thyssenkrupp AG

XETRA:TKA

Good morning, everyone. This is Andreas Trosch from Investor Relations. Also, on behalf of my entire team, I wish you a very warm welcome to our conference call on the first quarter results '24/'25 of thyssenkrupp AG.

With me in the room are our CEO, Miguel Lopez; and our CFO, Jens Schulte; and also my colleagues from the IR team. Before I hand over to the CEO and CFO for their presentations, I have some housekeeping.

All the documents for this call are available in the IR section on the website. The call will be recorded and a replay will be available shortly after the call. After the presentations, there will be the usual Q&A session for our analysts. [Operator Instructions]

And with that, I would like to hand over to our CEO, Miguel Lopez.

Thank you, Andreas, and also, a warm welcome from my side to our first conference call in this fiscal year '24/'25. As usual, first, I will provide you with an overview of our latest achievements in the first quarter, followed by Jens who will present to you the financials in detail.

Let's start with the first item on our strategic agenda, which is portfolio. Regarding Marine Systems, we are pressing ahead with a minority spinoff that we want to finalize in the course of calendar year 2025.

By that, we want to give our shareholders the chance to participate in the profitable growth path of the marine business. Regarding Steel Europe, we successfully closed the tk Electrical Steel deal and thus streamlined our portfolio and at the same time realized hidden values. In this case, the purchase price of approximately EUR 440 million.

The closing and payment of the purchase price happened at the end of January. You will see all effects in our Q2 reporting. Also at Steel Europe, following the presentation of the key points by the new steel executive board in November, the preliminary business plan is now being drawn up on this basis.

After that, the intended 50/50 JV with EPCG is the logical next step and we are, of course, working on all this with full determination.

Let's move on to performance. Overall, our quarter 1 figures look promising to us, especially in the light of the current market environment. Jens will give you all the details in a minute.

With pleasure, I would like to underline one of my personal highlights in the recent quarter, the record breaking new orders at Marine System. They comprise 4 new submarines for the German government as well as 1 new order for a civil icebreaking scientific research vessel, the Polarstern II. This clearly underpins the competitive position and the growth potential of that high-performing business.

On the back of the new orders, the order backlog is now with more than EUR 16 billion at a record level. With regard to APEX, the rollout of the enhanced program played a substantial part in enabling us to achieve an improved quarter 1 result.

We are satisfied with the progress and the positive effects will more and more be visible throughout the year. This is also true for our restructuring efforts that are necessary, but also paved the way for future profitability. Also here, we are on a good way.

And last but not least, I will give you 3 examples for our effort to prepare to scope for the future in the green transformation. First of all, Steel Europe and Volkswagen signed a memorandum of understanding for the supply of CO2-reduced steel.

With this memorandum, you can see that there's future demand for that kind of products. Secondly, Polysius will supply state-of-the-art CO2 separation technology to Greek TITAN Group to modernize its production facilities.

Here, with our oxyfuel technology, 1.9 million tons of CO2 can be captured annually. This corresponds to approximately 12% of all greenhouse gas emissions of the Greek industry. Thirdly, thyssenkrupp nucera and Hydrom signed a memorandum of understanding to explore the potential for water electrolyzers in the Middle East.

Jens will now present to you the financial section of this conference call. Jens, please go ahead.

Yes. Thank you very much, Miguel, and good morning, everybody also from my side. As always, we start with an overview of some of the highlights and challenges of the past quarter before we then dive into detail.

So on the highlight side, as Miguel already outlined, we've had a solid Q1 in our perspective from a financial point of view. And we are overall on track with respect to performance and transformation initiatives. Most KPI, as you could make -- KPIs, as you could see, are above the prior year. We've made progress on the portfolio side. So good first quarter in that respect.

With respect to outlook into the rest of the year, as you could see, we are confirming the EBIT adjusted guidance and we have been increasing our free cash flow before M&A guidance on the back of the net prepayments that we received from Marine Systems.

On a side note, this would be, if we achieve that and we are fully working on that, would be the third consecutive year with positive free cash flows, which, in turn, would be the first time in 20 years for our company that we achieve positive free cash flows for 3 years in a row. So would be a great fiscal year.

With respect to APEX, I told you last time that we have further beefed it up. We are now talking about APEX 2.0. We are focusing on structure performance improvement projects and execution. Resilience and APEX measures have actually helped us in backing up the results in Q1 and I will provide more details when we flip through the segments.

Balance sheet, all good. It's still a strong, largely unchanged, EUR 4.3 billion net cash. And last but not least, during our AGM 2 weeks ago, we received positive approval by investors for all of our points between 95% and 99% and as you know, we also paid out the dividend.

On the challenges side, no doubt, markets don't help at the moment. Many industries remain muted, many customer groups and particularly the automotive industry is under pressure. As everybody knows, we also face some geopolitical uncertainties that you're also very much aware of.

All of these have been the trigger for us to be more cautious on top line and for that, we have lowered our sales guidance. However, once again, to repeat, we keep our profit guidance and we increase our free cash flow guidance.

Tariffs are being discussed a lot these days. Overall, we estimate that the impact for the group from today's perspective, from direct effects, will be limited. We will see some impact on the automotive side once tariffs are more clear.

But overall, for the complete group with all of the businesses that we have and some upsides that we see in some of those businesses that are completely local, for local structured, we see the impact limited from today's perspective.

And then last but not least, from a cash flow perspective, we received the MS payment. On the other hand, we had net working capital build up in the first quarter that was largely, apart from seasonal effects, was driven by pre-production.

So for example, on the steel side, as you know, we are currently investing heavily into a new hot strip mill and to a continuous casting plant and we also have various crane repairs running and we need to pre-produce for that. And that also drove inventories up and similar things in the Automotive segment. So these were some of the reasons why net working capital was coming up in the first quarter.

Going from there to an overview of the numbers. Sales EUR 7.8 billion, down 4% versus the prior year, particularly driven by Automotive and this has been the trigger for lowering our top line guidance for the rest of the year.

EBIT adjusted EUR 191 million, which is up EUR 107 million versus the prior year. This does include one positive impact at SE that I will highlight in a minute. Even if you back out any of these effects, we would have been still significantly above the prior year. So good progress.

Net income almost up by EUR 300 million to minus EUR 33 million. This does include another impairment at Steel. Those impairments will stop once the new business plan is fully negotiated between the parties, between our steel management and the workers' representatives.

Right now we are still building on the old business plan and as long as that's the case, we may still face impairments and I already alluded to that when we did the annual closing announcements. So this is no surprise and it will stop once we have finished negotiations.

Free cash flow before M&A are almost 0. This includes the gross prepayments from MS. Two remarks on that. One is that, as you can see here, corresponding project cash-outs will follow over the next quarters.

We will partly synchronize those cash-outs with the cash-in within this fiscal year to the degree possible. This is also why we did not simply add the EUR 1 billion to our previous free cash flow guidance, but we try to synchronize some of the cash-outs with the fiscal year '24/'25.

And the second thing to be aware of already why we don't guide on quarters, one thing to be aware of is that we have to pay out the sales tax on this prepayment of EUR 150 million and this will happen in Q2. But very nice start into the year as well for this year.

Balance sheet, I think nothing unusual. Net cash, unchanged. Pensions, unchanged, equity ratios to 35%, so very solid for our transformation.

Going from there to an overview of the segments before I go into segment details. So top line development, I said 4% down. As you can see, this is primarily driven by Automotive and by the Materials businesses.

And on the bottom line side, we are -- we have been increasing significantly. Of the EUR 99 million increase for Steel, EUR 56 million is attributable to a compensation for electricity prices.

Now without going into too much detail, this is basically compensation for higher costs that we've actually had in the previous period. So in the period of 2023 and this only comes in with a time lag, which is why we see it right now here. But apart from that, in many businesses, we've seen profit improvements. AT and DT -- AT is under pressure. I come to that in a second.

Going from there through the segments quickly, Automotive Technology. Now this is where we face significant market headwinds, as I alluded to initially.

Top line is down 10%. This is a challenging market. We do have businesses that are growing. Bilstein is a notable business that is growing at the moment against this trend because we are also focusing, among other things, on aftermarket services and that does help.

Most of the other businesses are actually down versus the prior year. And that is then also reflected on the EBIT side where lower volumes, underutilization and some higher personnel costs leave their mark.

On the other hand, we're working heavily against that with APEX. I come to that in a minute. And overall restructuring also in that context, we believe, is on track.

ECF business cash flow is also down versus the prior year, partly driven by the earnings side and then also by net working capital buildups, which, as I said, are also attributable to preproduction.

On the APEX side, to be a bit more specific here, 3 top topics that we focus on. First, in this segment, we do focus on restructuring in various businesses, Automation Engineering, Automotive Body Solutions and Forged Technologies and a few others and that is well on track.

Second one is we also work further on bundling materials procurement across the business units for 5 categories and also get some synergies here. And then lastly, on the growth side, we are also ramping up a business for Bilstein for one specific large European customer in Mexico. So these are some of the APEX highlights here.

Decarbon Technologies, on the next slide, looks on the sales side flat versus the prior year. But please bear in mind that last year in May, we closed the sale of thyssenkrupp Industries India.

And if you would take that effect out, then organic growth would have been 10% versus the prior year. So this business is growing. We've had support from -- particularly from nucera, water electrolyzers and chlor-alkali businesses as well as some businesses within Uhde chemical plants business and this has brought top line up.

EBIT going up correspondingly, also including lower nonconformity costs. So we're working on better project execution there. And APEX also supports this development.

And then on the BCF front, we are also positive in the first quarter. Apart from operational measures and net working capital performance, we've also received some milestone payments within the 2 plant engineering businesses, Uhde and Polysius.

APEX, 4 highlights. First one is on rothe erde, our bearings business. We are focusing on operational excellence measures, including procurement, energy efficiency, workforce productivity, the whole spectrum and also restructuring at one of our German plants.

At Uhde, the chemical plant engineering business, we are working on standardizing and modularizing our -- basically our plant engineering capabilities. So this is coming closer to a quasi-serial business and with that becoming more dependable.

On Polysius, we are also restructuring and at the same time, boosting our services business. And last but not least, nucera is basically in the growth ramp-up to more hydrogen sales growth.

Coming from there to the Materials side, Materials Services. Materials Services market volumes are also muted, particularly in Europe and particularly in Germany. You don't see that so much on the shipment side because here, the direct trading business, which is the one with a lower margin within the businesses of Materials Services has been growing significantly.

But if you add the price point to the equation, then top line has been coming down by 4%. And as a consequence of that, also EBIT has been coming down, particularly in the warehousing business where volumes were down and then EBIT was coming down.

We are -- as you know, the strategy here is to further work on North American footprint and supply chain solutions business and we are continuing the journey there.

BCF, Business Cash Flow, has had a swing. Here, we have to note that the net working capital level in this business, which is basically shifting significantly throughout the fiscal year has been extraordinarily positive in the previous reference periods.

And so as a consequence of that, we have now a bit more normalized -- seasonally normalized in the first quarter. And because of that, free cash flow is significantly below the prior year.

APEX initiatives, both restructuring and growth. So on the one side, restructuring, thyssenkrupp Schulte. This is very well underway. And on the other hand, investments into North American growth and the solutions business. These businesses, both the regional component as well as solutions have significantly over proportional profitability.

And so the key strategy at Materials Services is to increase the share of these businesses in the portfolio. From Materials to Steel Europe, Steel Europe top line down by 11%. As you know, this business is also selling heavily into the automotive industry.

So we do see this impact. We have some businesses that are either on prior year level or even slightly growing within packaging and electrical steel. But overall, with a larger segment and with selling into automotive, this is down versus the prior year.

Nevertheless, as you can see on bottom line, bottom line is significantly above the prior year. So we've -- as I said, one effect in there was the compensation that has been coming in with a time lag versus cost that we've already had.

Then we have lower raw materials cost at the moment. So that also does help. And then we are also working on APEX measures. So overall, good quarter here. It's fair to say that 7.7% ROS is not the new normal for this business in the very short term. We are working on this with the new business plan, but this has been going extraordinarily well in this quarter. And of course, we are happy with that.

And then on the cash flow side, down EUR 235 million versus the prior year. 2/3 of that is actually CapEx-related, so higher CapEx and just because of the funding schedule, a little bit lower funding versus the quarter in the prior year. That explains 2/3 of the swing.

The other part is net working capital, within that inventories and that is, among other things, driven by preproduction for our current investments, as I already said.

APEX, now the most important part here is, of course, the new industry concept. And for the new industry concept, the business plan, which has been developed in cornerstones and is now subject to negotiations or will become subject to negotiations between the steel board and the workers' representatives, that is the key topic around Steel at the moment.

And in addition to that, we are also working on some performance initiatives that are still coming out of Strategy 2030, including some of the investments that we believe will bring further productivity to production.

Then last but not least, closing out with Marine Systems. Of course, that's a very nice business and with a very nice trajectory at the moment as you see. So top line is up, not difficult to see why, right, because of new orders and new projects and ramp-ups and things like that.

We have a record order backlog at the moment, EUR 16.4 billion. And we are still working on sales initiatives here. So this business has a positive outlook into the future.

And on the EBIT side, we are also up. We are growing profitably. We're making progress in execution of all projects. So all green here, I would say. And then BCF is driven by the EUR 1 billion cash in of the advance payment that has been coming in.

Nevertheless, also here, we work on APEX initiatives. The first one is what we call Target Operating Model. That is essentially a new organizational structure centering around the projects that we have.

And so we want to become more efficient on project execution. We've now started this and we expect that project execution will become even more dependable and efficient in the future.

Second one is a growth initiative. NXTGEN, we are thinking about civil maritime applications, for example, in the area of wind energy converter platforms. If we still have capacity with all of the business coming in, we would also prepare for additional directions here.

And then last but not least, we also try to reap additional synergies on the procurement front between the different projects that we have running.

So wrapping this up, going from operational profit EBIT adjusted to the net income side, EUR 191 million EBIT adjusted, deducting the special items, the largest of which is the steel impairment that we have booked, as I already outlined. This leads us to an EBIT reported of EUR 100 million.

Deduct from that the Elevator accounting essentially. Just remember, we have different -- we have 3 different financial instruments participating in Elevator. One is the ordinary shares.

Basically, they need to reflect the net income development of Elevator and since net income is always a negative there because of the financing structure, that leaves its mark in our equity result. This is no reflection of the operational development of this business, which is developing well and is also no reflection of the valuation of that business. It's just accounting at equity accounting.

Deduct from that financing items, tax items, then we come to net income, which is minus EUR 33 million, excluding restructuring of EUR 42 million would be a small positive net income for the first quarter.

And then from there, going to free cash flow from net income reconciling to operational cash flows, which is the largest item being the prepayment that we received and all of the other ups and downs that you can see in the cash flow statement leads us to OCF of EUR 300 million from that investments, positive free cash flow.

And then if you -- apart from a small M&A component, if you deduct from that IFRS 16, as you know, we are fully including capitalized IFRS 16 in our cash flows at the moment. This would lead us to minus EUR 21 million or almost balanced free cash flows in the first quarter.

Okay. And then closing with an outlook into the fiscal year. So on our guidance side, with respect to the group level, as I said, we have been lowering the sales side, syncing it with the start into the year and the generally subdued market environment, particularly on the Automotive side.

However, once again, we are confirming our EBIT guidance of EUR 600 million to EUR 1 billion and we have been increasing our free cash flow guidance to 0 to EUR 300 million. And as I said initially, would be the third consecutive year of positive free cash flows and the first time over the last 20 years.

And then on the segment side, we have lowered sales for all segments, except for MS. EBIT has been confirmed. And as I stated before, when we talked about the annual closing, MS and MX will have a chance to achieve their target ranges this year of 6% and 2% ROS respectively. So it would be a good, I think, next step in terms of achieving our road map.

And with that, I hand over back to Miguel.

Thank you very much, Jens. Now let's look at our strategic agenda for fiscal year '24/'25. The current business year will be a year of decision-making when it comes to our portfolio.

In the Steel business, we continue to work on the finalization of the business plan and we gained a strong partner with EP Group. They have initially acquired a 20% stake in the Steel business, an intermediate step on the way to the intended 50-50 joint venture.

And as I already mentioned, we pushed ahead with the minority spinoff of the Marine business. I'm convinced that we will see results in the course of the calendar year. We not only mastered numerous challenges, but also worked forcefully on the future of thyssenkrupp. We continue to build up our still young Decarbon Technologies segment and focus rigorously on the huge opportunities the green transformation presents.

And last but not least, in addition to the necessary restructuring measures that we have initiated and will further do, we are continuing to invest systematically in the future of thyssenkrupp.

I can only repeat myself, despite all current challenges, we should not doubt that thyssenkrupp has a bright future. A further proof point we have provided today and there's more to come.

And with that, we are at the end of today's presentation and I would like to hand over to Andreas. Thank you all for your interest and we are now ready to take your questions.

Thank you for your presentation. We start now our analyst Q&A session. [Operator Instructions] And the first question today comes from Jason Fairclough. Are you there, Jason?

Yes. It's this Teams. So we're Zoom people, sorry about that. Look, 2 quick questions for me, guys. First one is on Elevator. Second one is on Marine. First one, I think, is hopefully a simple question. What is the actual euro carrying value of the Elevator investment today? Why don't I just stop there?

The answer is EUR 1 billion, Jason.

Okay. Great. Second, just on Marine. There's been a few different stories out there suggesting what the path is now. Obviously, the Carlyle bid foundered last year, it seems on lack of government engagement. So the latest we hear or the latest we read is maybe IPO plus dividend in specie. Is that something you can confirm?

Absolutely. Of course, we are not speculating on why the Carlyle path was not successful. But yes, you are fully right. We are going to the minority spin within this calendar year.

And in terms of actually going ahead with that IPO, is there still a requirement here for the government to take a stake before that IPO can go ahead? Or is this something that can happen without government involvement?

That can happen without government involvement because it's a minority spin.

Okay. And again, just to come back to it. So is the medium-term plan to hold the rest of the shares? Or is it actually to dividend those out to shareholders?

Well, I think the basic idea is we have there a business with a strong and also for the many next years, interesting growth in terms of market, but also in terms of the business as such.

Of course, we are also intending to initiate then the consolidation of the industry with this move. So it's too early to say now what will happen after the spinoff. We will do first spinoff and then take the growth momentum, but also being then also the platform in our view for further consolidation of the industry.

Okay. So just so that I'm clear then, Miguel, you want to hold it or you want to spin these things eventually?

We are starting with a majority and we take it from there.

Okay. I mean, just a comment. One of the, let's say, criticisms historically is that it's a conglomerate, right? So if you list another business and then it just sits there, that, again, sounds like a recipe for ongoing derating. Why not just list it and then spin the shares?

Let us first do the first step and then we will come back with the next steps after this already happened.

Okay. I like that answer.

Thanks, Jason. And the next in line is Ephrem Ravi. Just one second, Ephrem, we are struggling with the technique. Yes. Ephrem, you have to unmute yourself, I just heard.

I have unmuted. Can you hear me now?

Now we can hear you.

Sorry, again, Teams. We are Zoom people. Can you update us on the progress of the negotiations with the EP Group on the 30% in Steel Europe? Specifically, could you give us some color on what are the key sticking points on reaching an agreement? And are there any sort of red lines for you and EP Group in completing the remaining 30%?

Well, of course, as mentioned before by Jens and by me, it is important that we have first clarity on the restructuring. And when having clarity with the restructuring and you know the Steel Managing Board has been announcing the key items, the key things to be done in the past November.

And of course, as soon as restructuring is built into the business plan, then we have the clarity. So conversations are good and we need now this to be happening and we take it from there.

The next question, it's one I'm sure you expected, tariffs. Understand it's a very volatile environment and many announcements and then suspensions of those announcements. But just to give a sense of the sales of -- into the U.S. from facilities outside of the U.S., mainly from Mexico and Canada and Automotive Technologies and Decarb Technologies, that could be vulnerable to tariffs. So any kind of steer on any potential tariff impact from that?

Yes. So I take this question. Thank you very much. Let me describe that to you more in general before I come to the figures. So essentially, we have 3 material businesses in the U.S. today, right?

So we have Automotive, we have Steel and we have Materials Services. On the Automotive side, we do have imports from other sites and also directly imports to customers in the U.S. So depending on how exactly tariffs will unfold and also depending on the individual [ inco ] terms of the respective customer contracts, which also play a role in tariffing, we would assume that we will see an impact on the AT side, but let's wait until tariffs are actually affected.

The second one is the Steel segment. On Steel, the EUR 1 billion of sales that we do in the U.S., there, we have a significant basically share of import. However, this is high-quality tinplate steel where our market position is fairly strong.

And in the past, including the first presidency, we have been able to roll this over to customers. On the Steel side, with direct impacts, we are relatively relaxed, midterm indirect impacts, nobody knows, right?

And then the third one is Materials Services. That is actually our largest business in the U.S. and Materials Services is a completely local-for-local structured business. So here, actually, our assumption would be that from a tariff situation, we may even benefit because that position is better than some of our competitors.

And then if you take everything together, AT, Steel and MS, today's judgment would be that tariff impact will be limited on the group in terms of the group's performance. But as you also correctly say, it's a highly volatile situation. Nobody knows what's going to happen next month. But this would be our best judgment today.

And in terms of import quotas and flows between our production sites, we wouldn't disclose figures. But as I said, overall, it shouldn't wrap up to a significant impact on our group from today's perspective.

Thanks, Ephrem. And the next questions come from Tom Zhang.

Just one for me actually and it's around, again, the sort of steel negotiations. Just -- yes, I would be interested in your thoughts on how you're thinking about the Decarbon investments and the sort of first DRI hybrid furnace given some of your peers are now pulling back waiting for more policy supports.

Are you still 100% committed to that project? And to what extent is that project linked to the negotiations that you're currently having with EPCG and within the Supervisory Board?

Yes. Thank you very much, Tom. The current view we have is that we will have the need to start production of the DRI using natural gas. So for the time being, the cost of green hydrogen is not competitive so that there's a clear indication that we need to start the whole thing, as said, with gas.

Of course, we are very committed to this project. But of course, it needs to be also monetized and it will be then effective if we are using gas in the beginning as long as we have not competitive pricing for the green hydrogen.

Having said this, of course, this plays a role in building the business plan as well. So this is also something that we need to finalize. And of course, this is then as the other topics as well, influencing the negotiation with EP Group.

Okay. That's clear. Could I just ask a quick follow-up? I think as part of the original plan, there were OpEx subsidies linked to that DRI plant. Would those still apply if you're using natural gas? Or was it always only linked to using hydrogen?

Well, this is depending on the ramp-up. The expectation is that this will be unchanged because of the no availability of the competitive green hydrogen.

Thanks, Tom. And the next question comes from Boris Bourdet.

I would have one question on Steel Europe. I know this is still -- you're still negotiating. But have you changed your mind on the overall funding estimate?

Last time I asked the question, I was referring to a range of EUR 1.3 billion to EUR 3.5 billion, which was mentioned by the press. And your answer, if I remember correctly, was that it would likely stand in the lower part of any range.

So are we still going that direction? And maybe on Steel Europe as well. There has been comments in the press that the Turkish group [ Tozielli ] was looking to buy some assets in Europe. So is it something that could be part of your plans, for example, exiting HKM?

And the last one is on the guidance. So you've downgraded the sales guidance with this release, but maintaining the EBIT guidance. I can see that consensus and myself, we are quite in the middle of that range of EUR 600 million to EUR 1 billion. So are you still comfortable with this EUR 4.8 billion?

Okay. I can start with the funding topic. Maybe I'll take the 2 financial topics, the first and the third one. On the funding side, I mean, of course, the funding requirements for steel are a function of the new business plan that is now being negotiated.

And so we will provide updates on that once those negotiations have come through. As Miguel said, this is the complete focus for the moment. We don't produce any new figures on that.

But of course, the target is to operate on the lower end of the ranges. But once again, it's a function of the business plan. Let's wait until negotiations are through.

On the guidance side, yes, I mean, our guidance is EUR 600 million to EUR 1 billion, which is essentially what we can confirm. And we have also not narrowed it to the one or the other direction at the moment. So we feel comfortable with the whole range for the moment, yes.

And in terms of potential interest of the group that you -- the company that you mentioned, not anything that I have been addressed with. So I cannot confirm.

Thank you very much. And the next question comes from Alain Gabriel.

A couple of them. Firstly, on the prepayments that you received from Marine Systems. Do those pertain to the German government order and the icebreakers that you have just referred on the call? And are there any other contracts that you expect to come through over the course of the year that may further boost your prepayments and free cash flows? That's my first question.

Okay. So I can take that. Yes, it is related to the government contract that we won in December. And on other contracts, I think we cannot comment on that yet.

But as I said, our sales teams haven't stopped working to put it this way. And so because we have a very good competitive position and we have very nice dynamics in this business, I would not be surprised if we get further contracts over time. But when exactly and so forth, it's too early to comment now.

And my second question is on the electricity compensation. Can you remind us what has been the absolute impact during Q1 '25? And how do you expect this to evolve over the course of the year, assuming current prices?

So maybe -- okay. So with respect to the absolute value, I think it has been EUR 125 million. And that is, as I said, mid EUR 50 million amount higher than the previous quarter of the previous year. And that compensation is always retroactive, yes. So it basically covers higher costs that we've had for energy in the calendar year of 2023, just to explain.

And how much would be the future impact for the course of the year on spot or on current prices?

Yes, we can say that because it's a -- what is -- without becoming too technical, what we get compensated is fluctuations in CO2 certificate prices. That's the German law, if you wish. And so it's a function of how CO2 prices will develop. If they increase further this year, then we get another compensation for that. But let's see how that's developing.

I see. So no further impact on the electricity side?

No further impact, no.

And the next question comes from Dominic O'Kane.

Just a couple of questions for me. On Electrical Steel India, could you just confirm, should we -- is there any taxes payable with the sale? And should we -- from a modeling perspective, should we assume the full sales contribution to come in, in Q2? That's my first question.

The answer is yes, but the amount is not high. So as we said, the purchase price has been EUR 440 million and we expect to cash in close to EUR 400 million after deducting taxes.

Okay. My second question again comes back to the sales guidance. So I recognize the kind of the macro environment is quite fluid. But in light of some of the news flow this week around Russia, Ukraine, I just wanted to maybe your thoughts on whether your sales guidance is maybe a little bit too conservative for the full year?

So I mean, our sales guidance is our best estimate at the moment, so to speak. So this is what we expect. I mean, as you rightfully point out, I mean, we can't foresee all of the geopolitical developments this year. But from all that we know today, all developments that we know today, we believe that's the best estimate we can give.

Okay. And my final question is just an add-on to Alain's question. Obviously, a record order backlog in Marine Systems. Could you maybe just give us some insight how you think we should maybe forecast that backlog unwinding over time? So any help on just sort of the timing of some of that backlog unwind would be really helpful.

So I mean, the only number that we give out, right, is our sales guidance, which, as you know, I mean, as we've just guided, is increasing by 3% to 6% for this year. In general, I think what you can assume is we have positive dynamics and we don't expect the order backlog to stay on the level that we currently have, yes.

So we expect it to further increase. And now the order that we received in December of EUR 4 billion is certainly on the upper end of individual orders -- of individual contracts, but you can assume that order backlog will probably further increase. But how much exactly, I think that's too early to say.

Thank you. And next in line is Christian Obst.

So first question is, again, concerning Marine Systems. Is there any kind of precondition when it comes to government guarantees for the spinoff? Or as you said before, there is no government involvement as a precondition for the minority IPO?

No, I'm confirming what Miguel said. So there are no preconditions. This will still be a fully consolidated business, right? And any financing structures are still basically covered by the group.

But before there was a statement that the government was more or less willing to take the guarantees, at least the bank stated something like that. So can you use that and not using direct stake of the government in Materials Systems? So can you separate that? Is that possible?

So I mean, with the structure that we now have, which Miguel described, in the first step, the government is not immediately in, right? So we make minority spinoff, still fully consolidated. We care for financing and also for guarantee structures.

I think what we can confirm and I think we have stated that before is that we continue discussions with the government. Midterm, we would welcome government involvement in this business. And around the discussions with the government, we also have discussions on the guarantee structures, yes.

That's true. But we have never confirmed that the government is -- has already confirmed that they're willing to take this over. These will be discussions in the next step, so to speak. Right now we focus on the minority spinoff, financing is unchanged.

Okay. Then coming to Steel Europe and all of these things there. Is the solution for HKM a precondition that you will come out with the finalization of your plan how to further develop with Steel Europe? And is that a precondition for the finalization of the 50% stake taken over by EPG?

Well, you know that we have been very clear communicating there is a process ongoing where we try to sell HKM and we also communicated clearly that if this sale would not be happening, then we need to pursue the closure of HKM. And of course, as EP Group is a fellow shareholder as ourselves, we are, as you can imagine, 100% aligned in this way of dealing with HKM.

Okay. Then there might be some kind of tightening of import quotas for steel maybe in April. Do you expect some tightening there from the import quotas and some positive impact maybe on prices?

Well, to be quite honest, I don't think that we have been now taking a positive look around this yet. But for sure, we will see the first effects after implementation and then we will make ourselves also then giving statements around it.

Okay. And last one is on Automotive Technologies. You have a target -- midterm target margin of 7% to 8% which this business area never achieved so far. Is there any chance that in the current structure, Automotive might achieve at least the low end of this range? And if not, what do you have to do beside any support from the economic environment to achieve the 7%, in what kind of time frame, in the next 2 years maybe?

Well, actually, we did set the target as, of course, we believe that we can achieve this range. Of course, something that needs to happen before and I think we were also very clear on this is that some of the businesses need to be restructured or sold. The ones that are dragging right now the EBIT to a level that we don't like. So this is, I believe, very clear. We need to adjust portfolio and we are confident that then our defined target margin range will be achievable.

Do you think this is possible in the next 2 years?

I believe that we will see that in the midterm future. I would not give you now 2 years or 3 years, but in the midterm, in any case, yes.

Thank you, Christian. And the next in line is Bastian Synagowitz.

I've got a couple left. Maybe firstly, following up on Steel. Just on the different moving parts here around this energy reimbursement on Steel and to get that 100% clear.

So when we think about basically the progression from the first quarter into the second, is the number we've got to back out here, is it EUR 56 million? Or is it EUR 125 million because this is just a payment, which is typically being made in the fourth quarter? That's my first question.

So I mean, as I said, the absolute number for this was EUR 125 million and the delta to the prior year quarter was EUR 56 million. This is an effect that is only taking place in the first quarter and it's not an effect for the second quarter. This is a compensation that's only happening once a year.

Got you. Understood. Okay. That's clear. And then my second question is on Marine. So when we look at the EUR 16 billion order backlog, it's obviously quite impressive. I'd imagine you must have a sizable amount of prepayments in the Marine's entity already.

Can you maybe update us on the total number of prepayments which is currently sitting in the Marine's entity here? And then maybe also briefly update us on where exactly the negotiations with the German government stand here, i.e., like what are the missing parts? I guess it's lingering and dragging on already for quite some time. Is there any hard point you're negotiating over? That would be great.

Thank you, Bastian. I think the second piece -- the second question, let's put it this way. Of course, we are in a very intense collaboration with the government because simply the nature and the importance of the industry. We can't call these negotiations. It is, of course, an important discussion about our common interests. But it's not a negotiation to be very clear.

Okay. All right. So -- sorry, go ahead.

I was just saying, Bastian, on your other question, we are just digesting. So just continue with further questions while we're working on the other one.

Yes. Okay. Sounds good. I mean, on the government situation, so is this basically like just you and mostly the German government, which really have to sort out, I guess, how the whole industry is supposed to be set up in maybe this new geopolitical environment as well? Is this what basically just defers it? Is that your impression?

Well, I think the overall logic that we have in the industry is, of course, that Europe and Germany need to build up a defense and also a defense industry that is really guaranteeing the security of Europe.

And of course, associated with that, we need to see how the growth that we need to see in this industry, how this growth can be managed. And you have seen that the need for -- with the orders that we got last quarter, the need for building up now a sufficient -- a self-sufficient defense industry is giving a clear indication.

And I think this is how we will also see the next future around the defense industry and of course, also the marine part of the defense industry. And this is, of course, something that we are intensively discussing with the government, of course.

On your other question, Bastian, we just reviewed and discussed that we would not disclose any further figures on total prepayments received. So we have this EUR 1 billion. And so you can assume that, of course, it's more than EUR 1 billion in total that we already have in the books, but any figure would be very difficult to interpret given the range of projects that are currently operating in various different phases.

And then the question is what is attributable to what and what exactly does it tell us? So we would not disclose any further figures. It's above EUR 1 billion. I mean, that in any case, of course.

Okay. I guess it's still a quite relevant number, particularly when you think about spinning it off because I guess it would be moving your cash balance quite a bit. So I guess it would be very helpful at least to have a bit more color, if not now, maybe throughout the year, just to give a little bit more background on how your cash balance basically moves.

But then my last question is on autos. And I guess it's not surprising that the business had a weak start given the environment and the headwinds in automotive land. You've been also cutting your sales guidance.

So I'm wondering how confident would you be to say that you'll get back to the EUR 50 million plus run rate in the next quarter, which you need to hit the lower end of guidance? I suspect it's obviously a different environment and it probably has just become more tricky to call just in the tariff context.

But it would be interesting, obviously, to hear your view and your conviction. And maybe if you could at least also single out the Mexican sales, which you do have sitting in that entity.

So on the first question, how confident are we? First of all, it is -- I mean, 2 simple things to say, right? The first one is, yes, this business is under pressure. That's why we lowered the top line guidance.

And the second one is we have kept the profit guidance, right? I mean, these are the cornerstones at the moment. So what I would say is the following.

We are currently taking additional measures in this business. We are already restructuring quite a bit and we have enlarged the restructuring further and we think about even further measures that will have a profit impact this year, which means that from today's perspective, we do confirm this guidance.

You cannot necessarily expect that that is, of course -- that everything is already having an impact in the next quarter, yes. So whether in the next quarter, the run rate for AT is EUR 50 million or not there, I would be -- I cannot say that yet, yes, because some of the measures are loaded towards the second half of the year.

But so far, our clear ambition is that we have enough measures defined and topics working on to get to the point that we're guiding at the moment.

Okay. Great. And Mexican sales exposure?

We -- actually we are -- so I have a sign here that we don't disclose figures on that level.

And now we have a full circle moment with Jason. He started the Q&A session and he has apparently some follow-up questions before we then finalize the call.

All right. So I love starting and ending. That's great. Maybe a simple question. I'm trying to think about freeing up capital as you get the government on board, which allows you to sort of release the capital associated with the guarantees in the Marine business. So my question is, I guess, if we think about bringing the government into that business, how much capital becomes available that's trapped today?

So I think what is important to understand structure-wise, Jason, is that there is -- these guarantees don't have to be backed up by cash, right, or by any other capital. These guarantees are a burden for a group because they are, of course, being looked at in the context of any other additional financings we want to make.

So it's a relevant piece of information for banks and they look into this. But these are not guarantees of a type where we need to back them up with specific capital, yes. So it's not that all the guarantees that we currently have, X% needs to be cash back.

So so far, long story short, while it would be great to get the government in, this would further increase our financing flexibility. It does not immediately "free up capital."

So it doesn't directly free up capital. But if we think about it then in terms of financing capacity, can you put a euro number on the financing capacity that becomes available if you get that kind of guarantee removed?

I think this is difficult at the moment because the potential ranges of outcomes with the government, as we've seen from our first discussions with the government, are pretty broad, yes. So I think it would be unwise for me to put out any numbers of how further changes that capacity, for example, for the time being. Let us first do further work with the government and then we update you on this.

Okay. That's helpful. Just last comment and I guess to end the call, your cash -- net cash is over EUR 4 billion. Your market cap is EUR 3 billion. I sort of mentioned this before, but you could just buy the whole company back, right?

We are not doing this theoretical analysis right now, Jason. We are focusing very, very much on the 2 portfolio things that we have been discussing for a while.

We are focusing on getting the performance up and getting more capacity for free cash flow generation. And that's our full concentration and of course, the green transformation.

And there will be a time where when we achieve these goals, then we can also start to think product, but this is not now and not within the next, I would say, 24 months. So now what we need to do is very, very clear.

And we are showing -- and that's good despite of all the really difficult market challenges that are around us, we are showing progress and we will continue to show progress.

So thank you very much, everyone. This concludes our Q&A session. The Investor Relations team is available for further questions if you might have them. Thank you. Have a nice rest of the week and bye-bye.