Ladies and gentlemen, welcome to our Q1 Earnings Call. My name is Markus Heidler. I'm the Head of Investor Relations at Salzgitte AG. Joining me today are my colleagues Gunnar Groebler and obviously most relevant, our CFO, Birgit Potrafki, who will be available to answer questions after a brief introduction statement. I look forward to an engaging discussions and without further ado, I'll hand to you, Birgit.

Thank you Markus, and warm welcome from me to you out there as well. Happy that you take your time to listen to us. Actually, it's not such a long time since we spoke last time, it's only seven weeks ago and this was when we published our annual report and actually I guess it may feel a lot longer than just a few weeks because we all may think these days that the world changes significantly every single day. Just to give a few examples which are keeping us all very busy. For example, the noise around the trade tensions and the impact of the US administration's tariff policy are of high interest to all of us. And then there is also some lingering uncertainty about how the new German government will address the key economic challenges through concrete measures, and we are very positively looking at that and waiting for that. And third, unfortunately there are some more subdued economic forecasts for the major economies, just recently. So while the environment also for us remains quite challenging to predict and of course very volatile, we believe that our first quarter results underpin the outlook for the full year 2025. We see the assessment we made in March confirmed by the reported figures for the first quarter. As expected, the sales are below the previous year's level and this decline is mainly due to three factors; firstly, the contribution of the Mannesmann Stainless Tubes Group are no longer included in the current figures following the divestment of the asset; second, the sales decreased due to lower average selling prices when compared to the first quarter of last year; and third, sales came down due to lower volumes in the trading business. Adjusted for non-operating special items, the earnings before taxes were more or less breakeven. The turmoil surrounding the US Trade Policy of course had an impact on currency exchange rate and as a result on the validation of derivatives. In the first quarter, we had a negative effect here of around EUR23 million from the reporting date valuation of our derivative positions. In addition, we made a risk provisioning of EUR10 million for a planned portfolio measure. All in all, these items burdened our EBIT by EUR32 million. Without these effects, we have achieved a black zero. Working capital rose seasonally in the first quarter, which it does every year after year, and closing up to EUR2.67 billion. That was almost EUR200 million higher than at the end of the year end closing at the end of last year 2024; however, which is good, it was EUR360 million lower than at the end of Q1; EUR360 million lower than one year before. Our gross cash flow, on the other hand, improved significantly. While still slightly negative, it improved by around EUR100 million versus the previous year's figure. Our cash flow from investing activities that was almost balanced overall in the first quarter and this is mainly due to the receipt of EUR155 million public funding for our SALCOS project. And all this leads to a net financial position of minus EUR624 million by the end of the first quarter and compared to the end of last year, this represents only a slight decline of roundabout EUR50 million in another peak spending year of SALCOS. Let us now turn to the outlook. There are some quite mixed singles with respect to the German market. Both the German government and the International Monetary Fund now expect growth to stagnate in the current year. At the same time, we consider that political measures will stabilize the economy, in particular the announced Special Fund for infrastructure projects and this we expect as fundamentally positive impact to become over the course of the next quarters. And this is not yet reflected in concrete order, so we are waiting for the concrete orders coming out of this. A noticeable upturn in demand from these funds is still quite some way off so. The spot prices for steel rose in the first quarter and this is not yet fully reflected in our sales for the first three months. And as the possible upward trend in this area will only become apparent in the coming months and quarters in our books, also, because especially for hot rolled coil, our contracts have a runtime between 6 and 12 months for half of the contracts and for the others with a shorter period. So in case the prices would keep picking up, we expect some positive impacts in the second half of the year coming from that. And in the light of all these developments, we confirm our forecast for sales and earnings as we presented to you in March. And with this, ladies and gentlemen, I conclude my introductory remarks and I'm looking forward to your questions.

All right, Elba, you may start the Q and A session.

[Operator Instructions]

All right, we start with Bastian.

The next question comes from Bastian Synagowitz from DB. Please go ahead.

Yeah, good morning and thanks for taking my question. My first one is actually on the demand side and volumes. So if we look at the first quarter volumes in steel, I guess they were the strongest since Q1 2023. And I guess they have only been in total two quarters since COVID, which were stronger versus what you just reported. What has been driving this strength? And do you believe that this was also customers buying a little bit ahead of the anticipated tariff and safeguard event which we had at the end of the quarter? I guess it's probably hard to picture that underlying demand is really as strong as what it was two years ago but would be curious to get your view on this. That is my first question.

Yeah, thank you Bastian, for chipping in that question. Actually, we'll share your view. We have exactly the same interpretation, I would call it. Yeah, absolutely on the same page.

Understood. Okay. And then maybe also with regards to the second quarter, what's the volume trend you're seeing there so far? Do you think you will keep up that very strong volume run rate? I guess. What is your general environment you're seeing? Is there any change in pattern in any of the markets either to the positive or to the negative as far as you see it? And then maybe also more technical question. Is there going to be a direct cost impact from the maintenance at Blast Furnace C and when do you aim to bring that back?

Yeah, first of all, if we look at the second quarter of this year, we have several impacts that we need to consider. First of all, especially in Germany, there are quite some public holidays, which will have an impact on production output. And secondly, not only Blast Furnace C will be under maintenance, we will have other aggregates facing, especially in May, maintenance period. So we will have an input here coming from the maintenance, the planned maintenance activities on several aggregates, which will push down revenues and of course also EBITDA contribution at the same time. And Blast Furnace C will be under maintenance from March until end of October. However, this will not negatively impact our revenues because we have enough stocks already in place and also being provided by HKM, so this was no negative impact on revenue side.

Understood. And the other aggregates which you have on maintenance, are they downstream or what types of aggregates are those?

Yeah, they are downstream after the furnaces. Of course they are the -- how do you call it, hot rolling mill, and also two of the [Foreign Language]. A - Markus Heidler Hot-dip galvanizing lines.

Yeah, these are the main aggregates that will be also under maintenance and thus downstream and thus impacting of course the output, but this is all planned. However, this of course will have an impact in the second quarter for sure.

Understood. Okay. And then lastly on free cash flow, which was actually very decent for first quarter as far as I thought, particularly on the working capital side. What helped you to manage the working capital here better? Was this also driven by the very strong volume of take, which probably lowered the inventory side, which went down a lot, at least more than last year? And maybe could you also give us an updated guidance on what you expect for year-end net debt?

Looking at the -- first, starting with the inventories, I think it's a quite, how to say, multiple impacts we see here. Of course, demands draw inventories. However, we are also having a very strict inventory management and very carefully looking at our inventory levels and taking measures in order to organize cash contributions, of course. And looking at the net debt position, I here also stick to my guidance which I gave last time, which is between minus EUR1.5 billion and minus EUR2 billion by the year end and with some confidence that it will be on the higher side. Higher, because it's -- we're talking negative numbers.

So on the higher -- just to get that clear, more towards the 1.5, I guess.

Right, exactly.

Yep, understood. Okay, perfect. Those were my questions so far. I'll get back into the queue. Thanks so much.

Thank you.

The next question comes from Boris Bourdet from Kepler Cheuvreux. Please go ahead.

Hello everyone. Good morning. I have two questions. The first is on the impairment that you booked the EUR10 million. You refer that to being connected with portfolio streamlining. Can you bring some more details on which assets had been impaired? And also regarding HKM, do you have more visibility on the plant closure and what that might cost for -- what cost that could be for the group? Thank you.

Concerning the 10 million provision, we talk for M&A activities. Please understand that I'm not going to give any further details, otherwise the negotiation process on this asset could be impacted. I will inform you in the next call as soon as I'm able to link that to a special asset. And the second one was about HKM, in HKM we are right now in process, very intensively evaluating the different options we are having, so also compared to seven weeks ago, no updates so far.

Okay, so you don't have -- no -- but still you have some good visibility on your sourcing, right.

Of course, of course. Sourcing is key, is one of the key questions in this discussion here. That's very clear. However, we anyway do not talk about closing down HKM in the next 24 months, no matter which direction it will take. Yeah, so it's not a -- no matter which option we will follow, it's anyway not going a super short term action.

Okay. May I had a very quick question on CapEx.

Of course, of course.

Yes, there's been some lines recently on a new walking beam furnace for an amount of 3 digit million Euro. Was that already planned or is it something incremental to CapEx?

No, it's of course part of our plan.

Yeah. Okay, thank you.

Thanks for asking.

The next question comes from Cole Hathorn from Jefferies. Please go ahead.

Good morning, thanks for taking my question. I'd just like some detail on the outlook for the steel production division. I'm just wondering what would make you revise that guidance towards the upside considering we do have some higher steel prices and raw material costs are quite muted. So I'm just wondering what would be the upside risk to numbers as we progress through 2025 to the steel production unit? And then on the technology business, can you just give an update on how you see that business into 2025 and the order book progression for the filling lines? Thank you.

Looking at the steel producing entities, of course the major driver for our turnover are the call-offs by the OEM. So our turnover will be mainly decided by their call-off behavior over the course of the year. And of course, as I said in my introductory statement, price level of course will also have a major impact, in case it remains or even picks up further. However, you have seen our guidance and we already included these chances here we think in our guidance fully. So if you would have thought that there is further potential right now, we would have included that and all we know is reflected in the stretch we have given here. The second one, please forgive me, was about technology segment and if you could repeat please, the precise question.

I'm just looking for some color on how you see the order books in the technology division and any color on that business unit as it progresses through 2025.

We see it stabilizing our turnover planning. So how to say -- we are going to have another record year in turnover and in profit and we see our other books confirming that.

Thank you.

The next question comes from Alain Gabriel from Morgan Stanley. Please go ahead.

Yes, good morning and thank you for taking my questions. The first one is on the CapEx budget. So the pace of spending year-to-date appears to be far below what you have budgeted for the year. Can you please reconfirm your spending budget for 2025, net of grants? And how realistic do you see a catch up in the next nine months? That's my first question.

The total spending for this year is around EUR800 million and half of this net after the subsidies is around 50% of that and the other 400 is for all investments without SALCOS. And you have seen that our cash flow from investing activities was balanced, so that means in the first three months we got 155 cash inflow and this means we had around 150 cash outflow, so I think we are quite on track here.

Thank you. So just to confirm, 800 million is net or gross, so you will be spending 400 million net. Is that the way to interpret it?

It's net. It's net, yeah.

Okay. Okay, very clear. And the second question is on the outlook for raw materials, given that you engage in a lot of hedging, how do you expect your raw material costs to evolve in the second quarter of the year given that [Indiscernible] prices have pulled back a lot?

Yeah, we are not hedging the full quantities, of course. And of course we took opportunity of the good price levels that we have seen, so we definitely think that it will contribute to our results also.

Thank you.

The next question comes from Dominic OKane from JP Morgan. Please go ahead.

Thank you for taking my question. Two quick questions. The cash flow guidance that you've given is very helpful, and the net debt guidance. I just wanted to just double check on the working capital. So Blast Furnace C maintenance between March and October, is that already kind of fully reflected in your inventory valuation? Is there going to be a working capital impact in Q2, just to be aware of for the Blast Furnace C maintenance? And then second question, coming back to Alain's previous question on the derivatives, just looking into Q2, obviously markets are very volatile, very difficult to predict, but is the kind of volume of derivatives that you have in place in Q2 similar versus Q1? Again, should we think about these as kind of a recurring derivative item or is there any kind of comments you can make on the derivatives positioning looking into Q2? Thank you.

Thanks for your two questions. Starting with working capital, I can tell you that of course the impacts we know we include in our planning and bank, so the maintenance of the Blast Furnace C is included in our working capital planning and will definitely have an impact. And number two, was about the exchange rate effects. I really would also love to have the glass bowl for the future. However, if we look at the last quarter, I guess we were all surprised by the way the exchange rate Euros/US dollar developed; most likely nobody of us has foreseen that and there are quite some interesting predictions for the upcoming months. As I said, it's quite volatile. However, of course we have a rolling hedging strategy and we are doing rolling hedging activities and we very quickly adapt to the newest information we see in the market and of course we have adapted to that information as well. How does it go the next months? We will see according to our best knowledge and to the experts best knowledge. We will follow our hedging strategy.

So just to be clear, if we think about an assumption, a scenario of a strengthening US dollar environment, we should think that would be a positive for a revaluation gain for Q2.

There could be chances in here.

Okay, very clear. Thank you.

Thank you.

The next question comes from Christian Obst from Baader Bank. Please go ahead.

Good morning. Three questions if I may. First on KHS, what is the current price and order trend? I’ll see some kind of headwinds or more pressure on prices, maybe flattening or declining orders or is everything right on track?

First of all, thank you Christian for coming with your questions. And there are no, how to say, major negative or positive impacts to be reported on the order side, nor on the price side.

Okay, thank you. Then you talked about concrete orders may come in the coming months, so you see that there are activities and so on and so forth. Can you give us some kind of an indication where do you see the most possible orders coming?

Yeah, if it would be infrastructure, then it would be heavy plates and beams and of course the shortest impact always comes via the trade business unit. That's also clear, yeah.

Yeah. Well there is some kind of a chance that we see some kind of an improvement, especially in beams, which is a highly loss making entity so far that you see some improvement going into the second half or the end of the year.

As soon as the new government will get traction and get the things into place and the orders will be placed into the markets, as soon as this is happening, we expect to profit from that. Do we really see a high impact on this year? I would be rather cautious, yeah, if we look at turnover and profit side. Maybe first orders, but let's be prudent and -- positive, but prudent at the same time, there will be chances arising from that. However, this year we have been quite prudent in our planning so far.

Yeah, okay, makes sense. The last one is on financing policies on the debt touching 1.5 with the risk going to 2 billion, whatever comes. So are you thinking about some kind of a new structure here beside banking financing touching capital markets or some longer-term bonds or whatsoever? Any discussion on that side?

Nothing to be announced today. Of course we are looking at all options we are having in order to deal with this situation.

This means that you are fine with the current structure so far?

So far I can give you the information that we have a syndicated loan so far that is completely undrawn for the moment. So we have quite some possibilities still open.

Okay, thank you very much. Have a good day.

Thank you, Christian.

[Operator Instructions]

Well, if this is not the case, then we close this Q1 call. Thank you all for your participation and see you next time. Bye, bye

Thank you. Bye.