thyssenkrupp AG

Hello, everyone. This is Andreas Troesch from Investor Relations.

Also on behalf of my entire team, I wish you a very warm welcome to our conference call on the first half year results of ThyssenKrupp '24-'25. 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, some housekeeping. All the documents, as usual, 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, will be the usual Q&A session for sell-side analysts.

We use Microsoft Teams [Operator Instructions] and with that, I would like to hand over to our CEO, Miguel Lopez.

Thank you very much, Andreas, and also a warm welcome from my side to our Q2 conference call. As usual, first, I will provide you with an overview of our latest achievements with regard to our strategic initiatives in the second quarter, followed by Jens, who will present to you the financials in detail.

Let's start with the first item, portfolio. The planned spin-off of Marine Systems in calendar year 2025 will be a significant move for the business and ThyssenKrupp as a whole.

The next step will be the invitation for the Extraordinary General Meeting that is required for the targeted spin-off. As mentioned in Q1, we have received the cash approximately EUR400 million for the sale of Key Electrical Steel India, which has bolstered our financials.

At Steel Europe, we are in the process to finalize the business plan, including the necessary restructuring. Here, actually, last week, we achieved an agreement in principle with IG Metal on the implementation of the industrial concept.

The subsequent negotiations on the collective bargaining agreement should be concluded by the summer. You can see we are delivering proof points.

And now on to performance. Overall, our Q2 financials have been impacted by tough market conditions.

That's a fact. However, despite facing tough market conditions, our APEX 2.0 program is proving effective in maintaining resilience and thus safeguards our group guidance for fiscal year '24-'25.

With our necessary restructuring efforts, we continue to pave the way for future profitability. For instance, at Automotive Technology, here, we will respond to ongoing challenging market conditions with additional cost-cutting measures to save cost of approximately EUR150 million as well as a gradual phaseout of the production site in Hagen.

At Marine Systems, the positive momentum continues. Just last week, TKMS received an order extension for 2 additional submarines from Singapore.

And last but not least, I will give you some examples and proof points for our efforts to prepare ThyssenKrupp for the future, the green transformation. First of all, ThyssenKrupp has been awarded a landmark contract by Gujarat Namada Valley Fertilizers and Chemicals for the construction of a weak nitric acid plant in India that will enhance the production capacity by more than 50%.

The new plant will be equipped with Ude's highly effective and proven NVinOx technology to reduce greenhouse gas emissions by eliminating nitrogen oxides from nitric acid production. Secondly, at Steel Europe, we are committed to and remain on track with the DRI plant construction in Dryburgh.

The progress is becoming more and more visible at site. Thirdly, ThyssenKrupp has been awarded the highest rating in the prestigious CDP climate rating for the ninth time in a row.

This award underscores the company's ongoing commitment to climate protection as well as its transparent approach to disclosing its own CO2 emissions and its strategy for the transition to a climate-friendly economy. 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.

Let's start, as always, with the key highlights and challenges of the quarter. So as Miguel said, markets remain weak overall.

And so the first point to highlight is that despite that environment, we keep group guidance on all parameters for this year against the background of the impact of our measures that we have already initiated plus some market and price stabilization still expected for the second half of the year. OpEx, we are satisfied with the progress.

Miguel already mentioned that. I will go through that by segment to highlight to you the individual and specific measures that we're taking.

Contingency programs work. I think important to note that we are down by 2,600 FTE versus Q4 of last fiscal year, of which 600 are portfolio related, particularly Electrical Steel India, and then the rest is operational, of which approximately half was AT related, the other half is spreading across the segment.

So we're actually seeing the impact of our programs in our FTE capacity. Marine Systems are green here.

I will comment on that further later on. And then on the balance sheet side and financial side, balance sheet is solid, EUR4 billion in net cash, unchanged, and we also repaid our last bond, which basically makes the group debt-free as of today.

On the challenger side, as noted, we do face market weaknesses, particularly driven by the sector trends in automotive and also some general uncertainty based on all of the factors that you're very much aware of geopolitical resorting, tariff politics negotiations and so forth. We do have some exceptions in our portfolio.

So for example, on the Marine Systems side, of course, defense is a strong tailwind at the moment. Material Services in the U.S.

is developing nicely. It's a growing business.

And for example, within the AT portfolio, Birstein is also growing on the back of aftermarket services. But it's fair to say that overall markets are weak at the moment.

And that has an impact on our top line, as I will take you through in a minute. Let me make a few comments on the tariff situation at the moment because that is also highly volatile, as you know.

As I explained in one already, we do have 3 businesses in the U.S., ATSE and MX. On the AT side, we do have tariffs that we are subject to right now as we are through that 90 days period that was announced by the U.S.

government. We are facing the 10% minimum tariffs plus some additional things for special deliveries.

So far, we are able to pass that through to customers fully, so we don't have an impact yet. Of course, we need to review that when those 90 days are over beginning of July to see what the negotiated scheme between the U.S.

and the EU will be. On the Steel Europe side, as I can confirm what I said in Q1, we are particularly selling tinplate into the U.S.

and so we can also pass that one through. And then on the Material Services side, which is our biggest business in the U.S., as I explained to you, that's a local-for-local business.

So we don't have any tariff impacts at all. To the contrary, we could see potential for upsides driven by price measures of other competitors that have a different value chain setup.

So long story short, no negative impact net for us at the moment, of course, something to be continuously reviewed. And then last point, cash flow volatility.

The good thing is we have a strongly growing Marine Systems business. Of course, that does bring additional volatility by quarter because, for example, in the first quarter, we received a large advance payment, as you're aware of.

In the second quarter, we needed to pay taxes on that advanced payment plus the first supplier payments. And so between Q1 and Q2, we have a huge swing.

The first half consolidated gives a better picture. Coming to the top financials.

On the sales side, we are down by 5% on the quarter and half year. As I said, continued market headwinds across most businesses.

I will analyze that further on the next page later. EBIDTA adjusted, we are down versus the prior year, both on a quarterly as well as on a half year basis.

That's driven by, on the one hand, the volumes, particularly steel, AT and material services. I will also explain that more on the next page.

And the second effect I want to highlight to you is the flip side of our extraordinary share price development since the beginning of the year. So share price was up, and that is driving a review of the LTI accruals, long-term incentive accruals because those are, of course, linked to share price performance.

And so as of Q2, we needed to book an accrual increase on the LTI above EUR30 million across the group. If you would back that effect out from first half figures, then first half would be approximately within striking distance of the prior year, where the story is pretty much the same as last year.

So last year, down minus 7%. We kept the prior year profits.

This year, so far down minus 5%, and we are also in striking distance of prior year, thanks to our contingency and FX measures. And on the net income side, we are positive for the quarter, actually the first time since 7 quarters.

And for friends of statistics, it's actually the highest net income since 10 quarters. That is, of course, supported by our Electrical Steel India sale plus a higher valuation of our Elevator stake that I will explain to you also throughout the presentation.

All of that is a wash with the regular impairment at Steel that we had again, hopefully, the last one. And so net income development is actually significantly positive.

And as you can see, for half year, EUR0.5 billion above the prior year. Free cash flow before M&A is negative as expected following first, our normal seasonal patterns with cash outs for all of our bonuses and year-end investments towards the first half of the year.

Second thing was, as already mentioned, our payouts at MS. We needed to pay out EUR160 million in taxes on the advanced payment of Q1.

And we also, of course, had first supplier payouts. And the third one, which I think is positive confirmation of our progress on transformation is that we, of course, have restructuring payouts.

I shared with you at the beginning of the year that we are expecting EUR200 million to EUR250 million in restructuring payouts for the year. We are approaching half of that now with the first half of the year.

And that, of course, also has an impact on that number, but I think it's a good sign that we're actually pulling through and making progress. One just last additional note on free cash flows.

Of course, it does not include the proceeds from our India sale because it's by definition before M&A. If you would back it in, so free cash flow after M&A, then this would be up versus the prior year.

So that, I think, is also something to note. Balance sheet, I think nothing specifically to highlight.

Everything solid equity ratio up 37% now rounded driven by the positive net income. Compared to top and bottom line analysis, on the top line side, as I mentioned, we are down by 5%, and this is particularly driven by the steel business by AT and MX following the market situation that I mentioned.

DT actually is positive if you adjust it for the sale of our ThyssenKrupp Industries India business that we sold last year. So operationally, DT is growing.

MS was plus/minus neutral for the quarter, but positive year-to-date, but the other 3 businesses were below the prior year for the first half and also for the quarter. On the EBIDTA adjusted side, compared to the prior year quarter, you see, again, in sync with the volumes that this is basically driven by those 3 segments plus headquarters where we also booked a significant part of the LTI accrual increases.

You also see that the biggest impact is coming from SE, and that is true for both quarter versus prior year quarter as well as quarter-over-quarter analysis. And let me provide a little bit of more transparency to you, particularly on the SE run rate so that you have a good feeling how that is developing.

So it was quarter-over-quarter down significantly from EUR169 million in Q1 to minus EUR23 million in Q2. What were the drivers of this swing?

First one is the electricity price compensation that we had in the first quarter of EUR125 million. That's an annual booking, so it doesn't repeat in the second quarter.

Second important aspect is that I think I highlighted that to you also in Q1, we had production standstills at SE in the second quarter, driven by huge investments. So after our DRI plant, the next second biggest investment that we're doing is a new continuous casting plant and hot strip mill in Dborg.

This is one of the largest industrial construction sites in Germany. And we took the predecessor plants out in November, so within the first quarter and now second quarter was completely production standstill for that part of our production, which means that we had basically the highest cost from that without sales benefits.

And in addition, we ramped up another investment, the so-called annealing and isolighting line or GIL that also caused additional costs there. And that is something that also impacted SE in Q2, and we expected that.

And third element was prices in spot prices in Q2. Now why are we positive that this should improve for the rest of the year?

So why should the run rate for SE go up? It's the corresponding 3 elements.

The first one is positive utilization effects from the end of those standstills. We expect the new equipment going live now towards the end of the month of May.

Second element is actually better prices based on also some contract renewals we have in front of us. And the third one is what we also see lower cost for raw materials and energy going into the second half of the year.

So that is basically explaining the largest part of our adjusted EBIT swings Q1, Q2 and why we expect that the following should become better. Quickly browsing through the segments, starting with Automotive Technology, strong hard market headwinds.

I think I don't have to comment too much on that one. You see that top line is down 6% in the quarter and 8% year-to-date.

and that's in most businesses with the exception of Beilstein. Correspondingly, EBIDTA adjusted is down, driven by lower volumes and underutilization and also a bit by supplier claims for lower volumes, which, of course, we, on the customer side, also try to get back.

And then we are compensating for that with FX measures. I'll comment on that in a minute and restructuring.

BCF business cash flows also correspondingly down, driven by the lower earnings, a bit higher net working capital that is following the lower top line and then payments for restructuring. So AT is a significant part of our overall restructuring programs, and so that is hitting business cash flows as well.

What are we doing specifically on the OpEx front? AT is a lot of restructuring.

You will have seen that we announced an additional larger restructuring scheme here, a new indirect cost reduction program, targeting 1,800 FTEs which should become fully impacting next year. Miguel already mentioned that we expect cost benefits of magnitude, EUR150 million run rate for the next fiscal year.

And also, we -- in addition to what we're already doing, which is quite a lot, we also decided to close another site, the Hagen site, approximately 300 FTEs as previously published. In addition, we do work on commodity procurement.

So we do see a number of purchasing synergies. For the first time, we have bundled purchasing across all of the business units within the segments.

That's also generating a nice additional run rate improvement. And then we have another topic for more special topic for Beilstein, where we ramp up a Mexican plant for a specific customer growth.

So we make good progress here. From there to Decarbon Technologies, actually, Decarbon Technologies growth reported is negative.

But as I said, if you back out the sale of ThyssenKrupp Industries India from last year, it's positive, 3% for the quarter and 7% for the 6 months period. And all of the other KPIs follow through profits up, BCF up.

So that's actually developing well. On the OpEx side, we have programs per business within DT.

So on the water side, we have an operational excellence and restructuring program going on currently. At Odle, we are working on standardizing and modularizing our production.

This will have an impact from next year onwards, not this year yet. On the Poli side, we try to increase the portfolio share of services.

And for Nucera, we are working on ramping up sales and with that also further expanding gross margin. Materials Services, also top line impact, minus 4% below the prior year.

Within Materials Services, as I said earlier, North America actually looks good. We're growing in that area, and that's a good message because that is the more profitable business, and we are also strategically targeting more growth in North America.

Nevertheless, it's overshadowed by Europe, which is also why we restructure more in Europe. And so EBIDTA adjusted has been going down in most businesses.

Nevertheless, important to say that all businesses are positive and particularly the Supply Chain Solutions business, which is also a strategic focus for MX, where we grow -- where actually profit is significantly over proportional to the portfolio. BCF is down.

I explained the huge swing in Q1 already to you in Q1. So that was driven by a strong release of net working capital towards the end of the last fiscal year.

That is explaining part of that swing. And then the rest is lower earnings and also payouts for restructuring that we're doing in this segment.

And so correspondingly, OpEx, key initiatives, restructuring, particularly in Germany. So we have taken out several hundred employees here, which also gives a good benefit.

We want to invest further in the U.S. and then, as I said, increase our contribution from solutions with impact also from next year onwards.

From there to Steel Europe. So we do have persistently weak demand here.

As you know, Steel Europe is also significantly selling into the automotive space. And you see that on the top line side here, which is down minus 8% or 9% for quarter and half year.

And also, we had some headwinds from the price levels in Q2, as I already explained to you, that has impacted EBIT with lower volumes and price levels and underutilization -- and it has also impacted the BCF for the half year. For the quarter, actually, as you can see, BCF was positive.

That is driven by net working capital release. So the segment is working strongly on better inventories steering and that is starting to leave its impact, as you can see here.

FX key initiatives, the most important thing is to translate what Miguel already said, the industry concept into negotiated terms and then, of course, into implementation plans. That's the biggest topic here.

And the second one is that we still optimize based on Strategy 2030 with some of the investments now becoming live end of May and beginning of June. And then last but not least, Marine Systems.

I mean that business, of course, is having a great time. As you can imagine, we have significant positive market dynamics here.

As you may have seen, we just secured another order from Singapore of 2 submarines, and we still even have further demand in this business. So that is developing very nicely.

We translated into the bottom line, as you can see. So Marine Systems always set a target range of 6% to 7% ROS.

We are approaching that right now. And on the BCF side, don't look at Q2 because that doesn't make any sense.

You need to see Q1 and Q2 together, the advanced payment plus corresponding payouts. So of course, up by EUR850 million.

Some OpEx initiatives going on here as well. We are optimizing the way that we actually manage production with a new target operating model -- but much of the other energy is actually focused on fully ramping up capacities here.

We are ramping up Visma, our new production site and look for further capacities. So from that, coming back to the aggregated group side and going from operational profits to net income, I already highlighted the most important elements.

So we had positive disposal gains from the Electrical Steel India sale that have impacted this. And the other positive impact was Elevator.

Let me quickly comment on Elevator because that's, of course, also of interest. So as you know, we've had the signing, not yet the closing of the Allied investment announced at the end of February.

And that led to a reversal of historical impairment losses for our ordinary shares part. Without going into too much detail, we have three different securities going on here that constitute our share in Elevator's ordinary preference shares and noninterest-bearing liabilities.

And the ordinary shares part can be revalued. We took it up by EUR105 million.

That's, as I said, a reversal of historical losses. And the total book value has consequently increased to EUR1.1 billion now.

Fair value, of course, can be assumed to be significantly higher. You can make the math what your best assumptions are on this one.

Our current -- we are accounting for this at equity. So we will not fully reflect the fair value in our current shares.

So it's, if you wish, a hidden value currently in the balance sheet, but assume that the actual value is probably significantly higher. And then from there to free cash flow before M&A, I also mentioned the most important elements here.

Once again, if we start from net income, we need to back out, of course, the accounting effect of the disposal gains of Electrical Steel India. In addition, we need to take down restructuring here.

We've had approximately EUR70 million of restructuring cash outs hitting Q2 that goes to OCF. And then we back in and back out again electrical steel depending on whether we look at free cash flow after or before M&A.

And then after M&A would be minus EUR170 million above prior year and before M&A for minus EUR569 million as reported. And then closing with my part with a look into the rest of the fiscal year.

As I said, we do keep group guidance unchanged on all parameters. Of course, we continuously review markets and tariffs and so on and so forth, also after the 90 days period in July.

But so far, we keep it. And yes, of course, that requires an improvement in our second half run rates.

But as I tried to explain with the example of Steel Europe, we are positive for the moment that we can actually still achieve that. And on the individual target ranges, we are phasing the segments step by step now, as I said.

So the Marine Systems segment has a good chance of achieving its target range of 6% to 7% this year. The MX segment can also achieve its target range or the lower end of the 2% to 3%.

However, that requires some market support in the second half of the year and then the others will follow through the next years. And free cash flow, as I said, we do keep the guidance of a positive free cash flow of EUR0 to EUR300 million.

To repeat, it's the third year in a row and first time since 20 years that we achieve that. And with that, I give back to Miguel.

Thank you very much, Jens. Now let's look at our well-known strategic agenda for fiscal year '24, '25.

It is the year of milestones decisions. In the steel business, we continue to work on the finalization of the business plan.

The achievement in principle between Iigmetall and ThyssenKrupp Steel on the implementation of the industrial concept from last week is, of course, a very important step towards the implementation overall. And as already mentioned, we pushed ahead with the minority spin-off of the Marine business in calendar year 2025.

Additionally, leveraging opportunities from the green transformation and making necessary restructuring investments will be crucial for positioning thyssenkrupp for future success. And with that, we are at the end of today's presentation, and I would like to hand over to Andreas.

My first question is on the steel discussions. You pointed that the recently announced agreement in principle with Metal.

Just how much visibility do you have on the process? And does the tariff uncertainty plus the macro uncertainties impact discussions with Krinskem?

That would be my first question. And the second question would be on Material Services.

There have been headlines pointing at the fact that maybe you might be looking at exit options. I've seen the headlines this morning that you mentioned the business being core.

What is it exactly regarding this division?

Yes. Thank you very much for the question.

First of all, steel. Of course, as mentioned, the agreement about that the negotiations are starting now between Steel Europe management and Icometal is a major achievement.

And we are looking to the process in a way that the results will be available during summer. So this is our expectation.

Of course, the prerequisite for further negotiations on the 50-50, the prerequisite is the negotiations between Steel Europe and Iigmetal to be concluded in order to have there a clear situation. In terms of Material Services, you know that we have been deciding on clear target margin ranges for profitability on all of our 5 businesses.

And of course, we are driving the performance improvements through OpEx, and this is true for all the 5 divisions. So for us, it's important that we get to these levels of profitability to the levels of performance.

Just to recall, we were building this goal -- target margin ranges, taking into consideration also the competitive landscape. And this is our primary focus.

The Material Services business is, of course, core and will remain core. You remember that we have been in the last couple of quarters also being very focused on having also some M&A additions in order to strengthen portfolio and specifically, as mentioned, in the U.S.

So we continue to be active in order to get our U.S. business growing.

And that's one fundamental part of our strategy.

And just on steel, does the discussion -- is there any impact from the current macro uncertainties and discussions? Or are they running just like before, you would say?

It's not influenced by the macroeconomic uncertainties. It's more like that we want to have a clarity on the final results of the restructuring, and then we will continue with the negotiations.

Actually, my first one is just a quick follow-up on steel. So with regards to the concept you've been agreeing on, I guess when we read the release, at least, it seems like the 11,000 FTE number is no longer mentioned in the release.

And I think then it also says that you have been putting the closure of the Siegen site on ICE for the moment. I don't think it's permanently put on IC though.

So maybe can you give us some color here? Have you been making some concessions on the restructuring side?

It seems like that is the one crucial point. What are the other main points you still need to agree on with regards to that agreement?

And is there also already a number on the starting balance sheet, which you have been provisionally agreeing upon with the unions at this point?

Yes. Thank you, Sebastian, for the question.

I mean the agreement between the Steel Europe management and the Metal of course, is around the industrial concept that has been presented in November last year. So this is the headline.

And I think that for that reason, they were not repeating everything what was an industrial concept again in the agreement because as the industrial concept is mentioned, this means that everything is included as in the industrial concept. So there is no change to what the expectation is expressed clearly in the industrial concept.

I think that's very, very important to understand. And on the on the side of, I believe the summary is that it is fair now to give the site the opportunity to improve profitability and then they will take it from there.

Got it. That is helpful color.

And what are the other main points then, which you still need to agree on? And have you agreed on a starting balance sheet already?

Well, this -- the start of the negotiation between the Steel Europe executive management and the IG Metall, of course, is taking place as we speak. And they will, for sure, need to go in many, many, many details as normal in this kind of negotiation.

So I would not go into any details because I think the areas are clearly and logic to be identified. So I think we are very happy that this negotiation starts now.

And of course, we expect this to be finalized, as said before at summer time.

Okay. So if I can probably infer then that starting balance sheet question has not been defined at this point then?

Well, the starting balance sheet can only be defined as soon as the restructuring is clear. So always following the principle, first, you have a P&L.

Then secondly, you make out of the P&L and cash flow statement and then you make a balance sheet, and this is the order and the sequence. So to my knowledge, that's something that needs to be done after the restructuring measures are fully defined.

Okay. That's super clear.

Then my next question is just on Automotive Technology. Can you maybe single out that item on claims for suppliers, if that was a major item?

And then also, I guess, when we look at the top line so far, you've been trending down 8%. I guess when we look at your order intake, it's been down 10%.

And so I guess when we look at your sales guidance of minus 4% to 0%, it looks obviously reasonably ambitious here. So is your current third quarter order book firmly supporting the minus 4% to 0% growth guidance, which you've been giving?

Okay. I take that question.

For the first one, supplier claims, that's a smaller amount. So it's actually not worth mentioning it as a big figure is always, I mean, small, means small double-digit million amounts magnitudes.

And on the second one, yes, I mean, of course, on the AT side, the outlook is most under pressure. So far, Q3 is, of course, still supporting guidance.

Otherwise, we would have adjusted guidance, right? But still, we need even some more improvement in Q4.

And we have certain sub businesses where we do see some promising developments. I mentioned that, for example, at Beilstein, we're actually growing.

So there are businesses within there that are growing with specific customer contracts and some of the business units that do help. But of course, yes, it is probably the one that's most under pressure top line-wise.

Okay. Understood.

Okay. Then last question on Marine.

I guess that's a business which is probably most fun to look at for you as well, for most investors. So I guess the current dynamics in India may possibly help the momentum on the decision process for the Indian order, which from -- as far as I understand is in the market.

Is the mid- to higher EUR1 billion order volume, which is discussed in the press is that the right ballpark? And when may this be decided?

And maybe if you could give us some color on whether you are indeed the last and only bidder or whether there may be other bidders which could possibly reenter the bidding process? Any update or any color on that would be great.

Well, Sebastian, you certainly understand that we wouldn't like to disclose this kind of data around defense. matter.

So I think it's important. We are there talking to the government.

We will see how this develops and the situation looks quite promising, but we would not like to disclose any kind of details. I ask for your understanding here.

Yes. No problems.

I do understand. I guess maybe there could have been something maybe you could have hinted, I understand it's obviously very, very sensitive.

I guess you can't talk about timing and whether it may at least possibly still fall into the current business here, right?

Absolutely right.

I have a few follow-on questions in Marine Systems. On the orders and the new order that has been announced for the 2 new submarines, is it realistic to assume we might see some sales fall into the Q3 and Q4 from the new orders that have come through, i.e., the Singapore submarines?

And then my second question is, again, on Marine. We've seen continued margin expansion quarter-on-quarter, year-on-year.

As we look forward into Q3, do you think that the current rate of margin expansion is sustainable and can potentially grow further? And then final question on Marine.

Can you just maybe talk through what the next steps are for the spinout? Where are you in the process?

And could you maybe just give us a little bit more context about how you think about the structure and timing of the spinout strategy?

All right. So I take the first 2, and Miguel will take the spinout topic.

So on the first one, Singapore, so you asked for sales. We need to see.

But if anything, then sales for this contract that we can book is modestly lower in the third and fourth quarter of this year. We will need to see when advanced payments are coming in here.

That is not finally defined here, but this could be more likely effect somewhere happening this autumn. So advanced payments, the cash-ins.

I would say that on the sales side, if anything, it's very low numbers in Q3, Q4. And on the margin expansion side, well, basically, as I said, I mean, the Marine Systems business, we see a good chance hitting the 6% ROS, and they are not yet there year-to-date.

So yes, we do expect that the margins will further expand throughout the year to achieve that target.

Yes. Well, as mentioned before, we are targeting calendar year 2025 for the spin-off as such.

And there are now two very fundamental things, milestones that need to happen. First, the Supervisory Board meeting needs to decide calling the extraordinary AGM.

And then the extraordinary AGM will be held. And there, the shareholders will be asked whether they agree to the spin-off details.

So these 2 major milestones will take place now in the months to come. And then the spin-off as such will happen.

So what I can share is we are doing good progress here. And so preparations are running as expected.

And so we I said again, we are very confident that this will take place in calendar year 2025.

Just one follow-on question. On free cash flow, the Q2 free cash flow was -- had obviously very significant tax for Marine prepayments.

Will we see a similar tax cash flow item in Q3 for Marine?

No. So that was related to the order that we secured in December for our German contract, and that is now fully paid.

Having said that, let me maybe make one additional statement. So there will be no further tax payments.

But of course, we are now starting to ramp up production there, right? And I mean that is generating payouts, but no further tax payments.

Continuing on the theme of the Marine, my question is slightly longer dated. So for FY '25, your guidance is implying a revenue run rate of around EUR2.2 billion, EUR2.3 billion.

So my question is that, okay, given the size of the order book for more than EUR16 billion, do you see some kind of a rapid acceleration in the revenue run rate in FY '26, FY '27, say around 3 billion plus?

So quite frankly, currently, we cannot comment on that, right? Because as part of the spin-off process, we're sort of getting into the period where we do not comment where that is midterm guidance and that midterm guidance is currently being developed, so to speak.

So I would not comment on that specifically. What we can say is, as I said, it's a very nicely growing business, right?

And so we do have further demand here. It's only a question of production that we actually grow further.

But specific figures, I ask for your understanding that will be part of guidance through the spinout process.

Understand. No problem.

The second question is on the Steel Europe. So we are two quarters into the full year and your guidance range is pretty wide in terms of EUR250 million to EUR500 million.

Now you've given 3 kind of drivers for acceleration into 3Q, production standstill better prices and the lower raw material. So can you help us confirm if the midpoint of the guidance is still into the play for Steel Europe?

Or shall we look at the lower end of the guidance?

Well, actually, we don't -- I mean, that's the beauty of the ranges right now that we are not more specific on where exactly we are in there. So far, I mean, the fact that we still have these ranges means that we still see a broad range of possible outcomes, right?

And I tried to explain to you some of the effects. There are very tangible effects here, including, as I said, the production sensor, including better prices, including also the fact that we have been taking out significant headcounts, right?

I mentioned to you the 2,000 operational, of which also part is. So long story short, there is a number of very specific measures that make us believe that this range is still possible.

More comments on the specific points within the range we wouldn't give for the moment.

A little bit kind of a longer-term question. So concerning the current situation that you are debt free, you have the kind of hidden values in the balance sheet and despite the fact that we are uncertain about the future of Steel Europe and all the cash requirements.

So what is your current framework to allocate cash for Capex, for growth Capex into the areas? So what are the areas which get the most Capex for what kind of products where you see the most growth?

Or are you still very restrictive because you do not know how to fund or what do you need to fund Steel Europe going forward?

Yes. So I take this question.

Thank you very much for the question. So in general, it's true that we are very tight on Capex allocation, of course, and we manage that very closely in sync with the respective market developments.

We do invest, as you know, magnitudes of EUR1.5 billion to EUR1.7 billion per year. So that is still a significant Capex amount.

And part of that actually does go, of course, into the Steel Europe business. And one big chunk of that is the direct reduction plant, of course, and the other one is what I already mentioned, the remaining Strategy 2030 investments to basically make the steel business fit for the future and more productive.

Apart from that, we invest very much based on specific segment business cases that are attractive. So for example, we invest into the North American business of materials handling because we see quite overproportionate growth opportunities and margins there.

We do invest in some of the automotive businesses, for example, steer-by-wire applications. And of course, we do invest into the ramp-up of the Marine Systems business because we need to build the capacity to cope with all of the order inflow.

So long story short, we are very disciplined here. We are also currently, of course, adjusting our investment allocation in sync with how the markets develop, but we still do invest on specific business cases.

And that's across the segments, steel materials, MS are the biggest ones, I would say, and then a bit on the other.

Okay. Getting a little and getting a little bit more specific.

Having in mind that Marine Systems and Steel Europe will not be a major part of the core business going forward. So the 2 main areas where you're currently investing in growth is material handling, especially in North America and steelby-wire in automotive area.

Is that right?

No, these have been examples. I want to correct one statement that you just made on Marine Systems not being core of the group.

As Miguel outlined, this will still be consolidated, right? So we are spinning a minority.

It's still part of the group. It's a great business.

And it's the way that the situation is. So we do invest quite a lot in marines.

Otherwise, we could produce out of the submarines, right? And this, we expect also to continue.

I steel, also still, I mean, even if we are -- if the structure further develops, we will, of course, co-fund investments there. And then the others, yes, materials handling is one investment area, some parts of automotive are other areas.

And when it comes to Marine Systems, of course, in the first step, you would try to get you will remain with 51% something. But going forward, if the German government or KfW will come around the corner, then you are able to sell or also willing to sell another 10%, 15%, 20%, right?

Well, the -- I think we need really to go step by step. We have decided to have the minority spin to remain the majority.

I think that's a very clear and also going forward, a very solid structure. And as Jens mentioned before, of course, for us, this is a growth business.

Going through this process right now into a spin-off will give us additional growth opportunities, and that's the purpose. We remain, of course, in very good collaboration with government.

And there will be, of course, as you know, very intense collaboration needed for getting the products also to the government. So that's what we are looking for.

Yes, just looking at the outlook and the building blocks, it seems like Apex will play an increasing role. Can you just provide figures on how much CapEx contributed in maybe H1?

And how much do you expect it to contribute in H2?

I would maybe answer that slightly differently as we are not disclosing individual OpEx figures. I think one thing to get more comfortable with, with respect to our second half year run rate is really the number of FTEs that we are already taking out now, right?

And I explained that at the beginning. So as of the end of Q2, we are down 2,600 versus Q4 of last fiscal year, of which 600 are portfolio and the rest was actually operational.

So we do have 2,000 people less in the second half of the year. And that is partly due to OpEx measures, partly due to other restructuring programs.

And I mean, you can make the math what impact that has if 2,000 people are not there for half a year, right? So that is one significant component.

And the second one is then a portfolio of other measures, including raw materials optimization at SE procurement consolidation effects, operational excellence within Rota and a few other things. I wouldn't comment on how much specifically that is, but you can always assume that these are quite significant positive effects that we are generating.

So we are -- at Apex, maybe just to go back to what I said at the beginning of the year, we have come away from hundreds of smaller measures to really focusing on the big things, structural performance improvement projects or Ss and each one of those has significant measurable impacts. So it's not small items that we're tracking here.

So all in all, I think we are confident that the measures will contribute significantly to the bottom line in the second half. Thank you very much.

Actually, one last question on the mix and your cash flow performance there specifically. So maybe if we look at the price cycles here, they have not been too different.

And if anything, price amplitudes have been actually less and lower versus last year. Yet you had a very strong working capital build, it seems or at least the business cash flow was EUR500 million down versus last year.

So could you maybe help us to reconcile this? My guess would be that you restocked maybe more than usual ahead of the very well-flagged tariff events.

But yes, maybe you can give us a bit of color on what's been driving this cash flow performance versus last year.

I need to counter ask, Bastian, maybe I didn't get that right. You're talking about the Material Services business or --

Exactly Mix precisely, yes. Yes, yes, absolutely.

Well, the situation that we've had here, I mentioned that in the first quarter is that at the end of Q4 of last fiscal year, we've had a very significant release of net working capital. That was a combination of many effects.

It was partly business is down. It was partly really clearing part of our network and a couple of other things.

So we had an extraordinary low level of net working capital. That has partly come back now, and that is a significant effect here.

I think the good thing about this business, though is, I think on a general note that this business can steer net working capital and cash flow performance very tightly. So I think we are able to produce the targeted cash flows that we want to generate in this business because of the mechanics of how it is actually being run.

But long story short on your question, it was not one big strategic move. It was really extraordinarily low levels of net working capital driven by many factors that now partly swung back.

But we do expect still a good finalization of the year.

So to be crystal clear, so you're basically not running with, I would say, slightly excess working capital versus like last year just to take advantage of the price situation.

I wouldn't say so for the moment.

So very quick one. What is the current status and your plans for sorting out internal activities to service centers or third parties, and this is excluding steel, so for the remaining business going forward?

Are there any bigger plans you have or measures you have taken?

Can you repeat on which part on the material services service centers or...

Sorting out internal measures or internal activities to service centers or third-party providers just to reduce the cost base.

And in terms of -- you mean outsourcing and similar activities. I would say that there is nothing specific to report here.

So we are actually constantly reviewing that, of course, both within the businesses and also within headquarters and supporting service units. As you know, we have a large service unit within TK called TK Services.

I mean, it goes by this name, and that is our internal outsourcing, if you wish. And of course, we do constantly review whether we can further optimize these things, but there is nothing specific to report today.