Dear ladies and gentlemen, welcome to the conference call of Thyssenkrupp. At our customers' request, this conference will be recorded. As a reminder, all participants will be in a listen only mode. After the presentation, there will be an opportunity to ask questions. May I now hand you over to Claus Ehrenbeck, who will lead you through his conference.
Please go ahead.
Yes. Thank you very much, operator. Hello, everybody. Also on behalf of the entire team, I would like to welcome you to our conference call today. The conference call will be on Q4 numbers, fiscal year numbers and, of course, the outlook for 2021.
And we will also have a section in our presentation, which in which we will go through the value levers that our businesses have identified to drive the structural improvements going forward. The presentation will be held and the conference call will be hosted, of course, by our CEO, Martina Mertz and our CFO, Claus Kuisberg. Both will share the presentation. And all the documents for this conference call, you can find on the IR section on our websites. And with that, I would like to hand over to Martina to start the presentation.
Martina?
Thanks, Claus. Hey, all. Martina speaking. First, thank you for your participation in the call today. We'll be leading you through the presentation, which is rather long one today, and I'm looking very much forward to having a good discussion afterwards.
First, with the presentation, we want to provide a recap what we've accomplished in the last 12 months. 1st and foremost, and by far the biggest step in the strategic realignment of the group was at the beginning of the year, the sale of the Elevator Technology business, which we closed successfully on July 31. This has, of course, transformed our balance sheet substantially and turned our net debt to a net cash position of EUR 5,100,000,000 In addition, we significantly increased our equity up to more than EUR 10,000,000,000 With this, we paved the path the way for more restructuring and business development going forward. And I can ensure you that we continue to focus all our energies on substantially improving the performance of our business. Moreover, realizing the best owner concept for our earmarked businesses is also progressing.
As you are all aware of, we received non binding offer from Liberty Steel for Steel Europe, which we are examining at the moment with an open mind, of course, and ensure and we are ensuring we achieve at the end of this process the best possible result for all stakeholders. That means we continue to explore options for industry consolidation. We narrowed already the range of options. And at the end of the day, we believe that we can come to a final decision in spring 2021. For plant technology, we received indicative offers for different constellations.
The due diligence is almost complete, particularly for Mining and Cement. It's a bit different. I would say it's different for the chemical business as we've observed in the last month very strong dynamics in the market for hydrogen technologies, which we will not let me say, which we have not seen before being this strong, but yes, now consequently, we are currently examining how we can strengthen our fundamentally strong staffing position in this growing market through partnerships. I think I can go a step further by saying we believe that in the part of hydrogen technologies we are in, I think we have a very strong competitive position in large scale water electrolysis plants. For AST, our steel our stainless steel operations in Italy, we have been approached by numerous parties.
This does not come as a surprise to us because the business is well positioned. Nevertheless, for AST, it is far too early to draw concrete conclusions. But together with an investment bank, of course, we will thoroughly evaluate the expressions of interest received. On top of that, we are also making visible progress in restructuring of our business. Last year throughout the entire organization, we reduced personnel by more than 5,700 FT
feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet
feet feet Es. And to cope with long term market developments and the effect of the pandemic, we have accelerated our initiatives and thus ended our restructuring target now in the next step from 6,000 FT feet
feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet
feet feet feet feet feet feet feet feet feet feet feet
feet feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet
Feet Feet Feet Feet
Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet
Feet Feet Feet Feet Feet Feet Feet Feet Feet.
Is the essential part of our new group of company concept. Together with our businesses, we defined value levers, which Claus will later on he will lead you through in detail. And also, of course, we define then together with the businesses, structural improvements fiscal year going on and beyond. We will provide you more details on that in the second half as said in the presentation. All of this said pays into our performance in this fiscal year and beyond.
It reflects a step up in our operational performance on the back of the execution of our value levers and also it reflects a slide of course a market recovery. Alongside, we will leverage our leading steelmaking expertise for ultimately working towards climate neutrality and green steel offerings with our strong concept, Teekay, hydrogen, steel and water and H2 electrolysis. So on the next slide, it's a little bit complicated, but actually the slides you should see in front of you now these 4 phases, this is actually our transformation plan, which we follow very stringently and disciplined. With this plan, we have a plan how to make Tuzum Group ready for the future and we use, of course, this plan constantly for internal and external communications. Let me illustrate now what this sideways view, as we call it, what this means in detail.
We divided our transformation into 4 phases. In the first phase, which we called FIGHT, we dealt in particular with the impact of the coronavirus pandemic. We sold in a consequent the elevators business as a prerequisite for everything to come. In the 2nd phase focus, we are now restructuring our portfolio. We made fundamental decisions as said before with the announcement of our new target portfolio in May, and we are on the way to implement this portfolio structure which will make our company smaller but more profitable.
And in addition, of course, with this focus, we can much more discipline allocate our capital to promising businesses generating value going forward. In the SURF phase, which we consider we are on the way to this phase now, the 3rd phase improve will run-in parallel now, which is it is about increasing competitiveness in all areas, regardless of whether we intend to develop the businesses as part of the group or not. The restructurings we have initiated and in part already implemented as well as our value levers are an example of this. And let me say a few things in more detail. Of course, leadership makes in such a turnaround the difference.
And in this first part, of course, in a leadership approach, it means that we try and we are working on beating the odds. We uniquely and ambitiously reframe what it means to win. We make multiples and we are making really multiple bold moves early and methodologically in this focus step. And we reallocate constantly, frequently to focus our resources on priorities. So leadership asset is absolutely key in this phase we are in.
And after all, once we have achieved our path to competitiveness, Of course, after that then, we can start about the process to scale the business up that requires having competitive businesses in order to achieve profitable growth again. Size in itself is not the relevant measure for us. It's the profitability of cost and the cash and value generation of the company. And as you can imagine, the phases mentioned will not and the phases they are in, of course, are different with that too. But one thing is clear, we will make further substantial process progress along the curve over the next 12 months.
If we all know and let me mention this at this point too, Of course, the question can be centered on the long term why for Thyssenkrupp. Everybody is asking for that. We believe, I believe it's very important for the organization to focus now to clearly focus on delivering a positive free cash flow at this point in time and not using too much resources for thinking beyond. That's our clear priority and this is why you do not hear us talking constantly about this long term why. We want our people to understand that we have a clear priority at this moment in time.
This is to optimize all what we are doing towards profitability and positive free cash flow. So we really focus fundamentally and with all we can, our resources on turning the company around. So in bonds we are through this part of the process of course, as everybody in this market is well aware that Thyssenkrupp has from its technological capabilities everything needed to scale up the businesses. At that moment, once we are there with our competitiveness, we are totally committed of course to making a positive big picture impact and then we would prioritize of course our internal resources towards profitable growth again. But at this point in time, we believe it's about beating the odds.
So then now we can be a little bit quicker and you saw the documents talking about on the next page in order to make a difference on the leadership of the company. Of course, we formed below the executive board an executive company to drive the transition from a centralized group to a powerful group of companies. And I think you read it yourself. I will not lead you through the details. I think it speaks for itself.
But very important to us here is we, of course, have a comprehensive multiyear agenda. We want the CEOs of our units that they own the total company performance of their group company And we expect an experience in transforming their business and a relentless focus on priorities in leading the company asset back to value generation. So with this, I think come to the implementation of our initiatives And this is then, Claus, your part of the story. Thank you. Okay.
Thank you, Martina. So let's have a closer look at the milestones that we have achieved and the restructuring completed or initiated in the past fiscal year. When we started the transformation, we said that we will turn around every single stone in our company. And as you can see with the numerous initiatives across all segments, the market situation in Automotive System Engineering remaining extremely challenging, further restructuring was needed. Hence, we recently commenced the operational realignment, splitting the businesses into 2 independent companies for Body and Powertrain and bringing structures and administrative costs in both parts businesses in line with market levels, resulting in additional restructuring of around 800 jobs in the current fiscal year.
Moreover, with the presentation of the Steel Strategy 2030 in March, we announced cost reductions and job cuts of 3,000 jobs, and of which 1,000 will already be achieved until the end of 2020. This was followed by an extensive restructuring plan for the German Springs and Stabilizer sites. Under the plan, around 400 jobs will be impacted by closure of Olpe by the end of 2021 and to be largely the Hague site in Haagen. At corporate headquarters, restructuring also progressed as planned. As of April 1, around 200 FT feet feet feet feet feet feet feet feet feet feet feet feet Es decided to join a transfer company or leave directly, bringing us closer to our target of Berlin Holding.
1 of the last announcements in August affected adjustments in our cement business, including the reduction of 460 FT feet feet feet feet feet feet feet feet feet feet feet feet Es worldwide. Despite the substantial programs that are finished, underway or announced, all of our businesses will have to accelerate their initiatives going forward. Consequently, we increased the previously announced target of 6,000 FT feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet Es to 11,000 FT feet feet feet
feet feet feet feet feet Es
to 20 2, 20 23. Another important step was the introduction of our group of companies' content in May, sharpening our target portfolio with a clear focus on industrial logic, competitive, profitability and cash flow. With that, we also announced the newly created Multitrack segment, including businesses for which we see no substantial future prospects within the group, who might do better in partnerships or for which closure might be the best solution. But Multitrex will also be an entity for managing our investments in businesses such as our stake in our former Elevator business. And last but not least, a big step was the termination of our disproportionate balance sheet, date driven net working capital measures towards an ongoing continuous management, which is an essential contribution to turnaround our cash flow.
As already said, we only accept targets from our businesses if there is a consistent and solid concept behind. And in the past 12 months, we already cut some 3,600 jobs in the previous fiscal year, I mean, in our existing restructuring framework. They are roughly 1600 jobs in Germany and around 2,000 jobs in the rest of the world. And in fact, we have actually gone further. As of September 30, a total of 5,700 employees are no longer on our payroll compared to the previous year.
With simple math, we will have to cut another 7,400 more jobs over the next 3 years to reach our new target of 11,000 FT feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet Es in Germany and the remaining 2,100 in the rest of the world. While at first we have to incur the cost of payouts, this will ultimately support our performance through sustainable savings, ramping up from a high 2 digit €1,000,000 amount in the past year to a low to mid 3 digit amount in the current fiscal year and in a total a mid- to high 3 digit €1,000,000 until fiscal year 2020. Again, let me be clear. The target of 11,000 employees is only a snapshot from today's perspective, heavily depending on our further course of businesses. Hence, this figure can also change upwards.
This is the largest restructuring process and the largest planned reduction in the number of employees since the Chisinauk was founded, and we will work permanently on further measures and also add them during the year if necessary. Coming to the financials for recent fiscal year of our continued operations. Unsurprisingly, the pandemic had a clear impact on the top line, especially pronounced in absolute terms at our materials as well as on our Car and Truck Components business. However, we see indications for an ongoing demand recovery, especially from the automotive side, giving us reasons to be cautiously confident. Q4 already showed sequential improvement at almost all businesses, which is very likely to continue in fiscal Q1.
Unfortunately, this is not reflected in last year's bottom line, with EVIT adjusted significantly weaker year on year despite extensive measures to reduce costs and safeguard our business, including short term working. With slower development prevalent in the Materials and Automotive Components businesses and the beginning of the fiscal year, the impact of the pandemic on demand and capacity utilization additionally burdened. Added to this were the structural changes in the steel sector. To quantify this, steel rope, ex heavy plate accounted for EUR820,000,000 EBIT adjusted loss in fiscal year 2020, while the new created multi track segment added a further €593,000,000 eVT adjusted losses. Consequently, free cash flow before M and A was sharply down year on year.
Besides the operating performance, the normalization of the net working capital up to €3,000,000,000 as well as the cartel fine at Steel Europe weighed down. Again, Steel Europe and Multitracks were the largest drags with together CHF 2,500,000,000 negative business cash flow in the past 12 months. Here you can see where our progress lies. And with that, let us have a look at the development of our balance sheet that experienced a strong push by the realized value of proceeds of the elevator sale, by far outweighing the loss incurred by our continuing operations. Thus, net income for all for the full group jumped to €9,600,000,000 The continuing operations were, besides the operating performance, heavily influenced by provisions for restructuring.
In addition, we took risk out of our balance sheet through asset and goodwill impairments amounting to roughly SEK 3,000,000,000, especially pronounced Steel Europe and Automotive Technology considering a potentially slower than so far anticipated development in the auto sector. At year end, our equity stood at more than CHF 10,000,000,000 which now is more than ever important, resulting in an equity ratio of 28%, up from 6% 12 months earlier. At the same time, the cash inflow from the transaction turned our net debt to a net cash position of €5,100,000,000 providing us a decent safety cushion and will be an enabler for our operational and portfolio restructuring, aiming at returning Thyssenkrupp to sustainable positive financial KPIs. Looking at our operational performance in more detail, especially in Q4. As the automotive production was restarted in many countries towards the end of Q3, the 4th quarter saw sharp quarter on quarter growth in order volumes, thanks partly to state stimulus packages and other initiatives and other incentives.
Consequently, EBIT adjusted the automotive technology marked a gradual improvement quarter on quarter at almost all businesses. And we also saw some one timer, which negatively impacted the results of Automotive Technology. However, Springs and Stabilizers and Systems Engineering were still significantly negative. Industrial Components delivered a positive earnings contribution yet lower quarter on quarter. While components for heavy duty engines increased their EBIT adjusted significantly by recovering sales, earnings at Bearings were temporarily slightly lower, but on a high level.
EBIT adjusted at Plant Technology came in stable quarter on quarter, remaining negative on the back of lower utilization and ongoing construction site costs that couldn't be charged to customers. However, we see improvements year on year since the robust service business and stringent G and A cost reductions are bearing fruit. Marine Systems came in positive and up year on year as well as quarter on quarter as efficiency measures and cost reduction in project execution continue to take effect. Nevertheless, earnings continue to be held back by low margins on older projects built. In line with recovering markets, Materials Services saw an increase in its main product groups quarter on quarter with significant higher warehousing shipment, especially at auto related service centers in both regions, Europe and North America.
Overall, utilization and the mix remained below prior year level with respective effect on margin. And at Steel Jug, we saw stabilizing market prices in the 4th quarter, while shipments were significantly higher quarter on quarter on the back of an improved utilization and better product mix EBIT adjusted improved quarter on quarter yet remained negative and lower year on year. Last but not least, cost of the corporate headquarter was stable quarter on quarter with significant improvement year on year, mainly due to lower G and A costs. With pandemic still dominating and implications and durations of the 2nd wave still uncertain, forecast for global economic growth and the impact on our business, particularly materials and components for cars and trucks, are still subject to major uncertainties. For fiscal year 2021, we expect sales growth in the low-tomidsingledigit percentage range, well below the pre pandemic level.
Our expectations are, of course, dependent on the recovery of the global automotive market. But to make it clear, with this level, we anticipate for 2021, we are more than 10% so to repeat, we are more than 10% below pre corona level. EBIT adjusted is expected to improve significantly with structural advances being by far the biggest driver, additionally supported by sales growth on the back of the recovering markets. And as I explained before, with the assumptions I just made before regarding the top line development. All businesses are expected to contribute positively with the exception of Steel Europe and Multitrack, keeping the group's EBIT adjusted in the mid-three digit €1,000,000 range negative.
Across all of our businesses, the strongest driver for the envisage upside for 2021 and beyond are the value levers. That the leadership teams of our business have developed and committed to. These value levers are aiming at pushing bottom line as well as top line in addition to the expected recovery of our markets. A summary of these levers are exhibited on the right side of the slide. We will walk you through each segment in a minute.
Before that, I would like to touch free cash flow before M and A, which is expected to be significantly better but still negative in the range around €1,500,000,000 determined, of course, by the step up in operational performance in all segments and the elimination of the burden from normalization of capital as well as defined in the arbitrage proceedings. Ongoing payments for restructuring and depending on the payment profile from incoming orders as well as milestone achievement in the project at Marine Systems, Plant Engineering and considering higher payouts for restructuring as already shown. Important to mention here also is that as of October 1, we tightened our guideline for the recognition of special items by aligning it more closely with IFRS rules. It will be more conservative and strict to make here adjustments to the AYT. Now let us have a closer look together at our segments and how they will drive the upcycle improvement.
Here on this slide, just for your reference, you can see how we transitioned our portfolio into the new group of company structure, which will also be our reporting structure for the current fiscal year start. Let's start with Materials Services, which will return to positive territory in the current fiscal year. For the segment, excluding ASD and some other small companies' infrastructure, we expect EVIT adjusted to improve to a mid- to low 2 digit range on the back of tailwinds from market, meaning higher volumes, albeit from a low level and not yet returning to the pre corona crisis to be more precise also material service. With this assumption of top line will be more than 10% below pre corona level. However, the largest contribution will come from structural improvements.
For example, we will drive G and A efficiency along the value chain by optimization of our footprint and logistic concept. In addition, we want to further reduce complexity by streamlining our portfolio and closure of sites. In order to push the top line, we will roll out sales initiatives with materials processing offerings aiming at becoming a more service focused business, especially our new growth strategy, Materials as a Service, will provide us with additional revenue streams bearing higher margin and lower volatility. That's why we also target small scale M and A activities in the North attractive North America market where customers clearly recognize and appreciate the extra value from our processing or supply chain management offering. Nevertheless, our traditional materials warehousing and distribution activities will always be substantial in the end of our business.
Overall, having all these measures in place makes us very confident for the new fiscal year. And as always, if market turns more dynamic, we will see what happens. Industrial Components. At Industrial Components, we want to foster our leading market positions on the back of an efficient cost base on the one hand and with the support of a robust growth for our markets. For the current fiscal year, we expect a slight increase in earnings, coming mainly from a significant improvement in our forged technologies business and also from a stable high contribution of our Beryx business.
Industrial Components is expected to grow slowly but steadily, mainly driven by 3 markets. First, the wind energy sector, which shows promising growth potential longer term. However, we will see a temporary slowdown in 2021 as a result of pull forward effects in China from expiring subsidies. 2nd, the auto market, which is expected to recover significantly, however, not yet back to pre pandemic levels. And last but not least, the market for Construction Machinery, which probably remains stable globally, the only exception being China expected to grow.
Besides the potential from the by nature, uncontrollable market, industrial components will work on the controllable internal drivers such as offering an improved product mix and new products and services, for instance, at Barings, by extending our existing production lines mainly in low- and best cost countries and continually improving our products together with our customers and at our FOX business by catching additional market share with the introduction of new services line for undercarriage components or with our new and powertrain independent products for trucks, the front axle. Industrial Components leadership teams are fully committed to continue their path of constant and consequent cost control over the next years by improving everyone's productivity and therefore reducing personnel costs, which also includes restructuring programs, optimizing production costs and operations with a debottlenecking or reducing purchasing costs by securing flexibility via multiple suppliers. Let's turn to our Automotive Components business, Automotive Technology, which is now operating in a new setup, excluding the Springs and Stabilizers as well as the Powertrain and Battery Solutions Business from the former Systems Engineering Business, which moved to the Multitrack segment beginning October 1. Automotive Technology was hit hard by the pandemic and will therefore do everything in their power to return to profitability supported by stricter cost control and comprehensive effective measures.
If we take a closer look on our expectations for the current fiscal year, you will see that we are targeting a mid- to high 2 digit €1,000,000 earnings contribution, which represents a significant recovery from last year. As fiscal year 2019 2020 was severely affected by the significantly lower demand from customers, we had to reflect these new market circumstances in our business plan, leaving the revaluations and impairments not all being adjusted and thus included in our EBIT adjusted figure, as I said before. We, therefore, expect earnings also to improve by the omission of these nonrecurring effects. In line of the currently highly uncertain environment, also in the global automotive market, we are cautious about the upside from the market recovery at the moment. And to also give you an indication, the top line we estimate for the current fiscal year will be more 20% or in the direction of 20% below pre corona level.
And therefore, concentrate more on the levers as we actually can influence the further ramp up of our new projects and plant, mainly at steering and continuous and consequent cost control by improving personal productivity, for example, via restructuring. Here we are planning to reduce about 800 FT feet feet feet feet feet feet feet feet feet feet feet feet feet Es in the next or current fiscal year and with that target annual savings in a low two digit medium range and also by enhancing the operational excellence, for instance, by reducing production costs while improving the quality or by carefully choosing the best quality but also best cost supplier. Marine Systems. We are quite positive on the operating perspective, also on the back of Q4 order intake with frigates for the Brazilian Navy, as you already heard, giving us top line growth over the execution time of this order. Moreover, a further perspective will open from the submarine program for the Norwegian and German Navy and as a subcontractor to the Italian ship, Jaltic Cantieri, where we are also part of the promising bidding process for an Italian submarine program.
We expect to receive both orders in the current fiscal year. In order to safeguard our margin, we won an even more diligent calculation and strict cost control over the construction time of each and every new order. And in addition to that, we implemented a number of efficiency measures addressing, among others, performance in naval electronics systems, push performance and service, excellence in procurement, utilize efficiency gains from integrated product teams. For the current fiscal year, we will see a first slight uptick in EVIT adjusted for Marine Systems from both kind of levers, top as well bottom line, which will become more dynamic going forward. Steel Europe.
Steel Europe will also show a significant improvement in the current fiscal year, however, still remain negative. With Heavy Plates now being part of Multitracks, we expect EBIT adjusted to be negative low three digit million figure. Main drivers will be the expected marked recovery, leading to about 10% increase in shipments year on year, but also, of course, being far behind the precolone, with a clear ramp up, of course, for also more high margin focused products for the auto sector. However, despite a substantial recovery in volumes, pre crisis levels will be far not yet be reached, as I said before. This, in turn, will result in a better utilization of aggregates with a significantly improved cost base in up- and downstream operations as well as an improved raw material consumption.
Moreover, the steel high level of the iron ore prices could be likely potential push for steel prices. In addition to market tailwind, we expect already sizable effects from our Steel Strategy 2,030 with priority on accelerating of restructuring, leading to a savings in the mid-two digit range this fiscal year. Moreover, we identified additional efficiency measures with additional savings potential on top of already identified measures related towards ESG2,030. Much more important, all these levers will provide substantial upside also after 20 21. And alongside, of course, we will work towards climate neutrality with strong concepts like our internal Dekaertzweiss team.
So talking about new concepts. We see ourselves well positioned to capture opportunities arising from the green transformation as we are competing and partly leading in attractive future markets and areas. Our bearings business, for instance, is technology leading in Fluid bearings, used in wind energy turbines. By this, we contribute to the energy transition. In addition, we intend to make full use of the enormous greenhouse gas reduction potential of hydrogen in steam making processes to be able to offer green steel to our customers.
In order to transform towards a climate neutral steam production, we plan to use hydrogen in direct reduction plants and electric metals. Also, our power core non grain oriented electrical steel is a high-tech core material used throughout the entire energy value chain for generators to electrical engines for e mobility, thus offering us attractive growth opportunities. We are pioneering not only the use of hydrogen but also play a leading role in its production process, as Martina said earlier. Our joint venture, Oudoclorine Engineers, is technology and market leader for high efficient electrolysis plants and specialized on hydrogen production via alkaline water electrolytes. Demand for hydrogen is growing significantly, and we intend to profit from the expected expiring of production capacities.
In this year alone, project announcements for our hydrogen technology have doubled. In light of these facts, we are currently evaluating the continuation of the business with 1 or several partners. From today's perspective, we believe this to be a valuable option. Before we jump into the Q and A, let's wrap up and see what lies ahead. In the current financial year, we have 3 strategic priorities.
1st, in Europe, where we explore all options for industry consolidation and secure financing to carbon neutral steel production transformation. This is flanked by our restructuring initiatives, securing and pushing fundamental value. Of course, restructuring and enhancing performance is not limited to CRO, but applies to the entire organization of our second priority. We will stringently improve performance across all businesses into high performance group of companies supported by the defined value levers that are to be consistently backed up by concrete action plans. Moreover, we will work towards realization of the best order concept for our Multiflex businesses that Martina already explained and towards climate utility, including our hydrogen based steel climate strategy, Teika, Antwerp Steel, while exploring financial options.
To sum it up, we cannot drive the market, but we can drive our own performance, and that's
you very much, Martina. And with that, we want to go over to the Q and A session. And for this, operator, please take over for the moderation.
Thank you very much. Ladies and gentlemen, we will now begin our question and answer And the first question is from Ingo Schachel, Commerzbank. Your line is now
open. The first one would be on the next steps that we should expect for the Steel Europe business. I think on press call, you were saying that you expect clarity on the way forward by spring next year. Just wanted to understand what that means in case of a standalone solution where you would decide to develop the business on your own. If that's the way forward, would that imply that by spring next year, you would give us a more comprehensive announcement on your green steel strategy, including an exact price tag and size of investments and source of financing and explanation whether potentially the state would inject equity or silent participation or guarantee more debt?
Or would it rather be that in spring you would announce that you keep it and then develop a new standalone strategy on the back of that?
Yes. Well, thank you, Mr. Schafer, for the question. Let me I think let me start with
this answer. It's a
big one. It's a big one. It's a big one.
Comprehensive answer.
As I said before, as we said this morning, you know that we are in the process of examining what kind of industrial concepts would fit best to our steel. We have this, of course, the stand alone strategy. And to be honest, we have this steel strategy 2,030, which we think is a good one. We, of course, believe in it. But of course, with Corona going forward or, let's say, having Corona in place, we have to face this strategy maybe with lower volumes and at least for a certain period of time.
And this is something we have to work on. So this is the one thing. The other thing is, of course, we always said that we are looking for the best concept to create value. And this is, of course, the reason why we are talking also to other producers for potential cooperation. And this is the status where we are in.
And we think that we cannot do this too long because we have to have clarity for Capital Market, for ourselves, for our employees. And therefore, we decided that we have at least in spring next year that we know in which direction to go. The precise question you asked whether we are then able to give you a number what kind of subsidies or what kind of money you get from state to finance the transformation. This is not what we intended to say when we said we will be ready at spring 2020. It's more to give you a direction and a decision which direction it will go.
Maybe thanks Claus. Maybe, 2 more comments to avoid misunderstandings. In order to focus our teams, we consider it being 2 steps for the time being. Step number 1 is to restructure the steel business as is in today's environment more or less. Step number 2 is to transform our steel plants to green steel production.
For step 1, of course, as Claus mentioned, we have to realize that the capacities required in the market might not be the same after corona as they've been before. This will lead from today's perspective in a stand alone approach to a questioning of our today's capacities installed, which you can imagine is a kind of holy cow discussion. But in this holy cow or as we called it this morning, no taboos anymore. Of course, the Steel team is evaluating such options now, which they have not done before. With such an approach, of course, we compare external offers for our steel business.
And then at the end of the day, by March, we can come to a conclusion whether we believe a Thistle Group focused stand alone restructuring is more promising than another one. Because as we always said, we consider this book as a very valuable asset. And of course to generate the value which can be expected from such an asset, we will decide then do we go do we in the dual tracks approach, will we follow the external approach or will we follow the internal approach that we will be that should be delivered by March, including then, of course, a kind of rough business plan, but that covers the restructuring phase, not the green transformation as Claus mentioned. So this is the step 1 approach. Green transformation to green steel will then follow.
Okay. That's very clear. And maybe then just a shorter one on Steel Europe, and I'll, yes, skip the free cash flow question for this time. But on Steel Europe, I think you were saying you want to ramp up the shipments of Focus products by 20%. And the way you said it sounded quite simple, but it's probably not.
Can you explain a bit more? I guess you're trying to tell us that you are aiming to regain market share in automotive steel, which drivers are behind that? Is it really specific client wins, quality initiatives or more aggressive marketing and pricing push? Because our impression was probably that you lost market share in the last years and now you're quite confident to regain. Just wanted to understand what's changed or what is changing here.
I mean, in the first place, it is that we invest in our equipment and that we are able to go in the niches, which customer are asking us to do. And so we will be one of not so much the producers who can really produce then this kind of grades and this kind of products. And that's the reason why we why our why our investment program goes into this direction. But also we of course, we see this is one thing. If you look at the development of the last fiscal year, the volume development, we had a big reduction, a very big reduction of more than 30%, roughly like in this area of products.
And I think the main reason why we now think that we can go in this direction is that we clearly only catch up more or less the volumes we lost last year. In the first half, I understood your question to go more in the midterm range. In the midterm, I think you know our strategy. And of course, we will also increase our, let's say, share in automotive special grades. And this is, of course, the reason why we do the investment.
But this is not, of course, in the current fiscal year. This is going more mid midyear.
And as you mentioned, Claus, I think we are somewhat convinced in all the discussions, and this was for sure mentioned probably in one of the previous calls that the relative market positioning of Thyssen Group in this high strength still required for electromobility going forward is a relatively good one. Stronger than so this is let me say this is our crown jewel and the market demand for this crown jewel is growing.
I mean compared to other competitors, we lost quite a lot of volumes and quite a lot of margin, and it's because our automotive exposure. And what we see now is coming back. And if I look at the current situation in the current fiscal year, we can commit that we are on a good way here.
Okay, understood. Thanks very much.
The next question is from Vincent de Nangomez. Your line is now open.
Yes, good afternoon. I've got one question and just again to follow-up on the steel business. So if I just try to keep track with the restructuring effort here, I guess, relative to the size of the business, the amount of restructuring if needed and the amount of restructuring if needed, I guess, the restructuring provisions in the business still appear pretty low. Just considering the headcount impact as well, which you had maybe from the corona measures, I think there was not too much change on the employee side either. Now I guess for our business, which is burning SEK1.5 billion in cash and more than 50% of the company's market capitalization, the speed of restructuring here doesn't seem to be so high.
So is the reason for that, that you're basically waiting for the possible strategic solution for the business? Or is the union pushback, which you're facing at the moment, still just too strong and does not allow you to basically pick up speed?
I think if I would say no to your question, you would anyhow not believe it. So, of course
So what is the answer?
I do not want to create unnecessary tensions, But I think we feel normally and this is the case of course, we consider to we consider managing through a fundamental crisis like we are in, require in a certain way a co management between the key stakeholders. And I think the past shown in the last year showed that we were able to go in relatively high speed through this entire program. On the steel community, we had to face and I saved myself because I was new with the company in a way. The steel guys, they went through this catastrophe of 5 years standstill almost in the negotiations with the Tata joint venture. And this led to difficulties when we wanted to renegotiate the Steel 2,030.
We signed the contract directly after the sale of Elevators, And we were all in the Executive Board together with the Steel Board totally convinced that up that in order to upgrade our steel production to a more valuable product portfolio to market and to of course to a much better operational efficiency in the plant that that's the right thing to do. But we did it with 11,500,000 tonne capacity. And of course, our guys in Duisburg, they try to protect this capacity. And as I said before, we are now on the way to renegotiate these contracts, which we discussed yesterday with our board. And this is a kind of breakthrough, yes.
And you could say, yes, we were in a way bound by these discussions about external option for steel. But we, the executive board, felt to investigate a consolidation in Europe makes sense as a first step before we decide what kind of capacity we would want to invest in finally. This might not be this might look now as if it was the union, which led to this let me say, to this time needed now. But actually it was a matter of prioritization to say, okay, we have to accept that capacities will not be needed anymore maybe, but it's valuable to investigate whether a consolidation is creates more value than a stand alone path. So it was not the union, it was also us.
But it was not so easy after the 5 years stand still, yes. So maybe we could have been a month quicker, but not 1 month it could have been 1 month quicker or 2, but not 5 or 6. And now we are there, it's now okay.
Okay. Thank you. That is very good color. Thanks for the background. I have one more question on CapEx and capital allocation.
So if we just look at your financials on a high level, your depreciation line obviously now drops towards like €2,000,000,000 post the write downs and your CapEx obviously rises to €1,600,000,000 And I guess if we look at the situation overall, the spending above the depreciation level or significantly above the depreciation level, obviously, lifts the bar for the businesses to generate any cash. Is there just any prospect as to how the CapEx line and I'm talking about the current structure before any further portfolio reviews is actually coming down in the next, say, 2 or 3 years rather than in the next 12 months? Or is just the €1,000,000,000 depreciation level maybe slightly misleading in terms of what will be the sustainable requirements of CapEx spend for the next 2 to 3 years?
Yes. This is a good question. First of all, of course, the EUR 1,000,000,000 in depreciation is after the write down of the assets and so on. This is clear. And what we see so far is the following.
So we've said we will divest the Elevator business to enable the rest of the business and not the whole bunch of the rest of the business, but the Focus business we described. And I think it's this is where why we started so. So we now see good investment opportunities. And this is what we, let's say, considered in our way forward in the plan. So and in the number you said.
There are some structural issues here. We have IFRS 16 effect of EUR 100,000,000 and we have, let's say, other effects, so which, of course, is which leads to another view on it. But of course, we also have in these numbers the additional investments from coming out from Strategy 2,030, which we want to do. And other investments also, for instance, for bearings, and we released recently quite huge amounts in investments for further, let's say, further investments in China and other countries to really serve the growing market here. So and of course, we know that this is, let's say, more or less critical in the situation where we are in.
But this is the reason why we said we have the elevator deal and we are investing in this because most of the businesses in the past were underinvested. They were in the past underinvested and they invested less than depreciation. It's not for steel, but for the other business we are talking. So but then we come to the process. Our process, of course, there is a number now, yes?
During the year, we will have a close look on this. And if a business is not performing, if a business is not performing the cash ones and the cash plan, they will not receive this amount of money they are planning. This is very clear. So we will be more strict to do so. But in principle, we want to enable the businesses to do their Logic strategic investments.
And but the thing I want to make clear to you is that we will be very flexible in adjusting these numbers. And what is the amount of investments, the normal amount of investments? I mean, having in mind this investments for Steel Europe, you know that it is EUR 800,000,000 in 6 years. You can imagine this that this if you divide it by 6 years, that this is, of course, an on top investment. But if you, let's say, deduct this, we will come to a quite normal level of depreciation or a bit more, yes, also in other businesses.
Okay. Okay. Thank you. That is helpful. Then one more question on the on your hydrogen business or electrolyzer business, which I guess you started to talk about more just in the last couple of quarters.
But generally, it's obviously still a business which is probably not just underappreciated within your group, I think certainly underappreciated in terms of valuation. I mean, if you look at a couple of the hydrogen companies out there, they are obviously trading at pretty crazy valuation levels. Now however, at this point, I guess, it's still been falling very much below the radar when it comes to Thyssenkrupp and yet you're obviously world market leader in water electrolyzes by installed capacity. So what are the options you're basically looking into to maybe create value for investors from this side because it is absolutely clear that there is a lot of value potential in that unit?
Yes. So I think we took just recently the decision because you know that the water electrolysis business is part of our CPT business segment. And we were, let me say, trying to find out what is the value we might get for that business. So it's part of our multitracks. Interestingly, I have to say, these are somewhat surprised by the offers we got considering what value people see in this business.
So this all led us to the conclusion that we do not say that we will not sell this business. Instead, we will develop this business with us remaining at least a significant shareholder, not to say the biggest shareholder. So but we are going to investigate several options how to develop the business or possible ownership structures for the business. Because as you said, this is definitely a tool And we will come back with more details on this also say in the spring. We have projects running now to evaluate.
But yes, we believe we have a significant value upside in this business. Our investigation tell us that this is far beyond the €1,000,000,000 business value already now. So and we are asking ourselves in what direction we could lead this business to really get this value uplift to its maximum. And to create a bit fantasy for all of you in this question for Thyssenkrupp, the long term why Thyssen Group would be would have if we would form a Green Tech segment, we would already have a significant sale a significant sales amount in the Green Tech segment. And you can imagine that Claus and I have this in mind.
But we believe that we, at this point in time, have to focus our entire organization to the restructuring process and push them push the organization through this painful process before we talk about a possible future in other segments. So we really definitely believe that we are not it's not a good time to share, let me say, our ideas. We want our organization to focus on the top priority, and that is free cash flow positive and competitive and margins in the business we want to hold. And next year in May, we come back to you at latest with this long term perspective. But yes, hydrogen is for us is a value driver, yes, a significant one.
Let me know if you would not share this decision that we should prioritize on performance and restructuring now.
Does this answer your question, Bastian? Okay. With that, I think then we can go over to the next one in the row. So operator?
Yes, sure. The next question is from Zack Guilherme Baraig, BNP. Your line is now open.
Good afternoon. I think this is Seth Vaden Baraig, Exane.
If I can ask you
a couple of questions on autos, please. Your commentary on demand conditions strikes me being a bit more cautious, what you've heard from many of your peers impacting both auto technology and then of course Steel Europe. You touched on earlier some of the challenges within Steel, but for auto technology in particular, can you walk us through what perhaps contributes to this relative caution? In particular, I think you said earlier you expected top line 20% below pre COVID levels.
If you
can give us a bit more color on demand and your feedback from customers, that'd be a great place to start, please. And I do have a follow-up. Thank you.
I mean, as I start with this 20% below, I said in the direction, it's not 20%, it's a bit better. So this is something like but we are below pre corona level, as I indicated before. Do you want to say something about
with our business segments in the automotive market. We are really we have a share of market in several regions. And this we showed already even in the last fiscal year growth beyond the market growth. So it's always difficult to provide the details on compared with corona because yes, our we were below the previous year, but still better than corona figures indicated. So we gained relative we gained market share actually.
So the and the growth of the business is satisfying and we believe, as Claus mentioned, that for the time being to plan this moderate growth for the future is necessary for us because our first and highest priority with you as our shareholders is, we promise what we deliver. So we did not want to now, let me say, pump sales into our figures, which we would believe might be too high. So we have a relatively cautious planning going forward as promised and delivered. And with that regaining trust with our stakeholders is a high priority for us.
Yes. I mean, when we made this planning, I think it was spring or summer or something like this. And in that time, we were, of course, like everybody, a bit cautious. And I think it was good that we were cautious. And now after the summer, you know this volumes develop better than expected.
And this is also a trend we actually see that is a bit better than expected. But I would say really a but we are now in the, let's say, last quarter of the calendar year, and we know incentives and things like this. And but nobody of us really knows what will be the demand in next year. So therefore, we have to be cautious still cautious, and that's the reason why we stick with these numbers.
Okay. And one follow-up, please. Within automotive technology, I believe there is a quite large onetime charge recorded in Q4. My understanding is this might reflect some quality issues in the business. Can you give us a little bit more color on what drove that charge and how we should think about the ramp up progress of various facilities that should potentially be some of the growth driver moving forward?
Thank you.
So this is the one times was it was an effect on percentage of completion. It was depreciation and it was an R and D depreciation and the provision for quality issues, but this was a minor one.
But mainly the correction on the R and D depreciation.
Which we did in the light of the let's say, of the reflecting of the balance sheet items we saw at the last fiscal year end.
Yes. So I think you all know that we had a very kind of cleanup of our balance sheet, which was clear to us since we sold the Elevator business that we use this once in a lifetime opportunity to clean up all these extra within our balance sheet and one of these was this R and D depreciation Claus mentioned. So this was no surprise to us.
Nothing which should worry us in
the future.
Okay. Thank you very much.
The next question is from Carsten Rieck, Credit Suisse. Your line is now open.
Two questions from my side. The first one on the free cash flow outlook, EUR 1,500,000,000 around EUR 1,500,000,000 for fiscal year 2021. Looks rather cautious. Did you include any potential order from Marines and prepayments for it, just to hint on the Norwegian Submarine order? And what step up in CapEx do we talk about in 2021 From Chart 38, it suggests somewhere around €200,000,000 but I might be actually wrong.
That's the first one.
Yes. So, first question, yes, potential payments are included in this number. And there are also included in this number higher CapEx volumes than in the current than in the previous fiscal year. But as I said before, this is something which we will have to develop over the way. So this is something we at the moment plan, but let's see how it will develop.
So this your estimation was quite okay. It was quite good.
Thank you.
If
we're cautious or not, we will see at the end of the day.
That's fair. On the second question was actually on the electrolyzer business, the OODA business. Because my original question was where do you want to put it if you want to develop it yourself, but hearing now it could be a own segment. I'm just thinking whether it would be a wise decision to do the second step before the first step. Could be obviously, strategy wise, you need to clean up the portfolio before you add because what the market needs to see is actually a turnaround in the cash flows.
And that would be a nucleus and it could be developed, but we don't know yet. So isn't it not too early to think about this and do the second step before the first step? What is your view here? Because I believe even if you get something for the business right now and for the other business, I think the market doesn't actually reflect anything in your share price for any of the disposals of the multi track businesses. So I would say executing on the multi track business should be right now the most important one.
And then once this is done, we can think about what is left and do you develop it yourself or do you wind it down or whatever you do with this?
I think you're fully right. We are executing on the multitracks businesses where we look where we are looking for what we call the best owner concept. And the only exception is now or elevators business. And the second one is the CPG business, which means the water electrolysis business. These two businesses are not in the process to be prepared for joint venture or sale.
And what we do exactly, as you said, with this Ode business, we will see. But we are sure at this point in time that the value we can create possibly alone or together with somebody as a minority or majority shareholder has to be assessed.
Okay. Perfect.
I'll just jump back into the line. Thank you.
And of course, as you said, to push these businesses under the line is one of the top priorities for this year. You mean, the multi track businesses to develop the M and A process is going on to a point that we push them below the line before the end of the fiscal year is of course one of our top priorities. But it's uphill battle this corona and we do not want to have fire to do fire sales as there is no need for fire sale.
Okay, understood. Thank you very much.
The next question is from Barus van Ayser, Kepler Cheuvreux. Your line is now open.
Yes. Thanks for taking my questions. I have a follow-up on steel. I guess you talked at length about the strategic evolution and the stakeholder influence of the stakeholder and the further development of the steel business. What I'd like to understand is the relative preference for consolidation or standalone option in steel.
So you're saying you plan to have a decision by spring. What we have seen in the last couple of weeks months in the European steel industry that there has been a growing dynamic in terms of consolidation. Obviously, some of the companies you talk to are talking to each other. How shall we think about this liquidity bid? If this has only been finally decided in spring, what is the risk that this offer is not there?
And would that point that in spring we would rather talk about a kind of a stand alone concept? The second question is on the guidance you're giving for this year. Is this given under the current scope of consolidation? Or are there any certain asset deposits already implicitly considered? And following the impairment this year, do we then need to consider further impairment risk for these multi tracks businesses or for Steel Europe?
So let me start with the risk. So you know that this asset impairments, I mean, the system behind. And there are, let's say, evaluated by the current planning and the auditors are in discussions with us whether it makes sense or not. So we do not see big risk to further here make write offs or something like this. This is a very actual evaluation.
So this is on how the numbers are at the moment. So this is how it is. The other thing you asked, what is the preference and what is the overall situation in steel? Of course, every European player, I guess, has his own option like we do. And everybody more or less is talking to everybody.
This is how it works. And we also say that we really do not comment and you have to I think you will appreciate it. And we do not really comment or, let's say, make a comment on what kind of, let's say, option is now the best one or which we prefer because it really depends on how it develops, yes? So of course, yes, we have this liberty. But we have also other options, yes?
At the end of the day, we also have a stand alone option, and we will see during the time, till spring next week, what kind of option will be the month the one who creates most value. And then we are going to decide. This is the plan. So it's really too early to say so. And this is everything I can say to this.
Yes.
Okay. On this impairment question, I think I understand that when you do the planning for the next years and you have lower expectation that has impact on the devaluation of your assets. But when you are in a disposal mode and many of these multi tracks are potentially up for sale. So there could be still a difference between how you see business on a standalone on a constant dining basis versus potential exit routes. So I try to understand whether these impairments are closer to the next 3 years business planning or to what you currently see as a price tag in the market?
So the impairments are more on the as every time impairments are made are more on the 3 year business plan models. And at the end of the day, when we are talking about multi trucks divestitures, it's very open to say whether we will have a hit in equity or not. So this is something we clearly cannot say at this point of time or even again, nobody knows.
Okay. That makes sense. Maybe one final follow-up on these accelerated staff cuts to 11,000 and the incremental 7,400. Can you give us a rough split how this is impacting the revenues or at least how Stifel is being affected by that?
The line was quite bad. Can you please repeat
that? The impact on steel.
Okay. The
impact on steel in this the 11,000 people out of the 11,000 FTEs, 3,000 are coming from Steel Europe. And so this is the number which is included there is the one we already identified or defined during the strategy 2,030. So this is part of Steel Europe, which is included in this number. It's an old one. So as we said before, we are in discussions.
And as you know, when we are in discussions, we are not talking too much about the potential outcome, but we can confirm that we are in discussions for further measures.
Okay. Fair enough. Thank you very much.
Your next question is from Luke Knoll from JPMorgan. Your line is now open.
Hi, thanks for taking my question. Firstly, just on provisioning, you've guided to mid-three digit million impact for this current financial year. Can you give an indication on the additional restructuring charges required out to FY 20 20 3 to achieve your savings target?
So did I get you right so that we the question but the line was not too good. So you asked what kind of how much restructuring costs we will have to bear in the next 3 years or in the this year? Correct.
To get to the your FY 2023 target savings target?
If we talk about expenses, it will be roughly the mid lowtomid 3 digit €1,000,000 number, yes, starting this year. And both will be this year and some of this also next and the following.
You can see
number for 2021 and
also you see then, You see the number for 2021 and also you see then the numbers for the year thereafter. So we can make
So the lowtomid3 digit in FY 2021 should be thinking a similar quantum in the year or 2 out to 2023?
Yes. So the payouts for the payouts in 2021 will be higher than last year. We paid out last year €200,000,000 So we're going to pay out in the current fiscal year for that something between €300,000,000,000 €400,000,000,000 And the restructuring provisions for this headcount reduction is, let's say, it's €200,000,000 plus from today's point of view. Of course, it can go up depending on what we're doing also going forward. And if you know these numbers, then you can make your guess for the numbers then going forward.
Okay. Perfect. Second question is maybe one for Martina. You mentioned the new structure will make the business more profitable and specifically talked about turning the business returning the business to being free cash flow positive. Just based on these FY 2023 sustainable savings that you've outlined and in the context of the CapEx remaining above G and A, do you think it is enough to return the business to being positive free cash flow on that time horizon without any market tailwinds helping the business from what you're expecting in FY 2021?
Maybe I can start. So if you look first of all, free cash flow is, of course, also a matter how much COVID is going to impact us. And you know that we are planning in certain scenarios. We have a scenario, which for us is the leading one. We have the better scenario and the worst scenario.
But the one we are we actually have with the leading one is the one where we have in 2023 a sales volume on top line, which is a bit more than pre corona level. And the big businesses, Steel, MX and Forge Technologies in this scenario are not above pre corona level in this scenario. But even in this market scenario, we will be able to earn positive free cash flow in this period of time. But to be honest, we will be better and sooner. So this is something we clearly have to work on.
So in this scenario, it's only reflected what we at the moment have in the light of the, let's say, the given market scenario and the top line scenario and the restructuring matters. So in this scenario, there will be a positive cash flow. But we are also we clearly want to enhance and to be quicker and better.
So as Claus said, I think your answer can be your question can be answered with a clear yes. And still, as time is of the essence, for us, we and we as Claus said, we call our current case the moderate case. And of course, we and we announced it this morning to our organization and yesterday to all our stakeholders, our current what we call plan shows what Claus described and what you've heard from him. But we feel it still takes too long. So we are working on an improved plan still because we do not want to make promises.
We make our plan built on concrete actions on concrete measures. We do not pump hot air in anymore. And as we do not pump hot air in, we are planning until we reach our target. Now we call this process, we plan until we reach the target. And this is why we have just started a next round of planning in all our segments, and we have committed ourselves yesterday to our supervisory board that we provide an updated planning in the spring next year.
Because I think once we would lose momentum on this improvement path, we lose, of course, then as set the momentum. So we want now really to stay resilient and in a way also very disciplined on this improvement path. So we plan with concrete measures until this plan reaches the target set. And as Claus said, with this, we intend then to be better than what we have just recently announced as our plan. But we will not promise this to you today because we have this holy statement to us saying we promise what we deliver.
And we only promise what's based on concrete measures bottom up in our organization.
Okay. Thank you. And maybe just one quick one, if I may. Just if you can comment in any way around the headlines a week or 2 ago around a capital injection potentially from the German Economic Recovery Funds? And maybe why that would be necessary given, obviously, the balance sheet has been repaired post elevators and your comments on free cash flow improving over the next 2 or 3 years?
Yes. If you talk about what's going on in the media, it's true that you sometimes read there is potential capital injection. What is true so far is that we are in talks with the government with Berlin and also with the Philadelphia. But of course, we are talking about several issues. We always said that, for instance, the financing of the transformation to green steel is something nobody can know, steel producer can pay by their own cash flow.
And of course, in addition, our restructuring investments, this is a very costly one. And therefore, we are talking to also to governmental places what kind of subsidies could be possible. By the way, other steel producers are doing this also because they can also not finance the green steel transformation. And therefore, it is we don't talk about capital injection if we talk to official places here, but we talk about we talk with the government and everything is open. Everything is open.
And it has to be, let's say, intelligent mix of finance aids, and we will see what at the end of the day will be done or not done. This is the story from our side.
Okay. Thanks a lot, Rokay.
The next question is from Alain Gabriel, Morgan Stanley. Your line is now open.
Yes. Good afternoon, everyone. Just two questions from my side. Firstly, is on the Steel Europe business. How much pensions and provisions net of tax are attached to that business to be considered if you're looking to potentially sell it?
And connected to that business, what are the CapEx requirements that business in isolation for the next 3 to 5 years, including or excluding the Greensteel investments? That's my first question.
It was very quick and the line was the first question. How much pension is Related to steel. Is related to steel, it's €4,000,000,000
That's right. Okay. Is that net of taxes?
More or less, yes, this is yes, dollars 4,000,000,000 net of taxes. The other question, can you repeat it?
It's what are the CapEx requirements of steel in isolation for the next 3 to 5 years? Just trying to get a sense of the cash needs of that business, including or excluding the green steel investments.
We have of course, in the next year, we have a normal level of investments, which is roughly EUR 500,000,000. And in addition, for the next 6 years, we have EUR 800,000,000 of this investment, which are linked to the Strategy 2,030. And of this EUR 600,000,000 or let me make a guess how much is in the next 3 years, I think take 50% of it or let's say 40% of it. So this is then this is the investment level. And the investments in the transformation of steel, We do make investments in transformation.
You know that we inject hydrogen into the blast furnaces and also this come to chem issues. We do in this 3 years period, we do not have considered an investment into a direct direct reduction machine technology. But this will come we will do so, and this will come, I think, 2024, 2025, something like this. And but of course, we are going for state aid to finance.
Okay. Thank
you. And my second question is on the steel plate business. If you were to consider shutting down that business, what would be the cash out flows that would be linked to that? And I presume this is not in your guidance for next year, is it?
Well, it is in the guidance. So this is the first state. It is in the guidance, and it is in the planning year. And it will be, let's say, the question is, it is part of this in the guidance because it's we discussed it as a 2 year effort, I think. This is something like this.
And but the number is I don't want to be too precise at this point of time. So it is something you can count by yourself. So this is
Okay. Thank you.
The next question is from Christian George, Societe Generale. Your line is now
Thank you very much and Christian. On your steel scenario and under your moderate case you're referring to, is it fair to assume that in the first fiscal half you're having a higher level of operating loss. But is it possible that you may come to breakeven come the second half? Is that part of your of the possible scenario?
You mean for the whole group or for steel?
For steel.
For steel.
Well, I mean, what shall I say?
It's very much
really It's very, very cost
driven business.
We do this calculation of with numbers which are conservative. And we don't really want to give you so much of insights here at that point of time. If we talk about this moderate case, we will have, as I said before, a loss in the steel business. And whether it's possible at the end of the year to have a breakeven, we will see. So sorry, I cannot say more.
In the market, of course, such a fixed cost deal is very fixed cost business, high fixed cost relative to variable costs. So it's extremely dependent on market developments. And as Claus normally says, here it's difficult to provide precise forecast actually.
Great. But if everything being equal, it would be fair to assume that come the second fiscal half of the year, some of the restructuring and the cost cutting steps you're taking now would have an impact for second half?
Yes, it's not impossible.
Okay. And my second question is on your shipping Marine Systems division, because you mentioned some potential offers or interest on your stainless steel and other part of the business. Is it not an area where you're having also some discussions as possible merger and acquisition on the European scale?
You mean the AST? No, the Marine Systems.
Marine Systems.
Marine Systems. Marine Systems, sorry. Sorry. Yes, of course, in the Marine Systems, we are actually from our point of view, there will be consolidation. There is actually we do not consider the stand alone case at this point in time being the one which with the highest probability.
So for the time being, we believe consolidation and it's either a consolidation within Germany or it's a European consolidation. I think it's mostly known who it is. In the German consolidation, of course, that would drive a better market position towards the biggest customer, which is Germany. So and while in the European consolidation, it's definitely a better synergy case. There, of course, you have good synergies, but probably no improvement in market position.
So it's as we are comparing both, There is not yet any preference visible, but we are in a very intense discussions now with the players involved. So yes
It's a political thing, of course. And we wouldn't be we are quite self confident that we think that we can drive the business by our own. But if the political dynamics are in this way, as Martina said, potential consolidation is small is quite likely. But it always takes 2 to tango and the time line is difficult to predict.
Okay. And then my very last question is sorry.
So I just wanted to say, you might get the impression that we are cautious in everything. Actually it's not that we are cautious. We are very cautious in not over promising actually business results considering the difficulties for preview with the corona cases. But with our strategic moves, it's sometimes difficult for us to indicate because as Claus said, it's always 2 or 3 we are dancing with and this has its own dynamics. But please remain and rest assured that we are not that we are avoiding cases where we become a victim of dynamics of others.
So we try to remain in a position that we are, let me say, ahead of the curve and the curve is not turning in a way against us. This is why we are extremely cautious in sharing details about cases where we speak with us.
Yes, that's very clear. Thank you. And my last question was going back to a previous question about all these articles in the German newspapers about participations and other cash injections. You're highlighting that you want to be intelligent on the mix of finance. Does this include the possibility of a stake from either Berlin or Dusseldorf?
And if this were the case, is it something that the board and your main shareholders would be comfortable with?
As we believe in free markets, I would say and I think, Claus, I can speak for the 2 of us. To us, an equity state of Germany in a company is to me something where I would always say is not a good idea. So I do not consider that in any way a kind of preference I have. So to be very clear, it is so we, of course, want to develop the business and create value. And if there would be a case where we see, let me say, a temporary something support might make sense in order to accelerate a transformation.
So would create value because at this time, nobody would finance what people call dirty steel. You know banks, if we go to a bank and ask for a loan, everybody would say, thanks Martina, it was nice to see you again and goodbye. So but as we want to accelerate the transformation for cost reduction, we might it might make sense, but please rest assured to me such a situation is not is what I try to actually it's not that I like state equity of Germany in whatever company. So that's that's we might have a situation at the end of the day where we discuss this, but this is not our preference.
Great. Thank you for your very clear answer.
But please don't tell anybody.
Okay. And with that, I think we have come to the end of our call today. We would like to thank you very much for participating. We would like to thank you very much for your good questions and for contributing, and we look forward to staying in touch with you. And as always, for all the questions you might have after the call, the IR team is happy to be in contact with you.
And we look forward to speaking with you in the
final call. Yes.
And thank you very much to helping us lead the company through this very important phase. And I think I can speak behalf of Claus of all our leadership team, not only you and myself. We know that it's a tough time for you being a Thyssenkrupp shareholder.