Salzgitter Stock

Good morning, ladies and gentlemen, and welcome to the analyst conference of the Half-Year Results 2026 of Salzgitter. The conference will be recorded.

[Operator Instructions]

Let me now turn the floor over to Gunnar Groebler, CEO; Birgit Potrafki, CFO; and Markus Heidler, Head of Investor Relations.

Thank you, Melchinkke, and good morning, ladies and gentlemen. Welcome to Salzgitter AG's conference call for the first half 2026.

Joining me today, you just have heard it, are our CEO, Gunnar Groeblee; and our CFO, Birgit Potrafki. Following a short presentation of our results and current business development, we will open the floor for your questions.

Before we begin, please note this call is intended for the capital market. We kindly ask members from the media to contact our communications team directly. And with this, I hand over to you, Gunnar.

Markus, thank you very much. Good morning from our side. Very happy to be with you today and guide you through our first half of 2026, which has been bottom line, a positive first half of this year.

We will show this in the upcoming minutes in the presentation. Let me quickly go through some of the facts and then followed by you, Birgit, on the financials.

As you are well aware of, we are [Technical Difficulty] doesn't work, but we'll fix that in a second. We are Always starting with health and safety.

As you know, we have a clear health and safety strategy, and we have a clear health and safety target. Unfortunately, primarily due to harsh weather conditions in the start of 2026, our numbers for the first half are not looking as we want them to be and as we expect them to be.

You see we have set a target just shy of 6.6% on the LTF. We're way above that. So we have intensified the work on group-wide trainings on preventive health measures to improve second half and still reach our target for the full year 2026.

So some way to go. We're happy with the development over the last years. However, this year needs further improvement, and we're working on that.

It has been a very intense year and a challenging half year. This Clicker is doing what the Clicker wants to do, but not what I want to do. Challenging market conditions in the first half year.

Geopolitical, you know better than we do how the environment looks right now, and it will remain, and this is our view, at least highly volatile intense also for the remainder of this year.

ETS reform, there has been a lot of discussion and outreach on the ETS reform. We have seen the first proposal from the commission, a first proposal.

I think that is very important to understand of that commission this balancing of between CO2 prices and investment certainty is certainly something that needs further discussion and also lobbying through the remainder of this year.

First results or the results will only be available first half of 2027. Big step for us. We have acquired 100% of HKM. We'll go through that in a second. And also, as said, encouraging first half year also in the numbers. So that's certainly something we will talk you through.

Volatility, geopolitical tension, that is somehow most probably I'm the problem today. Geopolitical tension will remain. You see the map of Europe. Unfortunately, the color coding for the state of foremost is not perfect, certainly something where quite some uncertainty comes from these days, and this will also remain.

And as a result of that, at least partially, the GDP remains weak and also the steel demand in Europe remains weak. Regulatory tailwinds is something that we have seen, and I just mentioned and we'll go through that now in more detail.

What has happened on the EU trade policy is that it has been very active in terms of decision-making and also implementing of new tools.

The carbon border adjustment mechanism has started on the 1st. We have already seen a positive impact of the CBAM on the price side and also on the reduction of imports.

The new steel safeguard measure has taken effect on the 1st of July this year. Also here, a significant reduction in imports. Yes, there will be an impact on prices, or we have seen an impact on prices already, plus EUR 30 if you look at Ex Works Italy for hot-rolled coil.

So the effect that we intended to see there -- this is a bit annoying now with the clicker. Apologies for that technically, where we can improve. The intended effects are already visible.

I think what we need to state, and we have said that before, is that we have seen market participants acting proactively on the implementation of the new safeguard measures by importing prior to the 1st of July.

So this material needs to be worked through the value chain prior to seeing the full effect of that.

What happens now for 426, on top of those, is trade defense measures, antidumping measures on the cold-rolled steel, and further antidumping measures, especially when it comes to hot-rolled steel coming out of Turkey.

So there, the EU is still active. And I think what we have seen with the Steel and Metals action plan last year comes now more and more into effect from our perspective, a good development. I mentioned ETS before.

As said, we have seen the first proposal of the EU Commission. My read of that is given that it has been a very sort of cautious proposal. We're testing the water, testing how the reactions are.

And then now we will see a refinement, readjustment of the proposal as well as positioning from both the member states as well as parliament. What is good from our perspective is that the EU ETS as a system remains essentially unchanged. We see that the EU believes in the ETS, the way it is designed.

However, we also see that the current draft proposal is not as they promised; actually, it is not putting first movers at an advantage or at least at par with those that have not moved so far.

So here, certainly, we need further alignment with the Commission and further explanation to the Commission. We have started that process already.

So we shouldn't overvalue this first proposal. It's the starting point of a lateral trialogue between the Commission, the member states and the parliament, as well as accompanied by industry and other stakeholders here.

ETS is only one thing. We should always keep in mind that it has to be accompanied by compensatory measures outside the ETS. Let me point out 2 things here. The lead markets for CO2-reduced products made in the EU.

Lead market is a concept that has been widely discussed also in the member states, and we see more and more positive connotations to the concept of LEAP markets also from industry, also from our customers, like, for example, the automotive industry.

And the second measure we still have to work on, especially in Germany, is energy prices. We need to get energy prices to internationally competitive levels.

That is a low-brainer, and why that is, I'll show you in a second. And also here, we have had good and intense discussions also with German policymakers.

Katarina Reiter visited our site in Dalzgitter just a week ago. And rest assured, energy and energy prices have been one of the key topics that we have addressed.

Looking at raw material and energy prices, we just talked about energy prices. Let me start with the right-hand side. You see that electricity and natural gas have jumped upwards as a result of the Middle East conflict.

The current peak in electricity, on top of that, is weather-related. You all have followed that we have seen shutdowns of nuclear power plants in France and in the Eastern part of Europe due to low water levels in rivers and also temperature levels there.

On top, we have seen a lot of solar radiation in Europe, which, on average, increases electricity prices due to the fluctuations in feed that we have seen there.

Raw materials on our side: freight is one issue for the iron ore, again, something that is connected to the Middle East conflict.

Coal has been higher on a temporary level, which was primarily due to weather impacts in the mining regions, but coming back now, as you can see, as those weather impacts have been removed.

Looking at steel prices, basically a good development since July last year: hot-rolled coil ex Hugbeet has improved. We are now seeing EUR 715 per tonne. So that's a good development.

You also see the recent increase based on the regulatory development that I just mentioned. Also, compared to China and North America and the U.S., respectively, I think also here, again, in the middle and with a stable and good development.

And we see no signs, despite the low consumer market; we see no signs for this to change in the second half.

Now looking at Salzgitter and looking at our key figures for the first half, as I said, it's a positive development. Yes, we see improvement in all segments.

In all segments, we have seen a stronger first half '26 than we have seen in the first half '25. And this is a mixture of basically 2 things. One is the development of market prices versus raw material prices, so widening of the margin.

But even more so, we have seen that also our own work that we have done in terms of restructuring, in terms of cost reduction, pays off, and this is what you see in the results.

If you look at trading, with a positive result of almost EUR 40 million in the first half of this year is clearly a result of the heavy restructuring we undertook last year.

We have already reported to you guys, but just as a reminder, roughly 30% of the jobs have been cut on the trading side.

Steel production, predominantly P28, our performance program, roughly EUR 50 million alone from [indiscernible] contribution here.

So seeing it is really improving through the entire company, including also Aurubis here, we have seen a stronger first half compared to last year.

So good development here and certainly something we will continue to work on, and we can also see that next year. Now looking at 2 major projects we have been through or that we are carrying through.

One is Dalkos, of course. We had a rough start to the year. I mentioned the weather that has, of course, also impacted the construction side, but we've been able to catch up given that weather is not really an issue these days.

The Hien Tower is now fully assembled, 120 meters, the second-largest tower that we have now on site next to the DRI.

Large components have been installed. And especially on the power supply system, utility and power supply system, we are well on schedule here with the development.

So commissioning in late summer 2027 is our plan, and there is no sign that there will be a delay on that. Just also to remind you, this is only the first phase of SALCOS.

We have at least 2 more phases to go. And here, we are using the modularity of SALCOS to really find the sweet spot in the decision-making for the next phase, which would be an electric arc furnace.

The investment decision has been paused. We have reported on that. But rest assured, the preparation for the second step is well underway. So we're doing the engineering.

We're doing the business case modeling for that so that we are able to execute as soon as we deem this to be the right time.

Second big step of the first half of this year is, of course, the acquisition of HKM. We have been able to strike a deal with the 2 co-owners, thyssenkrupp Steel and Ballrec.

We are now since 1st of June, July, 100% owner of HKM. We have bought into HKM with a clear target to decarbonize also this site. So the EAF has been contracted already in July this year.

So also here, we are ramping up our project work to deliver green steel out of HKM as of late 2029. 90% CO2 reduction is the target we are looking at.

And yes, this comes with heavy restructuring in HKM, and we have been very clear about this the entire time. We are looking at roughly 3,000 people employed in HKM today, and we will reduce that by 2029 to roughly 1,000.

This has been discussed and negotiated with the works council and with the unions and is signed. So we have certainty on the numbers and certainty also on the cost impact of that.

This has been part of our business case all the way through together with the investment. Birgit, you will show us some more numbers on the HKM later in this presentation.

Let me finish with an outlook for 2026. The regulatory measures that I mentioned will certainly also help us through the second half of this year.

We have seen improved demand in terms of production from European steelmakers and European producers. The German association [indiscernible] showed a 9% increase in the first half of '26 compared to the first half of 2025. So that is certainly positive.

However, fundamental demand needs to further pick up. And we also expect the special funds on infrastructure and defense to be more visible late this year and predominantly in 2027.

So that will also then certainly help us in our product mix going forward. I think we should also mention that, especially for the steel processing side, given that this is predominantly project business, we also need those impulses from the special funds and other projects to remain at the good level that we have seen in the first half.

As said, the market is stabilizing at a lower level. We have been through the worst in '25. We're now picking up. We said in March back in black. I think we underpin that we are clearly in the black, and we remain in the black in '26 with a good recovery and a good result we foresee for 2026.

And with that, I hand over to you, Birgit, to guide us through the financials.

Thank you. First of all, a warm welcome also from me to you. Happy to have you here. Please excuse us for struggling with the technology here.

It seems like we are always jumping to the end of the presentation if we do not keep a certain time frame. So let's try to deal with that challenge. I hope it keeps everybody's attention high.

As Gunnar has just said, the economic environment is not yet providing meaningful support, which somehow a bottom, but not yet really meaningful support that we can see here.

What is helping us, and also Gunnar has talked about this, are the EU trade defense measures, which are having or will be having a positive impact on price levels.

Despite the absence of economic tailwinds, we achieved a significant year-on-year earnings improvement. And Gunnar has shown that, and I'm really happy to see that we could reach that in all segments.

All teams really did a great job here, I have to say. We expect this positive trend to continue also in the second half of the year, albeit at a somewhat slower pace than what we have seen in the first half.

I will also spend some words later on that because I know you may have some different expectations here.

Our performance that makes me especially happy continues to deliver really, really strong results. After half of the year, we have almost reached the full year's target.

As Gunnar has laid out, from July onwards, HKM will also contribute positively both to revenue and to earnings. All this, of course, before the purchase price allocation effect.

We do not, and I can say this, we do not expect any significant net cash outflow from the consolidation. If we look at the first half of the year, our net financial position is exactly where it was 1 year ago.

The difference is just EUR 4 million. So quite stable year-over-year. And including the HKM consolidation, our outlook for the net financial position for the total year remains broadly stable.

So I can say with confidence that the business is now increasingly well positioned to benefit from any future improvement in economic conditions.

So looking at the half-year's numbers, we see on the left upper side our sales revenues amounting to EUR 4.6 billion, which is 1.6% below the previous year's level and driven by trade only, we have to say.

Here, we also see economy doesn't really help. And all the other segments are stable or slightly increasing; however, only negative revenues compared to the previous year in the trade business unit.

The EBITDA and the EBT are significantly above the previous year in all segments. And the main contributions, of course, are coming from Aurubis, but also a very strong contribution from steel production as well.

As I mentioned before, all the others are also contributing in a good way. And here, you see a little bit grayish the figures that are not the adjusted result figures.

Here, you see that even the EBT, including the evaluation effect of the exchangeable bond, is also clearly positive. If you look at the right side, working capital, we see an increased working capital of EUR 2.6 billion, mainly coming from accounts receivable, and this is increased compared to 1 year before.

All of this is resulting then also in our operating profit, which reaches EUR 59 million in the first 6 months. And this has an impact on our net financial position.

As I mentioned before, very stable compared to 1 year before. If you look at our income statement, and Gunnar has mentioned already and I have mentioned already the P28 contributions that are, of course, spread all over most of the items in the profit and loss statement, but let me show you the structure of the profit and loss statement where we have the biggest contributions.

Here, I would like to mention 2 major, how to say, categories that lead to the fact that we have reached such a good result. One is that if we look at our cost of materials, we see in the box below a significant improvement compared to the year before of EUR 122 million.

To give you also a relation, this cost of materials represents 61% of our sales revenue, whilst 1 year before, we were still spending 65% of our sales revenues for cost of materials.

The other nice big figure, you see more on the right side, the plus EUR 113 million, mainly driven by the nice performance of our Aurubis participation here, also having a nice major impact on our profit and loss, and all of this resulting in the EUR 258 million EBT, and including the valuation of the exchangeable bond, also positive, EUR 76 million.

Then, after taxes, we come to a result all in of EUR 43 million. Looking at our balance sheet. And here, starting with the asset side.

We see an increase in our assets of EUR 374 million, driven mainly by 3 impacts. First impact, if you look at the noncurrent assets, of course, here, we see the impact of the Aurubis evaluation.

This is partially compensated in a negative way because the funding we received, they decreased the investments we have made, because the funding was also related to former spending.

We see that cash and securities have also increased due to the inflow of funding, and the other current assets are mainly accounts receivable. If we look at the equity and liability side, here, 2 things need to be mentioned.

First, our equity ratio is stable at 42%. And second, we have a switch between long-term and current liabilities, and this is due to the remaining maturity of some of the financial instruments we are using.

Coming to the cash flow statement, starting with the left side of the operating cash flow. I have mentioned the EUR 59 million we have already received in the first half of the year.

One year before, we could manage to receive EUR 81 million, and the difference is mainly driven by a different way of the development of the working capital, which increased whilst in the second quarter last year, we could significantly decrease.

If we look at the right side of the cash flow statement, we see that we could increase our cash up to EUR 1.2 billion.

What is really nice is that we see that in all categories, we have a plus, even in the cash flow from investments and also in the cash flow from financing at a smaller amount here for the cash flow statement, investments and depreciation.

We have quite an overseeable number in the first half of the year, amounting to EUR 88 million when we look at our investments. Also strongly influenced, of course, by the funding we received was EUR 290 million.

For the total year, we are looking at investments of EUR 650 million, and included in this is a EUR 100 million investment in HKM.

And you see that the majority of the investments go into all the business that is not [indiscernible] related because the [indiscernible] portion, for the total year, will be profiting from the funds that we have received and that we still will receive in the upcoming months.

Very happy to talk about the performance program P28 because, as I have mentioned before, on the right side, you see the target, EUR 122 million. Next to that, you see what we have effectively achieved after 6 months, EUR 97 million, which is already 80% of the total year's target.

As you may remember, we have significantly overachieved the targets that we set for last year.

So we are quite confident that we will not only reach our target for 2026, but that we will also be able to again overachieve our target.

Gunnar has also mentioned the major contributor here, you see, with above EUR 50 million, is the steel production area, followed by steel processing and technology.

Again, I would like to mention that restructuring effects are not represented in this program. This is why the nice restructuring effects we have seen in trade are accounted for in a different category, not indeed 28. I mean, Gunnar has shown it.

We have lost quite significant sales in the trade area, and we could improve the profit. And that is also strongly influenced, of course, by the effects that we realized due to our restructuring activities.

HKM of high interest, I know, results. We will see a positive contribution in the second half of 2026 when we will consolidate HKM. And of course, this is before the purchase price allocation effect.

I have mentioned that already before; we will complete that by the end of this year. And of course, the results, we will see positive impact on the revenue side.

If you ask how much, you can look at how much we have shifted our guidance. That's the major portion, of course, coming from HKM.

And looking at the profit side, and of course, you will ask that question: how much is the profit going to be that you will have in addition? I can say as much as this is a mid-sized double-digit million value.

If we look at the balance sheet effect, of course, the consolidation of HKM will prolong our balance sheet. However, it will not change the structure as it is.

We will have one positive implication, though, and this is concerning the leverage because HKM is coming with almost no debt and bringing additional EBITDA to the table.

Cash impact on Dalzgitter. I know that this is one of the most, how do I say, the figures of most interest to you. And a lot of questions are asked and will be asked, of course, about single views like restructuring or investment in transformation.

However, I have to really stress that we have to look at HKM as a whole. So we have money that comes from operating activities of HKM.

We have the contributions from the former shareholders, and we will receive funding for the transformation. And that money, of course, will be used to transform the company, to do the restructuring and also to do the investment.

So what is the figure that is, for me, the most important one to look at is if we look at Salzgitter as a whole, including HKM, how much additional cash overall will be required due to the fact that we now own HKM.

I can disclose the figure that is mentioned here, which is that, within the next 3 years, the net additional cash over all of these items that I have mentioned just right now, we will need EUR 100 million over the next 3 years. So I think that's quite an overseeable amount.

And of course, since we talk a lot about SALCOS and since you are all very familiar with the SALCOS figures, it's just logical that we also talk about the investments for the transformation at HKM.

And here, we are talking about around EUR 900 million, and we will receive EUR 200 million in funding.

As I mentioned before, there is no need to be, how to say, concerned because the overall holistic view shows that in the next 3 years it is around EUR 100 million net additional cash that this will require. So that is the number I ask you to keep in mind.

Bringing all of this together, looking at our guidance, of course, you have seen that our sales amounts are now up to EUR 10 billion, EBITDA between EUR 725 million and EUR 825 million, a pretax result between EUR 325 million and EUR 425 million, and the return on capital employed marginally above the previous year's figures.

And I also know that you are challenging us again on whether we are being too prudent rather than being too bold, looking at where we are after the first half of the year and comparing that to our guidance.

I can tell you, we feel quite confident with our guidance. I would also like to already give you some information here. Why is this the case? First of all, we will have seasonal effects, as we always do have coming from the summer period and coming from the Christmas period.

We will have downtime for maintenance, of course, influencing the business. We had a one-time effect in the first half of the year, not sustainable effects with around about EUR 20 million.

And taking all this into account, we think that we will still continue the nice path we have seen in the first half of the year. However, as I have mentioned in my introduction, a little bit, very slightly more moderate.

With this, I think we are starting now the Q&A session and are getting ready or are ready to receive your questions.

Prior to that, again, an apology for the mess-up with technology. I hope that you still were able to follow.

But please be reminded that the presentation is available on the Internet. So if there's anything you want to sort of get to through the Q&A, please do. Apologies. It's not our standard, and we certainly do better next time.

Well, at least I hope the audience appreciated that I had a more active role in the presentation. Let's start with the first question.

[Operator Instructions]

So we already have many questions. So we start with the first one from Reinhard van der Weal from Bank of America.

Maybe first, just a question on market conditions. The recent price increases that we've been seeing in HRC, do you think any of that has been driven by the European water levels, whether that be steepening of the cost curve or impacting supply?

Thank you, Rainhard, for the question. Of course, we are monitoring water levels, especially on the Rhine River, very thoroughly given that this has, of course, an impact on HCM.

So far, we have not been impacted by low water levels as Salzgitter, but your question was more general. I think it's too early really to see price increases through weather conditions like the low water levels on the rivers.

But certainly, if that continues to be the case and if water levels further drop, then you might see sort of shortages there. And then it might have an impact on price.

So far, I would say we haven't seen that. At least I'm not aware of any price increases due to restrictions on production.

Maybe just, I guess, a follow-up question on the market conditions. We've heard some sort of mixed comments from your peers about what volumes could look like in 3Q, some saying it will be up, some saying it will be down.

I mean in your business, are you expecting usual Q3 seasonality in volumes? Or do you think the TRQ is maybe already going to deliver some volume benefits?

Well, I think in Q3, we're going to see the effects of the TRQ starting. As I mentioned, some of the traders have reacted proactively and have proactively bought material and shipped it to Europe prior to the TRQ kicking in.

So we will see and need to work through the value chain. But I would assume that some of the TRQ effects will be visible already in Q3.

However, when it comes to flat, I would say stable development going forward, especially plate and large diameter tubes, which are more project-related businesses.

Certainly, we need to see a pickup here. And as Birgit mentioned, that market has been relatively silent last quarter. So we certainly need a pickup after the summer break.

So certainly something we are working hard on: different projects, but also need to bring them home here.

Then again, as soon as it is international projects, we also need to look at the trade development, especially with the U.S.

So the next question comes from Tristan Gresser from BNP Paribas.

The first one is on the cash needs you mentioned for HKM. It's a very large EAT, and I think you need to build all the additional infrastructure investment around it.

So $900 million for the full thing on a gross basis seems a bit low. But do you have built some contingency? Are you really confident that that's the highest point you'll have to spend?

And then if you can help us also understand the restructuring cost, maybe the cadence of it and the total amount? Yes, I will have a follow-up on that, but I'll start there.

So cash needs, yes, we are confident with the EUR 900 million. HKM has, and we have reviewed that, done a quite thorough project work on it.

And with our experience from SALCOS, we, of course, have sort of critically reviewed that. And we're confident that those EUR 900 million are sufficient. And yes, we have contingencies in that budget. So there's a bit of headroom also here.

We shouldn't forget that HKM is in a pretty lucky position given that grid infrastructure is already there. So unlike our project in [indiscernible], no grid infrastructure needs to be built, and also space is available there.

So they are in a relatively favorable sort of environment for a project like this. So that's one element. Restructuring cost, basically, was predominantly the reduction of personnel.

As said, this has been negotiated. So we have certainty on that. The main element of the personnel reduction will only come late in the process because this is when we stop the second blast furnace.

And with that, the coating unit, the center plant, and also part of the power plant potentially. So that's when the larger headcount reductions will actually appear. So that is it.

We have not disclosed the total amount of the cost, but it is well in line or, I would say, slightly below what you have seen in other restructuring processes in the German steel industry.

So that's going to come more in 2029, if I'm correct; that's when you plan to shut down the second BF.

Correct, correct. But what I forgot to mention, of course, with the shutdown of the first BOF, we already have a significant impact this year. But you're right, the larger portion then comes in '29.

So there is some restructuring costs impacting 2026 due to the shutdown of the first blast furnace. Is that correct?

Yes, exactly.

And that's included in the guidance you provided for the consolidation of HKM.

That is absolutely included, yes. The rule of thumb is 1/4 of the cost in '26 and 3/4 in '29, just to give you a bit of a ballpark.

And just on the EUR 100 million for the next 3 years for HKM, you also have, I think, included in your CapEx guidance update, EUR 100 million from HKM for just those 2 quarters. So what is this EUR 100 million?

I guess it's not maintenance, but yes, just trying to reconcile those 2 figures if we need to factor in some additional maintenance for HKM in the coming years as well.

Yes. So what is part of the EUR 100 million is, of course, the update of the remaining blast furnace is one part, a major part. And then what you need to keep HKM up and running every year, no major other how to say, bigger investments included here.

If your question is on what we have to expect in the upcoming years as investments that are not related to the transformation of the electric -- towards the electric arc furnace, you can count between EUR 50 million and EUR 100 million in investment.

For HKM?

For HKM. Yes.

So the cash impact over the next 3 years, that's excluding maintenance?

No. Thanks for putting that question again. The EUR 100 million I have mentioned is the amount that you need to look at HKM in total, taking into consideration all needs for restructuring for investments, be it the gray route, be it already investments for the green route, and all this funded by the shareholders' contribution funded by the activities that HKM is organizing and by public funding.

And the total picture, including also the investments I have just mentioned, including also the investments for the electric arc furnace, this figure includes all of this.

Okay. Including the maintenance, but also including the cash generation of the plant.

Yes.

And maybe last question. Can you help us a bit understand what we should expect in terms of investment cash needs for next year?

I think you still need to receive EUR 200 million in funding. What's the timing of that maintenance for next year as well, and what's remaining on SALCOS so we can calibrate a bit better the investment for the coming quarters and especially next year? That would be great.

For the coming quarters, I have talked about that in one of my slides. So we have spent EUR 88 million in the first half of the year.

The figure was especially low due to the funding that we received was EUR 290 million. We expect, including HKM, to spend a total of EUR 650 million; without HKM, EUR 550 million.

As I mentioned, for HKM, you can count on EUR 50 million and EUR 100 million depending on the topics that need to be invested. And for SALCOS for next year, you may count on something around EUR 0.5 billion in investment for 2027.

And the funding, the EUR 200 million that you need to receive, is that going to be H2 or next year and [indiscernible]

EUR 200 million funding will spread along the total investment of the EUR 900 million because what is happening in the procedure is that once you have paid the machinery provider, you are able -- or we are able -- once we have paid them, we are able to ask for the reimbursement to the states and to the German Republic.

And then they are quite quick in paying that. But this goes along with the investment that is really, how to say, done where you really had the cash outflow, yes.

Sorry, I mean the funding for SALCOS Phase I.

Sorry, you were not at HKM. Sorry, I was thinking you were still stuck with HKM, but you're not talking about SALCOS funding.

Yes, SALCOS, I think you got 1.1 billion; you need to get 1.3 billion. So there's EUR 200, Extra [indiscernible] or next year.

Yes, half-half.

So next question comes from Maxime Kogge from ODDO BHS.

First question, I'm staying on HKM. So you mentioned the mid-double-digit impact on EBITDA in H2. Is that purely an accounting impact? Or is that a reflection of the underlying contribution of HKM?

Can we perhaps annualize that to about EUR 100 million to get a sense of its recurring contribution?

Maxime, I cannot tell you what you can model in your models. And you're right, it's a million-double-digit amount I have mentioned for the second half of 2026.

As you're very well aware, not only concerning HKM, but concerning all other entities as well. At this point in time, we are not disclosing any expectations for next year since we are still in the process of putting our planning together.

So I'm also not going to disclose any expectations for HKM results for 2027 right now.

But is that purely accounting, or is it really the underlying contribution in H2? I mean, is that purely...

Maxime, it's a mix of both, There's an element of underlying business, and there's an element of sort of accounting there.

At this stage, you don't want to split the 2.

No. As we have said, Maxime, what's also important to keep in mind is that the effects from the purchase price allocation are not yet included in this figure, yes.

And I would have thought that the financial contribution of Vallourec and thyssenkrupp would already be recognized in the balance sheet at the onset of the acquisition.

But I guess this will also flow progressively over the next 3 years now as restructuring needs and CapEx needs also increase. Am I right to understand that?

Absolutely right, Maxim. Yes.

Now, if I switch to the Q2 results, I had one on the Trading division that had a very good result once again. And this time, it was not driven by exceptionals.

But I imagine there are some valuation adjustments included in that. Can you perhaps give us some sense of the underlying results for trading versus valuation adjustment contribution there?

Yes, I can give you one reason why the results were so nice. You're right. In the first quarter, we had a not sustainable onetime effect of EUR 10 million or EUR 11 million, to be more precise, which we did not see in the second quarter.

The good result in the trade was also driven by a very favorable combination of material cost basis and price basis because our colleagues from the Trade segment, they had some stock buildup, making use of very good material cost and then being able to transform that into business.

And for your next question, how do they look at the second half of the year? They are a lot more prudent when they look at the second half of the year also because the geopolitical tensions are putting pressure on international trade.

And here, we all deal with quite a high degree of uncertainty.

And just the last one, it's on your tax position because, as far as I understand, you have recognized on your -- so precisely, it's not recognized on your balance sheet, but you have EUR 4 billion of tax loss carryforwards accumulated over the past years.

And so far, you hadn't recognized anything of that or a very limited amount because you had limited profit generation ability. But now that things are improving a lot, that you're returning to healthy profit generation ability, should we expect that to be recognized on the balance sheet, so perhaps not at the 30th of September, but at the 31st and further beyond this time frame?

Yes, of course, we will make use of that as soon as we can. That's very clear. And you are absolutely right, since our business results were not in the range that we could make use of these losses carried forward, we just simply didn't.

And some of the positive results we achieved were mainly organized. We also couldn't in some parts. But of course, as soon as we can, we will make use of that. That's absolutely clear.

Okay. And then we should, therefore, expect that tax outlays will remain minimal over the next year, sorry, because you have so many tax loss carryforwards.

As long as these results are able to be accounted against the losses brought forward, yes.

So the next question comes from Bastian Synagowitz from Deutsche Bank.

I've got a few more follow-ups from HKM, if that's okay. Maybe you can bring us up to speed there. But what have been the recent production levels in 2025 at the HKM level?

And how exactly does the planned blast furnace setup look from here onwards? I understood that 1 of the 2 blast furnaces is currently being relined, but will that even come back? That's my first question.

Let me answer the blast furnace question. The reason for taking this blast furnace out of operation is still, as you said, the relining and basically upgrading the blast furnace to then go back into operation in August and then carry HKM through the upcoming 3 years.

So you might recall that the whole concept is based on us reducing capacity at HKM already this year. We have an installed capacity of roughly 5 million tonnes.

We will reduce that to 2.5 million, meaning 1 blast furnace. And that's exactly the blast furnace that is being relined right now. As soon as that one is operational again and stable, we will take out the other blast furnace and close that one down.

And that is then the first part of what we discussed with Tristan also when it comes to the restructuring, reducing the workforce roughly 1/4.

So that would certainly happen. And production levels for the 2 blast furnaces in 2025 have been good. The whole structure of HKM has been that HKM basically produced at an optimal level to support the 3 shareholders.

So production levels in 2025 have been on a very good level.

And what does that mean? Is it like 4 million tonnes or--

I don't have the output number on top of my head for the total HKM because I only looked at our share, and it has not been published.

So unfortunately, we cannot deliver that number. It's not been published, given that it has gone through to 3 different shareholders.

And so then as the one blast furnace, which is currently being as it's coming back, when will the second one leave? What's the broad timing for that? Is it going to be early next year?

No, no, no, no, no. As soon as the Reline blast furnace is operational and stable, we will take that one out. So it's going to happen in Q3, certainly. Very quickly after the Reline one is back in operation.

Yes. Okay. But basically, if we look at it at a high level, even with you not, I guess, disclosing the 2025 numbers, basically, what's happening is that we go from 2 blast furnace operations back in 2025 to basically an exit run rate using just 1 blast furnace at the end of this year?

Absolutely, yes.

So it's a net-net cut?

Yes.

And then just getting back on the CapEx guidance, which you guided for with EUR 50 million to EUR 100 million maintenance because that's a pretty broad range. Is this referring to just a blast furnace operation? Or is the upper end of that still based on 2 blast furnaces?

Yes. It's for what we expect for this year and the next few years, yes. So it's for the blast furnace.

And you're right, if you see that we have run 2 blast furnaces this year for half of the year, or HKM did. And then we will have one; then of course, you can assume where you maybe find yourself back between the EUR 50 million and the EUR 100 million.

I'm not going to give a more precise figure because, as I have said, we are still now in the process of putting our midterm plans together. So it would just not be fair to give any more precise figure because it's simply not there right now, yes.

And maybe on to next year, and I totally appreciate you can't really say too much given we don't know that much about the market yet. I can only take assumptions here.

But I guess what we do know is, I guess, you have a maintenance CapEx guidance for EUR 50 million to EUR 100 million, and the upper end certainly looks relatively high.

There's quite a bit of restructuring coming already next year from what you say, I guess; if you cut 500 people, that's giving you a decent mid-double-digit cost-saving amount already.

I guess it would be quite surprising if you would be taking this on without at least covering the full amount of the maintenance CapEx. So I guess whatever you expect as an earnings contribution must probably fully cover that. Is that a fair assumption?

Fully cover the restructuring cost, you mean?

Fully cover at least, like, probably the maintenance CapEx plus premium.

Yes. As I said before, looking at it as a whole, as you know, we have talked about that HKM is organizing some results from business activities.

We have the contributions from the shareholders. And the funding is, of course, 100% related to the electric arc furnace. But all of this funding plus EUR 100 million spread, as I have mentioned before, is enough to pay for CapEx, for restructuring and for the transformation.

Yes, we shouldn't forget that part of the takeover of HKM was also a delivery contract that we have signed with thyssenkrupp Steel.

So for the years '26, '27 and '28, we'll deliver slabs to thyssenkrupp out of HKM, with the biggest portion being in 2027. So from an operational business, we should also expect good results from HCM in that year.

So basically, the short answer to your question is yes.

Then last question, is there any early color on the PPA effects from HKM, which we may see? Will they be positive? Will there be negative? Any quantification if broad?

No, it's too early. Please understand that it's really too early to color that figure already as of today. Our teams are really dealing with that right now.

So the next question comes from Boris from Kepler Bourdet Cheuvreux.

Can you hear me well? Yes, I'll stay on HKM. So I get it that it's a net EUR 100 million cash that you need to cover the needs for HKM.

But I'm curious to know whether there is a specific sequencing across those coming 3 years, like I would guess, some cash drain at the start and then things getting better over the end of the period because you only get EUR 200 million public funding to cover the cost of the new EAT to be built over 3 years.

So also wondering if there is any additional public funding you would expect from the European level, maybe in connection with the ETS reform; would be interested in getting that, that's right.

Thank you, Boris. Let me start, and then I hand over to you. With the additional public funding, there is no additional public funding in our business plan.

So if there were an opportunity, of course, we would try to grasp that, but there's no expectation of additional public funding in the business plan.

And secondly, Boris, we shouldn't forget that the 2 shareholders that left HKM deliver a substantial contribution to the whole financing of HKM restructuring plus the investments.

So it's not only the public funding, but also money coming from the 2 shareholders that we will use and make use of for the upcoming work that we have with HKM.

For the spread of EUR 100 million, the question, right? I can tell you that the majority is not going to hit this year. So it's quite evenly spread, I would say, over the years.

No significant impact already this year.

And maybe a follow-up on the contribution from thyssenkrupp and Vallourec. Is it fair to assume something like EUR 0.5 billion total?

We have agreed not to disclose the numbers on those contributions. Sorry that we can't comment on that.

Yes. I guess we'll have to wait for the publication of the provision.

Maybe a possible way.

So the next question comes from Andrew Jones from UBS.

So yes, we have lots of questions on HKM. I'm still slightly confused, just to keep it simple. If you're talking about your net CapEx net of any subsidies or contributions from thyssenkrupp or Vallourec, broadly, how should we look at the CapEx schedule over the next few years?

You're saying $650 million this year. I think you were saying that gross SALCOS should be 500 million next year. What was the net number? And what's the likely total for CapEx next year?

And can you give us a ballpark for '28.

Yes, talking about SALCOS Phase 1 this year and next year, I have shown that this year, the CapEx will be quite overseeable.

In our graph, you have seen that due to the very high public funding we have received. We have talked about the fact that there are around about EUR 200 million of public funding open for SALCOS Phase 1 and that they will be more or less evenly spread over this year and next year.

And next year, we will see quite a high SALCOS spending here, as I have mentioned, around about EUR 0.5 billion after funding. So it's a net figure. That's a net figure.

Yes. So I mean, if we're talking about net figures, HKM shouldn't be adding much to that. And if we add in maintenance, what's a fair number for maintenance fee days.

I mean, all in, if we say 500 million plus 50 million for HKM plus 250 million is the number. So maybe we get up to about 800 million. Is that a reasonable ballpark?

You're trying to build up the CapEx for 2027. Is that what you're trying to do?

Yes, exactly.

I think 800 million would most likely be too prudent. Because you have, as I said, EUR 0.5 billion for IQOS.

You have between EUR 50 million and EUR 100 million for HKM, not Green. You will have the first payments for the electric arc furnace at HKM already this year and further payments already next year, also for the electric arc furnace at HKM.

And then we have investments around about between EUR 300 million and EUR 400 million for everything that is not related to the green transformation.

So the number EUR 800 million, I would rather see it as the lower number, rather than above that.

And after that, SALCOS stops, and then it's just HKM plus maintenance, so it should be going down to somewhere closer to that EUR 500 million figure, right?

Most likely.

Yes. I think, Andrew, what we shouldn't forget here is that we have seen also in the past- we have seen delays, right? So the cash-out profile has always been pushed out in time.

So even though big numbers, yes. But when things are getting paid, it normally drags out a bit in time. So that is certainly an effect that we have seen in the past also with SALCOs. Let's be sure about that.

And I also expect that to happen for next year and the years to come.

And then just on the operating costs of the new Air and also the new SALCOS production route.

If we compare to the existing production route, like how do you expect OpEx to actually trend, first of all, as we go into SALCOS Phase 1 of the main site?

And then when you start up at HKM compared to the existing blast furnace setup, how do you expect costs to trend in a stable CO2 price environment?

Yes. I think there are a couple of very important assumptions that we have to look at, right? If you say stable CO2 prices is certainly not what all the expectations of CO2 prices that are publicly available look at.

They look at a clear CO2 cost increase even with the ETS reform here. So the signal that we get from everybody on the policymaking side is that the price signal and the increase of CO2 prices will remain.

The question is how fast. So that's a difficult question to answer right now. But of course, if you expect regulatory developments as they have been planned so far, I think BCG put out a study that the electric arc furnace with DRI would cross the cost curve of the BOF in the early 2030s.

So that's why we also expect that by then electric arc furnace DRI is more cost competitive than a blast furnace due to the input costs that you would have there.

Of course, we're looking at brand-new electric arc furnaces, both in Fitter and in HKM, and I expect them to outperform on the cost side any other EAF that we have in Europe.

And just one other follow-up. I mean, the closure of the blast furnace at HKM, I mean, I guess there's a natural life to most of these blast furnaces, but clearly the European market will be tightening up as we see the imports drop off in the second half.

I mean, would it not be, I guess, beneficial to keep that blast furnace running to take advantage of some of that additional volume or demand for European steel in the market once imports drop out?

Yes. Of course, we have analyzed that, and we are closely monitoring how the market is developing so far.

Our strategy for HKM remains as just described because you shouldn't forget we would need an offtake of roughly 2 million, 2.5 million tonnes of slabs into the European market just from HKM.

And that comes also then, of course, with quite some uncertainty on the market side, but the market is prepared short term to digest another 2 million, 2.5 million tonnes.

So we are in talks. But for now, I would say the main scenario is that we're going to close down the blast furnace. If there are opportunities, of course, we're happy to evaluate those, but we need to be relatively fast with that because once the coking unit and the blast furnace are switched off, it's impossible to switch them on again.

So that would be a decisive point in time where we cannot go back.

Yes. And do you think there's a possibility that with these imports dropping out in line with the quota cuts, do you think that we'll need an imported ton paying the 50% tariff to balance the market?

Or do you think that domestic capacity is capable of stepping up to meet that additional demand?

A question about what you're talking about, right? If you're talking slabs, as of now, slabs are not part of the TRQ. So that is still to be sort of negotiated and included.

So from that end, I don't see a big change from regulatory developments. I think the dropping out of Russian slabs will certainly have an impact on the European market.

And either through additional imports or then through us with HKM as an example, we can certainly serve that market. And that's also the idea post 2028 when we have precapacity with that one blast furnace/EAF, certainly to address that market. That's part of the [indiscernible].

Yes. I was talking predominantly about the actual finished steel market. If we lose 14 million tonnes, is the 14 million tonnes of capacity that can actually restart in a timely manner from what you can say at the moment?

Well, I can speak for ourselves. We shouldn't forget we have a blast furnace that is not in operation right now. It's planned to kick in in Q4. So at least from a Salzgitter perspective, we have the opportunity to increase our capacity if and when needed at short notice. So that doesn't take a lot of time.

Okay. But do you think with the issues at Ilva and, I guess, those Liberty assets, I mean, a lot of that doesn't look like it's coming back quickly.

So I mean, potentially your tons HKM that might be needed. Do you think the market can step up to meet that demand overall from what you can see from some of your competitors?

If you look at the European market as a whole, I think, yes, the market should be able to step up to fill at least the vast majority of that demand, yes. And if there's more, then certainly, we will have to talk about imports and then at a different price point.

So there is another question from Tristan Gresser from BNP Paribas.

Just a quick one on the gross CapEx. Well, the net CapEx guidance for 2027, and I understand it's not really guidance.

But if you have the first payment of HKM EF next year with all the moving parts, is there actually a probability the CapEx goes above EUR 1 billion?

Not that I could see that right now. But then again, let us put the numbers together now in the fall.

And certainly, we will also adjust CapEx levels to something that is adjustable for the company. But above EUR 1 billion, that would be very surprising.

Okay. That's clear. And maybe just on Q3, if I understand correctly, so HKM will be consolidating steel production. And within steel production, you'll have the realignment of blast furnace HCM. You mentioned the restart of blast furnace, but probably Q4.

So how should we think about cost quarter-on-quarter for the steel production business? And also maybe if you can give us a sense of the spread margins that you would expect some stability or maybe some contraction there?

Anything would be helpful there.

On the spread side, I would rather say it's stable with a slight chance of contraction, but just looking at the 2-view, that's how I would guide Q3.

And on the cost elements, the relining is basically done. And that is then CapEx. Certainly, we'll also have to get the operational cost further adjusted downwards for the blast furnace with a relined, you normally have a better opportunity to work on your cost levels than with the worn-out one.

So that's certainly something where I would expect further improvements on the HKM side. And for Salzgitter, I don't see a major change.

And maybe a last one, just sorry, on the treasury share program. Any reason to believe that the pace that you had on the selling in Q2 would be any different in Q3?

Yes, I can take that question. And as you have seen from our cash position, we have, how to say, no pressure.

We have quite a comfortable cash position. So as we have said, we will sell our own shares by doing it in a way that is how to say, friendly for the value of the stake.

And this most likely, of course, will remain also our strategy since we are not depending on the cash inflow right now coming from that sale.

We will observe the market and act according to market development.

So the next question comes from Dirk Schlum from D Bank.

Okay. Maybe Dirk has some technical problems, but I saw he also sent the question in written form.

Will you read it out by yourself, or should I read. We can see it here. So if you could read it, please, then we can continue. Yes. He has 3 questions.

So the first question, at Q1, you said you plan to restart blast furnace in autumn. Is that still a plan given the still relatively weak demand environment and the full consolidation of HKM?

As said, we are looking at Q4 for the restart of the blast furnace. And we can do this at relatively short notice. So we will certainly observe market and market conditions.

But the way we read the market right now is that we will restart in Q4.

Okay. So the second one is, are the current low water levels having any meaningful impact on your business?

Is it mainly higher logistic costs? Or are you also seeing an impact on production?

Whilst we don't see any impact on production yet with regard to the lower water levels. If you look at Salzgitter, our main harbor is the Hamburg Harbour, which is not impacted by the low water levels.

So there's no change there. When it comes to HKM, we have taken precautious measures to deal with the low water levels on the river Rhime. We also have now transported coal via train from Rotterdam to HKM, and we have also increased stock at the HKM level to be able to run at production as planned.

And so far, no indication that we would have to change that going forward. So for Duisburg, water levels are still okay to be reached via vessel and deliver coal and ore.

Of course, we have to make use of more vessels given that we can't load them fully, but that is something that our colleagues in Duisburg are very well not only aware of, but also trained in.

So no impact on production. And yes, of course, for HKM, this means impact on logistic costs, but this is something we can also transfer to the customers of HKM, which is only partly Salzgitter.

As I mentioned, we also have contracts with, for example, thyssenkrupp Steel. So those logistic costs will end up there.

Okay. So question number 3 on technology. Order intake was weaker quarter-on-quarter and clearly below last year. How should we think about this development?

Is it just normal quarterly volatility? Or were there some larger orders in Q1 and Q2 last year?

Well, thank you, Jim, for that question. Finally, we get technology to be mentioned. That's very nice.

Now look, of course, there are some seasonal effects in there when it comes to the last quarter and also some projects that were, as you mentioned in your questions, that were available in Q1, Q2 last year. So it's rather project nature than structural nature that we see here.

So we're still, I would say, from our perspective, well on track when it comes to [indiscernible]

Okay. We have a few more written questions. Some of them are already there for a longer time. So I don't know if maybe you already answered them, but I will read them out.

There are 3 questions from Elaine Gabriel from Morgan Stanley. So the first one is how much would the electric arc furnace at HKM cost? How would the spending be phased? And do you think that you will be able to secure additional grant subsidies for this investment?

I think I mentioned all the points. So the total investment is roughly EUR 900 million gross.

If you take the EUR 200 million public funding, it's EUR 700 million net. So second, the phasing of the cost is as usually rather to the end of a project. And when it comes to additional grants and subsidies, I also said that we have not planned for additional subsidies.

Of course, if there are opportunities through programs on EU level or national level, we will certainly look into that.

Okay. So the next question, how much restructuring costs do you expect to incur at HKM? Over what time period would this be incurred?

And how much contributions have you received from thyssenkrupp and Vallourec?

Elaine, we have talked about those issues. We will not disclose the contributions. And on the restructuring costs, predominantly, it is personnel restructuring costs and, as said, 3,000 employees today, 1,000 then end of 2029.

And the cost that we have basically agreed upon with IG Metal and as a union and works council is in the same ballpark than other restructuring efforts we have seen in the steel industry.

I would say rather slightly below that, but compare that to recent restructuring and you get a good picture of that.

And then last question from Elaine. Trading had a very strong result in Q3. How much of this performance was driven by windfall gains and how much is from self-help? I'm trying to get a sense of how sustainable these profits are.

Now I need to understand Q3 last year, you mean. If you look at this year in first half of this year, you had roughly EUR 10 million positive one-off effect in the results.

So those are certainly not sustainable through the year.

I can also say that Q3 last year was not especially strong.

I think you mean Q2. Yes, we have quite a strong development in Q2.

Q2 this year. Then I have talked about this strong contribution in Q2 this year, which was that our colleagues from the trade segment, yes, right.

They pre-purchased quite some material. They were making use of the good material prices, which they can transform into revenues, especially also in the second quarter.

Okay. Then we have another question from Emmanuel from Reuters, but I think you already answered the question. Then we have a question from Stefan from.

You mentioned in your prepared remarks that you pocketed EUR 50 million from the sale of your treasury stock. Are you willing to continue selling at current prices as your cost price is around EUR 63?

Or how would you like to proceed?

I think, Birgit, you mentioned that already: what the strategy looks like when it comes to the treasury shares. So I think that's answered.

Okay. So the last written question for now from Jakob Schleider from IMC. Your order book growth in steel production looks solid at 6% Y-o-Y. Can you comment on what you are seeing in your order book for steel production into the back end of the year? Is this reflective of current spot pricing?

So what we see on the flat side is a stable positive development on the order intake also for Q3 and the remainder of this year so far. So we don't see any major changes to what we have seen in Q2, I would say.

So slightly different on steel processing, as I said, much more project-related business. So there, certainly, we are further working on securing projects there.

On the flat side, relatively stable development.

Okay. So at the moment, there are no more questions. This would be the last [Operator Instructions] if are no more questions coming, I would hand over to you again for some closing words.

Well, thank you. Well, thank you for your questions and the discussion we had. I appreciate your interest into Salzgitter and in how we perform to date, but also what the plans are going forward.

I hope we could clarify most of your questions and concerns. I understand that there were some concerning questions when it comes to HTM. I hope we could give you a bit of relief when it comes also to the cash out profile here.

And again, thank you for your interest, and see you soon again.

Yes. Thank you also from my side. Thank you.

Bye. Take care. Bye-bye. Stay safe.

Good morning, ladies and gentlemen, and welcome to the conference call of the Q1 results 2026 of the Salzgitter AG. [Operator Instructions]. Let me now turn the floor over to Birgit Potrafki, CFO; and Markus Heidler, Head of Investor Relations.

Thank you very much, and good morning, ladies and gentlemen, and a warm welcome from me here in Salzgitter. I'm happy to announce that with EUR 280 million adjusted EBITDA, we have made a promising start to 2026. And I can tell you that after 2 challenging years, that feels really good.

As announced on April 21, our first quarter performance was boosted by an exceptionally strong contribution from our stake in Aurubis. This was driven by the high prices commanded for precious metals. It's important to stress though that all our core business units also contributed to the earnings improvement versus a year earlier. This is obviously very pleasing. Our P28 performance program has been a key contributor to this business-wide turnaround. An additional EUR 43 million in efficiency gains were realized already in the first quarter.

Our net financial position has also improved considerably since the beginning of the year from minus EUR 954 million to minus EUR 679 million, mainly on the back of the prompt payment of additionally committed public funding of EUR 253 million on the first quarter.

Having said that, we are not getting carried away. The market environment in which we are operating offers some glimmers of hope, but remains challenging overall. We said at the start of the year that we were cautiously optimistic about our prospects for the year, and that remains the case. On the one hand, the new trade defense instrument proposed by the EU Commission in October will be formally adopted in the coming weeks. From July onwards, it will enable the EU to reset duty-free imports back to where they were a decade ago. This will reverse the surge in imports and help restore the long-term viability of EU steel production. At the same time, the Carbon Border Adjustment Mechanism introduced at the turn of the year is already showing a welcome impact on pricing. On the other hand, the high levels of economic uncertainty that has been depressing the European steel market have persisted. In fact, they have increased again due to the hostilities in the Gulf region and the closure of the Strait of Hormuz.

Additionally, they have resulted in surging energy prices and freight rates. While we are well hedged for 2026 for gas and electricity, those price pressures are pushing down growth projections worldwide. In that context, we have revised our guidance upwards for the year, but not by as much as some of you might have anticipated after such a strong first quarter. And when talking personally to some of you before we adjusted the guidance, I can tell you some of you really challenged me on that.

While we expect profit to be higher than projected at the start of the year, our revenue guidance is unchanged. As disclosed on April 21, we are now guiding for sales of around EUR 9.5 billion and an EBITDA VX of between EUR 625 million and EUR 725 million.

So to conclude, we have made a promising start to the year, and it's pleasing to see all our core business units contributing to our improved performance. EU measures will also bring some relief, but ongoing geopolitical and macroeconomic uncertainties mean our growing optimism must be balanced with a healthy dose of caution.

Thank you for your attention. I'm now looking forward to your questions.

[Operator Instructions].

Boris, your question, please.

Really my questions on the steel production business. We see that order intake shows a plus 7% year-on-year growth. So there seems to be a slight recovery. I would be interested in getting your comments on the drivers, what you see behind this recovery, and whether you continue to see a change in the customer behavior in Europe?

And on the profitability side, it seems like you've been helped by input prices, which shows a EUR 54 per tonne EBITDA in Q1. So how sustainable is that number? And do you see potential upside going into the rest of the fiscal year?

Thank you, Boris, for your questions. So starting with the sales. And we see an overall sales improvement for the total year in steel production as well as for the whole company, of course. And we have already gave that outlook when we talked last time here. And looking at the cost basis, we believe also that this will be continued to be stable. And yes, you're right, we have seen an increased order intake, and that is supporting our projection that sales will be improved compared to last year and is perfectly in line with our guidance that is also above sales of last year.

Okay. And just as a follow-up, when you say this continued to be stable, you mean the costs, so we should see an improvement in the EBITDA per tonne margin over the remainder of the year. That's the right way to put it?

So you are still talking about the segment steel production, Boris, right?

Yes, correct. Yes.

Yes. So we see -- we have had also in steel production, a good result in the first quarter and a lot stronger than the year before. And we see a continued strong performance in the total year and also in each of the quarters.

Okay. So at least this kind of profitability could be extrapolated?

Yes, I see a really good stability.

The next question is from Tristan Gresser, BNP Paribas.

Yes. Just going back to Boris' question on the stability of margin performance for steel production. I mean, steel prices have moved up quite a bit since the start of the year. Your ASP in Q1 were probably not reflected that price increase. So I'm a bit surprised, you said that you would expect some stability. My understanding is that Q2 should see a sharp appreciation in margin with steel pricing being the main driver, but would be keen to hear a bit about the bridge for that division into Q2. You talked about costs, but what about prices and what about volumes? How should we think about it? That would be my first question, and then I have 2 more.

Volume-wise, we have seen the order intake. So that is also giving some positive impacts on the volume side price-wise. If you look at the HRC price levels, and you see where they are right now, like around EUR 700, EUR 710, slightly below EUR 700. So that price level is almost back to the level we have seen during the second quarter of last year. So it's not really exceeding what we have seen last year yet, right? In July -- we had a peak in the second quarter, then we had a dip in July. And then prices have slowly recovered now, not even back to the level that we have seen in the second quarter. So what we see from the price side, it has not yet been developing beyond what we have seen in some months last year. So, so far concerning the prices, yes. And anyway, we are now negotiating, of course, contracts with customers based on the actual price level. And we have included that in our guidance already.

Okay. So you would not expect ASP selling prices to increase into Q2?

We have slight assumptions. To be honest, we do not see a bigger boost. And why is this? Because some of the price impacts coming from expected safeguards and coming from CBAM have already materialized in the prices. How much, we all don't know. However, some of these assumptions are already reflected in the price. We believe that the impacts coming from safeguards, which will apply up from July, will not be right away, because we expect that some stockholding will be provided in order to get prepared for that change. And we have already talked about that earlier. We see an additional impact from safeguards materializing more towards the end of the year, not in the middle of the year. So that is how much I can disclose on our view on price development.

Okay. But just to confirm I understood correctly, the bridge in the guidance into Q2 is stable cost, higher volumes, stable selling prices for the Steel Production division.

You are right, with some slight addition I would like to make. We are having our performance program, and we are targeting EUR 120 million cost savings, and we have materialized, in the first 3 months, already EUR 43 million. So there are still some EUR 80 million to go. And of course, this will have a positive impact on our cost basis. And also to mention, we have a seasonality, of course, always in our revenues, as each and every year, with national holidays and also revision of our machinery. But that is nothing different to what we have seen in the previous years.

Okay. All right. And the second -- well, now it's not the second question, but on Steel Processing, would you expect the division to be positive EBITDA into Q2? I mean you mentioned in the report, the strong increase in plate prices. They've continued to perform well. I know in the report, you also mentioned some higher costs offsetting fully this increase in prices. So keen to understand also a bit the bridge into Q2 and what sorts of cost pressure you've seen for that division, and if that should prevent the division to turn EBITDA positive into Q2?

So we definitely expect some improvement in the margins in the upcoming quarters and also in Q2. Let's see whether we will manage to be positive, yes. I hope we can come up with some nice news when we give our next updates. However, we plan to improve here. The market remains challenging, especially in the precision tube groups, where we have still quite some underutilization.

We are quite nicely booked in Ilsenburg, and we still have capacity when it comes to large diameter tubes and also when it comes to MGB. So in case economy would pick up, we would be able to use more of our capacities. As I said, still quantities not as good as we would like them. So we all this covered in our guidance. But in case economy would pick up even further, we are ready to provide out of the entities that I have just mentioned. Other than that, about prices, we have talked already. That's more or less the picture I can provide to you.

The next question is from Maxime Kogge, ODDO BHF.

Another French analyst asking questions now. So the first one is on HKM. So you obtained the EU antitrust agreement recently for the deal. So what do you still need to do to get to close the deal? Are you still in discussions with thyssenkrupp or Vallourec on some details? And when do you think you can give us a sense of the impact of HKM's integration into your results?

So thank you, Maxime, for raising the HKM questions that I think are of interest to almost everybody on the line. So you're right, we've received the EU antitrust. Okay. So that's fine. And other than that, we are still busy negotiating with our colleagues from thyssenkrupp Steel, and we are quite confident that we will be able to close the deal in the near future. Of course, you may understand, I'm not going to disclose any details on negotiation terms. However, we are really confident that in the upcoming time, there will be a good decision, which will be good for everybody. And after that, we will talk about the impacts on our results and what this means for Salzgitter AG in total.

Okay. Second one is on your recent announcements to dispose of your treasury shares. This had quite a negative impact on the share price when it was announced. Have you, in the meantime, carried out some disposals of treasury shares? And under which time frame do you expect to achieve those sales? Is your objective to go down to 0 of treasury shares? And what would be the expected use of proceeds from that?

Yes. We were also quite surprised by the drop in the share. And why was this? Because as you may have realized that one of our main shareholders has reduced its shares without causing such an impact. So that was kind of a surprise. However, shares have recovered. So no sustainable impact here. And yes, we have started to sell some of our shares. That is why we also went public, because we fell below 10%. And we are not under pressure here. You have seen from our net financial position and from our cash position that there is no pressure here. However, we decided to optimistically use the situation to sell some of our shares. And why is this? Because first, we got the feedback from the market that the liquidity in the share should be increased. And second, it is also contributing to financial stability of the company. Did I answer your question with this?

Yes. And the objective at the end would be to hold 0 of treasury shares, or you could still own some of them at the end of the process?

We are now targeting to move towards 5%. But as I said, not under pressure, no time limit set for that. So really easy going here.

Okay. No, that's clear. And just the last one, I mean, you said previously you didn't expect volumes to increase that much in the coming 2 quarters. So I should infer from that, that reopening the blast furnace #3, the one that is still idled, is still not being considered, right? I mean, this is something that you will perhaps rather envisage at the end of the year?

Maxime, when I talked about we are not expecting too much volume increase, I was in the steel processing area, not so much in steel producing. And about the blast furnace C, the plan is to get that switched on again in autumn somewhere.

In autumn. Okay. That's clear. Okay, just after the new safeguard has kicked in. All right. That's it from my side.

Thank you, Maxime.

The next question is from Bastian Synagowitz, Deutsche Bank.

Just a very quick remark on the pricing assumptions. I'm a little bit surprised. I mean, you say prices are not really above last year. I think they are well above last year, and so are margins. So I think there's a lot of good reasons to be probably a bit more positive here. But just I would probably take that as the usual Salzgitter conservatism. My question though is on cash flow. And I thought that was actually very strong. Now maybe could you please give us a quick refresher on the debt levels which you are now expecting for the end of this year? That's my first one.

Yes, sure. Thank you, Bastian. When we talked last time, I have shown a graph where I showed our investments, and I have also already announced on that graph that we are expecting this EUR 250 million. And luckily, we received them already in the first quarter. So when we talked last time, my view on the liquidity side and on the net financial position was already including the anticipation of the EUR 250 million. And with this, I state that we will be slightly above minus EUR 1 billion towards the end of the year. And looking at our EBITDA guidance, that means we will be max reaching a leverage of 2x.

Okay. All right. And then my next one is on, like, I guess, the use of your balance sheet as well as your assets. So you're now deciding to sell some treasury shares. Obviously, on the other hand, you still have a very sizable stake in Aurubis, which, I mean, has just been hitting another, I guess, record share price level. So how are you basically looking at these 2 options of selling your own shares relative to selling Aurubis shares at a record level? Just keen to get your thoughts here.

So you know that we have an exchangeable bond issued on some of our Aurubis shares, and we are fine with this. And next to that, we are quite pleased, especially looking at Q1 results, to participate in the nice Aurubis margins and EBITDA contributions to our EBITDA.

But has this been an option as well you've been at least considering?

Yes. We are always -- you may very well imagine that we are considering and evaluating all the options constantly that you are also seeing, right? And then we take our decisions. And our decision has been exchangeable bond and selling of own shares.

Okay. All right. And then, maybe staying on the topic of Aurubis and also what it means for your guidance framework, I would say just from, I guess, the capital market side, the last quarter probably illustrated very well why there are probably a lot of good reasons for why Aurubis should probably not be part of your operating guidance. I mean, your operating guidance is really more or less like a playball of metal prices and derivatives with the leverage from Aurubis. So is this something you also consider potentially whether you may change that?

And I guess the other question here is just given the significant volatility from Aurubis, which could obviously like almost change with any move in metal prices, I mean, is this something you have also basically been cushioning for a little bit with maybe haircuts in other parts of your operating guidance just given this is a volatility you can't really control?

First of all, we have not planned for the time being to change how we deal with the contributions from Aurubis. So we have done this for many, many years, the way we do it. And for the time being, we are going to continue that. What we have done, and you have seen that we have now established the EBITDA and EBT VX and taking out the valuation effects from the exchangeable bond. That's very important because that's also fluctuating. You're right, the Aurubis contribution includes 2 elements. The first element is the operational performance and the second element is the performance coming from the precious metal evaluation. And here, we have taken a prudent approach in that way that we do not anticipate any further contributions coming -- positive contributions coming from the precious metal sites in the remaining quarters.

The next question is from Dominic O'Kane from JPMorgan.

I have 3 short questions. So firstly, just again on cash flow. At the Q4 update, you indicated that you were expecting CapEx for 2026 to be around EUR 900 million. The Q1 run rate is quite significantly below that. So again, if you could just maybe talk to us about how you're thinking about CapEx for the full year and the timing of the CapEx spend? And then I have 2 other questions.

Okay. Let's start with this one. Thank you, Dominic. So in the last call, I have shown that we anticipate for this year EUR 875 million of CapEx. And I have already indicated that EUR 250 million of additional funding will have a positive impact on that, meaning reducing that. And that is what we have seen. So first of all, we always have a seasonality in our CapEx spending, which is, like in almost all other companies, more towards the second half of the year. And second big impact, this additional EUR 250 million of funding we have received in the first quarter. And that, of course, had a positive impact on our CapEx spending since it's accounted for in the CapEx. So that's as much as I can say for the CapEx spending. And we have proven, in the last years, that we anyway still look very carefully at each investment we are taking, and taking very mindful decisions on each bigger investment. So, so much on cash flow and CapEx.

Okay. Excellent. And then just 2 other questions. So obviously, your commentary around the Q2 outlook for Steel Production is, I think, relatively conservative. Could you maybe just talk to us about how you're seeing the current customer environment with regards to some of the uncertainties in the Middle East? Are you seeing any kind of slowdown in customer inquiries or orders? Is there any discernible change in customer behavior?

And then my final question is, could we just maybe talk about the Technology business unit. It was a very, very strong quarter. There's certainly been an improvement in the contribution from that division in recent quarters. Do you think that you are able to sustain the type of run rate that you had in Q1 for the rest of 2026? Those are my questions.

Sorry, I didn't catch the last question.

My last question is on the Technology business unit. You obviously had a very strong Q1. Should we think that, that is a sustainable run rate going forward?

Yes, fine. Thank you. So I will start with the sales, and why -- and you're thinking we may be more bold in our guidance. So sales, 2 messages. First of all, we have not seen significant cuts in single customer orders due to the crisis in the Middle East. Second, we have all seen that projections for the economy have been revised downwards, right; for Germany below 0.5%. And to be honest, that is not growth. That is a slight recovery of what -- about what we have lost the years before. So the crisis in the Middle East and tariff discussions from U.S. are pushing on economic expectations, and this means also on all of our customer segments, of course.

Where we really feel the crisis in the Middle East is our international trade. Here, we feel the pressure on volumes, on prices. And here, we feel a real impact. So the customer behavior we have seen so far is more in line with the economic expectations rather than individual expectations.

And about our guidance. Look, as I have said in my intro, we have so much uncertainties from this tariffs now, from the situation in the Middle East, that there is quite some uncertainty about what's going to happen and how this is going to impact our business. So of course, we have taken into account that we somehow have to deal with these uncertainties. And saying that, I personally, at this point in time, do not see any major threats to our guidance.

The Technology result, I can tell that the Technology result in the first quarter has been strong, because we are still very much profiting from the Plasmax orders that we are delivering. We had a bigger Plasmax order, and we are still profiting from that. Other than that, overall, in the total year, especially KHS will have another record year when it comes to sales and we'll have another record year when it comes to profit as well. And we see that we expect all 4 quarters on the profit side being stronger than the quarters we have seen last year. So, so much is how I look at it. And with the first quarter being especially strong and if you look at the seasonality of the Technology segment, you also always see a very strong fourth quarter in almost each year. And we are expecting this to happen also this year.

There are no further analyst questions, but there is a question in the chat asking if there are any one-offs included in the results, especially in the Steel Production division?

If you look at the first quarter, we have had one one-off effect which was not in Steel Production, but which was taking place in the Trade segment. And here, we had reduced restructuring costs following some negotiations, and we had a positive result here of EUR 11 million.

And now we have the next question coming from Krishan.

Slight clarification on the green steel subsidy. So you said you received EUR 250 million, well ahead of your expectations. So can you help us as in how much of the total subsidy you have received? And do you expect to receive any further subsidy like in 2027?

So we have received more than EUR 1 billion of subsidies already, and we are getting EUR 1.3 billion subsidies overall. And the majority we will receive until the end of the remaining -- almost EUR 300 million we will receive until the end of this year, and only a minor portion is to be expected for 2027.

Understand. And then following up on Bastian's questions in terms of giving the operating guidance excluding the Aurubis. So what is the rationale of including Aurubis in your guidance when you are supposed to make an assessment of what Aurubis is going to make when you don't control that business. So have you considered giving the guidance only for the operating businesses, maybe from, say, next year onwards?

You know that Aurubis has been part of our group for many years, and it has always been -- we have a major stake here, and we look at the Aurubis as an integral part of our company. And that is why we have decided to include and to guide also the contributions from Aurubis. Apart from this year, where we have decided to guide an EBT VX and EBITDA VX taking into account -- or taking out the fluctuations we see on the exchangeable bond, our philosophy has always been not to provide EBT and EBITDA adjusted where it's difficult to see what's the result of the overall company. So that's what more or less has been our philosophy and still is.

Was there a follow-up question, Krishan?

Krishan, you're fine or if you have more questions?

No, I'm good. Thanks a lot.

Okay. Cole, it's up to you now.

Just would like a little bit of color on how you're seeing trading and inventory levels for steel in Europe, considering people are buying a little bit more before the quota system comes in. I'm just wondering how you see those inventory levels being managed through the rest of this year?

And then just a housekeeping question. I know you said you're going to be selling treasury shares, and there's no rush to do that. But could you give us how much shares you've sold at the moment just from a share count perspective for the following quarters?

Yes. Cole, thanks for your questions. I will start with your first question concerning inventory levels. We have seen higher imports in the fourth quarter of last year. And our interpretation is that this is a front-loading in line with the CBAM regulations and also already some preparation concerning the import quotas to be reduced mid of the year. So yes, we have seen that taking place. And still, if I talk to my colleagues from the Trade, they still see that happening. So that is why we believe that the impact from the safeguard measures as of July will materialize with the time being.

And concerning the treasury shares, I know and I can understand that this is of high interest to understand how much we have sold in the meantime. However, please be so kind to understand that we are not going to disclose any details here.

Will you just provide a share count number with every quarter then just so we get the correct share count?

We will provide the next information when we come to the 5%, so when like official regulations require us to give more information.

Okay. Understood. And then could I just follow up on HKM. Would you mind just providing, I know you can't give too much at this stage, but rough time lines and process from here when you will give us a more detailed update on HKM?

Yes. I would like to repeat, Cole, what I have said before that we are still in negotiations with the colleague from thyssenkrupp Steel, and that we are confident that in the near future we will be able to come to an agreement, which is good for all sides, and that as soon as this is happening, we will provide the required information.

We have a question in the chat from Jonas Freme, what steel price we assume in our guidance.

First of all, we do not disclose the prices we have in our contracts. And also, you have to understand that in our contracts, the contracts have different time horizons. So some contracts we are doing in steel have a time horizon of 4 weeks or 2 weeks, some have 3 months, some are 6 months, some have 12 months. So giving one single price would also be really of no help. And next to that, we are not disclosing single prices that we have included in our guidance.

Okay. We have all answered the questions from the chat. There are no further questions in the line. If so, please let us know.

At the moment, there are no further questions. So dear ladies and gentlemen, thank you very much for your questions. We are closing the Q&A session now.

Thank you. Have a great day.

Thanks.

Good morning, ladies and gentlemen, and welcome. Thanks for joining our analyst conference for the fiscal year 2025. I'm here with our CEO, Gunnar Groebler; our CFO, Birgit Potrafki, who will run you through the presentation. And afterwards, and as always, you've got the opportunity to ask questions.

And with that, I'd like to hand over to you, Gunnar.

Thank you very much, Markus. Good morning from my side. Welcome to the analyst conference for the full year 2025. Certainly, we also will touch upon '26 and how we look upon that. We have underlined the headline with back and black because that is what basically describes 2025. We have had a difficult market environment, continuously difficult market environment, perhaps even slightly worse than 2024. However, we have focused on our internal resilience. We have done our homework, and this is what we're going to show to you now through this conference, how we have been able to improve our internal performance and resilience to get to this statement back in black.

First of all, I would like to start with a number that went down, which is good. And that's our LTF, the long-term injury frequency. We have broken the trend of '23, '24 where we had a slight uptick. We're below 7 again and certainly not at the end of our journey here, a clear strategy, as you can see on the bottom of the page that we follow, starting from leadership and accountability of each and everybody in the company all the way to suppliers and contractors, how we include them into our health and safety work and take a very holistic approach. So first signal and first message on that element of health and safety. We're also back online and in the trend that we need. For sure, much more that is needed and much more to come. But again, trend is broken back on track.

We are looking at a time of a lot of uncertainty and where I think everybody is very concerned about what's going to happen within the next 24 hours. We have done a first assessment on what the impact is. And on the negative side, of course, the uncertainty that you have in the total economy is not good for investments, is not helping a fundamental uptick that we have seen in the markets for steel. So the longer this conflict takes, the more pressure we're certainly going to see on the global economy, including Europe, even though Europe might not be so much impacted as other regions like Asia. Still, we're going to observe that also in Europe.

Cost increase is already something that we see. Everybody sees once you get to the gas station. Of course, we see it as well. Freight rates for bulk cargo has gone up, so -- which is important for our iron ore and coal transports, even though more than 50% of our iron ore comes from Europe, still, there's a cost effect that we see. Same thing on the outbound logistics, trucks going to our customers. Certainly, something we're going to have to discuss, and we started that dialogue to have to discuss with our customers because it's pretty clear that the steel industry cannot carry those costs all alone. We will have to find common ground and common solutions here. The longer it takes, we're going to see certainly also more macro trends and macro influence on inflation, but also on the monetary policy globally. So that certainly will also affect us.

On the positive side, though, we have a euro single market that is functioning. We have an underlying stable demand coming out of Europe. And given that Europe is our core home turf in terms of customers, that's certainly something that will help us through the next period. And on top of that, as I said, other regions are hit potentially harder than Europe is when it comes to energy demand and energy cost. Those importers into Europe certainly will also have a different cost base, so higher prices for imports and higher level of uncertainty also given the distortions we see on logistical chains all over right now.

Last but not least, you have the picture of the Persian Gulf there. Most of the DRI projects that are ongoing right now are located in the Persian Gulf. So they are long term also hit by any sort of distortion that we're going to see on the Strait of Hormuz. So with our DRI on site here in Salzgitter, we have de-risked in that aspect, our future steel production.

And de-risking is perhaps also the wording that we're going to use when we're talking about strategy. We have been following through with our strategy also in 2025 and further de-risk the company, both internally, but also, as said, through the shift from CO2-intensive energy carriers to low CO2 steel production also de-risked from that geostrategic angle. So on the performance side, and Birgit will go through the details later in your presentation, Birgit, we have been able to do restructurings where necessary, mentioning trading here where we went through a deep restructuring in the European trading business, cutting product lines, cutting sort of customer groups, cutting jobs, ultimately also people, but bringing trading back to black already in 2025. So a successful restructuring that we have done there.

Same goes for steel processing and Mannesmann precision tubes. We did close our site in Helmond. We halved our size in a site in Mexico. So also here going through restructuring to adjust to market conditions as we see them also going forward.

P28 performance, our performance program has exceeded our ambition and Birgit will talk you through that in detail. And we have also managed to continue our portfolio management efforts. We have sold our shoe machinery factory, DESMA in 2025, and we are continuing to review the portfolio, but not only in divestments, but also in acquisitions. Latest example here is the acquisition of Thyrolf & Uhle prepared in 2025 and then executed early '26, which enables us to get a stronger foothold on the defense side. I will walk you through that in a sec.

Transformation, of course, is a lot around SALCOS Phase 1. Just to be very clear, there's no intention whatsoever to postpone SALCOS Phase 1. We're going to go live with that summer next year. So that is well underway. We are well advanced when it comes to construction. We are now sort of bringing more and more equipment into all the buildings that have been built. And we are also in a transition phase from a pure construction site into also the market phase where next to the construction, we also intensify the dialogue with the customers, and they intensify the dialogue with us to then get to sign contracts on green steel.

You might recall that we had first projects already in 2025 using our site in Peine for the slabs. So we have proven that Salzgitter can deliver green steel and can deliver green steel products. And now we're in the discussions to sort of further -- take it one step further with ramping up SALCOS then on site here.

What helped clearly is that we got the less certification. The low-emission steel standard is established as a European standard by now, and we have gotten certificates not only for Salzgitter and Peine, but also for downstream activities like Ilsenburg and Mühlheim. So that's also well underway.

And last but not least, it's not only our transition and our transformation, it's also supporting transformation outside, supporting transformation, especially on the energy side. We're delivering pipes for the hydrogen backbone, both in Germany, but also in Europe. So also here, we are supporting that transformation in other parts of the European industry as well.

Customer focus has been a core element of the strategy and remains a core element of the strategy. Let me start with defense. We have, as said, acquired Thyrolf & Uhle together with our company, Universal Eisen Stahl. They joined forces now to be able not only to deliver plate steel to our customers, but also already components so that for system aggregator, we can actually be and we are very well -- a very good sort of supplier. And this move has been highly appreciated by our customers that we are really sort of further integrating capacity on the construction side as well as delivering pure plate as we do from Ilsenburg.

Infrastructure. You all know the infrastructure package that the German government has put forward. We expect that now to hit the road second half of '26, but then full value in '27. And energy projects I mentioned already with the hydrogen backbone and other projects around the globe that we can serve with pipelines and other material.

Last but not least, let me have a short look also on our technology business. KHS has again performed very, very well and especially with the product Plasmax. We are well underway with a large contract that the company signed last year and also implementing that in other parts of the world.

So KHS has a strong foothold and really a good performance in '25 and good order intake that carries us through 2026. So pursuing our vision, it's a clear strategy, and we are sticking to the strategy, and it shows that even in turbulent times like we have it now, this strategy is resilient and helps us to really navigate through and prioritize where the focus should be. And I think we have delivered on that in '25 and continue in '26.

Looking at SALCOS. As said, we are preparing for commissioning. It is working as planned. You see the picture of the direct reduction facility at the final height of 140 meters. You can see it from outside the site far away. It's a new skyline that we have created here in Salzgitter. Electric arc furnace construction is well underway, so is the electrolyzer. I think we're going to move in the stacks now in Q2. So also here well on time and in full swing. So that leaves us confident to really have a commissioning over summer 2027, first half of '27. And then be able to deliver green steel to the market and be the first transformed integrated steel mill in Europe that will actually go that step at that scale.

What helps is the modularity that we have with SALCOS, so we can adapt to the current situation, both from a customer side, from the financing perspective, but also from the regulatory perspective and the market. And we have taken a decision in '25 to postpone SALCOS Phase 2 to '28, '29. And we will then look into that constantly when is the right moment in time, when do we feel sufficiently comfortable and confident that the next electric arc furnace in Salzgitter will hit the market at a good time. Without a doubt, we will build the second electric arc furnace on site. So we will go all the way when it comes to the transformation. Just the point in time is something that where we have flexibility through the modular approach, and we will use that, of course.

Then also coming back to SALCOS Phase 1, important to note, we have been successful in 2025 to negotiate both with our colleagues in Berlin, but also with the Federal State of Lower Saxony and the colleagues in Brussels to get the last tranche of the funding, another EUR 322 million that have been approved so that we're now looking at a total funding of EUR 1.3 billion for SALCOS, so coming from EUR 1 billion to EUR 1.3 billion to EUR 2 billion, which certainly supports the overall project. Also, as some of you have already mentioned to us, the cost increase that we have seen on SALCOS from roughly EUR 2.5 billion. That's how we said it to now EUR 2.7 billion. We are closing the end of construction. Hence, we are getting a bit more sharp, but that is certainly what we see. And hence, the additional funding exceeds the additional cost. So it's a positive impact on the project as such.

We get a lot of questions on HKM as the second steel mill that we operate for slabs. We have taken a decision to take responsibility for HKM and have made an offer to thyssenkrupp Steel and Vallourec to buy their shares and then take full ownership of HKM and transform HKM into a electric arc furnace steel mill as of 2029, 2030. Why do we do that? Because there's an industrial logic for us. There's an industrial logic from an integrated value chain, including HKM, which already today delivers material into Salzgitter. There's a clear security aspect when it comes to feedstock for defense products. And there are, of course, synergies between the 2 units, not only in decarbonization, but also beyond. But certainly in decarbonization, we're talking 2 new electric arc furnaces, we certainly can learn from each other there and create synergies.

And last but not least, and we shouldn't forget that, HKM will be the only steel mill in Europe that is able to provide slabs to the European market, especially once the Russian slabs are pushed out through the sanctions, which will happen in '28. There's certainly a market demand for slabs. And here, HKM as the sole steel mill in Europe that can deliver that is well positioned.

Financing of that transformation will happen through the internal resources through the transaction proceeds that we're going to get and through public subsidies. HKM has been able to secure EUR 200 million in public grant. So that's already signed and sealed, and that would certainly then also support the financial attractiveness of that deal. And we estimate that this deal will be closed by summer this year. So also here, speed is of essence, and we are in full swing together with the current co-shareholders to get that deal done.

I talked about defense. We made a great step forward in 2025 to get all the permits from especially the German military services, but as well as from some of the suppliers to the military. Good feedback when it comes to the secure material. Good feedback both from the defense industry, but also from the German military on the quality, on the protection features that we have with that steel. So that's good. We are looking at applications beyond military also in the civil defense like the Technisches Hilfswerk, German civil defense unit as well as Red Cross, UN, et cetera. So we are broadening our perspective here, but clearly, with a strong focus on getting ourselves more known and the product more known in the defense sector. That's what happened in '25.

As said, we extend the value chain, and we use '26 now to really get into that market, get first deliveries out, prove our quality and then ramp up from there for the years '27, '28 and years to come. So also here, a good step forward to create that market for us and create the product and the visibility of Salzgitter in that market environment.

Looking at the overall market environment, while, geopolitical that is sort of very acute right now with all the happenings in Iran, certainly something that we need to -- all of us need to follow and monitor closely. However, growth rates that we see underlying, especially in Europe, remain stable. So we will have a look at how long that war will take. That will certainly have an impact. But overall, we see a certain growth rate globally, but then also on the European side.

Germany recovers -- sorry, at least parts of the industrial sector and the construction sector, we see a pickup on the construction side, which helps our unit in Peine, but also in the plate business, especially vis-à-vis yellow goods. So with now winter being finally over, we certainly see a pickup there, mild recovery through the year. And then through the fiscal stimulus package, certainly something that we're going to see with more enthusiasm through '27, '28 but first elements of the second half of this year already, as we have said before.

Yes, European steel, I talked about. Let me perhaps look at regulatory framework in Europe. Carbon board adjustment mechanism has been implemented as of first of first. I think it was a success in '25 to get that through and get that implemented. We know it's not perfect. We absolutely know it's not perfect, and EU Commission also knows it's not perfect. So the amendments are out to improve the regulation, and we expect this to be implemented this year so that we get a carbon board adjustment mechanism that is even more robust and more perfect than what we see right now.

On the trade defense instrument, EU Commission has made a strong proposal in autumn last year, has been embraced by the parliament, the European Parliament and by most member states. The trialogue is ongoing, and we expect no further delay of that trade defense instrument to come into force 1st of July this year. And we already see this also on market -- steel price market, and I will get to that in a second.

Looking at CO2, of course, the whole debate around the ETS system has put the upward trend to a halt and CO2 has dropped. Still, we are above levels of 2025 if you look at it. However, I would say, a normal reaction in all the public debate around ETS. What I think is important is that none of those who are discussing the ETS reform right now questions the ETS system as such. I think it's fair to say that you need to adapt the system to the current environment that we have. And that's exactly the purpose of that long planned reform in summer '26. But none of the decision-makers nor those that are lobbying right now is question the ETS system as such, which I think is very important because it is a market-based system for CO2 and certainly something that works. It has at least proven that it works over the last 25 years.

Looking at other prices, be it raw materials and energy. Looking at energy, of course, you see the uptick given the Iran war. How do we look upon it when we're talking natural gas, more than 50% of our capacity has been hedged for '26. So we're, in that respect, not fully exposed to the gas price development. But we are, of course, closely monitoring and looking into how we can internally react to that.

Electricity, same pattern. However, here, we are even more hedged. You remember that we have a strategy in which we go for CO2-free electricity PPAs. And those PPAs, of course, are a good hedge now for us with that electricity price development.

Looking at the raw materials, iron ore spike is due to bunker oil price increase, hence, logistic costs that we see through the closure of the Strait of Hormuz. Coking coal, the decline comes from weather effects that we had, especially in Australia with strong rain pushed up prices. Those rains are gone now, hence, prices came down. Certainly, we're also going to see some effects on bunker oil here on the coal side as well, perhaps not that much then with iron ore, but certainly, we're going to see certain effects there as well.

Now with those, look at the steel prices. Steel price has picked up. Now I'm looking at the left side, blue line, hot-rolled coil. Since summer last year, we have seen a constant pickup in prices. We're north of 700 now, which is -- which we haven't seen since '24 -- early '24, which is really good. Other prices like plate and sections are following that trend, not as explicit but are following sections. I expect more price development now that construction kicks in, in Q2, Q3, regular seasonal pattern that we should see there as well. On the international side, the spread is widening. U.S. sees the price increase due to the tax regime that we have there. China, low internal demand, hence, lower prices and Europe is well positioned here in the middle.

How does that translate into key figures? Birgit, you will dive into the financial figures quite intensively as it is your role. So let me perhaps focus on some of the numbers that are less financial. Crude steel production went down year-on-year '24 to '25, which is predominantly due to us taking blast furnace C in Salzgitter out of operation. And then, of course, a couple of adjustments due to lower markets. Hence, also sales went down. Birgit will guide you through that. With lower production, you also, of course, have lower Scope 1 CO2 emissions also went down. And the decline in workforce is predominantly due to deconsolidation of Mannesmann Stainless tube in 2025, some countering effects, especially on the steel production side to ramp up the team that will handle the parallel operation of blast furnace and electric arc furnace. That's what you see in the core workforce numbers.

Short shot on the business units. Let me start on the right-hand side, technology. Again, a very strong year, record year for KHS, third record year in a row. So KHS is really, really performing well. And even though sales have been slightly below '24, but still a very strong development, very happy with the development of KHS and of course, also with the development of Aurubis, which you don't see on that slide, but still worth to mention because those 2 certainly have carried us through the year 2025.

Trading, positive, as said, restructuring has turned out very positively, positive numbers there. Steel processing, steel production, both negative. However, especially on the steel processing side, you see good development. On the results side, given the restructuring that we have seen there, given a strong focus on performance. So that's what you see here in the numbers. Steel production, yes, basically on the same level as 2024. But given the reduced sales, I think it also shows that restructuring or the performance measures have gotten some result effect here as well.

Let me close with the dividend proposal. We are proposing and have discussed that with the Supervisory Board a constant dividend vis-à-vis '24, EUR 0.2 per share. This underlines the investment activity that we still have with SALCOS. So cautious on the dividend. It underlines also the headwinds that we had in the market in '25 and that we continue to have also in '26. So prudent also on our end here. But it also underlines the stability that we owe our shareholders in terms of dividends. So we believe this is a fair representation of their contribution to Salzgitter. Hence, this is what we're going to propose to the shareholders then in the summer.

With that, I'd like to hand over to you, Birgit. Thank you and let you guide through the financials. Thank you.

Thank you, Gunnar. Yes, thank you, Gunnar. A warm welcome also from me to you out there. Happy to have you today. And before I go to the detailed figures, please allow me to reflect on 2025 and also to give you a slight outlook on what is to be expected for 2026 at a glance here.

So 2025, Gunnar has mentioned it, was still a challenging year for us, especially in the steel segments where the wind of the economy of the not recovering economy was still blowing very strong into our faces, especially in the trade segment, but also in steel producing and processing. We were burdened by prices and in trading also by volumes. You have said it, Aurubis and technology have performed nicely and flattened nicely the challenges we have faced in steel.

So for us, last year was a year of organizing financial stability. And how have we done this? Number one, we have concentrated on our performance program, and we have managed to exceed our self-set targets of almost EUR 100 million by 33%. And thanks, Gunnar, you have mentioned it. You left it to announce the exact figure by me. And I'm quite happy and proud of that because this is something that a lot of people in our company organize by constantly and every day working on the measures that are behind this program.

We also, Gunnar has mentioned this, have focused on continuing our restructuring activities with focus in the trading segment, steel trading segment. And here, despite the strong headwind we have faced, we have managed to be positive. Gunnar has just shown the figures here. And we issued an exchangeable bond in order to safeguard our financial basis. And also, we focused on cash measures. Also when spending money for our investments, there was a very strict discipline. And all of this paid in into our net financial position, which stayed below minus EUR 1 billion. And with this, a lot stronger than what we had forecasted over the course of last year. So we have focused on cost. We have focused on financial stabilization and on restructuring. And all of this plays a nice stable financial basis, and I will show you this in the figures as well.

And what is going to happen now in 2026? Headwinds are going to continue. We see some slight improvement. Gunnar has mentioned the prices. Gunnar has mentioned the EU measures. However, the German economy is not yet flourishing. And actually, we do not expect a sudden pickup here. And we also will see that we had some nice positive onetime effects in the trading unit last year, which we will not see again this year. This will also have an impact. We will still be positive, however, not as positive as driven by the onetime effects.

We do anticipate, as Gunnar has laid out in detail that the measures as well from the EU as well as from the German government will be effective. However, we expect to see some effects this year and to see the full potential of the effects rather starting from 2027 onwards.

So we see a positive momentum building in '26 to be continued in 2027. We are back to black already with our adjusted EBT with a slight positive number of plus 2, and we will be back to a stronger black even in this year as we have guided. So -- and of course, in addition, we will also continue to focus on our own homework, which is the cost improvement measures, which is restructuring and which is also shaping our portfolio in order to be fit for the future.

Looking now at the numbers, we see here that our sales, left upper side, came out at almost EUR 9 billion, which is EUR 1 billion below the year before. And when I come to the income statement, I will give you some more details where the minus EUR 1 billion went more or less. We see -- if we look at our adjusted EBT and EBITDA figures, we see that, of course, that the EBITDA was slightly reduced compared to 1 year before, and this is also due to the reduction in the sales revenues. And we see the adjusted EBT of breakeven of a slightly positive plus 2% here.

And the EBITDA VX and the EBT VX stands for valuation and stands for exchangeable bond shows the figures without the valuation effects coming from our exchangeable bond because this impact would not show the real performance of our company. That is why we decided up from 2026 to report adjusted figures here. And right to these figures, you see the EBITDA and the EBT including the valuation effect of the exchangeable bond, which was minus EUR 30 million by the end of last year.

Very strong last year, upper right figure, our business cash flow or gross operating cash flow. You see here slightly above EUR 0.5 billion. That is one of the most important figures to us in these challenging times, and you see that we could even manage to improve it by almost EUR 100 million compared to the year before.

And our net financial position came out at minus EUR 954 million, so below minus EUR 1 billion. Of course, it's negative. However, if you may recap, when we discussed this figure over the course of the last year, we were starting with expecting EUR 1.7 billion, then cut down to EUR 1.5 billion. And in the fourth quarter, we discussed EUR 1.1, and we even managed to be below the minus 1. And some smaller contribution were also coming from the working capital side here.

Looking at our income statement, you see here on the left side, our sales revenues of around EUR 9 billion. And before I come to the deviation to previous year, allow me to quickly guide you through the major elements of our profit and loss here of our income statement. And you see that we have 3 main drivers that are deciding about our results. First, our material costs, which were around EUR 5.8 billion last year, followed by personnel expenses of EUR 1.9 billion and then by other operating expenses of minus EUR 1.5 billion. And here, you also see the effect of the valuation of the exchangeable bond of minus EUR 30 million that is included here.

Our contributions from our equity companies is stable, slightly above EUR 180 million. You see a negative impact from financing results and all this leading to an adjusted EBT of plus EUR 2 million, including the valuation of the bond of minus EUR 28 million. Then we have taxes of EUR 42 million and a result after tax of minus EUR 70 million.

And if you look now at the boxes on the bottom of the slide, you see the deviations compared to last year. And here, I would like to mention the most significant ones. First, sales, down by EUR 1 billion. What were the major impacts? Major impact first was the deconsolidation of the Mannesmann Stainless group, which was not in our figures '25, but still in '24. We have seen quite some turnover reduction in the steel segments, in all steel segments, especially in trade and mainly driven by price impacts, as Gunnar has shown the price developments and in the trade segment as well by volume impacts.

And if we look at our material expenses, we see that our material expenses were a lot better than 1 year before and could even overcompensate the reduction in sales. And Gunnar has shown the development of the material prices starting beginning of '24 and coming down over the course of the year and even in '25. So this had really some very supportive impact here.

Personnel expenses also slightly reduced due to also MST deconsolidation and as well as restructuring activities from the Trade segment. Depreciation was burdened in 2024 by impairments in the MPT Group and HKM and some minor other impacts, which accounted for the most part of the difference compared to the year before of the EUR 300 million that you see here. You see in other operating expenses, a delta of minus EUR 119 million. Here, we have 2 impacts. We have the effect of the exchangeable bond worth EUR 30 million, and we have foreign exchange impacts here as well. And you see the counter position in other operating income where we have benefits from foreign exchange effects.

And you see from our financing activities, we even performed better, EUR 31 million than 1 year before. And all of this comes together in an improvement of EUR 298 million, so almost EUR 300 million compared to 1 year before if we look at the adjusted EBT.

If we have a look at our balance sheet, we see a lot of stability in our balance sheet. The total assets are stable, slightly above EUR 10.4 billion in both years, '25 and '24. We see a slight increase in our noncurrent assets due to mainly our spendings in SALCOS. We see a decrease in inventories due to prices and also due to working capital management, and we see a stability in the other 2 positions here.

If we look at the equity and liability side, we also see stability. We see an equity ratio which is constantly slightly above 42%. We see reduced pensions due to a higher interest rate, and we see some movements in our liabilities. Current liabilities have been decreased because we shifted some of our current liabilities to the noncurrent liabilities. And you also see an increase in the noncurrent liabilities due to our exchangeable bond worth EUR 500 million, which is reflected here.

Coming to our cash flow statement. On the left side, you see our operating cash flow contributions from each quarter 2024 and next to that, 2025, and you recognize the EUR 505 million 2025 that I had mentioned before. And we can see mainly two things. First, in 2025, in the first 3 quarters, we performed a lot better than the year before. And you see that in the fourth quarter of 2024, there is quite a huge contribution that was coming from the working capital, mainly revaluation of inventories and accounts payable that we had in line with our SALCOS spendings.

And if you look to the right side on our cash flow statement, you again can see a lot of stability. We started the year with EUR 1 billion of cash and cash equivalents, and we ended the year with slightly above EUR 1 billion. And our cash flow for investments that we needed, almost EUR 700 million was financed on one side by our operating cash flow and on the other side, out of our cash flow from financing activities.

Coming to investments. You have now just seen slightly above EUR 700 million. If we look only at the CapEx block out of this, you see here for 2025, EUR 528 million. And I can tell you that 2025 was actually a peak spending year concerning SALCOS. And it was also at peak year concerning inflow of fundings. That is why the net number is not as strong as the year before. But in 2025, we received fundings for the year '25 and also some fundings that were related to the investments in 2024.

I have mentioned a disciplined spending in our entities, and you can also see this here in our CapEx spendings, which are not SALCOS. And you see the EUR 299 million here are quite significantly below the 2 years before.

So what are we going to expect in 2026 now? You see a number slightly below minus EUR 900 million, approaching a similar level compared to 2024. However, Gunnar has mentioned the nice additional funding we are going to receive with EUR 322 million. And the cash inflow portion of that, we are expecting EUR 250 million this year. And this will bring down the figure of 2026 to slightly above EUR 600 million, and then the difference to '25 is around EUR 100 million.

Now I come to a topic that's really close to my heart, I have to say, because so many people are working on this and are so diligently doing this, and it's so fair that they also can harvest this nice success. You see the target on the right side, EUR 97 million, and you see next to that what we actually achieved, EUR 129 million. And within this figure, EUR 110 million have a sustainable effect will constantly bring down the cost basis. And this is an overachievement of 32%, what a figure.

If you look at the year before on the left side of the graph, you see that we managed in '24 to organize EUR 65 million of contribution. And you see that '25 number is double of the number of '24. So we doubled the cost contributions from 1 year to the other. And you see that the biggest portions are organized in the segments where we were negative last year, so in steel producing and steel processing. You may wonder why trade is such an overseeable number, and this is due to the fact that restructuring activities are not part of our performance program. So these contributions from restructuring activities are coming on top of the amounts that you can see here.

If we look at the contribution of the performance program by year, on the left side, you can see in the middle, again, the EUR 129 million. And on the left side of that, you see what we have organized the 2 years before. And let me remind you that we had an original program, which was targeting EUR 250 million, and we doubled that to EUR 500 million. And the EUR 250 million of the original program has already been organized by the end of last year. And this makes us confident that we can also manage to organize the remaining portion. And the target for this year is EUR 122 million.

And you see on the right side, not only have we doubled our ambition, we have further increased it up to EUR 575 million because we need it in some entities. And the best part is that not we as a Board did that, that the entities themselves did that. And you see here how the distribution is. The major contribution comes from steel processing with 60% and 20% from no, from steel producing -- excuse me, 60% from steel producing, 20% from steel processing.

Just I have listed some examples here because there's always the question raised, what exactly are you doing? How are you organizing? Let me just pick 2 examples here. Purchasing in our Peine entity, we have reorganized the material mix that we put in our electric arc furnace. And we have replaced part of the scrap components by other iron ore bearing materials with a positive impact on material cost and logistics.

Logistics has so many impacts, if you care about that. We have broad transports from trucks on rail. We have shortened transports. We have combined transports. And this has positive impacts on not only cost, but also on the time transports take and, of course, also on CO2.

Outlook for 2026, Gunnar has mentioned so much. I'm just going to run over the headlines here. The steel market is expected to recover slightly compared to the year before. We see positive production trend also for the German mechanical engineering sector and of course, impulses from regulatory and government demand. And all this led us to our guidance that we have issued already quite some time ago. Sales of EUR 9.5 billion, adjusted EBITDA VX between EUR 500 million and EUR 600 million, a pretax result VX between EUR 75 million and EUR 175 million. So really be back to black compared to 2 years ago and even stronger than last year and the return on capital employed marginally above the year before.

Outlook for the business units. Gunnar has shown that all business units and segments have suffered in sales in 2025, and we are expecting increased sales in all segments this year. We expect technology, Gunnar has talked about that to remain strong, to contribute further. We also expect Aurubis to remain strong to contribute further. And in addition, we expect, especially in steel producing and steel processing to have also significant higher EBT compared to 2025. We even expect in the steel production area to be also back to black.

So now let's come to the conclusion before we come to your questions. I will share the conclusions with Gunnar. I will start and then hand over to him. Let me quickly summarize. We managed to stabilize our earnings as forecasted. And P28 in our performance program, we exceeded our target by 33% and doubled our contribution compared to the year before. We focused to restructure and advanced here. We managed to diversity our liquidity and lay a stable foundation here. And we are cautiously optimistic for 2026 and see a stronger upward trend from 2027.

And with this, back to you, Gunnar.

Thank you very much, Birgit. And let me then conclude. So what you've seen is a lot of focus on stability and creating stability and creating resilience in our company on our way of that transformation. And it is just following through with our strategy. It's following through with improving the company's resilience going forward. The funding, the SALCOS funding, additional funding is certainly of great help for us. And you mentioned sort of how this will affect our net financial position.

I talked you through HKM. I think we have a good case going forward. There's a lot of work to be done, no ifs and buts about that. But we have a clear plan. We have a clear commitment also from the management team of HKM, and we are very confident that we, a, will be able to take over HKM this year and then also run through the decarbonization program, the transformational program for HKM, reducing capacity, reducing workforce, making this a slim and agile steel mill going forward.

Technology, we talked about, is strong, remains strong, has a good perspective also from a market view going forward. And yes, we're going to need continuous support from the regulatory environments, carbon board adjustment mechanism. Safeguards are addressed. The ETS now is under review, as we talked you through. And we will certainly also constantly remind the German government that energy prices in Germany are structurally higher and too high. So that's certainly something that we are also going to continue to work on in '26 and beyond. With that, I think we have, as said, a resilient company going forward that is able to support German's economy, German's industry, also securing a resilient year '26 for those with us as a systematically and systemically important foundation for Europe's industry, and we're happy to be part of that, happy to contribute to that and happy to support.

And now we now are thank you very much for your attention and ask for your questions. Thank you.

Right. There are already some hands raised. So let's start with Andy Jones, please.

I just had a few questions. Firstly, just on Ilsenburg with the contribution you expect from the defense steel. I mean, how -- what are we talking about in terms of tonnes? Can you compare the average margin on some of these defense applications compared to standard steel grades? That's the first one.

And then secondly, could you try and quantify potentially what the impact of higher energy costs and freight costs could be on your business? I mean if we just take where spot is today, can you give us as a ballpark for the annualized impact you expect on your financials?

Yes, happy to. Thanks, Andrew. So when it comes to defense contribution is certainly not that much on the volume side, right? I made that comparison in some other occasions that the volume coming through defense will certainly not compensate for the volume loss that we have seen on the automotive sector since 2018. So volume-wise, this is a different ball game. It will remain a niche market when it comes to volumes. However, of course, price levels, margins, et cetera, are much more attractive in this area. And this is also why we have, focused on defense and have broadened our spectrum there and are in that market and will also remain in that market. So that's -- I think that if I got it right, the first question, right?

Or put any numbers around it?

So what we have said is that we're going to see sales-wise, roughly single-digit percentage in sales coming from the defense market within the next 2, 3 years. So we are still in a ramp-up phase. We're still sort of in getting all the permits, both from the military, but also from some of the suppliers to the military. So '26 is a transitional year, but then I think we can get to a mid- to high single-digit number when it comes to overall sales.

So your second question, impact on energy prices with the current situation we're having in Iran. As I told you, sort of the hedging level that we have on the gas side is north of 50%. So that also already reduces it. Our assessment so far with current knowledge is that the impact will be between EUR 10 million and EUR 15 million on an EBT level. So relatively modest because also on the oil side, there is not that much impact on us. As said, electricity is what we are focusing mainly on. And here, we are well hedged. So it's a limited impact as we see it today.

And does that include freight?

Sorry, you couldn't...

I mentioned freight as well.

Yes, of course. As I think both of us said, there is an impact on freight rates. That is something we're seeing already and something we're discussing with the customers already. So we have initiated discussions with the customers because as I said, it's pretty unlikely that we can carry those cost increases all ourselves. There will be -- they will have to find agreements, but that's too early to sell. That's really -- that hasn't really sort of come to any conclusion yet, but there will be a burden sharing across the value chain, I believe.

The next question comes from Zurich from Bastian.

Can you hear me?

Yes.

I've got a couple. Maybe starting off with your outlook for the trading unit. We expect a drop in an environment despite prices having gone up significantly already. And at least from looking at your outlook statement for steel production and processing, you don't seem to be disagreeing with that. I guess this would be really the first time that trading losses correlation to the steel cycle. And even if we consider this EUR 8 million provision release, which we had last year, I guess the bar for an improvement should sit pretty low.

Now have you started the year with a lower-than-usual inventory position? Or is it just you being conservative? Maybe you can just help us why your guidance in trading does not really sound a bit more optimistic? That's my first one.

Yes. Look, when it comes to the outlook for trading, yes, we have been more on the cautious side also because we see clearly that on the international trading -- in the international trading sort of volumes have dropped significantly. There's a lot of uncertainty in the market right now. Hence, there's low volumes on the international trading. So we have been very cautious on that. And we shouldn't forget that we are not fully through with the restructuring of trading. So there is still some work to be done, and that's then also reflected in here.

When it comes to inventory, I think we have been -- but correct me if I'm wrong, relatively on at par level when it comes to '26.

Yes. What we expect in the industry is that before the safeguard measures will be -- how to say, will be put into place, the stronger safeguard measures, we expect that some will be building stock up in order to avoid to be affected right away from 1st of July. And this is also seen by our trading segment, and this is also what makes them cautious, yes.

Yes. We've seen a similar effect on CBAM as well, right, in Q4. I think we discussed it at some point that sort of there the market is reacting to those regulatory measures. And that's what we take into account.

Okay. Okay. Fair enough. Then my second question is maybe already on the first quarter, which is pretty much done. So could you please give us a little bit of early color on how the quarter has gone so far, how your order book shapes up for the second quarter and also whether you've seen any changes in client behavior just in the last 2 weeks in particular?

No, we haven't seen any changes in client behavior yet. So, so far, things have developed as planned. And I think it's fair to say that the first quarter has been as expected, so better than what we have seen last year. Of course, we had a pretty strong winter. We shouldn't forget that, which had effects on our delivery to customers and had effect on logistics, but it seems like we are able to catch up then in March on that end. So sales-wise, slightly below. But overall, I think also the additional cost measures, P28 is continuing, et cetera, are also delivering on that target. I don't know, do you want to add?

No, that's fine. That's fine. That's fine. But yes, the year start was as we had expected it and is carrying our guidance, especially for the EBT guidance.

Okay. Great. And then lastly, on the ETS reform. What is your expectation on how the system may be amended? Could we see a slower phaseout in free allocations? And what do you see as the most likely outcome?

Yes. Well, I think what has been discussed now also from Lafondnder line is to look at the market reserve and postpone sort of the market reserve there and through that, give a bit of release and pressure on CO2 prices. On top of that, but that's basically sort of an ad hoc measure, right? It's not the reform of the ETS.

I think it's going to be important to understand because you have a couple of building blocks of this ETS system, what you want to work with. One discussion is, of course, the slower phaseout of the free allocation. One is to review benchmark the benchmark process. So that's in the air right now, too early to -- at least for me, too early to have a firm view on that.

What is important, though, is that whoever we talk to, whoever we listen to, it's pretty clear that everybody has understood that whatever we do on the ETS should not harm those that have already done their investments. So this first-mover disadvantage is something that people are very well aware of and that should be -- in all cases, should be avoided in any type of reform.

Next question is from Cole.

I'd just like to follow up a little bit on your supply chain. And we've seen across various industries challenges getting certain raw materials. And I'm just wondering if is there anything that we should be thinking about? You've been quite clear on electricity and gas hedges, but are there any products or items available in your supply chain that give you pause for concern? And on your sales side, I know you mentioned there's been no change to client behaviors yet, but do you expect to see an increase in procurement from your customers just as they build up safety stocks in a longer supply chain?

Well, first of all, we have done a quick risk assessment on the supply chain. Is there anything that is at risk here? We haven't identified something that is absolutely at risk. We talked about energy, raw material. Rest coal is unaffected right now by the war in Iran next to bulk oil, as said, but unaffected otherwise. And on the iron ore side, as I mentioned, we're roughly 50% of our iron ore comes from EU. Hence, also here the risk is absolutely low.

Next to that, we haven't -- again, haven't seen any major threats when it comes to logistics. That actually also goes for SALCOS. It's not that we see any material that gets stuck somewhere and we would stop our construction process. So when it comes to sales, yes, as said, the expectation is there or the -- so far, we haven't seen any changes in the behavior of our customers. Of course, we are in discussions with those, what does a prolonged war in Iran means to them and how do they react?

What I can envisage is that some of the customers that are also focusing on imports from outside Europe for their material, for their steel might actually turn to more a European value chain in order to reduce uncertainty and also given that other producer outside Europe are much more dependent on oil and gas coming from the Persian Gulf, hence, are hit more than we are with the cost increase, which then also will increase their cost of production and make the import less attractive than it has been perhaps in the past years. So we might see a shift call when it comes to behavior and pattern for sales from our customers or from -- yes, the buying pattern from our customers. But again, it's too early to say right now. We don't see those changes yet.

That's helpful. And then maybe just following up on HKM. I'd just like to hear your thoughts on the slab market and how you think it's going to develop over the next few years because slab is not subject to the 50% import tariffs. We're seeing some more slab getting imported now. I'm just wondering to see how you see the slab market developing over the next few years.

Yes. I think in terms of cost and cost development, I think the same goes for slab then I just mentioned to any kind of steel product. First thing.

Secondly, the slabs from Russia are under a -- I'm missing the word, the European sort of regime.

Sanction.

Sanction regime. Thank you. So they will be pushed out by latest September '28. And we're talking 3.5 million tonnes of slabs coming out of Russia still into Europe today. So those 3.5 million will vanish. In total, -- we're looking at a slab market of roughly 10 million tonnes that is a free market for slab in Europe. And with HKM delivering roughly -- and of this, the 3.5 million will move out. So -- and HKM will have an excess capacity for the market of roughly 1 million tonnes.

So we are very confident that in such a market, a market share of 10% for an HKM, which has proven in the past that they can deliver in quality and time to that market because we always have sold slabs into the market from the 3 shareholders that is not overly ambitious and should very well work. And we shouldn't forget we're talking then about one of the most modern, most efficient electric arc furnace in Europe. Hence, also from a cost position, we should be able to compete. We are very confident with that.

Then we have Boris, please.

I have three questions. So the first maybe on HKM. Can you share those key elements that have been agreed upon with thyssenkrupp Vallourec? And what kind of support you would expect from those guys to go further in that -- in buying the assets?

The second question would be on the TRQs. Do you still expect the TRQs to be voted with a minimal dilution and by the end of this quarter. So that leaves a few days to go.

And the last one, I would be interested to know the split of your production costs between the different kinds of energy being electricity, natural gas and coking coal. Because it seems like at the moment, you are quite relying on blast furnaces or potentially less exposed than other players using electric arc furnaces like Turkey at the moment.

Yes. Let me try to answer those questions. So on the HKM side, we are in negotiations right now. So I'm very confident that we're going to sign this and close this by middle of this year and as of then, get full ownership of HKM.

When it comes to the support, Boris, apologies, but we're in those negotiations, so too early to tell. But if you take -- I think it was publicly stated, we were in discussions on a sale to CE Capital, HKM to sell to CE Capital. I think 2 years ago, if you do some research on those numbers, you might be very close to -- or relatively close to reality. Let's see. But again, we're in the middle of the process. Additional funding will be the EUR 200 million that HKM got on public funding, right? So we shouldn't forget that. They asked for public funding under the BIK regime and got that approved in December last year. So that will certainly be available for the transformation as well.

When it comes to the split of energy costs, I don't have those numbers top of my head. But what you said is absolutely right. We are -- especially with Salzgitter, with our site in Salzgitter operating on blast furnaces right now. So we are producing most of our energy ourselves with the blast furnace gas coming out of coal. So that is how we look upon our energy situation in Salzgitter. Peine is certainly -- given it's an electric arc furnace is a different thing. I think I mentioned when we talked about the electricity that we are very well hedged on the electricity side for 2026. So we don't see any major deviation or any major impact on Peine through the electricity cost given the hedges that we have, the green PPAs that we signed over the last 3 years are a great deal of help here when it comes to Peine. And then you had a third question that I missed out.

Development of the tariff quotas.

So what was your question on the tariff quotas, please, again?

Do you still expect the parliament and the council in Europe to adopt the proposal of the European Commission by the end of this quarter? And do you expect that to be the dilution of the final document to be minimal?

Well, first of all, yes, we believe that we're going to get a decision that leads to an implementation by 1st of July with the trade defense instrument. And there is a discussion of this carryover effect. I think that's what you're mentioning, what you're talking about, right? And we have a clear position as Salzgitter, but also as a steel industry, both through the virtual signing in Germany, but also Eurofair in Brussels and try to massage that in that this carryover effect will not affect us on the business side if it cannot be included because that certainly is a certain risk. I don't see this as a major risk, but it's certainly unpleasant to have. So we're going to work against that.

Okay. Then Maxim, it's up to you.

So first question is on natural gas because at this stage, your needs are quite manageable in the current setup. But with SALCOS ramping up from 2027, I mean this will get multiplied by -- I don't have the figure on the top of my mind, but by very high amount. So how do you prepare for that given that gas prices might remain elevated until -- or are you starting there to hedge already? Or is there a risk that the SALCOS setup will be less competitive than traditional blast furnace production due to high gas prices?

Yes. Well, first of all, if gas prices remain high, will not only hit us, it will hit everybody, right? So in that sense, we'll just increase price levels overall. And in that context, then I think we -- SALCOS will remain competitive. On top of that, we are -- of course, we then will strengthen our efforts or review our efforts in terms of hydrogen and whether hydrogen can compensate for natural gas quicker than anticipated.

So we have options here to play, Maxim. So first of all, increased price level overall. And then we have flexibility with SALCOS when it comes to natural gas and to hydrogen. So we certainly can deal with that development. But you're right, we certainly have to look at the developments now and how that will impact our overall cost situation going forward, and that is then well beyond the energy part only.

Okay. Second question is on a follow-up on HKM. So could you perhaps detail the impact it will have on your crude steelmaking capacity because you already account for some of HKM's capacity for about 30% of it. Do you have plans to downsize it. So what will be the net impact in terms of capacity on that filter? And how long do you think you need to bring the operation back to profits?

Yes. So what we have is at HKM today is a 5 million tonne operation, right?

As far as I understand, it's now loss-making.

Sorry, I broke up. Hope you can hear me clear, Maxim? Can you hear me?

Maxim now you're moving -- can you...

Okay. Good. Good. So looking at HKM, we're looking at 5 million tonnes capacity right now. In the end stage, after transformation, we will downsize it to max 2.5 million tonnes. So 1 electric arc furnace that we're going to operate on site in HKM. So that's capacity-wise, how we look upon it. So we're taking out capacity in the European -- overall European market.

HKM is not loss-making. It is a cost center as it is operated right now. We will certainly turn that into a profit center. And the business plan shows that we will be able to bring HKM back into -- or bring -- make it a positive contribution to the overall group already by 2027. So that's -- and the interim period is due to capacity adjustments, et cetera, but it will be well funded through the proceeds that we get through the acquisition, the funding that HKM has gotten themselves and our contribution as well.

Maxim, is that right for you. Maxim, is that right for you? Did everything come through?

Okay. And just the last question is on perhaps the net debt guidance for this year because previously, I think you had spoken of...

Yes, we can hear you.

You can't is on the net debt guidance. Net debt for this year.

I will take that. Yes. Of course, thanks for that question, and I, of course, expected it.

I spoken...

There's a delay in here.

Yes, there's some technical challenges. Can you hear us now back? Can you hear us?

Yes.

Okay. Sorry, you seem to be interrupted. But anyway, the most important part is that you can hear us. I think we got your question. It's about the guidance on the net financial position, where we came out slightly below minus EUR 1 billion last year and what's going to happen this year. So we expect to be something between minus EUR 1.1 billion and not exceeding EUR 1.billion 5 yes, rather on the lower side, definitely not exceeding EUR 1.5 billion.

Okay. Great. Next question is a kind of black box because someone haven't stated his or her name, but let's see who it is. And if we take the question, please.

Yes. Can you hear me?

Yes.

It's Tristan Gresser from BNP Paribas. Apologies for that. So my first question is on the steel production business. I think in the annual report, in the steel outlook, you mentioned that strip demand will not quite cover capacity utilization. I was wondering if you could explain a bit what this means. I think in previous reports, you always were quantifying that business as able to cover capacity utilization. And it sounds a bit more cautious, but with the CBAM, the quotas tailwinds, it would be helpful if you could help us understand the volume trajectory there and also to confirm a bit the time line you have in mind for the restart of the smaller blast furnace.

Yes. I think you are -- you're spot on with the blast furnace. As you might know, we have taken that out of operation in 2025 to do a relining. We have then consciously decided not to take it into operation for 2025. It's still not in operation. And that helps us also then to get to that match that you mentioned between the demand and our production. And you shouldn't forget that for -- for our site in Salzgitter, they're not only producing for the flat business, but also for the plate business for Ilsenburg. So we're able -- there is flexibility in the system. We're able to adjust according to demand, and we have that flexibility through the blast furnace C. Is that -- if I got your question right. Otherwise, please come back.

Yes. No, it's fair. So you do plan to restart the blast furnace C at some point this year. But regardless of the demand environment, there seems to be strong, let's say, tailwinds just from the policy perspective. If demand remains steady, you should still be able to grow your volume and gain market shares versus imports. Is that still -- I thought it was a fair assessment a couple of months back, but I'm just trying to understand if it's still a fair assessment that regardless of the demand environment, we should expect some stronger volumes for the steel production business this year.

Yes. I think that was our view a couple of months back, and then we still remain stable on that view. Otherwise, sort of the -- yes, no, I think we remain stable on that view that we should be able to recover some of the demand that might occur through lower imports into Europe.

Let me add some information, which may be interesting for you because after the electric arc furnace, there is our hot rolled mill, right? And we have not brought this capacity down. And we feeded it with slabs coming from our own production from our own arc furnaces. And we feed it in addition with slabs that we had on stock from HKM from the year before. So not -- please don't be mistaken that we have taken out a blast furnace C does not mean we have cut down downstream on the value chain capacities, yes.

Okay. That makes sense. And then a second question is on steel processing. I think you flagged good utilization in H1. Energy demand in the U.S. is good. I've seen you had some recent hydrogen orders coming through. So I think the direction of travel is clear. You were getting close to positive EBITDA in Q4. So with those tailwinds, could you be positive EBT at some point during the year, if not the full year? I'm trying to understand why it might be a bit some cautiousness for that business.

Well, the cautious comes from our market assessment that we have not seen this huge pickup in -- on the energy side, as you mentioned. Yes, you're right, we have been able to earn some contracts on the hydrogen backbone. However, expectation in the previous years have been much higher. So this has been slow.

U.S. is not a strong market for us. We are delivering pipes into the U.S., yes. But given the tax regime that is there, of course, U.S. is also pretty cautious with buying from Europe because that is substantial additional cost. However, we see that some of the steel mills, especially on the midsized pipes in the U.S. are well booked. So U.S. customers are turning also to us. But so far, I would say it is not that clearly visible. Hence, we are a bit cautious on that end.

All right. And maybe a last question on the ETS reform. Do you want more free allocation? What would be a positive outcome for you? I think the steel industry is relatively split on that matter. And you have some carbon allocation, but you're also quite advanced in your decarb program. So what do you want from the ETS reform? And also, we've seen over recent weeks and over the past months, European steel equities, including South fall when the CO2 price is falling. That seems counterintuitive, but I wonder if that does make sense to you and if you could discuss that a little bit.

No, I don't -- I share your view with the counterintuitivity of the CO2 price. As we still run on blast furnaces, we shouldn't forget that. We're talking about SALCOS, but we're still running on blast furnace. And even with SALCOS Phase 1 coming into operation next year, we still have blast furnaces in operation. So that's a bit counterintuitive.

However, when it comes to the ETS, for me, it is of utmost importance that we don't skip the system as such. It is very clear to me and to a lot of people I talk to that the system as a competitive CO2 reduction system is functioning and is functioning and should remain in that general setup. Of course, you can discuss the phaseout of free allowances. Of course, you can discuss sort of the benchmark of certain assets, be it blast furnaces, DRI, et cetera. Happy to do so as long as everybody understands that those companies that have taken investment decisions have taken those investment decisions on a certain regulatory framework that was given to us, and there was a lot of stability around over the last 25 years. So if you change on the ETS system, you cannot harm those first movers. I think that, to me, is the most important one when looking at the reform of the ETS.

Are there any further questions?

I think it's Tristan's hand. So there shouldn't be no more questions left so far. So thank you for your participation for the last 1.5 hours and see you next time. Thank you.

Thank you very much. Have a great weekend. Take care.

Thank you.