thyssenkrupp AG Q3 2024 Earnings Call Transcript

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

Question: Jason Fairclough - Bank of America - Analyst : Look, the question, I guess, for me is the big one, which is on the structural changes to the business. And I guess, for a change, this seems to be taking longer, right? And I guess the concern from investors is that as things take longer, the half-life of value in thyssen is quite short. And so as things take longer, more and more value just disappears from the business. When we looked at Steel, I think KfW have been instructed to take a stake before the summer break. And here are, we're getting through August. So it doesn't look like that's going to happen. So what can you say to us to give us more confidence about the timing of these structural changes?

Question: Jason Fairclough - Bank of America - Analyst : Just a follow-up, if I could. Do you mind updating us with your thoughts on appropriate capital structures for the spin vehicles for Steel and for Marine? How should these things be capitalized? What should the balance sheet look like?

Question: Alain Gabriel - Morgan Stanley - Analyst : Yes, thank you for taking my questions. I have two of them. The first one is on Steel Europe, I guess, following on, on Jason's question. There were some headlines over the weekend of your discussions with the Steel Europe Supervisory Board. Do you mind giving us some color on what are the key friction points milestone threshold that we need to look for to progress the discussions? So where do you stand and what does the Supervisory Board stand for Steel Europe? That is my first question. And the second one is on HKM. Will it be included in the JV with Mr. Kretinsky? And what are your future plans for the business? Again, there is a lot of headlines. What is your latest thinking? What are you leaning most towards? Thank you.

Question: Bastian Synagowitz - Deutsche Bank - Analyst : I do have a couple of questions, if I may. And I'll start off on the Steel business as well and the going content audit you're currently working on. Can you give us a bit more context on what the implications of this audit actually are? Because if the audit comes to the conclusion that there is a material concern with regards to the going concern, investments basically don't have a robust likelihood to yield the positive return, would that not mean that you as an owner from thyssenkrupp group perspective, can't really justify allocating further capital to the business? And then also maybe in terms of the time frame here, I would have thought that this is more like a due diligence type of process or a matter of a few months rather than weeks. Maybe you can also give us a bit of color here and how far the outcome of this opinion is required to finalize the business plan. I'll stop here.

Question: Bastian Synagowitz - Deutsche Bank - Analyst : Okay. And just in terms of how this actually works, maybe you can help us there because, I mean, there's a whole lot of assumptions, which have to be taken in that -- I guess, in that analysis. The decarbonization, you're spending EUR 2.5 billion, obviously, on the first phase of decarbonization with funding support. There is no funding support at this point for the second phase, yet there is a need for decarbonization. We don't know the CO2 price. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 14, 2024 / 9:00AM, TKAG.DE - Q3 2024 thyssenkrupp AG Earnings Call It's a lot of moving parts, right? So this could be skewed in any direction. But I mean, how does this work? It's going to be like probability weighted or how are we -- how is your partner there looking at the situation?

Question: Bastian Synagowitz - Deutsche Bank - Analyst : And just to be 100% precise there, the business plan, which is being said is the one which has been suggested to this by the Steel Board just a week ago or so? Or is it the previous one?

Question: Bastian Synagowitz - Deutsche Bank - Analyst : Yeah, got you. Okay. Then moving over to HKM, could you please confirm whether the book value of HKM is still around the EUR600 million level, which you reported end of last year? And then secondly, also, what is the balance sheet on an HKM level looking like at the moment? And would

Question: Bastian Synagowitz - Deutsche Bank - Analyst : Okay, understood. Then just moving on to your target. So I guess with the lowered guidance now the gap to achieve next year's midterm targets has probably become even larger. I saw the 2025 time frame has been removed from the slides, and I guess the stock shows that the market probably has very little faith that was realistic in any case. But have you officially pulled the timeline? And are you planning to come back with REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 14, 2024 / 9:00AM, TKAG.DE - Q3 2024 thyssenkrupp AG Earnings Call review targets and the new timeline by maybe the end of this year? Maybe you can share some color on that and what you're planning for and maybe also how that process looks like at your end.

Question: Bastian Synagowitz - Deutsche Bank - Analyst : But has the 2025 target or time frame been officially pulled now?

Question: Christian Obst - Baader Bank AG - Analyst : I have a question concerning the EUR900 million free cash flow that you have to achieve in the fourth quarter. So how much of any kind of possible restructuring charges are included?

Question: Christian Obst - Baader Bank AG - Analyst : Okay. So where do you think the main data should come from just some stop paying something or acquiring less of raw material or whatsoever? And then we have the swing in the first quarter like we have several years before, swing of EUR1 billion -- again, is the negative side in the first quarter of the next year. Or will you smoothen that a little bit because EUR1 million -- and EUR1 billion delta in fourth quarter is quite a lot.

Question: Christian Obst - Baader Bank AG - Analyst : Okay. Then I have a question concerning how much of the cash is -- it's related to the prepayments you achieved from [resistance]? So how much of this cash currently on the balance sheet will go out when you separate Marine Systems?

Question: Christian Obst - Baader Bank AG - Analyst : But in the end, you can directly say what are the prepayments directly related to Marine Systems or not?

Question: Christian Obst - Baader Bank AG - Analyst : So normally, for the big orders, you have some -- you get some prepayments for big orders for submarines or frigates or something like that. And this is, of course, included in your balance sheet and your cash position. And I just asked how much is linked to the Marine Systems area.

Question: Ephrem Ravi - Citi - Analyst : Two non-Steel questions and one Steel question. So firstly, on the Decarb Technologies, which are supposed to be your growth engine, your order intake sales has been less than one for the last two quarters. Is this because of the end market weakness or is it that you're prioritizing a higher mix of higher-value projects in this business? That's the first question. Secondly, can you give us a bit more detail on the EUR80 million one-off due to incorrect cost accounting at policies? Was this related to something like warranties that had not been accounted for something or higher cost and construction. The reason I'm asking is EUR80 million, you could build 0.5 million to 1 million tonnes of steel -- cement capacity. So it seems like a big number. So are you also comfortable that there's nothing similar across the group going forward? And finally, on the Steel, I mean, of the EUR5.4 billion pension liabilities you had indicated earlier that like Steel Europe is about EUR3.4 billion or EUR3 billion, is that number still correct given the decline in pension liabilities by about EUR400 million since the beginning of the year? And finally, the HKM transaction, is that precedent or preconditional on the 30% sale of the rest of the Steel Europe business? Thank you.

Question: Ephrem Ravi - Citi - Analyst : The HKM transaction that you're considering, is that dependent or precedent to the other 30% that is sales? So does Kretinsky want a conclusion on HKM before he kind of does the deal on the remaining 30%?

Question: Ephrem Ravi - Citi - Analyst : Thank you. And on the Decarb?