Voestalpine AG ($VOE)

Ladies and gentlemen, welcome to the Voestalpine Publication First Quarter 2025-2026 Business Year Conference Call. I am Matilda, the Chorus Call operator. [Operator Instructions]. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Peter Fleischer, Head of Investor Relations. Please go ahead.

Good afternoon, ladies and gentlemen, and a warm welcome to our results presentation today of the business year 2025, 2026. With me is the complete Board of Voestalpine and [indiscernible] as the gentlemen will give you a brief overview of what has happened in the last business year as well as where we stand today as well as what our outlook expectations are. After the presentation, we will be very happy to answer questions. Now I would like to hand over to Herbert Eibensteiner to start the presentation.

Good afternoon, ladies and gentlemen, we, together, will present the business year 2025-'26. And I would like to start with the highlights. You have already seen our figures. So even in a very difficult environment, the performance was good and in nearly all key financial indicators and the results, I would say, were driven by a very robust strategy and very active reorganization. And on the positive side, we had high demand in railway infrastructure. We get good orders in aerospace business and also this sector is smaller. We had record results in warehouse technology. In construction, mechanical engineering and consumer goods, it was stable, but at the low level. And automotive was mixed, good for flat steel and with some difficulties in automotive body parts. And for me, very important is that we can deliver a very good free cash flow and we have reduced net debt. That means a very low gearing. And we have reduced our employees coming from this reorganization measures of around 1.8%. Greentec steel, our begin investment project is still well on track in time and in budget. And we want to pay a dividend of 0.75 per share compared to last year where we have paid 0.60 and the outlook is EBITDA between EUR 1.6 billion and EUR 1.85 billion. How was the performance of our markets. You know it for sure that we have a very flat economic growth in Europe. And we had faced this pressure from U.S. tariffs, which is a very high double-digit euro. Negative effect and the industry production was on a very low level. When you look at the U.S. very solid, robust development. But to the high extent, it's coming from investment in the technology sector and not so in the normal industry sector, which was very flat. China, still stable growth were driven by exports but domestic demand was very low and Brazil in South America, Brazil is our biggest market, the economic momentum reduced a little bit coming from these high interest rates and very strong competition from Chinese imports. Brazil was a market without any tariff, which has now changed a little bit. We will see how this will influence our business. And when it comes to the actual strategic focus, no changes. We are working diligently on our economically successful decarbonization of our steel production replacement of blast furnaces by electro furnaces. And when we look at our value-added areas, let's say, we had a good development in Railway System, Tubes & Sections, Warehouse & Rack Solutions, aerospace, and we look also into attractive regions like India which we have still a small footprint, but we plan to increase our activities in India. And as I mentioned before, very important for our results where this very consistent reorganization and portfolio optimization and where we're focusing clearly on efficiency. And you know that we reorganized the automotive facilities in our automotive components business, particular in Germany, but not only. And high-performance metal made a great effort, a big effort in portfolio optimization, and this is now largely complete. Greentec steel is no change in our plan. So we want to start up with our 2 electro arc furnace sites in Linz and in and Donawitz next year in around February to May. And we will start up then until 2029, and then you will see a reduction of 30% of CO2 emissions. And after 2029 you will see further replacement of blast furnaces and with the goal that we are CO2 neutral in 2050. I mentioned before, the added value downstream business. Just to give you a flavor of what I'm talking about. So in Railway Systems, very important for us is that we got very good orders. We have a good order book for Deutsche Bank. And the Swiss railway companies, we got contracts of around EUR 5 million. And also core PAM, which is in Austria we've finalized this big project in the course of this year. Warehouse & Rack Solution still growing steadily, and we got very large orders in several countries in Europe and also out of euros, and we get the biggest order ever in Eastern [ board ], for instance, and we have already announced that we got for our aerospace business, record orders of around EUR 1 billion for the next 5-year. And that's a very good outlook for this aerospace business. And what we are doing there, high-performance materials for engines complex forgings for landing gear, and we also provide our customers logistics service worldwide. And when you ask what are the production sites. This is [indiscernible] in Austria, and we also deliver parts from Brazil, from [ Sumare ] all over the world. Yes, it was very briefly the highlights of last year, and I would like to hand over to my colleagues in the divisions.

Ladies and gentlemen, it's my pleasure to walk you through the highlights of the Voestalpine Steel division of the past fiscal year. It was a difficult one, as we all know, but also a very successful one. You find the corresponding figures, the financial figures in the boxes on the right-hand side of the slide, and were able to achieve a remarkable margin -- EBIT margin of close to 10% and EBITDA margin slightly above 14%. And what is remarkable for the time where we are living in. We could manage to perform stable deliveries in our most important customer segments. There was a low demand, but some demand in construction business, mechanical engineering and white goods and the industry segments, our most important segment, the automotive segment, was also not performing good, but it was able for Voestalpine Steel division to gain additional market shares and to gain additional orders from our competitors what was, at the end, good for our financial figures. We think that also the demand for the energy industry, especially for heavy plates, [ claded ] plates had a very positive impact on our results. And we also saw at the beginning of the calendar year and also business year a positive effect by the CBAM regulation. And we do expect also a positive momentum for the second half of the calendar and fiscal year when the post safeguard measures will be operational by 1st of July. In the actual already running business here, we see that there is a kind of a pause for the heavy plate business. We expect to get additional orders by end of this calendar year. but this effect will more than compensated by the rest of the division. The rest of the market trends will be, in our opinion, unchanged. So we do not see a very positive upturn or downturn. So I think that we can look forward to another successful business year for the Voestalpine Steel division. Ms. [indiscernible] already mentioned the transformation project, greentec steel. So I don't want to add anything new just that I'm looking very much forward to ramp up the production by February next year. Thank you.

So good afternoon, ladies and gentlemen. It's my honor to walk you through the highlights of High Performance Metals Division. The business development in the last fiscal year we started with quite a lot of headwinds and the tooling markets were muted in Europe and in the Americas. We saw a robust demand in China. So we could position ourselves quite well for high-pressure die casting, plastic injection molding and high-speed steel where we see that the market was quite stable. We saw a mixed development depending on the subsegments in segment Industrial, we saw quite -- not the boost, but we are building it up. And we had some successes in Food and Beverage and also in medtech as well as in mining. As Automotive was a little bit muted in this segment. And we saw also that the oil and gas segment, renewable CPI was some headwinds. But now we see slight tendencies due to the overall situation worldwide in terms of fracking business in the United States. Aerospace business, as mentioned earlier, was quite strong as well in special forgings as well as materials. And what we also can say is that the reorganization project. We are progressing as planned and implemented as planned. And this means the portfolio optimization warehouse consolidations and also mergers of companies like Voestalpine [indiscernible]. If we come to the current situation and the outlook, we see some very slight trends, upward trends in tooling and industrials. But overall, the trends are continuing in these segments, we see that, as I mentioned earlier, the rising energy prices have a positive sentiment in certain segments in the oil and gas business. We see that also customer orders in the second half of this year will go up to a small extent. And we see the positive effects from the reorganization project, which we are currently pursuing and which we will consequently follow up and implement with the same fervor as we did in the last months and years. Thank you.

Good afternoon, ladies and gentlemen. It's my pleasure to present to you the Metal Engineering division business year 2025-'26. If you look about our figures, there a little bit less good than last year, mainly impacted by the tariffs who -- sorry, which have impacted our business unit[indiscernible]. And that has been -- on the other side, backed up by a good market environment for the railway infrastructure globally, which is still, and also will be in future, the backbone of the division. In the industrial business units, as already mentioned, we had a mix development regarding the seamless tubes I've already mentioned. The impact of the U.S. there is up from June last year. Also the wire business with muted demand and strong competition was under pressure. The welding business unit overall and globally was on a stable trend with some regional creations. Regarding the current situation and the outlook, we expect that the global stable trend in the Railway Systems business unit will proceed on. Our systems approach is growing in all the regions and get good response, especially our digitalization efforts by introducing our new asset management platform, [ Sigrid ] already has shown some fruits. One of them, for example, was the award of the rail [indiscernible] project with an overall project sales volume of about EUR 500 million. We expect no real improvements on the seamless tube side within this business here because of no changes to our expected changes on the U.S. tariff side. But the other 2 business units, the wire and the welding should perform better than last year and should show a stable development even moderate ones. As already mentioned by my colleague, site, also our part of the overall greentec steel project of Voestalpine, part in Donawitz, where we're also investing into an electric arc furnace facility is on time and on budget. Thank you very much.

So we continue with the Metal Forming Division. Let me guide you through the different business units, and I will start with the automotive business. We heard the markets will not improve, so we will adapt to the new levels, which we see especially in Europe. We have a big program running for almost 2 years now. It's called restart, and we have now completed, for example, the closure of [ Birkenfeld ], we have relocated our presses, and we have conducted our social plans that are now being implemented. With that, we have already reduced our head count in Germany by roughly 500 FTE. And of course, we do also have a focus on Cartersville making it profitable. We are in the middle of a transformation in our platform. It's a new business. The quality is stable. We have reduced our headcount. We are improving our OEE, but this project as well as the German project is not yet over, so we will still work on it for at least the next 12 months. We need further reductions in Germany and of course, further improvements in Cartersville. We are also looking into synergies in our organization, and we are looking for synergies in procurement, supply chain and IT. From the market side, of course, we are also looking for new opportunities, especially with non-German accounts. Looking towards Tubes & Section, a lot of headwinds actually in Hudson sections in the last year. While Europe was relatively solid, and we had well performing sites, for example, in Austria and also in Belgium, U.K., especially in the construction market was difficult and very difficult at these times is the U.S. business. Looking at the market, you can imagine that photovoltaics or [ CAF ] business is difficult there at the moment, customers are a little bit reluctant to give new orders at this point in time. But good news in terms of our large investment projects, it's our investment in the U.S. in terms of frame rails or trucks. This project is on track, and I'm very happy that our start of production will be as planned in July 2026. So upcoming very soon. Also, we are progressing in India where we are in the middle of the premarketing phase founding a legal entity. So this is a greenfield project, and we are well on track in South America with our investment project over there. It's a new slitter improving our logistics supply chain there. We will remain focused on the market. It is not getting easier for tube transactions, but we are still optimistic that we will find our profitable niches, and we have started a project on this topic as well to improve our synergies. A word on raw tech. This is part of Tubes & Section, but this is the part which focuses on safety and comfort components for the automotive industry. In a nutshell, also a restructuring project. We had a closure of U.K., and we had an almost closure. It's now only a sales office in Canada, and we are moving basically our production to more lower-cost countries. This is successful, and we are already turning into positive results. Very briefly on our very positive business units, and this is, for example, precision strip in spite of headwinds in -- for the exchange rates and also tariffs. Our new strategy is working out very well. We are ahead of budget, and we will continue very profitably as well. We are focusing on innovations, new applications, new customers and also new geographies. And we are also reducing successfully our working capital. So a very big success story there, which is going to continue. And last, but really not least is Warehouse & Racks. It was a year of record in terms of turnover, EBITDA, working capital, cash flow. We have an excellent project pipeline also in the future. We are going to grow further. Torri, our recent acquisition is positive and on budget. So we are also looking forward into a successful next year. So in terms of outlook, in a nutshell, we will further improve our EBIT from this year's improvement even more. The target is that for automotive components, restructuring will show further benefits. Tubes & Section still in a difficult market, some growth and precision strip and Warehouse & Racks are continuing their successful path. Thank you very much.

Ladies and gentlemen, it's now my turn to wrap everything up and translate how everything you heard now also translate it into our financials. Let me start with our financial overview. Revenue, as you see here, is down by EUR 680 million, roughly EUR 400 million that we see a direct impact from lower raw material prices compared to prior year, which translated directly into lower sales prices for our product. We also had an impact of roughly USD 100 million in the revenue line item out of the U.S. dollar. We also had a positive effect from higher volumes, in particular from Steel division, some lower volumes from HPM division. And in addition to that, it was mentioned that we sold [ Voestalpine ] last year and the part of simply deconsolidating [indiscernible] accounted for EUR 250 million of turnover in the prior year. Talking about the profitability. EBITDA is up EUR 140 million. You heard from my colleagues, we were doing quite well in Steel division last year. So a lot of positive initiatives. We approach the market we drove costs down and then streamline processes, so a positive contribution also comparing to the prior year from steel in HPM division, we also saw a sharp increase, the main reason. The other cost measure was restructuring from last year. And again, the [indiscernible], sale we had in the business year '25, and there we had a valuation impact in the prior year. And we saw some challenging market environments, and these cost measures compensated actually for that. All in all, a better year 2025-2026 compared to '24-'25 also for HPM division. Metal Engineering, Franz Kainersdorfer mentioned that in particular in uvula, we were, of course, suffering from tariffs. All in all, if you look at the total number. And this is also what we published and told you in our publications before that we were suffering roughly with a high double-digit million number, which is the impact of U.S. tariffs from the U.S. and the main business units offering out of that is our business unit tubules, and this is [indiscernible] of Metal Engineering Division for buyer market, also still difficult in '25-'26. Stable, but also with some headwinds was welding. And rail, as we said before, was positive at lower price levels, in particular, for rail in last year. Metal Forming, as Carola just said, prior year driven by a lot of restructuring measures, so roughly in the amount of EUR 45 million, of course. This was one main reason that these cost measures are positive now and saw some improvements, in particular in automotive components but of this division, upon sections, as Carola mentioned, some headwinds there, but still solid and the record year of Warehouse & Racks Solution was also mentioned. Going to EBIT. EBIT is up by EUR 270 million. In addition to the reasons I just explained, we had some impairments last year in HPM and Metal Forming division. This year, we were very stable in that regard. And so no additional impairments were recognized between EBIT and profit before tax. You do not see the financial result there. But if you do the math there, you will see an improvement there of roughly EUR 40 million. The main reason sense a lower interest rate, of course, Europe was down 1.1% compared to the average number compared to the prior year. And in addition to that, we also mentioned the positive free cash flow before. And so net debt was also down roughly EUR 400 million, and this was the main reason for that. It been profit before tax and after tax, you see a normalized tax rate. Last year, we were above 30%. This year, a little bit above 27%. And so we saw a normalized one this year. Going to the first bridge. From business year '24-'25. The EBITDA was [ EUR 1,346 million ]. Lower prices, EUR 378 million, more or less compensated by lower raw material cost in mainly all the divisions. We have a positive impact from higher volumes, in particular from Steel division. Some negative effects are also included there from HPM, what I mentioned also before. And then miscellaneous, what you see there is actually this reorganization, reorganization caused in prior period in particular and also valuation of [indiscernible] and the impact of tariffs is also included there. So this is how we bridge from EUR 1.3 billion to EUR 1.4 billion roughly in EBITDA. A quick look to the changes where do they come from in terms of division. You see there that we see a better performance from Steel division, EUR 67 million. HPM, EUR 133 million in particular driven by these one-offs in the prior period, metal engineering, driven by, in particular, tariffs minus EUR 87 million in Metal Forming, we were doing better by roughly EUR 49 million, and so we end up at EUR 1.5 billion. Cash flow was very positive this year. So you see here driven, first of all, by higher results, cash flow from results, EUR 1.2 billion compared to EUR 900 million in the year before. Again, positive effect of changes in working capital. If you add this up, these 2 periods, we released working capital in amount of roughly EUR 800 million. Of course, at a certain point, this also will have an end and come to an end and this has tend to do with the guidance we are giving for our cash flow numbers. in terms of cash flow from investing activities, you see EUR 1.1 billion was '24-'25. Last year, we were at EUR 1 billion roughly perhaps a little bit below our expectation. But as my colleagues explained before, both big projects are on time, on budget. So we will see these expenditures and it is more or less a cut off topic, and there are no big delays or no delays actually and no overruns in terms of cost expected. So we will finish our projects on time, on budget as of today. This is our clear expectation there. So we end up with the free cash flow of EUR 530 million in which was very positive compared to EUR 300 million prior year, which was also not that bad. In terms of capital allocation, you see the investable cash flow of EUR 1.1 billion means operating -- cash flow from operating activities, minus maintenance CapEx was EUR 1.1 billion. I start at the corner top right, EUR 170 million were spent into growth projects, in particular, the biggest one was one in Metal Forming Divisions for the rail frames Carola just explained to you. We paid dividends of roughly EUR 120 million this year based on the capital allocation and dividend policy we published in July last year. Not based on that, this was -- this policy. The next one, of course, will be based on that investments in decarbonization, EUR 380 million, so a little bit above that. As said, once again, on time, on budget, and we optimized our capital structure down by roughly EUR 400 million. Having a look at this bridge, now you see the details there. Again, investable cash flow of 1.1 billion. And what I just explained to you is again here and shown in the format of this bridge, which we want to, yes, give you regularly, but same numbers as we saw it here. I would like to end this overview. So our equity base is very solid, EUR 7.8 billion or 49% gearing, of course, is very low. -- at 16% net debt-to-EBITDA at 0.9%. This, first of all, brings us into the position to be simply prepared for 2 things. And this is -- we are in an uncertain environment. This is number one. We are driving big projects here. And as we said, this is -- it does not go without saying that we are performing there on time and on budget and we won't simply want to be prepared for growth steps. As Herbert explained to you that we define some areas if we want to grow. And I think why I'm convinced we have a balance sheet which gives us now also the basis and the foundation for perhaps future growth steps. So having said that, I would like to hand over to Herbert for the outlook. Thank you.

What is our outlook behind this line with ongoing geopolitical uncertainty is that we have still -- or we expect still no changes in tariffs. And we have, in addition, the negative aspects of the war in Middle East. And when you look at the market trends, we see most of these markets at actual level when it comes to automotive, it's difficult for them when you look at mechanical engineering, same level when you look at building, not really improvement, still very good Railway System, aerospace, warehouse, as we have mentioned before. And we expected a further positive performance. We have this positive effects or the expectations from the introduction of CBAM and the implementation of the post safeguard measures. Also we know that CBAM has led to relatively high stock levels. And what's clear to us that we have to talk and to talk about these positive effects from reorganization measures. So as my colleague said, we are on plan, but not finally finished. So there is a way to go and to put effort in that, and all these things together with all this negative and positive aspects of our outlook. We expect of between 1.6 and 1.85. Thank you. Thank you, and we are happy to answer your questions.

[Operator Instructions] The first question comes from the line of Tristan Gresser from BNP Paribas.

Yes. I have 2. The first one is on the guidance. It's a bit wider range than what you usually do. Can you explain why is that? And also if I understand correctly, there's a EUR 100 million kind of positive one-off from the sales of Bohler in there. So the low end of the guidance adjusted for that would be EUR 1.5 billion. It would be barely up year-on-year. So in what kind of scenario you would see that happening given you talked relatively positively notably about you your steel business and the momentum going into calendar H2? And maybe more specifically, how much of headwind this heavy plate, well, moderation, let's say, is for fiscal 2027? I'd start there.

Let me start with some general remarks and then Gerald will give you some figures, maybe I think it's very difficult at -- and I said it with my first sentence in the in the guidance is that, okay, we are used to this, let's say, tariffs, which is around EUR 100 million. And now we got in addition this Middle East war, which is affecting the whole world more or less. And we think that -- and we see it at the moment, higher energy prices will increase inflation with higher inflation, we will see higher interest, and this will dampen growth rates at the end how much this and in what context this will be is open, but this will be the outcome. And both of these negative aspects is EUR 100 million, no change. And the headwinds from the lower economy is not really clear at the moment, you know that you have wrote in different scenario. But what do you think of that is how long will it take to come to a conclusion in this war. And it's -- in our scenario, it looks like that the low end is when it takes longer and the higher end of our range our guidance is for sure when it ends in the next days or weeks, then we'll see the upper end of our guidance.

Perhaps I would like to add something there. First of all, you asked a wider range than usual. Last year, we asked exactly the opposite. Why is it that narrow at the beginning of this year. I would say uncertainty is higher this year, and this is the clear answer to that. It was not an easy exercise to give you this guidance. But let me talk about and guide you perhaps a little bit through our divisions. First of all, let me start with this Steel division you saw, I would say, an excellent performance this year. And the other and during our Q3 call, also elaborated on that. We cannot expect to continue a certain project-type business like that in the energy sector, in particular, because of the war in the East, for example. This is where we thought this will happen again that we'll have some projects there perhaps starting end of this year. So this is, I would say, not really realistic. A lot of things are destroyed there. And right now, this business is something which is more difficult, and this is perhaps a reason why we think that we will have, again, a very good year in Steel division. Will it be dramatically higher. I would say it's more at the level where we are this year. In HPM division for sure, we have to see an improvement because we are convinced there that our measures work out to be the right ones. We are on track there. We elaborated in our pre-call previous calls that we will see a level of EUR 400 million EBITDA around '28, '29. I think this is still valid by the way, for both divisions for metal forming and for HPM division. And in both, we see improved results compared to this year. Then I would like to change and talk a little bit about Metal Engineering division. You saw there an EBITDA or an EBIT now of EUR 180. And the respective EBITDA number to that. Talking about the business units there in [indiscernible],we have simply to assume that we will stick to this 50% tariff the whole year. And so we -- it's very difficult for us to expect a big improvement. On the other side, we see a railway systems business, which was very good in the last 2 years. maybe it's also partly a project-driven business, which might be a little bit more difficult also this year. So we are a little bit cautious perhaps there, but this path going forward to a EUR 3 billion business unit is absolutely the right one, and we will be there. So as we promise, we will deliver until 2030. And then there is less welding. And why are welding a stable business with some headwinds in the states, in Europe at the moment, we'll see how this is performing, but no big improvements can be expected out of this business, I would say, for this year. And in [indiscernible] we are on the track that we are improving right now a bit, but still also we have headwinds there. so the physical demand is still a difficult one. And this is how we ended up in this guidance we gave you. So if you add this up, what I just said, you will end up somewhere perhaps in the middle of this range, and then there is some upside and some downside. This is how we see it.

Okay. No, that's very clear and helpful. So I appreciate the color. My second question is a bit more on the current market conditions in Europe. I know you're not too exposed to the spot market, but we've seen European steel prices go down the past 2 months, I would be keen to understand what's your view, what's driving this leg down? Do you think there is a big inventory overhang at the moment in Europe? And if you could touch also a little bit on your contract negotiations, the half year 1, I think you have in June. I think you have some in July as well. I know the January 1 were maybe difficult. Are the half year negotiations moving into the right direction. And are you able to have better prices in line with what we're seeing in spot conditions?

If I may answer your question. I would say at the beginning of this calendar year, the price dynamics on the market and also when our fiscal year started, were a little bit better than expected. I think we saw some effects from the CBAM regulation, which is effective since January this year. And we saw a positive price dynamic a little bit better than we expected. And you had it included in your question already. So we saw also on the market that some customers building up inventory. And that is why the situation right now is a bit more moderate. I think that is because the post safeguard measures will be operational by 1st of July this year. So some customers try to get material before this date. And now we're in a kind of wait-and-see situation, and we do expect a positive momentum again in the second half of the calendar or more of our fiscal year after the summer. And I would say that you also mentioned and what is absolutely right, we are not so exposed on the spot market. We do more yearly contracts and quarterly contracts and also half year contracts. The negotiations are more concentrated on contracts beginning on April and then in fall again who have hardly contracts starting in summer. The contracts we negotiated in -- for April, where slightly positive, more positive than we thought. And also the few contracts we are negotiating for July, the negotiations are going. If you look at the situation right now is okay because there we're also negotiating contracts, which are one which should substitute contracts, which are 1 year old. So we are able to negotiate positive adjustments for that. So put it in a nutshell. It is difficult, but we -- I think we see the market dynamics on the positive side.

[Operator Instructions] The next question comes from the line of Bastian Synagowitz from Deutsche Bank.

I've got a couple. And maybe starting off here with the cost-cutting measures, which you have ongoing here in HPM and also Metal Forming. I think you signaled that you may be topping up the cost measures here beyond what you said so far. So can you please share with us how much more cost driven improvements you still expect in those 2 businesses in 2027 and 2028, those are -- this is my first question.

I already reported on automotive components. I also referred back to the market that we do see that the market is even weaker than we thought in the beginning. So we will look into more cost measures. If we talk about cost measures that consists of different elements. I talked about procurement an order of magnitude here is difficult to say. I will not do it here, but there is more that we can gain. But I think the biggest lever still remains headcount. And I mean you can translate that. If you go down, we are now slightly above 2,000 FTE in Germany. The plan is to go down by at least another 100 to better 200 FTE. So you can translate that into cost as well.

And for HPM division, if we look at the last fiscal year, we have reduced the head count around 600 FTEs. And for this year, we scheduled another 300. So this is also significant. So we will end up with this 900 over 1.5, 2 years. This is one point. And the other point where we gain cost-cutting measures is from taking the synergies, for instance, in merging [indiscernible] where we can reduce redundancies as well. So these are the main topics and then there are some smaller measures throughout the world on our locations outside Europe and in Europe.

Okay. Great. Then my next question is on firstly your energy exposure and maybe also your Middle East exposure, maybe starting with that. What's your total Middle East exposure by revenue, maybe in percentage numbers then? And also, just in terms of the energy market, which is, I guess, way end market exposure is quite sizable in HPM and also engineering in many of the end markets you have been operating and obviously have been pretty soft until now. So could you please give us a quick update on the current energy-related demand picture? What you're seeing in those 2 businesses? And could you maybe share with us how you expect the current high energy price levels to drive demand in these businesses in the next, say, 2 to 3 years?

Yes. Regarding the exposure of the Metal Engineering division regarding the Middle East. Yes, we have a certain exposure that's approximately actually between EUR 50 million, EUR 70 million. That's mainly from tubulars and to a certain extent from the welding business unit. The actual situation shows that the demand is still there. and the erratic states are finding now waste, logistical ways, new ways on the land bridge side and from the South via [indiscernible] to bring in the products probably not on that level that we have expected, but it's not 0, yes. So it's improving. And -- so it will impact to a certain extent, hopefully, it ends soon and comes back completely, but it's not that it's completely halted. As for HPM division, we see that we have quite a good position in the fracking in the United States, and this is what currently is showing some signs of increasing the business. This is one part, and we see it from other customers, mainly Asia and also United States and even in the South American region that they expect a higher demand in the second half of this year. And this has to be, let's say, validated because we don't know how this will materialize but we are very cautiously optimistic that we can get some tailwind from that.

Okay. Great. And just maybe to complete the picture, what is the Middle East exposure in the steel business, mostly with [indiscernible]?

Yes, if I may add. Our energy plate business in the heavy plate company is mainly driven at the moment by this area. So we do not see any halts or stops in this project because they have to build pipes out of it. So there is sometimes, and I think the market believes that there is time enough to finish their projects. But what we do see that new projects are postponed a little bit. So orders that would have been negotiated during summer, they are postponed the negotiation are postponed to the last quarter in this year. what means but also here at the moment, a little bit of a wait and see. And the projects are halting a little bit until there is a clearer picture how long this voice going on in this area.

Okay. Understood. Great. And maybe one more last question just on, I guess, the ramp-up of the new ES, which is nearing next year, given your significant CO2 deficit, which you still need to cover near record CO2 prices should obviously change the cost dynamics quite a bit, and I guess you will be able to run a little leaner there as well. So with mechanics may be looking different in steel and metal engineering, what would be the cost savings on the various line items such as energy, labor and CO2, which you would expect once these plants have fully ramped up?

Regarding the Metal Engineering part of the greentec steel project. The next step we are starting now in April 2027 is to ramp up the electric arc furnace. And so we have an intermediate period for 2, 3 years, where we have a hybrid mode where we're still running one line on the blast furnace and convert the set and then the electric arc furnace side. And the major improvements there will be first the reduced CO2 certificate costs, and they will be already significantly. But then after this first part and once we have decided to get into the second step, then there will be also from the head count had an additional part becoming active.

Okay. And could you put some numbers to those?

For Linz, it's basically the same. I'll come to some numbers. So on the one hand side, you're saving, as everybody knows, CO2, and you don't have to buy certificates for that. that depends a lot on the cost for the certificates. On the other hand, you buy a lot more electricity and scrap [indiscernible]. So at the end, there is -- depending on the market situation can be on the cost side advantage or not. That's just a question of a few euros, I would say. What is different between Linz and Donawitz is in Linz, a larger production and we are following a modular approach, so substituting one plus furnace by the other. The big advantage in Donawitz is that you come quicker to a situation where you can change your structural costs step by step. So -- and the real difference, in my opinion, in the situation we are right now in the next 1, 2, 3, 4 years, is not the cost side. The big advantage will be, do you get a premium for selling a greentec steel in our case that greentec is our brand for greener steel. And if we are able to sell your steel produced by electric arc furnace with a premium and having depending on the situation, but more or less the same cost situation, that is a big advantage to go that path. And in our case, so we are actively getting orders for our greentec steel production. And these orders are coming in with contracts in our hands. Saw some OEMs in the automotive business and also in the energy business when it comes to CCS or similar projects, they're willing and they want to have a green steel for building their cars for building their energy facilities. And therefore, we have a positive number of contracts already in our hands, and that is the big advantage, not the cost difference for the next some years. It's a different story when you look further into the future. when ETS stays like it is, CO2 welcome become more expensive than it is now. But until 2030, I would say that the cost issue is not the big difference. One thing can be to put it in a nutshell, if you can change your structure in your company. And the most important thing is if you're able to sell your greener steel for a green premium on the market. That is a big difference, I would say.

From my side, Bastian, one thing to add there. I think, one number which is a real number, what I can give you because this is what we paid for CO2 last year. In this business here we are talking about right now is EUR 230 million. It's quite a number. And all this discussion we have is simply based on a lot of assumptions, and I think it's not serious to give you there because with how we do our math there. Of course, you have assumptions for energy. You have assumption for development of CO2 prices. You have assumption what are the 3 certificates we get in future and so on and so forth. We are carefully looking at that. And yes, and we have 2 different models and the Francine told you his side and Hubert told you the side of this deal division. Perhaps we have 2 different paces there, which we will. And we will keep you posted. But we do have, I would say, a very diligent job there on our side. And as soon as we have more to share, we will do so.

We now have a question from the line of Dominic O'Kane from JPMorgan.

I just have one question, which is my understanding is in April, the U.S. Department of Commerce initiated a countervailing duty investigation into imports of OCTG [indiscernible] products. And I just wondered, does that have -- well, are you aware of that investigation continuing? And could you just maybe comment on whether you have exposure to tubular products being exported into the United States?

We are actually running or we are within 2 procedures. The one is AD, an antidumping procedure. The second is the countervailing duty procedure you mentioned. And both are in process or processing. And we have had regarding antidumping, I would assume 2, 3 times already and always have got out of that without any penalty. The counterman duty one is something we have not seen in the past before. And there, it will be an issue, for example, how the U.S. authorities are going to see certificate CO2 certificates and 3 CO2 certificates. We, on our side, I think it will be on our side. But earliest in September this year, we will know more because in the first judgment, preliminary judgments of the U.S. Department of Commerce will be available so much more about it now.

Are you able to maybe quantify what percentage of Metal Engineering division's revenue is those type of products?

I think the overall revenue of Metal Engineering is roughly EUR 4 billion. The overall revenue of [indiscernible] is perhaps EUR 500 million and a maximum 50% goes into the U.S. as a total. So it is perhaps -- but this is not just out of my an estimation, roughly 5% of Metal Engineering.

[Operator Instructions] We have a follow-up question from the line of Tristan Gresser from BNP Paribas.

It's just on Bastian questions before on greentec. So if I understand you have the EF ramping up in H1 calendar 2027. How -- you mentioned the date of April. How much -- how should we think about volumes from those EF in calendar 2027? Is that very gradual ramp-up? Or do you expect to already have some meaningful tonnage and how it's going to be maybe on the steel division? Or are you going to shut down the blast furnace already in calendar 2027? I think you mentioned the positive on the contract side in green steel premiums. Is it a good chunk of future orders that you've already kind of locked in contract? Is it meaningful volumes? And then I have another follow-up. I'll start there.

Yes. Thank you for the question. I try to give you a flavor, we are going to in Linz. For the Steel division, we are going to start the ramp-up of the electric arc furnace in February '27, more or less in the already running business here. And we are careful to ramp it up. So we will see a full running it at full capacity the business year after. So in the first business year I would say the business year '27, '28, I have to be careful not to mix up the numbers. We are running the blast furnace and the electric arc furnace and gradually, we will reduce the blast furnace and shut it down by end of next business year and then the electric arc furnace will reach a capacity -- its capacity of 1.6 million tonnes a year. What means -- having in mind that we -- in Linz Steel division, we have a capacity of close to 6 million tonnes of steel production. So 1.6 of that will be electric arc furnished by end of next year. And I would say it's a good estimate to say we're starting the ramp-up by February. And then when you start a new facility, you have to stop it and repair, improve some things I would say if you take the middle of the EUR 1.6 million for the next business year that would be a reasonable figure for that.

Okay. No, that's clear. And just confirming on CapEx and OpEx subsidies. There is no update there. Anything you hope to get maybe with the reform of the ETF market and maybe there's some more [indiscernible].

No. Positive side is that we have our destiny in our own hands, and we can have the freedom to operate and manage the transformation that is a positive thing.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Peter Felsbach for any closing remarks.

Thank you very much for this very interesting discussion so far. I would like to finish this session with a personal remark. After 20 years, almost exactly 20 years, I'll be leaving IR by end of June. I will be taking over a new role adding the strategic FP&A department in the Steel division. So I want to thank Hubert Zajicek for his trust and for this opportunity. And of course, I want to thank the whole board who is very friendly, very good cooperation in the last years. And in particular, I want to thank Herbert Eibensteiner for his support over so many years. Thank you very much for that. I will be missing the capital markets. We had very good discussions, very interesting discussions, very good times, and I want to thank you for all this friendly cooperation over the last 20 years. My successor is in a market, as you can see. He's coming from the Voestalpine Group treasury department. So he's very experienced in dealing with capital markets. So you will be in very good hands. All the best to you, and thank you very much.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.