Half Year 2026 Kloeckner & Co SE Earnings Call
Speaker #1: Hello everyone. This is Fabian Joseph from Investor Relations, also on behalf of my entire team, I wish you a warm welcome to our Q2, 2026 conference call.
Fabian Joseph: Hello, everyone. This is Fabian Joseph from Investor Relations. Also, on behalf of my entire team, I wish you a warm welcome to our Q2 2026 conference call. With me today, our CEO, Guido Kerkhoff, and our CFO, Oliver Falk. They will guide you through the presentation, afterwards, we are happy to take your questions. In order to ask a question, you have to press the live Q&A button, we will open your line. With that, I would like to hand over to you, Guido.
Fabian Joseph: Hello, everyone. This is Fabian Joseph from Investor Relations. Also, on behalf of my entire team, I wish you a warm welcome to our Q2 2026 conference call. With me today, our CEO, Guido Kerkhoff, and our CFO, Oliver Falk. They will guide you through the presentation, afterwards, we are happy to take your questions. In order to ask a question, you have to press the live Q&A button, we will open your line. With that, I would like to hand over to you, Guido.
Speaker #1: me today are our CEO, Guido Kerkhoff, and our CFO, Oliver Falk. They will guide you through the presentation, and afterwards we're happy to take your questions.
Speaker #1: and we will open your line. With that, I'd like to hand over to you, Guido.
Speaker #1: and we will open your line. With that, I'd like to hand over to you, Guido.
Speaker #1: and we will open your line. With that, I'd like to hand over to you, Guido.
Guido Kerkhoff: Yes. Thank you. Welcome to our Q2 2026 conference call. Let's begin with the financial highlights of the quarter. I would like to remind you that at the end of the full year 2025, we successfully sold eight US distribution sites in order to focus even more on higher value-added products and services. As in our previous analyst, and investor presentations, we also included the deltas for a divestment-adjusted baseline to enable a true year-over-year comparison. The group-level shipments in the second quarter decreased slightly year-over-year. Negative development is mainly driven by the aforementioned sale of eight US distribution sites at the end of fiscal 2025. However, this was partly offset by positive momentum in our segment, Kloeckner Metals Europe. Excluding the divestment, shipments increased by 4.3% year-over-year. This is proof that our growth strategy remains intact, the implemented strategic initiatives are gaining traction.
Guido Kerkhoff: Yes. Thank you. Welcome to our Q2 2026 conference call. Let's begin with the financial highlights of the quarter. I would like to remind you that at the end of the full year 2025, we successfully sold eight US distribution sites in order to focus even more on higher value-added products and services. As in our previous analyst, and investor presentations, we also included the deltas for a divestment-adjusted baseline to enable a true year-over-year comparison. The group-level shipments in the second quarter decreased slightly year-over-year. Negative development is mainly driven by the aforementioned sale of eight US distribution sites at the end of fiscal 2025. However, this was partly offset by positive momentum in our segment, Kloeckner Metals Europe. Excluding the divestment, shipments increased by 4.3% year-over-year. This is proof that our growth strategy remains intact, the implemented strategic initiatives are gaining traction.
Speaker #2: Let's begin with the financial highlights of the quarter. I'd like to remind you that at the end of the full year 2025 we successfully sold 8 U.S.
Speaker #2: distribution This is proof that our growth strategy remains intact and that the implemented strategic initiatives are gaining traction. Sales increased slightly by 3% on a year-over-year basis, due to a higher average price level.
Speaker #2: Sites and orders focus more on higher value-added products and services. As in our previous analysis and investor presentations, we also included the deltas for a divestment-adjusted baseline to enable a true year-over-year comparison.
Speaker #2: At the group level, shipments in the second quarter decreased slightly year over year. The negative development is mainly driven by the aforementioned sale of eight U.S.
Speaker #2: distribution sites at the end of fiscal 2025. However, this was partly offset by positive momentum in our segment, Kloeckner & Co Europe. Excluding the divestment, shipments increased by 4.3% year-over-year.
Guido Kerkhoff: Sales increased slightly by 3% on a year-over-year basis due to a higher average price level. On an adjusted basis, excluding the divestment, sales increased by 12.1%. Gross profit decreased considerably year-over-year, largely attributable to the write-down at Becker Group, which affects the comparability of the year-over-year development rather than reflecting a deterioration in the underlying business. We achieved an EBITDA before material special effects of EUR 63 million, positioning us in the upper half of our guidance. Notably, Kloeckner Metals Europe delivered a significant contribution for the second consecutive quarter, marking another important milestone in the segment's turnaround. I will provide a bit more detail on the key drivers behind this performance on the next slide. Positive operating cash flow of EUR 10 million was achieved, though it was considerably lower than the previous year's quarter.
Guido Kerkhoff: Sales increased slightly by 3% on a year-over-year basis due to a higher average price level. On an adjusted basis, excluding the divestment, sales increased by 12.1%. Gross profit decreased considerably year-over-year, largely attributable to the write-down at Becker Group, which affects the comparability of the year-over-year development rather than reflecting a deterioration in the underlying business. We achieved an EBITDA before material special effects of EUR 63 million, positioning us in the upper half of our guidance. Notably, Kloeckner Metals Europe delivered a significant contribution for the second consecutive quarter, marking another important milestone in the segment's turnaround. I will provide a bit more detail on the key drivers behind this performance on the next slide. Positive operating cash flow of EUR 10 million was achieved, though it was considerably lower than the previous year's quarter.
Speaker #2: On an adjusted basis, excluding the divestment, sales increased by 12.1%. Gross profit decreased considerably year over year, largely attributable to the write-down at Becker.
Speaker #2: Which affects the comparability of the year-over-year development rather than reflecting a deterioration in the underlying business. We achieved an EBITDA before materials especially affects of 63 million euros, positioning us in the upper half of our guidance.
Speaker #2: Notably, Kloeckner & Co Europe delivered a significant contribution for the second consecutive quarter, marking another important milestone in the segment's turnaround. I will provide a bit more detail on the key drivers behind this performance on the next slide.
Speaker #2: Positive operating cash flow of 10 million was achieved, though it was considerably lower than the previous year's quarter. As a result, net financial debt increased to 1.108 million billion at the end of the second quarter of 2026.
Guido Kerkhoff: As a result, net financial debt increased to EUR 1.108 billion at the end of the second quarter of 2026. Let's have a look at our performance into Q2 2026 by segment. Starting with Kloeckner Metals Americas, reported shipments declined considerably year over year by around 8%, primarily reflecting the divestment of the eight US distribution sites as discussed earlier. As a result, reported sales also were slightly below previous year's level. However, on a like-to-like basis, the underlying business continued to develop positively. Excluding the divestment, shipments increased slightly by 4.7% compared with the second quarter of last year, while sales grew strongly by 13.5% year over year, supported by a favorable pricing environment. EBITDA before material special effects reached EUR 42 million in the second quarter of 2026, demonstrating the resilience of the segment despite the still challenging market environment.
Guido Kerkhoff: As a result, net financial debt increased to EUR 1.108 billion at the end of the second quarter of 2026. Let's have a look at our performance into Q2 2026 by segment. Starting with Kloeckner Metals Americas, reported shipments declined considerably year over year by around 8%, primarily reflecting the divestment of the eight US distribution sites as discussed earlier. As a result, reported sales also were slightly below previous year's level. However, on a like-to-like basis, the underlying business continued to develop positively. Excluding the divestment, shipments increased slightly by 4.7% compared with the second quarter of last year, while sales grew strongly by 13.5% year over year, supported by a favorable pricing environment. EBITDA before material special effects reached EUR 42 million in the second quarter of 2026, demonstrating the resilience of the segment despite the still challenging market environment.
Speaker #2: Performance in Q2 2026 by segment—starting with Kloeckner & Co Americas: reported shipments declined considerably year over year by around 8%, primarily reflecting the divestment of the eight U.S.
Speaker #2: distribution sites as discussed earlier. The result: reported sales rose for slightly below previous year's level. However, on a like-to-like basis, the underlying business continued to develop positively, excluding the divestments, shipments increased slightly by 4.7% compared with the second quarter of last year.
Speaker #2: While Let's have a look at our sales grew strongly by 13.5% year over year, supported by a favorable pricing environment. EBITDA before materials especially affects reached 42 million euros in the second quarter of 2026, demonstrating the resilience of the segment despite the still challenging market environment.
Speaker #2: Turning now to Kloeckner & Co Europe, the segment continued its positive momentum, shipments increased slightly by 3.6% year over year, while sales rose 10.4% mainly reflecting the high average price level.
Guido Kerkhoff: Turning now to Kloeckner Metals Europe, the segment continued its positive momentum. Shipments increased slightly by 3.6% year over year, while sales rose 10.4%, mainly reflecting the high average price level. At the same time, the consistent execution of strategic initiatives continued to support profitability. As a result, EBITDA before material special effects increased to EUR 20 million, marking the highest quarterly level since Q1 2023. This also represents the second consecutive quarter of positive earnings contributions from the segment. With that, I'd like to hand over to Oliver to have a closer look at the financials.
Guido Kerkhoff: Turning now to Kloeckner Metals Europe, the segment continued its positive momentum. Shipments increased slightly by 3.6% year over year, while sales rose 10.4%, mainly reflecting the high average price level. At the same time, the consistent execution of strategic initiatives continued to support profitability. As a result, EBITDA before material special effects increased to EUR 20 million, marking the highest quarterly level since Q1 2023. This also represents the second consecutive quarter of positive earnings contributions from the segment. With that, I'd like to hand over to Oliver to have a closer look at the financials.
Speaker #2: At the same time, the consistent execution of strategic initiatives continued, to support profitability. As a result, EBITDA before materials especially affects increased to 20 million euros, marking the highest quarterly level, since the first quarter of 2023.
Speaker #2: This also represents the second consecutive quarter of positive earnings contributions from the segment. With that, I'd like to hand over to Oliver to have a closer look at the financials.
Oliver Falk: The favorable pricing environment we saw in Q1 continued into Q2 2026, particularly in the US, providing ongoing support for our business. Against this background, we achieved an EBITDA before material special effects of EUR 63 million, representing a considerable increase compared with the previous quarter and only a slight decline year over year despite lower shipments. This performance demonstrates our ability to translate supportive market conditions into strong operating results. Operating cash flow was EUR +10 million during the quarter. Further, the number of digital quotes increased by around 9.5% year over year. We continue to reduce manual processes, enabling our sales team to focus more on value-added activities. Let's take a look at the development of our shipment sales, gross profit, and gross profit margin for Q2 2026.
Oliver Falk: The favorable pricing environment we saw in Q1 continued into Q2 2026, particularly in the US, providing ongoing support for our business. Against this background, we achieved an EBITDA before material special effects of EUR 63 million, representing a considerable increase compared with the previous quarter and only a slight decline year over year despite lower shipments. This performance demonstrates our ability to translate supportive market conditions into strong operating results. Operating cash flow was EUR +10 million during the quarter. Further, the number of digital quotes increased by around 9.5% year over year. We continue to reduce manual processes, enabling our sales team to focus more on value-added activities. Let's take a look at the development of our shipment sales, gross profit, and gross profit margin for Q2 2026.
Speaker #3: The favorable pricing environment we saw in the first quarter continued into the second quarter of 2026, particularly in the U.S., providing ongoing support for our business.
Speaker #3: Against this background, we achieved an EBITDA before materials especially affects of 63 million euros, representing a considerable increase compared with the previous quarter and only a slight decline year over year, despite lower shipments.
Speaker #3: This performance demonstrates our ability to translate supportive market conditions into strong operating results. Operating cash flow was positive at 10 million euros during the quarter.
Speaker #3: Further, the number of digital quotes increased by around 9.5% year over year. We continued to reduce manual processes enabling our sales team to focus more on value-added activities.
Speaker #3: Let's take a look at the development of our shipment sales, gross profit, and gross profit margin for the second quarter of 2026. To provide a meaningful comparison, we are also showing the figures excluding the 8 U.S.
Oliver Falk: To provide a meaningful comparison, we are also showing the figures excluding the eight US distribution sites that were divested at the end of 2025, allowing for a like-for-like view of the business. Reported shipments decreased slightly year over year, mainly due to the divestment of eight US distribution sites at the end of 2025, primarily reflecting the impact of the divestment, partly offset by stronger demand in Europe. In contrast, sales increased slightly year over year, mainly due to the overall higher average price level compared with the prior year quarter. As Guido already highlighted, the underlying performance of the business remains strong. On a like-for-like basis, excluding the divestment, shipments increased by 4.3%, while sales grew by a considerable 12.1% year over year. This demonstrates that our strategic initiatives continue to support our growth.
Oliver Falk: To provide a meaningful comparison, we are also showing the figures excluding the eight US distribution sites that were divested at the end of 2025, allowing for a like-for-like view of the business. Reported shipments decreased slightly year over year, mainly due to the divestment of eight US distribution sites at the end of 2025, primarily reflecting the impact of the divestment, partly offset by stronger demand in Europe. In contrast, sales increased slightly year over year, mainly due to the overall higher average price level compared with the prior year quarter. As Guido already highlighted, the underlying performance of the business remains strong. On a like-for-like basis, excluding the divestment, shipments increased by 4.3%, while sales grew by a considerable 12.1% year over year. This demonstrates that our strategic initiatives continue to support our growth.
Speaker #3: distribution sites that were divested at the end of 2025, allowing for a like-for-like view of the business. Reported shipments decreased slightly year over year, mainly due to the divestment of 8 U.S.
Speaker #3: Distribution sites at the end of 2025 primarily reflected the impact of the divestment, partly offset by stronger demand in Europe. In contrast, sales increased slightly year over year, mainly due to the overall higher average price level compared with the prior-year quarter.
Speaker #3: As Guido already highlighted, the underlying performance of the business remains strong. On a like-for-like basis, excluding the divestment, shipments increased by 4.3%, while sales grew by a considerable 12.1% year over year.
Speaker #3: This demonstrates that our strategic initiatives continue to support our growth. Gross profit amounted to 243 million euros compared with 320 million euros in the second quarter of 2025.
Oliver Falk: Gross profit amounted to EUR 243 million compared with EUR 320 million in Q2 2025. The year over year decline was primarily attributable to the write down at Becker, which weighted on the reported gross profit. As a result, the gross profit margin declined to 14.4%. We will now focus on the EBITDA development in Q2 2026. We have adjusted the EBITDA for Q2 2025 for the divestment of eight US distribution sites to enable a like-for-like comparison. Therefore, starting with an EBITDA before material special effects for Q2 2025 of EUR 56 million. All year over year effects visible here have also been adjusted to enable the like-for-like comparison. In Q2 2026, EBITDA before material special effects came in at EUR 63 million, a considerable increase year over year.
Oliver Falk: Gross profit amounted to EUR 243 million compared with EUR 320 million in Q2 2025. The year over year decline was primarily attributable to the write down at Becker, which weighted on the reported gross profit. As a result, the gross profit margin declined to 14.4%. We will now focus on the EBITDA development in Q2 2026. We have adjusted the EBITDA for Q2 2025 for the divestment of eight US distribution sites to enable a like-for-like comparison. Therefore, starting with an EBITDA before material special effects for Q2 2025 of EUR 56 million. All year over year effects visible here have also been adjusted to enable the like-for-like comparison. In Q2 2026, EBITDA before material special effects came in at EUR 63 million, a considerable increase year over year.
Speaker #3: The year-over-year decline was primarily attributable to the write-down at Becker, which weighted on the reported gross profit. As a result, the gross profit margin declined to 14.4%.
Speaker #3: We will now focus on the EBITDA development in the second quarter of 2026. We have adjusted the EBITDA for the quarter 2, 2025 for the divestment of 8 U.S.
Speaker #3: distribution sites, to enable a like-for-like comparison. Therefore, starting with an EBITDA before materials especially affects for quarter 2, 2025 of 56 million euros. All year over year affects visible here have also been adjusted to enable the like-for-like comparison.
Speaker #3: In Q2, 2026, EBITDA before materials especially affects came in at 63 million euros, a considerable increase year over year. We faced a positive volume effect, which totaled 13 million euros and a positive price effect of 21 million euros, supporting our operating result.
Oliver Falk: We faced a positive volume effect, which totaled EUR 13 million and a positive price effect of EUR 21 million supporting our operating results. Furthermore, in total, OpEx increased by EUR 27 million year-over-year, mainly due to the high personal expenses and higher expenses for shipments and operating supplies. Further, we had no significant FX effects. Therefore, our EBITDA before material special effects reached EUR 63 million in Q2 2026. Lastly, adjusted by material special effects mainly resulting from the planned divestment of Becker, the EBITDA was reported at EUR -108 million. We are now coming to cash flow and net debt development. In Q2 2026, we benefited from the change in networking capital, which amounted to EUR 156 million. After interest and tax payments, as well as other cash outflows totaling EUR 38 million, cash flow from operating activities remained positive at EUR 10 million for the quarter.
Oliver Falk: We faced a positive volume effect, which totaled EUR 13 million and a positive price effect of EUR 21 million supporting our operating results. Furthermore, in total, OpEx increased by EUR 27 million year-over-year, mainly due to the high personal expenses and higher expenses for shipments and operating supplies. Further, we had no significant FX effects. Therefore, our EBITDA before material special effects reached EUR 63 million in Q2 2026. Lastly, adjusted by material special effects mainly resulting from the planned divestment of Becker, the EBITDA was reported at EUR -108 million. We are now coming to cash flow and net debt development. In Q2 2026, we benefited from the change in networking capital, which amounted to EUR 156 million. After interest and tax payments, as well as other cash outflows totaling EUR 38 million, cash flow from operating activities remained positive at EUR 10 million for the quarter.
Speaker #3: Furthermore, in total, OpEx increased by €27 million year over year, mainly due to higher personnel expenses and higher expenses for shipments and operating supplies.
Speaker #3: Further, we had no significant FX effects. Therefore, our EBITDA before material special effects reached €63 million in Q2 2026. Lastly, adjusted by material special effects, mainly resulting from the planned divestment of Becker, the EBITDA was reported at a negative €108 million.
Speaker #3: We are now coming to cash flow and net debt development. In the second quarter of 2026, we benefited from the change in net working capital, which amounted to €156 million.
Speaker #3: After interest and tax payments, as well as other cash outflows, totaling 38 million euros, cash flow from operating activities remained positive at 10 million euros for the quarter.
Speaker #3: With net capex of 3 million euros, we generated a positive free cash flow of 7 million euros. Let's look at our net financial debt.
Oliver Falk: With net CapEx of EUR 3 million, we generated a positive free cash flow of EUR 7 million. Let's look at our net financial debt. The positive free cash flow was more than offset by several items during the quarter. Negative effects were visible for leases, FX, and the dividend payment to our shareholders, totaling EUR 33 million. Partly offsetting these effects were the EUR 9 million IFRS reclassification related to the planned divestment of Becker and EUR 2 million from other items. Consequently, our net debt increased from EUR 1,092 million to EUR 1,108 million in Q2 2026. Let's now focus on the outlook for the full year 2026.
Oliver Falk: With net CapEx of EUR 3 million, we generated a positive free cash flow of EUR 7 million. Let's look at our net financial debt. The positive free cash flow was more than offset by several items during the quarter. Negative effects were visible for leases, FX, and the dividend payment to our shareholders, totaling EUR 33 million. Partly offsetting these effects were the EUR 9 million IFRS reclassification related to the planned divestment of Becker and EUR 2 million from other items. Consequently, our net debt increased from EUR 1,092 million to EUR 1,108 million in Q2 2026. Let's now focus on the outlook for the full year 2026.
Speaker #3: The positive free cash flow was more than offset by several items during the quarter. Negative effects were visible for leases, FX, and the dividend payment to our shareholders, totaling 33 million euros.
Speaker #3: Partly offsetting these effects, were the 9 million IFRS reclassification related to the planned divestment of Becker, and 2 million from other items. Consequently, our net debt increased from 1 billion 0.92 to 1 billion 108 million in the second quarter of 2026.
Speaker #3: Let's now focus on the outlook for the full year 2026.
Speaker #2: Yes, thank you, Oliver. Let me now provide you with an update on the market environment and the outlook for our key North American and European end markets.
Guido Kerkhoff: Yes. Thank you, Oliver. Let me now provide you with an update on the market environment and the outlook for our key North American and European end markets. Starting with North America. After a generally weak start to the year, we've seen improving demand growth trends developing over Q2 2026 in both the US and Mexico. Given the current positive momentum, we continue to forecast a decent recovery in 2026, with North America's real steel demand increasing by 1% to 2% compared to the prior year. Of course, there remains significant uncertainty and downside risks related to the current conflict in the Middle East and continued unpredictable trade policy that can negatively impact the outcome. Now turning to the expected development in specific market segments. Looking first at construction activity. Building starts for both residential and non-residential investments are expected to be modestly higher at 0.6% versus 2025.
Guido Kerkhoff: Yes. Thank you, Oliver. Let me now provide you with an update on the market environment and the outlook for our key North American and European end markets. Starting with North America. After a generally weak start to the year, we've seen improving demand growth trends developing over Q2 2026 in both the US and Mexico. Given the current positive momentum, we continue to forecast a decent recovery in 2026, with North America's real steel demand increasing by 1% to 2% compared to the prior year. Of course, there remains significant uncertainty and downside risks related to the current conflict in the Middle East and continued unpredictable trade policy that can negatively impact the outcome. Now turning to the expected development in specific market segments. Looking first at construction activity. Building starts for both residential and non-residential investments are expected to be modestly higher at 0.6% versus 2025.
Speaker #2: Starting with North America. After a generally weak start to the year, we've seen improving demand growth trends developing over the second quarter 2026 in both the U.S.
Speaker #2: and Mexico. Given the current positive momentum, we continue to forecast a decent recovery in 2026, with North America's real steel demand increasing by 1 to 2 percent compared to the prior year.
Speaker #2: Of course, there remain significant uncertainty and downside risks, related to the current conflict in the Middle East and continued unpredictable trade policy that can negatively impact the outlook.
Speaker #2: Now, turning to the expected development in specific market segments. Looking first at construction activity, building starts for both residential and non-residential investments are expected to be modestly higher by 0.6% versus 2025.
Speaker #2: While underlying long-term demand shift remains strong, the ability and persistently higher mortgage will remain growth constraints for the foreseeable future. Non-building and infrastructure spendings are likely to expand by 11% in 2026 after increasing by almost 22% in 2025.
Guido Kerkhoff: While underlying long-term demand should remain strong, affordability and persistently higher mortgage will remain growth constraints for the foreseeable future. Non-building and infrastructure spendings are likely to expand by 11% in 2026, after increasing by almost 22% in 2025. Manufacturing activity, as indicated by the Institute for Supply Management Manufacturing Index, has expanded during the first six months in 2026. This is a very positive development considering this index indicated contraction for almost all of 2025. In line with this indication, we expect overall new orders for industrial and off-highway equipment to increase modestly, up by 1% to 2% in 2026, with some variation depending on the specific segment. Some larger OEM customer forecasts in these sectors continue to indicate even substantially stronger growth rates heading into H2 2026. Turning to transportation.
Guido Kerkhoff: While underlying long-term demand should remain strong, affordability and persistently higher mortgage will remain growth constraints for the foreseeable future. Non-building and infrastructure spendings are likely to expand by 11% in 2026, after increasing by almost 22% in 2025. Manufacturing activity, as indicated by the Institute for Supply Management Manufacturing Index, has expanded during the first six months in 2026. This is a very positive development considering this index indicated contraction for almost all of 2025. In line with this indication, we expect overall new orders for industrial and off-highway equipment to increase modestly, up by 1% to 2% in 2026, with some variation depending on the specific segment. Some larger OEM customer forecasts in these sectors continue to indicate even substantially stronger growth rates heading into H2 2026. Turning to transportation.
Speaker #2: Manufacturing activity, as indicated by the Institute for Supply Management Manufacturing, index has expanded during the first six months in 2026. This is a very positive development, considering this index indicated contraction for almost all of 2025.
Speaker #2: In line with its indications, we expect overall new orders for industrial and off-highway equipment to increase modestly by 1 to 2 percent in 2026, with some variation depending on the specific segment.
Speaker #2: Some larger OEM customer forecasts in these sectors continue to indicate even substantially stronger growth rates heading into the second half of 2026. Turning to transportation.
Speaker #2: The automotive segment has been the most impacted by changing trade policy as well as the removal of the EV tax credits. For 2026, current forecasts indicate stable to slightly negative order production growth in the U.S.
Guido Kerkhoff: The automotive segment has been the most impacted by changing trade policy, as well as the removal of the EV tax credit. For 2026, current forecasts indicate stable to slightly negative order production growth in both the US and Mexico. Subdued consumer confidence, higher for longer rates with the recent spike in gas prices will likely limit growth prospects for the near term for autos. On a more positive note, and after a significant pullback in 2025, we now expect a very positive recovery of above 12% in the heavy truck and trailer segment. On the defense shipbuilding front, activity remains robust. Kloeckner has recently been awarded a number of large multi-year programs and remains extremely well positioned to take advantage of what is expected to be a massive increase in defense shipbuilding investments over the next decade.
Guido Kerkhoff: The automotive segment has been the most impacted by changing trade policy, as well as the removal of the EV tax credit. For 2026, current forecasts indicate stable to slightly negative order production growth in both the US and Mexico. Subdued consumer confidence, higher for longer rates with the recent spike in gas prices will likely limit growth prospects for the near term for autos. On a more positive note, and after a significant pullback in 2025, we now expect a very positive recovery of above 12% in the heavy truck and trailer segment. On the defense shipbuilding front, activity remains robust. Kloeckner has recently been awarded a number of large multi-year programs and remains extremely well positioned to take advantage of what is expected to be a massive increase in defense shipbuilding investments over the next decade.
Speaker #2: and Mexico. Subject to consumer confidence, higher borrowing rates, and the recent spike in gas prices, we’re likely to limit growth prospects in the near term for auto.
Speaker #2: On a more positive note, and after a significant pullback in 2025, we now expect a very positive recovery of above 12% in the heavy truck and trailer segment.
Speaker #2: On the defense shipbuilding front, activity remains robust. Kloeckner has recently been awarded a number of large, multi-year programs and remains extremely well positioned to take advantage of what is expected to be a massive increase in defense shipbuilding investments over the next decade.
Guido Kerkhoff: Appliance, HVAC, and electrical, which are key segments of KMC Americas, remain challenging, with modestly negative growth expected in 2026. After a significantly slow start in early 2025, we see clear signals of production increases and overall more positive growth trends for H2 2026. Energy will continue to be the strongest end consumer segment in 2026, a major driver of overall steel demand growth. Power transmission will remain extremely strong, generating growth of above 16% year-over-year after achieving a similar result last year. Modernizing and expanding North America's transmission infrastructure is imperative in order to support the significant forecasted increase in demand for electricity across North America. This is especially critical for the previous comment related to data center investments.
Guido Kerkhoff: Appliance, HVAC, and electrical, which are key segments of KMC Americas, remain challenging, with modestly negative growth expected in 2026. After a significantly slow start in early 2025, we see clear signals of production increases and overall more positive growth trends for H2 2026. Energy will continue to be the strongest end consumer segment in 2026, a major driver of overall steel demand growth. Power transmission will remain extremely strong, generating growth of above 16% year-over-year after achieving a similar result last year. Modernizing and expanding North America's transmission infrastructure is imperative in order to support the significant forecasted increase in demand for electricity across North America. This is especially critical for the previous comment related to data center investments.
Speaker #2: Appliance, HVAC, and electrical, which are key segments of KMC America, remain challenging with modestly negative growth expected in 2026. After a significantly slow start in early 2026, clear signals of production increases and a return to more positive growth trends over the second half of 2026.
Speaker #2: Energy, we'll continue to be the strongest steel-consuming segment in 2026, with major driver of overall steel demand growth. Power transmission will remain extremely strong, generating growth of above 16% year over year, after Modernizing and expanding North America's transmission infrastructure is imperative in order to support the significant forecasted increase in demand for electricity across North America.
Speaker #2: This is especially critical for the achieving a similar result last year. previous comment related to data center investments. While come under pressure after last year's change in government policy, we're now expecting strong growth for almost 15% in 2026, as both wind and solar continue to be the most immediate solution to help bridge the growing deficit between the surging demand for electricity and constrained supply.
Guido Kerkhoff: While renewable energy growth was expected to come under pressure after last year's change in government policy, we're now expecting strong growth of almost 15% in 2026 as both wind and solar continue to be the most immediate solution to help bridge the growing deficit between the surging demand for electricity and constrained supply. With that, I will quickly summarize the North American outlook as follows. With current variance in growth expectations between industry segments nothing short of unprecedented, and despite potential downside risks that still need to be navigated, we remain optimistic about the overall North American outlook for 2026. Additionally, the significant reduction in imports resulting from the Section 232 tariffs has clearly created a better balance between US supply and demand, which is likely to result in higher for longer, potentially more sustainable.
Guido Kerkhoff: While renewable energy growth was expected to come under pressure after last year's change in government policy, we're now expecting strong growth of almost 15% in 2026 as both wind and solar continue to be the most immediate solution to help bridge the growing deficit between the surging demand for electricity and constrained supply. With that, I will quickly summarize the North American outlook as follows. With current variance in growth expectations between industry segments nothing short of unprecedented, and despite potential downside risks that still need to be navigated, we remain optimistic about the overall North American outlook for 2026. Additionally, the significant reduction in imports resulting from the Section 232 tariffs has clearly created a better balance between US supply and demand, which is likely to result in higher for longer, potentially more sustainable.
Speaker #2: With that, I will quickly summarize the North American outlook as follows: with the current variance in growth expectations between industry segments, nothing short of unprecedented, and despite potential downside risks, that still need to be navigated, we remain optimistic about the overall North American outlook for 2026.
Speaker #2: Additionally, the significant reduction in imports resulting from the Section 232 tariffs has clearly created a better balance between U.S. supply and demand, which is likely to result in higher following and potentially more stable growth prospects.
Speaker #2: With these positive market dynamics, at our best and with our continued focus on higher value-added products and services, we're very confident that Kloeckner Metals America's continuing operations will once again deliver strong year-over-year growth, recognizing the gains and further improved financial results in 2026.
Guido Kerkhoff: With these positive market dynamics at our backs and with our continued focus on higher value-added products and services, we're very confident that Kloeckner Metals Americas continuing operations will once again deliver strong year-over-year growth. Record market share gains and further improved financial results in 2026. Now overall, we continue to expect real steel demand in Europe to increase by between 2% unchanged from the outlook presented during our conference call in March. Nevertheless, the anticipated recovery remains moderate and uneven. European steel consumption continues to be well below pre-pandemic levels, while underlying industrial activity remains subdued, particularly in Germany. In addition, geopolitical uncertainty remains elevated. Coming now to our sectors, starting with the construction industry. No major change compared to our previous conference call. We continue to expect the construction industry to grow slightly in 2026, driven by infrastructure investments and pent-up demand.
Guido Kerkhoff: With these positive market dynamics at our backs and with our continued focus on higher value-added products and services, we're very confident that Kloeckner Metals Americas continuing operations will once again deliver strong year-over-year growth. Record market share gains and further improved financial results in 2026. Now overall, we continue to expect real steel demand in Europe to increase by between 2% unchanged from the outlook presented during our conference call in March. Nevertheless, the anticipated recovery remains moderate and uneven. European steel consumption continues to be well below pre-pandemic levels, while underlying industrial activity remains subdued, particularly in Germany. In addition, geopolitical uncertainty remains elevated. Coming now to our sectors, starting with the construction industry. No major change compared to our previous conference call. We continue to expect the construction industry to grow slightly in 2026, driven by infrastructure investments and pent-up demand.
Speaker #2: Now coming to overall, we continue to expect real steel demand in Europe to increase by between 2% in 2025, unchanged from the outlook presented during our conference call in March.
Speaker #2: Nevertheless, the anticipated recovery remains moderate and uneven, with European steel consumption continuing to be well below pre-pandemic levels for underlying industrial activity, which remains subdued, particularly in Germany, in addition to geopolitical uncertainty remaining elevated.
Speaker #2: Now, turning to our sectors, starting with the construction industry. There are no major changes compared to our previous conference call. We continue to expect the construction industry to grow slightly in 2026, driven by infrastructure investments and pent-up demand.
Speaker #2: Let's continue with manufacturing, machinery, and mechanical engineering—the sectors in which we now expect constant development. Higher defense spending and selected infrastructure investments provide some support.
Guido Kerkhoff: Let's continue with manufacturing, machinery, and mechanical engineering, a sector in which we now expect a constant development. Higher defense spending and selected infrastructure investments provide some support. At the same time, trade policy uncertainty, elevated energy costs, weak global demand, and challenging financing conditions continue to weigh on investment and production activity. Transportation. Starting with the automotive sector. Automotive is now expected to have a constant development in 2026. This represents a downward revision from the forecast made last quarter. Demand is expected to remain on rather low levels for as long as there is no significant improvement in the broader economic outlook, including global trade and consumer sentiment. Shipbuilding. While the commercial segment in shipbuilding could face increased pressure due to economic uncertainty, we're well-positioned in the grey ship sector to benefit from upcoming demand. Household and commercial appliances.
Guido Kerkhoff: Let's continue with manufacturing, machinery, and mechanical engineering, a sector in which we now expect a constant development. Higher defense spending and selected infrastructure investments provide some support. At the same time, trade policy uncertainty, elevated energy costs, weak global demand, and challenging financing conditions continue to weigh on investment and production activity. Transportation. Starting with the automotive sector. Automotive is now expected to have a constant development in 2026. This represents a downward revision from the forecast made last quarter. Demand is expected to remain on rather low levels for as long as there is no significant improvement in the broader economic outlook, including global trade and consumer sentiment. Shipbuilding. While the commercial segment in shipbuilding could face increased pressure due to economic uncertainty, we're well-positioned in the grey ship sector to benefit from upcoming demand. Household and commercial appliances.
Speaker #2: At the same time, trade policy uncertainty, elevated energy costs with global demand, and challenging financing conditions continue to weigh on investment and production activity.
Speaker #2: Transportation, starting with the automotive sector. Automotive is now expected to have a constant development in 2026. This represents a downward revision from the forecast made last quarter.
Speaker #2: Demand is expected to remain on rather low levels for as long as there is no significant improvement in the broader economic outlook, including global trade and consumer sentiment.
Speaker #2: Shipbuilding, while the commercial segment in shipbuilding could face increased pressure due to economic uncertainty, we're well positioned in the gray shift sector to benefit from upcoming demand.
Speaker #2: Household and commercial appliances. No major change compared to our previous conference call in March. The segment with marginal impact on our European business, but we still expect production to increase slightly in 2026.
Guido Kerkhoff: No major change compared to our previous conference call in March. Segment with marginal impact on our European business, but we still expect production to increase slightly in 2026. Nevertheless, strong competition poses a structural challenge on higher energy prices and uncertainty weighing linearly. Energy industry. No major change compared to our previous conference call. The Iranian conflict still weighs on the forecast. However, slight growth is still expected in the energy industry, driven by the continued electrification of transport and heating, as well as further growth in the data center sector. Let's now come to the financial outlook for the full year 2026. Based on our performance in the H1 of the year and our current market expectations, we forecast a slight decline in shipments, a slight increase in sales for the full year compared to our prior year.
Guido Kerkhoff: No major change compared to our previous conference call in March. Segment with marginal impact on our European business, but we still expect production to increase slightly in 2026. Nevertheless, strong competition poses a structural challenge on higher energy prices and uncertainty weighing linearly. Energy industry. No major change compared to our previous conference call. The Iranian conflict still weighs on the forecast. However, slight growth is still expected in the energy industry, driven by the continued electrification of transport and heating, as well as further growth in the data center sector. Let's now come to the financial outlook for the full year 2026. Based on our performance in the H1 of the year and our current market expectations, we forecast a slight decline in shipments, a slight increase in sales for the full year compared to our prior year.
Speaker #2: Nevertheless, strong competition poses a structural challenge, while higher energy prices and uncertainty weigh in the near term. Energy industry: No major change to our previous conference call.
Speaker #2: The Iranian conflict still weighs on the forecasts. However, slight growth is still expected in the energy industry, driven by the continued electrification of transport and heating, as well as further growth in the data center sector.
Speaker #2: Let's now come to the financial outlook for the full year 2026. Based on our performance in the first half of the year and our current market expectations, we forecast a slight decline in shipments and a slight increase in sales for the full year compared to the prior year.
Speaker #2: In total, we expect a strong EBITDA before material special effects in the full year 2026, of $170 million to $250 million. Moreover, we also expect operating cash flow to come in positive; however, below full year 2025 figures.
Guido Kerkhoff: In total, we expect a strong EBITDA before material special effects in the full year 2026 of EUR 170 to 250 million. Moreover, we also expect operating cash flow to come in positive, however, below full year 2025 figures. With that, we're now happy to answer your questions.
Guido Kerkhoff: In total, we expect a strong EBITDA before material special effects in the full year 2026 of EUR 170 to 250 million. Moreover, we also expect operating cash flow to come in positive, however, below full year 2025 figures. With that, we're now happy to answer your questions.
Speaker #2: With that, we're now happy to answer your questions.
Speaker #1: Once again, if you would like to ask a question, you have to press the Live Q&A button, and we will open your line. Once again, if you'd like to ask a question, you have to press the Live Q&A button, and we will open your line.
Fabian Joseph: Once again, if you would like to ask a question, you have to press the live Q&A button and we will open your line. Once again, if you would like to ask a question, you have to press the live Q&A button and we will open your line. The first question comes from Lars Samklev, Deutsche Bank. Lars, your line should be open now.
Fabian Joseph: Once again, if you would like to ask a question, you have to press the live Q&A button and we will open your line. Once again, if you would like to ask a question, you have to press the live Q&A button and we will open your line. The first question comes from Lars Vom Cleff, Deutsche Bank. Lars, your line should be open now.
Speaker #1: The first question comes from Lars from Kletz, Deutsche Bank. Lars, your line should be open now.
Speaker #3: Yes. Thank you very much. Good afternoon. Two quick questions, if I may. I mean, Q2 shipments, and especially revenue, showed a very solid organic growth.
Lars Samklev: Yes. Thank you very much. Good afternoon. Two quick questions, if I may. In Q2, shipments and especially revenue showed a very solid organic growth. I would be interested in your view on how Q3 has progressed so far, especially with regards to shipments.
Lars Vom Cleff: Yes. Thank you very much. Good afternoon. Two quick questions, if I may. In Q2, shipments and especially revenue showed a very solid organic growth. I would be interested in your view on how Q3 has progressed so far, especially with regards to shipments.
Speaker #3: So I would be interested in your view on how Q3 has progressed so far, especially with regards to shipments.
Guido Kerkhoff: The start of Q3 was as well in line with what you saw in Q2. For us, a strong start.
Guido Kerkhoff: The start of Q3 was as well in line with what you saw in Q2. For us, a strong start.
Speaker #2: The start of this third quarter was, as well, in line with what you saw in Q2. So for us, a strong start.
Speaker #3: Okay. Thank you. And combining that with still satisfying steel price level, taking your now quantified EBITDA guidance for this year at midpoint, you would already have reached 52% of that.
Lars Samklev: Okay. Thank you. Combining that with still satisfying steel price level, taking your now quantified EBITDA guidance for this year at midpoint, you would already have reached 52% of that. To me, that looks relatively conservative. I would be interested in your view on that as well.
Lars Vom Cleff: Okay. Thank you. Combining that with still satisfying steel price level, taking your now quantified EBITDA guidance for this year at midpoint, you would already have reached 52% of that. To me, that looks relatively conservative. I would be interested in your view on that as well.
Speaker #3: To me, that sounds looks relatively conservative. So I would be interested in your view on that as well.
Speaker #2: Well, I mean, you never know what happens in the near future, so there is always a lot of uncertainty. But the start to Q3 was pretty promising.
Guido Kerkhoff: Well, you never know what happens in the near future, so there is always a lot of uncertainty, but the start into Q3 was pretty promising.
Guido Kerkhoff: Well, you never know what happens in the near future, so there is always a lot of uncertainty, but the start into Q3 was pretty promising.
Speaker #3: Okay, understood. I'll go back into the line, then.
Lars Samklev: Okay. Understood. I'll go back into the line then.
Lars Vom Cleff: Okay. Understood. I'll go back into the line then.
Speaker #1: Thank you, Lars. Once again, if you'd like to ask a question, you have to press the live Q&A button. So there are currently no further questions, so I would read our questions Boris Boudet from Kepler Chevreux sent beforehand the call.
Fabian Joseph: Thank you, Lars. Once again, if you'd like to ask a question, you have to press the live Q&A button. There are currently no further questions, so I would read out questions Boris Bourdet from Kepler Cheuvreux sent beforehand the call. I would suggest to read them out one by one and then to answer them. The first question was on Europe. Could you elaborate on the recent improvement in Europe? How has demand evolved, and have you observed any changes in customer behavior following the introduction of the TRQs?
Fabian Joseph: Thank you, Lars. Once again, if you'd like to ask a question, you have to press the live Q&A button. There are currently no further questions, so I would read out questions Boris Bourdet from Kepler Cheuvreux sent beforehand the call. I would suggest to read them out one by one and then to answer them. The first question was on Europe. Could you elaborate on the recent improvement in Europe? How has demand evolved, and have you observed any changes in customer behavior following the introduction of the TRQs?
Speaker #1: So I would suggest to read them out one by one and then to answer them. The first question was on Europe. Could you elaborate on the recent improvement in Europe?
Speaker #1: How has demand evolved, and have you observed any changes in customer behavior following the introduction of the PRQs?
Speaker #2: Look, not that many changes we have seen. I mean, the TRQs and the rest have all been rather a bit positive. Demand is still not really great, but kind of stable.
Guido Kerkhoff: Look, not that many changes we have seen. The TRQs and the rest have all been rather a bit positive. Demand is still not really great, but kind of stable. I think the growth you've seen in our European business goes more out to our repositioning and all the strategic initiatives we were driving that was very helpful to really turn it around.
Guido Kerkhoff: Look, not that many changes we have seen. The TRQs and the rest have all been rather a bit positive. Demand is still not really great, but kind of stable. I think the growth you've seen in our European business goes more out to our repositioning and all the strategic initiatives we were driving that was very helpful to really turn it around.
Speaker #2: And I think the growth you've seen on our European business goes more out to our repositioning and all the strategic initiatives we were driving.
Speaker #2: That was very helpful to really turn it around.
Speaker #1: So, the second one was on Becca. You previously mentioned, you previously indicated that the divestment process was progressing as planned. Could you provide any update on the process, on when we could realistically expect a disposal to be completed?
Fabian Joseph: The second one was on Becker. You previously indicated that the divestment process was progressing as planned. Could you provide any update on the process on when could we realistically expect the disposal to be completed?
Fabian Joseph: The second one was on Becker. You previously indicated that the divestment process was progressing as planned. Could you provide any update on the process on when could we realistically expect the disposal to be completed?
Speaker #2: Yeah. Well, our target is clearly that we have it completed, meaning closed in this fiscal year. We're well on track. There's nothing more I can say, but we're really well on track with that one.
Guido Kerkhoff: Yeah. Well, our target is clearly that we have it completed, meaning closed in this fiscal year. We're well on track. There's nothing more I can say, but we're really well on track. That one, I'm pretty confident.
Guido Kerkhoff: Yeah. Well, our target is clearly that we have it completed, meaning closed in this fiscal year. We're well on track. There's nothing more I can say, but we're really well on track. That one, I'm pretty confident.
Speaker #2: I'm pretty confident.
Speaker #1: The next one is on the TK Axilis IPO. How do you view the planned IPO of ThyssenKrupp Axilis? Do you see it as more it as more of a competitive threat or an opportunity for the sector, more broadly?
Fabian Joseph: The next one is on the tk accelis IPO. How do you view the planned IPO of thyssenkrupp Accelis? Do you see it as more of a competitive threat or an opportunity for the sector? More broadly, how do you expect the competitive landscape to evolve over the next few years?
Fabian Joseph: The next one is on the tk accelis IPO. How do you view the planned IPO of thyssenkrupp Accelis? Do you see it as more of a competitive threat or an opportunity for the sector? More broadly, how do you expect the competitive landscape to evolve over the next few years?
Speaker #1: How do you expect the competitive landscape to evolve over the next few years?
Speaker #2: Well, I think we have to see how that works out. I mean, what Thyssen is doing, split or spin or IPO, whatever, remains to be seen.
Guido Kerkhoff: Well, I think we have to see how that works out. What thyssen is doing, split or spin or IPO, whatever, remains to be seen. That won't change the competitive landscape. I think it's good if this company then stands alone, so that it can run and compete with us the way it is already today. Therefore, from that move alone, I don't see and expect any changes. It's a clear, focused company then, and we will have a stock listing from them so we can see how they perform. I think it's a good move. Overall competitive landscape, I think will a bit remain where it is. What we see in Europe is indeed with a weaker demand, especially compared to pre-COVID levels, but there is some overcapacity still.
Guido Kerkhoff: Well, I think we have to see how that works out. What thyssen is doing, split or spin or IPO, whatever, remains to be seen. That won't change the competitive landscape. I think it's good if this company then stands alone, so that it can run and compete with us the way it is already today. Therefore, from that move alone, I don't see and expect any changes. It's a clear, focused company then, and we will have a stock listing from them so we can see how they perform. I think it's a good move. Overall competitive landscape, I think will a bit remain where it is. What we see in Europe is indeed with a weaker demand, especially compared to pre-COVID levels, but there is some overcapacity still.
Speaker #2: But that won't change the competitive landscape. I think it's good that this company then has stand alone. So that it can run and compete with us the way it does already today.
Speaker #2: So therefore, from that move alone, I don't see and expect any changes. But it's a clear focused company then, and we will have a they perform and I think it's a good move.
Speaker #2: Overall, the competitive landscape, I think, will remain where it is. What we have seen in Europe, indeed, is weaker demand, especially compared to pre-COVID levels, and that there is still some overcapacity.
Speaker #1: And then the last one on the Washington Steel. Could you update us on the situation with Washington Steel? What are the next steps?
Fabian Joseph: The last one on the Worthington Steel. Could you update us on the situation with Worthington Steel? What are the next steps?
Fabian Joseph: The last one on the Worthington Steel. Could you update us on the situation with Worthington Steel? What are the next steps?
Speaker #2: Nothing really new to add there. Everything's working well. I mean, the transaction closed. We're now working on the delisting. To be expected rather sooner than later.
Guido Kerkhoff: Nothing really new to add there. Everything's working well. The transaction closed. We're now working on the delisting, to be expected rather sooner than later, and we're working on the DPLTA as they announced. It's all in line as planned. Nothing new there.
Guido Kerkhoff: Nothing really new to add there. Everything's working well. The transaction closed. We're now working on the delisting, to be expected rather sooner than later, and we're working on the DPLTA as they announced. It's all in line as planned. Nothing new there.
Speaker #2: And we're working on the DPLTA as they announced. So it's all in line and planned. Nothing new there.
Speaker #1: At the moment, there seem to be no further questions at this time. Thank you very much for joining the call today. If you have any questions during the day or after, then please contact the Investor Relations team.
Fabian Joseph: At the moment, there seem to be no further questions at this time. Thank you very much for joining the call today. If you have any questions during the day or after, then please contact the investor relations team. Thank you, and have a nice day.
Fabian Joseph: At the moment, there seem to be no further questions at this time. Thank you very much for joining the call today. If you have any questions during the day or after, then please contact the investor relations team. Thank you, and have a nice day.
