Ladies and gentlemen, welcome to our analyst conference for the fiscal year 2023. Given the political and economical uncertainties, it's quite a special one, basically, as every year. But special one is particularly true this year for our CFO, Burkhard Becker, because it's his last one. His successor, Birgit Potrafki, is already with us today, so we secure a smooth transformation. But today, we stick with the established setup, means Gunnar starting with the strategy implementation, as well as the business development of the, of the business units, and give you the outlook for the fiscal year 2024, before Burkhard Becker make a deep dive into the financials, and then we jump into Q&A. And with that, I'd like to hand over to you, Gunnar.
Thank you very much, Markus. First of all, dear colleagues, sincere apologies for the delay. We had a bit of a technical issue. Hopefully, that is now resolved, and you can all hear us loud and clear. Looking forward then also to the interaction after the presentation. Looking at the year 2023 is, of course, as Markus said, it has been an exciting year and quite a challenging year. But prior to digging into numbers, please let me start with the occupational safety. As you know, this is important to our company, this is important to me, and it's good to see that we, over the long-term trend, show a positive development.
But we're still not there, and as you can see also, 2023 has not met our ambition in terms of further reduction. We have had a certain setback there. So the efforts, the continuous efforts, have to continue, and as our target remains on zero accident for the entire group. We have set up some actions for 2024 to further improve on the LTIF and on the occupational safety, as you can see, especially including temporary workers and including also contractors into our measurements and into our activities on occupational health, safety. Especially as we have a lot of contractual workers and employees right now on site with our big construction site at SALCOS. I think this is exactly the right way to move forward. Now, looking at the key financial data of 2023.
Of course, compared to 2022, it looks like a big decline. It is a big decline, but we all should keep in mind that 2022 has been an exceptional year. We have seen steel prices going extremely high up, especially after the start of the Russian war in Ukraine. We have seen shortages in steel supply and a very strong reaction of our customers, hence, an intense increase of steel prices. That, of course, has normalized now in 2023. So what you look at is a more normalized year, and especially in the second half of the year, very challenging economic environment in Europe, which then puts additional pressure on that year.
Given all of that, I think we can say that it has been a successful result in 2023, with an EBT level of EUR 238, EBITDA of EUR 677, and an overall steel production at 5.7 million tons. So ROCE level is, of course, lower given all of that, but with 5.6, also in an acceptable range for a year like 2023. Burkhard will dive into the numbers further, so I'll ask for your patience on that one. Now, looking into strategy, as you recall, we started the Salzgitter 2030 strategy in 2022. What you see here are four building blocks of that strategy.
First of all, of course, we're looking at the CO₂ reduction of Salzgitter as a group, and one of the main building blocks of that is the implementation of SALCOS. It's fully underway. 2023 has been a very important year for SALCOS. We secured the funding for stage 1, EUR 1 billion, EUR 700 million coming from the state, EUR 300 million from the federal government in Hanover, so EUR 1 billion in total. And we top that up with EUR 1.2 million-EUR 1.4 million of equity coming from the company. All main components are ordered, the electric arc furnace, direct reduction plant, the electrolyzer, but also the grid connection.
Everything has now been ordered, so we're in full swing when it comes to the implementation, and through that, we secure first deliveries to our customers mid-2026. Talking about customers here, I think we have received a very good feedback from our customers. The steel to be produced in 2026 is basically sold out, and we're also able to grant or to contract a premium on the Green Steel. So our customers fully appreciate the low carbon content of steel as that also helps them to further decarbonize their products. Looking at the circular economy, as you recall, circularity is the very center of our strategy. And if you look at steel, of course, element of circularity is the acquisition of scrap. Here, we have...
We are proud to pronounce, actually, that we will build a new shredder here in Salzgitter. That will be then operational, just ready for Salzgitter in 2026. Through that, we're able to process post-consumer scrap in a much better way, create higher quality grades of scrap on-site in Salzgitter, and define also the scrap quality that we need for Salzgitter, with even an own scrap grade, being Salzgitter scrap. And through that, also ensure that we get also to the quality grades for steel that our customers expect us to have. On the customer-oriented solutions, I think I'd like to highlight two things here. One is, of course, the heat treatment line in Ilsenburg. Customers appreciate that.
We see a growing spectrum of grades for diverse applications that are questioned, and we are able to deliver, and we're able to gain market shares in different markets. One is a bit unfortunate, but that's unfortunately reality. Steel for security applications, we're now up and running when it comes to our steel grade sec.ure. The only outstanding is the qualification process with the German Army, but that also should happen through the year. But for private application, that is already in the market. And second, a second element is KHS. KHS has been very, very successful through 2023, especially with their product Plasmax for PET bottling, and high customer interest here, and a very good order situation.
Actually, a record high order intake for 2023, which then also leads to a good, well, to a good work in 2024 for KHS, given the high order order backlog that we have now in the books. Strong presence in Asia. This is, this is where especially the Plasmax is very, very successful. On the profitability side, two elements here. We have been very vocal on active portfolio management. Happy to say that we did some, some divestments, but also acquisitions in 2023. We continue with that also in 2024, with the sale of Mannesmann Stainless Tubes.
As we don't produce any stainless steel, the connection and the strategic connection to Mannesmann Stainless Tubes was limited, and we have found an owner that actually produces stainless steel and is a supplier to MST already today. So a much better strategic fit. So from a best owner's principle, a very good situation for both the new owner, for MST, but also for us as we're able to further focus on core here. And last, but certainly not least, our performance program, Performance 2026, you recall that we launched that already prior to any economic downturn, because we believe performance is a day-to-day job that we have on our agenda.
So, being successful here also, you recall we had a target of EUR 150-200 million by 2026. This target has now been increased to EUR 200-250 million full year effect in 2026, and we're well underway here also. I think the different activities lead to at least 230, but I'm confident that we're gonna reach the 250 there also, as a bottom-line result. So all in all, good progress on the strategy implementation, good progress in different milestones that we have laid out for the year 2023.
As part of the Salzgitter 2030 strategy, we also said we're gonna partner and team up with other companies that have a similar decarbonization agenda. As you can see, we have also increased the numbers of partners in the areas of technology, energy, and raw materials, as this is a major shift for us, logistics, but also on the customer side. More and more customers are getting interested in our decarbonized steel, and hence, we're able also to team up with those in a very sustainable and good way.
So also here, I would say, good progress on the partnering side, and helping us to making the whole transformation more robust and really securing it all the way through to 2033, when we wanna have our transformation fully completed here on site in Salzgitter. Just to be more specific on the Performance 2026 program, as you can see, 235 is what we see in the books today, with a good ramp up through the different years. EUR 56 million, full year effect in 2023 already, and as I said, we're well started also in 2024, and given the economic development, certainly something where we will continue to focus on, also from group, but throughout the entire company.
Now, looking at the different business units, and how they performed, we're starting with the steel production. Of course, we have seen a significant decline in steel prices, as I just mentioned, compared to 2022. And that, together with the general cost increase, through inflation, of course, we have seen electricity prices or energy prices coming down significantly to the back end of 2023, but in total, a different cost level than we have seen before. On top of that, you are all very well aware of the blast furnace relining that we did in the second half of 2023, which of course, sort of had an impact on availability and the cost situation. But that is now done.
Blast furnace is up and running again since December, so we went well through that project, and we now have a blast furnace that technically is upgraded and secures production until 2033, so that our customers will be served as they are used to it also going forward. Looking at 2024, while the start into 2024, as you are well aware of, has been a bit bumpy, volume is there, prices are not yet at the level that we want them to be. But we see at least some signals that there is a recovery possible towards the second half of 2024.
You all have seen the reduction on inflation rates in Germany and Europe, which then could trigger a further discussion on the fiscal side, as well as some technical developments we're gonna see also that should help us on the recovery in 2024, second half, as said. Strip steel is under almost full capacity utilization, and so is long products in Peine. On the section, so plate demand is weaker, and certainly, as I mentioned, we have a challenging pricing environment.
Of course, given also raw material prices coming down recently at least, this offers opportunities for further hedging that we have paused, given the market development for raw materials, so at least some positive signals also on that end. On the processing side, good year in 2033, predominantly through a good start in plate. Market increase, sales prices went up, but that then sort of softened through the year, with a stabilization versus year-end. So that contributed well to the result as well as the large diameter pipes, Europipe and Mannesmann Grossrohr. They delivered well into the demand for energy projects.
You all recall that we were able to deliver pipes to connect the two LNG terminals in Germany, both Wilhelmshaven in 2022—end of 2022, and then beginning of 2023, the LNG terminal in Brunsbüttel. Both were connected via pipes coming from Salzgitter, so that certainly helped this business section. Precision tubes, though, given the low automotive production, were under pressure, and also started with a low, started on a low end into this year. When we look at plate, we see a normalizing market environment. Utilization is okay, as it looks now, and also for the second quarter, as long as we can see. On the tube side, we are hoping for some more projects being materializing through the year.
I think there's a lot of discussion on different projects in the market, but they now have to also hit our business in order to then sort of continue on the good path that we had in 2023. Trading, not surprising, in a market where prices are softening, is suffering, especially on the German trading. The international trading, though, has done good business in 2023 and also has had a good start into 2024. For the German trading business, we have a clear way into profitability for 2024, with some internal measures, but also through a price level, actually, that stabilized over the last couple of weeks.
With a bit more volume, I think this is very doable for trading to return into profitability, certainly the ambition level within the team there. Last, but certainly not least, technology. As said before, we are looking at a very sort of good year 2023, especially on KHS, with a record order intake, and also seeing now the benefits of KHS Future, of our growth and efficiency program, that actually puts us into the position to also handle this kind of order intake, through our global network of production units. So very well equipped also to serve the different markets around the globe. Result has been outstanding, as it is written here. So for KHS, really a fabulous year.
The two Desma companies had a bit of a struggle in 2023, but also here we're seeing first signals for market recovery, especially on the Schuhmaschinen side. Desma in the south, in Fridingen, is focusing very much on cost and also on quality on the product in order to attract customers then also through the year. So for 2024, I would say it is important for KHS to continue on the order intake. And as it looks now, order intake is on a good level. It's not on a similar level than 2023, but very decent order intake also here.
Widening the scope a bit on the wider global and European picture, the global economy has at least first signals on recovery. As said, debate on interest rates, interest rates has at least started. Now let's see how that develops over time. United States, with the IRA, is relatively robust, India, strong, China, let's see how that plays out and pans out after the convention that ended last week, but also at least some growth there. Certainly, we're gonna have issues on logistics.
Red Sea is mentioned here, but we have seen that supply chain has been under pressure, especially the global supply chain has been under pressure quite a bit over the last months, and unfortunately, also years, with different elements. Red Sea is one. We have seen chip crisis, we have seen the Panama Canal issues, and other things. So certainly something where our customers also are focusing more and more on a closer, regionally closer supply chain, which then should support our business model going forward. On Germany as such, yeah, it's an economic problem, but it's also a question of growth. We're seeing more and more international companies reducing the investment levels in Germany, which is certainly not helpful.
Steel process or steel business is a bit the opposite. And us, as front runners, we have invested in Germany. We stay firm on our belief in a German economy and also producing steel for the German and European business. So that remains. However, we have some structural issues that needs to be addressed, and we're doing so, be it on energy costs. You recall the very sort of heated debate on industry electricity costs in 2023. We haven't come to a solution yet there, but certainly, this will stay on the agenda to have a competitive energy level or energy price level, competitive in a global comparison, as our competitors are global as well. Skilled workers. I...
What we see here is that through our transformation program, we're able, actually able to attract skilled workers into Salzgitter. So especially on the steel side, our transformational program and our firmness here helps us to attract the workers we need also for that transformation and afterwards as well. Bureaucracy, to mention one more. Of course, there has been a debate in Germany since many years back. Now, first signals, at least from government, that this topic is addressed through additional legislation and to reduce bureaucracy. On the European steel market, yeah, there is a weak development, especially for the first half of this year, expected for most of the steel-consuming sectors. Take construction as one element.
Construction, and housing, et cetera, has been very, very weak, since the autumn last year. This is, of course, also related to interest rates, so as soon as that debate sort of picks up, we should also see a pickup in that market. But as it looks right now, it is a weak development here. As said, we're gonna see—we are, we're convinced we're gonna see a certain demand grow in 2024 versus the later part of the year, but from a low level, as I just mentioned.
Taking all of that together, yeah, our own capabilities within Salzgitter, our clear path forward, but also embed that into the overall framework, economic and regulatory framework, we come to a management guidance that sees sales between EUR 10.5 billion and EUR 11 billion, an EBITDA level of EUR 700 million-EUR 750 million, an EBT level of EUR 250 million-EUR 300 million, and hence, a ROCE based basically on previous year's level. So what you see here is a continuation, basically, of our financial performance compared to 2023.
Slight uptick, 'cause we believe in our strength, we believe in our, in our sort of activities we do on increasing efficiency, and we also believe in a certain market pickup, as now mentioned a couple of times, through 2024. I would leave it with that for, for a second and hand over to Burkhard Becker for the financials. Thank you.
Yeah, thank you, Gunnar. Ladies and gentlemen, first, I like to look on the income statement. Due to the normalization of the steel prices, we lost 1.8 billion for turnover, for sales. And in combination with the change of the inventories, we had a decrease of the total output of EUR 2.2 billion. As the raw material prices remained robust, the cost of materials decreased not similarly. So, here, we have a decrease of EUR 1.4 billion. That means that, for the gross margin, we lost nearly EUR 800 million, and that is the main reason and explanation for the decrease in EBT of EUR 1 billion.
Results from the investments under equity method. Here, the performance of the Aurubis and the 30% share of HKM decreased, whereas Europipe performed very well, but net we lose EUR 90 million. The EUR 50 million net finance expenses is due to higher interest rates. Asset sides of our consolidated balance sheets, the increase of EUR 180 million for property, plant, and equipment is mainly due to investment in SALCOS and in the relining of Furnace A in Salzgitter.
You see then, under the current assets that we managed to bring down the working capital inventories, trade receivables, that is very good for our financial performance. It means that the net financial debts had been in 2023, EUR 214 million, compared to EUR 550 million end of year 2022. Then we have the asset held for sale in 2023. That is the reclassification of the assets of the Mannesmann Tubes; the sales contract was signed in mid of February. Then we have the equity.
On the equity side, we have changes from the interest rate of pensions coming down from 4.5 in 2022 to 3.41 to 3.5 end of 2023. So we have the corresponding profit neutral changes in equity and liabilities, and furthermore, the decrease in financial liabilities due to the working capital management. The cash end of 2023, EUR 940 million, that is roughly the same number we had at the beginning of the year. That is due to the strong cash from operating activities.
Again, that's the reason for that is the working capital decrease. And there we have this quarter by quarter coming from EUR 3.6 billion. We have this decrease in the last year, 827 million euros. That is very nice, and we have this investments and depreciation slide here. You learn from this that investments in 2023 is cash investment is EUR 583 million. For 2024, we expect a cash out for SALCOS in the range of EUR 500 million and EUR 500 CapEx for all other activities in the Salzgitter Group.
You know that we follow the rule of continuous dividend payments after the very good year 2022. We are back to normal. Looking on the past and history, we think that 45 cents are in line with what we practiced in the past. And that means for 100% of the shares, a cash out of seventy... of EUR 27 million after the decision of the General Assembly in May. Yeah, thank you very much. That is my presentation to you so far. Thank you.
All right, then let's jump into Q&A. We start with the people here in the Zoom meeting, just in case you are not in and it doesn't work, just write me an email and I will read it out loud. But now we start with Andrew Jones, please.
Thanks, Jens. Just a couple for me. On the CapEx, you've said EUR 1 billion for this year, 500 SALCOS, 500 the other. 500 for kind of the rest of the portfolio sounds higher than I would have expected. Can you give us a bit of a breakdown as to why that number is as elevated as it is? And can we clarify that billion, that, that is net of any subsidies, right? Or is that like a growth number that you expect to have some, some offset from subsidies at some point this year? And can you give us any idea of the timing of when that, when that government money comes in? Thank you.
500 for Salzgitter. That is after the public fund. So that is a net number. The net cash, and net means we expect to invest for Salzgitter in 2024, EUR 800, and receiving EUR 300 as a public fund. So, yeah, that is the 500. And the other five hundred for the other activities is also for Salzgitter Flachstahl. Various projects. There are some strategic elements, for example, in Peine for the U-Mill.
There are strategic investments in a mid-million EUR amount for KHS, because KHS is growing, so we are investing here. It is also, for example, the shredder Gunnar mentioned in his presentation.
That's clear. Thank you. And just one on MST and the spin out. Can you just give us an idea as to maybe the profitability of that asset in maybe the fourth quarter or last year, to get an idea for what we're stripping out of our numbers now, now that's going to be taken out?
Yeah, the profitability of MST from the operational side was a red zero. We had a impairment depreciation for MST of EUR 20 million.
Sure. But what, what, when you say zero, you're saying it's zero after that impairment?
No, no, no. No, no. The total in EBT of MST was minus EUR 22 million, yeah. And 20 of that is the impairment. Yeah, so a red zero for MST.
Great, thank you.
All right, then we continue with Christian Obst, please.
Yes, thank you for taking my questions. First of all, I'd like to come back to the, to the guidance. In the end, if we are looking down, what you are guiding for the segments, the only one which is significantly short of 2023, or should be, is steel processing. And looking deeper into steel processing, in the end, you say, there will be lower margins, but for most of the parts within steel processing, you also expect a quite positive to sideways development. So what is the main driver for the significant, currently lower expectations for processing? This is the first question.
Yeah, Obst. We had in 2023 a very good performance in Europipe, in the MLP, so in the medium line pipe business, and also in Großrohr in Salzgitter. And that came from orders we took in 2022 with high margins. Unfortunately, especially for Europipe, we wait for decisions on projects. Projects are in the market, yeah, for the big diameter business, but as we wait here for a decision, and that means that the utilization of the capacity is much lower than in 2023. We cannot expect this result we have seen in 2023.
But we are confident that the decisions will come. There are projects out in Europe and in Mexico also. So but it needs time. And that also means that our plate plant in Mülheim is not loaded with deliveries to Europipe, yeah? So compared to 2023, a lower expectation, yeah, but confident that we pick up in the second half of 2024.
Okay. Yeah, thank you for that. Then I have a question concerning the net financial result. So of course, notably higher from 2021, it was EUR 47 million, then EUR 66 million, and EUR 160 million negative in the last year. So what will be the guidance, or what do you expect going forward? So because of the high CapEx and the investments you have to do, another increase, or will you stay at the current level for a certain reason?
... Yeah, we expect that coming from EUR 200 million net financial debt end of 2023, we will see an increase of net financial debts in the range of we say 700-800. And part of this, maybe half of it, has to be financed by credits. And credit interest rate market is about 4%. Yeah, and then you can calculate that this means an additional expense of around EUR 20 million.
Okay, so this also means that in the 116 net financial result in 2023, there was nothing extraordinary would not occur in 2024. So the counterbalance part of this EUR 20 billion increase?
Yeah, the only special item is that we expect the cash in of the sale of MST, yeah.
Yeah.
That is part of the financing of the CapEx. Yeah.
Yeah. And then going further down the line, you had a 16% tax rate. Any idea what you, you are expecting for the next year?
Yeah, we had a-
Critical
... special positive, impact-
Yeah
... in 2023, of around EUR 20 million coming from a tax-driven merger of Corpoplast, being a subsidiary of KHS, with the mother company, KHS GmbH. And that brings us EUR 20 million, and that is recorded in the tax result of 2023. So we expect coming back to normal. However, you are aware of that we still have tax loss carrying forward amounts in a range of EUR 1-1.3 billion.
Yeah.
Yeah. Mm-hmm.
Yeah. And then the last question is concerning the current status of the so-called green steel demand. So we had a lot of pre-contracts for the green steel delivery from 2026 onwards. So has there something changed? Is that increasing? Is that stable? Is that going down because of the current discussion? So what is the current status here?
Let me take that question. Christian, thanks for it. The current status here is that there is still steel, green steel demand. Given that we are basically, let's call it sold out for 2026, so we're looking into 2027. And but we're seeing also that some of our customers are a bit more cautious with-
Yeah
... that sort of a view into 2027. So, the fundamental demand is still there. However, given that this is further out in time, there's a certain hesitation, but the fundamentals haven't changed.
Maybe an additional to that, do you see any kind of the premiums you talked about before, that they are coming down, or will they stay stable, or what is the current situation here?
Well, let me put it that way. There is still a good understanding of our customers that green steel has an additional value to them. So, we're still talking green steel premium for our products, and there's also an understanding of our customers that this will remain for the time being.
Yes, now, now really the last one, maybe. Do you expect any kind of OpEx support for, for your company, for the steel production, until the year 2030?
Well, as you're well aware of, we have this so-called Klimaschutzverträge.
Mm-hmm.
The concept is now out. The first round of application has been opened this week. As you are also aware of, this is predominantly focused on mid-sized companies, so not on-
Yeah
... on us as large basic industry companies. However, the second and the third and the fourth round will be open also for companies like ours. So we're clearly evaluating how we could fit into that and whether that makes sense. That's one element. And secondly, we're also on the hydrogen side, of course, discussing with hydrogen providers, then themselves can apply for support in the European Hydrogen Bank. So also from that angle, there is an indirect support, but also support possible that would help us on the OpEx.
Okay. Thank you very much, and all the best, and especially-
... Down, please.
Yeah, thanks, and good afternoon, all. My first question is, just coming back on the overall, overall guidance, please. I guess if we look at the framework, you seem to be guiding for a more or less flat first quarter, and then build the guidance for the full year on an improvement, later on, particularly in the production business as well. I think you already talked about processing. If we look at the flat steel markets in Europe, they're obviously coming off again, so I'm wondering, is this guidance framework built on tangible trends which you can already see in your order book, or basically a recovery which still needs to happen? And maybe in that context, you can round off the picture also for the other divisions, besides processing, which you talked about already.
Let me, let me start it off, and then Volker fills in when I, when I miss out on anything. So, yes, we're seeing sort of a good sort of order book for flat right now. So it has been, has been sort of we're producing basically full steam. Prices are certainly an issue, and something we need to further improve, but we see first signals that sort of people understand that a pickup in the second half would also impact prices. That is perhaps on the flat side. The steel processing Volker talked about, I think that's well covered. Trading.
International trading runs actually pretty well, so we see quite a, quite some movement on the international steel trading side, which we are able to participate in. So that is certainly a market that is good for us. And on the German steel trading, of course, we have seen a difficult year 2023, given the high prices we bought steel at, and then with the deteriorating of prices, that sort of had to go through the books first. This has now happened, so we're also in our inventories on a normal and regular level again. Hence, we see possibilities to build up margin and to build up also the result from here again.
Certainly, volumes here are more the issue than prices, given that our customers, which are very sort of local customers, are slightly hesitant, given the weaker signals on economic improvement through the year, at least yet. So, that perhaps is on the steel trading side. Last but not least, the technology. I mentioned that the order intake in 2023 has been exceptionally strong for KHS, and this is exactly what we now carry through 2024 to be delivered in 2024. Hence, we expect another very, very strong result from KHS, also for this year, even above the level of next, last year. So, we are also very confident that technology will contribute to the overall result.
Finally, perhaps also worth to be mentioned, you are all aware of Aurubis and the issues Aurubis had in the last year. This is certainly something that we won't see this year again, hence, also an improvement on the Aurubis contribution to the overall result. Hope that answers your question, Bastian.
Yeah, no, perfect. That, that does indeed.
If you allow to add two things. If, and I believe there are good reasons for that, if Aurubis and KHS perform as expected and seen and budgeted, yeah, these two companies contribute EUR 200 million. And this, I think, is important for the plausibility of the guidance. Also, on the second remark is that the seen softening of raw material prices, especially on the iron ore side, that comes into result after 3-4 months, yeah. That has to do with the lead times and the accounting, the moving average in valuation of the inventory, so.
Okay, perfect. No, thanks for clarifying that, Mr. Becker. Maybe another one for you, quick follow-up on CapEx. When we look at the 2024 CapEx budget, I guess it seems maybe a little higher than expected, to say the least. Can you please update us on the CapEx profile also for the next years? Because there seems to be a little bit of a shift, at least versus the earlier communication. And then also, maybe when will you decide what you will do for the next phase of circuits, as you're probably getting closer to a point when you will have to take a decision there as well?
Yeah. I would expect for SALCOS in 2025 a similar amount, so meaning another EUR 500 million, and then a decrease of that number. What you have to be aware of is that the net, and that is here in the presentation, that the net cash out for SALCOS in 2023 had been only EUR 100 million, yeah? That, yeah, we expected this a little higher. A little means EUR 100-EUR 150 million, yeah? And that is included in the EUR 500 million we expect now for 2024. The reason for that is that the orders for the DRI plant happened later.
It happened in 2023. Yeah, all equipment is ordered, but it happened a little later. Therefore, we have some postponement of cash out, but in total, nothing new on that. Yeah.
Mm-hmm. On the residual budget, if there are EUR 500 million for SALCOS, I guess we obviously, obviously have the EUR 500 million others, and I guess here the scrap part was probably something which has not been talked about that much earlier. Could it be another EUR 500 million for the residual bucket as well next year? Or is it likely going to be less than that, and if so, how much?
Yeah, of course, as I mentioned before, Bastian, we are also investing into our asset base in order to keep that upgraded and updated, in order to be able to serve our customers. So, there is certainly investments that we're gonna do there to upgrade also quality. And, we talked about the shredder, that is certainly in there, within going live in 2026. We are looking into upgrading to be able to serve the wind market, upgrading on the plate steel side, which would also then help us to address the wind market in a much better way and capture that growing demand here.
And another example would be that we are looking into our Flachstahl to also replace some ovens here in order to reduce the OpEx through energy efficiency measures and also reduce the tap to tap time, so to speak, in those ovens. So those are investments that are clearly sort of earmarked to improve our quality and improve our efficiency, and that will add to the overall CapEx budget then for the next upcoming three to four years.
Yeah, but, anyhow, I would expect kind of normalization back to EUR 400 million rather than the EUR 500 million.
Yes. Yes.
Okay, perfect. Now, that's, that is clear. And then my last question, please, just briefly also on the energy transition. I think you did very well there in terms of securing some of the energy for your plans. And I'm wondering, how much of the expected 2026-2027 energy and hydrogen needs have you actually been able to secure at this point? And also, are you confident that the required infrastructure really will come together, to make your plans feasible and competitive at reasonable costs? I guess some, companies have started to be a bit more skeptical on that front, but very, very interested in your use as well.
Right. A very interesting topic, but indeed. Let me start with the hydrogen side. So as you're well aware of, we are building 100 MW of electrolyzer capacity ourselves, that which will be available as of 2026. Hence, we're able to produce roughly 5% of our needs ourselves. For the rest, we're basically waiting for clearance on this hydrogen backbone grid, the so-called Startnetz, which is... I think the layout is there since November last year, where, as far as I understand, policymakers still discuss the commercial framework of that grid. As soon as that is cleared, they- we can start building, or they can start building, we can start providing the pipes for it, but they can start building.
As soon as we're connected there, we can also feed in more hydrogen coming from the grid. We're in good talks with different suppliers of hydrogen, current and future suppliers of hydrogen, to also come to terms to HPAs, hydrogen power power agreements or hydrogen purchase agreements, excuse me, hydrogen purchase agreements. As soon as we have clarity on when Salzgitter will be connected to the hydrogen backbone, we will also be able to close contracts on the hydrogen delivery. Pricing, as set, there are multiple options to get support here.
Hydrogen Bank is one, the H2 Global Initiative, which is a German initiative, is another one, and thirdly, of course, the Klimaschutzverträge, to get, those hydrogen deliveries in a, in a competitive, on a competitive level. On the electricity side, we have been active this year. I think we're now, up to 7 PPAs that we have signed, different PPAs with different production patterns. So anything from, from, solar, wind, sorry, sorry, from solar, large-scale solar to onshore wind and offshore wind. By 2027, we should be able... Well, right now, I think we're, north of 25% of the total electricity consumption that we, that we need. If you then look at the needs for SALCOS and the implementation of SALCOS, I think we're, we're well beyond that.
We're beyond 50% of the electricity need that we would need for SALCOS. But we're continuing to negotiate PPAs. We're continuing the discussions with providers of green electricity to increase that level.
Mm-hmm. Thanks. Just one quick follow-up, Mr. Groebler. On the, I think what you said on the hydrogen side was quite interesting. I suspect that's some domestic, but also some imported material. I mean, what are the price points you're seeing there? Is this in the, say, 4-6 EUR range per kilogram? Is this the right ballpark at this point, or is this already coming in at a cheaper price point?
... So price points I have heard in the market are slightly above the range that you have just mentioned. And that's also why the support schemes that I just mentioned are important to kick the market off. But everybody I talk to is very certain that price will drop as soon as production ramps up. 'Cause as soon as you have a certain production volume in place, you can run down the cost curve, and that's exactly what's gonna happen. I think we have seen that in other industries as well, and everybody also in the hydrogen industry is expecting that. Right now, given that there aren't any large producers of hydro- green hydrogen right now, those price points are at a higher level.
This is a starting point, and I think, as said, we have seen other industries that actually can reduce through scale. Cost, they can reduce cost through scale.
Okay, understood. Thank you. Then, well, Mr. Becker, also from my side, all the best for your future.
Thank you, Herr Synagowitz.
All right, then we come to Sandeep from Morgan Stanley, please.
Good afternoon, gentlemen. Thank you for taking my questions. I have couple, couple of questions left. Firstly, coming back to your guidance on Aurubis, you expect profitability to improve year on year. However, we have seen spot copper treatment charge declining close to zero. How confident are you that this profitability will be achieved?
Very confident.
Okay, and in terms of numbers, if you can provide some numbers, what is baked in, in that guidance?
Sorry, say that, say that again.
In terms of numbers, what is baked in into your guidance for Aurubis for 2024?
Well, we don't comment on the Aurubis guidance. That Aurubis gives, we hand out to you guys. We take that and copy that in. We take in what their planning is, but that translates into roughly EUR 80 million EBT on our end.
Thank you. And then, second question: What is the total CapEx required for new shredder? And I'm assuming this is not part of SALCOS I project.
Exactly. It's not part of the SALCOS I project. The new shredder is around EUR 30 million investment total.
Okay. Thank you very much.
Thank you.
Then we have the next question from Moses, please.
Hi, all. Thank you very much for taking my questions. So first one, again, is just on the CapEx guidance, but really more just trying to understand your capital application policy at this point in the cycle. Because if we look at 2023, if we take EUR 100 million for SALCOS net spend, EUR 100 million for the relining, and then EUR 400 million for SIB CapEx versus your cash outlay of around EUR 750 million, it shows that you've probably spent additional EUR 150 million on some growth aspects. And then same, similar here again in 2024, close to another EUR 100 million in other spending and growth.
Just at this point, this low point in the cycle, just want to understand just the explanation for being more aggressive in the CapEx spending versus what we see typically from your peers who look to conserve cash at this point of the cycle.
Yeah, let me start with CapEx for SALCOS. Overall numbers. Investments gross, without public funds, EUR 2.2 billion for the total project, phase one. Subsidy, public fund, -EUR 1 billion, means over the years until 2026, EUR 1.2 billion, of which we have cash out 200 million EUR net in 2022, 100 and 100 in 2023. So another EUR 1 billion to come. And as I said, 500 in this year expected, 2024, and I would expect 2025, maybe 350, and the remaining part of 150 then in 2026, yeah? And again, this is somewhat higher than we originally on the timeline expected, yeah, not overall.
And for the remaining EUR 500, well, we see some growth in KHS and like to invest there. And we see some needs to keep the Peine productive, yeah. And we think after the good years in 2021 and 2022, we can finance that, and that is the background of our decision. But of course-
... with a more difficult situation, yeah, new decisions, yeah, for the next 6-8 months, yeah, have to reworked and revised carefully, because the situation is tougher, yeah. But that is normal business. We did that in the past, yeah, and whether all decisions are like that, and might be, yeah, that CapEx finally is EUR 100 million less than that, because we are early in the year, yeah, and there are some decisions to come.
Okay. So right now, you see opportunities elsewhere to perhaps still conserve on the capital spending? Is that what you're-
Yeah, yeah. Sure. Certainly, if I, if I may add to that. Of course, we are very well aware of the current situation. And of course, we are reviewing our cost position, be it CapEx, be it OpEx, on a very sort of frequent basis. And we will review also the investment plan for 2024 and the years to come, to reflect that situation. However, I think it is also fair to say that those that have stopped investing into existing assets had then problems to actually capture markets when markets picked up again, and this is certainly not a situation we wanna get into. So we will carefully balance the needs of investments into existing assets and the needs to invest into new market opportunities with the current situation, clearly.
But that is, I would say, day-to-day job of management and the entire company.
That's, that's understood. Thank you. And, and just, just two, two more from me, please, if I may. So, on the portfolio, currently, where do you still see further opportunities? You know, which assets maybe, perhaps, you feel at this point are non-core, that you are able to perhaps sell down the line?
Well, I certainly will not pinpoint any specific assets at this point in this group. And I think you're gonna understand that. But what I can clearly say is that the active portfolio management that we have started with in, well, I think last year, in 2023, will continue. So you shouldn't be surprised to see further shifts in the portfolio. Two elements that are, for us, crucial in the discussion: One, does the asset support the strategy of circularity? And second, are we best owner to develop that asset forward? Are we sort of best suited to help the respective asset to further grow and to flourish? Those are the two main questions we're asking ourselves when looking at the portfolio.
Hopefully, you're understanding that we will not sort of talk specific asset, assets in this, in this group.
Yeah, that's well understood. And then finally, so you've spoken about green steel premiums on low CO2 steel volumes. But just wanted to understand more on the contract structure of these low CO2 steel volumes. We've seen some peers, such as like H2 Green Steel, speak about take-or-pay contract structures over 5-7 years. Obviously, this is something we've never seen before in the steel market. Is this a model that you believe can be successful? Is this something that you are also looking to perhaps implement in terms of just moving away from a more commoditized steel pricing contract structure that we've seen historically in the past?
So we haven't seen that much take-or-pay contracts in the market so far. This is certainly a new element, and as I said, this is not sort of what we see mostly in the discussions we have with our customers. Predominantly, we're talking about a certain volume and then a premium on the respective price level at the time of delivery.
Understood. Thank you very much.
Thank you.
It's Andrew again.
Yeah, just one point of clarification on the premiums. I mean, last year this time, you were talking about triple-digit EUR per ton for a, you know, for a kind of blend, you know, natural gas-based DRI/EF product. Is that... I mean, if we're thinking about you selling all of your volumes in 2026, is it fair to assume you've achieved a 100+ EUR per ton premium on all that volume?
That's a fair assumption, Andrew. Yes.
Ah, good stuff. Thank you.
Thanks.
Are there any further questions? I haven't received any emails. Seems there are no further questions from the Zoom link. So before we close the presentation on the conference, please allow some personal remarks. Mr. Becker, we have done this together on several occasions for more than 10 years, in good times and in bad times. It was, it was a pleasure, and especially your unpretentious manner. It was really helpful for my team and me, also in the time where it wasn't as normal as it might be, might be today. So I'd like to thank you for that, and also, I guess, on behalf of the financial communities, and you have, you have heard this today, I wish you all the best for the times ahead. Thanks.
Yeah, Herr Heidler, thank you very much for these kind words, and thank you to all of you here in this virtual meeting who are covering the Salzgitter AG. I learned really a lot from you and from your questions. And my impression is, well, always had been fair questions to us and constructive and open to Salzgitter. Thank you very much for this. All the best for you.
Not more to add from my end. Big thank you to you, Burkhard. A big thank you to you joining in. Sorry again for the technical hiccup that we had at the very beginning. But thank you very much for listening in, for your questions. All the best from our side. Hope you have a nice weekend soon to come, and see you soon. Thank you very much.
Thank you.