thyssenkrupp AG

Thank you very much, operator. Hello, everybody.

This is Claus Ehrenbeck from the Investor Relations team. And also on behalf of the entire team, I would like to wish you a very warm welcome to our conference call today on Q3 and nine-months numbers.

All the documents for this release have already been disclosed this morning at seven o’clock and are available on our website. This is also far from my side, I would like now to hand over to Klaus Keysberg, our CFO who will lead you through the presentation and the slides.

And afterwards, there will be a Q&A session. So Klaus, please.

Yes. Thank you very much.

Also a warm welcome from my side here to today’s conference call. And let us briefly take a look at some key financial highlights reflecting our strong operational progress year-on-year upswing here, fueled by continued market tailwinds, particularly related to the materials and automotive businesses, we were able to improve our top line year-to-date with a significant order intake and sales increased by 28% and 14%, respectively, year-on-year.

Consequently, we recorded a nine-month order intake of €25.3 billion and sales totaling €24.6 billion. Simultaneously, we have been able to generate a positive EBIT adjusted of €266 million in Q3 alone.

This results in a nine-month figure of €564 million supported caused by string in custom restructuring measures. This figure represents a significant improvement vis-à-vis the minus €1.16 billion loss recorded during the same period of time for the nine-month of the previous fiscal year and includes also a negative minus €236 million effect from the multi-tax segment.

Furthermore, we recorded an even stronger performance in Q3 this year with an EBIT adjusted of €266 million compared to €220 million in Q2, which is up 21% and by far more than sales growth, which was 1%. This positive development is also reflected in the free cash flow before M&A, which has improved substantially by €3.1 billion year-on-year from minus €4 billion in the first nine-month of the fiscal year 2019, 2020 to minus €953 million thus far in the fiscal year 2021.

With the latter figure, including also business cash flow of minus €167 million from the Multi Tracks segment. In this context, it should be noted that Q3 contributed a free cash flow before M&A of minus €235 million representing a marked improvement versus the minus €750 million in Q2.

And let me emphasize at this point, that we will relentlessly continue our efforts to render TK a much better company and to drive performance regardless of the current tailwind we can see. Let us now jointly take a look at the performance in Q3, more specifically, starting with our performance and restructuring programs.

In light of the strong demand, particularly in the case of material service, we achieved the already mentioned EBIT adjusted of €266 million. Without externalities, this figure might have been even higher due to Automotive Technologies, industrial components being affected by the all-known semiconductor shortage causing lower customer call-offs and higher ski costs and primary products and stereo being hit by high raw material prices due to the time lag in reflecting price development in contracts with our customers.

Moreover, we have continued to stringent execution of our headcount reduction and reached cumulative FTE decrease of roughly 6,900 FTE within our defined programs. Therefore, we have already achieved more than half of our overall reduction target of more than 12,000 FTEs.

And at the same time, we have achieved a total head count reduction, including additional indication of about 7,700 FTEs so far. Regarding our free cash flow before M&A of minus €235 million, significantly higher earnings were offset by required net working capital buildup of roughly €700 million.

As I mentioned in previous conference calls already, we anticipate the current fiscal year to exhibit disproportionately higher investments, especially but not only Steel Europe, which are markedly above depreciation. - to create a sustainable performance boost.

And last but not least, we have a strong balance sheet with a net cash position of supporting our transformation program and enabling decrease of freedom for pursuing performance-enhancing actions. Moving on to our portfolio transformation.

We see clear and swift progress in the streamlining of Multi Tracks with the signing of the mining sale to Ethel Smith, leading to a positive cash to positive effects on net cash, pensions and equity alike. At the same time, we have accomplished the signing of the Infrastructure business sale on August 5th and have entered the due diligence phase at AST underlining our commitment to a rapid portfolio transformation.

In terms of Steel Europe, we are working on optionality for a stand-alone solution, as reported already earlier, a decision regarding the preferred future scenario we will be taking most likely in spring next year. The next slide depicts and summarizes where we stand with the restructuring plans for our businesses.

As part of our restructuring, entailing a reduction of more than 12,000 FTEs, we estimate that 2/3 of our current target will be achieved until the end of this fiscal year ‘21 within an almost equal split between Germany and the rest of the world. This target can be reconfirmed given that we have already accomplished a cumulative headcount reduction of 6,900 FTEs until the end of June.

As part of the restructuring, we expect a low to mid-three-digit million cash out for the entire fiscal year, while provisions will also be in this range. Based on these restructuring efforts, we will have realized from headcount reduction of this headcount reduction programs low to mid-three-digit million number in sustainable annual savings since 2019, 2020 until the year-end.

In addition to savings from other restructuring initiatives, for example, closure of sites, reflecting our strong commitment to substantially improve the bottom line. Let me briefly highlight some major developments at our business segment in the following - starting with Materials Services, which reported an outstandingly strong quarter, the strongest in at least the last 10-years, and it looks as if this will be also true for the entire fiscal year.

So we see also good dynamics going on for the next weeks and months ahead. As you can see, we have revised the format of our presentation, thereby presenting one charter segment, reflecting the group of companies concept.

In addition, the business insights, we have also added some information regarding market trends on the right. At Materials Services, we were able to benefit from strong market recovery leading to a note degree shipments increase year-on-year, even though these figures are still below pre pandemic levels.

And it should be noted that shipment volumes would have recovered even stronger if demand would not have exceeded supply from steel mill for some materials. Moving on to sales.

The segment clearly benefited from an increase in material prices, especially for carbon stainless steel and the significantly higher shipment translating into 70% search year-on-year. In addition, the demand for steel has experienced a significant increase year-on-year across Europe and North America, particularly in the case of carbon steel in Europe.

Simultaneously, adjusted has improved substantially to a total of €232 million in Q3, in line with the favorable price dynamics in the spot market that led to sizable windfall profits and productivity gains achieved in the via continued FTE reduction. This is also Important to say this FTE reduction totaled 1,800 versus the fiscal year ‘18/’19.

These developments broadly reflects the overall market picture where strong demand recovery is likely to drive shipments above pandemic levels during the next fiscal year with supply from producers is available. Moving on to Industrial Components.

We have recorded a 40% increase in order intake and sales year-on-year. In case of bearings, the growth mainly came from industrial applications in Europe and the Americas, while the demand for the wind energy was temporarily lower year-on-year as expected, given the tax incentive driven extraordinary strength of the Chinese market last year.

And Forged Technologies witnessed strong demand with components across all regions, mainly for trucks and construction machinery with a slight effect of the semiconductor shortage and car manufacturers. At the same time, EBIT adjusted has increased by €41 million year-on-year, particularly due to forge technologies driven by the top line as well rigid cost control and savings related to personnel costs and procurement.

On the other hand, bearings recorded a lower EBIT adjusted year-on-year due to changes, particularly in the product and regional mix as well as higher steel prices. Nonetheless, the business achieved positive, of course, positive effect year-to-date due to scale economies in wind energy, product mix effects and efficiency gains in [indiscernible] via restructuring.

Looking further out, a positive midterm trend for wind turbines is clearly expected with the rising demand for energy and the shift towards larger wind turbines and rotor blades as key drivers for which we offer the right solutions with our products. For Forged Technologies, market experts such as IHS predict further demand growth for heavy-duty engines and construction machinery, which obviously goes very much in line with the GDP growth.

Next up is Automotive Technologies, which experienced a significant upswing across all businesses, supported by strong automotive demand, especially in China. As a consequence, the order intake and sales have increased year-on-year by 53% and 49%, respectively, despite the aforementioned semiconductor issues.

Simultaneously, Automotive Technologies was able to substantially improve the EBIT adjusted year-on-year based on high plant utilization rates at all businesses, particularly for new plants, a more favorable order structure and cost savings related to higher production efficiencies and restructuring. This result has been achieved despite headwinds stemming from higher logistics and packaging costs.

Taking a look at the overall market environment, IHS expects further growth in the global automotive production to 80 million units in calendar year 2021, which is still below pre-pandemic levels. Over and above, we believe that we are well positioned with our products to benefit from the major trends of autonomous driving and e-mobility.

At Steel Europe, we recorded significantly higher shipments, sales volumes and prices, particularly related to the automotive industry. In more concrete terms, shipments increased 5% and while sales rose by 74% year-on-year, reflecting the strong demand recovery in the steel sector.

Furthermore, net sales per tonne have ramped up quarter-on-quarter and we are confident that we will see positive effects also in the quarters to come. Moving on to EBIT adjusted higher selling prices and an optimized product mix were partly offset by higher material costs and temporary production constraints mainly due to the relining of Blast Furnace 1 initiative in Disco in the third quarter.

Our long-term contract structures mean there is a delay in increased raw material and steel prices feeding through to our revenues and earnings. While we expect a significant positive sales and margin effects from our contract in upcoming quarters, this margin improvement will in Q4 be offset by the blast furnace relining just because of lower volumes.

For the upcoming fiscal year, we expect a significant margin in EBIT adjustment improvement based on the already signed and respectively, upcoming signing of long-term contracts with clients and ongoing cost cuttings under Strategy 2030. To sum it up, the positive effect on earnings will come.

We will just see it later than our competitors. Marine Systems, Q3 order intake mainly consists of smaller surface vessels and marine electronics as well as corresponding services.

Whilst the Q3 figure represents a 24% growth year-on-year. It remains below Q2 due to the impact of the sizable Italian Navy order in that quarter.

But it should also be noted, however, that the big ticket, the €5.5 billion order for submarines from Norway and Germany was signed in July and will hence be booked in Q4. Sales have followed a similar development with a slight increase year-on-year to the handover of the second and third correct to the Israeli Navy, but below we have triggered and over to the German Navy occurred.

In terms of EBIT adjusted temporarily higher costs related to the percentage of completion accounting of ongoing projects have led to a slightly [indiscernible]. At the same time, we have initiated performance initiatives in new orders and to secure the profitability of current order backlog.

Looking at the overall market, the Norwegian and German submarine orders could have lighthouse effect and serve as entry ticket to additional orders of Europe and Navis. And last but not least, at Multi Tracks, there has been a significant improvement across all major KPIs, in particular AST, took advantage of the favorable market environment.

And we also managed to win the first reference project in the United States for water electrolysis, where the client intends to produce green ammonia based on green hydrogen. In the light of more favorable trading conditions, we managed to boost our sales by 16% year-on-year and the order intake by an even more sizable 90%.

Furthermore, we have substantially enhanced our EBIT adjusted from previously minus €189 million in Q3 2019, 2020 to a loss of only €45 million over the same time frame in fiscal year 2021, mainly driven by the improvements at AST and plant engineering the latter being driven also by the strong progress with the mining as well as the sentiment business are making. Overall, ongoing restructuring programs across all units with a total of now 700 measures led to an FTE reduction of roughly thus far.

Over and above, we made some significant progress regarding our portfolio transformation, for our Multi Tracks business, where we aim for a strategic partnership sale or closure. And this is the number one reason why we established this segment last year in May.

The solution is already in reach four or five businesses as of today. As previously announced, we have initiated closure of heavy plate and carbon components.

And during Q3, we have been able to conduct the successful signing of the mining sale on July 29th and the sale of infrastructure on August 5th and of course, started the due diligence with potential buyers. For the ASP business.

Based on the solid performance during the first three quarters, we would like to confirm our previously increased guidance for sales and EBIT adjusted and further detail our guidance for free cash flow before M&A. Consequently, we still expect all segments to contribute positively to EBIT adjusted with the sole exception of dire -.

Regarding Q4, we anticipate a lower positive EBIT adjusted quarter-on-quarter because seasonality effects at our Autolated components business the blast furnace relining at Steel Europe and effects of likely slower call-offs from auto manufacturers due to their supply chain constraints, seasonality might also have effect on Materials Services, however, cushioned by the obviously existing strong trading positions. Therefore, we expect a positive mid-three-digit million EBIT adjusted for the entire fiscal year, and this at the top of the implicit range, which includes a Multi Tracks loss of approximately 300 million.

In terms of free cash flow before M&A, we anticipate a significant improvement and to move towards the year-end figure of minus €1 billion with a range of minus €1.2 billion to minus €1.5 billion, mainly caused by a net working capital build up in line with sales growth and high commodity prices and the effects from temporarily, previously mentioned supply chain issues at our customers. The variability of the cash profile at Marine Systems and Multi Tracks and investments above depreciation to further support our plant performance step up going forward.

Moreover, it should be noted that our free cash flow before M&A guidance includes a negative business flow - cash flow assumptions of around about €350 million from Multi Tracks. In this context, I would like to recapitulate the supportive fundamentals going forward, which lead us to expect sound training conditions to prevail beyond 2021.

Before outlining this positive development law, let me reemphasize that we will have to continue monitoring the semiconductor supply situation. First of all, the continued favorable demand situation for cars, trucks and off-highway vehicles alike are set to benefit AT and Industrial Components.

Next, we witnessed a strong demand for steel and industrial materials, positively affecting our material businesses. Moving on, we expect a further decarbonization and the related green hydrogen trend to lead to increased demand for industrial scale electrolyzers, supporting our Uducloran Engineering business.

And finally, in addition to these market-related factors, we have secured long-term contracts with our clients at Steel Europe, they consider the strong demand as well as higher raw material prices. Moving on to the next slide.

I would like to reemphasize our commitment to value creation and provide you with an overview of what we are building on. First of all, in almost all our businesses, we are amongst the market leaders.

In this context, I would like to once more highlight our leading position in the green hydrogen electrolysis, which we are confident to leverage even stronger in the future. Over and the box, we are renowned for our technological expertise based on our long-standing engineering expertise, including IP and profound ties with our customer base.

Furthermore, we have successfully initiated our financial turnaround by demonstrating that we are capable of extracting value from our restructuring efforts and while achieving some first success stories as part of our ongoing portfolio stream. Simultaneously, we possess a strong balance sheet with an equity ratio of 29% and a net cash position of €4 billion, thereby, creating a solid basis for continuing our restructuring efforts and portfolio streamlining.

And finally, we have a clear commitment to substantially, which will - sorry, to sustainability, which will continue to be a management priority moving forward and have and have defined a road made leading to science-based target initiative approved climate types. Having said that, I would now like to take the time to answer your questions.

Thank you very much.

Thank you very much, Klaus. Hello operator, could you please take over for the Q&A session.

And my first question would be on your free cash flow. And on the free cash flow expectation for next year.

Of course, it is still highly uncertain what the earnings level is going to be. But also this year, I think you have shown that the company can be cash flow break before net working capital swings and before restructuring-related cash outflows can you already tell a bit what that means for next with regards to those, let’s say, more one-off related factors, for example, on net working capital, maybe the opposite of the debate we had years after a strong Q4 net working capital buildup, which you naturally expect to release next year?

Any reason speaking against that? And also on restructuring, maybe you can already tell us whether or not or maybe that the cash outflow for restructuring is going to be similar next year, like this year and then maybe also anything special on CapEx that we should already be aware of for next year?

Yes. Thank you, Mr.

Schachel for this question. Of course, the cash flow performance is, of course, one which I normally get the most answer questions for I mean if you look first at the free cash flow development in this year, we always get the question, so now you are accreting your EBIT, but why you are not increasing your free cash flow so much in line with.

If you look at the structure of our free cash flow, you have to bear in mind the following. We have principal high priorities.

The first priority is to come to a positive free cash flow, yes. But what we also always said is that we have to come to a position where we enable our businesses to come to in a position to be in the top three peer groups.

And therefore, we have to enable our businesses. This means we have to restructure the business on the one hand, but we also have to invest in the business, which we consider as core.

And this is what we are clearly doing. If you look at our full year cash flow of our full year performance, then you have to bear in mind that we invest in our business, 160% of our depreciation.

This is something [indiscernible], and we do this because we are strategically totally convinced that this is the right way to do. This is the first one.

This is an investment in the future of the businesses. We could early say, no, we are not doing this then we could come up here and say, well, we have a positive cash flow, but we are investing on the depreciation level, we could do so, but this is not something where we have strategically consent.

The second item is we are investing in structuring. We are investing in restructuring, as I said before, a low to mid cash out in this year.

This is something we do by intention. - because we think that the restructuring is necessary, we could postpone the restructuring to save cash flow.

No, we are not doing it because we want to speed up. This is something we are also doing with our cash flow.

And of course, we have some business in the Multi Tracks. Yes, we do have where we have structural problems.

This is what we always said. So with these three items, we do that, what we always do what we always said, what we do, we are investing in.

And our balance sheet position. I mean, we have to come back to positive cash flow.

This is very clear. But this is the reason - one of the reasons why we also divested Elevate to be in a position to enable our businesses and now coming to net working capital.

So I mean, you all know the low price - the raw material price development. And of course, if you look at our net working capital development for the full year, we will have an effect of a very high three-digit from net working capital.

And 80% or something like it is coming just because of prices, just because of prices. So this comes not as a surprise to me.

I don’t like the number, but this is not coming as a surprise to me. So this is the structure of this year.

And if you now come to the next fiscal year, I mean if you come to the next fiscal year, we will still have a cash out for next fiscal year for restructuring. This is something which is also a low three-digit number.

And we will also have investment, which are exceeding depreciation. This is what we clearly intend to do to further enable our business.

But in spite of having this our clear target is to have a positive free cash flow. So this is - I cannot say more at this moment, but - This is at least what we are aiming for.

I hope.

Sure. No, it has a question.

Thank you for sending a very clear message on the cash flow ambition. And can I also ask you about the timing of your, I think, decision on the, I would say, strategy or structure for Steel Europe.

I think you have now indicated early next year at a point in time when you want to make a decision. I think you have already looked into this matter for a while, and I think the last quarters, we were under the impression that maybe it is the steel market outlook, where we still want to see how things play out before you take a decision on Steel Europe.

And of course, steel markets being at least seemingly more stable waters right now. What is it that prevents you from taking a decision earlier?

Is it maybe the performance gap you want to have more visibility how quickly you can close that you want to demonstrate that the margin gap to peers is closed. - the competitive landscape and that you need a firm a view of your willingness or your competitors to engage into M&A activity with you why do you now aim for spring next year?

I mean if you come to a decision to, let’s say, separate the business, if you look at other examples of this and if you look in detail to this you never get to a decision very quick to this. So you have to make preparations.

You have to talk to this and that and so on and so on. So if we say that we will intend to have a decision on this spring next year.

This is on the time line. This is not too conservative.

This is more normal time line for us. But what you said, of course, is playing, of course, the road if you look at the performance of the SKU business, we indicated that we consider this business is going up with margins and EBIT because of the structure of the contract you all know this.

And of course, this is helping, and we have to see these proof points for us and also for the outside world to take a decision from this. And of course, you know that we are working on, let’s say, make also some assumptions regarding the transformation to carbon neutral steel.

This is something, of course, we want to have a bit more planning security these are some items, which, of course, let’s say, lead to the fact that we will come to - that we plan to do the decision in March next year or whenever - not much in spring for the next year. Yes, Ingo, thank you very much for the questions and also for asking only two questions at a time.

And we would also like to ask all other participants who ask questions only to ask two questions at a time so that as many as possible participants has a chance to ask your questions.

Thanks very much.

Ingo, thank you very much for questions and also for asking only two questions at a time. And we would also like to ask all participants who ask questions, only to ask two questions at a time so that as many as possible participants have a chance to ask the questions.

Thank you. So operator, please continue.

First one is on the last merger line. What percentage of the cost was taken in Q3?

And how much should be the remainder for fiscal Q4?

I don’t know whether I got the question right. the cost for the blast furnace reline and Q3 And yes, I think this is - the cost for the relining is a low two-digit number in this respective Q3.

And then is it fair to assume it is a high two-digit in Q4?

Yes. Yes.

Okay. So my second question is around pension.

You obviously got a large amount of net cash. What is the catalyst for fixing the pension liability?

And by fixing, I don’t be topping it up completely, but putting in sufficient cash to the plan assets that it can meaningfully self-fund its annual requirements.

Yes, we could do so. This is clear.

This is something we will always from time to time consider for ourselves. I mean in the past, we did not because we want to, let’s say, keep the flexibility with the liquidity.

I think we explained it also before. And now it is the time if you come to certain let’s say, M&A decisions regarding steel and things like this.

We would like to have a clearer picture on what the portfolio will be in the coming months or years. and then take a decision on this.

I mean if you talk about the steel business, you know that in the steel business, there are €4 billion in pension liabilities. And it makes a difference if you - how to deal with these pension liabilities if you consider this as part of the group or stand-alone and things like this.

And therefore, we are, at the moment, a bit reluctant on making a decision on this. But in price could do yes, we could do, but this is the reason why we do not so far.

Okay. So after spring 2022 then?

Yes, most likely.

Dr. Keysberg.

I appreciate it. Just on steel, you mentioned that the profit is going to come.

It is just going to take longer than peers. I was looking at it and this business once earned more than €1.7 billion in EBITDA per year for five-years in a row.

And this year, it looks like it is going to do €400 million in the strongest steel market ever. And so I guess the question is, can it recover?

Or is it permanently broken? And is anybody at Tyson held accountable for the contracts that mean that this thing is under earning?

Yes. So first answer to the first question, very clear, yes, this business can come back to this level.

Very clear. We are totally convinced about it totally.

So if you come to the explanation of this, I mean, our contract structure is more long term. I explained it several times.

So our spot price exposure is not much more than 10%. The other competitors do have much more.

And if you look now into the development of the steel prices and the raw material prices, which we saw in the last 12-months, I mean, I know something about the steel business now surely also. I have never seen such a price development of both of sales prices and raw material prices in the last 20-years.

And if you now have contracts, 12-month contracts or 6-month contracts, which we normally do with our customers. I mean it is very clear that it takes longer.

So our net sales per tonne increased, but I mean the spot market increase much more. And the raw material costs were also quicker, but because of the long-term structure of our customers, we will see the benefits later.

And we will see it in the upcoming months. This is very clear, and we are totally convinced that we see this come totally.

And I mean, and then you have to take into account that we have, let’s say, this relining of the blast furnace. In this year, we are losing volumes in these times.

And especially in this quarter, we could use these volumes, of course, to gain sales on a profitability base. But this is not possible.

This is something, of course, yes, it is not a good news. But I think we know that this is coming.

And starting from first of October, this will be changed. And the other thing is, the other thing is also - I mean, we always said we have to restructure the business.

You know that we have a restructuring program running, which is 3,750 people. And the restructuring is running in plan.

So far, roughly 800 people left the company. So you can see we are on plan with this, but we are not at the end of this.

So I mean, profit improvement is also coming out of this. But we are very much convinced that starting with next year, we will see a good development in this business.

Okay. Just a second sort of follow-up and not really a question, but actually a request to you as CFO, Dr.

Keysberg. Would you please consider focusing on EBITDA rather than EBIT as your key focus figure?

All of your key peers use EBITDA. So you really do stand out using EBIT.

And obviously, we have distortions there because of the write-downs and the differences in D&A over time.

Yes. So I will take it into my consideration.

I have two questions on Multi Tracks. We have seen good progress here over the past few weeks with regard to potential disposals.

But is there any solution in sight for the remaining plant technology businesses. And here, I refer to chemicals and cement in the portfolio of Multi Tracks?

That is the first one.

Yes. I mean, chemical and the cement business, you know the net business, we try to, let’s say, divest, and we got orders which we were not - which we did not accept.

So we always said we do not make fire sales, and we reject it what we saw there. And then we decided to, let’s say, to stop this process for a while, and we will start this process at one point of time again.

We will do so, but I cannot tell you when. So we are always considering what will be the right time to start this process for the other businesses here.

I mean I can tell you that for most of the businesses, which are now still in the Multi Tracks business, which are not divested so far, our target is to start the process in the next fiscal year again. So this is also valid for the other business you can see here.

Okay. Perfect.

The question I have is more on the free cash flow. You mentioned the SIP shortage and Laura automaker call off.

What is actually the headwind here in the net working capital because of that? Do you see it as a part of your revised guidance on the free cash flow?

Maybe you could shed a little bit of light in here?

This is part of this - I mean, this situation is a bit difficult to explain. If you remember, I was always talking about this semiconductor shortage and, let’s say, the impact on our business.

And meanwhile, I think it is more obvious or more public in the communication, but also the OEMs are admitting that they have problems with this. And what we see is the following, and this is difficult to handle.

So the OEMs, they do come up with order intake for us, so-called proof. I don’t know the of the calls.

But when they see or recognize that they are not able to produce something, then all of a sudden, they are closing down a plant. And the warning time is not very long.

So there are several days or if it is long a week where we say, this plant is going to be shut down in the next 14-days or this plant is going to be shut down in the next three-months - three weeks. And this is something what we see also in the Q3 that, of course, we are, let’s say, we are working to the callers we see in the systems.

But at the end of the day, it is not sure whether they are really call off because of the strategies. I mean the OEMs would produce if they could, they would even produce more, but sometimes they may shut down because they cannot produce because they have shortage of materials.

And this we see also in the Q4. This is very clear.

But this is pretty difficult to predict. For instance, for the September, we see quite a good number of call-offs, but we are not very - we cannot be very sure if the call-outs really taking place because of this shortage of semiconductors.

And the...

Sorry, could you give us a number for the previous quarter, so the third quarter, how much those kind of headwinds were in the net working capital?

Not so much I cannot give you a number. It is more than you can imagine, but it is something, it is something, but I cannot give you -.

Okay. Fair enough.

Thank you very much.

Just the first question for me, please, the assumptions underlying your guidance clay hit a mid- three-digit million number you are implying Q4 EBIT down to maybe 100 million, 150 million. I understand the sort of seasonal weakness in industrials and steel, but it feels like material services can be a factor here.

Could you just elaborate on where you see steel prices in the next two months, whether or not you are assuming any sort of further inventory gains or losses in that guidance. So I was just trying to get a sense of whether there is upside or downside that we might expect to that range?

[indiscernible] was not too good. I was just checking whether I got the question right.

The first one is where we see our EBITDA guidance. Is this what other would other fundamentals be?

Was this the right?

So with Materials Services, what assumptions you make with steel prices really or raw material prices for the next quarter, just whether or not there should be more inventory gains that you are expecting or losses?

For the Materials Services business, we think that just the assumption is that we will have quite stable steel prices and also the raw materials prices, we saw it not so much valid from material services here, but more the steel prices, but on the raw material prices, we see development, which is slightly below the Q3 number, slightly below Q3, slightly, more stable.

Okay. Very clear.

And second question, please. We are seeing more signs of slowing China demand, especially now with signs of renewed lockdowns.

Are you feeling any impact from this yet in auto and industrial components? Does it worry you at all in the next few quarters?

We see clearly a slower dynamic in China, also because of semiconductor. This is what we are seeing.

We cannot really judge how much the impact will be. That is the reason why we are also cautious for Q4.

This is very clear. But anyway, all in all, if you don’t focus on one business, the July we have seen so far was quite, let’s say, successful was quite a good start in the quarter.

so far.

First one is on Steel Europe mature whether this has been covered before. But can you give us a sense about how much of the employee reduction at Steel Europe, the total of 3,750 will be realized by the end of the next and in two-years time to get there, you said 800 are so far removed.

Can you maybe give us a bit more visibility on the time frame?

Yes. Just wait a minute.

So let me just have a look. I think in the next two years, we will get additional 1,200 people redundant.

And I think then we will have an effect in 2024 of additional 300 or 400, something like this because of the closure moving.

Okay. Got it.

And then maybe it on the last finish-line, which obviously started a bit earlier than initially planned. How big will be the volume loss now in the fiscal from this measure?

I think the volume loss will be 300 tonnes or something like this, it is always difficult really just because you know that normally you buy slabs to compensate on [indiscernible]. And this is also what we did.

But of course, at the moment, prices are not favorable to do so. But we, of course, did it somewhere also.

Okay. So this 300 will refer to the shipment level, yes?

Yes.

Okay, makes sense. And then finally, on hydrogen, I think I could read on to take the just stake sale is still being considered, I just want to get a sense about the priorities.

I think you have high expectations in that business. So, while diluting eventually that stake you have, instead of funding through exit from other peripheral assets, such as, reducing your elevator stake or other optionalities?

And can you also give us a sense, what your expectations are about the potential CapEx funding you see for the next five years in this joint venture? Can you see?

Yes, this is a difficult question regarding the additional future funding, which is something I will not comment on at this point of time. Sorry for that, but you may understand this.

The question about the - you can say what are we doing with this business? So in principle, the most priority is to really have a look, what are we doing with this business?

Do we proceed alone or do we proceed with the partner. So the partnership could be one partner, which is, let’s say, really strategically contributing to the business.

could also be at the end of the day that we make, let’s say, a partial value consolidation to fund future investments. But we have not made up our mind on this.

I can tell you, I think I said it also last time that we are approached by very much companies to offer partnerships regarding this. And we clearly have to make up our mind.

In some cases, these are really good strategic stories behind this, and we have to sort it out. And of course, let’s say, if we talk about partnerships, also valuation on this has - takes - is an important role about this.

And therefore, we cannot confirm on the one or the other direction here. This is something which is still in consideration.

Can you just give a direction, would you say that the strategic fit is the absolute priority over the optimum or the highest potential value I think which is feasible in the market?

The strategic fit does play a very important role, yes.

Firstly, again, just on Steel Europe and the blast furnace reline, guidance of mid-double-digit impact in Q4. Can you just highlight and reiterate what is included in that number?

Is that just direct maintenance? Or does that include loss margin underutilization, et cetera?

That is the first question.

Everything is included. Yes?

Okay. Very clear.

And secondly, on restructuring of cash out restructuring of low mid-three-digit million this year. If I look at Slide four for midterm guidance.

It looks like restructuring next year is potentially more. There is no particular scale to it.

But could you maybe just give a bit more granularity around what the cash out for restructuring will be next year?

I mean next year, it will be a bit lower than this year. So it will a bit lower.

And then in 2023, then it will be, let’s say, in a high two-digit number. So this year, low to mid.

Next year, it is more low the mid. And then in 2023, it is a high two-digit number.

So this is a profile of the restructuring expenses.

Okay. Thanks for clarifying that.

Yes. Look, the graph next to the 2021.

So where you see a way to go until 2022, 2023, this is for two years. And therefore, it appears that there will be more in the next year to come.

But in fact, it is for two years, that means it is actually less than in 2021.

Okay. Sure.

Thanks for clarifying.

Yes. I just have one more follow-up on steel or part of that may be as a or clarify but you are trying to get to the bottom of what is happening there.

So just firstly, on realized prices and margins. If I look at the average ASPs, they have been increasing by roughly eight and obviously more than absorbed this.

So has the increase in SDA has been mostly driven by maybe mix rather than actual price increases because obviously, the margin isn’t really reflecting at all what is happening in the market? And secondly, just also looking at your order intake, it seems like it is been like literally flat for the last three quarters and has been pretty much in line with the better quarters of the last couple of years, while obviously, the steel prices have more than tripled.

I’m wondering what is going on here as obviously doesn’t really make too much sense because, a, we are not really seeing any impact from higher steel prices? And then also technically, you should be able to do more volumes, I guess, in this environment?

I don’t know whether I got your question right because you were talking about AST, at least I understood that you -.

Sorry, average selling prices, I was talking about average selling prices in steel. Sorry.

Can you confine.

No, it was quite mistake. So if I got the question right, you were saying that the average selling price could you - it is the development, you cannot follow the logical

Yes. So I’m basically wondering the 80 increase is mostly mix driven because obviously the higher prices haven’t really been falling down to your bottom line in your margin in not rising.

I was wondering, is this just mostly a mix effect, not really a price increase effect, which has been driving up the ASP? This is what has happened there in the steel business because obviously our margin isn’t expanding?

Well, no, this is not what is happening. So all in all, we saw an average price increase and increase per tonne we clearly see an increase per tonne in selling prices.

I don’t know where you got your information from. So first point, the sales per tonne, net per tonne are increasing or increased in the first nine and six-months in these businesses and it increased in the 6 months and also quarter-on-quarter.

So I don’t know where you get your things from. The question is now what is the increase in the coming months and quarters because we are now, let’s say, bringing it into the long-term growth to more and more the price development, which we see in this quarter.

But definitely, Network also to sales per ton increased in this fiscal year. So this is something which is clearly, but I don’t know where you got your information from.

So maybe you could work it afterwards with the team here, but I cannot...

No, I mean, clearly, your ASPs did increase by €89 per tonne, I guess. And I guess the question is, has this been driven by an actual price increase or more by a mix change.

you say it is been actually the price increase and costs more than offset that?

Yes. It is not only a mix.

It is a price increase press.

Yes. Okay.

Cool. And then on order intake?

On order intake, the question was why we did not -.

So the question is - so I think organic is €2.4 billion has been pretty much around those levels for three quarters now. And at that time, I mean steel prices went like up two times, three times and volumes obviously should be pretty good.

So I mean, this is basically order intake in line with like better quarters over the past two to three years, but we can’t really see that reflected in the order intake. So seems like you are basically not capturing prices, not capturing prices or volumes basically in this order intake.

So I’m wondering what is happening there?

I mean, we are capturing price increases but not as much as you might consider, if you look at the spot market, and we are also capturing of course, volume increases, but which you can see only later because you know that our total output this year will be definitely much lower than previous year. And I know you know the explanations about this.

And this is this is some kind of explanation to this, but maybe you can also follow this afterwards because you know that we - in the Q4, we have lower shipments, which is very clear. And this is then more spread on the time line than the order intake.

Yes, yes. And shipments in Q3 were a bit lower than in Q2?

Yes.

Okay. And then maybe just one very last follow-up, if that is okay.

on Multi Tracks. So I think you have been giving some guidance in terms of the upper ceiling of the cash out in multi-tax.

350, that would imply almost I think, €200 million of cash out for Multi Tracks in Q4, if I reconcile it correctly. Could you maybe let us know how much of that is probably for heavy plate, where we are obviously going to going to shut it down in the fourth quarter, and you are probably going to have a bulk of the restructuring payments because I think the AST business probably should sequentially do quite well in terms of cash contribution into the fourth quarter?

Well, this is a very detailed question. Let me have a check on this in one moment.

Well, heavy place is going to contribute to this negative number a mid-two-digit number.

Yes.

And the rest there are operative issues, of course, and heavy plate is contributing a mid-two-digit negative number.

Maybe the first one on [indiscernible]. Can you please comment on your current carbon credit position?

If you have seen any OpEx inflation this year and what you expect for the next year? Also, when do you expect January to for short of inventory free allocation and buy more actively on the market?

I got the question right, it was about this car credits, yes okay. I mean the car credit, you know that we get the reallocation on the one hand.

And on the other hand, we also buy and sometimes. At the moment, we can say that we are more or less covered to the end of our planning time.

This is 2024 or something like this, we are pretty much covered. So we do not expect an effect out of this major effect out of this.

But you know that the European Commission is talking and considering what they are doing, this is something we cannot foresee at the moment. But this is going to have an impact on the old industry.

All right. That is helpful.

And maybe on decarbonization, you put out decarbonization CapEx figures. Some peers expect some level of policy support of 50%?

Is that a figure number you can also expect that maybe if you can give us some sense of where your applications are with the European innovation from maybe at the German levels? How much you have applied?

And when should we expect some decisions there?

I mean, yes, I can clearly confirmed this 50%. But I have to say, this is at least 50%.

So there are still talks going on where there might be the possibility to get more. But this is very open.

This is also something which is not so much for the publicity, but you know that I think there is a big commitment to at least give - to support more than 50% on this. And this is where we are talking talks with European and also German government.

And just when should you expect some decision taking place there? By year-end or maybe next year?

I mean you know that I think the problem is - not the problem. Every steel producer is now planning to do, to build up and invest in the direct reduction equipment to install the capacity to produce it.

and w also do so. And our plan is to do this in 2024, 2025.

So we have our applications running. And we have, let’s say, a so-called pre -.

Preapproval.

Pre-improvement to this. This is not to be checked by the European government.

And with that, what is in there, we are quite happy with this. So this is something where we see quite good progress.

The problem is this is only the first step. The transformation of this industry into carbon-neutral business is not only an issue of two or three years, it is an issue of 10-years, 20-years.

And politics, they only think in two or three years, they only get commitments for the next two years or three years. So that is a bit the question.

I think we are quite okay with the first phase of investing. But having said that, we have to take care about the next phase of investing next pace investing.

And here, we have to fight for further support. This is the CapEx side.

But there is also, of course, there are other sites that producing carbon-neutral steel you might get into a situation that the producer of car mutant with hydrogen is more expensive than the longer production to. And therefore, the industry is asking for carbon contracts for difference.

And this is also something where German politics is supporting at least the actual one. And Europeans one are looking at it.

So this is something where we also have to get more clarity

Alright. Thank you.

So it is a question of CapEx, OpEx and market behavior. So our customers really asking for green steel, but they have to be ready also to pay for this.

This is a process, let’s say it this way.

So if there are no further questions, then we would like to thank you for participation. And of course, as always, we are happy to continue the dialogue with you.

If you might have further questions, then please call us. We are available for you and we are also looking forward to seeing you on the road at conferences once the marketing season, I have started again, and this will foreseeably be early September.

And of course, if you wish to have conference calls with us, please tell us, and we are happy to arrange something for you. Thank you very much, and look forward to staying in touch.

Bye-bye.