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Dear ladies and gentlemen, welcome to the webcast of thyssenkrupp. At our customers' request, this conference may be recorded. [Operator Instructions] I now hand you over to Claus Ehrenbeck, who will lead you through this conference. Please go ahead.
Yes. Thank you very much, operator. And hello, everybody. This is Claus Ehrenbeck from the Investor Relations team. Also on behalf of the entire team, I would like to wish you a very warm welcome to our conference call on Q1 numbers today. All the documents for this call have already been released this morning, and you can find them on the IR section on our website. The documents do not yet contain the numbers from -- for nucera, those will be released tomorrow at around 3:00 p.m. This is for process reasons. And with that, I would like to hand over to Klaus Keysberg, our CFO, who will lead you through the slides for today before we then go into the Q&A session. Klaus, please.
Yes. Thank you. So hello, and also a warm welcome from my side to our conference call on TK's Q1 figures. As you seen today, thyssenkrupp has made a good start in the new fiscal year '21/'22 and continued the positive trend of its business performance. And before I comment on the Q1 figures, allow me to briefly summarize where we currently stand on our transformation path. So considering our ambitious prospects and our performance targets to breakeven net free cash flow, the current fiscal year '21/'22 can be considered as a financial milestone year. With the progress clearly visible in our financial ratios, we are at the apex of the line U, where we are getting closer and closer to the scale phase. To describe the way ahead on our transformation curve, we published the medium-term targets of the segments and the group at our Capital Market Day in December. Beyond the performance milestones, we have set further strategic deliverables where we are well on track. For our strategic realignment as a group of companies, we have our target portfolio defined. In addition, we have taken action for our hydrogen business, nucera, by preparing an IPO as a preferred option for value crystallization and for Steel Europe, we are assessing a stand-alone option. Well, as the CFO, I'm pleased to state that our transformation plan is backed by a very strong balance sheet with an equity ratio of 30% and a net cash position of roughly EUR 3.6 billion as of the end of last fiscal year that will further strengthen with the financial effects from portfolio streamlining and more important operational progress in '21/'22. Furthermore, we run our largest restructuring program in the history with additional efficiency and cost reduction programs initiated. Our portfolio streamlining is well on track with more than half of the planned M&A activities within the MT segment signed or exited. On that basis alone, we expect positive high 3-digit million euro effects on net cash and pensions for the current fiscal year. Furthermore, we emphasized ESG topics in our strategy and thus made sustainability and transparency as a CEO priority. We have a clear defined road map to carbon neutrality by 2050 and have set ourselves ambitious climate targets, which are assessed by the SBTI, and fully in line with the 2015 Paris agreement. All of the deliverables gives you a perspective of where we are standing currently. As a major part of the future viability, it is important to us to mention that our businesses are well positioned to benefit from major transformational trends. And let me give you some examples on the next slide. First, advanced mobility. In advanced mobility, we are at the forefront of the topics. E-mobility and automated driving, where TK takes leading positions within the segments of automotive technologies is Steel Europe in important areas such as autonomous driving and materials for e-engines. For lightweight solutions, particularly high-strength steel, our colleagues in Duisburg build up capacities for steel that is making cardboard is more energy efficient, while not compromising on safety. In Green Energy, the TK Group is standing out in the technologies for hydrogen electrolysis, green ammonia and renewable energy. Nucera is market leader in industrial scale plants for alkaline water electrolytes, while Uhde is a market and technology leader for green ammonia plants that are essential for hydrogen and energy carrying as well as fertilizer production. And the bearing business of Industrial Components has a leading position in its field, for example, wind turbines. For decarbonization, the Europe is currently preparing the largest transformation in its history through a green steel producer with a clear road map defined to becoming a climate-neutral steel location by 2045. And also at Materials Services, here, it takes part in decoronization with being a first mover in supplying CO2-reduced materials and CO2 optimized supply chains. Digitization takes -- obviously plays in all of our businesses, particularly emphasized should be the digital services with the state-of-the-art digital offerings for resilient supply chain solutions. And the in-house expertise at Automotive Technologies since software-assisted mechanical functions are becoming increasingly important. Hereto mentioned, the electric powered steering and the fully active damper for vehicle motion control as illustrated already on the Capital Market Day. Overall, this shows that our businesses keep up at the forefront of the development in some of the most promising transformational trends. This also reflects our heritage of relentless ambition to capitalize on our long-standing expertise in engineering and technology. With that having said, and before I guide you through our Q1 financials, I would like to show you this slide from our Capital Markets Day that summarizes the midterm targets for our segments and the group. I mean being conscious of time, I will not go too in detail now, I mean you know this already, and you have read it. But however, let me state that the resumption of dividend payments is a clear target for us, and this is already, let's say, due for the current fiscal year. Let us now briefly take a look at the highlights of what we have accomplished during the first quarter. Across all segments, order intake has grown significantly year-on-year by 33%, driven by Material Services, Marine Systems and Multi Tracks for the latter, particularly to mention nucera with more than EUR 0.8 billion in the hydrogen businesses with winning 2 landmark projects. Simultaneously, we have been able to lift the EBIT adjusted by EUR 300 million year-on-year to EUR 378 million. And the margin significantly from 1.1% to 4.2%, mainly due to strong improvement at the segment Materials Services, Steel Europe and Multi Tracks. And we expect an acceleration of EBIT adjusted in the following quarters, particularly driven by Steel Europe due to higher spread also from renewed steel sales contracts, and higher shipments following seasonality as well as continuing stabilization of supply shortage at auto producers. As anticipated in our plan for Q1 and already flagged last November at our Capital Markets Day, free cash flow before M&A is significantly negative and below the prior year. This is driven by temporary increases in net working capital with high inventories and high material prices that came on top of the seasonal pattern, mainly due to slow customer [ colors ] as a result of the aforementioned supply shortage. We expect, however, a significant release of net working capital going forward, leading to a significantly positive free cash flow in Q3 and Q4. The next slide depicts and summarizes where we stand with the restructuring plans or businesses. We extend our restructuring initiatives to a total reduction of more than 12,700 FTEs so far. And in the last 2 years, we already achieved roughly 2/3, which means in absolute terms, roughly 8,400 FTEs. As part of the restructuring, we expect for the group a cash out on a prior year level of fiscal year '21/'22, fourth fiscal year '21/'22. While the remaining expense will be significantly lower due to the provisions already made in previous years. Based on these restructuring efforts, we have realized from headcount reduction already, sustainable savings in the low to mid 3-digit million euro range during the past fiscal year, and expect them to climb to a sustainable high 3-digit million euro number in the midterm. Let's look -- let's take a look at our operational performance and the overview on the next slide. As evidenced by the graph and figures, we see a significantly improved performance in Q1 year-on-year, with all segments contributing with a positive EBIT adjusted with MT being the sole exception. Year-on-year, we see significant positive contribution with strong effects from Materials Services, Steel Europe and MT. At Materials Services, mainly due to significantly higher product prices. At Steel Europe with significant increase in average selling prices, however, partly offset by material and supply bottlenecks in many customer industries, especially auto. At Multi Track significantly reduced losses mainly by the positive contribution of AST and improved project execution by plant engineers. The positive effects from the operational side is supported through the stringent execution of headcount reduction that I already illustrated. The structural improvements are partly offset by effects from the aforementioned supply sub-shortages and higher factor costs, particularly relevant for Automotive Technologies and Industrial Component segments. Let me now walk you through each of our business segments and briefly highlight some major developments of Q1 in the following, starting with Materials Services. So we have seen slightly lower shipment year-on-year due to material shortages, mainly in Europe. However, sales clearly benefited from the favorable trading conditions with an increase of 39% year-on-year due to higher prices in all product groups, partly offset by lower warehousing shipments. Simultaneously, EBIT adjusted continued to be strong with a total of EUR 219 million in Q1, which is an improvement of EUR 250 million year-on-year, by favorable price dynamics clearly supporting margins as well as productivity gains achieved in the earlier via continued FTE reduction with a closure of 2 additional sites in this quarter. These developments broadly reflected the overall market picture with continued recovery in Europe and North America. Moving on to Industrial Components. In case of bearings, we observed a decline in order intakes and sales, mainly due to temporary decline in demand in China, especially in wind energy applications. And industrial applications with heterogenous performance bearing for construction equipment and general engineering higher year-on-year, while exploration was weaker year-on-year and crane construction, mainly on the level of prior year. Forged Technologies achieved significant increases in order intake and sales performance by strong demand for its components, mainly driven by growth in the industrial business and continued high level of powertrain components for trucks. Slightly supported by expansion of the product range and development of new markets and business areas. EBIT adjusted has declined year-on-year in both businesses and was impacted by increased factor costs at Bearings, this was mainly driven by declining sales, of course, and significantly higher cost of materials. The negative effect was partly counteracted by efficiency enhanced measures due to restructuring efforts. At Forged Technologies, the decline is based on rising steel prices as well as significantly increased energy and freight cost, which, of course, we are working on to pass them through. Continued cost-cutting measures with the associate optimization of the personnel expense ratio were able to partially also offset the increased costs. Next, to Automotive Technologies, which has been challenged with ongoing supply chain bottlenecks, mainly at their customers and thus volatile call-offs and weakening demand in China. Thereof, Automotive Technologies is lower in order intake and sales. However, we see signs in stabilization in customer demand quarter-on-quarter. Simultaneously, EBIT adjusted is substantially down year-on-year due to lower capacity utilization and increased factor costs. Partially compensated by price and performance measures, including sustainable reduction of personnel costs and cost savings related to higher production efficiencies and restructuring. Looking at Steel Europe, we had slightly lower volumes, particularly from auto customers, again, related to the supply chain shortage situation. However, Steel Europe is slightly up quarter-on-quarter after the planned relining of blast furnace 1 in Q4. Sales are significantly up with 39% year-on-year, driven by high price levels and a better product mix. This was partly offset by lower shipments and higher raw material costs. EBIT adjusted increased strongly year-on-year by EUR 104 million. Additionally, positive effects were achieved from the ongoing restructuring measures on the performance program. Looking forward with the upcoming adjustment on long-term contracts to actual market conditions, a significant improvement in the relevant financial ratios will become apparent progressively in the quarters to come. Moving on to Marine Systems. The stable sales growth and earnings improvement processes as planned. Order intake was up 55% year-on-year based on maintenance, service and marine electronics as well as the extension of existing surface vessel contracts. EBIT adjusted is slightly higher year-on-year, backed by measures taken under the performance program to stabilize or lower-margin legacy orders taking effect. And furthermore, Marine Systems managed to further optimize its administrative costs. And last but not least, Multi Tracks could again significantly improve across all KPIs. Order intake grew up by 80% year-on-year due to the aforementioned water electrolytes contracts of TK nucera and demand increases in plant engineering and as well as AST. Sales have been boosted by 28% year-on-year. The major driver was AST with higher volumes and higher prices. In addition, we saw positive developments at our cement plants business and the automotive-related businesses. And also nucera with its [indiscernible] service businesses developed positively. EBIT adjusted has significantly improved from previously minus EUR 111 million in Q1 '21/'22 to a loss of only EUR 1 billion over the same time frame in fiscal year '21/'22, mainly driven by improvements at AST as well as plant engineering on the back of better project execution. For our holistic outlook on the fiscal year '21/'22, we believe with an optimistic yet cautious view is appropriate based on the structural improvements in our business. Favorable economic forecast for GDP growth in Europe, the U.S.A. and China and. Also considering uncertainties stemming from supply chain constraints, effects from the recent sharp increase in input factor costs and not least, the ongoing costs of the pandemic. The development in Q1 and what we already see going forward is very confirming our targets for the fiscal year. Sales growth for '21/'22 is expected to be in the mid single-digit percentage range year-on-year and adjusted EBIT to significantly improve to a figure between EUR 1.5 billion and EUR 1.8 billion. Looking at cash flow, very important. We are expecting a significant increase in free cash flow before M&A to breakeven. And let me make it very clear, we clearly confirm this milestone. This is most likely the most important message regarding our guidance here. The improvement will come primarily from the increasing earnings and will also depend on changes in net working capital also including effects from payment profiles at project businesses, payouts for the restructuring plan that are currently estimated in the low mid 3-digit million range as well as the level of capital spending. Investor CapEx will be higher at Steel Europe in conjunction with Strategy 2030 and the other businesses, invest will stay high in order to strengthen competitiveness and targeted growth. But it is important to note, investments will be approved on a restrictive basis depending on business performance and cash generation. For our net cash position, we anticipate an increase of a high 3 digit million number, mainly driven by M&A closings of AST and mining. With regards to our outlook on the upcoming quarter Q2 to Q4, we expect Steel Europe with a further step-up in performance, in particular, on the back of better spreads from better prices and higher volumes as well as Strategy 2030 and positive effects also on the other auto-related businesses from continuing stabilization of supply shortages. At the same time, uncertainties stemming from the development of factor costs have to be monitored. For Q2, in particular, we aim to further quarter-on-quarter increase in EBIT adjusted, while free cash flow before M&A as anticipated in our plan, will be negative by effects from net working capital related to the strong demand. And here, we are especially talking about receivables. For the second half, of the fiscal year, we expect significant net working capital release, and both Q3 and Q4 are generating substantial positive free cash flow before M&A, also driven by a strong earnings development. To conclude, our quarterly figures clearly show that the measures of our transformation program are taking effect. Our goal to build a powerful group of companies with strong independent businesses is getting closer. We clearly confirm our guidance for the current fiscal year with an at least breakeven free cash flow before M&A, we are reaching another milestone in our transformation. This is a major and important step towards the midterm targets we announced in December '21. We made strong progress on our portfolio streamlining with value crystallization underway for our Steel business, where we will continue diligently evaluating a stand-alone option. And we continue to pursue M&A opportunities for our Multi Tracks businesses. And for TK nucera, an IPO as the preferred option is currently in preparation. A further important step is rewarding the trust of our shareholders. Therefore, we have set the clear target of the resumption of reliable dividend payments. Last but not least, it should be emphasized that sustainability is core competence for TK strategy and thus management priority. Our most recent rating results from CDP, for example, we are ranked for the sixth time in a row on the Climate A List, are already a further reward for our efforts, which we will continue driving forward. Furthermore, we are improving transparency for our stakeholders by publishing important information according to frameworks like most recently, the Sustainability Accounting Standard Board's report. Having said that, thank you for the attention, and I'm now ready to answer your question.
Yes. Thank you very much, Klaus. And we can now hand over to the operator for moderating the Q&A session. [Operator Instructions] Thank you very much for this. And now operator, please take over.
The first question is from Seth Rosenfeld of BNP Paribas.
I have 2 questions with regard to Steel and also on the auto side space. As it came off with regards to what you're seeing from your Automotive customers, can you just give us bit more color on to what extent you might argue witnessing an improvement in auto offtake over recent weeks? I think your guidance is pointing throughout the stability in Q2 -- fiscal Q2, and was to pickup only second half of the year. We've heard from several of your peers who have been more optimistic noting they've already witnessed an inflection. What could be driving that disparate guidance? I'll start there, please.
As we already, I think, mentioned last time. So if you look at this development in the auto industry and the semiconductor shortage, we saw huge effects on this in our Q1. So we have these call-offs which were not stable and things like this. But we also said that we consider this Q1 as the worst point. So -- and what we actually see is that we saw a normalization on a low level in call out from Automotive customers, yes. But we think it's going to increase during the next quarter. So we clearly think that this semiconductor issue, we will see till summer, at least till summer, yes. But within, let's say, ongoing normalization. So we already saw a normalization on low levels, but we are now seeing slightly increasing momentum here in this issue.
Okay. And the second question, please, with regards to Steel Europe performance. Last year, it was quite challenging to understand to what extent your lagging margins were due to cost headwinds versus the challenge of low-priced contracts. Now we're seeing a very sharp recovery in profitability. But again, it's challenging to know to what extent that -- because restructuring has been successful or just because the contracts are surging. What would you point to if we want to have more confidence with the fact that your internal operations are actually performing better, stripping out the tailwind on the contract side?
The question was hard to understand, but if I understood the question right, what can we, let's say, explain regarding the contracts and how is the restructuring running. So I think the restructuring is at the moment running clearly on plan. So you know that we had this restructuring target of making TK redundant. And then here, we are fully in plan. So on the cost side, we saw improvements here, really according to plan. On the other thing, the contracts. So we were quite successful to transform the spot price development into our long-term contracts, as we already mentioned last year. So if you look at the performance in the first quarter, so we were able to increase our performance to an EBITDA per tonne roughly, I think it's EUR 87 or something like this. So it is clearly the right direction, but this is not enough. So if we know that we want to increase our EBIT numbers in this deal, the last time we said we want to increase our EBIT by EUR 1 billion compared to previous year. And this is still our goal. And If we talk about this, you know that our performance has to be even much higher than EUR 87 EBITDA per tonne. So we are increasing this. And of course, this will be, let's say -- this will be supported by, of course, the better spreads we could achieve because of the contracts here. And of course, we see increasing volumes over the year.
Can you break out in that billion, how much is simply because of prices versus how much due to cost improvement?
Well, this is something we've -- this is a number very much in detail. So I mean you can make your own calculations on this segment. You know that how many people we made redundant, these are more or less -- more than 2,300 or more than 2,400 already. And this will also increase during the year. And you know the sensitivities of the prices here, so you can make your calculation because we are not providing that kind of details or information, yes.
The next question is from Faisal Qureshi of Jefferies.
It's Faisal Qureshi from Jefferies. So maybe just to look at Seth's question from a different angle. So some of your peers have reported that automotive supply chains have largely passed or are over. So could you perhaps highlight to us when you expect the industrial components and Automotive Technology businesses to return to historical profitability levels?
Yes. So if you look at our businesses here, if you look at Automotive Technology business, there are 2 effects. Of course, we see lower volumes and then, for instance, than previous year quarter and we see higher factor costs. Two issues on this year. We will see, let's say, improving volumes, especially if you look at our Q3 and Q4, yes. So we are in the phase that volume are coming up, and we see especially a dynamic in Q3 and Q4. So this is the one thing. Regarding the factor costs, I mean, this is something the industry is working on it. So we, of course, are working against this increase of factor costs. There are several ways to do so to pass it on to other programs to reduce the effects here. And with this, we think that we come to quite let's say, numbers where we are satisfied with at the end of the day. So this is where we stand here. So if you look at the Automotive Technologies, the margin in the first quarter was roughly 3-point something. And if I recall right. So of course, we will increase this margin. If you look at our Industrial Components business, I mean, also 2 effects. So in the Bearings business, we have clearly lower volumes because of this well-known development in the wind industry in China. Last year, we saw so much subsidies. And now we have, let's say, more normalization of the demand in this industry. So therefore, we see lower volumes in the Bearings business, especially here, which we, by the way, see coming up in the following years. This is very clear. We do not have any doubt in the future of this growth perspective in this business here. But we see it this year in a dip. And of course, we see also increasing factor costs here. So if you look at the margin of the Industrial Components business in the first quarter, we -- I think we achieved between 9% and 10%. This is something -- well, yes, we have been higher, and we will get higher during the year. But this is something, from our point of view, which is not a disaster. So we are clearly working on measures to work against this. We will see a bit upcoming volumes, but we will also see more measures to work against these factor costs.
Okay. And maybe secondly, so you mentioned that you're going to generate a significant amount of working capital release in the second half. So what's driving that? Maybe just in brief.
What is driving the working capital release?
Yes. The working capital is -- if you look at the normal development of working capital through the year. So if you look at the Materials business and also some Automotive business. So you always see a lift up in working capital to be prepared for the, let's say, for the strong months, January to summer, January to July. This is the normal seasonal pattern we always see. In this year, we saw 2 additional effects. The first one is that we, of course, saw price increases in our -- let's say, in our inventories here, which is, of course, something which is driving up the net working capital. And this was -- by the way, this was clearly a 3-digit million number and more, yes, which was price effective on the net working capital. And then at end of the day, we have to sell this inventory to higher prices, and this is something we will do successfully. This is the 1 thing. The other thing is what we saw is that the call-outs of our customer, especially the call-outs from the auto industry in the first quarter were lower than we expected. And this is also something which increased the net working capital. Clearly, we have to manage and we will manage that we can -- let's say, can sell off to relevant prices our inventories through the next quarters. But it's also very clear, we increased our inventories quite normally of the 2 effects I just explained, quite normally in the first quarter. In the second quarter, we will see higher receivables. That's the reason why our net working capital is not directly driving it down in the next quarter. Inventories will go down, but receivables not. And then we will see in the normal course of the business with the upcoming volumes and the upcoming sales numbers, we will see decreasing net working capital numbers.
Next question is from Bastian Synagowitz for Deutsche Bank.
A quick follow-up on costs. I guess you've been cutting your guidance in Autotec and I understand also order costs have been one of the reasons for this year. Could you maybe quantify the cost inflation which you're seeing in both AT and IC for us? And I understood that you're working on passing this one. What would be the time frame for that? That would be my first question.
Can you hear us?
Yes.
Well, to give you a precise number is very difficult at the moment. So the first thing I can tell you, if you look at energy costs, it's a question where you are. So if you look at the energy develop -- energy cost development in Europe and especially South Europe, you will see higher increases in the rest of the world. I mean, this is very clear. We are working with measures against it, but it is also very clear that these numbers do hit us. At the end of the day, we will see increasing numbers, but we -- it's too early to say that we really can give you -- provide you correct numbers here. And this is something we cannot really predict for the rest of the year. But the thing I can tell you is, if we consider the energy prices, which -- where we are at the moment, then of course, we will have an increase in numbers, a reasonable amount increase in energy cost during the year. But the good thing is that they are already implemented in our guidance.
Maybe if I can follow up on that. So I appreciate it's obviously difficult to quantify, but at the same time, only that's, I guess, the cost inflation which you're facing, I guess, most of your competition will be producing a similar product with a similar structure when it comes to these input factors. So is there a structured approach within that business on how you basically aim to pass that inflation on to customers? Or is it just very difficult to do because of the competition, but I guess your competition would probably try the same, yes?
This is something, of course, the whole industry is doing. And it is very, let's say, different from business to business, and it's what kind of contracts do you have. If you have longer-term contracts -- anyway in what kind of business, if you have long-term contracts, you normally have this contract where you can adjust these factor costs. This is easier to do. If you had short-term contracts, you normally do not have these issues or you have them in a lower amount. And the simple structure is that everybody is fighting to, let's say, get into the contracts and to pass them on. So this is a structural approach. But everybody is fighting for this, and everybody will do their -- in their respective businesses and in their respective industries. So it will be a fight.
Okay. Okay. Got it. That clarifies this. And then my second question is just on the AST disposal again. What are the terms for the 15% retainer stake, which you're having in AST? And how are you able to extract value from that? Will you receive the dividend? And -- or do you have some optionality to sell at a later point? Maybe you can give us some quick color here as well.
Yes. I mean, we have this minority stake already in. So this is -- the ratio is, of course, that in a certain perspective of time, of course, we will see whether we will have still this minority stake. But you have to mention -- or you have to bear in mind that there are still business development between thyssenkrupp and between AST independent from the new shareholders. So this is, of course, something which is helping. And therefore, it makes sense to have this minority stake. And I mean, we can do what we want with the stake, and we are free to do so whenever we want to do something. This is the only thing I can say. So I can't give you an outlook when or what are we going to do with this, I can only say we are free to do whenever we want to do something.
Okay. And is there -- I don't know, like a put closer in the framework or is this just up to a new negotiation with your JV partner?
I mean, put you mean, do we have to...
Which would allow you to sell it at a certain price?
Yes. We do have some clauses which think are in favor for us, but we are not commenting in detail on this. So you have to understand this. So -- but again, we are very flexible with this.
The next question is from Christian Georges of Societe Generale.
I'll have 1 more go at it. Because you mentioned in your statement that you're remaining cautious on maintaining your EUR 1.5 billion, EUR 1.8 billion target or range. I mean yesterday was obviously a bit more positive on the outlook for Automotive. And we've seen China as reinvest into infrastructure in recent 2 weeks. So perhaps good for the wind mill industry. If you were cautious, which of those divisions that you're looking at, would it maybe have more leverage on less caution? More steel or more your Industrial side?
I mean, if I got your question right, you said that the guidance we gave between EUR 1.5 billion and EUR 1.8 billion are conservative. This is what you're saying? Or...
Yes, that's what your statement says, right? Company remains cautious. So I'm just thinking if there were less caution, would you see perhaps more leverage on this caution in IC or IT or more in Steel Europe?
No. We always said that why we do this in this range because we clearly see still uncertainties in market environment. As we said before, we see this Corona issue, we see supply chain constraints, but we see them improving. And -- but there are some certainties in the world. That's the reason why we said this. If you ask me where we see upwind, I think it can come from every kind of business. So there is no really -- I would not say that Steel is or the Industrial business is the 1 who is coming up at the end of the day more than we expect. So no, I can't give you this information. Sorry for that, but we are...
If you were following the optimism with Automotive Technologies potentially improve year-on-year? Or is it something you're pretty sure will be lower year-on-year?
I didn't get the question. Can you repeat?
I'm saying you're guiding for EBIT in '20 -- this year below last year in Automotive Technology. I mean if you were more optimistic like the [indiscernible] is, do you think that possibility would be that you will at least match last year EBIT?
Well, this is a very detailed question. We did our guidance for reasons, yes. I mean, at the moment, we see some volume issues, and we see some factor cost issues. It depends very much on the development in Q3 and Q4. We are quite optimistic that Q3 and Q4 are going to improve. Our estimation is it is going to improve and the outcome is our guidance at the moment. If it's coming more, we will see. But at the moment, our estimation is like it is.
Okay. And on free cash flow, just to clarify what you were saying earlier, you were saying that you're pretty convinced you should be able to achieve a neutral free cash flow, but you're not ruling out a positive free cash flow. Is that a fair statement?
Yes, this is a fair statement. Because you have to bear in mind our structural issues. We still want to invest more than depreciation, much more than depreciation. And we do this by intention because we want to really enable -- increase the performance of the business. And we still have cash out for restructuring. So if we would not have the structural effects, we were not talking of -- we will not be talking about breakeven. We will clearly talk about the positive free cash flow. But these structural effects we see in this area -- in this year, and therefore, we're talking about a breakeven free cash flow.
The next question is from Carsten Riek of Crédit Suisse.
My 2 questions. The first one, we have seen recently an increase in raw materials. Could that hamper your fiscal year '21/'22 targets? And what are the assumptions you have actually in for iron ore and coking coal for fiscal year '21/'22, if you could share that? That's the first one.
We are not sharing the detailed numbers, but I can give you the raw material price increases, yes. Also that selling prices, we had some assumptions here. If we take the selling price development and the raw material price development, so let's call the spread into account, we clearly see that the assumption in our planning is fulfilled. So no risk about this at this point of time as far as we can see.
Perfect. The second question I have is on Industrial Components. When do you expect to push through the cost energy price increases to customers because you mentioned the performance was hampered here a little bit by those kind of factors. Is anything hindering you to actually increase the prices here or is it just a matter of time when we actually get this improvement through?
Yes, I mean, this is always a question which I fully understand. And -- but you also know how the business works. What is hindering us that we are passing on the factor cost. This is clearly our customer. We have contracts in some, as I said before -- especially also in the Bearings, we have some long-term contracts where it's more, easy some short-term contracts where it's not so easy. But we are fighting on this. And clearly, we can push through, we think we can push through a big portion of this, but of course, also with the time frame. This is not going to be one-on-one. So that is where we are going for. This is a clear focus and priority of us to work on this clearly, but it is too early to say when we will be successful and to what market, but it's a high priority, very clear.
The next question is from Luke Nelson of JPMorgan.
Firstly, just on the potential sales or IPO processes that are happening. Just a point of clarification on my side. I saw obviously, the headlines this morning around Steel Europe likely being delayed. Can you maybe just talk through what is happening with regards to the Steel Europe process? And maybe if you can give us some more detail around the path to a resolution around that? And then also, obviously, nucera, just if you can confirm the timing? I think previously, the sort of the Capital Markets Day or late last year was sort of indicating the June quarter, it looks like that has maybe slipped maybe again, just to give a bit of an indication on the timing around potential IPO of nucera. That's my first question.
Do you want to go on with the second? Or shall I first answer -- I'm answering the first question. So regarding Steel Europe, of course, it's a long way. I also saw these headlines in the newspaper and I know why they are there. And if you go back, we always said that, let's say, a spinoff or separation of the Steel Business is the preferred strategic option for us. And therefore, we started the process diligently, diligently go into details and work for the requirements to do so. And in this process, we are -- and we never, at least from our perception, we never said that we have a clear point of time where we can give you now. This is -- will be the time of decision we never said that. Tomorrow in an interview, I said we were not going to make this decision in February or March. And I will stay with this but we never said this. So we will go on with this process. And what we also said also on the Capital Market Day and at the general assemblies, the more clarity we have with this transformation of the steel industry or the steel plant into carbon neutral production the better it's for the separation. Clearly, we simply need more clarification for the business plan and other necessary things. And therefore, we said we take our time, and we review this diligently and when we are ready to talk about it, we will be ready, and we will inform you about this. This is the story behind, clear intention to do so. We are working on this, still on this. But I cannot give you a time line when we say this is not the time line where we say, yes, we need, let's say, further security in some issues on this. You may can understand this.
Nucera?
Nucera? Nucera was the one -- yes, we said that IPO is the solution we want to go for. And we said, I think also on the Capital Markets Day, I think we said the most likely window of opportunity will be the first half of this calendar year. And this is still valid. This is still valid. So most likely, we will have this IPO in the first half of this calendar year.
And tomorrow this will be available.
Okay. That's very clear. And then just on -- following up on inflation and raw material cost questions. Cut on iron ore, met coal power, but CO2 carbon is obviously at all-time highs. Can you maybe just confirm your exposure, either at a group level or particularly in Steel Europe, your potential exposure to that or whether there's any banked allowances or hedging in place that can offset the effects going forward?
Yes. So of course, the main issue is in the Steel segment here. And if you look at the CO2 things, you have to understand, we have a hedging in place. This is a hedging where we do some hedging. This is -- we are hedging the predictable amounts for the next year and then a certain portion for the over next year and then a certain lower portion for over next year. So this is a hedging which is still in place. In addition to this, we, of course, have this free allocation of CO2 certificates. And with these 2 instruments, we have, let's say, no major impact on CO2 exposure for the next, let's say, 2, 3 years, 2 or 3 years. So this is the first important statement. If you look further, it very much depends on how the free allocation of certificates will developed. There's something going on in the EU. You know that there are some plans to reduce this. This is not decided. But then we will see what kind of impact this will have on us. But first of all, for the foreseeable time, it is guilty what I explained before.
The next question is a follow-up from Carsten Riek of Crédit Suisse.
Just 1 question on materials -- on Multi Tracks. As we have seen, as you mentioned already before, the reduction in EBIT almost to a breakeven. But we also know that there are still AST in there. What was actually the AST contribution to the EBIT result from Multi Tracks in the first quarter?
So I mean, let's say it this way. We have not disclosed this -- single numbers for these companies in the Multi Tracks business. But if you look, of course, through the business or the development, what can be said, I mean nearly all businesses compared to previous year improved. So this is, first of all, very clear. So we guided for Multi Tracks a negative EBIT for the full year, and we still do so. We still do so. The positive development we saw in the quarter this fiscal year, yes, came from plant but also came from AST and the biggest portion -- positive portion came from AST. So AST is positive and contributed positive to this. So now, of course, the rest of the year, you know that since the end of January, we closed the business, it's not going to contribute to the EBIT development here. So -- but of course, the others are developing, positive developing. But we still are guiding for a negative EBIT for Multi Tracks for the whole fiscal year. I hope this helps a bit.
Yes, that helps. The other question I have is on Materials Services, another big contributor to your results. Could you remind me what percentage of that business is exposed to the North American market? Do you have it right in mind it's about 30%?
It's roughly 30%. It's a good.
Okay. I just wanted to double check. Perfect.
It depends very much on development between, 25% and 30%. This is...
So it looks as if there are no further questions. If that's really true, then I think we can conclude the call today -- for today. So we would like to thank you very much for your participation and for your questions. And with that, we say goodbye. And as always, of course, the IR department is available for you, and we are happy also here to take your questions. Thank you very much, and goodbye.
Goodbye.
Ladies and gentlemen, thank you for your attendance. This conference has been concluded.