Dear ladies and gentlemen, welcome to the webcast of Thyssenkrupp. At our customer's request, this conference will be recorded. 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 this conference. Please go ahead.
Yes. Thank you very much, operator. Hello, everybody. This is Claus Ehrenbeck from the Investor Relations team. And also on behalf of the entire team, I would like to wish you a very warm welcome to our conference call today on Q3 9 months numbers.
All the documents for this release have already been disclosed this morning at 7 and are available on our website. This is all so far from my side. I would like now to hand over to Claus Kuisberg, our CFO, who will lead you through the presentation and the slides. And afterwards, there will be a Q and A session. So Claus, Please.
Yes. Thank you very much. Also a warm welcome from my side here to today's conference call. And let us briefly take a look at Some key financial highlights reflecting our strong operational progress year on year, upswing year. Fueled by Continued market tailwinds, particularly related to the Materials and Automotive businesses, we were able to improve our top line year to date with a significant order intake and sales by 28% 14%, respectively, year on year.
Consequently, we recorded a 9 month order intake of €25,300,000,000 and sales totaling €24,600,000,000 Simultaneously, we have been able to generate a positive EVIP adjusted of €266,000,000 in Q3 alone. This results in a 9 months figure of €564,000,000 supported Of course, by stringent cost and restructuring measures. This figure represents a significant improvement vis a vis So minus €1,160,000,000 loss recorded during the same period of time for the 9 months of the previous fiscal year and includes also a negative minus €230 €6,000,000 effect from the Multitrack segment. Furthermore, we recorded an even stronger performance in Q3 this with an EBIT adjusted of EUR 266,000,000 compared to EUR 220,000,000 in Q2, which is up 20 1% and by far more than sales growth, which was 1%. This positive development is also reflected in the free cash flow before M and A, which has improved Substantially by €3,100,000,000 year on year from minus €4,000,000,000 in the 1st 9 months of the fiscal year €19,000,000 to minus €953,000,000 thus far in the fiscal year 2021.
With the latter figure including also business cash flow of a minus €167,000,000 from the Multitrack segment. In this context, it should be noted that Q3 contributed a free cash flow before M and A of minus €235,000,000 representing A marked improvement versus the minus €750,000,000 in Q2. And let me emphasize at this point That we will relentlessly continue our efforts to render Teekay a much better company and to drive performance regardless of the current tailwinds we can see. Let us now jointly take a look at the performance in Q3, more specifically starting with our performance and restructuring progress. In light of the strong demand, particularly in the case of Materials Service, we achieved the already mentioned EBIT adjusted of €266,000,000 Without externalities, this figure might have been even higher due to Automotive Technologies, Industrial being affected by the all known semiconductor shortage causing lower customer costs and higher steel cost and primary products And Steel Europe being hit by high raw material prices due to the time lag in reflecting price developments in contracts with our customers.
Moreover, we have continued to stringent execution of our headcount reduction and reached a cumulative FTE Our overall reduction target of more than 12,000 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 Es.
And at the same time, we have achieved a total headcount reduction, including Additional and M and A of minus €235,000,000 significantly higher earnings were offset by required net working capital buildup of roughly €700,000,000 As I mentioned in previous conference calls already, we anticipate the current fiscal year to exhibit Disproportionately higher investments, especially but not only at Steel Europe, which are markedly above depreciation, to create a sustainable performance boost. And last but not least, we have a strong balance sheet with a net cash position of €4,000,000,000 supporting our transformation program and enabling degrees of freedom for pursuing performance enhancing actions. Moving on to our portfolio transformation. We see clear and swift progress in the streamlining of Multitracks with the signing of the mining sale to Edel Smith, Leading to a positive cash to positive effect on net cash, pensions and equity alike. At the same time, we have accomplished The signing of the infrastructure business sale on August 5 and have entered the due diligence phase at ASD underlining Our commitment to a rapid portfolio transformation.
In terms of Steel Europe, we are working on optionality for a stand alone solution. As reported already earlier, a decision regarding the preferred future scenario will be taken most likely in spring next year. The next slide depicts and summarizes where we stand with the restructuring plans for our businesses. As part of Entailing a reduction of more than 12,000 FT feet
feet feet feet feet feet feet feet feet
feet feet feet feet Es, we estimate that twothree of our current target will be achieved until the end of this fiscal year, fiscal year 2021, Within an almost equal split between Germany and the rest of the world. This target can be reconfirmed given that we have already accomplished a cumulative account reduction 6,900 FT feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet Es until the end of June. As part of the restructuring, we expect a low to mid-three digit €1,000,000 cash out for the entire fiscal year, While provisions will also be in this range. Based on these restructuring efforts, we will have realized from headcount reduction This headcount reduction program, a low- to mid-three digit million number in sustainable annual savings since 1920 until the year end. In addition to savings from other restructuring initiatives, for example, closure of sites, reflecting our strong commitment to substantially improve the bottom line.
Let me briefly highlight some major developments at our business segments in the following, starting with Materials Services, Which reported an outstandingly strong quarter, the strongest in at least the last 10 years. And it looks as if this will be also true for the entire fiscal year. So we see also good dynamics going on for the next weeks months ahead. As you can see, we have revised the format of our presentation, thereby presenting 1 chart per segment reflecting the group of companies' concept. In addition, the business insights we have also added some information regarding market trends on the right.
At Materials Services, we were able to benefit from strong market recovery leading to a no degree shipments increase year on year, Even though these figures are still below pre pandemic levels, and it should be noted that shipment volumes would have recovered even stronger if demand would not have Exceeded supply from steel mills for some materials. Moving on to sales. The segment clearly benefited from an increase in material prices, especially for carbon stainless steel and the significantly higher shipment translating into 70% surge year on year. In addition, the demand for steel has experienced a significant increase year on year across Europe and North America, particularly in the case of carbon steel in Europe. Simultaneously, EBIT adjusted has improved substantially to a total of €232,000,000 in Q3, in line with the favorable price dynamics In the spot market, that led to sizable windfall profits and productivity gains achieved in the area via Continued FTE reduction.
This is also important to say this FTE reduction totaled to 1800 versus the fiscal year 2018 2019. These developments broadly reflect the overall market picture, where strong demand is likely to drive shipments above pre pandemic levels during the next fiscal year if supply from producers is available. Moving on to Industrial Components. We have recorded a 40% increase in order intake and sales year on year. In case of bearings, the growth mainly came from industrial applications in Europe and the Americas, while the demand for the wind energy was temporarily lower year on year As expected, given the tax incentive driven extraordinary strength of the Chinese market last year.
And FORSH Technologies witnessed strong demand with components across all regions, mainly for trucks and construction machinery, With a slight effect of the semiconductor shortage on car manufacturers. At the same time, EBIT adjusted has increased by €41,000,000 year on year, particularly Due to forged technologies driven by the top line as well, rigid cost control and savings related to personnel cost and procurement. On the other hand, Bearings recorded a lower EBIT adjusted year on year due to changes particularly in the product and regional mix as well Nonetheless, the business achieved positive, of course, positive effects year to date due to scale economies in wind energy, product mix effects And efficiency gains in Talia via restructuring. Looking further out, a positive midterm trend for wind turbines is clearly expected With the rising demand for energy and the shift towards larger wind turbines and rotor blades as key drivers for which we offer the right solutions with our products. For Forge Technologies, market experts such as IH S predict further demand growth for heavy duty engines and construction machinery, Which obviously goes very much in line with the GDP growth.
Next up is Automotive Technologies, which experienced a significant Upswing across all businesses, supported by strong automotive demand, especially in China. As a consequence, the order intake And sales have increased year on year by 53% 49%, respectively, despite the aforementioned semiconductor issues. Simultaneously, Automotive Technologies was able to substantially improve the EBIT adjusted year on year based on high plant utilization rates at all business, particularly for new plants, a more favorable order structure and cost savings related to higher production efficiencies and restructuring. This result Has been achieved despite headwinds stemming from higher logistics and packaging costs. Taking a look at the overall market environment.
IHS expects further growth in the global automotive production to 80,000,000 units in calendar year 2021, which is still below pre pandemic levels. Over and above, we believe that we are well positioned with our products to benefit from the major trends of autonomous driving and e mobility. At Steel Europe, we recorded significantly higher shipments, sales volumes and prices, particularly related to the automotive industry. In more concrete terms, shipments increased 55%, while sales rose by 70 4% year on year reflecting the strong demand recovery in the steel sector. Furthermore, net sales per tonne have ramped up quarter on quarter, We are confident that we will see positive effects also in the quarters to come.
Moving on to EVIT adjusted higher selling prices and an optimized product mix We're partly offset by higher material costs and temporary production constraints, mainly due to the relining of Blast Furnace 1 initiated in Duisburg in the 3rd quarter. Our long term contract structures mean there is a delay in increased raw material and steel prices feeding through to our revenues and earnings. While we expect a significant positive sales and margin effects from our contract in upcoming quarters, this margin improvement will, in Q4, We offset by the blast furnace re lining just because of lower volumes. For the upcoming fiscal year, we expect A significant margin and EBIT adjustment improvement based on the already signed and, respectively, upcoming signing of long term contracts With clients and ongoing cost cuttings under Strategy 2013. To sum it up, the positive effect on earnings will come.
You will just see it later than our competitors. Marine Systems. Q3 order intake mainly consists of smaller service vessels and Marine Electronics as well as corresponding services. Whilst the Q3 figure represents a 24% growth year on year, it remains below Q2 Due to the impact of the sizable Italian Navy order in that quarter. But it should also be noted, however, that the big ticket, The €5,500,000,000 order for submarines from Norway and Germany was signed in July and will hence be booked in Q4.
Sales have followed a similar development with a slight increase year on year due to the handover of the second and third quarter to the Israeli Navy but below Q2 We have a fragrant handover to the German Navy occurred. In terms of EVIT, adjusted temporarily higher costs related to the percentage of completion accounting Ongoing projects have led to a slight decrease. At the same time, we have initiated performance initiatives in new orders And to secure the profitability of current order backlog. Looking at the overall market, the Norwegian and German submarine orders could have Lighthouse effect and serve as entry ticket to additional orders from Europe, the Air Navies. And last but not least, at Multitrex, there has been a significant improvement across all major KPIs, in particular, ASD took advantage And we also managed to win a first reference project in the United States for water electrolysis Where the client intends to produce green ammonia based on green hydrogen.
In the light of more favorable trading conditions, We managed to boost our sales by 16% year on year and the order intake by an even more sizable 90%. Furthermore, we have substantially enhanced our EBIT adjusted from previously minus €189,000,000 in Q3 'nineteen-twenty to a loss of only EUR 45,000,000 over the same time frame in fiscal year 2021, mainly driven by the improvements at AST and Plant Engineering, The latter being driven also by the strong progress that the mining as well as the cement business are making. Overall, ongoing restructuring programs Across all units with a total of now 700 measures led to an FTE reduction of roughly EUR 15 100,000,000 thus far. Over and above, we made some significant progress regarding our portfolio transformation for our Multitrack business where we aim for a strategic partnership, Sale or closure, and this is the number one reason why we established this segment last year in May. The solution is already In reach for 5 businesses as of today, as previously announced, we have initiated the closure of heavy blade and carbon components.
And during Q3, We have been able to conduct the successful signing of the mining sale on July 29 in the sale of infrastructure on August 5 And of course, started the due diligence with potential buyers for the AST business. Based on the solid performance during the 1st three quarters, we would like to confirm our previously increased guidance for sales and EBIT adjusted And further details our guidance for free cash flow before M and A. Consequently, we still expect all segments Regarding Q4, we anticipate a lower positive EBIT adjusted quarter on quarter Because seasonality effects at our auto related components business, the blast furnace relining at Steel Europe And effects of likely slower call loss from auto manufacturers due to their supply chain constraints. Seasonality might also have effect on Materials Services, however, Cautioned by the obviously resisting strong trading conditions. Therefore, we expect a positive mid-three digit €1,000,000 EBIT adjusted for the entire fiscal year and this at the top of the implicit range, which includes And we'll take a loss of approximately €300,000,000 In terms of free cash flow before M and A, we anticipate a significant improvement And to move towards, a year end figure of a minus €1,000,000,000 with a range of minus 1 €200,000,000 to minus €1,500,000,000 mainly caused by a net working capital buildup in line with sales growth and high commodity prices And the effects from temporarily previously mentioned supply chain issues at our customers.
The variability of the cash profile at Marine Systems and the Multitracks And investments above depreciations to further support our planned performance step up going forward. Moreover, it should be noted that our free cash flow before M and A guidance includes a negative business flow cash flow assumptions Of roundabout €350,000,000 from Multitracks. In this context, I would like to recapitulate The supportive fundamentals going forward, which lead us to expect sound training conditions to prevail beyond 2021. Before outlining this positive development though, let me reemphasize that we will have to continue monitoring the semiconductor supply situation. First of all, the continued favorable demand situation for cars, trucks and off highway vehicles alike are set to benefit AT and Industrial Components.
Next, we witnessed a strong demand for Steel and Industrial Materials positively affecting our material businesses. Moving on, we expect a further decarbonization and the related green hydrogen trend to lead to increased Demand for industrial scale electrolyzer supporting our, Oudichlorine Engineering business. And finally, In addition to these market related factors, we have secured long term contracts with our clients at Steel Europe that consider The strong demand as well as high raw material prices. Moving on to the next slide. I would like to reemphasize our commitment to value creation and provide you with an overview of what we are building on.
First of all, in almost all our business, we are amongst the market Leaders, in this context, I would like to once more highlight our leading position in the green hydrogen electrolysis, Which we are confident to leverage even stronger in the future. Over and above, we are renowned for our technological expertise Based on our long standing engineering expertise, including IP and profound ties with our customer base, furthermore, we have Successfully initiated our financial turnaround by demonstrating that we are capable of extracting value from our restructuring efforts And via achieving some first success stories as part of our ongoing portfolio streamline. Simultaneously, we possess a strong balance sheet an equity ratio of 29% and a net cash position of €4,000,000,000 thereby creating a solid basis for continuing our restructuring efforts and portfolio streamlining. And finally, we have a clear commitment to substantially, which will to sustainability, which will continue to be A management priority moving forward and have defined a roadmap leading to science based target initiatives approved climate targets. Having said that, I would now like to take the time to answer your questions.
Thank you very much.
Yes.
And the first question is from Ingol Shahjal, Commerzbank. Your line is now open. Please go ahead, sir.
Yes. Thank you. And my first question would be on your free cash flow and on the free cash flow expectation for next year. Of course, Still highly uncertain what the earnings level is going to be. But also this year, I think you've shown that the company can be cash flow break Even before net working capital swings and before restructuring related cash outflows.
So can you already tell us a bit What that means for next year with regards to those, let's say, more one off related factors, for example, on net working capital, maybe it's the opposite of the debate we had in previous years after a strong net working capital buildup, would you naturally expect to release next year? Any reason speaking against that? And also on restructuring, maybe you can already Tell us whether or not maybe that the cash outflow for restructuring is going to be similar next year, like in this year and maybe also anything special on CapEx that we You should already be aware for next year.
Yes. Thank you, Mr. Schafer, for this question. Of course, The cash flow performance is, of course, one which I normally get the most answered questions for. I mean, if you look first at the free cash flow development in this year, we always get the question, so now you're increasing Your EBIT, but why you are not increasing your free cash flow so much in line with.
If you look at the structure of our free cash flow, you have to bear in mind the following. We have, in principle, 2 high priorities. The first priority is to come to a positive free cash flow, yes. But what we also always said is that we have to come to a position where we enable our businesses to come to in a position to be In the top 3 peer groups, and therefore, we have to enable our businesses. This means we have to restructure the business on the one hand, But we also have to invest in the business which we consider as core.
And this is what we are clearly doing. If you look at our full year Cash flow order of our full year performance, then you have to bear in mind that we invest in our business 160% of our depreciation. This is something, 160%. And we do this because we are strategically totally convinced that this is the right way to do. This is the first one.
This is an investment in the future of the businesses. We could easily say, no, we are not doing this. Then we could come up here And say, well, we have a positive cash flow, but we are investing on a depreciation level, we could do so. But this is not something where we have strategically convinced it. The second item is we are investing in restructuring.
We are investing in restructuring. As said before, A low to mid cash out in this year. This is something we do by intention Because we think that the restructuring is necessary. We could postpone the restructuring to save cash flow. No, we are not doing it because we want to speed up.
This is something we are also doing with our cash flow. And of course, we have some business in the Multitracks, yes, we do have where we have structural problems. This is also what we always said. So with these three items, we do that what we always do what we always said, what we do. We are investing it.
And our balance sheet position I mean, we have to come back to positive cash flow. This is very clear. But this is the reason One of the reasons why we also divested Elevate to be in the position to enable our businesses. And now coming to net working capital. So I mean, you all know the raw price the raw material price development.
And of course, if you look at our net working capital development for the full year, We will have an effect of a very high three digit number from net working capital. And 80% or something like that is coming Just because of prices. So this comes not as a surprise to me. I don't like the number, but it's not coming as a surprise to So this is the structure of this year. And if you now come to the next fiscal year I mean, if you come to the next fiscal year, will still have a cash out for next fiscal year for restructuring.
This is something which is also a low three digit number. And we will also have investments which are exceeding depreciation. This is what we clearly intend to do, to further enable our business. But in spite of having this, our clear target is to have a positive free cash flow. So This is I cannot say more at this moment, but this is at least what we are aiming for.
I hope you have Okay.
Sure. No, it answers the question. Thanks for sending a very clear message on the cash flow Ambition. And can I also ask you about the timing of your, I think, decision on the, let's say, strategy or structure for Steel Europe? I think you've now indicated Early next year is the point in time when you want to make a decision.
I think you've already looked into this matter for a while. And I think in the last quarters, we were under the impression that maybe it's Steel market outlook, where you still want to see how things play out before you take a decision on Steel Europe. And of course, steel markets being at least seemingly in more stable Waters, right now, what is it that prevents you from taking a decision earlier? Is it maybe the performance gap that you want to have how quickly you can close or that you want to demonstrate that the margin gap to peers is closed or the competitive landscape and That you need to firm a view of your willingness of your competitors to engage into M and A activity with you? Why do you now aim for spring next year?
I mean, if you come to a decision to, let's say, separate a business, If you look at other examples for this and you look at detail to this, you never get to a decision very quick to So we have to make preparations. We have to talk to this and that and so on and so on. So if we say that we will intend to have a decision on this in the spring next year, this is On the time line, this is not too conservative. This is more normal time line for us. But what you said, of course, is Playing, of course, a role.
If you look at the performance of the SKU business, we indicated that we consider this business is going up with margins and EBIT Because of the structure of the contract, you all know this. And of course, this is helping. And we have to see these proof points for us and also for the outside world to take a decision from this. And of course, you know that we are working on, let's say, make also some assumptions regarding the transformation to carbon neutral steel. This is something, of course, we want to have a bit more planning security.
These are some items which, of course, Let's say, lead to the fact that we will come to that we plan to do the decision in March next year or whenever, not March, in spring next year,
Yes. Ingo, thank you very much for the questions and Thank you. So operator, please continue.
The next question is from Alan Spence, Jefferies. Your line is now open. Please go ahead.
Thanks and good afternoon. First one is on the Glass Forestry line. What
I don't know whether I got the question right. It was cost for the blast furnace alignment and Yes. I think this is the cost for the realigning is a low Two digit number in this respective Q3.
And then is it fair to assume it's a high two digit in Q4?
Yes. Yes.
Okay. So my second question is around the pension. You obviously got a large amount of net cash. What's the catalyst for Fixing the pension liability. And by fixing, I don't mean topping it up completely, but putting in sufficient cash to the planned assets that It can meaningfully self fund its annual requirements.
Yes, we could do so. This is clear. This Something we will always, from time to time, consider for ourselves. I mean, in the past, we did not because We want to, let's say, keep the flexibility with the liquidity. I think we explained it also before.
And Now is the time, if you come to certain, let's say, M and A decisions regarding steel and things like this, We would like to have a clearer picture on what the portfolio will be in the coming months or years And then take a decision on this. I mean, if you talk about the steel business, you know that in the steel business, there are EUR 4,000,000,000 in pension liabilities. And it makes a difference if you how to deal with these pension liabilities if you consider this as part of the group or stand alone and things Therefore, we are at the moment a bit reluctant on making a decision on this. But in principle, we could do, yes? We could do.
But this is the reason why we Do not so far.
Okay. So after spring 2022 then?
Yes, most likely.
Okay.
Thank you very much.
The next question is from Jason Fairclough, Bank of America. Your line is now open. Please go ahead.
Thanks very much for the presentation, Doctor. Kaisberg. I appreciate it. Just on steel, you mentioned that the profit is going to come. It's I was looking at it and this business once earned more than €1,700,000,000 in EBITDA Per year for 5 years in a row.
And this year, it looks like it's going to do €400,000,000 in the strongest steel market ever. And so I guess the question is, can it recover or is it permanently broken? And is anybody at Thyssen held accountable for the contracts that mean that this thing is under earning?
Yes. So first answer to the first question, very clear. Yes, this business can come back to this level. Very clear. We are totally convinced about Totally.
So if you come to the explanation of this, I mean, our conference structure It's more long term. I explained it several times. So our spot price exposure is not much more than 10%. The other competitors do have much more. And if you look now into the development of the steel prices and the raw material prices, which we saw in the last 12 months, I mean, I know something about the steel business, and you surely also, I have never seen such a price development of both Sales prices and raw material prices in the last 20 years, yes?
And if you now have contracts, 12 month contract or 6 month contracts, which we normally do with our customers. I mean, it's very clear It takes longer. So our net sales per ton increased. But I mean the spot market Increased much more. And the raw material costs were also quicker.
But because of the long term structure of our customers, we will see the benefits Later. We will see it in the upcoming months. This is very clear. And we are totally convinced that we see this coming, totally. And if I mean and then you have to take into account that we have, let's say, this relining of the blast In this year, we are losing volumes in these times.
And especially in this quarter, we Could use these volumes, of course, to gain sales on a profitability base, but this is not possible. This is something, of course, yes, this is not a good news, but Yes. I think we know that this is coming. And starting from 1st October, this will be changed. And the other thing is also, I mean, we always said we have to restructure the business.
You know that we have a restructuring program running, Which is 3,750 people. And the restructuring is running in plan. So far, roughly 800 people left the company. So you can see, we are on plan with this, but we are not at the end of this. So we so I mean profit improvement is also coming out of this.
But we are very much convinced that Starting with next year, we will see a good development in this business.
Okay. Just a 2nd sort of follow-up and not really a question, but actually a request to you as CFO, Doctor. Kaisberg. Would you please consider focusing on EBITDA Rather than EBIT as your key focus figure, all of your key peers use EBITDA. So you really do stand out in using EBIT.
Obviously, we have distortions there because of the write downs and the differences in D and A over time.
Yes. I will Take it into my consideration, yes. Thank you for that.
Okay. Thank you very much.
The next question is from Carsten Riek, Credit Suisse.
I have two questions on Multitracks. We have seen good progress here over the past Few weeks with regard to potential disposals. But is there any solution inside for the remaining Plant Technology businesses? And here, I refer Chemicals and Cement in the portfolio of Multitrack. That's the first one.
Thank you.
Yes. I mean, Chemical and Cement Business, you know that the Cement Business, We tried to, let's say, divest, and we got orders, which we were not Which we did not accept. So we always said we do not make fire sales, and we rejected what we saw there. And Then we decided to, let's say, to stop this process for a while, and we will start this process at one point of time again. We will do so, but I cannot tell you when.
So we are always considering what will be the right time to start this process for the other businesses here. I mean I can tell you that for most of the businesses which are now Still in the Multitrex business, which are not divested so far, our target is to start the process in the next fiscal year again. So this is also valid for the other business you can see here.
Okay, perfect. Thank you. The other question I have is more on the free cash flow. You mentioned the ship shortage and lower automaker call offs. What is actually the Headwind here in the net working capital because of that, do you see it?
Is it part of your With revised guidance on the free cash flow, maybe you could shed a little bit of light in here.
Yes, this is part of this. I mean, this situation is a bit difficult to explain. If you remember, I was always talking about this semiconductor shortage and, let's say, the impact on our business And meanwhile, I think it is more obvious or more public in the communication that also the OEMs are admitting that they have problems with this. And what we see is the following, and this is difficult to handle. So the OEMs, they do come up with order intakes for us, Yes.
So called ABROFE, I don't know if the individual it was call offs, the call offs. But When they see or recognize that they are not able to produce something, then all of a sudden, they are closing down a plant. And the warning time is not very, very long. So there are several days or if it's longer week where we say, no, this plant is going to be shut down the next 14 days Well, this plant is going to be shut down the next 3 months 3 weeks. And this is something where we clearly see what we see also in the Q3 But of course, we are, let's say, MDR, we are working to the call offs we see in the systems.
But at the end of the day, it's not sure whether they are really call offs Because of the shortages. I mean, the OEMs would produce, if they could, they would even produce more. But sometimes, They make shutdowns because they cannot produce because they have shortage of materials. And this we see also in the Q4. This is very clear.
And this is but this is a pretty difficult predict. For instance, for the September, we see quite a good number of call ups, But we are not very we are not we cannot be very sure if the call offs are really taking place because of this shortage of semiconductors. And therefore, yes, sorry.
Sorry, could you give us a number for the previous quarter, so the third Quarter, how much those kind of headwinds were in the net working capital?
No, not so much. I cannot give you a number. It is More than you can imagine, but it's something, it's something. But I cannot give you enough.
Okay. Fair enough. Thank you very
much. Yes.
Next question is from Tom Zeng, Barclays. Your line is now open. Please go ahead.
Yes. Good afternoon, Deutsche Heinzberg.
Just the first question for me, please. The assumptions underlying your guidance, and the disclaimer you hit a mid-three digit million number you're trying to keep EBIT Maybe €100,000,000 or €150,000,000 I understand the sort of seasonal weakness in industrials and steel, but it feels like material services could be the swing factor here. Could you just elaborate on where you see steel prices in the next 2 months, whether or not you're assuming any sort of further inventory gains or losses in that guidance? So I was just trying to get a sense of whether there's upside or downside that we might expect to that range.
So the line was not too good at it. I was just checking whether I got the question right. The first one is where we see our EBITDA guidance. Is this what are the fundamentals behind this? Was this the right one?
No.
More so, with material services, What assumptions you make with steel prices really or raw material prices for the next quarter? Just whether or not there should be more inventory gains that you're expecting or losses?
For the Materials Services business, we think that Just the assumption is that we will have quite stable steel prices and also the raw materials prices we saw. It's not so much value for Materials Services here, But more the steel prices, but on the raw material prices, we see a development which is slightly Below the Q3 number, slightly below Q3, slightly, more stable.
Okay. Very clear. And second question, please. We're seeing more signs of slowing China demand, especially now with Signs of renewed lockdowns. Are you feeling any impact from this yet in Auto and Industrial Components?
And does it worry you at all in the next few quarters?
We see clearly a slower dynamic in China also because of semiconductor. This is what we're seeing. We cannot Really, just how much the impact will be. That's the reason why we are also cautious for Q4. This is very clear.
But anyway, all in all, if you don't focus on one business, the July we have seen so far It was quite, let's say, successful. It was quite a good start in the quarter so far.
Okay. That's clear. Thanks very much. I'll turn it back.
The next question is from Rojas Van Aiser, Kepler Cheuvreux. Your line is now open. Please go ahead.
Yes, thanks for taking the questions. First one is on the Europe maturity has been covered before. But can you give us a sense About how much of the employee reduction at Steel Europe, The total of 3,750 will be realized by the end of the next And in 2 years' time, to get there, you said 800 are so far Removed, can you maybe give us a bit more visibility on the time frame?
Yes. Just wait a minute. So So let me just have a look. I think in the next 2 years, we will get additional 1200 people redundant. And then we will have I think then we will have an effect in 2024 of additional 300 or 400, something like this because of the closure in Wuhan.
Okay. Got it. And then maybe on the blast furnace free line, which obviously started a bit early than initially planned. How big will be the volume loss now in the fiscal Q4 from this measure?
I think the volume loss will be 300,000 tonnes or something like this. It's always difficult really just because you know that normally you buy slabs to compensate on And this is also what we did. But of course, at the moment, prices are not favorable to do so, but we, of course, did it somewhere else.
Okay. So this we have not referred to the shipment level, yes?
Yes.
Okay. Makes sense. And then finally, on hydrogen, I think, I could read on tape that the stake sale is still being considered.
Didot, just want to get
a sense about the priorities. I think you have high expectations in that business. So why diluting eventually that stake you have instead of funding through exit from other peripheral assets Such as reducing your elevator stake or other optionalities? And can you also give us a sense what your Expectations are about the potential CapEx funding you'll see for the next 5 years in this joint venture, Tika UCE?
Yes. This is a difficult question regarding the additional the future funding. This is something I will not comment on At this point of time, sorry for that, but you may understand this. The question about the You can say it, what are we doing with this business. So in principle, the most Priority is to really have a look what are we doing with this business.
Do we proceed alone? Or do we proceed with a partner? So the partnership could be one partner which is, let's say, really strategically contributing to the business. It could also be at the end of the day that we make, let's say, a partial value crystallization to fund Future investments. But we have not made up our mind on this.
I can tell you, and I think I said it also last time, That we are approached by very much companies to offer partnerships regarding this, and we clearly have to make up our mind. Some cases, there are really these are really good strategic stories behind this, and we have to sort it out. And of course, Let's say, if we talk about partnerships, also valuation on this has takes is an important role about this. And therefore, we cannot Confirm on the one or the other direction here. This is something which is still in consideration.
Mr.
Geister, can you give a direction? Would you say that the strategic fit is the absolute priority over the Optimum or the highest potential value, which is feasible in the market?
The strategic fit does play a very important role, yes.
Okay. Thank you very much.
And the next question is from York Nelson, JPMorgan. Your line is now open. Please go ahead.
Hi, thanks for taking my questions. Firstly, again, just on Steel Europe and the blast furnace reline, the guidance of mid Just direct maintenance or does that include loss margin, underutilization, etcetera? That's the first question.
Everything is included. Yes. Okay. Very clear.
And secondly, on restructuring of cash out restructuring of low mid 3 digit million this year. If I look at the Slide 4, for mid term guidance, it looks like Restructuring next year is potentially more. There's no particular scale to it. But Could you maybe just give a bit more granularity around what the cash out for restructuring will be next year?
Thanks.
I mean next year, it will be a bit lower than this year. So it will be a bit lower. And then in 2023, There will be then it will be, let's say, in a high
two
digit number, yes? So This year, lowtomid. Next year, it's more low than mid. And then in 2023, it's a high two digit number. So this is the profile of the restructuring expenses.
Okay. Thanks a lot for clarifying it.
Yes. Look, the graph beside next to the 2021, So where you see way to go until 2022, 2023, this is for 2 years. And therefore, it appears That there will be more in the next year to come, but in fact, it's for 2 years. That means it's actually less Then in 2021.
Okay. Sure. Thanks for clarifying.
And the next question is from Vasyl Silagovich, Deutsche Bank. Your line is now open. Please go ahead.
Yes. Good afternoon. I just have one more follow-up on steel. It's always part of that maybe has an already clarified, but you're trying to get To the bottom of what's happening there. So just firstly on realized prices and margins.
If I look at the average ASPs, they've been increasing by roughly $80 and Cost obviously more than absorbed this. So has the increase in ASP been mostly driven by maybe mix rather than actual price increases Because only your margin isn't really reflecting at all what's happening in the market. And then secondly, just also looking at your order intake, it seems like it's been like literally flat For the last three quarters, and has been pretty much in line with the better quarters of the last couple of years, while all of these steel prices have more than tripled. I'm wondering what's going on here as this obviously doesn't really make too much sense because a, we're not really seeing any impact from higher steel prices. And then also, technically, you should be able to do more volumes, I guess, in this environment.
I
don't know whether I got your question right because you were talking about AST. At least I understood that you Sorry,
average selling prices. I was Talking about average selling prices in steel. Sorry for getting confused.
No, it was my mistake. So if I got the question right, you were saying that the average selling price in steel, could you it is the development, you cannot follow the logic or what
Yes. So I'm wondering, the €80, €88 increase is mostly mix driven because obviously the higher prices haven't really been falling down to your bottom So your margin is declining, not rising. And so I was wondering, is this just mostly a mix effect, not really a price increase effect, which has been driving up the ASP? Is this what has happened there in the Steel business? Because obviously, your margin isn't expanding.
Well, So this is not what is happening. So all in all, we saw an average price increase and increase per ton. We clearly see an increase per tonne in selling prices. I don't know where you got your information from. So first point, The sales per tonne, Neto Allerta per tonne, are increasing or increased in the 1st 9 6 months of in these businesses.
And it increased yes, it increased in the 6 months and also quarter on quarter. So I don't know where you got your things taken from. The question is now, What is the increase in the coming months quarters? Because we are now, let's say, Bringing it into the long term growth tons more and more the price development which we see on the spot. So but definitely, Net to a low the per tonne, sales per tonne increase in this fiscal year.
So this is something which is clearly, but I don't know where you got your information from. So maybe you Could work it afterwards with the team here, but I cannot follow-up.
Yes, sure.
No, I actually I mean, clearly, your ASPs did increase by €80 per ton, I guess. And I guess the question is, has this been driven by an actual price increase or more by a mix change? Or do you say it's been actually the price increase and cost more than offset
Yes. It's not only a mix. It is a price increase. Yes.
Okay. Cool. And then on order intake?
On order intake, the question was why we did not
So the question is, so I think organic is €2,400,000,000 has been pretty much around those levels for 3 quarters now. And in that time, I mean, steel prices went like up 2 times, 3 times and volumes obviously should be pretty good. So I mean, this is basically order intake in line with like quarters of the past 2 to 3 years, but we can't really see that reflected in the order intake. So it seems like you're basically not capturing Prices, not quite capturing prices or volumes basically in this order intake. So I'm wondering what's happening there.
I mean, we are capturing price increases, but not as much as you might consider if you look at the spot market. And we are also capturing, of course, volume increases, but which You can see only later because you know that our total output in this year will not be will be definitely Much lower than previous year. So and I know you know the explanations about this. And This is some kind of explanation to this, but maybe you can also follow this afterwards because You know that we in the Q4, we have lower shipments, which is very clear, yes? And this is then more spread on the time line and the order intake.
Yes. And shipments in Q3 were a bit lower than in Q2? Yes.
Okay. And then maybe just one very last follow-up, if that's okay, on Multitracks. So I think you've been giving Some guidance in terms of the upper ceiling of the cash out in Multitracks, I think it's been €350,000,000 that would imply almost, I think, €200,000,000 of cash out for Multitracks in If I reconcile that correctly, could you maybe let us know how much of that is probably for Heavyplate where we're obviously going Going to shut it down in the Q4 and you're probably going to have a bulk of the restructuring payments because I think the AST business probably should sequentially do quite well in terms of cash contribution into the Q4?
Well, this is a very detailed question. Let me have a check on this. One moment. Well, HeavyPlates is going to contribute to this negative number, a mid-two digit number. And the rest there are on operative issues, of course.
And HeavyPlates is contributing a mid-two digit negative number.
The next question is from Tristan Dreyesen, Exane BNP Paribas. Your line is now open. Please go ahead.
Yes. Hi. Thank you for taking my questions. Maybe the first one on NITI, can you please comment on your current carbon credit Position, if you haven't seen any OpEx inflation this year and what do you expect for the next year? Also, when do you expect generally to fall short of inventory free allocation and buy more actively on the market?
If I got the question right, it was about this the common credit, yes. Okay. I mean the common credit, You know that we get this free allocation on the one hand. And on the other hand, we also buy and sometimes At the moment, we can say that we are more or less covered till the end of our planning Time, this is 2024 or something like this. We are pretty much covered.
So we do not expect an effect out of this or a major effect out of this. But you know that the European Commission is talking and considering what they are doing. This is something we cannot foresee at the moment, but this is going to be have an impact on the whole industry.
All right. That's helpful. And maybe on decarbonization, you put out decarbonization CapEx figures. Some peers expect some level of policy support of 50%. Is that a figure or a number You can also expect that maybe if you can give us some sense of where your applications are with The European Innovation Fund maybe at the German levels, how much you've applied?
And when should we expect some decisions there? Thank you.
I mean, this is yes, I can clearly confirm this 50% and but I have to say this is at least 50%. So there are still talks going on where there might be the possibility to get more. So but this is very open. This is also something which is not so much for the publicity. But You know that I think there is a big commitment to at least give to support more than 50% on this.
And this is where we are talking talks with European and also German government.
And just when should you expect some decision taking place by year end or maybe next year?
I mean, you know that I think the problem is not the problem. Every steel producer is now planning To build up and invest in the direct reduction equipment to install the capacity To produce it. And we also do so. And our plan is to do this in 2024, 2025. So we have our applications running.
And we have, let's say, so called
Preapproval?
Preapproval. So this is now to be checked by the European government. And with that, what is in there, we are quite happy with this. So this is something where we see it's we see quite good progress. The problem is this is only the first step.
The transformation of this industry into carbon neutral business is not only an issue of 2 or 3 years. It is an issue of 10, 20 years. And politics, they only think in 2 or 3 years. They only give commitments for the next 2 years or 3 years. So That is a bit the question.
I think we are quite okay with the first phase of investing. But Having said that, we have to take care about the next phase of investing, the next phase of investing. And here, we have to fight for further Support. This is the CapEx side. But there is also of course, there are other sites that producing Carbon neutral steel, you might get into a situation that the producer of carbon neutral steel with hydrogen It's more expensive than the longer production with methyledonodie.
And therefore, the industry is asking for carbon contracts for difference. And this is also something where German politics is supporting, at least the actual one. And Europeans are looking at it. So this is something where we also have to get more clarity.
All right. Very clear. Thank you.
So it's a question of CapEx, OpEx and market behavior. So our customers really asking for green steel, But they have to be ready also to pay for this. This is a process. Let's say it this way.
So if there are no further questions, then we would like Thank you for participation. And of course, as always, we are happy to continue the dialogue with you. If you might have Further questions, then please call us. We are available for you, and we are also looking forward To seeing you on the road at conferences once the marketing season has started again and this will foreseeably be early September. And of course, if you wish to have conference calls with us, please tell us, and we would like we are happy to arrange something for you.
Thank you very much, And look forward to staying in touch. Bye bye.
Ladies and gentlemen, thank you for your attendance. This conference has been concluded.