do a little bit more in future. But give us perhaps another quarter there, and then we can do a proper decision and the have something in place perhaps which we can then continuously report. But comparing last year and this year, it will be a little bit weaker, but still stays on a very high level and strong. And also long term, we expect growth there.

Okay, thank you. Very clear. And the second question is on restructuring. You seem to have become far more active in restructuring the business and taking out loss-making assets where we are seeing visible results. What is the next opportunity ahead? Are we done? If not, what should we expect in terms of profit initiatives or profit improvement initiatives over the next 12 months? Thank you.

So I think when I touched the topic high-performance metals and automotive components, so we have a clear plan for the next two years, I would say. And all what we are doing is on track, and this is – reduction of complexity, restructuring supply chain in high-performance metals, reduce people gaining efficiency. Same in automotive components, where we focus in different companies on different part of business, assembly, stamping, big parts stamping. smaller parts. And this is at the moment a reshuffling from all the presses around these businesses. So we have for the next year really a clear plan what we are doing. So we will see what this year and next year, efforts to streamline the business.

If I may add something. So you know that we are continuously working on continuous improvements. So CIP is part of the DNA of the Stalpine Group. And for example, last year we had CIP projects in an amount which added up to roughly $500 million. which we actually did. And also this year, there are quite big, I would say, projects in there, part of our outlook, by the way. So CAP is above 300, which we expect, plus additional optimization projects, as we just learned from restructuring and so on. So I would say all in all, again, we will see roughly 400 or 500 million this year out of that. And this is part of our outlook and our guidance.

Next question comes from the line of Reinhard van der Walt from Bank of America. Please go ahead.

Hi there. Good afternoon, folks. Thanks for taking my question. I just wanted to revisit your comments about the railway market. From what I can see, you know, volumes have been fairly stable. Can you just give us a comment on what your production footprint looks like in rail? And this growth that you're referring to, are you seeing that more in sort of rail steel or are you referring here more to the signaling business contributing more growth in the future?

I think we, when it comes to rail, I think we are more or less have a high utilization which is around 450,000 tons. When I think in growth, we are talking about, so this is existing capacity we have and this is especially rails for Europe. And when we talk about growth and new opportunities, this is turnouts, and this is also signaling. So, when we talk about that, we talk about the turnout business. And you may remember that we did some acquisitions in the past, about fixation company, sleepers, and also signaling. And so we are a one-stop shop, more or less. But the growth is coming for sure, turnouts, fixation, signaling, and all this sleeper business we have. And that means we are a one-stop shop for our customers. We can provide them with most of this infrastructure business. And turnouts and fixation and signaling are also worldwide.

All right, that's clear. Thanks. And can I just check, in turnouts and in signaling, I presume you've got some unutilized capacity that you can use to grow, or do you think there needs to be some more capacity investment in order for you to capitalize on this upturn in the market?

I think in turnout, we have capacity. It's... mostly space to build that turnout. But in turnouts and also in signaling, we can grow.

Perfect. Thank you. And maybe if I could just sneak one more in.

Your capex, you ask also capex. There is for sure you have to add capex. But when you look at this turnout business with a rosy of 25%, plus you see that this is not such a capex heavy business compared to steel production.

Got it. Thanks a lot. And maybe one final one, just your comments around the CBAM update, which we can expect in the next six months. There's still a little bit more decarbonisation investment left in the business. How should we think about a CBAM update over the next six months and potentially further announcements from yourself around further decarbonisation investments?

You know, we have a step-by-step plan with now this activity we are just working on. It's just to digest all this capital expenditure and have capacity to start up the plans, considering that you are in the middle of a fully running still facility. So I think that's important to mention. I think we, as we said, we are working on that. We will start 2027. So we are in time for that. And then we have to decide latest 2028, what are the next steps or when is the next step in For the second part, just to remind you, first step, 1.5 billion and 30% CO2 reduction. Next step with another electric furnace in Linz, another 500 million plus and then 50% reduction. And the final step will come after 35%. But that's still the plan. And we have a certain idea or business plan when CBAM is coming. So far, I think we haven't the final plan. logic about CPM on hand and then maybe there is a change and but I think well what we want to have is maybe that we we get a certain relief in reducing CO2 certificates. There are some countries which are working on that. But at the end, it's the most risk-reduced way you can decarbonize from our perspective.

Understood. Thank you a lot.

The next question comes from line of Tom Zheng from Barclays. Please go ahead.

Hi, thanks for the questions. Two for me as well, please. The first one just on your sort of steel and production outlook. I guess if I'm looking at the monthly numbers, there was quite a deceleration in June production down 10% versus down two in May.

and is there any particular driver for that and should we read that as a sort of run rate into your q2 i.e you know a bit of incremental volume weakness to come we do not expect reduced volumes in production and steel division if i got your your question right here so we expect also a high level of production in the in the next uh three quarter two quarters minimum and the land of calendar year we are really feeling quite well

I think it was in June. I'm not sure. In June, we had lower figures, but this was about some maintenance issue. And we think that we can catch up with this lost volumes in the next months.

Okay, that's clear. Thank you. And then the second one, just on U.S. and tariffs, so you said the sort of 50% tariffs are manageable. Having now been through a month with 50% tariffs, would you still say a mid-double-digit number is the right number to think about in terms of tariff impact? And maybe linked to that, could you just clarify how much of your OCTG is still going into North America? I think historically, that number was about half or slightly over half. I guess in the release today, you've talked about China, Middle East, demand being quite strong there. Have you been able to shift significant shipments away from North America and into those other regions? Thank you.

Yeah, you know, we haven't the final annexes with all the custom number we need, what is affected and what is not affected or have reduced tariffs. That's not finally clear, but when we look at this 50% figures, we see this increase between 60 and 80 million at the moment. As I mentioned before, this is, I think, still not a good figure, but it's manageable so far. What we think is, and this is what you mentioned in your second part of the question, is that we see OCTG business is down a little bit volume-wise in the U.S., and 50% tariffs will lead to a reduction in shipments. So I think we can... We can reduce, this is at least a plan, when it stays as it is, we will reduce one shift in OCDG business and the rest we can fill with other businesses. So I think a third of our volume will... will be then affected. And we looked in the rest of the world. We got some additional orders, but we cannot fully compensate that. That's the reason why we plan at least this reduction in a two-shift operation.

Okay, sorry, just to clarify, so in OCTG, you're moving to two shifts from three, a third of volume being affected, and presumably most of that was going into the U.S., so volumes now being sent into the U.S. are fairly minimal, you would say?

At the moment, yes. Okay, clear.

Thank you.

The next question comes from line of Tristan Gressup from BNP PXA. Please go ahead.

Yes, hi. Thank you for taking my question. So I have two. First one, can you discuss a little bit the outlook you have for European steel prices and volumes in the coming two quarters? I mean, you mentioned prices on the bottom. Would you expect some pickup in demand in September, October with the announcement of the details of the steel action plan? Or, on the contrary, would you expect a rebound in imports before new trade measures are put in place, which could depress a little bit the second half?

You know, we have the imports. You know, we have our safeguard regulation at the moment. I think all this... Quotas are fully booked so far, and with the effects for the European steel industry, that's clear. But I heard it from my colleagues that they think that the spot prices are bottomed out. We have not the full picture at the moment, but maybe it's some forward buying, forward buying, considering that we will see or we'll have a CBAM and also a new regulations after these safeguard measures. We are not fully... We have the full picture at the moment, but we see that we get here and there some slight improvements in prices. So that's the picture at the moment, and that's what we can say today. I think it's too early to say, is it a... sustainable tailwind or is it just a restocking in expectation of higher prices at the end of the summer? So, sorry for that, but it's the most recent information and we haven't the full picture so far.

That's very clear and helpful.

But it's positive.

Right. Love that. And when you discuss, can you discuss a little bit your exposure to German infrastructure? I mean, when we think about Verstappen, usually we think about your auto business. So how do you plan to benefit from German infrastructure, putting aside rail, how much of, you know, a percentage of your business is actually going to be directly or indirectly impacted? And in your full year 26, EBITDA guidance. Do you have some pricing tailwinds or some more significant improvement baked into your fiscal Q3, Q4, which is where you could start to see an impact of that German infra?

Q3, Q4. What we, you know, direct directly is infrastructure, not the biggest business of First Alpine, but what we see is... At the moment, the money isn't spent. But what we see is when it comes to grains, when it comes to yellow goods, then we see some improvements in orders. So at the moment, I would say it's more volume-wise, but customers take the opportunity to produce in advance when the money is coming from this market. from these activities and we hear from projects in Germany. So I think it's more indirectly affected by all those cranes and yellow goats and other things and trucks in this infrastructure program. Also, we have some activities in industrial building as well.

Would you have a percentage to share with us of, you know, your direct exposure or roughly speaking, is it 20% or lower than that?

What I can give you, Tristan, and this is definitely not an infrastructure number, but what I can share with you is that roughly from railway, roughly 20% goes to Germany as we speak first quarter. This is a most recent number. And from steel division, roughly 30% go to Germany, to all the industries we are serving there. And in heavy plate, it's definitely even more than the 30%, which goes to Germany, and that definitely will benefit from all the developments. So I think significant numbers and definitely room to improve for us. And as Herbert said, we are waiting for also that we see the funds flowing, because this is what we all are waiting for.

right that's uh that's very clear thank you for that next question comes online of bastian from dv please go ahead yeah hi good afternoon and thanks for taking my questions um my uh my first one is actually just on just on your general performance if you look at your portfolio i guess steel business is also performing pretty well still i guess in this environment despite all of the volatility But then obviously the other businesses are probably struggling a little bit more. So maybe just compared to what you see as like where these businesses should be in a normal environment, where do you see the largest gaps? And just looking at all of the performance measures which you've actually launched, are you confident that these would basically get you back pretty much on track to where you see mid-cycle numbers in those businesses? That's my first question.

I would like to take this question. I think your question specifically goes to our areas where we are restructuring, reorganizing at the moment and looking at the levels where we are in HPM. As I mentioned before, this is definitely still too low for sure. And I would say what we might expect there in the long run is again what we saw in the past minimum. So it means in HBM this year we might not expect this 350, 400 million in EBITDA, which we saw in the past, but we should be there in the next, let's say, three, four years. And with regard to this year, I would say it's absolutely realistic to end up at 250, 280. I don't know yet because we also need some support from markets. This is clear. And the measures we undertook is – and this is what I mentioned in my presentation in particular with regard to HPM. I mentioned that in terms of volumes, we are down. We are not there. So we do not see enough market support as we speak. But in terms of reorganization measures, I would say we make good progress there. And we will see the first impacts also this year, which why we should end up at 250 plus. And I cannot give you the real specific number as we are also waiting and re-evaluating every day. Long run, as I said, 350, 400 should be absolutely realistic. And it is a three-year program we are talking about. It's not just, let's say, a restructuring process which we are working on just one year. It's a three-year program where we take out significant cost and then we are restructuring. In terms of metal forming division, Yeah, I think Herbert explained where we are and that we are taking out one site there that we are reshuffling to following more dedicated plants type of concept there. We know that and after a very difficult last year where we saw some and we provided for restructuring expenses significantly. We will see just minor restructuring adjustments in terms of, let's say, expenses this year. What we will see, what we should see, that we end up in an area of around perhaps 220, 230, 240 million of EBITDA. I think this is absolutely realistic. We are on track there. And again, it is not a one-year program. It's again a three-year program what we are working on there. So also here in the long run, a similar number, as I mentioned, for HPM should be possible. And let's talk about 350 to 400 roughly. But we also need the markets there. So there's uncertainty in there. But we are confident and realistic that this is doable. I hope this answers your question.

Yeah, it does, actually. Thanks so much for the color, Gerard. Then just last one, actually, on the energy transition, I guess, as we're moving a little bit closer to the completion of the first EF. I guess in the new setup here, you will be able to run with a considerably leaner operation and maybe also headcount numbers. First of all, have you done the numbers in terms of how much fixed costs you may be able – to take out there in the first transition step, which I think, I guess, is actually a bit more steel and metal engineering rather than the two businesses you just talked about. And then secondly, maybe also, again, looking at the overall OPEC structure in the targeted setup using scrap and gas-based DI. Is there any updated color on how you expect this to move and how you expect your margins to develop then once the new technology is starting to phase in?

There's a lot of questions. I think what in the first phase, you know, when we start up, we are talking about 2020, 2029, when we reduce one blast furnace, this is 200 people. I think very interesting is that in the In the second step, where we can reduce some capacities and fixed costs in other businesses, and in the second blast furnace, another 200, 300 people. So at the end, we will see a reduction of roughly 1,000 for the first two steps. And the biggest step is then When we close down the last blast furnace, then you have a really big portion. And this is also part of our calculation that we reduced another 1,000 people.

And that is just steel, I guess?

That's just steel.

Okay. And in metal engineering?

Metal engineering will be a bit less, 700, I would say, at the end of the program. Understood. You have to think of a center plant, which is relatively maintenance extensive and so on, so we can reduce a bigger portion of people then.

Okay, understood. And maybe just in that context, because you obviously talk about the SINTA plan as well, I guess previously I think you basically said I think maintenance capex is around 500 to 600 million. I think you're spending obviously, we're committed to that ceiling of 1,150 of capex at the moment. Is there any updated close or maybe on how your maintenance capex will develop? I guess typically I would think that probably comes off a little bit even with the new technology being onboarded.

I think that's a bit early, but it will for sure be reduced. As I mentioned before, this Sinter technology is very capital maintenance intensive. And when you think of blast furnaces where you have every five, six, seven years, every ramp with costs of... I don't know, a small one, 40 million, a big one, 80 million. So I think that's quite a reduction in maintenance costs.

Okay. And then just following up on the OPEX question, if there's any answer you have at hand at this point?

What's clear for me is that the... The markets at the moment, how should I say, is developing step by step. But we have now the first orders for 2020, 2027. in place and you know the market is developing slowly, I would say, but we will not be the last one who will start up a facility. The margins, the interesting question is what is after 2035. This is the biggest step, I would say. And what we see, there is no change in our cost calculation so far. but we will see how the market will develop, and we have the first orders. And you may remember that I always say at the beginning there will be a small green market, and until 2035 there will be a lack of green steel in Europe. I think that will positively influence also the margins in steel. And as I mentioned before, at the end, a green market or green steel market is one thing, but to make the higher quality products, this will be the USP of what we are doing, and this will bring higher margins compared to spot market deliveries.

And if I may add to your question with regard to just metal engineering division now. So we expect that the total cost for one ton of produced, I cannot give you a specific number, of course, but it should be slightly cheaper than it is as we speak today. but everything is based of course on many assumptions what is energy price and cost what is scrap rate we can utilize there and so on and so forth but but we expect that it is cheaper than today okay thanks so much next question comes from line of christian oops from barda bank please go ahead thank you and good afternoon just two questions uh one again and

Sorry for that. Coming to the U.S. plant, Cartersville, you had some kind of a margin target going into 26. Are you on plans there? And what are your current plans in your three-year horizon you are describing for your market in the U.S.? So what do you like to produce there? And what is the current idea for the U.S. going forward?

what we, you know, Carter's Wheel is the right question. I think it's the goal is there that we have at the end of this year, I would say, a Black That's the plan there. But I think it's worth to mention that the U.S. business is not only automotive. I think it's the biggest growth potential we have in tubes and sections where we produce different products for different applications, yellow goods, agricultural machinery, and different part, also aerospace a little bit. This is, I think, a growing business. We have invested in this particular business and Amazon is a big growth potential. We have moved our production for high-pay warehouses into the U.S., And this is for sure a growing business. It's the first time that we are asked about local content at the moment, which we can provide now. I think this is very important. You know, these are the Walmarts and others in this world. And then we think when you ask about Cartersville, so I would say this is the right size we have there in the U.S. for the U.S. market. It's not Cartersville or the automotive business. It's not the growth target. But what we are investing at the moment is this truck side member production for European truck producer for the American market. This is another growth potential, and we are investing there $70 million at the moment, and we will start up in the course of the next year.

The entire U.S. is kind of an ongoing process, cut us around, break even. You're investing into growth, and you are expecting some positive returns maybe in two to three years.

Yes, that's right. So I think that the existing tubes and section business is very profitable. And the new business, I would say, when it comes in the course of the next year, you can expect In 2027, the first, you know, after startup, the first positive results from this side member business. And, you know, Cartersville is more efficiency topic. But all those things are gross opportunities. Hybrid warehouse activities, then this side member and tubes in section.

Okay, thank you for that. And another question, also some kind of a strategic approach. So when you are in some kind of a reorganization part and you have ended the three years, you are also rethinking the structure of reporting. So it doesn't make sense really to go to metal forming, metal engineering and high performance metals oil. You are also thinking about some kind of a new structure to present your company going forward.

Yeah, what we always discuss is that we, you know, this business must have a certain size and the biggest single part which is not visible for you or for the capital market is railway systems. And we think of that how we can... we present this part of the business knowing that this is now integrated more or less in so many different ways but you can be sure that we work on that that we show you another picture also figure wise and much clearer in the future. I think it has to be a certain size. I think 2 billion is such a size which is worth to change reporting. But it's not so easy. It takes time. But we try to do that in the course of the year and give you a better picture what is happening what railway systems are doing.

Okay, thank you. Maybe a third one, an additional one. Also not easy to answer, maybe. You have two electric arc furnaces in Brazil and Scandinavia. They also need some kind of relining renewable. Do you think about maybe closing down one of these furnaces, or do you think that you will stay in these markets?

I think that at the moment it's not the plan to close these activities. When you look at this business, it belongs to high-performance metals. I think they are a bit smaller than what we are thinking in flat steel. But so far, we have no plans. What we have done, and this is Putero's, here we come to the conclusion that's a difficult business in Europe, and that was the decision to do that. But so far, there are no additional plans.

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

Thank you very much.

Next question comes from the line of Tommaso Castello from Jefferies. Please go ahead.

Good afternoon and thanks for your presentation. I would like to touch on raw materials, especially on scrap, given the increasing discussions behind potential export restrictions in Europe. and broader trend towards protecting domestic scrap availability. So my question is, how do you see this impacting your medium-term outlook over the next few quarters for the supply and pricing of scrap? And additionally, if you could provide an update and some color on the current offtake situation and the strategic role of Corpus Christi HBI facility within your decarbonization roadmap. Thank you.

Yes, scrap is, in our view, a strategic topic for us. I think we have secured, when it comes to Vestalpine, we have secured scrap contracts for the first step. And we have some shares in it. at scrap dealers and long-term contracts. This is maybe what's directly affecting First Alpine. What is in Europe discussed is when we see this increasing demand EF capacities in Europe, why we sent over 30 million tons of scrap to the rest of the world, but this is a European Union topic. What we have done is to create or to make sure that we get the right quality of scrap, is that we have closed loops with our customers. Our biggest customer, you can imagine that we, on Monday, we bring the coils to OEMs in Germany and abroad. Wednesday, we go back with the scrap of that OEMs and also other companies inside. First Alpine, you know that we are producing in Netherlands and also in other parts of Europe, also automotive parts. And these are also a source of OEMs. of scrap. So far, what we see, I think the scrap prices have recently a bit increased. What we see availability is okay so far. And, you know, scrap prices is always difficult to to project in the future. But what we have seen in the last months that all the raw materials are relatively stable with minor movements, I would say. We will see when the market would pick up, then we will see for sure increased prices in some of that raw material segments. At the role of HBI in Corpus Christi, yes, we have this 20% share in this activity, and we have a very long-term contract here, and this contract is still valid. We get now, even now, HBI, and we use that in our facilities, and so far When it comes to HBI and when it comes to Scrap, for the first step, we are sure and we have everything in place.

Thank you very much. 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. Thank you very much, ladies and gentlemen, for the discussion, for joining us today for our conference call webcast. If there come up any questions, please feel free to give either Gerard or myself a call. We'll be in the office in a few minutes. Otherwise, I wish you a wonderful rest of the summer. Thank you. Goodbye.

Bye-bye. Thank you.