Salzgitter AG ($SZG)

Welcome to the conference call of the Q1 Results 2026 of the Salzgitter AG. [Operator Instructions] Let me now turn the floor over to Birgit Potrafki, CFO; and Markus Heidler, Head of Investor Relations.

Thank you very much; and good morning, ladies and gentlemen, and warm welcome from me here in Salzgitter. I'm happy to announce that this EUR 280 million adjusted EBITDA, we have made a promising start to 2026, and I can tell you that after 2 challenging years, that feels really good. As announced on April 21, our first quarter performance was boosted by an exceptionally strong contribution from our stake in This was driven by the high prices commanded for precious metals. It's important to stress though that all of our core business units also contributed to the earnings improvement versus a year earlier. This is obviously very pleasing. Our P20A performance program has the key contributor to this business-wide turnaround. An additional EUR 43 million in efficiency gains were realized already in the first quarter. Our net financial position has also improved considerably since the beginning of the year from minus EUR 954 million to minus EUR 679 million, mainly on the back of the payment of additionally committed public funding of EUR 253 million on the first quarter. Having said that, we are not getting carried away. The market environment in which we are operating offers some glimmers of hope, but remains challenging overall. We said at the start of the year that we were cautiously optimistic about our prospects for the year, and that remains the case. On the 1 hand, the new trade defense instruments proposed by the EU Commission in October will be formally adopted in the coming weeks. From July onwards, it will enable the EU to reset duty-free imports back to what they were a decade ago. This will reverse search and inputs and help restore the long-term viability of EU steel production. At the same time, the carbon border adjustment mechanism introduced at the turn of the year is already showing a welcome impact on pricing. On the other hand, the high levels of economic uncertainty that has been depressing the European steel market has persisted. In fact, they've increased again due to the hostilities in the Gulf region and the closure of the Strait of Hormuz. Additionally, they have resulted in surging energy prices and freight rates. While we are well hedged for 2026 for gas and electricity, those price pressures are pushing down growth projections worldwide. In that context, we have revised our guidance upwards for the year, but not by as much as some of you might have anticipated after such a strong first quarter. And when talking personally to some of you before, we adjusted the guidance, I can tell you some of you really challenged me on that. While we expect profit to be higher than projected at the start of the year, our revenue guidance is unchanged. As disclosed on April 21, we are now guiding for sales of around EUR 9.5 billion and EBITDAX of between EUR 625 million and EUR 725 million. So to conclude, we have made a promising start to the year, and it's pleasing to see all our core business units contributing to our improved performance. EU measures will also bring some relief, but ongoing geopolitical and macroeconomic uncertainties mean our growing optimism must be balanced with a healthy dose of caution. Thank you for your attention. I'm now looking forward to your questions.

[Operator Instructions]

The question is really -- my questions on the steel production business. We see that order intake shows a plus 7% year-on-year growth. So there seems to be a slight recovery. I would be interested in getting your comments on the drivers, what you see behind this recovery and whether you continue to see a change in the customer behavior in Europe? And on the profitability side, it seems like you've been helped by input prices, which shows a EUR 54 per tonne EBITDA in Q1. So how sustainable is that number? And do you see potential upside going into the rest of the fiscal year?

Thank you, Boris, for your questions. So starting with the sales. And we see an overall sales improvement for the total year in steel production as well as for the whole company, of course. And we have already gave that outlook when we talked last year. And looking at the cost basis, we believe also that this will be continued to be stable. And yes, you're right. We have seen an increased order intake, and that is supporting our projection that sales will be improved compared to last year and is perfectly in line with our guidance, that is also above sales of last year.

Okay. And just as a follow-up. When you say this continued to be stable, you mean the costs? So we should see an improvement in the EBITDA per-tonne margin over the remainder of the year? That's the right way to put it?

So you are talking about -- you're still talking about the segment steel production bonus, right?

Yes, correct. Yes.

Yes. So we see -- we have had also in scale production, a good result in the first quarter and a lot stronger than the year before. And we see a continued strong performance in the total year and also in each of the quarters.

Okay. So at least this kind of profitability could be extrapolated?

Yes, I see a really good stability.

The next question is from Tristan Gresser, BNP Paribas.

Yes. Just going back to Boris question on the stability of margin performance for steel production. I mean steel prices have moved up quite a bit since the start of the year. Your ASP in Q1 were probably not reflected that price increase. So I'm a bit surprised you said that you would expect some stability. My understanding is that Q2 should see a sharp appreciation in margin with steel pricing being the main driver, but I would be keen to hear a bit about the bridge for that division into Q2. You talked about costs, but what about prices and what about volumes? How should we think about it? That would be my first question, and then I have 2 more.

Volume-wise, we have seen the order intake. So that is also giving some positive impact on the volume side. Price-wise, if you look at the HRC price levels and you see where they are right now, like around EUR 700, EUR 710, slightly below EUR 700, so that price level is almost back to the level we have seen during the second quarter of last year. So it's not really exceeding what we have seen last year yet, right? In July, we had a peak in the second quarter than we had a dip in July, and then prices have slowly recovered now back -- not even back to the level that we have seen in the second quarter. So what we see from the price side, it's -- it has not yet been developing beyond what we have seen in some months last year, so, so far concerning the prices, yes? And anyway, we are now negotiating, of course, contracts with customers based on the actual price level. And we have we have included that in our guidance already.

Okay. So you would not expect ASP selling prices to increase into Q2?

We have slight assumptions. We do not see -- to be honest, we do not see a bigger boost. And why is this? Because some of the price impacts coming from expected safeguards and coming from have already materialized in the prices. How much? We all don't know. However, some of these assumptions are already reflected in the price. We believe that the impacts coming from who will apply -- which will apply up from July will not be right away because we expect that some stock holding will be provided in order to get prepared for that change, so -- and we have already talked about that earlier, we see an additional impact from materializing more towards the end of the year, not in the middle of the year. So that is how much I can disclose on our view on price development.

Okay. But just to confirm, I understood correctly, the bridge and the guidance into Q2 is stable cost, higher volumes, stable selling prices for the steel production division?

With some slight -- you are right with some slight addition, I would like to make. We are having our performance program, and we are targeting EUR 120 million cost savings and we have materialized in the first 3 months already EUR 43 million, so there are still some EUR 80 million to go. And of course, this will have a positive impact on our cost basis. And also to mention, we have the seasonality, of course, always in our revenues as each year, each and every year with national holidays and also revision of our machinery. So -- but that is nothing different to what we have seen in previous years.

Okay. All right. And the second -- well, now it's not the second question, but on steel processing, would you expect the division to be positive EBITDA in Q2? I mean you mentioned in the report, the strong increase in plate prices. They've continued to perform well. I know in the report, you also mentioned some higher costs offsetting fully this increase in prices. So keen to understand also a bit the bridge into Q2? And what sorts of cost pressure you've seen for that division? And if that should prevent the division to turn EBITDA positive into Q2?

So we definitely expect some improvement in the margins in the upcoming quarters and also in Q2. Let's see whether we will manage to be positive, yes? I hope we can come up with some nice news when we give our next update. However, we plan to improve here. The market remains challenging, especially in the precision tube group where we have still quite some underutilization. We are quite nicely booked in Ilsenburg, and we still have capacity when it comes to large diameter tubes and also when it comes to MGB. So in case economy would pick up, we would be able to use more of our capacities. As I said, still not as good as we would like them. So we all discovered in our guidance. But in case economy would pick up even further, we are ready to provide out of the entities that I have just mentioned. Other than that, about prices, we have talked already. That's more or less the picture I can provide to you.

The next question is from Maxime Kogge, ODDO BHF.

So the first one is on HKM. So you obtained the EU antitrust agreement recently for the deal. So what do you still need to get to close the deal? Are you still in discussions with on some details? And when do you think you can give us a sense of the impact of HKM integration into your results?

So thank you, Maxime, for raising that HKM questions that I think are of interest to almost everybody on the line. So you're right, we received the EU antitrust, okay, so that's fine. And other than that, we are still -- how to say, we are still busy negotiating with our colleagues from and we are quite confident that we will be able to close the deal in the near future. I'm not going -- of course, you may understand I'm not going to disclose any details on negotiation terms. However, we are really confident that in the upcoming time there will be a good decision, which will be good for everybody. And after that, we will talk about the impacts on our results and what this means for Salzgitter AG

Okay. Second one is on your recent announcements to dispose of your treasury shares. This had quite a negative impact on your share price when it was announced. Have you, in the meantime, carried out some disposals of treasury shares and under which time frame do you expect to achieve the sales? Is your objective to go down to 0 of treasury shares? And what would be the expected use of proceeds from that?

Yes. We were also quite surprised by a drop in the share. And why was this? Because as you may have realized that one of our main shareholders has reduced its shares without causing such an impact. So that was kind of a surprise. However, shares have recovered. So no sustainable impact here. And we have started to sell some of our shares, that is why we also went public because we fell below 10%. And we are not under pressure here. You have seen from our net financial position and from our cash position that there is no pressure here. However, we decided to optimistically use the situation to sell some of our shares. And why is this? Because first, we got the feedback from the market that the liquidity in the share should be increased; and second is also contributing to financial stability of the company. Did I answer your question with this?

Yes. And the objective at the end would be to hold 0 of treasury shares or you could still own some of them at the end of the process?

We are now targeting to move towards 5%. But as I said, not under pressure, no time limit set for that, so really easy going here.

Okay. No, that's clear. And just the last one. I mean, you said previously you didn't expect volumes to increase that much in the coming 2 quarters. So I should infer from that, that reopening the blast furnace, number three, the one that is still idled is still not being considered right? I mean this is something that you will perhaps whether envisage at the end of the year?

Maxime, what I talked about, we are not expecting too much volume increase. I was in the steel processing area, not so much is steel producing. And about the blast furnace. See, the the plan is to get that switch on again in autumn somewhere.

Okay. That's clear. Okay, so just after the new [indiscernible]. All right. That's it from my side.

Thank you, Maxime.

The next question is from Bastian Synagowitz, Deutsche Bank.

Just a very quick remark on the pricing assumptions. So I'm a little bit surprised. I mean you say prices are not really above last year. I think they are well above last year and so on margin. So I think there's a lot of good reasons to be probably a bit more positive here, but I just -- I would probably take that as the usual as conservatism. My question is is on cash flow. And I thought that was actually very strong now. Maybe could you please give us a quick refresher on the debt levels which you're now expecting for the end of this year? That's my first one.

Yes, sure. When we talk -- thank you, Bastian. When we talked last time, I have shown a graph where I showed our investments, and I have also already announced on that graph that we are expecting this EUR 250 million. And luckily, we received them already in the first quarter. So when we talked last time, my view on the liquidity side and on the net financial position, was already including the anticipation of the EUR 250 million. And with this, I stick that we will be slightly above minus EUR 1 million towards the end of the year. And looking at our EBITDA guidance, that means we will be max reaching a leverage of 2x.

Okay. All right. And then my next one is on maybe, like, I guess, the use of your balance sheet as well as your assets. So you're now deciding to sell some treasury shares; obviously, on the other hand, you still have a very sizable stake in Aurubis, which I mean, has just been hitting another, I guess, record share price levels. So how are you basically looking at what these 2 options of selling your own shares relative to selling Aurubis shares at a record level? Just keen to get your thoughts here.

So you know that we have an exchangeable bond issued on some of our old shares, and we are fine with this. And next to that, we are quite pleased, especially looking at Q1 results to participate in the nice Aurubis margins and EBITDA contributions to our EBITDA.

But has this been an option as well you've been at least considering...

Yes. We are always, you may very well imagine that we are considering and evaluating all the options constantly that you are also seeing, right? And then we take our decisions. And our decision has been exchangeable bond and selling of own shares.

Okay. All right. And then maybe staying on the topic of Aurubis and also what it means for your guidance framework. I would say just from, I guess, the capital market side, the last quarter probably illustrated very, very well while there are probably a lot of good reasons for where Aurubis should probably not be part of your operating guidance. I mean, your operating guidance mainly more or less like a playball of metal prices and derivatives with the leverage from Aurubis. So is this something you also consider potentially whether you may change that? And I guess the other question here is just given the significant volatility from Aurubis, which could obviously like almost change with any move in metal prices. I mean, is this something you have also basically been cushioning for a little bit with maybe haircuts in other parts of your operating guidance just given this is the volatility you can't really control?

First of all, we do not -- have not planned for the time being to change the -- how to say, how we deal with the contributions from Aurubis. So we have done this for many, many years, the way we do it. And for the time being, we are going to continue that. What we have done, and you have seen that we have now established the EBITDA and [indiscernible] and taking out the valuation effects from the exchangeable bond. That's very important because that's also fluctuating. You're right, the Aurubis contribution includes 2 elements. The first element is the operational performance, and the second element is the performance coming from the precious metal evaluation, and here, we have taken a prudent approach in that way that we do not anticipate any further contributions coming -- positive contributions coming from the precious metal side in the remaining quarters.

The next question is from Dominic O'Kane from JPMorgan.

I have 3 short questions. So firstly, just again on cash flow. At the Q4 update, you indicated that you're expecting CapEx for 2026 to be around EUR 900 million. The Q1 run rate is quite significantly below that. So again, if you could just maybe talk to us about how you're thinking about CapEx for the full year and the timing of the CapEx spend? And then I have 2 other questions.

Okay. Let's start with this one. Thank you, Dominic. So in the last call, I have shown that we anticipate, for this year, EUR 875 million of CapEx, and I have already indicated that EUR 250 million of additional funding will have a positive impact on that, meaning reducing that. And that is what we have seen. So first of all, we always have the seasonality in our CapEx spending, which is -- like in almost all other companies more go towards the second half of the year; and second, a big impact, this additional EUR 250 million of funding we have received in the first quarter and that, of course, has a positive impact on our CapEx spending since it's accounted for in the CapEx. So that as much as I can say for the CapEx spending. And we have proven in the last year and in the last years, that we anyway still look very carefully at each investment we are taking and taking very how to say very mindful decisions on each bigger investment. So so much on cash flow and CapEx.

Okay. Excellent. And then just 2 other questions. So obviously, your commentary around the Q2 outlook for steel production is, I think, relatively conservative. Could you maybe just talk to us about how you're seeing the current customer environment with regards to some of the uncertainties in the Middle East, are you seeing any kind of slowdown in customer inquiries or orders? Is there any discernible change in customer behavior? And then my final question is, could you just maybe talk about the Technology business unit? It's a very, very strong quarter. There's certainly been an improvement in the contribution from that division in recent quarters. Do you think that you are able to sustain the type of run rate that you had in Q1 for the rest of 2026...

Sorry, I didn't catch the last question.

My last question is on the Technology business unit. You obviously had a very strong Q1. Should we think that, that is a sustainable run rate going forward?

Okay. Yes, fine, thank you. So I will start with the sales. And why -- and you think we may be more bold in our guidance. So sales, first 2 messages. First of all, we have not seen significant cuts in single customer orders due to the crisis in the Middle East. Second, we have all seen that projections for the economy have been revised downwards, right? For Germany, below 0.5%. And to be honest, that is not growth. That is a slight recovery of about what we have lost the years before. So the crisis in the Middle East and tariff discussions from U.S. are pushing on economic expectations. And this means also on all of our customers' segment, of course. Where we really feel the crisis in the miss our international trade. Here, we feel the pressure on volumes, on prices, and here, we feel a real impact. So if the customer behavior we have seen so far is more in line with the economic expectations rather than individual expectations. Looking at technology -- and about our guidance. Look, we have so much -- as I have said in my intro, we have so much uncertainties from this tariffs now, from the situation in the Middle East, there is quite some uncertainty about what's going to happen and how this is going to impact our business. So of course, we have taken into account that we somehow have to deal with this uncertainty. And saying that, I personally, at this point in time, do not see any major threats to our guidance. The Technology result, I can tell that the Technology result in the first quarter has been strong because we are still very much profiting from the Plasmax orders that we are delivering. We have Plasmax order, and we are still processing from that. Other than that, overall, in the total year, especially KHS will have another record year when it comes to sales, and we'll have another record year when it comes to profit as well. And we see that we expect all 4 quarters in the profit side, on the profit side being stronger than the quarters we have seen last year. So, so much is how I look at it. And with the first quarter being especially strong. And if you look at the seasonality of the Technology segment, you also always see a very strong fourth quarter in almost each year. And we are expecting this to happen also this year.

There are no further questions, but there is a question on the chat asking if there are any one-offs included in the results, especially in the steel production divisions?

If you're talking -- if you look at the first quarter, we have had one-off effect, which was not in steel production, but which was taking place in the Trade segment. And here, we had reduced restructuring cost following some negotiations, and we had the positive result here of EUR 11 million.

And now we have the next question coming from Krishan.

Slight clarification on the green steel subsidy. So you said you received EUR 250 million well ahead in your expectations. So can you help us as in how much of the total subsidy you have received? And do you expect to receive any further subsidy like in 2027?

So we have received more than EUR 1 billion of subsidies already, and we are getting EUR 1.3 billion subsidies overall. And the majority we will receive until the end of the remaining almost EUR 300 million we will receive until the end of this year and only a minor portion is to be expected for 2027.

Understood. And then following up on Bastian's questions in terms of giving the operating guidance excluding the Aurubis. So what is the rationale of including Aurubis in your guidance when you know -- when you are supposed to make an assessment of what Aurubis is going to make when you don't control that business. So have you considered giving the guidance only for the operating businesses maybe from, say, next year onwards?

You know that our Aurubis has been part of our group for many years. And it has always been -- it's a major stake -- we have a major stake here, and we look at the Aurubis as an integral part of our company. And that is why we have decided to include and to guide also the contributions from Aurubis, apart from this year, where we have decided to guide taking into account or taking out the fluctuations we see on the exchangeable bonds. Our philosophy has always been not to provide EBT and EBITDA adjusted where it's difficult to see what's the result of the overall company. So that's what's more or less has been our philosophy and still is.

Okay. Cole, it's up to you now. .

Just would like a little bit of color on how you're seeing trading and inventory levels for steel in Europe considering people are buying a little bit more before the quota system comes in. I'm just wondering how you see those inventory levels being managed through the rest of this year? And then just a housekeeping question. I know you said you're going to be selling treasury shares and there's no rush to do that. But could you give us how much shares you've sold at the moment just from a share count perspective for the following quarters?

Yes. Starting -- Cole, thanks for your questions. I will start with your first question concerning inventory levels. We have seen higher imports in the fourth quarter of last year. And we -- our interpretation is that this is a front loading in line with the CBAM regulations and also [indiscernible] I would like to repeat, Cole, what I have said before that we are still negotiations with the colleague from thyssenkrupp Steel and that we are confident that in the near future, we will be able to come to an agreement, which is good for all sites. And that as soon as this is happening, we will provide the required information. We have a question in the chat from [ Jonas Fanning ], what steel price we assume in our guidance? We do not -- first of all, we do not disclose the prices we have in our contract. And also, you have to understand that in our contract, how to say, the contracts have different time horizons. So some contracts we are doing in steel still have a time horizon of 4 weeks or 2 weeks, some have 3 months, some have 6 months, some have 12 months. So giving 1 single price would also be really of no help. And next to that, we are not disclosing single prices that we have included in our guidance.

Okay. We have all answered the question from the chat. There are no further questions in the line. If so, please let us now.

At the moment, there are no further questions. So dear ladies and gentlemen, thank you very much for your questions. We are closing the Q&A session now.

Thank you. Have a great day.

Thanks.