Q3 2026 thyssenkrupp AG Earnings Call

August 13, 2026

Andreas Trösch: CFO Axel Hamann, and also my colleagues from the IR team. Before I hand over to the CEO and CFO for their presentations, some housekeeping. All the documents, as usual for this call, are available in the IR section on the website. The call will be recorded, and the replay will be available shortly after the call. After the presentations, there will be the usual Q&A session for our analysts. We use Teams for the call again. In order to ask a question, you have to push the Raise Your Hand icon, and we will announce your name and open your line. If you are on mute, you must unmute yourself in addition. With that, I would like to hand over to our CEO, Miguel López.

Speaker #1: CFO Axel Hamman, and also my colleagues from the IR team. Before I hand over to the CEO and CFO for their presentations, some housekeeping: All the documents, as usual, for this call are available in the IR section on the website.

Speaker #1: The call will be recorded, and the replay will be available shortly after the call. After the presentations, there will be the usual Q&A session for our analysts. We are using Teams for the call again. In order to ask a question, you have to click the "raise your hand" icon, and we will announce your name and open your line if you are on mute.

Andreas Trösch: We use Teams for the call again. In order to ask a question, you have to push the Raise Your Hand icon, and we will announce your name and open your line. If you are on mute, you must unmute yourself in addition. With that, I would like to hand over to our CEO, Miguel López.

Speaker #1: You must unmute yourself. In addition, I would like to hand over to our CEO, Miguel López.

Speaker #2: Thank you, Andreas, and hello everyone. Welcome to our Q3 conference call. The key message for Q3 is clear: execution continues to move forward, even against the still uncertain market backdrop.

Miguel López: Thank you, Andreas, and hello, everyone. Welcome to our Q3 conference call. The key message for Q3 is clear. Execution continues to move forward even against the still uncertain market backdrop. As usual, I would like to give you a concise management summary for the third quarter of fiscal year 2025/2026, covering our performance, our portfolio progress on the ACES 2030, and the key milestones with regard to our green transformation efforts. On portfolio and ACES 2030, the transformation of our headquarters towards a financial holding company is in execution. This goes hand in hand with the declining cost base over time. Last year, we demonstrated that we can successfully execute spinoffs and establish independent businesses when we brought TKMS to the capital market. Since then, TKMS performance has clearly validated our strategy and proven the strength of its standalone investment case.

Speaker #2: As usual, I would like to give you a concise management summary for the third quarter of fiscal year 25/26, covering our performance, our portfolio progress under ACES 2030, and the key milestones with regard to our green transformation efforts.

Speaker #2: On portfolio and ACES 2030, the transformation of our headquarters towards a financial holding company is in execution. This goes hand in hand with the declining cost base over time.

Speaker #2: Last year, we demonstrated that we can successfully execute spin-offs and establish independent businesses when we brought PKMs to the capital market. Since then, PKMs' performance has clearly validated our strategy and proven the strength of its standalone investment case.

Speaker #2: This is also reflected in recent major orders worth billions of euros, including the contracts from the German Armed Forces for service vessels and the contracts from the Canadian government for submarines.

Miguel López: This is also reflected in recent major orders worth billions of EUR, including the contracts from the German Armed Forces for service vessels and the contracts from the Canadian government for submarines. As a strong anchor shareholder, thyssenkrupp AG continues to actively support and accompany TKMS in its further development. We now intend to follow the same path with tk accelis, our Materials Services segment. The spinoff is on track. I will come back to this on the next slide. On Steel Europe, the clear focus is on restructuring towards profitability and independence of the segment following the HKM exit in July 2026. This really has been a historic milestone for thyssenkrupp and the overall Steel Europe segment. Looking ahead, we are planning to host a dedicated Steel Europe Capital Markets Day at the end of September in London to update all of you on our transformation journey.

Speaker #2: As a strong anchor shareholder, thyssenkrupp AG continues to actively support and accompany PKMs in its further development. We now intend to follow the same path with TK Exelis, our Material Services segment.

Speaker #2: The spin-off is on track. I will come back to this on the next slide. And to steel Europe, the clear focus is on restructuring towards profitability and independence of the segment following the HKM exit in July 2026.

Speaker #2: This really has been a story milestone for thyssenkrupp and the overall steel segment. Looking ahead, we are planning to host a dedicated Steel Europe Capital Markets Day at the end of September in London to update all of you on our transformation journey.

Speaker #2: And with regard to TK Elevator, the value crystallization continues following the KONE bid from earlier this year. Now, only a few remarks on performance, as Axel will provide more details in the financial section of today's call.

Miguel López: With regard to TK Elevator, the value crystallization continues following the Kone bid from earlier this year. Now, only a few remarks on performance, as Axel will provide more details in the financial section of today's call. Operationally, we see a further step up in performance, also driven by restructuring benefits that are becoming more and more visible. The group outlook is lowered for sales, narrowed for EBIT adjusted, and confirmed for free cash flow before M&A. Regarding the political and regulatory framework, the steel tariffs got effective in July, thus they are not yet fully reflected in our results, and they should provide additional upside going forward, especially for the upcoming fiscal year. On green transformation, Uhde delivered a successful ammonia converter modernization in Turkey with a 13% production boost, while Polysius reached an important oxy-fuel demonstration milestone with a CO2 capture potential of up to 95%.

Speaker #2: Operationally, we see a further step up in performance, also driven by restructuring benefits that are becoming more and more visible. The group outlook is lower for sales, narrowed for EBIT adjusted, and confirmed for free cash flow before M&A.

Speaker #2: Regarding the political and regulatory framework, the steel tariffs took effect in July. Thus, they are not yet fully reflected in our results, and they should provide additional upside going forward, especially for the upcoming fiscal year.

Speaker #2: Now, on green transformation, UDE delivered a successful ammonia converter modernization in Turkey, with a 13% production boost, while Polysius reached an important oxy-fuel demonstration milestone with a CO2 capture potential of up to 95%.

Speaker #2: At Steel, the DRI plant construction continues with full commitment, as it remains central to our pathway towards green steelmaking in the future. Turning to TK Excellis, our upcoming spin-off remains on track.

Miguel López: At Steel Europe, the DRI plant construction continues with full commitment as it remains central to our pathway towards green steelmaking in the future. Turning to tk accelis, our upcoming spinoff remains on track. The enhanced standalone equity story and increased midterm targets were presented at the Capital Markets Day in July and attracted the interest of the investor community. The planned structure is a 49% minority spinoff, while 51% remain with thyssenkrupp and therefore continues to be a fully consolidated segment. The financing framework is in place, including a borrowing base financing agreement in the amount of EUR 1.7 billion. Shareholders are expected to receive one tk accelis share for every 20 thyssenkrupp AG shares, enabling them to participate directly in tk accelis growth and value potential. The extraordinary general meeting on 7 August was successfully conducted with broad approvals.

Speaker #2: The enhanced standalone equity story and increased midterm targets were presented at the Capital Markets Day in July and attracted the interest of the investor community.

Speaker #2: The planned structure is a 49% minority spin-off, while 51% remains with thyssenkrupp and therefore continues to be a fully consolidated segment. The financing framework is in place, including a borrowing base financing agreement in the amount of €1.7 billion.

Speaker #2: Shareholders are expected to receive one TK Excelis share for every 20 thyssenkrupp AG shares, enabling them to participate directly in TK Excelis' growth and value potential.

Speaker #2: The extraordinary general meeting on August 7 was successfully conducted with broad approvals. The next major step is the listing within this calendar year, in the prime standard of the Frankfurt Stock Exchange.

Miguel López: The next major step is the listing within this calendar year in the Prime Standard of the Frankfurt Stock Exchange. Now, Axel, the stage is yours for the financial section.

Speaker #2: And now, Axel, the stage is yours for the financial section.

Speaker #1: Thanks, Miguel. Let's now turn to the financial overview for the third quarter. Overall, the main challenge remains the limited visibility on macroeconomic developments, in addition to quite muted demand across several customer groups and regions.

Andreas Trösch: Thanks, Miguel. Let's turn now to the financial overview for Q3.

Axel Hamann: Thanks, Miguel. Let's turn now to the financial overview for Q3.

Axel Hamann: Overall, the main challenge remains the limited visibility on macroeconomic development, in addition to quite muted demand across several customer groups and regions. However, the financial overview shows that our strict performance management is translating into tangible bottom-line results. Let's have a look into some details. Sales in Q3 were EUR 8.8 billion, up 8% year-on-year, showing a promising momentum. For the first 9 months, sales were EUR 24.4 billion, down 1% year-on-year. That is considering portfolio and currency exchange effects. Sales were up +9% and +2% respectively. Let's get to EBIT adjusted. Improved to EUR 183 million in Q3. That is an increase of EUR 28 million year-on-year, and reached EUR 591 million for the first 9 months. That increase was also driven by our restructuring efforts.

Speaker #1: However, the financial overview shows that our strict performance management is translating into tangible bottom-line results. So let's have a look at some details. Sales in the third quarter were €8.8 billion, up 8% year on year, showing a promising momentum.

Speaker #1: For the first nine months, sales were €24.4 billion, down 1% year on year. That is considering portfolio and currency exchange effects; sales were up plus 9% and plus 2%, respectively.

Speaker #1: Let's get to EBIT adjusted, improved to 183 million euro in the third quarter. That is an increase of 28 million euro year on year.

Speaker #1: ...and reached €591 million for the first nine months. That increase was also driven by our restructuring efforts. In that regard, workforce reduction is progressing well, with FTE down by approximately 3,500 year-to-date.

Axel Hamann: In that regard, workforce reduction is progressing well, with FTE down by approximately 3,500 year to date. Let's talk about net income. Net income improved to EUR 34 million in Q3, supported by write-ups at Steel Europe following a more efficient production setup considering the HKM exit Miguel just mentioned. The 9-month figure remains negative at minus EUR 311 million, mainly on the back of the preceding restructuring provisions in Q1 that you are all aware of. Talking about free cash flow before M&A, that was minus EUR 114 million in the quarter, improving by EUR 140 million year on year. That leads to accumulated 9-month figure of minus EUR 1.9 billion. Overall, important to note, that reflects our usual cash flow pattern that will reverse in the running quarter. Miguel has already mentioned that we do confirm our full year guidance for free cash flow before M&A.

Axel Hamann: In that regard, workforce reduction is progressing well, with FTE down by approximately 3,500 year to date. Let's talk about net income. Net income improved to EUR 34 million in Q3, supported by write-ups at Steel Europe following a more efficient production setup considering the HKM exit Miguel just mentioned. The 9-month figure remains negative at minus EUR 311 million, mainly on the back of the preceding restructuring provisions in Q1 that you are all aware of. Talking about free cash flow before M&A, that was minus EUR 114 million in the quarter, improving by EUR 140 million year-on-year. That leads to accumulated 9-month figure of minus EUR 1.9 billion. Overall, important to note, that reflects our usual cash flow pattern that will reverse in the running quarter. Miguel has already mentioned that we do confirm our full year guidance for free cash flow before M&A.

Speaker #1: Let's talk about net income. Net income improved to 34 million euro in the third quarter, supported by write-ups at Steel Euro following a more efficient production setup, considering the HKM exit Miguel just mentioned.

Speaker #1: The nine-month figure remains negative at minus €311 million, mainly on the back of the preceding restructuring provisions in Q1 that you're all aware of.

Speaker #1: Talking about free cash flow, before M&A, that was minus 114 million euro in the quarter, improving by 140 million euro year on year. That leads to accumulated nine-month figure of minus 1.9 billion euro.

Speaker #1: Overall, it's important to note that this reflects our usual cash flow pattern, which will reverse in the current quarter. Miguel has already mentioned that we do confirm our full-year guidance for free cash flow before M&A.

Speaker #1: With regard to our balance sheet, we maintained a solid net cash position at around €2.6 billion. And in order to conclude the financial overview for the group, the key message is quite straightforward: We are executing strongly on performance management and, at the same time, preserving balance sheet strength while staying realistic about the macro and demand environment.

Axel Hamann: With regard to our balance sheet, we maintained a solid net cash position at around EUR 2.6 billion. In order to conclude the financial overview for the group, the key message is quite straightforward. We are executing strongly on performance management and, at the same time, preserving balance sheet strength while staying realistic about the macro and demand environment. Turning to the next slide, this provides a high-level view of sales and EBIT adjusted development in Q3. On sales, overall message is that top-line development shows a promising momentum. Improvement was especially supported by Materials Services, now tk accelis, with positive effects from prices and volumes, while other segments such as Automotive Technology and Decarbon Technologies still faced pretty low demand. Let's get to EBIT adjusted. Overall increase was mainly driven by Steel on the back of restructuring efforts and more favorable raw material costs.

Speaker #1: Turning to the next slide, this provides a high-level view of sales and EBIT-adjusted development in the third quarter. On sales, the overall message is that top-line development shows promising momentum. Improvement was especially supported by Materials Services, now TK Exelis, with positive effects from prices and volumes, while other segments such as Automotive Technology and Decarbon Technologies still faced pretty low demand.

Speaker #1: Let's get to EBIT adjusted, overall increase was mainly driven by steel, on the back of restructuring efforts, and more favorable raw material costs. In addition, material services and marine systems also posted pleasant year-over-year increases.

Axel Hamann: In addition, Materials Services and Marine Systems also posted pleasant year-over-year increases. These developments more than offset the declines in Automotive and Decarbon Technologies. In short, the quarter demonstrates that our performance measures are becoming increasingly visible in the numbers, even though we are not yet seeing a broad-based market recovery across all segments. Let's turn to our segments. First, Automotive Technology. The key message for Q3 is that we are continuing to manage through a soft market environment while staying focused on restructuring and internal countermeasures. Sales remain under pressure year over year, mainly reflecting softer demand in the serial business. At the same time, continue to see growth in the aftermarket group and Forged Technologies. Please also keep in mind the M&A effect from automation engineering with closing of the transaction at the end of March 2026. Hence, from an organic perspective, sales were rather flat.

Axel Hamann: In addition, Materials Services and Marine Systems also posted pleasant year-over-year increases. These developments more than offset the declines in Automotive and Decarbon Technologies. In short, the quarter demonstrates that our performance measures are becoming increasingly visible in the numbers, even though we are not yet seeing a broad-based market recovery across all segments. Let's turn to our segments. First, Automotive Technology. The key message for Q3 is that we are continuing to manage through a soft market environment while staying focused on restructuring and internal countermeasures. Sales remain under pressure year-over-year, mainly reflecting softer demand in the serial business. At the same time, continue to see growth in the aftermarket group and Forged Technologies. Please also keep in mind the M&A effect from automation engineering with closing of the transaction at the end of March 2026. Hence, from an organic perspective, sales were rather flat.

Speaker #1: These developments more than offset the declines in automotive and decarbon technologies. In short, the quarter demonstrates that our performance measures are becoming increasingly visible in the numbers, even though we're not yet seeing a broad-based market recovery across all segments.

Speaker #1: Let's turn to our segments, starting with automotive technology. The key message for Q3 is that we are continuing to manage the soft market environment while staying focused on restructuring and internal countermeasures.

Speaker #1: Sales remain under pressure year over year, mainly reflecting softer demand in the serial business. At the same time, we continue to see growth in the aftermarket group and Forge Technologies.

Speaker #1: Please also keep in mind the M&A effect from automation engineering with closing of the transaction at the end of March 2026. Hence, from an organic perspective, sales were rather flat.

Speaker #1: On profitability, adjusted EBIT declined in the quarter. Restructuring benefits and our internal countermeasures are visible, but they could not fully compensate for the lower volumes and higher special freight costs.

Axel Hamann: On profitability, EBIT adjustments declined in the quarter. Restructuring benefits and our internal countermeasures are visible, but they could not fully compensate the lower volumes and higher special freight costs. On BCF, business cash flow, the development was quite encouraging. Lower investments improved net working capital, both more than offset the earnings decline and restructuring cash outs. As a result, business cash flow improved year over year. So in summary, demand in Automotive remains challenging, but the operational measures are gaining more and more traction. Let's move on to Decarbon Technologies. At Decarbon Technologies, we are still facing a pretty hesitant project environment, mainly in the chemical plant business. Customers continue to postpone projects, which together with the usual volatility in the project business, leads to weak order intake and therefore decreasing sales.

Axel Hamann: On profitability, EBIT adjustments declined in the quarter. Restructuring benefits and our internal countermeasures are visible, but they could not fully compensate the lower volumes and higher special freight costs. On BCF, business cash flow, the development was quite encouraging. Lower investments improved net working capital, both more than offset the earnings decline and restructuring cash outs. As a result, business cash flow improved year-over-year. So in summary, demand in Automotive remains challenging, but the operational measures are gaining more and more traction. Let's move on to Decarbon Technologies. At Decarbon Technologies, we are still facing a pretty hesitant project environment, mainly in the chemical plant business. Customers continue to postpone projects, which together with the usual volatility in the project business, leads to weak order intake and therefore decreasing sales.

Speaker #1: On BCF, business cash flow, the development was quite encouraging. Lower investments and improved net working capital both more than offset the earnings decline and restructuring cash out.

Speaker #1: As a result, business cash flow improved year over year. So in summary, demand in automotive remains challenging, but the operational measures are gaining more and more traction.

Speaker #1: Let's move on to Decarbon Technologies. At Decarbon Technologies, we're still facing a pretty hesitant project environment, mainly in the chemical plant business. Customers continue to postpone projects, which, together with the usual volatility in the project business, leads to weak order intake and therefore decreasing sales.

Speaker #1: The main driver of the sales decline was plant engineering. And these deteriorating sales negatively impacted our EBIT adjusted in the third quarter. That was also affected by project-related additional costs in the cement business, coming from past legacy projects.

Axel Hamann: The main driver of the sales decline was plant engineering. These deteriorating sales negatively impacted our EBIT adjusted in the Q3. That was also affected by project-related additional costs in the cement business coming from past legacy projects. Performance measures and efficiency gains resulting from our ongoing restructuring and purchasing optimization could support earnings. We were not able to fully compensate for the decrease. Positive news on the last KPI on this slide. DT was able to raise business cash flow, mainly on the back of temporarily favorable payment profiles. Let's move on to Materials Services, now known as tk accelis. tk accelis delivered a clear earnings improvement supported by a favorable market environment, especially in North America, but also in Europe.

Speaker #1: Performance measures and efficiency gains resulting from our ongoing restructuring and purchasing optimization could support earnings; however, we're re not able to fully compensate for the decrease.

Speaker #1: Positive news on the last KPI on this slide: BT was able to raise business cash flow, mainly on the back of temporarily favorable payment profiles.

Speaker #1: Let's move on to Material Services, now known as TK Excellis. TK Excellis delivered a clear earnings improvement, supported by a favorable market environment—especially in North America, but also in Europe.

Speaker #1: We saw strong growth in sales, that was driven by materials and processing business in Europe and North America, with significantly higher shipments particularly in direct-to-customer businesses and on the back of distribution and processing volumes.

Axel Hamann: We saw strong growth in sales that was driven by materials and processing business in Europe and North America, with significantly higher shipments, particularly in direct-to-customer businesses and on the back of distribution and processing volumes. Let's take a look at earnings. EBIT adjusted significantly increased due to supportive market conditions and a very strong operational performance, with the North American operations delivering the strongest earnings uplift. In addition, our processing business as well as the European materials business also performed positively. Talking about cash flow, our business cash flow benefited here from higher earnings, partly offset by price increase, net working capital build-up. Moving on to Steel Europe. Their sales increased in the Q3, driven by higher shipments, particularly from automotive and industrial customers. However, pricing there remained under pressure, especially in packaging and electrical steel.

Speaker #1: Let's take a look at earnings. EBIT adjusted significantly increased due to supportive market conditions and very strong operational performance, with North American operations delivering the strongest earnings uplift.

Speaker #1: In addition, our processing business, as well as the European materials business, also performed positively. Talking about cash flow, our business cash flow benefited here from higher earnings, partly offset by price increase net working capital buildup.

Speaker #1: Moving on to Steel, Steel Europe saw sales increase in the third quarter, driven by higher shipments, particularly from automotive and industrial customers. However, pricing remained under pressure, especially in packaging and electrical steel.

Speaker #1: Moving on to adjusted EBIT, that improved significantly in the third quarter, and more than doubled year-to-date. That was mainly driven by restructuring measures, our hiring freeze, operational excellence initiatives, and lower raw material costs.

Axel Hamann: Moving on to EBIT adjusted, that improved significantly in the Q3 and more than doubled year to date. That was mainly driven by restructuring measures, our hiring freeze, operational excellence initiatives, and lower raw material costs. Cash flow. Our business cash flow also improved year over year, supported also by government funding for the direct reduction plant that is progressing. Overall, self-help measures continue to deliver tangible results and help offset the challenging market environment. Last but not least, Marine Systems, TKMS. As usual, only a couple of brief comments on Marine Systems, as all operational details have already been presented yesterday. It is without saying that we, as a majority shareholder, are more than happy with the development of our segment. Marine Systems continues to build a strong foundation for future growth, supported by an order backlog of more than EUR 20 billion.

Axel Hamann: Moving on to EBIT adjusted, that improved significantly in the Q3 and more than doubled year to date. That was mainly driven by restructuring measures, our hiring freeze, operational excellence initiatives, and lower raw material costs. Cash flow. Our business cash flow also improved year-over-year, supported also by government funding for the direct reduction plant that is progressing. Overall, self-help measures continue to deliver tangible results and help offset the challenging market environment. Last but not least, Marine Systems, TKMS. As usual, only a couple of brief comments on Marine Systems, as all operational details have already been presented yesterday. It is without saying that we, as a majority shareholder, are more than happy with the development of our segment. Marine Systems continues to build a strong foundation for future growth, supported by an order backlog of more than EUR 20 billion.

Speaker #1: Cash flow—our business cash flow—also improved year over year, supported by government funding for the direct reduction plan that is progressing. Overall, self-help measures continue to deliver tangible results and help offset the challenging market environment.

Speaker #1: Last but not least, marine systems—TKMS. As usual, only a couple of brief comments on marine systems, as all operational details have already been presented yesterday.

Speaker #1: But it goes without saying that we, as the majority shareholder, are more than happy with the development of our segment. Marine Systems continues to build a strong foundation for future growth, supported by an order backlog of more than €20 billion.

Speaker #1: Let's move on to our EBIT adjusted bridge to net income. Looking at the special items, we saw a slight net positive effect that was mainly driven by the HKM exit from early July and its implications.

Axel Hamann: Let's move on to our EBIT adjusted bridge to net income. Looking at the special items, we saw a slight net positive effect that was mainly driven by the HKM exit from early July and its implications, and most notably, write-ups at Steel Europe of round about EUR 400 million in light of a more profitable business outlook of the remaining segment without HKM. As well as the respective impairment losses of EUR 276 million by classifying HKM as a disposal group, discontinued operations. Please note that the actual deconsolidation of HKM with a negative low three-digit million euro impact will be included in our Q4 accounts. The remaining positions are rather straightforward after the financial results in taxes. Net income for the Q3 came in at EUR +34 million. Next chart. Our Q3 reconciliation to free cash flow before M&A.

Speaker #1: And most notably, write-ups at Steel Europe of around €400 million in light of a more profitable business outlook for the remaining segment without HKM.

Speaker #1: As well as the respective impairment losses of €276 million by classifying HKM as a disposal group, this continues operations. Please note that the actual deconsolidation of HKM, with a negative low three-digit million euro impact, will be included in our fourth quarter accounts.

Speaker #1: The remaining positions are rather straightforward. After the financial results and taxes, net income for the third quarter came in at €34 million positive.

Speaker #1: Next chart: our third quarter reconciliation to free cash flow before M&A. As you can see, in the third quarter we did not face any material net reconciliation items. Investments are net positive in the quarter.

Axel Hamann: As you can see, in Q3, we did not face any material net reconciliation items. Investments are net positive in the quarter, mainly on the back of funding for the direct reduction plant at Steel Europe with an amount of EUR 252 million. The M&A adjustment includes the proceeds for the sale of the remaining stake in Acciai Speciali Terni in the range of a high double-digit million euro figure. Overall, that led to a free cash flow before M&A of -EUR 114 million. While the quarterly figure remains negative, it improved year on year and continues to reflect the typical seasonal cash flow pattern. Let's have a closer look at our outlook for the remaining year. As Miguel already mentioned, for the full year, we are lowering our group guidance for sales and narrowing for EBIT adjusted while confirming for free cash flow before M&A.

Axel Hamann: As you can see, in Q3, we did not face any material net reconciliation items. Investments are net positive in the quarter, mainly on the back of funding for the direct reduction plant at Steel Europe with an amount of EUR 252 million. The M&A adjustment includes the proceeds for the sale of the remaining stake in Acciai Speciali Terni in the range of a high double-digit million euro figure. Overall, that led to a free cash flow before M&A of -EUR 114 million. While the quarterly figure remains negative, it improved year-on-year and continues to reflect the typical seasonal cash flow pattern. Let's have a closer look at our outlook for the remaining year. As Miguel already mentioned, for the full year, we are lowering our group guidance for sales and narrowing for EBIT adjusted while confirming for free cash flow before M&A.

Speaker #1: Mainly on the back of funding for the direct reduction plan at Steel Europe, with an amount of €252 million. The M&A adjustment includes the proceeds from the sale of the remaining stake in AST, in the range of a high double-digit million-euro figure.

Speaker #1: Overall, that led to a free cash flow before M&A of minus €114 million. While the quarterly figure remains negative, it improved year-on-year and continues to reflect the typical seasonal cash flow pattern.

Speaker #1: So, let's have a closer look at our outlook for the remaining year. As Miguel already mentioned, for the full year we're lowering our group guidance for sales and narrowing for EBIT adjusted.

Speaker #1: While confirming free cash flow before M&A, let's have a look at the details. For the Group, sales are now expected to be between minus 3% and minus 1% versus the prior year.

Axel Hamann: Let's have a look at the details. For the group, sales are now expected to be between -3% and -1% versus the prior year. EBIT adjusted is now expected in the range of EUR 600 million to EUR 900 million, compared with our previous range of EUR 500 million to EUR 900 million. Free cash flow before M&A is confirmed at -EUR 600 million to -EUR 300 million, including lower restructuring cash outs of up to EUR 250 million, as well as a somewhat lower CapEx guidance of EUR 1.2 billion to EUR 1.3 billion. Net income is expected to be between -EUR 700 million and -EUR 400 million, including restructuring provisions, mainly at Steel Europe. At a segment level, there are several adjustments that led to the updated group guidance. Let me highlight a couple of them. We raised our guidance for sales and EBIT adjusted at Materials Services and Marine Systems.

Speaker #1: EBIT adjusted is now expected to be in a range of €600 million to €900 million, compared with our previous range of €500 million to €900 million.

Speaker #1: Free cash flow before M&A is confirmed at minus 600 to minus 300 million euro, including lower restructuring cash outs of up to 250 million euro, as well as a somewhat lowered capex guidance of 1 to 2 to 1.3 billion euro.

Speaker #1: Net income is expected to be between minus €700 million and minus €400 million, including restructuring provisions mainly at Steel Europe. At a segment level, there are several adjustments.

Speaker #1: That led to the updated group guidance. Let me highlight a couple of them. We raised our guidance for sales and EBIT adjusted at Material Services and Marine Systems. We also raised our EBIT adjusted guidance for Steel Europe, while becoming a bit more cautious in terms of sales expectations.

Axel Hamann: We also raised our EBIT adjusted guidance for Steel Europe, while becoming a bit more cautious in terms of sales expectations. Overall, the guidance reflects improved operational execution while maintaining appropriate caution on market visibility. With that, Miguel, up to you again.

Speaker #1: Overall, the guidance reflects improved operational execution while maintaining appropriate caution on market visibility. And with that, Miguel, it's back to you.

Speaker #2: Thank you very much, Axel.

Miguel López: Thank you very much, Axel. Let me wrap up today's call with five key messages. First, we are changing the setup of thyssenkrupp AG into a lean financial holding company. That transformation is in execution. Second, the tk accelis spin-off will be the next visible proof point in delivering on ACES 2030. Third, on the Steel Europe Capital Markets Day at the end of September, we will provide transparency on the recent progress and milestones that we have reached. Fourth, we will continue to take an individual approach for each business, including the necessary restructuring to secure sustainable success. Finally, we will leverage the opportunities arising from the green transformation. With that, we are at the end of today's presentation. Thank you all for your continued interest and trust. Axel and I are now happy to take your questions. Andreas, back to you.

Speaker #1: Let me wrap up today's call with five key messages. First, we are changing the setup of thyssenkrupp AG into a lean financial holding company. That transformation is an execution.

Speaker #1: Second, the TK Excelis spin-off will be the next visible proof point in delivering on ACES 2030. Third, on the Steel Europe Capital Market Day at the end of September, we will provide transparency on the recent progress and milestones that we have reached.

Speaker #1: Fourth, we will continue to take an individual approach for each business, including the necessary restructuring to secure sustainable success. And finally, we will leverage the opportunities arising from the green transformation. With that, we are at the end of today's presentation.

Speaker #1: Thank you all for your continued interest and trust. Axel and I are now happy to take your questions. Andreas, back to you.

Speaker #2: Thank you very much. We are now coming to the Q&A session. You know the drill. Please go to Teams and use the raise your hand feature.

Andreas Trösch: Thank you very much. We are now coming to the Q&A session. You know the drill. Please go to Teams and use the raise your hand button, then please unmute yourself. The first question is coming from Ephrem Ravi from Citi. Ephrem, please.

Speaker #2: Button, and then please unmute yourself. So the first question is coming from Ephraim Ravi from Citi. Ephraim, please.

Speaker #3: Thank you. Three quick questions. Firstly, should we see the Steel capital market stay as sort of a prelude for what you kind of have done for marine systems and Excelis, i.e., kind of a spin-off with holding and then one is to 20 shares, or is this not kind of a signal to the market that that's the current preferred route of how to kind of unlock value in that business?

Ephrem Ravi: Thank you. Three quick questions. Firstly, should we see the Steel Capital Markets day as a prelude for what you have done for Marine Systems and Axel's, i.e. a spin-off with holding and then 1 is to 20 shares, or is this not a signal to the market that that is the current preferred route of how to unlock value in that business? Second question on Steel Europe again. The reduction in sales guidance, but upgrade in EBIT guidance. Should we take that as more lower volumes, but obviously higher prices and profitability that you are expecting for the last quarter of the fiscal year? Third and final question.

Speaker #3: Second question, on sort of Steel Europe again, the reduction in sales guidance, but upgrade in EBIT guidance, should we kind of take that as more lower volumes but obviously higher prices and profitability that you're expecting for the last quarter of the fiscal year?

Speaker #3: And third and final question—sorry to ask this, I know this is a boring and standard question—but Rhine River levels in terms of impact on raw material cost and finished product logistics cost.

Ephrem Ravi: Sorry to ask this, I know this is a boring and standard question, but Rhine River levels, in terms of impact on raw material cost and finished product logistics cost, could you give us a sense as to how much potentially volume impact or cost impact could be because of that development? Thank you.

Speaker #3: Could you give us a sense as to how much potential volume impact or cost impact there could be because of that development? Thank you.

Speaker #1: Yeah, thank you very much. For the questions, I would like to start with how to frame the Steel Capital Market Day at the end of September.

Miguel López: Yeah. Thank you very much for the questions. I would like to start with how to frame the Steel Capital Market day end of September. Actually, as explained, we have been concluding three major milestones in Steel, which was in December, the agreement on the restructuring plan. Then, as mentioned, also the HKM agreement and deal. Third, obviously very important as well, is the European Union tariff increase and quota reduction being in place since 1 July. These three major events need to be, in our belief, better explained, and that is the reason why we are doing this Capital Market day end of September, in order that the impact from these three very important milestones can be interpreted in the right way by you. That is the motivation for doing this Capital Market day. That we are driving also Steel into independence. I think this has been communicated.

Speaker #1: Actually, as explained, we have been concluding three major milestones in Steel. The first was in December with the agreement on the restructuring plan. Then, as mentioned, also the HKM agreement and deal. And third, obviously very important as well, is the European Union tariffs and quota reduction—tariff increase and quota reduction being in place since July 1st.

Speaker #1: These three major events, in our belief, need to be better explained. That is the reason why we are holding this Capital Market Day at the end of September, so that the impact of these three very important milestones can be interpreted in the right way by you.

Speaker #1: And that's the motivation for doing this Capital Market Day—that we are also driving Steel into independence. I think this has been communicated.

Speaker #1: This is very clear. But we should, first of all, inform about the three major things that happened, and we take it from there.

Miguel López: This is very clear. We should first of all inform about the three major things that happened, and we take it from there.

Speaker #2: All right. Hi, Ephraim. Maybe I'll start with your question. On the Ryan River situation, that's something we're monitoring on a daily basis. Steel has set up a dedicated task force for that.

Axel Hamann: All right. Hi, Ephrem. Maybe I start with your question on the Rhine River situation. That is something we are monitoring on a daily basis. Steel has set up a dedicated task force for that. We are slightly adapting logistics and also taking precautious measures at our production. I cannot yet tell you any potential impact. Let us see what the next weeks bring. There is a laser focus on the topic and production is all on it. Second, with regard to your question, Steel Q4, exactly as you said, assuming lower volumes and somewhat better pricing.

Speaker #2: We are slightly adapting logistics and also taking precautionary measures at our production. I cannot yet tell you any potential impact. Let's see what the next weeks bring.

Speaker #2: But there is a laser focus on the topic, and production is all on it. Second, with regard to your question—Steel fourth quarter—exactly as you said, assuming lower volumes and somewhat better pricing.

Speaker #3: Thank you.

Speaker #1: Sure.

Speaker #2: Thanks, Ephraim. Now, next in line is Domenico Cain from JP Morgan. Domenico, please go ahead.

[Analyst]: Thank you.

Ephrem Ravi: Thank you.

Andreas Trösch: Sure. Thanks, Ephrem. Now the next in line is Dominic O'Kane, JP Morgan. Dominic, please go ahead.

Speaker #3: Thank you, and thanks for taking my question. I have two questions. Again, going back to Steel Europe and, again, the guidance that you've given for the full year.

Dominic O'Kane: Thank you. Thanks for taking my question. I have two questions. Again, going back to Steel Europe and the guide that you have given for the full year. I guess my question is, to what extent is the guide overly conservative, or is it signaling quite significant weakness for Q4? Obviously, if we look at your nine months realized adjusted EBIT, you are at 373. So you are already comfortably at the midpoint of the range. Given what you are seeing at the moment in terms of a slowdown in Europe, is Steel Europe profitable at adjusted EBIT for Q4? Again, I just want to get a sense of, are you actually signaling a materially weaker Q4 at Steel Europe than I think ourselves and consensus might be expecting.

Speaker #3: So I guess my question is, to what extent is the guide overly conservative, or is it signaling quite significant weakness for Q4? Obviously, if we look at your nine-month realized adjusted EBIT, you're at 373.

Speaker #3: So you're already comfortably at the midpoint of the range. Given what you're seeing at the moment in terms of the slowdown in Europe, is Steel Europe profitable on an adjusted EBIT basis for Q4?

Speaker #3: So again, I just want to get a sense of—are you actually signaling a materially weaker Q4 at Steel Europe than I think ourselves and consensus might be expecting?

Speaker #3: My second question, again—just maybe going back to the group structure and the success that you've clearly had on TKMS, and Excellis coming up.

Dominic O'Kane: My second question, again, just maybe going back to the group structure and the success that you have clearly had on TKMS and tk accelis coming up. How are you thinking about whether the 51% long term is the right ownership level? Again, we are at a situation where at the moment we obviously have peak demand for defense, very strong performance for that market. How are you thinking about maybe monetizing the opportunity and the strengths that you see for both TKMS and tk accelis at the moment? Thank you.

Speaker #3: How are you thinking about your—again, whether the 51% long term is the right ownership level? Again, we're at a situation where, at the moment, we obviously have kind of peak demand for defense—very, very strong performance for that market.

Speaker #3: How are you thinking about maybe monetizing the opportunity and the strength that you see for both TKMS and Excelis at the moment? Thank you.

Speaker #1: Should I start with your last question? I think it has been a very successful start that we had with Marine System, and we also expect a good start with TK Excelis.

Axel Hamann: Should I start with your last question? I think it has been very successful start that we did with Marine Systems, and also we expect a good start with tk accelis with our 51% ownership. There are no plans in the future to monetize that or to change that so far. All right, Dominic. Let me try to answer your question on our Steel guidance. I would say in your words, it is more caution than weakness. Caution is due to a couple of factors. First of all, uncertainty on energy prices, given the quite volatile situation in and around Iran. Then we have touched upon the Rhine River situation. That is also something we need to monitor. There are some upcoming and planned maintenance. So that is probably the underlying reason for what we would call more caution than weakness.

Speaker #1: With our 51% ownership, and there are no plans in the future to monetize that or to change that—so far.

Speaker #2: All right, Domenico. Let me try to answer your question on our Steel guidance. I'd say, in your words, it's more caution than weakness. And caution is due to a couple of factors.

Speaker #2: First of all, there is uncertainty on energy prices, given the quite volatile situation in and around Iran. Then we've touched upon the Rhine River situation; that's also something we need to monitor.

Speaker #2: And there are some upcoming and planned maintenance, so that is probably the underlying reason for what we would call more caution than weakness.

Speaker #3: Could you maybe just elaborate on the maintenance? How long will the maintenance be affecting the plants?

Dominic O'Kane: Could you maybe just elaborate on the maintenance? How long will the maintenance be affecting the plants?

Speaker #1: Yeah. It's not an overall maintenance. You're aware that the plant consists of many huge aggregates. I'd say a major maintenance period is now upcoming for around about two quarters.

Axel Hamann: It's not an overall maintenance. You're aware that that plant consists of many huge aggregates. I'd say a major maintenance period is now upcoming for around about 2 quarters. It's regular business, and that's something we need to manage.

Speaker #1: That's something we—it's a regular business, and that's something we need to manage.

Speaker #3: So that would be Q4 and Q1, just to be clear?

Dominic O'Kane: So that will be Q4 and Q1, just to be clear?

Speaker #1: Yeah. Q4, Q1, and also lingering into the second quarter.

Axel Hamann: Yeah. Q4, Q1, and also lingering into the second quarter.

Axel Hamann: Yeah. Q4, Q1, and also lingering into the Q2.

Speaker #3: Thank you. Thanks very much. I'll go back to the queue.

Dominic O'Kane: Okay. Thank you. Thanks very much. I'll go back to the queue.

Speaker #2: Thanks, Domenico. And the next in line is Jason Fairclough, Bank of America. Jason, please.

Andreas Trösch: Thanks, Dominic. The next in line is Jason Fairclough, Bank of America. Jason, please.

Speaker #4: Hi guys, thanks so very much for the presentation and for the opportunity to ask questions. Two for me, please. First one's on Excelis, and then just a follow-up on Steel.

Jason Fairclough: Hi, guys. Thanks so very much for the presentation and for the opportunity to ask questions. Two for me, please. The first one's on tk accelis, and then just a follow-up on Steel. First of all, in tk accelis, obviously a big increase in profitability, and I'm just wondering if you could give us some color on how this might be helped by inventory effects from materials that were perhaps previously acquired at a lower price and are now being sold for higher prices, versus how much is actual structural profit uplift from running the business better, perhaps in anticipation of the spin. So that's the first question. The second question is on Steel business. It's a bit of a turnaround here, right? So you previously effectively were looking at giving this away for free. So you've now got the TRQ, you've got the announced restructuring.

Speaker #4: So, first of all, in Excelis, obviously there's a big increase in profitability. I'm just wondering if you could give us some color on how this might be helped by inventory effects from materials that were perhaps previously acquired at a lower price.

Speaker #4: And are now being sold for higher prices, versus how much is actual structural profit uplift from running the business better—perhaps in anticipation of the spin?

Speaker #4: So that's the first question. The second question is on the steel business. It's a bit of a turnaround here, right? Previously, you were effectively looking at giving this away for free.

Speaker #4: So, you've now got the TRQ, you've got the announced restructuring. Are you willing to confirm a potential profit uplift in Steel from the labor restructuring of, say, €400 to €450 million?

Jason Fairclough: Are you willing to confirm a potential profit uplift in Steel from the labor restructuring of, say, EUR 400 to 450 million?

Speaker #2: Well, maybe let's start with Jason. This Excel—maybe let's start with Excelis, Material Services. The uplift that we have been mentioning, the majority is based on volume.

Axel Hamann: Well, maybe let's start with Jason, this Axel. Maybe let's start with tk accelis Materials Services. The uplift that we are mentioning, the majority is based on volume, but it's also due to the effect you've been describing, selling materials at higher prices. So it's a mix of volume and price increases. For Steel, can you specify your question maybe? What do you mean with 400 to 500?

Speaker #2: But it's also due to the effect you've been describing—selling materials at higher prices. So, it's a mix of volume and price increases. For steel, could you maybe specify your question?

Speaker #2: What do you mean by 400 to 500?

Speaker #4: So you're laying off—you've got, I think, a total of 11,000 people who are leaving the business. 5,500 are leaving, leaving. 5,500 being outsourced. If we think about 5,500 and the cost of a steelworker; if we think about the run-rate profitability of this business, it could be several hundred million euros better than it has been historically.

Jason Fairclough: You are laying off, you have, I think, a total of 11,000 people who are leaving the business. 5,500 are leaving, 5,500 being outsourced. If we think about 5,500 and the cost of a steelworker, if we think about the run rate profitability of this business, it could be several hundred millions of EUR better than it has been historically. Is that the right way to think about it? I guess we are just trying to think about the profit potential for this Steel Europe business and how it is evolving versus what it was two or three years ago.

Speaker #4: Is that the right way to think about it? I guess I'm just trying to think about the profit potential for this steel business and how it's evolving versus what it was two or three years ago.

Speaker #2: Jason, this question energizes me a lot. To be honest, I think this is exactly the reason why we are now doing the Capital Market Day at the end of September, because we want to be transparent about what the different buckets will be and how they impact the bottom line.

Axel Hamann: Jason, this question energizes me a lot, to be honest. I think this is exactly the reason why we are now doing the Capital Market Day end of September, because we want to be transparent in what the different buckets will be impacting the bottom line. Please stay tuned until end of September, and I would like to see you in London. Then we will get you and all the other market participants informed about what the three big things that I mentioned before will be in terms of bottom line and also in the medium term. It is indeed something very important to communicate.

Speaker #2: So please stay tuned until the end of September. And I would like to see you in London, and then we will get you and all the other market participants informed about what the three big things that I mentioned before will be in terms of bottom line and also in the medium term.

Speaker #2: So, it's indeed something very important to communicate.

Speaker #4: And just so that I understand: historically, there was a dual track here, which was to separate the Steel business through an IPO, like we've done already with Marine, like we're doing with Exelis.

Jason Fairclough: Just so that I understand, historically, there was a dual track here, which was separate the Steel Europe business through an IPO like we have done already with Marine Systems, like we are doing with tk accelis, or potentially pursue a trade sale to a third party. Would you confirm that the focus today is very much on door number one?

Speaker #4: Or potentially pursue a trade sale to a third party. Would you confirm that the focus today is very much on door number one?

Speaker #2: Definitely.

Speaker #4: Okay. Thank you.

Miguel López: Definitely.

Speaker #2: You're welcome. Thanks, Jason. Next in line is Paul Escudi from Kepler. Paul, please.

Jason Fairclough: Okay. Thank you.

Axel Hamann: You are welcome.

Andreas Trösch: Thanks, Jason. Next in line is Boris Bourdet from Kepler Cheuvreux. Boris, please.

Speaker #5: Hello, gentlemen. Thank you for taking my questions. Just as a follow-up on Jason's question on the steel CMD and the potential spin-off: would that be a minority spin-off, or would that be a majority spin-off?

Boris Bourdet: Hello, gentlemen. Thank you for taking my questions. Just as a follow-up on Jason's question on the Steel Europe CMD and potential spin-off, would that be a minority spin-off or would that be a majority spin-off? I remember in the past, you were really much looking to make that business independent. Given the three elements you have outlined, like the TRQ, the restructuring, and the deal on HKM, do you see now the lines moving in terms of potential buyers? That is the first question. The second question would be on restructuring. I have not seen provisions for restructuring moving so much quarter on quarter. Is it something pending that we should expect in Q4? Maybe a very last one on the DRI plants. I remember the total investment was a gross investment of EUR 3 billion, financed up to EUR 2 billion with public funding.

Speaker #5: Because I remember in the past you were very much looking to make that business independent. And given the three elements you've outlined, like the TRQ, the restructuring, and the deal on HKM, do you now see the lines moving in terms of potential buyers?

Speaker #5: That's the first question. And the second question would be on restructuring. I haven't seen provisions for restructuring moving so much quarter-on-quarter. Is it something pending that we should expect in Q4?

Speaker #5: And maybe a very last one on the DRI plans. I remember the total investment was a gross investment of €3 billion, financed up to €2 billion with public funding.

Speaker #5: I've seen a press release this morning pointing to potential renegotiations. So, what could be the upside here? Thank you.

Boris Bourdet: I have seen press release this morning pointing to potential renegotiations. What could be the upside here? Thank you.

Speaker #2: All right. Boris, it's Excel. Maybe on the DRI, you're totally right. Our volume is around €3 billion; funding, or public funding, is €2 billion.

Axel Hamann: All right. Boris, it's Axel. Maybe on the DRI, you are totally right. Overall volume of around 3 billion funding or public funding is 2 billion. There is no renegotiation on the financial terms or fundings. There is talks around to what extent we need to, let's say, use hydrogen in the first instance. That is something we have been very successfully and very positively negotiating with both the EU on a EU level, but also on a national level. So from a financing perspective, nothing is going to change. 3 billion overall, let's say CapEx, and of that 3 billion, 2 billion is publicly funded. That is with regard to DRI. Then your question with regard to restructuring provisions, there is not much more to expect in the remaining year. We have done our restructuring provisions mainly for Steel Europe in the first quarter.

Speaker #2: There is no real negotiation on the financial terms or funding. There are talks around to what extent we need to, let's say, use hydrogen in the first instance.

Speaker #2: That is something we have been very successfully and very positively negotiating with both the EU on an EU level, but also on a national level.

Speaker #2: So from a financing perspective, nothing's going to change. Three billion overall, let's say capex. And of that $3 billion, $2 billion is publicly funded.

Speaker #2: So that is with regard to DRI. Then your question with regard to restructuring provisions: there is not much more to expect in the remaining year.

Speaker #2: So we've done our restructuring provisions mainly for Steel in the first quarter. And we've now—that is also important to realize—in the first quarters, we have somehow anticipated restructuring provisions for HKM.

Axel Hamann: And we have now, that is also important to realize, in the first quarters, we have somehow anticipated restructuring provisions for HKM. However, as you know, we have now sold our shares to Salzgitter AG, and that is why there is not going to be any restructuring provisions on HKM anymore. And I guess, Miguel, you are going to take the- Yeah. Regarding your question about a spin-off in Steel Europe, majority and minority, I would like to indicate, let's please do step by step. The next step, and that's the reason why we announced it the other day, the next step is to get the Capital Market Day for Steel Europe end of September. There we will inform about, as mentioned before, the three major actions that we did put in place.

Axel Hamann: And we have now, that is also important to realize, in the Q1s, we have somehow anticipated restructuring provisions for HKM. However, as you know, we have now sold our shares to Salzgitter AG, and that is why there is not going to be any restructuring provisions on HKM anymore. And I guess, Miguel, you are going to take the- Yeah.

Speaker #2: However, as you know, we have now sold our shares to Salzgitter, and that is why there are not going to be any restructuring provisions for HKM anymore.

Speaker #2: And I guess, Miguel, you're going to take this.

Speaker #3: Yeah. Regarding your question about a spin-off in Steel, majority and minority, I would like to indicate: let's please do this step by step. The next step—and that's the reason why we announced it the other day—the next step is to have the Capital Markets Day for Steel at the end of September.

Miguel López: Regarding your question about a spin-off in Steel Europe, majority and minority, I would like to indicate, let's please do step by step. The next step, and that's the reason why we announced it the other day, the next step is to get the Capital Market Day for Steel Europe end of September. There we will inform about, as mentioned before, the three major actions that we did put in place.

Speaker #3: There, we will inform you about, as mentioned before, the three major actions that we put in place: the restructuring agreement, HKM, and also the increase of tariffs and a reduction of the import quota into the European Union.

Miguel López: So the restructuring agreement, HKM, and also the increase of tariffs and a reduction of import quota into the European Union, and the respective bottom line impacts that we will see over time regarding these three impacts. And then, with the CMD being done, we will then take one step after the other. So no decisions are made. And as said, we have been making a lot of good experience with getting really very organized step by step, and we will do so the same way for Steel Europe.

Speaker #3: And the respective bottom line impacts that we will see over time regarding these three impacts. And then, with the CMD being done, we will then take one step after the other, so no decisions are made as a set. We have been making a lot of good experience with getting really very organized, step-by-step.

Speaker #3: And we will do so the same way for Steel.

Speaker #4: Thank you.

Speaker #2: Thanks, Boris. Next in line is Alan Gabriel from Moritz Stanley. Alan, please.

[Analyst]: Thank you.

Boris Bourdet: Thank you.

Axel Hamann: No problem.

Andreas Trösch: Thanks, Boris. Next in line is Alain Gabriel from Morgan Stanley. Alain, please.

Speaker #6: Thank you for taking my questions. I have three short questions. The first is on HKM and the impact of that business on Steel Europe.

Alain Gabriel: Thank you for taking my questions. I have three short questions. The first is on HKM and the impact of that business that it had on the Steel Europe. Now that you are stripping out HKM, can you give us an order of magnitude of the impact of that business, upside or downside to your underlying Steel Europe EBITDA or EBIT in that sense? That is one. Then two, on TK Elevators. If you were to hypothetically sell your stake today, would you be incurring any capital gains taxes? Then three is on your free cash flow guidance. You have lifted your EBITDA or EBIT, you have cut your CapEx, and yet your free cash flow remains unchanged. Presumably, this is entirely a change in assumptions on the net working capital, or is there anything else that you have changed? Thank you.

Speaker #6: So now that you're stripping out HKM, can you give us an order of magnitude of the impact of that business outside, or the downside, to your underlying Steel Europe EBITDA or EBIT?

Speaker #6: In that sense, that's one. And then, two, on TK Elevators, if you were to hypothetically sell your stake today, would you be incurring any capital gains taxes?

Speaker #6: And then, three, is on your free cash flow guidance. You've lifted your EBITDA or EBIT, you've cut your capex, and yet your free cash flow remains unchanged.

Speaker #6: Presumably, this is entirely a change in assumptions on the net working capital, or is there anything else that you've changed? Thank you.

Speaker #2: All right. Thanks, Alan. Maybe let me start with HKM. We cannot quantify the EBIT impact, but I think I can give you a little bit of, let's say, color or clarification.

Axel Hamann: All right. Thanks, Alain. Maybe let me start with HKM. We cannot quantify the EBIT impact, but I think I can give you a little bit of, let us say, of a calibration. By selling HKM, we were able to write up our steel business at an amount of around EUR 400 million. That should give you an impression, let us say, what the impact has been over the past years. So it is a positive impact on our steel business that we have sold our shares to Salzgitter. Hopefully, that puts that into perspective, HKM. Then free cash flow. We are expecting still restructuring cash outs. We have confirmed our guidance, again, -300 to -600 million euro, and we are quite optimistic in order to reach that guidance.

Speaker #2: We were able, by selling HKM, we were able to write up our steel business at an amount of around 400 million euro. That should give us that should give you an impression let's say what the impact has been over the past years.

Speaker #2: So, it's a positive impact on our steel business that we have sold our shares to Salzgitter. Yeah, hopefully that puts that into perspective.

Speaker #2: HKM. Then free cash flow—it's still, I mean, we're still expecting restructuring cash out. We have confirmed our guidance, again, minus €300 million to minus €600 million.

Speaker #2: And we're quite optimistic in order to reach that guidance.

Speaker #3: Can you specify your question with regard to TKM, as that wasn't so clear to me?

Andreas Trösch: Can you specify your question with regard to TKMS? That was not so clear to me.

Speaker #6: Yes, you do have that on your statement—on your balance sheet. At book value, if you were going to sell your stake, let's say at market value today, would you be incurring any capital gains tax, or do you have some tax losses that you can write off against it, so that you can sell it at market value?

Alain Gabriel: Yes. You do have that on your statement, on your balance sheet at book value. If you were going to sell your stake, let's say, at market value today, would you be incurring any capital gains tax, or do you have some tax losses that you can write off against it so that you can sell it at market value?

Speaker #2: Yeah, I'd say, off the top of my head, capital gains tax would be insignificant.

Axel Hamann: I would say from the top of my mind, capital gains tax would be insignificant.

Speaker #6: Okay. Thank you. Very clear.

Speaker #2: Thanks, Alan. And now the last one currently is Bastian. So, in order to ask a question, if you still want to ask a question, please raise your hand.

Alain Gabriel: Okay. Thank you. Very clear.

Axel Hamann: Sure.

Andreas Trösch: Thanks, Alain. Now the last one currently is Bastian. In order to ask a question, if you still want to ask a question, raise your hand. But now, Bastian Synagowitz, Deutsche Bank. Bastian, please.

Speaker #2: But now, Bastian Synagovitz, Deutsche Bank. Bastian, please.

Speaker #4: Yeah. Hey, good morning. Thanks for taking my questions. So, I'll start off briefly on automotive. I guess where you've been cutting your guidance, but I guess if we extrapolate what this now implies for your expectations on the fourth quarter, it would still be, obviously, an improved performance relative to Q3.

Bastian Synagowitz: Yeah. Hey, good morning. Thanks for taking my questions as well. I start off briefly on Automotive Technology, I guess, where you've been cutting your guidance. But I guess if we extrapolate what this now implies for your expectations on the Q4, it would still be obviously an improved performance relative to Q3. I guess usually there's also a bit of a softening Automotive Technology seasonality. So could you please help us to understand what's driving this improvement? I suppose it is restructuring. But I guess when we look at the overall restructuring cash out, which you're guiding for, I think it's gone down to EUR 250 million from EUR 350 million before. So is this just a deferral, and why is the restructuring pace being slowed here? That would be my first question.

Speaker #4: I guess usually there's also a bit of softening in automotive seasonality. So could you please help us understand what's driving this improvement? I suppose it is restructuring.

Speaker #4: But I guess when we look at the overall restructuring cash-out, which you're guiding for, I think it's gone down to €250 million from €350 million before.

Speaker #4: So, is this just a deferral? And why is the restructuring—basically the restructuring pace—being slowed here? That would be my first question.

Speaker #2: All right. Bastian, first of all, automotive—remainder of the year, yeah, there's still some way to go. But honestly, it's a similar pattern.

Axel Hamann: All right, Bastian. This is Axel. First of all, Automotive Technology remainder of the year. Yeah, there's still some way to go, but honestly, it's a similar pattern you've seen throughout the past years. Part of the Automotive Technology business is also claims management towards the end of the quarter, particularly towards the end of the fiscal year. That is something the guys from Automotive Technology are also pushing on heavily. That is part of the reason or that's the major source why we expect Automotive Technology to come up what we've guided for. So it's basically short answer is claims management. Then second part is free cash flow reduction. Yeah. Bastian, we're not slowing our pace.

Speaker #2: You've seen this throughout the past years. And let's say part of the automotive business is also claims management towards the end of the quarter, particularly towards the end of the fiscal year.

Speaker #2: And that is something the guys from automotive are also pushing on heavily. And that is part of the reason, or that's the major source, why we expect automotive to come up to what we've guided for.

Speaker #2: So, basically, the short answer is claims management. Then the second part is free cash flow, restructuring. Yeah. It's not Bastian, we're not slowing our pace.

Speaker #2: It's something—the €350 million was also part of the figures, was also related to HKM, which we're now not restructuring but we're selling.

Axel Hamann: The EUR 350 million was also part of the figures was also related to HKM, which we're now not restructuring, but we're selling, and the remainder is going to become visible also for the next year. So what we see is our FTE decrease in Steel Europe is currently still the majority coming from our hiring freeze, but the real restructuring is more and more kicking in, and that's something we're going to also report to you over the next quarters.

Speaker #2: And the remainder is going to become visible also for the next year. So what we see is our FTE decrease in SE is currently still the majority coming from our hiring freeze.

Speaker #2: But the real restructuring is more and more kicking in, and that's something we're going to also report to you over the next quarters.

Speaker #4: Okay, great. Very clear. Maybe, just given that you mentioned HKM, maybe starting with that as the next question. I guess, given that the transaction here is now finalized, can you just update us on the provisions for any potential future payments to HKM? Will these sit in this Steel entity or in the parent entity, please?

Bastian Synagowitz: Okay, great. Very clear. Maybe just given that you mentioned HKM, starting with that as the next question. I guess given that the transaction here is now finalized, can you just update us, the provisions for any potential future payments to HKM? Will these sit in the Steel Europe entity or in the parent entity, please?

Speaker #2: Yeah, thanks for the question. Happy to answer that because we've made a clear cut—we've transferred our pension provisions to HKM. So nothing is going to sit with Steel or with TKAG.

Axel Hamann: Yeah. Thanks for the question. Happy to answer that. Because we have made a clear cut, we have transferred our pension provisions to HKM, so nothing is going to sit with Steel Europe or with thyssenkrupp AG.

Speaker #4: Gotcha. But I was actually referring more to any potential future payments for restructuring or decarbonization, where I thought there was still a— I think you mentioned in the last calls that some of the potential payments would be in a deferred way and come just in the future years.

Bastian Synagowitz: Got you. But I was actually referring more to any potential future payment for restructuring decarbonizations, where I thought there was still a. I think you mentioned that in the last calls, that some of the potential payments would be in a deferred way and come just in the future years. So I was just wondering, will this be made out of the parent entity or of the Steel Europe entity?

Speaker #4: So I was just wondering, will this be made out of the parent entity or of the steel entity?

Speaker #2: Oh, okay. You mean the pattern. Let's say we've guided a low to mid three-digit million euro number for HKM, and that's going to come over the next three years.

Axel Hamann: Okay. You are meaning the pattern. Let us say we have guided a low to mid three-digit million EUR number for HKM, and that is going to come over the next three years. It is going to be paid off from Steel Europe.

Speaker #2: And it's going to be paid off from Steel.

Speaker #4: From Steel. Yeah. Gotcha. Okay, perfect. And then, just maybe looking at Steel again, and just given the overall refinancing and separation you're currently working on at the business unit level, can you already give us some color on the starting balance sheet which you're aiming for for Steel, and whether you're planning to equip the entity with a certain portion of your net cash, which you still have on a group level?

Bastian Synagowitz: From Steel. Yeah. Got you. Okay, perfect. Then just maybe looking at Steel again, just given the overall refinancing and separation you are currently working on the business unit level, can you already give us some color on the starting balance sheet, which you are aiming for Steel, and whether you are planning to equip the entity with a certain portion of your net cash which you still have on a group level? Because when we look at Acciai Speciali Terni as a comparable case, I guess it has been allocated actually with some debt on top of the pensions. In Steel, you have already been investing heavily over the last couple of years. Now the economics are clearly improving. There is obviously a lot of restructuring on the way, but then there is obviously the pension restructuring and maybe still a bit of an unknown on decarbonization. So what are your thoughts here?

Speaker #4: I guess, when we look at SLS as a comparable case, it's been allocated actually with some debt on top of the pensions.

Speaker #4: And in steel, you've already been investing heavily over the last couple of years. And now, the economics are clearly improving. There's obviously a lot of restructuring underway.

Bastian Synagowitz: In Steel, you have already been investing heavily over the last couple of years. Now the economics are clearly improving. There is obviously a lot of restructuring on the way, but then there is obviously the pension restructuring and maybe still a bit of an unknown on decarbonization. So what are your thoughts here?

Speaker #4: But then there's obviously the pension restructuring, and maybe still a bit of an unknown on decarbonization. So, what are your thoughts here?

Speaker #2: Yeah, Bastian, I totally appreciate your interest in that question, but it's just too early to talk about. We're going to discuss the right capital structure for the business when the time comes.

Axel Hamann: Bastian, I totally appreciate your interest in that question, but it is too early to talk about. We are going to talk about the right capital structure for the business when time comes. We are really looking forward to talking about the performance of the Steel business in our upcoming Capital Markets Day in September.

Speaker #2: And we're really looking forward to talking about the performance of the steel business at our upcoming Capital Markets Day in September.

Speaker #4: Okay. Great. Then, last one—could you maybe help us with how much, out of the €3 billion budget for the transformation and DI plant, has been paid already relative to what is still due in the next few years?

Bastian Synagowitz: Okay, great. Then last one. Could you maybe help us with how much out of the EUR 3 billion budget for the transformation and DRI plant has been paid already, relative to what is still due in the next few years?

Speaker #2: Yeah. So first of all, what I can, again referring to what I mentioned a couple of minutes ago, overall, roundabout €3 billion. And of that, €2 billion funding, and so far, we have received roundabout €1 billion public funding.

Axel Hamann: Yeah. First of all, again, referring to what I have mentioned a couple of minutes ago, overall around about EUR 3 billion. Of that, EUR 2 billion funding. So far, we have received around about EUR 1 billion public funding.

Speaker #4: Okay. And how much have you been paying then on a gross level for the project? So, if you say relative to the three, how much of the three have you been paying in total?

Bastian Synagowitz: Okay, and how much have you been paying then on a gross level for the project? So if you say relative to the 3, how much of the 3 have you been paying in total?

Speaker #2: Yeah. So, roundabout net payments after funding, this has cost us so far around €300 million.

Axel Hamann: Yeah. So around about net payments after funding, this has cost us so far around about EUR 300 million.

Speaker #4: Okay, so $1.3 billion gross then. Yeah, got you. Okay, great. Thanks so much for the color.

Bastian Synagowitz: Okay. So EUR 1.3 billion gross then. Got you. Okay, great. Thanks so much for the color.

Speaker #2: Sure. Thank you very much. And there is a follow-up question from Jason. Jason, please.

Andreas Trösch: Sure. Thank you very much. And there is a follow-up question from Jason. Jason, please.

Speaker #3: Yeah, thanks, guys. I just wanted to chat a little bit about the pensions. This is a bit of a bugbear for a lot of people in the market.

Jason Fairclough: Yeah, thanks, guys. Just wanted to chat a little bit about the pensions. This is a bit of a bugbear for a lot of people in the market. I think historically, you've said that about half of the EUR 5 billion is associated with Steel Europe. Maybe you could give us a little bit of color about how much of the pension is actually leaving with HKM. As we think about all these businesses being deconsolidated, is it time to start thinking about an attributable pension liability rather than a consolidated pension liability?

Speaker #3: I think historically you've said that about half of the €5 billion is associated with Steel. Maybe you could give us a little bit of color about how much of the pension is actually leaving with HKM.

Speaker #3: And then again, as we think about all these businesses being deconsolidated, is it time to start thinking about an attributable pension liability rather than a consolidated pension liability?

Speaker #2: Yeah. Jason, this is Axel. First of all, you're right. Pension provisions overall amount more or less to €5.2 billion. It's also true that about half of it is with Steel.

Axel Hamann: Yeah, Jason, this is Axel. First of all, you're right. Pension provisions overall amount more or less to EUR 5.2 billion. It's also true that about half of it is with Steel Europe. What has been transferred to HKM is not a significant number. If I'm not mistaken, it's a low three digit million euro number. Yeah.

Speaker #2: What has been transferred to HKM is not a significant number. If I'm not mistaken, it's a low three-digit million-euro number. Yeah.

Speaker #3: Okay. So again, on a go-forward basis, as we think about all these carve-outs and spin-outs and IPOs, historically, the view was 'let's deconsolidate Steel,' and we deconsolidate half of the pensions. Is that still a consideration, or has that moved to a bit of a back seat?

Jason Fairclough: Okay. On a go forward basis, as we think about all these carve-outs and spin-outs and IPOs, historically the view was let's deconsolidate Steel Europe and we deconsolidate half of the pensions. Is that still a consideration or has that moved to a bit of a back seat?

Speaker #2: Well, it depends on the capital structure, and pensions, as you know, are a part of the capital structure. Ideally, every business, every segment, is able to finance on its own its capital structure.

Axel Hamann: Well, it depends on the capital structure and pensions, as you know, the part of the capital structure. Ideally, every business, every segment is able to finance on its own its capital structure. So does TKMS, and so will do tk accelis. To give you an example with tk accelis, we've also transferred pension liabilities that can be, let's say, tied to the business.

Speaker #2: So does, take TKMS and so will do TKXLs. And to give you an example, with also transferred pension liabilities that can be, let's say, tied to the business.

Speaker #3: So, if we look at the—because I think the annual cost flowing through the income statement is about $300 to $400 million, or is it $300 million and then the cash payments are $400 million?

Jason Fairclough: If we look at the, because I think it is the annual cost flowing through the income statement is about EUR 300 to EUR 400 million, or is it EUR 300 million and then the cash payments is EUR 400 million? I assume that is broadly correlated with the actual pension liability. Again, if we look at that payment, half of that payment is being made by the Steel Europe business. Is that the right way to think about it?

Speaker #3: I assume that's broadly correlated with the actual pension liability. So again, if we look at that payment, half of that payment is being made by the Steel business.

Speaker #3: Is that the right way to think about it?

Speaker #2: That is absolutely correct.

Speaker #3: Okay, so I guess, again, I think we probably need to go in and have a think about just treating this as a 100% consolidated debt. Maybe it feels like we're being a bit too harsh on it.

Axel Hamann: That is absolutely correct.

Jason Fairclough: Okay. I guess, again, I think we probably need to go away and have a think about just treating this as 100% consolidated debt. Maybe it feels like we are being a bit too harsh on it.

Speaker #2: All right, understood. Thanks, Jason. And I'll send it to you from Auto, please.

Andreas Trösch: All right. Understood. Thanks, Jason. Now, from Otto, please.

Axel Hamann: All right. Understood.

Andreas Trösch: Thanks, Jason. Now, from Otto, please.

Speaker #4: Yes. Hello, everybody, and thanks for taking my question. Just one thing on the bullet point in the presentation, where you said that you want to leverage your opportunities in the green transformation.

[Analyst] (Otto): Yes. Hello, Ralian. Thanks for taking my question. Just one thing on a bullet point in the presentation where you said that you want to leverage your opportunities of the green transformation. Question here, if this is within the existing, let's say, technologies and then assets, or would you also look beyond? Some comment here would be appreciated. Thank you.

Speaker #4: Question here: if this is within the existing, let's say, technologies and assets, or would you also look beyond? Some color here would be appreciated.

Speaker #4: Thank you.

Speaker #2: Well, I think the green transformation has been driven in decarbon technologies on one hand, and on the other hand, in steel with the DRI.

Miguel López: Well, I think the green transformation has been driven in Decarbon Technologies on one hand and on the other hand in Steel Europe with the DRI. We have seen over the last three years, very hesitant markets in around clean fuels overall, and of course also impacted by the regulations not clear, so policy frameworks not clear, but also by a geopolitical impact. Having said that, we are focusing, of course, very much still on the technologies that we have currently on hand. That will be so for the next time as well. As soon as markets stabilize and we have a much better visibility of what will be coming regarding clean fuels, then obviously, situation can change. But for the next coming time, we will exploit the technologies that we have right now on hand.

Speaker #2: We have seen over the last three years very hesitant markets around clean fuels overall—and, of course, this has also been impacted by regulations not being clear.

Speaker #2: So, policy frameworks are not clear, but also influenced by geopolitical impact. Having said that, we are, of course, still focusing very much on the technologies that we currently have on hand.

Speaker #2: And that will be so for the next time as well. As soon as markets stabilize and we have much better visibility of what will be coming regarding clean fuels, then obviously the situation can change.

Speaker #2: But for the coming period, we will exploit the technologies that we have right now on hand.

Speaker #4: Okay. Thanks for the clarification.

Speaker #2: Thank you very much. That seems to be all from your side. Thank you very much for participating. Thanks for all your questions. If you have follow-up questions after the call, please call myself or the team.

[Analyst] (Otto): Okay. Thanks for the clarification.

Andreas Trösch: Thank you very much. That seems to be all from your side. Thank you very much for participating. Thanks for all your questions. If you have follow-up questions after the call, please call myself or the team. Thank you and have a great day.

Speaker #2: Thank you, and have a great day.

Speaker #1: Thanks everyone. Bye-bye.

Miguel López: Thanks, everyone. Bye bye.

Andreas Trösch: Bye bye.

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Q3 2026 thyssenkrupp AG Earnings Call

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