Ladies and gentlemen, welcome to the Publication First Half Business Year 2024-2025 Conference Call. I'm Sirgen, the Chorus call operator. I would like to remind you that all participants will be in a listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Peter Fleischer, Head of IR. Please go ahead.

Thank you very much. Good morning, good afternoon, ladies and gentlemen for the call and the webcast of our half years results. With me is our CEO, Herbert Eibensteiner; and our CFO, Gerald Mayer. We will give you a brief overview around 10 minutes, 20, 10, 15 minutes presentation of what were the highlights of the half year and the outlook. And afterwards, we will be very happy to answer your questions. So far from my side, Herbert, please go ahead.

Thank you very much, Peter. Ladies and gentlemen, good afternoon. You have already seen our information on the first half 2024-2025 financial year. So today, I would like to start by presenting what we have done in this difficult environment in the first half of the year. And we have quite a bit managing tasks to do or have done this. We have made some structural decisions for structural challenges. That's mean that we started the selling process for Buderus Edelstahl in Germany. It was a strategic decision and we have signed this project. So closing is planned at the end of the calendar year, and we started the reorganization and the streamlining of our automotive components business in Germany. I think we can discuss this afterwards, and I'm sure that you have some questions about that. But on the other hand, on the positive side, we want to show you our successful international growth projects for this last half year on the example of our Railway Systems, which is very well underway, and growing even in these difficult times. We have made a small acquisition of a turnout plant in Knoxville in Tennessee for the United States for the American markets. And we have implemented two years ago a joint venture in Egypt turnout plant. And we have now the first delivery for a big project in Egypt, more than 250 turnouts for this bigger high-speed train project in Africa. And we have already completed in the last weeks a major rail project in Hong Kong for underground in China. And I always explained to you in the past that we have the rail business, the turnout business, and we want to be more and more a system supplier for that Railway Systems and when we say systems, we need to have a system and the heart of the – digital heart of this business we have now presented at the InnoTrans in Berlin and zentrak system means all the software and all the sensors we need for more complex railway applications is presented and will be complete our system approach. Yes, I would like to continue with the green bond placement. You know that we placed successfully our first green bond. That was also the first green bond in the European steel universe. It's a five-year bond, the €500 million, a 3.75% annual coupon. Value date was beginning of October. This is also the reason why you will not find it in our half year numbers. On the one side, we paid back the prior bond, and we put into our books on October 3 the new one. And this, of course, was a very positive and attractive bond in particular also for retail, where we are very strong in Austria. I want to continue – sorry for that. I want to continue with our decarbonization project, greentec steel, the headline is everything on time, on budget. Just to remind you that we have planned a digestible risk-reduced step-by-step approach for the first step, 30% CO2 reduction with an investment capital expenditure of €1.5 billion. We are in the middle of our project, 50% of the CapEx is already awarded. And as I mentioned before, everything is on time and on budget. What was the development and what is the development on our markets. European is the weakest market for us. Nevertheless, Railway System, our Aerospace department and Warehouse & Rack Solutions business did very well. And in North America, all our Voestalpine plants did very well and also, we have to see that there is a slowdown in oil and gas business, but this business affects more or less mainly a European production site. In Brazil, also, we see a slowing economic environment, all this flooding in the south of Brazil, where we are affected a little bit. But all in all, our plants really performed quite well and which is remarkable in this complicated environment there and also our Chinese plants performed very well, thanks to a very good industrial production. So you can see what we always say that this global positioning and being in these different sectors and focusing on this high quality products are balancing our earnings. What was the development for different divisions? Steel division performed well in a very difficult European environment and High Performance Metals was under pressure especially in tool steel. This was the reason also strategically that we sell or divest Buderus. But aerospace and all the specialty business did quite well. Metal Engineering, very unchanged, strong. Thanks to this high demand on railway infrastructure. And this is a global business for us. And as I mentioned before, with a slowdown, especially in prices and also some volumes in the OCTG business. Metal Forming is somewhat divided. Automotive components weak in Germany. That's why we have – our reaction is this reorganization program in Germany with efficiency programs and redundancy plans, but the industrial business, Tubes & Sections and also especially warehouse, the warehouse business developed overall solid. And that leads again that we see these different divisions and every division adds to our resilience when it comes to our results compared to the difficult environment we are in. And now I would like to hand over to Gerald Mayer for the financial overview.

Markets about our strategy and some success projects and also reorganization projects we started. I would like to show you now how this translated in the first half into our numbers. First of all, in this overview, you see that revenues are down by €500 million roughly. A €300 million directly linked to lower prices, €200 million are roughly directly linked to lower volumes. One thing to mention is that we saw reductions in all our divisions. So Steel division is down roughly by €200 million, High Performance Metal by €160 million, Metal Forming by €80 million, and Metal Engineering by roughly €30 million. Of course, this has also an impact on EBITDA. But to mention here, so this reduction by €185 million in our EBITDA. It has reflected also €81 million which are, again, linked to the Buderus sale. You know that because we reported it also in the first quarter, we reported an impact there of minus €27 million and another €50 million roughly. €54 million in the second quarter. So €81 million is referring directly to Buderus sale. In addition to that, our EBITDA is affected by roughly €40 million of our gas storage, natural gas storage valuation. Prior year, it was just €18 million. So the delta is there €22 million. And of course, I also mentioned that we saw lower volumes, and this has, again, an impact on the lower EBITDA. Depreciation was roughly at the same level as last year, so around €380 million. And so we end up at an EBIT of €339 million and this is again roughly €180 million below the comparing period. Nothing really important to say about the financial results, it's again at the same level as last year, minus €90 million. And for you as a guidance, so we expect, on the one side, of course, we have our new bond at 3.75%. On the other side, we still see reductions in interest rates. So all in all, we expect perhaps a slightly lower total interest number going forward. Tax rate, in particular, for Q2, not for the first half seems to be a little bit higher. This has to do with an impact from Buderus sale. But the overall number tax rate is 26 point something percent. So that's slightly higher than expected. Giving you some details about the EBITDA bridge. The first two columns here means price minus €303 million and raw material plus €353 million. This shows that we saw a gross margin which was better than in the comparing period. Going there into the details, I have to mention that we have a positive, some tailwind from Steel division. And on the other side, we have negative impact, which partly compensates the positive effect from Steel division in HPM, in High Performance Metal and Metal Engineering. Mix volume negative is down by €60 million. Again, we have some positive impact there from a better mix, which is more than compensated by lower volumes. And I talked about the volumes before when I showed you, presented to you the reduction in our turnover line item. Miscellaneous, minus €175 million. This is the number where you see €81 million out of the Buderus sale. And of course, we have some inflationary effects there in our cost structure. And of course, this is minus €175 million, but the bulk there is €81 million from Buderus. Cash flow. Next slide, cash flow from results is at €585 million after €659 million in the comparing period. Changes from working capital, minus €239 million. It's a little bit lower than in the prior year. And here, I would like to draw your attention to our comment there. We have a €100 million tax liability, which we reduced, which referred to prior periods. So we had a very positive year 2022-2023 with an EBITDA at this time of €2.5 billion for the whole year. And this €100 million referred to this period, and we had to pay the taxes as you said, right now, so it's not referring to the current period here. So cash flow from operating activities at €350 million roughly compared to €390 million. We would say it's a strong cash flow from operations, given our environment right now and taking into account what I just mentioned about this extraordinary tax payment or periodic tax payment we had. Cash flow from investing activities, minus €500 million. This €500 million includes €56 million from our steel – greentec steel project, I mean from the transformation to CO2-free production in Linz and in Donawitz. As we mentioned before, both projects are on time and on budget. Giving you also some guidance here about the rest of the year. So what we expect for the second half going forward is around €700 million in terms of investing activities and also with a significant or higher contribution there or share of our greentec steel project. So we will end up roughly at €1.2 billion in investing activities for this year. So cash flow €165 million minus free cash flow in the first half after €85 million minus this year. You definitely will ask the question about how do we see the future there. So we will see, in our opinion. We are convinced to see a swing here in the second half, and we will expect a positive free cash flow for the full-year 2024-2025. Slide number 10. Development of our gearing ratio. You see that it was increased slightly in the first half of this year. The main reason were that we have, for example, our dividend payment and distribution, there is included, of course, also this tax payment, some I would say, seasonal things there. So we are convinced that this will come down a little bit again until end of this year. So the equity base is unchanged and solid, 48% of equity ratio and net debt to EBITDA at 1.4 given compared to – taking in account the last four quarters of EBITDA, very solid. Next slide, and this is my last slide. This simply should give you an overview of our redemption schedule, which is very sound. You also see on the first column there, liquidity. We also included our green bond we placed. As I mentioned before, value date was beginning of October, so it's not included yet in our numbers, in our half year numbers, but it was fixed at this time. So this is €500 million. And in the €1.3 billion committed lines, I think I reported is also the last time in our Q1 presentation €300 million, which we already signed with European Investment Bank are included and are not here in the committed line column, but it's not included in our financial liabilities yet. We will do this when we need it. So in my opinion, the homework regarding redemption and refinancing is done for the year 2024-2025, and we have a very sound redemption schedule in front of us. So having said that, I would like to hand over again to Herbert, who will give you the outlook.

Okay. Thank you. I think the outlook will be no surprise for you because we have already reported our outlook, what are the basis of our outlook. So we see that the European in the course of this first half year, we see that the sentiment indicators written in Europe. We have recently heard some warnings of several European car producers. And this was then the figures you heard were the effect of all those weaker economy. And what is the expectation for the second half of the year. We do not really see a recovery in Europe despite we expect interest rate – further interest rate cuts, we see also muted demand in European automotive industry. We do not expect a relevant improvement in the next month. We have already in this forecast, the non-recurring expenses for the reorganization of the German automotive components business plan. And we think, and I think we see good development so far that first our business our Voestalpine business outside of Europe, is positive. So we think that it will continue on good actual levels mentioned before, Railway business, Aerospace business, Warehouse & Rack Solutions, Tubes & Section to a certain extent. So this is what is the basis of our forecast and you know it, we expect EBITDA of around €1.4 billion at the end of the year. And as Gerald mentioned before, this forecast includes this one-off of even more than €100 million for this reorganization and other topics. So this was our presentation. Thank you for listening, and we are happy to answer your questions.

Ladies and gentlemen, we'll now begin the question-and-answer session. [Operator Instructions] And we have the first question coming from the line of Alain Gabriel from Morgan Stanley. Please go ahead.

Thank you. Thank you for taking my questions. I have two questions, please. The first one in your release today, you referenced quite a bit your business ex Europe as you appear to be focused more on increasing your geographic diversification and reducing your earnings volatility. From an EBITDA mix perspective, how much is ex Europe today? And where do you see its share evolving in the next three years as per your ambition. That's my first question.

I will start to answer this question. We have a clear strategic path that we want to increase our share in local for local. That means, especially the U.S., which is a growing market for us. We have, as I mentioned before, already moved several activities there out of Europe. So Warehouse & Rack Solution is a growing business. So we had the discussion to build up or to expand our production sites here in Europe now. We did it other way around. We implemented a Warehouse & Rack production site in Kentucky, we have increased our Tubes business for the U.S. in the U.S. with €25 million investment. We will do a business for site members for two international truck supplier in the U.S. for the U.S. And so these are results of our strategy that we exit for example for this strategy to be there where the customers are and this will be the core of our strategy in the years to come. And when you look at Railway Systems, which is very international, all those activities I mentioned, we did this acquisition in the U.S. for turnout business for the U.S. market well aware that railway business is a business where everything is America first. So I think that's – you have a good evidence how we think about that.

Thank you. And in terms of the numbers in terms of your view?

I'm right now adding – try to add the numbers now. So it is an estimate, which I have here now with me. So you might know that our share in the European Union is roughly 63% in turnover. So the EBITDA number might be a little bit lower as we have this extraordinary effects like Buderus sale and so on, included there. So I would guess roughly 55% is in Europe as we speak and 45% rest of the world and given our strategy and our ambitions in general, it should grow out of Europe, but of course, we have to take into account that we had this €80 million roughly of Buderus, which have again compensate something. But structurally, definitely will happen that it will grow outside of Europe.

Thank you very much. And my second question is that you're embarking on substantial restructuring of your underperforming businesses like Buderus and a few others. How much of an uplift in EBITDA do you anticipate as a result of all these measures you're doing currently and in the future on an annualized run rate, how should we think about the uplift to your profits as a result of these initiatives? Thank you.

So this is a 2.5 years project in automotive components, and you will see a higher double-digit recovery in automotive business. And when you look at Buderus, which was €30 million to €40 million negative, so we can expect for the year to come after the closing that we will see a €30 million to €40 million EBITDA uplift coming from Buderus. In automotive, you have to – so we started now, will increase in 2026/2027. You will see this always planned to see this higher double-digit million euros in EBITDA.

Thank you.

The next question comes from the line of Tristan Gresser from BNP Paribas Exane. Please go ahead.

Yes. Hi. Thank you for taking my questions. I also have two. So I'll start with the pricing dynamic in Europe. So current HRC prices are around €550, €560 a ton. And last year, they were on their way towards €700 per ton. So how do you look at annual contract negotiation in that environment? And can you remind us if you had to accept ever in your history a triple-digit declines on your contracts in the past? And if this year, that could be a possibility?

I think I would like to start. First of all, of course, we saw and you know that we have quarterly, half year and yearly contracts, which we have to negotiate with our customers, just a part of the yearly contracts are ready to be discussed right now as we speak, starting from first of January. And of course, we saw this downward movement of the markets. On the other side, we also recognized that we saw again upswings in the last weeks there in our markets and also CRU and the other research houses show us that they expect, let's say, increases in the upcoming weeks. So historically, I think perhaps my colleagues can answer this. But from my conversation, I never heard from a triple-digit price reduction. And this is also, from my perspective, not what we expect right now. This will not happen.

Yes. I think that's true. So I think there are – and you know all these discussions were around the market, considering that when we talk about auto contracts, this is more high-quality steel, what we are focused on, and we do not expect that we will see this triple-digit price reduction. We expect a reduction. This is part of our forecast. That's clear, but we do not expect a triple-digit price reduction.

All right. That's helpful. Thank you. And moving to the – well, still the scale business, and if you can discuss a little bit the outlook for the division into 2Q, 3Q, 4Q. On the volume side, I think you're 9% down year-on-year and you have a blast furnace that I think should have restarted by the end of October, but how should we think about volumes and the margin development. I'm also curious about – and I mean the performance on selling price has been good, and you flagged the mix. But if I look at plate shipments, they're actually down half-on-half if I look at H1. So what was really the mix impact? And if you can discuss that, that would be great? Thank you.

Q4 is always our volume – strongest volume-wise, our strongest quarter. Normally, we will see a certain margin squeeze that's clear coming from the automotive contracts. But as I mentioned before, better volume, and it's always a price volume mix. What's important for me, we can expect in the second half of the year a better mix in heavy plates. So far, as we see this is more project business for us. So we are – we know what we want to produce. And I think that the volume reduction when you look at the volume production in heavy plates, I think that's not really a good indicator for this EBITDA development because this is project business with very special high-grade material which we have a huge variation in EBITDA and it's very mix dependent. So the focus is that we – or the key message is better volume, but better mix coming from heavy plates and all in all, especially when it comes to flat steel and lower margin.

All right. That's very helpful. Thank you.

The next question comes from the line of Bastian Synagowitz from Deutsche Bank. Please go ahead.

Yes. Hi. Good afternoon all. Thanks for taking my questions. I've got a couple. Maybe first one following up on the restructuring plans you have. I'm wondering is there anything which you're working on beyond Metal Forming to address the possibly structural headwinds in the [indiscernible] businesses and elsewhere? That's my first question.

It's clear that we do the adaption to the lower volume. I want to – when you look at our employee figure, you may see that we have a slight increase year-on-year. In fact, we have reduced 1,200 employees to adapt to the lower volumes in all over the world, I would say. And on the other hand, we have 1,700 people in addition coming from the growth of Railway System coming from the growth in hybrid warehouses and coming also from two smaller acquisitions this Railway business, and we have acquired also a drawing company, wire drawing company in Italy. So I think the reaction is all over our business in this 1,200 people which reflects roughly €100 million, where we have already reduced our workforce.

Okay. Thanks for the color. And on a different topic, and actually around Ukraine, should we go into a P steel scenario what would be the implications for you? And what, if anything, would be changing to your raw material procurement and then also logistics versus how you're operating today?

You know that we got still some material from Ukraine and we get iron ore pellets from there. The biggest portion is so far coming from other regions of the world when it's a logic supplier because of the logistic way, and there are some – there would be some positive effects coming from logistics costs, I would say.

Understood. Is there any chance you could quantify those? Or is this €20 million, €30 million?

No, not that much. Not that much. It's – I would say, it's far lower. It depends how much we buy from the Ukraine. Normally, our strategy is to put not everything in one basket because of logistic strategy. Logistics strategy is that we have more supplier in any of our raw materials.

And then if I may add, I think what we can expect then is perhaps a very positive sentiment from the overall economy and perhaps that we gain them more than this €20 million, you propose, therefore, for logistics. I think this has the bigger impact.

Okay. Understood. Great. And then lastly, switching topics towards decarbonization. Could you please update us on how you are going about securing the energy, which you need for the new EAF modules? And if you're may be happy to disclose that. May you also give us a bit of a color on the actual electricity costs, which you are seeing today?

I think we – as I mentioned before, is we are – everything is on budget and within the timeframe. And we have secured our energy supply for the new EAF because we have, in the right time, got the grids for that. So the energy supply is secured, I would say, also the scrap supply, HPI supply and so on for this first step. And so it's a good question because we, at this time, discussing with our energy suppliers for contracts for the upcoming years. So I haven't finally all the figures. But I think you are well aware that the electricity costs are compared to other regions compared to the U.S., for example, are higher.

But maybe just in terms of the character of those countries, are they all going to be fixed costs? Are those going to be flexible?

I think last year, we had electricity cost in an amount of roughly €450 million for the group as a whole. Out of €1.2 billion of energy cost and of course, this will change. And I think what dramatically we change is the profile, how we will consume electricity is, electric arc furnace come with a big, I would say, volatility. So you need it for some minutes, and then it has to go down. So the whole profile will change. And this is what our guys in the responsible department are working on right now how we will manage this. So things will dramatically change. It's not just to supply and to procure and get energy. It's also how to treat it. So it will end – change our growth dramatically. But perhaps we can bring you a little bit more insight there in the future.

Yes. I think that would be very helpful actually in – I mean, I guess, ultimately, my question is obviously, if you look at the OpEx structures, which you're basically moving towards versus the current blast furnace route. And I appreciate there's always really lots of volatilities on both sides with iron ore, coal, mostly and then electricity on the other side. I guess I'm wondering, basically, if you would just take those different OpEx positions, which you're currently seeing in the market. I'm wondering how is this basically changing your cost structure? I suppose it's going to be slightly higher, but then you also obviously have the offset from having to buy less CO2. I mean just the tier amount of CO2, you're buying at the moment is obviously a massive burden against your current EBITDA and cash flow, which I guess I mean, just relatively to other companies, obviously, the burden you're carrying and you can carry it because you're financially very solid, and you're very profitable, but you're not getting anything in return for the moment, right?

Of course, we have a lot of – done a lot of math, of course, in the background there. This is clear. But one thing is also clear right now, it's coal, which accounts for 50% of our energy or even more if you add coke then, and it will change. And we can give you some more insights, as I mentioned before in future.

Okay. Thank you.

[Operator Instructions] There are no more questions at this time. I would now like to turn the conference back over to Peter Fleischer for any closing remarks.

Thank you very much for your attention. It's interesting discussions. If there come up any questions, please feel free to give me a call or Gerald a call, our numbers. We will be back in the office in a few minutes. Thank you very much.

Thank you. Bye-bye.

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