ThyssenKrupp(TKAMY) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In the first half of the year, sales were €19.1 billion, slightly below last year, but Q2 sales increased by 12% quarter-on-quarter [17] - EBITDA adjusted and EBIT adjusted were considerably lower year-on-year due to normalization of material prices at Materials Services and Steel Europe [19] - Free cash flow before M&A improved by more than €500 million, with a year-on-year increase of over €1 billion [20][21] - The company achieved a net cash position of €2.9 billion and improved its equity ratio to 39.8% [21] Business Line Data and Key Metrics Changes - Materials Services was affected by lower prices but saw improved EBIT adjusted quarter-on-quarter due to demand recovery and efficiency efforts [28] - Automotive Technology experienced a substantial increase of €86 million year-on-year, reflecting increased customer demand and operational improvements [30] - Steel Europe saw EBIT adjusted decrease by €493 million year-on-year, attributed to lower market prices and cost moving average effects [31] - Marine Systems continued its positive trend with an increase of €11 million year-on-year [32] - Multi Tracks reported a profit of €7 million in EBIT adjusted for the first time, supported by restructuring measures [33] Market Data and Key Metrics Changes - The company noted that fears of recession have slowed down, with GDP predictions for main regions improving [34] - The steel market is expected to stabilize, with contract renegotiations scheduled for January and April [91] - Automotive market volumes increased compared to the previous year, although supply chain issues persist [94] Company Strategy and Development Direction - The company is focused on maximizing the value and development of its businesses, including potential adjustments to ownership structures [13] - The strategic focus includes leveraging technological expertise for opportunities in the green transformation, particularly in hydrogen [12] - The company aims to maintain a solid balance sheet to navigate the macro environment and seize strategic opportunities [22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, highlighting the successful transformation and improved financial KPIs [6][47] - The company expects improving market conditions and a step-up in earnings for Q3 [35] - Management emphasized the importance of execution in the next phase of transformation, with a focus on operational performance [72] Other Important Information - The company has undergone significant restructuring, with a headcount reduction of more than 10,500 [25] - The preferred option for thyssenkrupp nucera remains an IPO, contingent on capital market conditions [61] - The company is exploring partnerships in the steel business to address economic and ecological challenges [14] Q&A Session Summary Question: What value can potential partners bring to Steel Europe? - Management indicated that partners with access to hydrogen and ammonia could create synergies in steel production [52][54] Question: What are the key focus points in discussions with third parties? - The focus is on synergies in the industrial base, particularly in energy-intensive processes [56] Question: What drove the positive result in Multi Tracks? - The positive result was attributed to operational improvements, but future quarters may not reflect the same level of performance [60] Question: What is the trajectory of restructuring costs? - Restructuring costs are expected to decrease in the next fiscal year, potentially reaching a two-digit million euro figure [60] Question: What is the status of the joint venture negotiations with a Japanese partner? - Discussions are ongoing, with due diligence being more complex than anticipated [97] Question: What was the positive one-time effect on Q2 results? - A mid-2-digit million amount from a settlement regarding a quality issue with a supplier was recognized [98] Question: How are rising interest rates affecting the balance sheet? - Rising interest rates resulted in a €350 million impairment for Steel Europe, linked to the overall cash-generating unit [100] Question: Are there plans for divestment of stakes in Elevator? - There are currently no plans for divestment, although the company is free to sell stakes if desired [107]