thyssenkrupp AG Q1 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jason Fairclough - BofA Global Research - Analyst : Good morning, gentlemen. Thanks for the presentation today. A couple of questions for me, both on Steel. So the first one, you've taken another write-down. And I guess my question is, could this be a prelude to a disposal? And could you give us some color on the timing of the steel disposal. So that's first. Second question on Steel. Slide 43 in your presentation, I'm confused by a couple of things. Capital spend is normally a few hundred million per quarter. This quarter, you're saying positive EUR8 million. Also, the capital employed in this business was most recently reported is EUR5.4 million, and it's dropped to EUR3.6 million. So I'm just wondering what's driving that.

Question: Jason Fairclough - BofA Global Research - Analyst : And sorry, Klaus, is that related to decarbonization sector or?

Question: Jason Fairclough - BofA Global Research - Analyst : Okay, thank you. Then the write-down and disposal timing? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 14, 2024 / 10:00AM, TKAG.DE - Q1 2024 thyssenkrupp AG Earnings Call

Question: Jason Fairclough - BofA Global Research - Analyst : Okay. And so just so that I'm clear, so what is the carrying value of the steel business today? Is it EUR3,563 million? Or is it something close to that? Or is it EUR3,563 million minus EUR200 million for the write-downs?

Question: Jason Fairclough - BofA Global Research - Analyst : Okay. And so to the extent that you made a disposal tomorrow, if it were above that, you make a profit if it were below that, you take further loss on it, yeah?

Question: Alain Gabriel - Morgan Stanley - Analyst : Yes. Thank you for taking my questions. Just a follow-up on Jason's question on the Steel Europe division. Do you have the self-imposed deadline or timeline for your ongoing discussions with respect to the future of that business with the other party you're negotiating with? Or is it an open-ended discussion? That's my first question. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 14, 2024 / 10:00AM, TKAG.DE - Q1 2024 thyssenkrupp AG Earnings Call

Question: Bastian Synagowitz - Deutsche Bank - Analyst : Thanks, and good morning, all. And my first question is also coming back to your guidance, please. So if we look at your guidance framework, you've been cutting the sales back part of your guidance despite the fact that the price dynamics in steel are probably admittedly a little bit stronger than one could have expected back at November time. So I'm wondering what are the moving parts here? And as this did not impact the EBIT part of your guidance, so would you say that you gain more conviction in achieving the target for improving EBIT versus the last year? That's my first question.

Question: Bastian Synagowitz - Deutsche Bank - Analyst : Okay. So basically -- but just maybe coming back on the deals -- so where are you able -- to what led you to cut the -- basically, cut the sales guidance I guess, prices are slightly better? Has it been lower volumes? And if it's lower volumes, where have you been able to compensate the sales part of your guidance within the EBIT framework?

Question: Bastian Synagowitz - Deutsche Bank - Analyst : Okay. Very clear. Thank you. And then maybe also going even a bit more into detail on the steel business, and I guess I know you should have pretty good visibility on your order book. But without talking about shipments where I guess the call-off rates can still be a little bit uncertain, do you expect to be able to keep your gross margins in steel, at least flat into the second quarter?

Question: Bastian Synagowitz - Deutsche Bank - Analyst : Okay. Fair enough. At least worth a try. But maybe then moving over to my last question on marine, where you entered the next phase, and I think you started negotiations with KfW. And from what I understand, that has been a very important step. But I guess there are also some articles suggesting that your two main competitors potentially aim to transfer the control to the German government as well. So can you maybe update us here what you are aiming to achieve? And what is really the desired end game scenario for marines you were looking for?

Question: Moses Ola - JPMorgan - Analyst : Hello everyone. Thank you very much for taking my questions. I have three questions, but just a housekeeping question firstly. So you have not provided quarterly guidance with this report, should we assume that this will be a protocol now going forward? And why is this the case, please? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 14, 2024 / 10:00AM, TKAG.DE - Q1 2024 thyssenkrupp AG Earnings Call

Question: Moses Ola - JPMorgan - Analyst : Okay. Thank you. And then just on Steel Europe, please. What has been the evolution of your annual contract negotiations this year, calendar year versus last calendar year? And if you could also give any color on a half-year contracts as well, please?

Question: Moses Ola - JPMorgan - Analyst : Basically, output. So you had contract, annual contract negotiations in terms of the pricing year on year, what you were able to see from negotiations. And then also, if you could give color on some of the half-year contracts as well.

Question: Moses Ola - JPMorgan - Analyst : That's clear. Could we assume maybe a step-down year on year given where we saw spot prices in 2023 versus 2022?

Question: Moses Ola - JPMorgan - Analyst : Okay. No worries. And then just finally, could you please just give up-to-date value for current pension liabilities associated with just Steel Europe.

Question: Jason Fairclough - BofA Global Research - Analyst : Hi guys. So just a quick follow-up. Apparently, I am hearing from investors that there is somebody suggesting that you are not going to be in a position to repay the debt that you have got coming due this year. I think you have got a EUR1.5 billion debt maturity this year. Just given the cash on the balance sheet, I am surprised to hear that somebody is suggesting that, but could you confirm to us that there is no problem at all to repay the debt that's due this year?

Question: Jason Fairclough - BofA Global Research - Analyst : Yes. So there is no issues at all with liquidity for the group given that your capital balance is great, your net cash balance is bigger than market capital.

Question: Jason Fairclough - BofA Global Research - Analyst : While we are at it, what do you think about buying back all the shares since you have got more cash than the market cap?

Question: Jason Fairclough - BofA Global Research - Analyst : So, look, joking aside, guys, I mean the shares are trading down 10% today. I don't know if you are surprised by that. On top of that, the market cap is much less than the net cash balance. And then you have got your APEX program where you are talking about saving EUR2 billion a year in EBIT REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 14, 2024 / 10:00AM, TKAG.DE - Q1 2024 thyssenkrupp AG Earnings Call or generating EUR2 billion a year in EBIT. And meanwhile, the market cap is only EUR3 billion. So there is a giant valuation disconnect here, right, which to me suggests either that the markets doesn't trust you or something else? What are your thoughts?

Question: Jason Fairclough - BofA Global Research - Analyst : How do you think about surplus liquidity? And why wouldn't you put some money to work in a buyback given the extreme discount on the equity?