Salzgitter AG (SZG) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the analyst conference of the Half-Year Results 2026 of Salzgitter. The conference will be recorded. [Operator Instructions] Let me now turn the floor over to Gunnar Groebler, CEO; Birgit Potrafki, CFO; and Markus Heidler, Head of Investor Relations.

Thank you, Melchinkke, and good morning, ladies and gentlemen. Welcome to Salzgitter AG's conference call for the first half 2026. Joining me today, you just have heard it, are our CEO, Gunnar Groeblee; and our CFO, Birgit Potrafki. Following a short presentation of our results and current business development, we will open the floor for your questions. Before we begin, please note this call is intended for the capital market. We kindly ask members from the media to contact our communications team directly. And with this, I hand over to you, Gunnar.

Markus, thank you very much. Good morning from our side. Very happy to be with you today and guide you through our first half of 2026, which has been bottom line, a positive first half of this year. We will show this in the upcoming minutes in the presentation. Let me quickly go through some of the facts and then followed by you, Birgit, on the financials. As you are well aware of, we are [Technical Difficulty] doesn't work, but we'll fix that in a second. We are Always starting with health and safety. As you know, we have a clear health and safety strategy, and we have a clear health and safety target. Unfortunately, primarily due to harsh weather conditions in the start of 2026, our numbers for the first half are not looking as we want them to be and as we expect them to be. You see we have set a target just shy of 6.6% on the LTF. We're way above that. So we have intensified the work on group-wide trainings on preventive health measures to improve second half and still reach our target for the full year 2026. So some way to go. We're happy with the development over the last years. However, this year needs further improvement, and we're working on that. It has been a very intense year and a challenging half year. This Clicker is doing what the Clicker wants to do, but not what I want to do. Challenging market conditions in the first half year. Geopolitical, you know better than we do how the environment looks right now, and it will remain, and this is our view, at least highly volatile intense also for the remainder of this year. ETS reform, there has been a lot of discussion and outreach on the ETS reform. We have seen the first proposal from the commission, a first proposal. I think that is very important to understand of that commission this balancing of between CO2 prices and investment certainty is certainly something that needs further discussion and also lobbying through the remainder of this year. First results or the results will only be available first half of 2027. Big step for us. We have acquired 100% of HKM. We'll go through that in a second. And also, as said, encouraging first half year also in the numbers. So that's certainly something we will talk you through. Volatility, geopolitical tension, that is somehow most probably I'm the problem today. Geopolitical tension will remain. You see the map of Europe. Unfortunately, the color coding for the state of foremost is not perfect, certainly something where quite some uncertainty comes from these days, and this will also remain. And as a result of that, at least partially, the GDP remains weak and also the steel demand in Europe remains weak. Regulatory tailwinds is something that we have seen, and I just mentioned and we'll go through that now in more detail. What has happened on the EU trade policy is that it has been very active in terms of decision-making and also implementing of new tools. The carbon border adjustment mechanism has started on the 1st. We have already seen a positive impact of the CBAM on the price side and also on the reduction of imports. The new steel safeguard measure has taken effect on the 1st of July this year. Also here, a significant reduction in imports. Yes, there will be an impact on prices, or we have seen an impact on prices already, plus EUR 30 if you look at Ex Works Italy for hot-rolled coil. So the effect that we intended to see there -- this is a bit annoying now with the clicker. Apologies for that technically, where we can improve. The intended effects are already visible. I think what we need to state, and we have said that before, is that we have seen market participants acting proactively on the implementation of the new safeguard measures by importing prior to the 1st of July. So this material needs to be worked through the value chain prior to seeing the full effect of that. What happens now for 426, on top of those, is trade defense measures, antidumping measures on the cold-rolled steel, and further antidumping measures, especially when it comes to hot-rolled steel coming out of Turkey. So there, the EU is still active. And I think what we have seen with the Steel and Metals action plan last year comes now more and more into effect from our perspective, a good development. I mentioned ETS before. As said, we have seen the first proposal of the EU Commission. My read of that is given that it has been a very sort of cautious proposal. We're testing the water, testing how the reactions are. And then now we will see a refinement, readjustment of the proposal as well as positioning from both the member states as well as parliament. What is good from our perspective is that the EU ETS as a system remains essentially unchanged. We see that the EU believes in the ETS, the way it is designed. However, we also see that the current draft proposal is not as they promised; actually, it is not putting first movers at an advantage or at least at par with those that have not moved so far. So here, certainly, we need further alignment with the Commission and further explanation to the Commission. We have started that process already. So we shouldn't overvalue this first proposal. It's the starting point of a lateral trialogue between the Commission, the member states and the parliament, as well as accompanied by industry and other stakeholders here. ETS is only one thing. We should always keep in mind that it has to be accompanied by compensatory measures outside the ETS. Let me point out 2 things here. The lead markets for CO2-reduced products made in the EU. Lead market is a concept that has been widely discussed also in the member states, and we see more and more positive connotations to the concept of LEAP markets also from industry, also from our customers, like, for example, the automotive industry. And the second measure we still have to work on, especially in Germany, is energy prices. We need to get energy prices to internationally competitive levels. That is a low-brainer, and why that is, I'll show you in a second. And also here, we have had good and intense discussions also with German policymakers. Katarina Reiter visited our site in Dalzgitter just a week ago. And rest assured, energy and energy prices have been one of the key topics that we have addressed. Looking at raw material and energy prices, we just talked about energy prices. Let me start with the right-hand side. You see that electricity and natural gas have jumped upwards as a result of the Middle East conflict. The current peak in electricity, on top of that, is weather-related. You all have followed that we have seen shutdowns of nuclear power plants in France and in the Eastern part of Europe due to low water levels in rivers and also temperature levels there. On top, we have seen a lot of solar radiation in Europe, which, on average, increases electricity prices due to the fluctuations in feed that we have seen there. Raw materials on our side: freight is one issue for the iron ore, again, something that is connected to the Middle East conflict. Coal has been higher on a temporary level, which was primarily due to weather impacts in the mining regions, but coming back now, as you can see, as those weather impacts have been removed. Looking at steel prices, basically a good development since July last year: hot-rolled coil ex Hugbeet has improved. We are now seeing EUR 715 per tonne. So that's a good development. You also see the recent increase based on the regulatory development that I just mentioned. Also, compared to China and North America and the U.S., respectively, I think also here, again, in the middle and with a stable and good development. And we see no signs, despite the low consumer market; we see no signs for this to change in the second half. Now looking at Salzgitter and looking at our key figures for the first half, as I said, it's a positive development. Yes, we see improvement in all segments. In all segments, we have seen a stronger first half '26 than we have seen in the first half '25. And this is a mixture of basically 2 things. One is the development of market prices versus raw material prices, so widening of the margin. But even more so, we have seen that also our own work that we have done in terms of restructuring, in terms of cost reduction, pays off, and this is what you see in the results. If you look at trading, with a positive result of almost EUR 40 million in the first half of this year is clearly a result of the heavy restructuring we undertook last year. We have already reported to you guys, but just as a reminder, roughly 30% of the jobs have been cut on the trading side. Steel production, predominantly P28, our performance program, roughly EUR 50 million alone from [indiscernible] contribution here. So seeing it is really improving through the entire company, including also Aurubis here, we have seen a stronger first half compared to last year. So good development here and certainly something we will continue to work on, and we can also see that next year. Now looking at 2 major projects we have been through or that we are carrying through. One is Dalkos, of course. We had a rough start to the year. I mentioned the weather that has, of course, also impacted the construction side, but we've been able to catch up given that weather is not really an issue these days. The Hien Tower is now fully assembled, 120 meters, the second-largest tower that we have now on site next to the DRI. Large components have been installed. And especially on the power supply system, utility and power supply system, we are well on schedule here with the development. So commissioning in late summer 2027 is our plan, and there is no sign that there will be a delay on that. Just also to remind you, this is only the first phase of SALCOS. We have at least 2 more phases to go. And here, we are using the modularity of SALCOS to really find the sweet spot in the decision-making for the next phase, which would be an electric arc furnace. The investment decision has been paused. We have reported on that. But rest assured, the preparation for the second step is well underway. So we're doing the engineering. We're doing the business case modeling for that so that we are able to execute as soon as we deem this to be the right time. Second big step of the first half of this year is, of course, the acquisition of HKM. We have been able to strike a deal with the 2 co-owners, thyssenkrupp Steel and Ballrec. We are now since 1st of June, July, 100% owner of HKM. We have bought into HKM with a clear target to decarbonize also this site. So the EAF has been contracted already in July this year. So also here, we are ramping up our project work to deliver green steel out of HKM as of late 2029. 90% CO2 reduction is the target we are looking at. And yes, this comes with heavy restructuring in HKM, and we have been very clear about this the entire time. We are looking at roughly 3,000 people employed in HKM today, and we will reduce that by 2029 to roughly 1,000. This has been discussed and negotiated with the works council and with the unions and is signed. So we have certainty on the numbers and certainty also on the cost impact of that. This has been part of our business case all the way through together with the investment. Birgit, you will show us some more numbers on the HKM later in this presentation. Let me finish with an outlook for 2026. The regulatory measures that I mentioned will certainly also help us through the second half of this year. We have seen improved demand in terms of production from European steelmakers and European producers. The German association [indiscernible] showed a 9% increase in the first half of '26 compared to the first half of 2025. So that is certainly positive. However, fundamental demand needs to further pick up. And we also expect the special funds on infrastructure and defense to be more visible late this year and predominantly in 2027. So that will also then certainly help us in our product mix going forward. I think we should also mention that, especially for the steel processing side, given that this is predominantly project business, we also need those impulses from the special funds and other projects to remain at the good level that we have seen in the first half. As said, the market is stabilizing at a lower level. We have been through the worst in '25. We're now picking up. We said in March back in black. I think we underpin that we are clearly in the black, and we remain in the black in '26 with a good recovery and a good result we foresee for 2026. And with that, I hand over to you, Birgit, to guide us through the financials.

Thank you. First of all, a warm welcome also from me to you. Happy to have you here. Please excuse us for struggling with the technology here. It seems like we are always jumping to the end of the presentation if we do not keep a certain time frame. So let's try to deal with that challenge. I hope it keeps everybody's attention high. As Gunnar has just said, the economic environment is not yet providing meaningful support, which somehow a bottom, but not yet really meaningful support that we can see here. What is helping us, and also Gunnar has talked about this, are the EU trade defense measures, which are having or will be having a positive impact on price levels. Despite the absence of economic tailwinds, we achieved a significant year-on-year earnings improvement. And Gunnar has shown that, and I'm really happy to see that we could reach that in all segments. All teams really did a great job here, I have to say. We expect this positive trend to continue also in the second half of the year, albeit at a somewhat slower pace than what we have seen in the first half. I will also spend some words later on that because I know you may have some different expectations here. Our performance that makes me especially happy continues to deliver really, really strong results. After half of the year, we have almost reached the full year's target. As Gunnar has laid out, from July onwards, HKM will also contribute positively both to revenue and to earnings. All this, of course, before the purchase price allocation effect. We do not, and I can say this, we do not expect any significant net cash outflow from the consolidation. If we look at the first half of the year, our net financial position is exactly where it was 1 year ago. The difference is just EUR 4 million. So quite stable year-over-year. And including the HKM consolidation, our outlook for the net financial position for the total year remains broadly stable. So I can say with confidence that the business is now increasingly well positioned to benefit from any future improvement in economic conditions. So looking at the half-year's numbers, we see on the left upper side our sales revenues amounting to EUR 4.6 billion, which is 1.6% below the previous year's level and driven by trade only, we have to say. Here, we also see economy doesn't really help. And all the other segments are stable or slightly increasing; however, only negative revenues compared to the previous year in the trade business unit. The EBITDA and the EBT are significantly above the previous year in all segments. And the main contributions, of course, are coming from Aurubis, but also a very strong contribution from steel production as well. As I mentioned before, all the others are also contributing in a good way. And here, you see a little bit grayish the figures that are not the adjusted result figures. Here, you see that even the EBT, including the evaluation effect of the exchangeable bond, is also clearly positive. If you look at the right side, working capital, we see an increased working capital of EUR 2.6 billion, mainly coming from accounts receivable, and this is increased compared to 1 year before. All of this is resulting then also in our operating profit, which reaches EUR 59 million in the first 6 months. And this has an impact on our net financial position. As I mentioned before, very stable compared to 1 year before. If you look at our income statement, and Gunnar has mentioned already and I have mentioned already the P28 contributions that are, of course, spread all over most of the items in the profit and loss statement, but let me show you the structure of the profit and loss statement where we have the biggest contributions. Here, I would like to mention 2 major, how to say, categories that lead to the fact that we have reached such a good result. One is that if we look at our cost of materials, we see in the box below a significant improvement compared to the year before of EUR 122 million. To give you also a relation, this cost of materials represents 61% of our sales revenue, whilst 1 year before, we were still spending 65% of our sales revenues for cost of materials. The other nice big figure, you see more on the right side, the plus EUR 113 million, mainly driven by the nice performance of our Aurubis participation here, also having a nice major impact on our profit and loss, and all of this resulting in the EUR 258 million EBT, and including the valuation of the exchangeable bond, also positive, EUR 76 million. Then, after taxes, we come to a result all in of EUR 43 million. Looking at our balance sheet. And here, starting with the asset side. We see an increase in our assets of EUR 374 million, driven mainly by 3 impacts. First impact, if you look at the noncurrent assets, of course, here, we see the impact of the Aurubis evaluation. This is partially compensated in a negative way because the funding we received, they decreased the investments we have made, because the funding was also related to former spending. We see that cash and securities have also increased due to the inflow of funding, and the other current assets are mainly accounts receivable. If we look at the equity and liability side, here, 2 things need to be mentioned. First, our equity ratio is stable at 42%. And second, we have a switch between long-term and current liabilities, and this is due to the remaining maturity of some of the financial instruments we are using. Coming to the cash flow statement, starting with the left side of the operating cash flow. I have mentioned the EUR 59 million we have already received in the first half of the year. One year before, we could manage to receive EUR 81 million, and the difference is mainly driven by a different way of the development of the working capital, which increased whilst in the second quarter last year, we could significantly decrease. If we look at the right side of the cash flow statement, we see that we could increase our cash up to EUR 1.2 billion. What is really nice is that we see that in all categories, we have a plus, even in the cash flow from investments and also in the cash flow from financing at a smaller amount here for the cash flow statement, investments and depreciation. We have quite an overseeable number in the first half of the year, amounting to EUR 88 million when we look at our investments. Also strongly influenced, of course, by the funding we received was EUR 290 million. For the total year, we are looking at investments of EUR 650 million, and included in this is a EUR 100 million investment in HKM. And you see that the majority of the investments go into all the business that is not [indiscernible] related because the [indiscernible] portion, for the total year, will be profiting from the funds that we have received and that we still will receive in the upcoming months. Very happy to talk about the performance program P28 because, as I have mentioned before, on the right side, you see the target, EUR 122 million. Next to that, you see what we have effectively achieved after 6 months, EUR 97 million, which is already 80% of the total year's target. As you may remember, we have significantly overachieved the targets that we set for last year. So we are quite confident that we will not only reach our target for 2026, but that we will also be able to again overachieve our target. Gunnar has also mentioned the major contributor here, you see, with above EUR 50 million, is the steel production area, followed by steel processing and technology. Again, I would like to mention that restructuring effects are not represented in this program. This is why the nice restructuring effects we have seen in trade are accounted for in a different category, not indeed 28. I mean, Gunnar has shown it. We have lost quite significant sales in the trade area, and we could improve the profit. And that is also strongly influenced, of course, by the effects that we realized due to our restructuring activities. HKM of high interest, I know, results. We will see a positive contribution in the second half of 2026 when we will consolidate HKM. And of course, this is before the purchase price allocation effect. I have mentioned that already before; we will complete that by the end of this year. And of course, the results, we will see positive impact on the revenue side. If you ask how much, you can look at how much we have shifted our guidance. That's the major portion, of course, coming from HKM. And looking at the profit side, and of course, you will ask that question: how much is the profit going to be that you will have in addition? I can say as much as this is a mid-sized double-digit million value. If we look at the balance sheet effect, of course, the consolidation of HKM will prolong our balance sheet. However, it will not change the structure as it is. We will have one positive implication, though, and this is concerning the leverage because HKM is coming with almost no debt and bringing additional EBITDA to the table. Cash impact on Dalzgitter. I know that this is one of the most, how do I say, the figures of most interest to you. And a lot of questions are asked and will be asked, of course, about single views like restructuring or investment in transformation. However, I have to really stress that we have to look at HKM as a whole. So we have money that comes from operating activities of HKM. We have the contributions from the former shareholders, and we will receive funding for the transformation. And that money, of course, will be used to transform the company, to do the restructuring and also to do the investment. So what is the figure that is, for me, the most important one to look at is if we look at Salzgitter as a whole, including HKM, how much additional cash overall will be required due to the fact that we now own HKM. I can disclose the figure that is mentioned here, which is that, within the next 3 years, the net additional cash over all of these items that I have mentioned just right now, we will need EUR 100 million over the next 3 years. So I think that's quite an overseeable amount. And of course, since we talk a lot about SALCOS and since you are all very familiar with the SALCOS figures, it's just logical that we also talk about the investments for the transformation at HKM. And here, we are talking about around EUR 900 million, and we will receive EUR 200 million in funding. As I mentioned before, there is no need to be, how to say, concerned because the overall holistic view shows that in the next 3 years it is around EUR 100 million net additional cash that this will require. So that is the number I ask you to keep in mind. Bringing all of this together, looking at our guidance, of course, you have seen that our sales amounts are now up to EUR 10 billion, EBITDA between EUR 725 million and EUR 825 million, a pretax result between EUR 325 million and EUR 425 million, and the return on capital employed marginally above the previous year's figures. And I also know that you are challenging us again on whether we are being too prudent rather than being too bold, looking at where we are after the first half of the year and comparing that to our guidance. I can tell you, we feel quite confident with our guidance. I would also like to already give you some information here. Why is this the case? First of all, we will have seasonal effects, as we always do have coming from the summer period and coming from the Christmas period. We will have downtime for maintenance, of course, influencing the business. We had a one-time effect in the first half of the year, not sustainable effects with around about EUR 20 million. And taking all this into account, we think that we will still continue the nice path we have seen in the first half of the year. However, as I have mentioned in my introduction, a little bit, very slightly more moderate. With this, I think we are starting now the Q&A session and are getting ready or are ready to receive your questions.

Prior to that, again, an apology for the mess-up with technology. I hope that you still were able to follow. But please be reminded that the presentation is available on the Internet. So if there's anything you want to sort of get to through the Q&A, please do. Apologies. It's not our standard, and we certainly do better next time.

Well, at least I hope the audience appreciated that I had a more active role in the presentation. Let's start with the first question.

[Operator Instructions] So we already have many questions. So we start with the first one from Reinhard van der Weal from Bank of America.

Maybe first, just a question on market conditions. The recent price increases that we've been seeing in HRC, do you think any of that has been driven by the European water levels, whether that be steepening of the cost curve or impacting supply?

Thank you, Rainhard, for the question. Of course, we are monitoring water levels, especially on the Rhine River, very thoroughly given that this has, of course, an impact on HCM. So far, we have not been impacted by low water levels as Salzgitter, but your question was more general. I think it's too early really to see price increases through weather conditions like the low water levels on the rivers. But certainly, if that continues to be the case and if water levels further drop, then you might see sort of shortages there. And then it might have an impact on price. So far, I would say we haven't seen that. At least I'm not aware of any price increases due to restrictions on production.

Maybe just, I guess, a follow-up question on the market conditions. We've heard some sort of mixed comments from your peers about what volumes could look like in 3Q, some saying it will be up, some saying it will be down. I mean in your business, are you expecting usual Q3 seasonality in volumes? Or do you think the TRQ is maybe already going to deliver some volume benefits?

Well, I think in Q3, we're going to see the effects of the TRQ starting. As I mentioned, some of the traders have reacted proactively and have proactively bought material and shipped it to Europe prior to the TRQ kicking in. So we will see and need to work through the value chain. But I would assume that some of the TRQ effects will be visible already in Q3. However, when it comes to flat, I would say stable development going forward, especially plate and large diameter tubes, which are more project-related businesses. Certainly, we need to see a pickup here. And as Birgit mentioned, that market has been relatively silent last quarter. So we certainly need a pickup after the summer break. So certainly something we are working hard on: different projects, but also need to bring them home here. Then again, as soon as it is international projects, we also need to look at the trade development, especially with the U.S.

So the next question comes from Tristan Gresser from BNP Paribas.

The first one is on the cash needs you mentioned for HKM. It's a very large EAT, and I think you need to build all the additional infrastructure investment around it. So $900 million for the full thing on a gross basis seems a bit low. But do you have built some contingency? Are you really confident that that's the highest point you'll have to spend? And then if you can help us also understand the restructuring cost, maybe the cadence of it and the total amount? Yes, I will have a follow-up on that, but I'll start there.

So cash needs, yes, we are confident with the EUR 900 million. HKM has, and we have reviewed that, done a quite thorough project work on it. And with our experience from SALCOS, we, of course, have sort of critically reviewed that. And we're confident that those EUR 900 million are sufficient. And yes, we have contingencies in that budget. So there's a bit of headroom also here. We shouldn't forget that HKM is in a pretty lucky position given that grid infrastructure is already there. So unlike our project in [indiscernible], no grid infrastructure needs to be built, and also space is available there. So they are in a relatively favorable sort of environment for a project like this. So that's one element. Restructuring cost, basically, was predominantly the reduction of personnel. As said, this has been negotiated. So we have certainty on that. The main element of the personnel reduction will only come late in the process because this is when we stop the second blast furnace. And with that, the coating unit, the center plant, and also part of the power plant potentially. So that's when the larger headcount reductions will actually appear. So that is it. We have not disclosed the total amount of the cost, but it is well in line or, I would say, slightly below what you have seen in other restructuring processes in the German steel industry.

So that's going to come more in 2029, if I'm correct; that's when you plan to shut down the second BF.

Correct, correct. But what I forgot to mention, of course, with the shutdown of the first BOF, we already have a significant impact this year. But you're right, the larger portion then comes in '29.

So there is some restructuring costs impacting 2026 due to the shutdown of the first blast furnace. Is that correct?

Yes, exactly.

And that's included in the guidance you provided for the consolidation of HKM.

That is absolutely included, yes. The rule of thumb is 1/4 of the cost in '26 and 3/4 in '29, just to give you a bit of a ballpark.

And just on the EUR 100 million for the next 3 years for HKM, you also have, I think, included in your CapEx guidance update, EUR 100 million from HKM for just those 2 quarters. So what is this EUR 100 million?

I guess it's not maintenance, but yes, just trying to reconcile those 2 figures if we need to factor in some additional maintenance for HKM in the coming years as well.

Yes. So what is part of the EUR 100 million is, of course, the update of the remaining blast furnace is one part, a major part. And then what you need to keep HKM up and running every year, no major other how to say, bigger investments included here. If your question is on what we have to expect in the upcoming years as investments that are not related to the transformation of the electric -- towards the electric arc furnace, you can count between EUR 50 million and EUR 100 million in investment.

For HKM?

For HKM. Yes.

So the cash impact over the next 3 years, that's excluding maintenance?

No. Thanks for putting that question again. The EUR 100 million I have mentioned is the amount that you need to look at HKM in total, taking into consideration all needs for restructuring for investments, be it the gray route, be it already investments for the green route, and all this funded by the shareholders' contribution funded by the activities that HKM is organizing and by public funding. And the total picture, including also the investments I have just mentioned, including also the investments for the electric arc furnace, this figure includes all of this.

Okay. Including the maintenance, but also including the cash generation of the plant.

Yes.

And maybe last question. Can you help us a bit understand what we should expect in terms of investment cash needs for next year? I think you still need to receive EUR 200 million in funding. What's the timing of that maintenance for next year as well, and what's remaining on SALCOS so we can calibrate a bit better the investment for the coming quarters and especially next year? That would be great.

For the coming quarters, I have talked about that in one of my slides. So we have spent EUR 88 million in the first half of the year. The figure was especially low due to the funding that we received was EUR 290 million. We expect, including HKM, to spend a total of EUR 650 million; without HKM, EUR 550 million. As I mentioned, for HKM, you can count on EUR 50 million and EUR 100 million depending on the topics that need to be invested. And for SALCOS for next year, you may count on something around EUR 0.5 billion in investment for 2027.

And the funding, the EUR 200 million that you need to receive, is that going to be H2 or next year and [indiscernible]

EUR 200 million funding will spread along the total investment of the EUR 900 million because what is happening in the procedure is that once you have paid the machinery provider, you are able -- or we are able -- once we have paid them, we are able to ask for the reimbursement to the states and to the German Republic. And then they are quite quick in paying that. But this goes along with the investment that is really, how to say, done where you really had the cash outflow, yes.

Sorry, I mean the funding for SALCOS Phase I.

Sorry, you were not at HKM. Sorry, I was thinking you were still stuck with HKM, but you're not talking about SALCOS funding.

Yes, SALCOS, I think you got 1.1 billion; you need to get 1.3 billion. So there's EUR 200, Extra [indiscernible] or next year.

Yes, half-half.

So next question comes from Maxime Kogge from ODDO BHS.

First question, I'm staying on HKM. So you mentioned the mid-double-digit impact on EBITDA in H2. Is that purely an accounting impact? Or is that a reflection of the underlying contribution of HKM? Can we perhaps annualize that to about EUR 100 million to get a sense of its recurring contribution?

Maxime, I cannot tell you what you can model in your models. And you're right, it's a million-double-digit amount I have mentioned for the second half of 2026. As you're very well aware, not only concerning HKM, but concerning all other entities as well. At this point in time, we are not disclosing any expectations for next year since we are still in the process of putting our planning together. So I'm also not going to disclose any expectations for HKM results for 2027 right now.

But is that purely accounting, or is it really the underlying contribution in H2? I mean, is that purely...

Maxime, it's a mix of both, There's an element of underlying business, and there's an element of sort of accounting there.

At this stage, you don't want to split the 2.

No. As we have said, Maxime, what's also important to keep in mind is that the effects from the purchase price allocation are not yet included in this figure, yes.

And I would have thought that the financial contribution of Vallourec and thyssenkrupp would already be recognized in the balance sheet at the onset of the acquisition. But I guess this will also flow progressively over the next 3 years now as restructuring needs and CapEx needs also increase. Am I right to understand that?

Absolutely right, Maxim. Yes.

Now, if I switch to the Q2 results, I had one on the Trading division that had a very good result once again. And this time, it was not driven by exceptionals. But I imagine there are some valuation adjustments included in that. Can you perhaps give us some sense of the underlying results for trading versus valuation adjustment contribution there?

Yes, I can give you one reason why the results were so nice. You're right. In the first quarter, we had a not sustainable onetime effect of EUR 10 million or EUR 11 million, to be more precise, which we did not see in the second quarter. The good result in the trade was also driven by a very favorable combination of material cost basis and price basis because our colleagues from the Trade segment, they had some stock buildup, making use of very good material cost and then being able to transform that into business. And for your next question, how do they look at the second half of the year? They are a lot more prudent when they look at the second half of the year also because the geopolitical tensions are putting pressure on international trade. And here, we all deal with quite a high degree of uncertainty.

And just the last one, it's on your tax position because, as far as I understand, you have recognized on your -- so precisely, it's not recognized on your balance sheet, but you have EUR 4 billion of tax loss carryforwards accumulated over the past years. And so far, you hadn't recognized anything of that or a very limited amount because you had limited profit generation ability. But now that things are improving a lot, that you're returning to healthy profit generation ability, should we expect that to be recognized on the balance sheet, so perhaps not at the 30th of September, but at the 31st and further beyond this time frame?

Yes, of course, we will make use of that as soon as we can. That's very clear. And you are absolutely right, since our business results were not in the range that we could make use of these losses carried forward, we just simply didn't. And some of the positive results we achieved were mainly organized. We also couldn't in some parts. But of course, as soon as we can, we will make use of that. That's absolutely clear.

Okay. And then we should, therefore, expect that tax outlays will remain minimal over the next year, sorry, because you have so many tax loss carryforwards.

As long as these results are able to be accounted against the losses brought forward, yes.

So the next question comes from Bastian Synagowitz from Deutsche Bank.

I've got a few more follow-ups from HKM, if that's okay. Maybe you can bring us up to speed there. But what have been the recent production levels in 2025 at the HKM level? And how exactly does the planned blast furnace setup look from here onwards? I understood that 1 of the 2 blast furnaces is currently being relined, but will that even come back? That's my first question.

Let me answer the blast furnace question. The reason for taking this blast furnace out of operation is still, as you said, the relining and basically upgrading the blast furnace to then go back into operation in August and then carry HKM through the upcoming 3 years. So you might recall that the whole concept is based on us reducing capacity at HKM already this year. We have an installed capacity of roughly 5 million tonnes. We will reduce that to 2.5 million, meaning 1 blast furnace. And that's exactly the blast furnace that is being relined right now. As soon as that one is operational again and stable, we will take out the other blast furnace and close that one down. And that is then the first part of what we discussed with Tristan also when it comes to the restructuring, reducing the workforce roughly 1/4. So that would certainly happen. And production levels for the 2 blast furnaces in 2025 have been good. The whole structure of HKM has been that HKM basically produced at an optimal level to support the 3 shareholders. So production levels in 2025 have been on a very good level.

And what does that mean? Is it like 4 million tonnes or--

I don't have the output number on top of my head for the total HKM because I only looked at our share, and it has not been published. So unfortunately, we cannot deliver that number. It's not been published, given that it has gone through to 3 different shareholders.

And so then as the one blast furnace, which is currently being as it's coming back, when will the second one leave? What's the broad timing for that? Is it going to be early next year?

No, no, no, no, no. As soon as the Reline blast furnace is operational and stable, we will take that one out. So it's going to happen in Q3, certainly. Very quickly after the Reline one is back in operation.

Yes. Okay. But basically, if we look at it at a high level, even with you not, I guess, disclosing the 2025 numbers, basically, what's happening is that we go from 2 blast furnace operations back in 2025 to basically an exit run rate using just 1 blast furnace at the end of this year?

Absolutely, yes.

So it's a net-net cut?

Yes.

And then just getting back on the CapEx guidance, which you guided for with EUR 50 million to EUR 100 million maintenance because that's a pretty broad range. Is this referring to just a blast furnace operation? Or is the upper end of that still based on 2 blast furnaces?

Yes. It's for what we expect for this year and the next few years, yes. So it's for the blast furnace. And you're right, if you see that we have run 2 blast furnaces this year for half of the year, or HKM did. And then we will have one; then of course, you can assume where you maybe find yourself back between the EUR 50 million and the EUR 100 million. I'm not going to give a more precise figure because, as I have said, we are still now in the process of putting our midterm plans together. So it would just not be fair to give any more precise figure because it's simply not there right now, yes.

And maybe on to next year, and I totally appreciate you can't really say too much given we don't know that much about the market yet. I can only take assumptions here. But I guess what we do know is, I guess, you have a maintenance CapEx guidance for EUR 50 million to EUR 100 million, and the upper end certainly looks relatively high. There's quite a bit of restructuring coming already next year from what you say, I guess; if you cut 500 people, that's giving you a decent mid-double-digit cost-saving amount already. I guess it would be quite surprising if you would be taking this on without at least covering the full amount of the maintenance CapEx. So I guess whatever you expect as an earnings contribution must probably fully cover that. Is that a fair assumption?