voestalpine Stock

Ladies and gentlemen, welcome to the Voestalpine Publication First Quarter 2025-2026 Business Year Conference Call. I am Matilda, the Chorus Call operator. [Operator Instructions]. The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Peter Fleischer, Head of Investor Relations. Please go ahead.

Good afternoon, ladies and gentlemen, and a warm welcome to our results presentation today of the business year 2025, 2026. With me is the complete Board of Voestalpine and [indiscernible] as the gentlemen will give you a brief overview of what has happened in the last business year as well as where we stand today as well as what our outlook expectations are. After the presentation, we will be very happy to answer questions.

Now I would like to hand over to Herbert Eibensteiner to start the presentation.

Good afternoon, ladies and gentlemen, we, together, will present the business year 2025-'26. And I would like to start with the highlights. You have already seen our figures. So even in a very difficult environment, the performance was good and in nearly all key financial indicators and the results, I would say, were driven by a very robust strategy and very active reorganization.

And on the positive side, we had high demand in railway infrastructure. We get good orders in aerospace business and also this sector is smaller. We had record results in warehouse technology. In construction, mechanical engineering and consumer goods, it was stable, but at the low level. And automotive was mixed, good for flat steel and with some difficulties in automotive body parts. And for me, very important is that we can deliver a very good free cash flow and we have reduced net debt. That means a very low gearing. And we have reduced our employees coming from this reorganization measures of around 1.8%. Greentec steel, our begin investment project is still well on track in time and in budget. And we want to pay a dividend of 0.75 per share compared to last year where we have paid 0.60 and the outlook is EBITDA between EUR 1.6 billion and EUR 1.85 billion.

How was the performance of our markets. You know it for sure that we have a very flat economic growth in Europe. And we had faced this pressure from U.S. tariffs, which is a very high double-digit euro. Negative effect and the industry production was on a very low level. When you look at the U.S. very solid, robust development. But to the high extent, it's coming from investment in the technology sector and not so in the normal industry sector, which was very flat. China, still stable growth were driven by exports but domestic demand was very low and Brazil in South America, Brazil is our biggest market, the economic momentum reduced a little bit coming from these high interest rates and very strong competition from Chinese imports. Brazil was a market without any tariff, which has now changed a little bit. We will see how this will influence our business.

And when it comes to the actual strategic focus, no changes. We are working diligently on our economically successful decarbonization of our steel production replacement of blast furnaces by electro furnaces. And when we look at our value-added areas, let's say, we had a good development in Railway System, Tubes & Sections, Warehouse & Rack Solutions, aerospace, and we look also into attractive regions like India which we have still a small footprint, but we plan to increase our activities in India. And as I mentioned before, very important for our results where this very consistent reorganization and portfolio optimization and where we're focusing clearly on efficiency. And you know that we reorganized the automotive facilities in our automotive components business, particular in Germany, but not only. And high-performance metal made a great effort, a big effort in portfolio optimization, and this is now largely complete.

Greentec steel is no change in our plan. So we want to start up with our 2 electro arc furnace sites in Linz and in and Donawitz next year in around February to May. And we will start up then until 2029, and then you will see a reduction of 30% of CO2 emissions. And after 2029 you will see further replacement of blast furnaces and with the goal that we are CO2 neutral in 2050. I mentioned before, the added value downstream business. Just to give you a flavor of what I'm talking about. So in Railway Systems, very important for us is that we got very good orders. We have a good order book for Deutsche Bank. And the Swiss railway companies, we got contracts of around EUR 5 million. And also core PAM, which is in Austria we've finalized this big project in the course of this year.

Warehouse & Rack Solution still growing steadily, and we got very large orders in several countries in Europe and also out of euros, and we get the biggest order ever in Eastern [ board ], for instance, and we have already announced that we got for our aerospace business, record orders of around EUR 1 billion for the next 5-year. And that's a very good outlook for this aerospace business. And what we are doing there, high-performance materials for engines complex forgings for landing gear, and we also provide our customers logistics service worldwide. And when you ask what are the production sites. This is [indiscernible] in Austria, and we also deliver parts from Brazil, from [ Sumare ] all over the world.

Yes, it was very briefly the highlights of last year, and I would like to hand over to my colleagues in the divisions.

Ladies and gentlemen, it's my pleasure to walk you through the highlights of the Voestalpine Steel division of the past fiscal year. It was a difficult one, as we all know, but also a very successful one. You find the corresponding figures, the financial figures in the boxes on the right-hand side of the slide, and were able to achieve a remarkable margin -- EBIT margin of close to 10% and EBITDA margin slightly above 14%. And what is remarkable for the time where we are living in. We could manage to perform stable deliveries in our most important customer segments. There was a low demand, but some demand in construction business, mechanical engineering and white goods and the industry segments, our most important segment, the automotive segment, was also not performing good, but it was able for Voestalpine Steel division to gain additional market shares and to gain additional orders from our competitors what was, at the end, good for our financial figures.

We think that also the demand for the energy industry, especially for heavy plates, [ claded ] plates had a very positive impact on our results. And we also saw at the beginning of the calendar year and also business year a positive effect by the CBAM regulation. And we do expect also a positive momentum for the second half of the calendar and fiscal year when the post safeguard measures will be operational by 1st of July. In the actual already running business here, we see that there is a kind of a pause for the heavy plate business. We expect to get additional orders by end of this calendar year. but this effect will more than compensated by the rest of the division. The rest of the market trends will be, in our opinion, unchanged. So we do not see a very positive upturn or downturn. So I think that we can look forward to another successful business year for the Voestalpine Steel division. Ms. [indiscernible] already mentioned the transformation project, greentec steel. So I don't want to add anything new just that I'm looking very much forward to ramp up the production by February next year. Thank you.

So good afternoon, ladies and gentlemen. It's my honor to walk you through the highlights of High Performance Metals Division. The business development in the last fiscal year we started with quite a lot of headwinds and the tooling markets were muted in Europe and in the Americas. We saw a robust demand in China. So we could position ourselves quite well for high-pressure die casting, plastic injection molding and high-speed steel where we see that the market was quite stable. We saw a mixed development depending on the subsegments in segment Industrial, we saw quite -- not the boost, but we are building it up. And we had some successes in Food and Beverage and also in medtech as well as in mining. As Automotive was a little bit muted in this segment.

And we saw also that the oil and gas segment, renewable CPI was some headwinds. But now we see slight tendencies due to the overall situation worldwide in terms of fracking business in the United States. Aerospace business, as mentioned earlier, was quite strong as well in special forgings as well as materials. And what we also can say is that the reorganization project. We are progressing as planned and implemented as planned. And this means the portfolio optimization warehouse consolidations and also mergers of companies like Voestalpine [indiscernible]. If we come to the current situation and the outlook, we see some very slight trends, upward trends in tooling and industrials. But overall, the trends are continuing in these segments, we see that, as I mentioned earlier, the rising energy prices have a positive sentiment in certain segments in the oil and gas business. We see that also customer orders in the second half of this year will go up to a small extent.

And we see the positive effects from the reorganization project, which we are currently pursuing and which we will consequently follow up and implement with the same fervor as we did in the last months and years. Thank you.

Good afternoon, ladies and gentlemen. It's my pleasure to present to you the Metal Engineering division business year 2025-'26. If you look about our figures, there a little bit less good than last year, mainly impacted by the tariffs who -- sorry, which have impacted our business unit[indiscernible]. And that has been -- on the other side, backed up by a good market environment for the railway infrastructure globally, which is still, and also will be in future, the backbone of the division.

In the industrial business units, as already mentioned, we had a mix development regarding the seamless tubes I've already mentioned. The impact of the U.S. there is up from June last year. Also the wire business with muted demand and strong competition was under pressure. The welding business unit overall and globally was on a stable trend with some regional creations. Regarding the current situation and the outlook, we expect that the global stable trend in the Railway Systems business unit will proceed on. Our systems approach is growing in all the regions and get good response, especially our digitalization efforts by introducing our new asset management platform, [ Sigrid ] already has shown some fruits. One of them, for example, was the award of the rail [indiscernible] project with an overall project sales volume of about EUR 500 million.

We expect no real improvements on the seamless tube side within this business here because of no changes to our expected changes on the U.S. tariff side. But the other 2 business units, the wire and the welding should perform better than last year and should show a stable development even moderate ones. As already mentioned by my colleague, site, also our part of the overall greentec steel project of Voestalpine, part in Donawitz, where we're also investing into an electric arc furnace facility is on time and on budget. Thank you very much.

So we continue with the Metal Forming Division. Let me guide you through the different business units, and I will start with the automotive business. We heard the markets will not improve, so we will adapt to the new levels, which we see especially in Europe. We have a big program running for almost 2 years now. It's called restart, and we have now completed, for example, the closure of [ Birkenfeld ], we have relocated our presses, and we have conducted our social plans that are now being implemented. With that, we have already reduced our head count in Germany by roughly 500 FTE. And of course, we do also have a focus on Cartersville making it profitable.

We are in the middle of a transformation in our platform. It's a new business. The quality is stable. We have reduced our headcount. We are improving our OEE, but this project as well as the German project is not yet over, so we will still work on it for at least the next 12 months. We need further reductions in Germany and of course, further improvements in Cartersville. We are also looking into synergies in our organization, and we are looking for synergies in procurement, supply chain and IT. From the market side, of course, we are also looking for new opportunities, especially with non-German accounts.

Looking towards Tubes & Section, a lot of headwinds actually in Hudson sections in the last year. While Europe was relatively solid, and we had well performing sites, for example, in Austria and also in Belgium, U.K., especially in the construction market was difficult and very difficult at these times is the U.S. business. Looking at the market, you can imagine that photovoltaics or [ CAF ] business is difficult there at the moment, customers are a little bit reluctant to give new orders at this point in time. But good news in terms of our large investment projects, it's our investment in the U.S. in terms of frame rails or trucks. This project is on track, and I'm very happy that our start of production will be as planned in July 2026. So upcoming very soon.

Also, we are progressing in India where we are in the middle of the premarketing phase founding a legal entity. So this is a greenfield project, and we are well on track in South America with our investment project over there. It's a new slitter improving our logistics supply chain there. We will remain focused on the market. It is not getting easier for tube transactions, but we are still optimistic that we will find our profitable niches, and we have started a project on this topic as well to improve our synergies. A word on raw tech. This is part of Tubes & Section, but this is the part which focuses on safety and comfort components for the automotive industry. In a nutshell, also a restructuring project. We had a closure of U.K., and we had an almost closure. It's now only a sales office in Canada, and we are moving basically our production to more lower-cost countries. This is successful, and we are already turning into positive results.

Very briefly on our very positive business units, and this is, for example, precision strip in spite of headwinds in -- for the exchange rates and also tariffs. Our new strategy is working out very well. We are ahead of budget, and we will continue very profitably as well. We are focusing on innovations, new applications, new customers and also new geographies. And we are also reducing successfully our working capital. So a very big success story there, which is going to continue. And last, but really not least is Warehouse & Racks. It was a year of record in terms of turnover, EBITDA, working capital, cash flow. We have an excellent project pipeline also in the future. We are going to grow further.

Torri, our recent acquisition is positive and on budget. So we are also looking forward into a successful next year. So in terms of outlook, in a nutshell, we will further improve our EBIT from this year's improvement even more. The target is that for automotive components, restructuring will show further benefits. Tubes & Section still in a difficult market, some growth and precision strip and Warehouse & Racks are continuing their successful path. Thank you very much.

Ladies and gentlemen, it's now my turn to wrap everything up and translate how everything you heard now also translate it into our financials.

Let me start with our financial overview. Revenue, as you see here, is down by EUR 680 million, roughly EUR 400 million that we see a direct impact from lower raw material prices compared to prior year, which translated directly into lower sales prices for our product. We also had an impact of roughly USD 100 million in the revenue line item out of the U.S. dollar. We also had a positive effect from higher volumes, in particular from Steel division, some lower volumes from HPM division. And in addition to that, it was mentioned that we sold [ Voestalpine ] last year and the part of simply deconsolidating [indiscernible] accounted for EUR 250 million of turnover in the prior year.

Talking about the profitability. EBITDA is up EUR 140 million. You heard from my colleagues, we were doing quite well in Steel division last year. So a lot of positive initiatives. We approach the market we drove costs down and then streamline processes, so a positive contribution also comparing to the prior year from steel in HPM division, we also saw a sharp increase, the main reason. The other cost measure was restructuring from last year. And again, the [indiscernible], sale we had in the business year '25, and there we had a valuation impact in the prior year. And we saw some challenging market environments, and these cost measures compensated actually for that.

All in all, a better year 2025-2026 compared to '24-'25 also for HPM division. Metal Engineering, Franz Kainersdorfer mentioned that in particular in uvula, we were, of course, suffering from tariffs. All in all, if you look at the total number. And this is also what we published and told you in our publications before that we were suffering roughly with a high double-digit million number, which is the impact of U.S. tariffs from the U.S. and the main business units offering out of that is our business unit tubules, and this is [indiscernible] of Metal Engineering Division for buyer market, also still difficult in '25-'26. Stable, but also with some headwinds was welding. And rail, as we said before, was positive at lower price levels, in particular, for rail in last year. Metal Forming, as Carola just said, prior year driven by a lot of restructuring measures, so roughly in the amount of EUR 45 million, of course. This was one main reason that these cost measures are positive now and saw some improvements, in particular in automotive components but of this division, upon sections, as Carola mentioned, some headwinds there, but still solid and the record year of Warehouse & Racks Solution was also mentioned.

Going to EBIT. EBIT is up by EUR 270 million. In addition to the reasons I just explained, we had some impairments last year in HPM and Metal Forming division. This year, we were very stable in that regard. And so no additional impairments were recognized between EBIT and profit before tax. You do not see the financial result there. But if you do the math there, you will see an improvement there of roughly EUR 40 million. The main reason sense a lower interest rate, of course, Europe was down 1.1% compared to the average number compared to the prior year. And in addition to that, we also mentioned the positive free cash flow before. And so net debt was also down roughly EUR 400 million, and this was the main reason for that. It been profit before tax and after tax, you see a normalized tax rate. Last year, we were above 30%. This year, a little bit above 27%. And so we saw a normalized one this year.

Going to the first bridge. From business year '24-'25. The EBITDA was [ EUR 1,346 million ]. Lower prices, EUR 378 million, more or less compensated by lower raw material cost in mainly all the divisions. We have a positive impact from higher volumes, in particular from Steel division. Some negative effects are also included there from HPM, what I mentioned also before. And then miscellaneous, what you see there is actually this reorganization, reorganization caused in prior period in particular and also valuation of [indiscernible] and the impact of tariffs is also included there. So this is how we bridge from EUR 1.3 billion to EUR 1.4 billion roughly in EBITDA.

A quick look to the changes where do they come from in terms of division. You see there that we see a better performance from Steel division, EUR 67 million. HPM, EUR 133 million in particular driven by these one-offs in the prior period, metal engineering, driven by, in particular, tariffs minus EUR 87 million in Metal Forming, we were doing better by roughly EUR 49 million, and so we end up at EUR 1.5 billion. Cash flow was very positive this year. So you see here driven, first of all, by higher results, cash flow from results, EUR 1.2 billion compared to EUR 900 million in the year before. Again, positive effect of changes in working capital. If you add this up, these 2 periods, we released working capital in amount of roughly EUR 800 million. Of course, at a certain point, this also will have an end and come to an end and this has tend to do with the guidance we are giving for our cash flow numbers. in terms of cash flow from investing activities, you see EUR 1.1 billion was '24-'25. Last year, we were at EUR 1 billion roughly perhaps a little bit below our expectation.

But as my colleagues explained before, both big projects are on time, on budget. So we will see these expenditures and it is more or less a cut off topic, and there are no big delays or no delays actually and no overruns in terms of cost expected. So we will finish our projects on time, on budget as of today. This is our clear expectation there. So we end up with the free cash flow of EUR 530 million in which was very positive compared to EUR 300 million prior year, which was also not that bad. In terms of capital allocation, you see the investable cash flow of EUR 1.1 billion means operating -- cash flow from operating activities, minus maintenance CapEx was EUR 1.1 billion. I start at the corner top right, EUR 170 million were spent into growth projects, in particular, the biggest one was one in Metal Forming Divisions for the rail frames Carola just explained to you. We paid dividends of roughly EUR 120 million this year based on the capital allocation and dividend policy we published in July last year. Not based on that, this was -- this policy. The next one, of course, will be based on that investments in decarbonization, EUR 380 million, so a little bit above that.

As said, once again, on time, on budget, and we optimized our capital structure down by roughly EUR 400 million. Having a look at this bridge, now you see the details there. Again, investable cash flow of 1.1 billion. And what I just explained to you is again here and shown in the format of this bridge, which we want to, yes, give you regularly, but same numbers as we saw it here.

I would like to end this overview. So our equity base is very solid, EUR 7.8 billion or 49% gearing, of course, is very low. -- at 16% net debt-to-EBITDA at 0.9%. This, first of all, brings us into the position to be simply prepared for 2 things. And this is -- we are in an uncertain environment. This is number one. We are driving big projects here. And as we said, this is -- it does not go without saying that we are performing there on time and on budget and we won't simply want to be prepared for growth steps. As Herbert explained to you that we define some areas if we want to grow. And I think why I'm convinced we have a balance sheet which gives us now also the basis and the foundation for perhaps future growth steps.

So having said that, I would like to hand over to Herbert for the outlook. Thank you.

What is our outlook behind this line with ongoing geopolitical uncertainty is that we have still -- or we expect still no changes in tariffs. And we have, in addition, the negative aspects of the war in Middle East. And when you look at the market trends, we see most of these markets at actual level when it comes to automotive, it's difficult for them when you look at mechanical engineering, same level when you look at building, not really improvement, still very good Railway System, aerospace, warehouse, as we have mentioned before. And we expected a further positive performance.

We have this positive effects or the expectations from the introduction of CBAM and the implementation of the post safeguard measures. Also we know that CBAM has led to relatively high stock levels. And what's clear to us that we have to talk and to talk about these positive effects from reorganization measures. So as my colleague said, we are on plan, but not finally finished. So there is a way to go and to put effort in that, and all these things together with all this negative and positive aspects of our outlook. We expect of between 1.6 and 1.85. Thank you. Thank you, and we are happy to answer your questions.

[Operator Instructions] The first question comes from the line of Tristan Gresser from BNP Paribas.

Yes. I have 2. The first one is on the guidance. It's a bit wider range than what you usually do. Can you explain why is that? And also if I understand correctly, there's a EUR 100 million kind of positive one-off from the sales of Bohler in there. So the low end of the guidance adjusted for that would be EUR 1.5 billion. It would be barely up year-on-year. So in what kind of scenario you would see that happening given you talked relatively positively notably about you your steel business and the momentum going into calendar H2? And maybe more specifically, how much of headwind this heavy plate, well, moderation, let's say, is for fiscal 2027? I'd start there.

Let me start with some general remarks and then Gerald will give you some figures, maybe I think it's very difficult at -- and I said it with my first sentence in the in the guidance is that, okay, we are used to this, let's say, tariffs, which is around EUR 100 million. And now we got in addition this Middle East war, which is affecting the whole world more or less. And we think that -- and we see it at the moment, higher energy prices will increase inflation with higher inflation, we will see higher interest, and this will dampen growth rates at the end how much this and in what context this will be is open, but this will be the outcome. And both of these negative aspects is EUR 100 million, no change.

And the headwinds from the lower economy is not really clear at the moment, you know that you have wrote in different scenario. But what do you think of that is how long will it take to come to a conclusion in this war. And it's -- in our scenario, it looks like that the low end is when it takes longer and the higher end of our range our guidance is for sure when it ends in the next days or weeks, then we'll see the upper end of our guidance.

Perhaps I would like to add something there. First of all, you asked a wider range than usual. Last year, we asked exactly the opposite. Why is it that narrow at the beginning of this year. I would say uncertainty is higher this year, and this is the clear answer to that. It was not an easy exercise to give you this guidance. But let me talk about and guide you perhaps a little bit through our divisions.

First of all, let me start with this Steel division you saw, I would say, an excellent performance this year. And the other and during our Q3 call, also elaborated on that. We cannot expect to continue a certain project-type business like that in the energy sector, in particular, because of the war in the East, for example. This is where we thought this will happen again that we'll have some projects there perhaps starting end of this year. So this is, I would say, not really realistic. A lot of things are destroyed there. And right now, this business is something which is more difficult, and this is perhaps a reason why we think that we will have, again, a very good year in Steel division. Will it be dramatically higher. I would say it's more at the level where we are this year.

In HPM division for sure, we have to see an improvement because we are convinced there that our measures work out to be the right ones. We are on track there. We elaborated in our pre-call previous calls that we will see a level of EUR 400 million EBITDA around '28, '29. I think this is still valid by the way, for both divisions for metal forming and for HPM division. And in both, we see improved results compared to this year. Then I would like to change and talk a little bit about Metal Engineering division. You saw there an EBITDA or an EBIT now of EUR 180. And the respective EBITDA number to that.

Talking about the business units there in [indiscernible],we have simply to assume that we will stick to this 50% tariff the whole year. And so we -- it's very difficult for us to expect a big improvement. On the other side, we see a railway systems business, which was very good in the last 2 years. maybe it's also partly a project-driven business, which might be a little bit more difficult also this year. So we are a little bit cautious perhaps there, but this path going forward to a EUR 3 billion business unit is absolutely the right one, and we will be there. So as we promise, we will deliver until 2030. And then there is less welding. And why are welding a stable business with some headwinds in the states, in Europe at the moment, we'll see how this is performing, but no big improvements can be expected out of this business, I would say, for this year.

And in [indiscernible] we are on the track that we are improving right now a bit, but still also we have headwinds there. so the physical demand is still a difficult one. And this is how we ended up in this guidance we gave you. So if you add this up, what I just said, you will end up somewhere perhaps in the middle of this range, and then there is some upside and some downside. This is how we see it.

Okay. No, that's very clear and helpful. So I appreciate the color. My second question is a bit more on the current market conditions in Europe. I know you're not too exposed to the spot market, but we've seen European steel prices go down the past 2 months, I would be keen to understand what's your view, what's driving this leg down? Do you think there is a big inventory overhang at the moment in Europe? And if you could touch also a little bit on your contract negotiations, the half year 1, I think you have in June. I think you have some in July as well. I know the January 1 were maybe difficult. Are the half year negotiations moving into the right direction. And are you able to have better prices in line with what we're seeing in spot conditions?

If I may answer your question. I would say at the beginning of this calendar year, the price dynamics on the market and also when our fiscal year started, were a little bit better than expected. I think we saw some effects from the CBAM regulation, which is effective since January this year. And we saw a positive price dynamic a little bit better than we expected. And you had it included in your question already. So we saw also on the market that some customers building up inventory. And that is why the situation right now is a bit more moderate. I think that is because the post safeguard measures will be operational by 1st of July this year.

So some customers try to get material before this date. And now we're in a kind of wait-and-see situation, and we do expect a positive momentum again in the second half of the calendar or more of our fiscal year after the summer. And I would say that you also mentioned and what is absolutely right, we are not so exposed on the spot market. We do more yearly contracts and quarterly contracts and also half year contracts. The negotiations are more concentrated on contracts beginning on April and then in fall again who have hardly contracts starting in summer. The contracts we negotiated in -- for April, where slightly positive, more positive than we thought. And also the few contracts we are negotiating for July, the negotiations are going. If you look at the situation right now is okay because there we're also negotiating contracts, which are one which should substitute contracts, which are 1 year old. So we are able to negotiate positive adjustments for that. So put it in a nutshell. It is difficult, but we -- I think we see the market dynamics on the positive side.

[Operator Instructions] The next question comes from the line of Bastian Synagowitz from Deutsche Bank.

I've got a couple. And maybe starting off here with the cost-cutting measures, which you have ongoing here in HPM and also Metal Forming. I think you signaled that you may be topping up the cost measures here beyond what you said so far. So can you please share with us how much more cost driven improvements you still expect in those 2 businesses in 2027 and 2028, those are -- this is my first question.

I already reported on automotive components. I also referred back to the market that we do see that the market is even weaker than we thought in the beginning. So we will look into more cost measures. If we talk about cost measures that consists of different elements. I talked about procurement an order of magnitude here is difficult to say. I will not do it here, but there is more that we can gain. But I think the biggest lever still remains headcount.

And I mean you can translate that. If you go down, we are now slightly above 2,000 FTE in Germany. The plan is to go down by at least another 100 to better 200 FTE. So you can translate that into cost as well.

And for HPM division, if we look at the last fiscal year, we have reduced the head count around 600 FTEs. And for this year, we scheduled another 300. So this is also significant. So we will end up with this 900 over 1.5, 2 years. This is one point. And the other point where we gain cost-cutting measures is from taking the synergies, for instance, in merging [indiscernible] where we can reduce redundancies as well. So these are the main topics and then there are some smaller measures throughout the world on our locations outside Europe and in Europe.

Okay. Great. Then my next question is on firstly your energy exposure and maybe also your Middle East exposure, maybe starting with that. What's your total Middle East exposure by revenue, maybe in percentage numbers then? And also, just in terms of the energy market, which is, I guess, way end market exposure is quite sizable in HPM and also engineering in many of the end markets you have been operating and obviously have been pretty soft until now. So could you please give us a quick update on the current energy-related demand picture? What you're seeing in those 2 businesses? And could you maybe share with us how you expect the current high energy price levels to drive demand in these businesses in the next, say, 2 to 3 years?

Yes. Regarding the exposure of the Metal Engineering division regarding the Middle East. Yes, we have a certain exposure that's approximately actually between EUR 50 million, EUR 70 million. That's mainly from tubulars and to a certain extent from the welding business unit.

The actual situation shows that the demand is still there. and the erratic states are finding now waste, logistical ways, new ways on the land bridge side and from the South via [indiscernible] to bring in the products probably not on that level that we have expected, but it's not 0, yes. So it's improving. And -- so it will impact to a certain extent, hopefully, it ends soon and comes back completely, but it's not that it's completely halted. As for HPM division, we see that we have quite a good position in the fracking in the United States, and this is what currently is showing some signs of increasing the business. This is one part, and we see it from other customers, mainly Asia and also United States and even in the South American region that they expect a higher demand in the second half of this year. And this has to be, let's say, validated because we don't know how this will materialize but we are very cautiously optimistic that we can get some tailwind from that.

Okay. Great. And just maybe to complete the picture, what is the Middle East exposure in the steel business, mostly with [indiscernible]?

Yes, if I may add. Our energy plate business in the heavy plate company is mainly driven at the moment by this area. So we do not see any halts or stops in this project because they have to build pipes out of it. So there is sometimes, and I think the market believes that there is time enough to finish their projects. But what we do see that new projects are postponed a little bit. So orders that would have been negotiated during summer, they are postponed the negotiation are postponed to the last quarter in this year. what means but also here at the moment, a little bit of a wait and see. And the projects are halting a little bit until there is a clearer picture how long this voice going on in this area.

Okay. Understood. Great. And maybe one more last question just on, I guess, the ramp-up of the new ES, which is nearing next year, given your significant CO2 deficit, which you still need to cover near record CO2 prices should obviously change the cost dynamics quite a bit, and I guess you will be able to run a little leaner there as well. So with mechanics may be looking different in steel and metal engineering, what would be the cost savings on the various line items such as energy, labor and CO2, which you would expect once these plants have fully ramped up?

Regarding the Metal Engineering part of the greentec steel project. The next step we are starting now in April 2027 is to ramp up the electric arc furnace. And so we have an intermediate period for 2, 3 years, where we have a hybrid mode where we're still running one line on the blast furnace and convert the set and then the electric arc furnace side. And the major improvements there will be first the reduced CO2 certificate costs, and they will be already significantly. But then after this first part and once we have decided to get into the second step, then there will be also from the head count had an additional part becoming active.

Okay. And could you put some numbers to those?

For Linz, it's basically the same. I'll come to some numbers. So on the one hand side, you're saving, as everybody knows, CO2, and you don't have to buy certificates for that. that depends a lot on the cost for the certificates.

On the other hand, you buy a lot more electricity and scrap [indiscernible]. So at the end, there is -- depending on the market situation can be on the cost side advantage or not. That's just a question of a few euros, I would say. What is different between Linz and Donawitz is in Linz, a larger production and we are following a modular approach, so substituting one plus furnace by the other. The big advantage in Donawitz is that you come quicker to a situation where you can change your structural costs step by step. So -- and the real difference, in my opinion, in the situation we are right now in the next 1, 2, 3, 4 years, is not the cost side. The big advantage will be, do you get a premium for selling a greentec steel in our case that greentec is our brand for greener steel. And if we are able to sell your steel produced by electric arc furnace with a premium and having depending on the situation, but more or less the same cost situation, that is a big advantage to go that path. And in our case, so we are actively getting orders for our greentec steel production.

And these orders are coming in with contracts in our hands. Saw some OEMs in the automotive business and also in the energy business when it comes to CCS or similar projects, they're willing and they want to have a green steel for building their cars for building their energy facilities. And therefore, we have a positive number of contracts already in our hands, and that is the big advantage, not the cost difference for the next some years. It's a different story when you look further into the future. when ETS stays like it is, CO2 welcome become more expensive than it is now. But until 2030, I would say that the cost issue is not the big difference. One thing can be to put it in a nutshell, if you can change your structure in your company. And the most important thing is if you're able to sell your greener steel for a green premium on the market. That is a big difference, I would say.

From my side, Bastian, one thing to add there. I think, one number which is a real number, what I can give you because this is what we paid for CO2 last year. In this business here we are talking about right now is EUR 230 million. It's quite a number. And all this discussion we have is simply based on a lot of assumptions, and I think it's not serious to give you there because with how we do our math there.

Of course, you have assumptions for energy. You have assumption for development of CO2 prices. You have assumption what are the 3 certificates we get in future and so on and so forth. We are carefully looking at that. And yes, and we have 2 different models and the Francine told you his side and Hubert told you the side of this deal division. Perhaps we have 2 different paces there, which we will. And we will keep you posted. But we do have, I would say, a very diligent job there on our side. And as soon as we have more to share, we will do so.

We now have a question from the line of Dominic O'Kane from JPMorgan.

I just have one question, which is my understanding is in April, the U.S. Department of Commerce initiated a countervailing duty investigation into imports of OCTG [indiscernible] products. And I just wondered, does that have -- well, are you aware of that investigation continuing? And could you just maybe comment on whether you have exposure to tubular products being exported into the United States?

We are actually running or we are within 2 procedures. The one is AD, an antidumping procedure. The second is the countervailing duty procedure you mentioned. And both are in process or processing. And we have had regarding antidumping, I would assume 2, 3 times already and always have got out of that without any penalty. The counterman duty one is something we have not seen in the past before. And there, it will be an issue, for example, how the U.S. authorities are going to see certificate CO2 certificates and 3 CO2 certificates. We, on our side, I think it will be on our side.

But earliest in September this year, we will know more because in the first judgment, preliminary judgments of the U.S. Department of Commerce will be available so much more about it now.

Are you able to maybe quantify what percentage of Metal Engineering division's revenue is those type of products?

I think the overall revenue of Metal Engineering is roughly EUR 4 billion. The overall revenue of [indiscernible] is perhaps EUR 500 million and a maximum 50% goes into the U.S. as a total. So it is perhaps -- but this is not just out of my an estimation, roughly 5% of Metal Engineering.

[Operator Instructions] We have a follow-up question from the line of Tristan Gresser from BNP Paribas.

It's just on Bastian questions before on greentec. So if I understand you have the EF ramping up in H1 calendar 2027. How -- you mentioned the date of April. How much -- how should we think about volumes from those EF in calendar 2027? Is that very gradual ramp-up? Or do you expect to already have some meaningful tonnage and how it's going to be maybe on the steel division? Or are you going to shut down the blast furnace already in calendar 2027? I think you mentioned the positive on the contract side in green steel premiums. Is it a good chunk of future orders that you've already kind of locked in contract? Is it meaningful volumes? And then I have another follow-up. I'll start there.

Yes. Thank you for the question. I try to give you a flavor, we are going to in Linz. For the Steel division, we are going to start the ramp-up of the electric arc furnace in February '27, more or less in the already running business here. And we are careful to ramp it up. So we will see a full running it at full capacity the business year after. So in the first business year I would say the business year '27, '28, I have to be careful not to mix up the numbers. We are running the blast furnace and the electric arc furnace and gradually, we will reduce the blast furnace and shut it down by end of next business year and then the electric arc furnace will reach a capacity -- its capacity of 1.6 million tonnes a year.

What means -- having in mind that we -- in Linz Steel division, we have a capacity of close to 6 million tonnes of steel production. So 1.6 of that will be electric arc furnished by end of next year. And I would say it's a good estimate to say we're starting the ramp-up by February. And then when you start a new facility, you have to stop it and repair, improve some things I would say if you take the middle of the EUR 1.6 million for the next business year that would be a reasonable figure for that.

Okay. No, that's clear. And just confirming on CapEx and OpEx subsidies. There is no update there. Anything you hope to get maybe with the reform of the ETF market and maybe there's some more [indiscernible].

No. Positive side is that we have our destiny in our own hands, and we can have the freedom to operate and manage the transformation that is a positive thing.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Peter Felsbach for any closing remarks.

Thank you very much for this very interesting discussion so far. I would like to finish this session with a personal remark.

After 20 years, almost exactly 20 years, I'll be leaving IR by end of June. I will be taking over a new role adding the strategic FP&A department in the Steel division. So I want to thank Hubert Zajicek for his trust and for this opportunity. And of course, I want to thank the whole board who is very friendly, very good cooperation in the last years. And in particular, I want to thank Herbert Eibensteiner for his support over so many years. Thank you very much for that. I will be missing the capital markets. We had very good discussions, very interesting discussions, very good times, and I want to thank you for all this friendly cooperation over the last 20 years.

My successor is in a market, as you can see. He's coming from the Voestalpine Group treasury department. So he's very experienced in dealing with capital markets. So you will be in very good hands. All the best to you, and thank you very much.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

Ladies and gentlemen, welcome to the Voestalpine Publication Third Quarter Business Year 2025-2026 Conference Call. I am Mathilde, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Peter Fleischer, Head of IR. Please go ahead.

Good afternoon, ladies and gentlemen, and a warm welcome to our first quarter to third quarter results of the business year '25, '26, the first 9 months of the actual business year. With me is Herbert Eibensteiner, our CEO; and Gerald Mayer, our CFO, who will give you a brief overview of what has happened in the first 9 months, and we will be happy to answer your question afterwards.

Herbert, please feel free to go ahead.

Thank you, Peter. Good afternoon, ladies and gentlemen, also from my side. I would jump right into the presentation. And for those who are not so familiar with Voestalpine, I would like to give a brief introduction. Voestalpine is a global special metals and steel company and an industrial group, and we combine this steel and metal production with processing and engineering competence. And from this expertise, we develop this special high-quality solutions that offer our customers the competitive advantages. And we are a leading partner for high-tech industries with high entry barriers such as aerospace, automotive, or railway systems, and we are stock listed since 1995 and committed to value creation for our shareholders.

So what was happened in this first 9 months when it comes to the global economic environment. Let me start with Europe, which is the biggest market for Voestalpine. In one word, relatively weak. So we had from the beginning of the business year, relatively subdued economic development. And only in the last weeks or days, we see a slight upturn in industrial production in Europe.

And when we come to North America, you know all the action around tariffs. We have still a robust economic growth, but we know that this is mostly driven by this high investment in the tech sector in Industry growth is by far weaker.

And when we go to -- or look to Asia, in particular, China, we see a relatively stable economic development, and this is supported mostly by exports into the rest of the world also because even more because of tariffs and South America, which is Brazil, the biggest market for us, we see a reduction in economic sentiment, why we have this increase in interest rates and we see strong competition from Chinese imports knowing that Brazil is not protecting its borders and trade flows.

Let me come to the highlights of the first 3 quarters. We have very solid results in the first 9 months in a relatively challenging environment. I have mentioned that. And I'm -- I think it's very positive that we have a very, very strong financial position. Gerald will present it in his part of the presentation. And for me, it's very important that we can show again strong cash flow development also in the last quarter.

And our markets, railway infrastructure, aerospace and warehouse and rack solutions unchanged, positive, good development, and I would say, the best to describe the rest of the markets is that it's a stable demand at low level in mechanical engineering construction industries.

And we have a mixed development in automotive industry on the one hand, steel flat still, which is very positive, mainly driven through gaining more market share and the automotive components business is a bit weaker. And so coming from all these restructuring measures we have implemented, we see also a decreased number of employees compared to previous year.

So what is still our strategic focus is these 3 pillars. The first is more short term. We have this reorganization measures in place. We do also portfolio optimization, portfolio management. You know we have sold in high-performance metals. And I think in the last days, you have heard that we have also divested BOHLER Profil in January, which is signed but not closed so far.

And I think the biggest part of reorganization is automotive components with all its sites worldwide, but also in high-performance metals, again, streamlining the warehouse structure, streamlining the sales structure and also in all those activities, focus is efficiency, efficiency, efficiency. And we are quite good on the way and all the programs in time.

So we do not forget our growth activities, which are strategically is railway systems, tubes and section, warehouse solutions and aerospace. And we are focusing also in new regions for us in attractive regions. And this is India. I will come afterwards in the presentation with a bit more information.

And the third pillar is this decarbonization projects we are running in -- on 2 sites in Austria, so where we want to replace 2 out of 5 blast furnaces by electric arc furnaces, EUR 1.5 billion. And I think all these projects are in time and on budget. And so we -- in a year from today's on, we will start the ramp-up, for instance, in both activities for this greentec projects.

Let me come to the 3 highlights. I think I want to give you some positive impressions what we are doing or what we have done. You know that Railway Systems is a very international business where we do business all over the world, but also in the small Austrian railway market. So we have recently closed the project in Austria, Koralmbahn, which is a 35-kilometer long tunnel, one of the longest worldwide, and we provided for this project, 290 kilometers rail and 235 turnouts and all the digital monitoring system, I think that's a quite positive project for Voestalpine. And we have numerous other international railway projects all over the world, very important for us.

Warehouse and Rack Solutions, a bit smaller as a business, but also with very positive projects. Currently, we are working on a hybrid warehouse in Turkey, the biggest we have ever built, 230 meters long, 80 wide and 40 meters high with thousands of pallet places and a similar project in Czech Republic for a tire producer. This is with 50 meters, even the highest we have ever built. So you see even in a very traditional business, there is every year new demand in bigger and more complex projects all over the world.

And I have mentioned India before. So for us, at the moment, a relatively small market. We have only EUR 190 million revenue. There are 5 location production sites with 1,000 FTEs. And we have already a turnout activity there, but we want to expand this engineering and design capabilities in India with a couple of people in India, which are training the local guys to improve our footprint there.

First production site is planned in special tubes, special sections. Most of you know that we have a standard procedure for that 20,000 square feet building, then adding 3, 4 machines after 5 years, we fill up this facility. And then we think of the next steps, we will start that next year, I think. And we are growing in aerospace supplies in India, so where we have seen more and more activities for delivery to the OEMs, and we have achieved the first important approval so we can deliver to the producers of aerospace airplane parts.

And also, we have a welding consumables facility there. We want to expand that. The market is growing. So 2 topics, railway very important for us, warehouse very important for us. And geographically, India is small, but will develop steadily in the years to come.

So let me come to a quick view on the divisions. Steel division, very, very strong performance in a relatively weak economic environment. And we faced a very good demand from the automotive industry. I've mentioned before that I think that we gained market share when it comes to higher quality steel sheets and also in the energy sector, which is mostly heavy plates.

And in all the other markets, mechanical engineering, building and so on, I have mentioned it before with a relatively stable and on a lower level demand. Market segments -- or sentiment in the steel sector improved after the announcement of the EU safeguard measures and CBAM. I think we will discuss that for sure when we come to your questions with a positive outlook for the remainder of the year and into -- especially into next year to come.

And when you look at the EBITDA figure with more than 13%, I think considering the time we are in a very good result. High Performance Metals, a bit different with a very weak economy and uncertain market condition with a high import pressures -- import pressure, especially when it comes to tooling and industrial parts. Oil and gas was impacted by this low rig count -- with low exploration.

Aerospace, on the other hand, very strong development in Europe. And in the course of the year, we see a very good improvement from the demand of Boeing. And we have got additional volumes, additional contracts in this segment. And High Performance Metals is a very important part of our reorganization plans. And we see this first positive results out of that when you consider decreasing volumes and the results remain steady. So we -- for me that the reorganization and restructuring is working.

And we -- as I mentioned before, we built a new sales organization and most of that is already implemented, and we will see the positive results into next year. And even in this difficult situation, we have this 7.6% EBITDA margin. Metal Engineering, Railway Systems, the biggest part of Metal Engineering is Railway Systems with a good performance. We have typical seasonal effects in the winter months this year, maybe a bit more. And Industrial Systems show different performance when it comes to welding, relatively stable on satisfying levels.

On the other hand, we have tubulars, which is heavily impacted by the U.S. tariffs. This is OCTG business and half of the business is U.S. business. So we have again reduced our volumes there. And wire is operating in a very weak market environment. But in the course of the year, we have at least increased the volumes on the price side. We are working actively and the efficiency. In all these activities, we have implemented efficiency programs and everything is well in place and on schedule and we look at the figure. The division has 8.7% EBITDA.

And we have promised you that we'll give you a deeper insight of the Railway Systems unit, which is the biggest part of the Metal Engineering division. It's a very important driver also for our long-term growth ambition. And in this business, we are a full service provider globally of railway infrastructure solutions. The biggest part is turnout systems with more than 60% of sales. And we have very good development in all markets globally. It's not only replacement and maintenance. It's also new projects, new activities and rail technology. Rail is a bit below 30% of sales with ongoing solid performance. Main market is Europe.

Fixation, new business for us, but again, a very positive development, especially in Central and Eastern Europe. This is a part of the business we want to grow in the future as well. And signaling has grown quite significantly in the last years. Again, already 6% of our sales, a very good development, and we are delivering at a very good level. And you see -- when you see this 10.3% in EBITDA margin, you are aware that this is the most important part of this Metal Engineering division.

Metal Forming, as I mentioned before, automotive components compared to that what we see in the Steel division is weaker. So we are mostly focusing on European carmaker. So in Europe, we see this 12 million cars and not more. And even the U.S. tariffs had an impact in our North American market, our business in automotive components. And as I mentioned before, we are in a deep reorganization part. And it's clear that we have -- there is a way to go, but we are sticking to our plan. And so far on time. And also, we see here the first positive results. Also, we have an outflow of money or cost for restructuring in this area.

So Tubes and Sections, overall solid performance. We had a slowdown in the second half of the year after the summer because of some delayed projects. We will see that in the fourth quarter, more or less good results with a bit lower volume. Precision Strip has improved in the course of the year also profitability-wise and Warehouse and Rack Solutions have touched it very strong demand, long order book also for the next year and even in 2027. EBITDA margin here because of the weakness of automotive component with 6.3%.

So this was a very brief overview of the divisional development, and I would ask Gerald to guide us through the figures.

Thank you, Herbert. So after this, as Herbert said, brief overview, I would say it was even comprehensive. I would like to share with you how this is reflected in our financials. So we have in front of us our table here with our key KPIs. You see there that revenues are down roughly EUR 600 million, EUR 450 million out of this EUR 600 million are referring to lower prices, and other EUR 50 million are referring to a weaker U.S. dollar, in particular, we had higher volumes. So this came with plus EUR 120 million. And then you remember that we sold last year, Buderus Edelstahl, and they had an impact last year of EUR 220 million. So this is a reduction, which we have, of course, then in the first 9 months of '25-'26.

Talking about our profitability, you see that all the lines are in green lights on. So we are up in all of these line items. So EBITDA is at EUR 1 billion, a little bit above EUR 1 billion compared to EUR 970 million last year. EBIT is up EUR 470 million compared to EUR 390 million last year. So in particular, strong, as also Herbert explained, was our Steel division operationally. We are up in HPM division and in Metal Forming division also, of course, partly driven by negative one-offs last year. We talked about restructuring efforts in our automotive components business unit.

I talked about the sale of -- or the divestment of Buderus Edelstahl last year. This had a positive impact this year. Metal Engineering was a little bit weaker compared to last year. I will talk about that in some moments. What is interesting here on this table is profit before tax. It's significantly up. There is one main reason between EBIT and between profit before tax, it's our financial income. We reduced our net debt by roughly EUR 300 million, if I compare an average the first 9 months last year to the first 9 months this year. And also interest rates are down, as you know, and this had this impact of, yes, a significant impact this year. And so therefore, EUR 120 million up.

On the other side, talking about profit after tax, you will realize immediately that we had quite a higher, let's say, perhaps an unexpected high tax rate. And last year, it was very positive, a very low one. Talking about last year, the main impact was that we recognized taxes for prior years last year, about EUR 20 million. And this year, it's the other way around. We had tax losses, as I talked about that also in our half year presentation in Brazil and Germany, in particular, where we did not recognize tax losses. And therefore, the tax rate is above 30% for the first 9 months.

Talking about the first bridge, EUR 968 million to EUR 1 billion roughly. So you see here the significant impact of lower prices in the first half and positively compensated at least partly by lower raw materials. So the gross margin is down EUR 137 million, roughly 60% attributable there to our Steel division and 75% to our Metal Engineering division. And out of the EUR 75 million in our Metal Engineering, I can share with you that a stake of EUR 50 million refers to simply higher tariffs to the U.S. tariff situation in our tubulars business in Metal Engineering.

Yes, higher volume and mix effect, which is positive there with EUR 73 million. So in particular, in our Steel division, we have had a super capacity utilization rate in the first 9 months. So we came with 300,000 tonnes higher volumes. So this is more than EUR 100 million. The mix effect is a little bit negative there in Steel division. And in HPM division, we lost some volumes compared to last year. So this had a negative impact there. But in total, for the group, as I said, EUR 73 million plus.

In Miscellaneous, also, as I mentioned here, the part of miscellaneous plus EUR 134 million. We had, of course, the impact of Buderus. We had the impact last year of our restructuring or reorganization efforts we had in automotive components. On the other side, inflationary effects were compensated by our cost, let's say, efforts we had all over our group, and this is in brief bridge #1.

And bridge # 2, I share with you the deviations of the respective Voestalpine divisions. You see there that we had this positive development in steel. As I mentioned before, higher volumes, lower prices, negative mix effect, but positive also optimized cost effects ended up in EUR 50 million plus. And as you know, also last year was still -- was a very positive one. And here, we are doing even better. So we are very proud of the performance here of our Steel division.

HPM, as also Herbert said, reorganization is on track. We have positive effects there, which compensated for the lower volumes. We still have been facing headwinds in HPM's there. It's turning a little bit at the moment, and we think we bottomed out the last months were a little bit better in terms of order intake and also in terms of turnover. So we see some slight improvements there at the moment. But market-wise, in the first 9 months, it was weaker compared to prior year. We also -- we talked about reorganization of several logistics sites there, we reduced manning. So this will have also a positive impact in future and had a positive and first positive impact in our first 9 months here.

Metal Engineering, I mentioned, this is the only division where we lost a little bit ground, at least when we talk about the results compared to prior year. So we are down EUR 79 million. In particular, I would say -- and it's obvious. So the main part there is the tariff situation in the U.S. We published that we reduced manning in our tubulars business unit in Austria. And this is simply the only reason there is lower tariffs and a little bit, of course, also the rig counts Herbert mentioned before.

In the business unit while also we are facing headwinds from the markets, very solid is our welding business unit in Metal Engineering. And we also were talking about Railway Systems before, which is strong, stays strong, very solid. And of course, we also have some cyclicality or seasonality in there, but very solid, and we have, for sure, a prosperous future in front of us in Railway Systems.

Metal Forming division, last but not least, plus EUR 21 million. If you look here at the business -- at our business units, we are a little bit weaker in Tubes and Sections, which is the biggest business units there compared to prior years. I would say, in total, it is solid, but also some headwinds in the first 9 months, but we expect also a good future there. Automotive components was touched by Herbert. We closed Birkenfeld. We have now 200 people less just because of that. And very positive is Precision Strip and Warehouse and Racks as Herbert shared with you some moments ago.

Very positive cash flow situation. What you see here is the summary. Actually, cash flow from results is EUR 873 million. I would like to add here the EUR 228 million from change in working capital. So if you add this up, we are above our EBITDA level. It's clear so that we had very positive impacts there from working capital initiatives. And yes, I think, yes, we did a good job there. We had some negative effects also in there because we had volumes picking up, for example, in Steel division on the other side, positively.

We optimized and we continue to optimize in HPM, also in Metal Engineering, and there is more to come also in Metal forming. Investing activities, you see here that we are exactly at the level of our prior year. You know our guidance of EUR 1.1 billion for the full year. So you immediately can see that we are not at the run rate for, let's say, what you would expect perhaps for the first 9 months. Our guidance stays at EUR 1.1 billion at the moment as our big investment projects are up and running and are on time and on budget actually. Of course, it is milestone driven and you never know exactly do you have a cash out then end of March or is it beginning of April or whenever it is. So it is -- but we stick to this EUR 1.1 billion in terms of guidance.

What you also have to take into account, if I talk a little bit about guidance, and I would like to do that now here that in the fourth quarter, we always have our cash outs for our CO2 certificates, ETS cash outs, which we pay normally in Jan. This is extra EUR 180 million roughly, which you do not see in the first 9 months and the additional cash out for CapEx, as I mentioned before. So this leads to the guidance of EUR 1.1 billion or another EUR 350 million to go until end of our business year, but it should stay a positive free cash flow, and we also expect a slight positive free cash flow in our fourth quarter.

Talking about our solid balance sheet, about our financial structure there. What you see here, and I share with you that we reduced since the beginning of the year, net debt by another EUR 200 million roughly. Our equity position is right now 50% or EUR 7.6 billion and gearing is down to 1.0 net debt to EBITDA or 19%.

So very solid. I think -- we think given the big projects which we have in front of us, given the idea also Herbert shared with you talking about strategic things that we have some growth segments in front of us, a lot of uncertainty. We are convinced that the strong balance is a good, let's say, a good and necessary foundation at times like this.

So this was my summary, and Herbert will now continue with the outlook.

So I think the outlook is not really a surprise for you. So we think that the global economy has more or less adapted to the -- after the imposing of these tariffs in the U.S. and we think that more or less the trends will continue what we have seen before. Automotive industry remains on current levels. As I mentioned before, this 12 million cars a year, construction, mechanical engineering, consumer goods, more or less stable at current levels.

Demand from the conventional energy sector for pipelines will remain strong in this fiscal year. And -- but we see no pickup in exploration activities, which would positively -- would be positive for OCTG. So stable situation, but we see still this positive momentum in railway infrastructure with a good order book in aerospace and also warehouse and rack solutions, we can say that we are booked quite well. And all this implementation of reorganization works quite well. So we can confirm the guidance of EBITDA between EUR 1.4 billion and EUR 1.55 billion.

So that was our outlook, and we are happy to answer your questions now.

[Operator Instructions] The first question comes from the line of Alain Gabriel from Morgan Stanley.

I have 2 questions from my side. The first one is starting with the guidance since you -- since that was the closing remarks, your steel business is highly levered to the improving spreads in Europe. The guidance for Q4 may not have fully captured the extent of the price action that we have been seeing recently in Europe. Can you help us better understand the drivers between volumes, pricing and costs as we look at your steel business beyond Q4, i.e., into Q1 fiscal '27 and beyond? That would be my first question.

Yes, to a certain extent that the most recent pickups are in our pricing because we have it in our yearly contracts in and also here and there in quarterly business. But when you ask beyond Q4, we have all this picture in mind where we have CBAM now in -- since January, we have these safeguards in front of us. We think that safeguards will be implemented in -- with 1st of July. And all the infrastructure programs, we -- in Germany, maybe the first defense spending is in front of us.

And surprisingly, the commission is talking about -- or discussing about how we proceed with the free allowances, CO2 allowances. So I think that's quite a positive momentum into next year. But we have to say there are 2 scenarios; a scenario with a quick pickup of prices and there is a scenario with a steady development of steel prices. I would say we think of the steady development in the course of the year, considering that safeguards will be into effect in July and also the infrastructure measures, we think and I have presented this also in last quarter, we think that the first bigger projects will come during the summer or after the summer.

So I think -- and we have with this -- with our -- how should I say, our contract structure, we have a certain time lag. So we are now locked in with our quarterly -- with our yearly business where we have achieved a certain improvement, but we are then locked in. We have half year -- this is 40% of our business, 40% of our business is quarterly business. So we are closer to the market and the rest is then half year business. So we will see a certain time lag.

So we will see improve -- we will see improved prices in the course of the year with this before mentioned time lag of Voestalpine. And I think it will improve, but this is how we see our guidance in the course of the year. And we know that we have into next year this project business in heavy plate, which is -- and we have some delays in projects. We know that into 2027, there are big projects again. So I think we will come through this year 2026 with slightly improving prices for Voestalpine, maybe a bit behind the market because of the things I mentioned, but we will then fully benefit in 2027 from all these positive effects.

That's clear. And the second question is on HPM, which has been a drag on the business for the last few quarters. You are clearly doing a lot of efforts and progress in restructuring the business, but ultimately, we may need to see an improvement in, let's say, automotive tooling, industrial CapEx and other end markets.

Are you seeing any early signs of restocking or improved order intake? I appreciate the outlook for the business may not be -- may not look great now, but at least any signs of green shoots that you are seeing? Or do you do expect a more prolonged demand trough? And then an extension to the question, what utilization rates are you currently running at for that business?

The utilization rate is relatively low, I would say, at 80%. And so there is room to improve. That's the reason why we make this efficiency measures. I would say, there was a sentence in our presentation, slight improvement, but that we see a quicker recovery. I think it's not the case. We see good products in China. We see this better projects in aerospace, but we see this improvement in results are mostly coming from the restructuring part.

I would like to add one sentence there. I think we also -- we're also really working hard in reducing working capital. And by doing that, of course, we produce also less. So we expect also a positive impact there next year. And in the last months, in particular, step by step, we saw some small signs. And you were asking about small signs of improvement in tooling. Yes, we do see that.

So in my opinion, we bottomed out there, and it should go up, at least this is our take as of today, means restructuring is going as planned. And I would say we will also see a higher level of production. And so we clearly expect an improvement there for next year. And you were asking the last times, what is this midterm, long-term outlook there. We stick to that. So in 3 years, we will have this EUR 400 million level of EBITDA.

The next question comes from the line of Tristan Gresser from BNP Paribas.

First, on the EBITDA guidance, I was wondering why you did not refine a bit more the full year guidance now that we have only 1 quarter left. Put another way, what would drive the EBITDA to the low end of the guidance? And what do you think would drive it to the high end? And at this stage, with the visibility you have, do you think the top end of the guidance is more than likely?

Tristan, I think a fair question. And we were really thinking about it. You saw that we signed to sell one of our companies in HPM division. And our guidance simply covers both scenarios. Do we close or not close this deal? And if we close this deal, we are more at the upper side. If we don't close it, we are more at the lower side of our guidance. So this is actually the take there. And you could split it. Is it EUR 1.4 billion to EUR 1.475 or is it EUR 1.475 billion to EUR 1.55 billion. So it is -- and we simply don't know if closing will happen or not.

All right. No, that's very clear. And then on the auto contract negotiations, I think you mentioned it, I just wanted to see if you could add a bit more color. So they have concluded -- the vast majority of it has concluded already. You're still not negotiating. Were you able to recoup the kind of loss -- the year-on-year loss you had last year? Or is it going to be more -- the increase you managed to lock in? Is it more type of a mid-double-digit increase for this calendar year as well. And then also, if you can share some outlook for auto demand and volumes, not necessarily for fiscal Q4, but for the calendar year 2026.

Yes. I think we will be fully -- and I think we talk about Steel division. I think we will be fully booked in our automotive business. We have these contracts. We have achieved -- we do not everything in January. So we have also in April and June and even in the fourth quarter negotiation -- in the third quarter negotiations. But when you put everything together, the bigger part is negotiated in January.

And yes, we achieved a plus in our auto -- yearly auto contracts. And I think volume-wise, we got a bit better mix. That's always the third part. We are talking about volumes, mix and prices. And yes, we achieved a better mix. And I think we are fully booked in auto. So I think that's the overall picture. When you would consider negotiations in October, we would have a reduction and with the improvement and the announcements of safeguards and whatever, we could achieve a plus in our auto contracts.

All right. That's very clear. And maybe a last question, if I can squeeze that in. The heavy plate business that's been really successful in fiscal 2026 on the energy side. You mentioned some delays. So should we expect the performance in fiscal 2027 to be not as good as what you've seen in 2026?

Yes. We are fully booked till the end of the year, more or less. And in the second half of this -- of 2027, we see some delays or postponing of projects into 2027. So this will be the difference between 2027 and 2026.

Okay. So it's more of an issue of maybe volumes rather than the margins themselves?

No, it's no margin squeeze. So this is a project business and we -- either you get the project or it's postponed or not available. In this case, it's postponed into 2027. And we think it's not lost so far. This is the reason why we are for 2027 quite -- 2027-'28 quite optimistic.

We now have a question from the line of Dominic O'Kane from JPMorgan.

I have one question. So if I just think about the interplay between your EBITDA, your cash flow and your balance sheet. So as we enter calendar 2026, I think there's a runway over the next couple of years where it's reasonable we can start thinking about maybe a EUR 2 billion a year continuing EBITDA profile. And obviously, with the Capital Markets Day in October, you unveiled a new dividend policy and gave more details around your thoughts on the balance sheet.

So -- my question is, given what you've reported this morning, we're now seeing a situation where you have 1x net debt EBITDA. Should we start to think about potential deleveraging of the balance sheet from this point forward? And therefore, how should we think about your use of the balance sheet as we look into 2026 and '27?

Yes, let me take this question. I think what we said in our Capital Markets Day, nothing really changed. So we are on track to all we said. So we really try our best to deliver there, and I think we are well on track there. And talking about the next years, we'll see what really will come. So I think Herbert explained a little bit our view and our take there. And I think we have to wait and see a little bit how things actually are really developing.

In terms of debt level in our balance sheet, I think, in particular, in times like that, where uncertainty is high, it's better to have a little bit more deleverage perhaps balance sheet, but we are more or less there where we should be. So -- and there is also some room for growth in there. This is also clear.

And I think we also talked about the 3 areas where we want to grow, and we simply want to be also ready for that. So I think everything unchanged. Our policy in terms of capital allocation is as presented, including dividends, as presented during our Capital Markets Day. So no real change. We simply deliver what we promised. So this is our take there.

If I could just maybe just ask one additional question. So do you have -- you've provided us with kind of free cash flow projections for FY '26. Is it too early to say whether we could think about a similar number for 2027?

What I can share here at the moment, we are right now preparing our business plan for the next year and our budget. But our take there is we -- next year, one thing is clear. We will have, I would say, in terms of CapEx or cash flow from investing, we will have a similar level of -- like we have this year, EUR 100 million, EUR 150 million is still our guidance for next year in terms of cash flow from investing activities.

In addition to that, we know that we have to rely in the blast furnace, for example, and Donawitz in our plant. So there are some extraordinary things which lead to some cash out. But our clear plan is to deliver again a positive free cash flow. Will it be at the same level as this year? I would say it is a little bit more limited to optimize working capital in addition to what we did the last 18 months. I think we achieved a lot there. And we will not see the same magnitude again.

This is not realistic in my opinion, but it should stay a positive free cash flow, in particular, driven by the 2 divisions, which did not contribute that much in the last year means this is in particular now Metal Forming and HPM division. And for the reasons I just mentioned for Metal Engineering, I expect here a little bit less contribution and also from Steel division here also we are peaking in terms of cash outs for our investing activities.

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

Maybe I'll bring one question forward given that we are already on the topic of capital allocation. Maybe just following up on CapEx specifically. I guess, at the Capital Markets Day, you gave this guidance for EUR 1.15 billion CapEx, and you said that, that also is a good assumption for the midterm. But of course, there's the EUR 400 million decarb CapEx, which will start to fade over time.

My understanding is that you may have sharpened your midterm plans on CapEx a little. So could you just please update us on what your CapEx thinking is once the decarb burden eases? And then briefly also on buybacks, I guess, given your balance sheet, given that you do expect another positive cash contribution next year as well, and I guess the outlook generally looks quite positive. Would you still consider buybacks as well if the time is right and balance sheet and cash flow do allow it?

So we did not make our mind about buybacks and so on. It still stays, as I said, I simply would like to confirm what we said at our Capital Markets Day and let us start to present and to deliver something for the next year. In terms of midterm outlook, in terms of capital expenditure, very similar to what we said before EUR 100 million, EUR 150 million for next year is what we assume, EUR 1.1 billion for this year, as I think we also shared with you last time.

And then I would expect it goes more to EUR 1 billion or a little bit below EUR 1 billion for the future. And this is then roughly at the level of our future depreciation when we start to depreciate also the new projects. So this is roughly how we see it at the moment. And of course, we need some room for perhaps some maneuvers in the future.

Understood. Okay. No, absolutely understood. I think you should probably provision for a bit of flexibility. And then maybe just lastly on, I guess, the demand also in the rail business, which obviously is a business where people turned quite positive a year ago. Could you just go a bit more into detail what you're seeing there? I guess the last calendar quarter is always a bit weaker, but do you now start to see more activity coming through in the German market as well?

We got this frame -- again, a frame contract in Germany. And so it was a bit weaker in autumn, I would say, October, November, the management change and all those things, I guess, that was the result. And what we see now is that steadily, I would say, steadily new demand is coming into this frame contract. So I assume that the Deutsche Bahn is well aware that repair measures will also be very important in the future.

So I think it will be a normal business year in Germany. And everybody who thinks that Deutsche Bahn has stopped repairing the railway infrastructure is for sure wrong. So we will get this project on stream, not immediately, with a certain time lag. And as I said, this infrastructure projects will then come more in the course of the year.

[Operator Instructions] We now have a question from the line of Tommaso Castello from Jefferies.

I got one left. Maybe if you could spend a few words on your capacity utilization rate at your steel operations. And I'm referring especially to the capacity of displacing potential lack of volumes coming from imports should as the estimates say, the import level would be reduced by around 10 million tonnes given the new trade measures and CBAM into the future. Is that something that you are confident in?

I think this is a good figure. So we know that the cutoff of this quota regulations is around 12 million tonnes, which is 10% of the actual production in Europe roughly. I would say that would lead to this higher capacity rate in Europe and maybe we will see some -- or the expectation is that the prices are rising. I think that's a very strong trade measure safeguard and it's not finally decided, but we will see it in July.

And in combination with CBAM and all the other topics I mentioned infrastructure, maybe the first defense spends, this will improve the economy in Europe. So all in all, in the next 2 years, I would say, very positive, especially 2027.

And that -- and our utilization was relatively high. There is always room to -- for different capacity, but this will be around, I would say, 300,000 tonnes, which is always possible to produce more. And I think we will fill up our capacity in our steel mill relatively quickly.

Okay. Sorry. So just to confirm, so you can add 300 kilotonnes to 400 kilotonnes per annum should the market demand that volumes?

Yes.

[Operator Instructions] We have a follow-up question from the line of Tristan Gresser from BNP Paribas.

It's just on -- there's been a lot of news flows and news around the potential reform of the ETS system and potentially the extension of the free allocations for industrial players in Europe. I was wondering if you could share your position. It does seem that a year, 1.5 years ago, that was not even part of the debate and now it seems that there is strong momentum building around it.

So how likely do you think this will be some sort of relief in terms of free allocation? What do you think could be the options that the commission is looking at? And eventually, if it comes to that and you receive more free allocation or for longer, will that change how you approach decarbonization spending? And can you spread out maybe your decarb project on a longer time period?

I think it's -- as I mentioned before, it was really a surprise that we started -- or the commission started this discussion. All over Europe, all the CO2 emitting companies, chemical industry, steel industry, we are fiercely asking the environmental ministers to ask the commission to prepare something how we can design this free allocation ETS system to a more pragmatic approach. And so this was the start of this discussion.

I think this -- for us, it's positive. We are under allocated. And I think -- and I was always of the opinion that in the time we are investing in CO2 reduction, we cannot, in addition, pay for CO2 allowances. And I think that's true and it's considered from the commission, we will see how the options are. Is it then a 100% dedication to CO2 reduction or a certain percentage. I think this is -- everything is in discussion. But at the end, when it would be -- come into action, it would be a relief for our future capital expenditure or cash management.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Peter Fleischer for any closing remarks.

Thank you very much for your time -- for spending the time with us and for this very interesting discussions. However, if there come up any questions or if you need any additional information, please feel free to drop either Gerald or myself a line, we will be happy to answer. Thank you very much, and have a good day.

Ladies and gentleman, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

Ladies and gentlemen, welcome to the Voestalpine Publication First Half Business Year 2025-'26 Conference Call. I'm Mortz, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Peter Fleischer. Please go ahead, sir.

Thank you very much. Good afternoon, ladies and gentlemen, for our first half 2025, 2026 results announcement. With me is our CEO, Herbert Eibensteiner; and the CFO, Gerald Mayer. We will give you a brief overview of what has happened in the first half, and we will be very happy to answer your questions afterwards.

Yes. Good afternoon, ladies and gentlemen. Let me start with a brief introduction of Voestalpine, for those who don't know us. Voestalpine is a global special metals and steel and industrial group. What we combine is this production and processing and engineering competence. And from this expertise, we develop innovative special solution to our customers to improve their competitiveness and that makes us the leading partner for high-tech industries with high entry barriers, such as railway systems, automotive or aerospace. And we are stock-listed since 1995, and we are committed to value creation for our shareholders.

Let me start with the global economic environment in the first half of the year. And what we see is that North America, we're still relatively robust economic growth, a lot of investments in the technology sector. Now I would say, industry is -- industry development is a bit lower at the moment. When we look at Europe, we have this subdued economic development. And at the moment, we are somewhat between cautious optimism and continuing uncertainty.

When we come to Asia, mostly China is important for us, a relatively stable economic development this growth in China is supported by high export in the rest of the world. We will talk about tariffs afterwards. And we see a weaker development of the domestic economy.

In South America, Brazil for us, very important. We see a reduction of the economic environment, why we have high interest rates and a very strong competition from Chinese import. This is a country with no trade restrictions and a target of the Chinese exports.

What are the highlights of this first half? For sure, the U.S. tariffs, which is led to uncertainty in the economy worldwide. And what we see, I have mentioned that before, this is noticeable in North America as well with a more cautious investments in industrial business so far. We can see that at the moment. For Voestalpine, these tariffs -- we are affected by these tariffs. We can say this is manageable for us. And we see a high double-digit EBITDA impact for this business year coming from the U.S. tariffs.

So all in all, the major economic trends are unchanged. We have, I would say, we delivered a very solid result for this first half year, considering the environment we are in, the earnings are as expected. We had a strong cash flow development and balance sheet is very solid. So far, Gerald will elaborate on that later on.

All our reorganization and efficiency measures are very well on track. And decarbonization, greentec steel projects are on time and on budget, so far, so good. And what we see at the moment is we can expect a tailwind from the announced EU safeguard measures and CBAM, and the implementation will be from our perspective in the next year. We'll discuss that anyway afterwards.

The outlook and the guidance is unchanged. So all these activities and impact from the tariffs included in the guidance, but it's unchanged. So only 4 interesting project that you know that we -- besides tariffs. There are also projects in Voestalpine. So we had the groundbreaking for a new R&D project. So in the R&D laboratories, we see that we can produce hydrogen-based pig iron, and that's the reason why we want to start to erect a demonstration plant in Linz and we have already started, start of production will be in 2 years in 2027.

And after 2 years, we know if this process is competitive. And we are -- we do that with very good partners with Primemetals, it's an engineering company in Rio Tinto, you know Rio Tinto, anyway. So because I will touch this high bay warehouse topic afterwards. So we got the major project in Turkey for a logistics service provider, start of production, end of this year and completion in 2027. Just to give you some figures. This is 250 meters long, 90 meters wide, 40 meters high, more than 11,000 tonnes of steel profiles. So that's these high-bay warehouses we are building, and this market is still growing and high profitable for us.

But we also think about our capacity expansion in the U.S. We have contracts with 2 international truck OEMs in the U.S. production for the U.S. market for site members. So production facilities completed, we are delivering the machines so far, and we will start production in summer 2026. By the way, we do the same business in Europe in Belgium for European OEMs.

And on the right-hand side, our Railway System business just as an example because it's coming from Austria, we got the contract for the Koralm tunnel, which is the sixth longest tunnel in the world, 33 kilometers, top speed 250-kilometer per hour, and this is a very interesting project with 290-kilometer rails and 235 high-speed turnouts on this way from Graz to Klagenfurt. So this is the example of projects we are doing, not only in Austria but all over the world.

Let me come to the divisions. Steel Division, very strong performance of our flat steel business in a relatively difficult market, why we are high utilized in this business, we have good orders, good production and we have projects in our heavy plate business. And the demand from the automotive sector is and was very good and also from the energy sectors and other markets remains stable on the existing level, I would say, when it comes to building mechanical engineering and so on which is on lower levels.

General market sentiment has improved after the announcement of the EU safeguard measures and the U.S. tariffs is not very important for Steel Division. It's negligible for this division. And when you look at the EBITDA margin, it's more than 13% so far.

I come to the High Performance Metals Division. So it's a bit different. We have lower demand with reduced utilization of all our special steel mills worldwide, tooling and industrials muted and also in Europe, especially intense competition. This was the reason why we sold Buderus, oil and gas is lower by low exploration activities. And aerospace, which is the bigger part of this division, very strong. We got new orders, and we see a continued upward trend.

We do a lot of reorganization. They are streamlining their global sales network. We have working capital measures there. And intense efficiency and cost-cutting programs in execution, and we see the first positive results in the course of the second half of the year. And the U.S. tariffs here, yes, again, affected, but manageable most affected, the Swedish and Brazilian special steel mills. But EBITDA margin of 7.6% is, I think, very solid in this given environment.

Metal Engineering is -- Railway Systems continue with very strong performance. And I will touch that in the next slide. We see a mixed picture in our industrial systems business, and we have also implemented efficiency programs, wire is stable on very low levels, I would say. And we see also a very low demand from seamless tubes and welding consumables, worldwide business is relatively stable on solid levels.

And this seamless tubes business is most affected in our Voestalpine Group by this tariff and has a negative impact. So we have to reduce volumes in this business. But still 9.1% EBITDA margin and the most important contributor to this result is Railway Systems, which is an integral part, the biggest part of Metal Engineering. And also, I would say, a business which is a driver of our long-term growth strategy.

Turnout systems, we are a world market leader there with 60% of sales of railway systems. We see all over the world a very good demand in all our relevant markets, rail technology, 30%. It's a more European business, strong, stable demand in Europe. Fixation, new business for us, but important solid development in Europe, particular in CEE. And signaling, fast-growing business, and it's very important to get such complex project, as I've mentioned before in Koralm Tunnel. It has a very stable demand and trends in Europe and also a growing business in Middle East and with this 10% -- more than 10% EBITDA, the biggest contributor.

Metal Forming Division, automotive components, lower production in Europe. So it's the division, which is most affected by the lower car production. We have reorganization projects in execution, Tubes & Sections, overall, solid, demand slowed a bit after the summer, but we will see an improvement until the end of the year. Precision Strip, surprisingly improved in the course of the first half of the year. So I think they developed quite well under the given environment. And as I mentioned before, Warehouse & Rack Solutions, very strong development and the order book for the next 2 years is very strong. And in this division we have no relevant impact from the tariffs. And the EBITDA level is below the average of the group with 6.3%.

And now I would hand over to Gerald to lead us through the figures.

Yes, ladies and gentlemen. Herbert provided an overview of the latest developments in our markets and business divisions. In the following minutes, I will outline how these developments are reflected in our financials. And I would like to start with this overview. Revenues declined by EUR 450 million or 5.6%. All 4 divisions contributed less operationally compared to the previous year of the total degrees about EUR 300 million attributable to lower price levels in particular and EUR 150 million are related to the sale of our former subsidiary, Buderus Edelstahl.

Despite the decline in revenue, our results are above the first half of '25, '25. Yes, and in particular, High Performance Metals Division achieved stronger contributions. This, of course, was also related to the sale of Buderus where we had a one-off impact last year of EUR 81 million.

Steel Division was fairly stable. Metal Engineering and Metal Forming Division recorded lower earnings. As a result our margins have improved. On the one side, of course, we had lower revenues. On the other side, we have this increased result levels. Of course, this resulted then in increased margins.

Our interest income is -- and if you do the math here, you will see that it is stronger than last year, more than EUR 20 million roughly related to a significantly reduced net debt position. And this, combined with lower interest rates supported our interest income. So profit before tax at EUR 278 million compared to EUR 248 million last year.

Profit after tax, you see an increase there of 8.6%. So this is below this plus EUR 12 million in profit before tax. The reason is -- the main reason is that we saw a higher tax rate there. And this is linked to losses we had in Germany and the U.S. and in Brazil that we did not recognize deferred tax assets.

I prepared 2 bridges. The first one you see on the Slide 14. You see the half year comparison and the impact of pricing, so means minus EUR 270 million, which was more or less, let's say, 2/3 of it was compensated by lower raw material prices. So the gross margin -- in gross margin, we lost roughly EUR 80 million. So this is what you can see in this slide, in this bridge.

And this EUR 80 million were more or less completely associated to our Steel Division. There is a minor impact also from Metal Forming in HPM Division and the Metal Engineering is plus/minus 0. You see a positive impact from mix and volume. Volume is, in particular, associated to a strong performance in Steel Division, where we had stronger volumes in the first half compared to the previous year in HPM division. volumes were down slightly, and we saw some negative mix impact in Metal Engineering Division. But all in all, it adds up to plus EUR 45 million.

Miscellaneous, plus EUR 39 million. As I mentioned here on this slide, there we, of course, have the positive impact, EUR 81 million from Buderus sale last year, this one-offs, we communicated 1 year ago. And of course, there are also included negative impacts from U.S. tariffs, cost inflationary items and also, of course, a positive impact from cost reduction programs, CIP programs and so on.

Last time, I prepared the bridge according to our divisional organization. You see here that Steel Division was very strong, by the way, also in the first half last year. It was very strong in Q1 last year. And this year, the full first half was very strong, and in particular, second quarter was very solid. You see the increase of EUR 87 million in HPM division, mainly associated to what I mentioned before, means the one-off from the sale of Buderus last year, which had a negative impact. The environment as Herbert discussed is still difficult, but our measures are working out quite well. And so we are a little bit above operationally the prior year level.

Metal Engineering, down EUR 61 million. We have 4 business units in there. Of course, for all of them, it's a little bit weaker than it was last year in the first quarter, but -- in the first half. But the main impact, of course, come from Tubulars business where we are highly affected by the tariff situation in the U.S. and in our wire division, we are somehow suffering from weaker markets.

Metal Forming is down EUR 23 million compared to prior year. We have some headwinds in the markets in our Tubes & Sections business, also still in Automotive Components business, we're also restructuring that area. Herbert also talked about that before. What was very strong again was Warehouse & Rack Solutions. And as we heard before, also in Precision Strip, we have some positive developments there. So in EBITDA, we are slightly above prior year level. And I would say, given the environment, a satisfying performance.

Cash flow statement, Slide 16, I would say, a very positive development there. Cash flow from results, EUR 687 million compared to EUR 481 million. Of course, we had a positive contribution of a higher net result there on the one side. On the other side, we have lower interest rates and interest payments. On the one side, our debt is down. Interest rates came down. On the other side, we also -- we issued a bond last year and EUR 20 million of these payments for interest in the second half and last year, definitely, the bulk of this was in the first half. It's EUR 20 million out of that.

Prior year, we also had a one-off there. We had interest payments for prior periods in there of more than EUR 100 million. So this was a burden to this prior year cash flow from results. Very strong again is our changes in net working capital, plus EUR 96 million there. So we managed in the last 12 months to release more than EUR 500 million of our net working capital there. And then also as roughly EUR 50 million are associated to lower inventory levels out of this EUR 96 million.

Cash flow from operating activities, this adds then up to EUR 783 million compared to EUR 346 million prior year, it means more than doubled this number. Cash flow from investing activities, EUR 510 million last year, EUR 490 million this year, roughly. So you see there that we are not at the run rate where we perhaps -- or you assume perhaps that we are. So our outlook is still EUR 150 million for the year as a whole. We are on time and on budget, doing -- and I'm talking about our greentec steel or as we call them Transnet projects, our decarbonization projects in Linz and Donawitz. And as I mentioned before, our guidance for this year still will be EUR 100 million, EUR 150 million. So there is more to come until end of this year. So this adds up then to free cash flow for this period of EUR 300 million, and this is one of the best performances we had for our first half of Voestalpine.

Yes. Having said that, we still, of course, have a solid equity base there with an equity of EUR 7.5 billion, equity ratio of 49%. Gearing ratio came down to roughly 20%. And as I also mentioned here, so there are no major redemptions until end of this year. So everything is solid. And yes, we can build on that for all the future challenges we have.

So let me come to the outlook. For the rest of the year, you know that the uncertainty is still there in the course of this U.S. tariffs and all the weak economies in Europe. So the existing trends in the major economies will more or less continue, mechanical engineering, construction, consumer goods at low level, but stable automotive industry is divided also for the rest of the year. Components is muted and with all the restructuring measures, and we see solid demand for the Steel Division, for high-quality steel. And energy market is mixed, exploration is very low, and our OCTG business is affected by the tariffs anyway.

But what we see is for the remainder of the year, good projects from pipeline business. And as I mentioned before, ongoing good development in railway systems, in aerospace and in warehouse technology and all the reorganization projects are well on track. We will see, especially in High Performance Metals and even more in Metal Forming the first positive results to the -- at the end of the year. And we think that the announced safeguard measures will lead to a more positive view for the upcoming year for the Steel Division and the negative effects included in the guidance as far as we know at this time. And that's the reason why we confirm our guidance, and we expect an EBITDA between EUR 1.4 billion and EUR 1.55 billion for Voestalpine till the end of the year.

I'm happy, thank you for your attention, and we will be happy to answer your questions.

[Operator Instructions] And the first question comes from Tristan Gresser from BNP Paribas.

I have 2. The first one, if you could discuss a little bit the ongoing contract negotiations with OEMs. Are they taking place earlier or later this year? Do you think there is a potential for a triple-digit increase for next year? And if you could just remind us how much of your steel portfolio is now on annual contract? And how much of that is renegotiated in January? That would be my first question.

We have roughly 2 million tonnes in auto, and 40% of that is annual contracts. So this is the figure we are talking about. At the moment, I would say we are just at the beginning of the negotiations. And I think it's -- when you look at the steel prices in the course of the years, we have now a very positive momentum for the next year. Normally, OEMs would ask for a reduction. And now we are fighting that we get more, that's clear.

But you can imagine that at this time, with the fantasy of CBAM and safeguard, it will be a very tough negotiation and wouldn't be surprised that we wouldn't -- that we will -- or we won't have a final result at the end of December, I would count for January. So I think it's -- they are very, very tough discussions, I assume.

Okay. No, that's very clear. And my second question is on the steel action plan. If tomorrow, the European Commission mandates that 60% of steel in public procurement should now be European-made low carbon steel. How big of an impact is it? Is that a game changer, how big it is for the industry, how big is public procurement in general for steel in Europe, but also for you, more particular for your own business, would it have an impact? And if you can elaborate a bit on that, that would be great.

In general, we have this 3 parts of -- how should I say, positive things in our environment, this is safeguard, this is CBAM and this green market activity. So all in all, I think it's positive for the steel -- for the Steel Division. And the public markets, we are not really in the building industry or not that much in the building industry. But when it comes to a green steel market, this is a very positive for us because we are we will be one of the first who can provide, in 2027, green steel or CO2 reduced steel. So I think that will be a very positive for Voestalpine in particular.

Okay. And just a quick follow-up on automotive demand. Would you say public buying, public purchasing is a big share or a single-digit share of the total demand? Or any color there?

Well, it's difficult. I think it's, at the moment, very difficult to say.

The next question comes from Bastian Synagowitz from Deutsche Bank.

I'll start off with the Metals Engineering business and the rails business here in particular. So first of all, I'm wondering what is your conviction here on a rebound in the German rail sector next year. I guess this year, you're seeing a bit of a pause, I guess, due to the budget constraints. But do you see any early indications or evidence from projects or tenders coming up already at this point? That's my first question.

Yes. There is business in the German market. We had a relatively good year in the German market and I think that we -- there are projects in -- also in the next years, we have booked, I think that we will realize that. But we know also that Deutsche Bahn is in a reorganization phase that we can -- we may face one or the other postponed projects that can be the case.

But what we have heard that in this infrastructure program that a bigger portion than expected is allocated to railway infrastructure, and this will come in 2027. And this is a very positive news for Voestalpine knowing that we are a relevant supplier for this railway infrastructure packages. .

Okay. That's very clear. Then my next question is on your free cash flow, which I think has been very impressive this quarter. Now I guess the third quarter is usually a little bit weaker due to the working capital you typically absorb from your customers, which have a different financial year. So can you please give us a little bit of color. First of all, what do you expect for Q3 on the free cash flow side and whether the EUR 350 million free cash flow target for the full year is more a floor or a ceiling?

And then maybe also related to this, is there any other item we need to consider for the cash flow this year? I guess you will have probably some restructuring expenses. And do you think that it is pretty safe to say that the year-end net debt will be at least on the level of the second quarter? And maybe also, I guess, what is your conviction here for also generating decent underlying cash flow next year?

I would like to take this question. First of all, I think many things went good and right in our first half of this year. Of course, as I also explained during my presentation, in terms of investing cash flow, cash flow from investing activities, we are not at the run rate to reach this EUR 1.15 billion until end of the year, but this is still our plan. So we will catch up there, and this will be a burden to our free cash flow in the second half of the year.

Working capital, I think we achieved a lot there. We cannot assume that we simply double what we have in there or even doing more because we released roughly EUR 500 million or even more than EUR 500 million in the last 12 months. So this come somehow to a natural end, I would say. There is potential, potential, I would associate and relates to our HPM division, in particular, they are working hard on that side. So we will -- some releases -- see some releases there.

To your question specifically, of course, for the 31st of December, we have many customers. It's their year-end, and we will see an impact. And after my 18 or 19 months here within Voestalpine, this is what I would like or can confirm. So we will see an impact there, which is a negative one in our Q3, that means 31st of December. And you ask specifically the question how I would qualify the EUR 350 million guidance. Is it a floor? I would say, as CFO, I would say, yes, it could be a floor, but there's still some uncertainty there. But I am positive that we will minimum reach this level and for the next year.

So we are right now in the phase of doing our planning exercise, we guided for next year. I think it was in our last call, EUR 1.15 billion for CapEx as well. This is up to now unchanged. So I can confirm that. And having said that, we definitely target the positive free cash flow for next year.

[Operator Instructions] The next question comes from Patrick Steiner from ODDO BHF.

Patrick Steiner speaking. One remaining from my side. Could you please share with us your view on the High Performance Metals Division. I mean, will you recover profitability to past margin levels? And if yes, how long will it take and what are, in your view, the main drivers to get there?

So also for the HPM division, we walked the talk, and as we said the last time, so this is still unchanged our plan. So we expect in the period of the next 3 years that we will see EBITDA levels again we had in the past, I mean EUR 350 million to EUR 400 million. This is our clear target there. The guys there are really working hard restructuring everything in full. This year, what we faced, as also Herbert deliberated was some headwinds also from the market, but the plan, the restructuring plan is absolutely on track, and this is definitely positive.

And this is also the reason why they are where they are in terms of profitability in this first half because with this market, this difficult market, I would even have expected a weaker result. But they're doing well. And I'm positive at the end of this sort of crisis, we will see some recovery from the markets. We will do well and we will be on top again. So EUR 350 million to EUR 400 million in 3 years plus, this is what I would assume.

So it looks like there are no further questions at this time. So I would like to turn the conference back over to Peter Fleischer for any closing remarks.

Thank you very much, ladies and gentlemen, for the interesting discussion and for your time. Anyway, anyhow, if you come up with any questions, please feel free to give either Gerald or myself a call, and I'm sure we will be able to continue the discussion. Thank you very much so far, and have a good day.

Voestalpine, one step ahead. Ladies and gentlemen, the conference has now concluded, and we may disconnect. Thank you very much for your attendance. Goodbye.