Salzgitter AG (SZG) Earnings Call Transcript & Summary

Thank you. Ladies and gentlemen, welcome to our analyst conference for the fiscal year 2023. Given the political and economical uncertainties, it's quite a special one, basically as every year. but special one is particularly true this year for our CFO, Burkhard Becker because it's his last one. His successor, Potrafki is already with us today. So we secure a smooth transformation. But today, we stick with the established setup means Gunnar starting with the strategy implementation as well as the business development of the business units and give you the outlook for the fiscal year 2024 before Burkhard Becker make a deep dive into the financials, and then we jump into Q&A. And with that, I'd like to hand over to you, Gunnar.

Thank you very much, Markus. First of all, dear colleagues, sincere apologies for the delay. We had a bit of a technical issue. Hopefully, that is now resolved, and you can all hear us loud and clear. Looking forward then also to the interaction after the presentation. Looking at the year 2023, of course, as Markus said, it has been an exciting year and quite a challenging year, but prior to digging into numbers, please let me start with the occupational safety. As you know, this is important to our company. This is important to me. And it's good to see that we -- over the long-term trends show a positive development, but we're still not there. And as you can see also, 2023 has not met our ambition in terms of further reduction. We have had a certain setback there. So the efforts -- the continuous efforts have to continue and as our target remains on 0 accident for the entire group. We have set up some actions for '24 to further improve on the LTIF and on the occupation and safety, as you can see, especially including temporary workers and including also contractors into our measurements and into our activities on occupational health safety, especially as we have a lot of contractual workers and employees right now on site with our big construction site at SALCOS. I think this is exactly the right way to move forward. Now looking at the key financial data of 2023. Of course, compared to '22, it looks like a big decline. It is a big decline, but we also should keep in mind that 2022 has been an exceptional year. We have seen steel prices going extremely high up, especially after the start of the Russian war in Ukraine. We have seen shortages in steel supply and a very strong reaction of our customers, hence, an intense increase of steel prices. That, of course, has normalized now in '23. So what you look at is a more normalized year and in -- especially in the second half of the year, very challenging economic environment in Europe, which then puts additional pressure on that year. Given all of that, I think we can say that it has been a successfully result in '23 with an EBT level of EUR 238 million, EBITDA of EUR 677 million and an overall steel production at 5.7 million tonnes. So ROCE level is, of course, lower, given all of that, but with 5.6% also in an acceptable range for a year like 2023. Burkhard will dive into the numbers further. So I'll ask for your patience on that one. Now looking into strategy. As you recall, we started the Salzgitter 2030 strategy in 2022. What you see here are 4 building blocks of that strategy. First of all, of course, we are looking at the CO2 reduction of Salzgitter as a group. And one of the main building blocks of that is the implementation of SALCOS. It's fully underway. 2023 has been a very important year for SALCOS. We secured the funding for stage 1, EUR 1 billion, EUR 700 million coming from the federal -- from the state, EUR 300 million from the federal government in Hanover, So EUR 1 billion in total. And we topped that up with EUR 1.2 million to EUR 1.4 million of equity from -- coming from the company. All main components are ordered, the electric arc furnace, star reduction plan, electrolyzer but also the grid connection. Everything has now been ordered. So we're in full swing when it comes to the implementation. And through that, we secure first deliveries to our customers mid-2026. Talking customers here. I think we have received very good feedback from our customers, the steel to be produced in '26 is basically sold out, and we're also able to grant a or to contract a premium on the green steel. So our customers fully appreciate the low carbon content of steel as that also helps them to further decarbonize their products. Looking at the circular economy. As you'll recall, circularity is the very center of our strategy. And if you look at steel, of course, element of circularity is the acquisition of scrap. Here, we are proud to pronounce actually that we will build a new shredder here in Salzgitter, that will be then operational, just ready for SALCOS in 2026. Through that, we are able to process post-consumer scrap in a much better way, create higher quality grades of scrap on site here in Salzgitter and define also the scrap quality that we need for SALCOS with even an own scrap grade being SALCOS scrap. And through that also ensure that we get also to the quality grades for steel that our customers expect us to have. On the customer-oriented solutions, I think I'd like to highlight 2 things here. One is, of course, the heat treatment line in Ilsenburg. Customers appreciate that. We see a growing spectrum of grades for diverse applications that are questioned and we are able to deliver. And we're able to gain market shares in different markets. One is a bit unfortunate, but that's unfortunately reality. Stay for security applications. We are now up and running when it comes to our steel grade secure. The only outstanding is the qualification process with the German Army, but that also should happen through the year. But for private application that is already in the market. And second element is KHS. KHS has been very, very successful through 2023, especially with product plus max for PET bottling and high customer interest here and a very good order situation, actually a record high order intake for 2023, which then also leads to a good -- well, to good work in '24 for KHS given the high order backlog that we have now in the books. Strong presence in Asia. This is where, especially the plus max is very, very successful. On the profitability side, 2 elements here. We have been very vocal on active portfolio management. Happy to say that we did some divestments, but also acquisitions in '23. We continue with that also in '24 with the sale of Mannesmann Stainless Tubes. As we don't produce any stainless steel, the connection and the strategic connection to Mannesmann Stainless Tubes was limited. And we have found an owner that actually produces stainless steel and is a supplier to MST already today. So a much better strategic fit. So from a best owner's principle, a very good situation for both the new owner for MST, but also for us as we're able to further focus on core here. And last but certainly not least, our performance program, Performance 2026, you'll recall that, we launched that already prior to any economic downturn because we believe performance is a day-to-day job that we have on our agenda. So being successful here also, you recall we had a target of EUR 150 million to EUR 200 million by 2026. This target has now been increased to EUR 200 million to EUR 200 million (sic) [ EUR 250 million ] full year effect in '26 and we're well underway here also. I think the different activities lead to at least EUR 230 million, but I'm confident that we're going to reach the EUR 250 million there also. As a bottom line result. So all in all, good progress on the strategy implementation, good progress in different milestones that we have laid out for the year '23. As part of '23 -- As part of the strategy 2030, we also said we're going to partner and team up with other companies that have a similar decarbonization agenda. And as you can see, we have also increased the numbers of partners in the areas of technology, energy and raw materials as this is a major shift for us, logistics, but also on the customer side. So more and more customers are getting interested in our decarbonized steel and hence, we're able also to team up with those in a very sustainable and good way. So also here, I would say, good progress on the partnering side and helping us to making the whole transformation more robust and really securing it all the way through to 2033 when we want to have our transformation fully completed here on site in Salzgitter. Just to be more specific on the Performance 2030 program, as you can see, 2035 is what we see in the books today with a good ramp-up through the different years. EUR 56 million, full year effect in '23 already. And as I said, we're well started also in '24. And given the economic development, certainly something where we will continue to focus on also from group but throughout the entire company. Now looking at the different business units and how they performed. We're starting with the steel production. Of course, we have seen a significant decline in steel prices, as I just mentioned, compared to 2022. And that, together with the general cost increase through inflation, of course, we have seen electricity prices or energy prices coming down significantly to the back end of '23 but in total, a different cost level than we have seen before. On top of that, you are all very well aware of the blast furnace relining that we did in the second half of '23, which, of course, sort of had an impact on availability and the cost situation. But that is now done. Blast furnaces up and running again since December. So we went well through that project. And we now have a blast furnace that technically is upgraded and secures production until 2033, so that our customers will be served as they are used to it also going forward. Looking at '24, while the start into '24, as you are well aware of, has been a bit bumpy. Volumes there -- prices are not yet at the level that we want them to be. But we see at least some signals that there is a recovery possible towards the second half of '24. You all have seen the reduction on inflation rates in Germany and Europe which then could trigger a further discussion on the fiscal side as well as some technical developments we're going to see also that should help us on the recovery in 2024, second half asset. Strip Steel is under almost full capacity utilization. And so is long products in Peiner. On the section, so plate demand is weaker. And certainly, as I mentioned, we have a challenging pricing environment, of course, given also raw material prices coming down, recently, at least, this offers opportunities for further hedging that we have been paused given the market development for raw materials, so at least some positive signals also on that end. On the processing side, a good year in 2033, predominantly through a good start in plate market increase. Sales prices went up, but that then sort of softened through the year with a stabilization versus year-end. So that contributed well to the result as well as the large diameter pipes, EUROPIPE and Mannesmann Grossrohr. They delivered well into the demand for energy projects. You all recall that we were able to deliver pipes to connect the 2 LNG terminals in Germany, both Wilhelmshaven end of 2022 and then beginning of '23, the LNG terminal in BRUNSBUTTEL, both were connected via pipes coming from Salzgitter. So that certainly helped this business section. Precision tubes, though, given the low automotive production were under pressure and also started with a low -- started on a low into this year. When we look at plate, we see a normalizing market environment. Utilization is okay as it looks now and also for the second quarter as long as we can see on the tube side, we are hoping for some more projects being materializing through the year. I think there's a lot of discussion on different projects in the market, but they now have to also hit our business in order to then sort of continue on the good path that we had in 2023. Trading. Not surprising in a market where prices are softening, is suffering, especially on the German trading. The international trading, though, has done good business in '23 and also has had a good start into '24. For the German trading business, we have a clear way into profitability for '24 with some internal measures, but also through price level actually that stabilized over the last couple of weeks with a bit of more volume. I think that this is very doable for trading to return it to profitability, Certainly, the ambition level within the team there. Last but certainly not least, technology. As said before, we are looking at a very sort of good year 2023, especially on KHS with a record order intake and also seeing now the benefits of KHS future of our growth and efficiency program that actually puts us into the position to also handle this kind of order intake through our global network of production units, so very well equipped also to serve the different markets around the globe. Result has been outstanding as it is written here. So for KHS really -- a fabulous year. The 2 DESMA companies had a bit of a struggling '23, but also here, we're seeing first signals for market recovery, especially on the shoe machinery side, DESMA in the south and fleeting is focusing very much on cost and also on quality on the product in order to attract customers then also through the year. So for '24, I would say it is important for KHS to continue on the order intake. And as it looks now, order intake is on a good level. It's not on a similar level than '23, but a very decent order intake also here. Widening the scope a bit on the wider global and European picture. The global economy has at least first signals on recovery. as said, debate on interest rates has at least started. Now let's see how that develops over time, United States with the IRA is relatively robust. India, strong. China, let's see how that plays out and pans out after the convention that ended last week, but also at least some growth there. Certainly, we're going to have issues on logistics. Red Sea is mentioned here, but we have seen that supply chain has been under pressure, especially the global supply chain has been under pressure quite a bit over the last months and unfortunately, also years with different elements, Red Sea is one. We have seen chip crisis. We have seen the Panama channel issues and other things. So certainly something where our customers also are focusing more and more on a closer -- regionally closer supply chain, which then should support our business model going forward. On Germany as such, yes, it's an economic problem, but it's also a question of growth. We're seeing more and more international companies reducing the investment levels in Germany, which is certainly not helpful. steel process or steel business is a bit the opposite. And us as front runners, we have invested in Germany, we stay firm on our belief in a German economy and also producing steel for the German and European business. So that is -- that remains. However, we have some structural issues that needs to be addressed and we are doing so, be it on energy costs. You'll recall the very sort of heated debate on industry electricity costs in '23. We haven't come to a solution yet there, but certainly, this will stay on the agenda to have a competitive energy level or energy price level competitive in a global comparison as our competitors are global as well. Skilled workers. What we see here is that through our transformation program, we're actually able to attract skilled workers into Salzgitter. So especially on the steel side, our transformational program and our firmness here helps us to attract the workers we need also for that transformation and afterwards as well. Bureaucracy, to mention one more. Of course, there has been a debate in Germany since many years back, now first Signals at least from government that this topic is addressed through additional legislation and to reduce bureaucracy. On the European steel market, yes, there is a weak development, especially for the first half of this year expected for most of the steel consuming sectors. Take construction as one element, construction and housing, et cetera, has been very, very weak since the autumn last year. This is, of course, also related to interest rates. So as soon as that debate sort of picks up, we should also see a pickup in that market. But as it looks right now, it is a weak development here. As said, we're going to see -- we are convinced we're going to see a certain demand grow in '24 versus the later part of the year, but from a low level, as I just mentioned. Taking all of that together, our own capabilities within Salzgitter, our clear path forward, but also embed that into the overall framework, economic and regulatory framework, we come to a management guidance that see sales between EUR 10.5 billion and EUR 11 billion, an EBITDA level of EUR 700 million to EUR 750 million, an EBT level of EUR 250 million to EUR 300 million and hence, a ROCE based basically on previous year's level. So what you see here is a continuation basically of our financial performance compared to 2023. Slight uptick because we believe in our strength, we believe in our sort of activities we do on increasing efficiency, and we also believe in a certain market pickup, as now mentioned a couple of times through 2024. I would leave it with that for a second and hand over to Burkhard Becker for the financials. Thank you.

Yes. Thank you, Gunnar. Ladies and gentlemen. First, I'd like to look on the income statement due to the normalization of the steel prices, we lost EUR 1.8 billion for turnover for sales. And in combination with the change of the inventories we had a decrease of the total output of EUR 2.2 billion. As the raw material prices remained robust. The cost of materials decreased not similarly. So here, we have a decrease of EUR 1.4 billion. That means that for the gross margin, we lost nearly EUR 800 million. And that is the main reason and explanation for the decrease in EBT of EUR 1 billion. Results from the investments under equity method, here the performance of the Aurubis and the 30% share of EAT decreased, whereas EUROPIPE performed very well. But net, we lose EUR 90 million. The EUR 50 million net finance income expenses is due to higher interest rates. Asset sides of our consolidated balance sheet, the increase of EUR 180 million for property, plant and equipment is mainly due to investment in SALCOS and in the relining of furnace A in Salzgitter. You see then under the current assets that we managed to bring down the working capital inventories, trade receivables. That is very good for our financial performance. It means that the net financial debt had been in '23, EUR 214 million compared to EUR 550 million end of year '22. Then we have the asset held for sale in '23, that is the reclassification of the assets of the Mannesmann Stainless Tubes, the sales contract was signed in mid of February. Then we have the equity. On the equity side, we have changes from the interest rate of pensions coming down from 4.5% and in '22 to -- 4.1% to 3.5% end of '23. So we have the corresponding profit neutral changes in equity and liabilities. And furthermore, the decrease in financial liabilities due to the working capital management. The cash end of year '23, EUR 940 million. That is roughly the same number we had at the beginning of the year. That is due to the strong cash from operating activities. Again, that's -- the reason for that is the working capital decrease. And there, we have this quarter-by-quarter coming from EUR 3.6 billion, we have this decrease in the last year, EUR 827 million. That is very nice. And we have this investments in depreciation slide here, you learn from this that investments in '23 is -- cash investment is EUR 583 million. For '24, we expect a cash out for SALCOS in the range of EUR 500 million and EUR 500 million CapEx for all other activities in the Salzgitter group. You know that we follow the rule of continuous dividend payments after the very good year '22. We are back to normal. Looking on the past and history. We think that EUR 0.45 are in line with what we practiced in the past, and that means for 100% of the shares a cash out of EUR 27 million after the decision of the general assembly in May. Yes, thank you very much. That is my presentation to you so far.

All right. Then let's jump into Q&A. We start with the people here in the Zoom meeting just in case you are not in and it doesn't work, just write me an e-mail, and I will read it out loud. But now we start with Andrew Jones.

Just a couple for me. On the CapEx, you've said EUR 1 billion this year, 500 million SALCOS, EUR 500 million for other, EUR 500 million kind of rest of the portfolio, sounds higher than I would have expected. Can you give us a bit of a breakdown as to why that number is well based as it is? And can we clarify that EUR 1 billion that is net of any subsidies, right? Or is that like a growth number that you expect to have from that obviously, at some point this year? I mean, can you give us any idea of the timing of when that customer money comes in?

EUR 500 million for SALCOS. That is after the public fund. So that is a net number, the net cash. And net means we expect to invest for SALCOS in 2024, EUR 800 million and receiving EUR 300 million as public fund. So, that is the EUR 500 million. And the other -- the EUR 500 million for the other activities is also for Salzgitter Flachstahl, various projects. There are some strategic elements. For example, in Peiner for the [ Umit ]. There are strategic investments in the middle MEO euro amount for KHS because KHS is growing. So we are investing here. And it is also, for example, the Shredder Gunnar mentioned in his presentation.

That's clear. And just one on MST on the spin out. Can you just give us an idea as to maybe the profitability of that asset in maybe the fourth quarter or last year to get an idea for what we're stripping out our numbers now -- now that's going to be taken out?

Yes. The profitability of MST from the operational side was at 0. We had a impairment depreciation for MST of EUR 20 million.

Sure. But what -- when you say 0, you're saying it's 0 after that impairment?

No, no. The total EBT of MST was 20 -- minus EUR 22 million and EUR 20 million of that is the impairment, so a [indiscernible] 0 for MST.

All right. Then we continue with Christian Obst, please?

Yes. First of all, I'd like to come back to the guidance. In the end, if we are looking down what you're guiding for the segments, the only one which is significantly short of '23 or should be is steel processing. And looking deeper into steel processing, in the end, you say there will be lower margins. But for most of the parts within steel processing, we also expect a quite positive to site rates development. So what is the main driver for the significantly lower expectations for processing. That is the first question.

Yes, Obst, we had in '23, very good performance in EUROPIPE in the MLP, so in the medium line pipe business and also in Grossrohr in Salzgitter. And that came from orders we took in '22 with high margins. Unfortunately, especially for EUROPIPE, we wait for decisions on projects. Projects are in the market for the big diameter business. But as we wait here for a decision. And that means that the utilization of the capacity is much lower than in '23. We cannot expect this result we have seen in '23. But we are confident that the decision will come. There are projects out in Europe, in Mexico also. So -- but it needs time. And that also means that our plate plant in Mulheim is not low. It is -- delivers to EUROPIPE. So compared to '23 lower expectation, but confident that we pick up in the second half of '24.

Okay. Then I have a question concerning the net financial result. So of course, notably higher from '21, it was EUR 47 million, then EUR 66 million and EUR 116 million negative in the last year. So what will be the guidance on what do you expect going forward? Because of the high CapEx and the investments you have to do another increase? Or will you stay at the current level for a certain reason.

Yes, we expect that coming from EUR 200 million net financial debt end of '23. We will see an increase of net financial debts in the range of, let say, EUR 700 million to EUR 800 million. And part of this maybe half of it has to be financed by credit. And credit interest rate market is about 4%. And yes, and then you can calculate that this means an additional expense of around EUR 20 million.

Okay. So this also means that in the EUR 116 million net financial result in '23, there was nothing extraordinary would not occur in '24. So the counter balance part of these EUR 20 million increase.

Yes, the only -- so if I understand you correctly, special item is that we expect the cash in of the sale of MST and that is part of the financing of the CapEx.

Yes. And then going further down the line, you had a 16% tax rate. Any idea of what you are expecting for the next year?

Yes. We had a special positive impact in '23 of around EUR 20 million coming from a merge, a tax-driven merge of Corpoplast being a subsidiary of KHS with a mother company, KHS GmbH. And that brings us EUR 20 million, and that is recorded in the tax result of '23. So we expect coming back to normal. However, you are aware of that we still have tax loss carrying forward amounts in the range of EUR 1 billion to EUR 1.3 billion, yes.

And then the last question is concerning the current status of so called green steel demand. So we had a lot of pre-contracts for the green steel -- from '26 onwards. So has there -- something changed? Is that increasing? Is that stable? Is it going down because of the current discussion but what is the current status here?

Let me take that question, Christian, thanks. The current status here is that there's still green steel demand, given that we are basically -- yes, let's call it sold out for '26, so we're looking into '27 and -- but we're seeing also that some of our customers are a bit more cautious with that sort of a view into '27. So the fundamental demand is still there. However, given that this is further out in time, there's a certain hesitation, but the fundamentals haven't changed.

And maybe an additional to that, do you see any kind of -- that the premiums you talked about before that they are coming down or will they stay stable? Or what is the current situation here?

Well, let me put it that way. There is still a widely -- it is still a good understanding of our customers that green steel has an additional value to them. So we're still talking green steel premium for our products, and there's also an understanding of our customers that this will remain for the time being.

Now really the last one. Do you expect any kind of OpEx support for your company for the steel production until the year 2030?

Well, as you're well aware of, we have this so-called Klimaschutzverträge. The concept is now out. The first round of application has been opened this week. As you're also aware of, this is predominantly focused on midsized companies, so not on us as large based industry companies. However, the second and the third and the fourth round will be open also for companies like ours. So we're clearly evaluating how we could fit into that and whether that makes sense. That's one element. And secondly, we're also on the hydrogen side, of course, discussing with hydrogen providers, then themselves can apply for support in the European hydrogen bank. So also from that angle, there is an indirect support but also support possible that would help us and the OpEx.

Thank you very much and all the best and especially for you, Mr. Becker, for everything which comes ahead of you. Thank you.

So that was Munich. Now let's fly over to [ Zurich ]. Bastian, please.

My first question is just coming back on the overall guidance, please. I guess if we look at the framework, you seem to be guiding for a more or less flat first quarter and then build the guidance for the full year on an improvement later on, particularly in the production business as well. I think you already talked about processing. If we look at the flat steel markets in Europe, they're obviously coming off again. So I'm wondering, is this guidance framework built on tangible trends which you can already see in your order book or basically a recovery which still needs to happen? And maybe in that context, you can round off the picture also for the other divisions besides processing, which you talked about already?

Let me start it off and then Burkhard fills in when I miss out on anything. So yes, we're seeing sort of a good sort of order book for flat right now. So it has been sort of -- we're producing basically full steel prices are certainly an issue and something we need to further improve. But we see first signals that sort of people understand that a pickup in the second half would also impact prices. That is perhaps on the flat side. The steel processing Burkhard talked about, I think that's well covered. Trading. International trading runs actually pretty well. So we see quite some movement on the international steel trading side, which we are able to participate in. So that is certainly a market that is good for us. And on the German steel trading, of course, we have seen a difficult year '23, given the high prices we bought steel at and then with the deteriorating of prices that sort of had to go through the books first. This has now happened. So we're also in our inventories on a normal and regular level again. Hence, we see possibilities to build up margin and to build up also the result from here again. Certainly, volumes here are more the issue than prices. given that our customers, which are very sort of local customers are slightly hesitant given the weaker segments on economic improvement through the year, at least yet. So that perhaps is on the steel trading side. And last but not least the technology. I mentioned that the order intake in '23 has been exceptionally strong for KHS and this is exactly what we now carry through '24, to be delivered in '24. Hence, we expect another very, very strong result from KHS also for this year even above the level of last year. So we are also very confident then that technology will contribute to the overall results. And finally, perhaps also worth to be mentioned, you are all aware of Aurubis and the issues Aurubis had in the last year. This is certainly something that we won't see this year again, hence also an improvement on the Aurubis contribution to the overall results. I hope that answers your question, Bastian.

Yes, not perfect, that does indeed.

If you allow to add 2 things, if and I believe there are good reasons for that. If Aurubis and KHS perform as expected and seen and budgeted, these 2 companies contribute EUR 200 million. And this, I think, is important for the plausibility of the guidance also on the second remark is that they have seen softening of raw material prices, especially on the iron ore side that comes into results after 3, 4 months, yes. It has to do with the lead times and accounting, the moving average in valuation of the inventory.

Okay. Perfect. Thanks for clarifying that, Mr. Becker. Maybe another one for you a quick follow-up on CapEx. When we look at the '24 CapEx budget, I guess, it seems maybe a little higher than expected to say the least. Can you please update us on the CapEx profile also for the next years because there seems to be a little bit of a shift at least versus the earlier communication? And then also maybe when will you decide what you will do for the next phase of SALCOS as you're probably getting closer to a point when you will have to take a decision there as well.

Yes, I would expect for SALCOS in '25, a similar amount, so meaning another EUR 500 million and then a decrease of that number. What you have to be aware of is that the net -- and that is here in the presentation, that the net cash out for SALCOS in '23 had been only EUR 100 million. That, yes, we expected this a little higher little means EUR 100 million, EUR 150 million, yes? and that is included in the EUR 500 million we expect now for '24. The reason for is that the orders for the DRI plant happened later. It happened in '23. All equipment is ordered, but it happened a little later. And therefore, we have some postponement of cash out. But in total, nothing new on that, yes?

And on the residual budgets, so there are EUR 500 million for SALCOS, I guess we obviously have the EUR 500 million others. And I guess here the scrap part was probably something which has not been talked about that much earlier. So could it be another EUR 500 million for the residual bucket as well next year? Or is it likely going to be less than that. And if so, how much?

Yes. Of course, as I mentioned before, Bastian, we are also investing into the -- into our asset base in order to keep that upgraded and updated in order to be able to serve our customers. So there is certainly investments that we're going to do there to upgrade also quality. And we talked about the shredder that is certainly in there within -- going live in 2016. We are looking into upgrading to be able to serve the wind market, upgrade on the plate steel side, which would also then help us to address the wind market in a much better way and capture that growing demand here. And another example would be that we are looking into our -- into Flachstahl to also replace some ovens here in order to reduce the OpEx through energy efficiency measures and also reduce the tap to tap time, so to speak, in those ovens. So those are investments that are clearly sort of earmarked to improve our quality and improve our efficiency, and that will add to the overall CapEx budget then for the next upcoming 3 to 4 years.

Yes. But anyhow, I would expect a kind of normalization back to EUR 400 million rather than the EUR 500 million.

Yes, yes.

Okay. Perfect. No, that is clear. And then my last question, please, just quickly also on the energy transition. I think you did very well there in terms of securing some of the energy for your plans. And I'm wondering how much of the expected 2026 to '27 energy and hydrogen needs have you actually been able to secure at this point? And also are you confident that the required infrastructure really will come together to make your plan feasible and competitive at reasonable costs. I guess, some companies have started to be a bit more skeptical on that front, but very interested in your views as well.

Right, a very interesting topic, but indeed. Let me start with the hydrogen side. So as you're well aware of, we are building 100 megawatts of electrolyzer capacity ourselves, which will be available as of '26. Hence, we're able to produce roughly 5% of our needs ourselves. For the rest, we're basically waiting for clearance on this hydrogen backbone grid, the so-called [ Wasserstoffnetz ], which is -- I think the layout is there since November last year, where -- as far as I understand, policymakers still discuss the commercial framework of that grid as soon as that is clear that we can start building or they can start building, we can start providing the pipes for it. But they can start building. And as soon as we're connected there, we can also feed in more hydrogen coming from the grid. We are in good talks with different suppliers of hydrogen, current and future suppliers of hydrogen to also come to terms to HPA's, Hydrogen Power Agreements or Hydrogen Purchase Agreements, excuse me, Hydrogen Purchase Agreements. So we should -- as soon as we have clarity on when Salzgitter will be connected to the hydrogen backbone, we will also be able to close contracts on the hydrogen delivery. Pricing, as I said, there are multiple options to get support here. Hydrogen Bank is one, the H2 Global Initiative, which is a German initiative is another one. And thirdly, of course, the Klimaschutzverträge to get those hydrogen deliveries in a -- on a competitive level. On the electricity side, we have been active this year. I think we're now up to 7 PPAs that we have signed, different PPAs with different production patterns. So anything from a solar, wind -- sorry, from solar, large-scale solar to onshore wind and offshore wind by '27, we should be able -- right now, I think we're north of 25% of the total electricity consumption that we need. If you then look at the needs for SALCOS and the implementation of SALCOS, I think we're well beyond that. We're beyond 50% of the electricity need that we would need for SALCOS. But we're continuing to negotiate PPAs. We're continuing the discussions with providers of green electricity to increase that level.

Just one quick follow-up. Mr. Groebler, on the -- I think what you said on the hydrogen side was quite interesting. I suspect that's some domestic, but also some imported material. I mean what are the price points you're seeing there? Is this in the, say, EUR 4 to EUR 6 range per kilogram? Is this the right ballpark at this point? Or is this already coming in at a cheaper price point?

So price points I have heard in the market are slightly above the range that you have just mentioned, and that's also why the support schemes that I just mentioned are important to kick the market off. But everybody I talk to is very certain that price will drop as soon as production ramps up because as soon as you have a certain production volume in place, you can run down the cost curve, and that's exactly what's going to happen. I think we have seen that in other industries as well. And everybody also in the hydrogen industry is expecting that. right now, given that there aren't any large producers of green hydrogen right now, those are -- those price points are at a higher level. But this is a starting point. And I think as said, we have seen other industries that actually can reduce through scale, cost -- they can reduce cost through scale.

Okay. Understood. Then well, Mr. Becker also from my side all the best for your future.

All right. Then we come to Sandeep from Morgan Stanley, please.

I have a couple of questions left. Firstly, coming back to your guidance on Aurubis, you expect profitability to improve year-on-year. However, we have seen spot copper treatment charge declining close to 0. How confident are you that this profitability will be achieved?

Very confident.

Okay. And then in terms of numbers, if you can provide some numbers, what is baked in that guidance?

Sorry, say that again.

In terms of numbers, what is baked into your guidance for Aurubis for 2024?

Well, we don't comment on the Aurubis guidance that Aurubis gives our hands out to you guys. We take that and copy that in. We take in what their planning is and -- but that translates into roughly EUR 80 million EBT on our end.

And then second question, what is the total CapEx required for new Shredder? And I'm assuming this is not part of SALCOS 1 project.

Exactly. It's not part of the SALCOS 1 project. The new shredder is around EUR 30 million invest total.

We have next question from Moses, please.

So first one, again, is just on the CapEx guidance, but really more just trying to understand your capital application policy at this point in the cycle? Because if we look at 2023, if we take EUR 100 million for SALCOS net spend, EUR 100 million for the relining and then EUR 400 million for SIB CapEx versus your cash outlay of around EUR 750 million. It shows that you've probably spent additional EUR 150 million on some growth aspects and then similar here again in 2024, close to another EUR 100 million in other spending and growth. Just at this point, this low point in the cycle, I just want to understand just the explanation for being more aggressive in the CapEx spending versus what we see typically from your peers who look to conserve cash at this point of the cycle.

Yes. Let me start with CapEx for SALCOS. Overall numbers. Investments gross without public funds, EUR 2.2 billion for the total project, Phase I. Subsidy, public fund minus EUR 1 billion means over the years until '26, EUR 1.2 billion. Of which we have cashed out EUR 200 million net in '22, EUR 100 million and EUR 100 million in '23. So another EUR 1 billion to come. And as I said, EUR 500 million in this year expected, '24. And I would expect '25, maybe EUR 350 million and the remaining part of EUR 150 million then in 2026. Yes. And again, this is somewhat higher than we originally on the time line expected, not over all. And for the remaining EUR 500 million -- well we see some growth in KHS and like to invest there, and we see some needs to keep the Peiner Trager productive. And we think after the good years in '21 and '22, we can finance that and that is the background of our decision. But of course, with a more difficult situation, new decisions for the next 6, 8 months, have to reworked and revised carefully, because the situation is tougher. But that is normal business. We did that in the past. And whether all decisions are like that and it might be that CapEx finally is EUR 100 million less than that because we are early in the year. And there are some decisions to come.

Okay. So right now, you see opportunities elsewhere to perhaps still conserve on the capital spending? Is that what...

Yes. Yes. Sure. Certainly. If I may add to that. Of course, we are very well aware of the current situation. And of course, we are reviewing our cost position, be it CapEx, be it OpEx on a very sort of frequent basis. And we will review also the investment plan for '24 and the years to come. to reflect that situation. However, I think it is also fair to say that those that have stopped investing into existing assets had then problems to actually capture markets when markets picked up again. And this is certainly not a situation we want to get into. So we will carefully balance the needs of investments into existing assets. and the needs to invest into new market opportunities with the current situation, clearly, but that is, I would say, day-to-day job of management and the entire company.

That's understood. And just 2 more for me, please, if I may. So on the portfolio currently, where do you still see further opportunities, which assets maybe, perhaps you feel at this point are non-core that you are able to perhaps sell down the line?

Well, certainly will not pin out any specific assets at this point in this group. And I think you're going to understand that. But what I can clearly say is that the active portfolio management that we have started with in -- I think last year in '23 will continue. So you shouldn't be surprised to see further shifts in the portfolio, 2 elements that are -- for us, crucial in the discussion. One, does the asset support the strategy of circularity. And second, are we best owner to develop that asset forward? Are we sort of best suited to help the respective assets to further grow and to flourish. Those are the 2 main questions we're asking ourselves when looking at the portfolio. But hopefully, you're understanding that we will not sort of talk specific assets in this group.

Yes, that's what I understood. And then finally, so you've spoken about green steel premiums on still less CO2 steel volumes. But just wanted to understand more on the contract structure of these low CO2 steel volumes. We've seen some peers such as like H2 green steel speak about take-or-pay contract structures over 5 to 7 years. Obviously, this is something we've never seen before in the steel market. Is this a model that you believe can be successful? Is this something that you are also looking to perhaps implement in terms of just moving away from a more commoditized steel pricing contract structure that we've seen historically in the past?

So we haven't seen that much take-or-pay contracts in the market so far. So -- this is certainly a new element. And as I said, this is not sort of what we see mostly in the discussions we have with our customers. Predominantly, we're talking about a certain volume and then a premium on the respective price level at the time of delivery.

Andrew again.

Just one point of clarification on the premiums. I mean, last year this time, you were talking about triple-digit euros per tonne for a kind of blend natural gas based DRI AF product. Is that -- I mean, if we're thinking about you signing all of your volumes in 2026. Is it fair to assume you've achieved a EUR 100-plus per tonne premium on all that volume?

It's a fair assumption, Andrew. Yes.

Are there any further questions? I haven't received any e-mails. It seems there are no further questions from the Zoom link. So before we close the presentation on the conference, please allow some personal remarks. Mr. Becker, we have done this together on several occasions for more than 10 years in good times and in bad times. It was a pleasure, and especially your unpretentious manner was really helpful for my team and me also in a time where it wasn't as normal as it might be today. So I'd like to thank you for that. And also, I guess, on behalf of the financial communities, and you have heard this today. I wish you all the best for the times ahead. Thanks.

Heidler, thank you very much for these kind words. And thank you to all of you here in this virtual meeting who are covering the Salzgitter AG, I learnt really a lot from you and from your questions. And I -- my impression is it always had been fair questions to us and constructive and open to Salzgitter. Thank you very much for this, all the best for you.

Not more to add from my end. A big thank you to you, Burkhard. We thank you to you joining in. Sorry, again, for the technical hiccup that we had at the very beginning. But thank you very much for listening in for your questions. All the best from our side. I hope you have a nice weekend soon to come and see you soon. Thank you very much.

Thank you.