thyssenkrupp AG (OTC:TKAMY) (TKA.DE) discussed its first-quarter results for the fiscal year 2023/2024, maintaining its full-year guidance despite facing a challenging market environment. CEO Miguel Lopez and CFO Klaus Keysberg highlighted the company's focus on portfolio simplification, performance improvement, and commitment to green technologies. Despite a decrease in sales and adjusted EBIT, thyssenkrupp confirmed its midterm targets and announced a dividend payment of €0.50 per share. The company's order backlog remained strong at €12.7 billion, and they aim to achieve a free cash flow before M&A in the low three-digit million euro range.
Key Takeaways
- thyssenkrupp's Q1 results showed a decrease in sales and adjusted EBIT, but the company maintains its full-year guidance.
- The sale of thyssenkrupp Industries India's remaining 55% share underscores a focus on green technologies in the cement and lime business.
- New performance program APEX is expected to generate high-margin sales growth.
- Decarbon Technologies and Steel Europe segments faced decreases in adjusted EBIT due to various market challenges.
- The company's order backlog is solid, and they plan to achieve free cash flow before M&A in the low three-digit million euro range.
- thyssenkrupp confirmed its midterm targets until the fiscal year '24/'25 and announced a dividend payment.
- The company is developing a new business plan for Steel Europe and remains confident in negotiations regarding Marine Systems.
- Despite a low market cap compared to the net cash balance, thyssenkrupp is prioritizing performance improvement over share buybacks.
Company Outlook
- thyssenkrupp expects sales to be at the prior year level due to ongoing challenging market conditions.
- The guidance for the full year remains unchanged, with an expected improvement in EBIT development throughout the year.
Bearish Highlights
- Decarbon Technologies segment saw a decrease in adjusted EBIT of €36 million year-over-year.
- Steel Europe's adjusted EBIT decreased by €21 million year-over-year.
- Weak market demand in Europe affected the Materials segment, although it was supported by efficiency measures and freight cost tailwinds.
Bullish Highlights
- Marine Systems' earnings remained stable, focusing on performance improvements.
- The company's order backlog stands strong at €12.7 billion.
- thyssenkrupp aims for free cash flow before M&A in the low three-digit million euro range.
Misses
- Sales in the first quarter were impacted negatively by both volumes and prices.
- The company faces competitive challenges, non-conformity costs, and higher cost bases in various segments.
Q&A Highlights
- CFO Keysberg confirmed the ability to repay the €1.5 billion debt due in February, with no liquidity issues.
- CEO Lopez emphasized meeting full-year guidance and improving EBIT and free cash flow over share buybacks.
- The company is considering share buybacks but prioritizes performance improvement and addressing portfolio issues first.
- Lopez expressed confidence in the ongoing negotiations with KfW regarding Marine Systems.
In conclusion, thyssenkrupp's earnings call painted a picture of a company navigating a tough market while staying committed to its strategic goals. The management's focus on green transformation and operational efficiency, despite the current financial headwinds, aims to position the company for long-term success.
InvestingPro Insights
In the context of thyssenkrupp AG's recent earnings call, InvestingPro data and tips provide a deeper understanding of the company's financial health and market position. Here are some key insights:
InvestingPro Data highlights that thyssenkrupp AG holds a market capitalization of approximately $3.1 billion USD. This figure is noteworthy considering the company's commitment to portfolio simplification and performance improvement as discussed in the earnings call. Additionally, the company's Price / Book ratio stands at a low 0.25 as of the last twelve months ending Q1 2024, suggesting that the stock may be undervalued relative to its book value, which could be of interest to value investors.
Furthermore, thyssenkrupp AG's stock has taken a significant hit over the past week, with a 1 Week Price Total Return of -2.38%. This may reflect the challenging market conditions the company cited, but it also aligns with the InvestingPro Tip that the stock is currently trading near its 52-week low, potentially offering a buying opportunity for long-term investors.
Among the InvestingPro Tips, two are particularly relevant to thyssenkrupp AG's situation:
1. The company holds more cash than debt on its balance sheet, which is a positive sign of financial stability and aligns with CFO Klaus Keysberg's confirmation of the company's ability to repay its €1.5 billion debt.
2. Analysts predict the company will be profitable this year, which supports CEO Miguel Lopez's confidence in meeting full-year guidance and improving EBIT.
For those interested in further insights, InvestingPro offers additional tips for thyssenkrupp AG, which can be accessed at: https://www.investing.com/pro/TKA. To explore these tips and more, readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 12 more InvestingPro Tips available for thyssenkrupp AG, providing a comprehensive analysis for investors.
Full transcript - Thyssen Krupp Ag Dus (TYEKF) Q1 2024:
Operator: Ladies and gentlemen, welcome to the thyssenkrupp Conference Call Interim Report First Quarter 2023/2024. [Operator Instructions] I will now hand you over to Andreas Trösch. Please go ahead.
Andreas Trösch: Thank you very much, operator. Hello, everyone. This is Andreas Trösch from Investor Relations. Also on behalf of my entire team, I wish you a very warm welcome to our conference call on the Q1 results. With me in the room are our CEO, Miguel Lopez; and our CFO, Klaus Keysberg; and also my colleagues, [indiscernible] and Anika from my team. Before I hand over to the CEO and Klaus for their presentations, some housekeeping, all the documents, as usual, for this call, are available in the IR section on the website. The call will be recorded and a replay will be available shortly after the call. After the presentations, there will be a Q&A session. Please only ask two maximum three questions at a time so that everyone has a chance to ask the questions. And with that, I would like to hand over to our CEO, Miguel Lopez.
Miguel Lopez: Thank you, Andreas. And since this is your first conference call with thyssenkrupp, welcome on Board officially. Also a warm welcome from my side to all of you in today’s Q1 conference call. So it’s a real pleasure. And at the beginning of our new fiscal year, we have to continue to cope with a still challenging and volatile macro environment, yet we were able to clearly deliver on our management priorities that you are well aware of. Let’s get to portfolio first. By the end of the last fiscal year, we simplified our group structure and now only report five segments, which leads to less complexity. This includes, as part of our transformation journey, that we created the segment Decarbon Technologies for which we would present first actuals today. And at Decarbon Technologies, there is one transaction I want to highlight. At the end of January, we signed the agreement to sell our remaining 55% share in our Polysius business thyssenkrupp Industries India to the core shareholders. With Polysius now being part of Decarbon Technologies, they are focusing on services and green technologies in the cement and lime business, whereas thyssenkrupp Industries India is involved in the mining business amongst others, the direction that we do not want to pursue any further. Closing is expected in fiscal Q3 after fulfillment of the necessary closing conditions, in particular after approval of the transaction by the Indian Merger Control Authority. Of course, we will continue the transformation at the other segments as well and relentlessly strive for stand-alone solutions for Steel Europe and Marine Systems. Our second priority, as you all know, is performance. And here, I’m happy to state that our Q1 results are in line with our expectations and that I can confirm our full year guidance for EBIT adjusted and free cash flow before M&A. Regardless of this, we all are aware that our performance is not where it should be. Therefore, we decided to anchor the performance ambition even more into our DNA and into our management Board by now having 2 additional board members each being responsible for a segment. Ilse Henne being responsible for Materials Services and Volkmar Dinstuhl , taking over responsibility for Automotive Technology from first of January 2024. If we look at our new performance program, APEX, I’m happy to report that the program is well on track and already showed first effect stabilizing our Q1 earnings. Our third item on our priority list is green transformation. Last but not least, with the formation of Decarbon Technologies, we are leveraging business opportunities by positioning ourselves as an enabler of green technologies and decarbonization. I have the great pleasure to participate in many extensive and fruitful discussions at the COP28 in Dubai last December, a very important platform to exchange ideas that will actually change our climate. Here, we are able to sign contracts for two projects that will drive forward decarbonization of emission-intensive industries, both based in the United Arab Emirates. Polysius and Fujairah Cement Industries will cooperate to replace fossil fuel in cement production. Our cement business Polysius has developed a new combustion chamber technology that allows fossil fuels to be completely replaced by green alternatives, thereby reducing emissions and operating costs. Uhde will build a large biopolymer plant for Gulf Biopolymers, the biopolymer from that plant will be derived from renewable biomass sources is biodegradable and has a substantially lower carbon footprint compared to synthetic polymers made from fossil fuels. Let me assure you, thyssenkrupp wants to play a proactive role in the green transformation, and this will pay off for all our stakeholders. Coming back to our second priority, I would like to provide you with some more color and give you some examples on actual APEX measures. At Decarbon Technologies or to be more precise at Polysius, we have launched a large-scale service transformation program. The aim is to enable Polysius to evolve its original business model as a mechanical engineering and construction company even further in the direction of services in order to generate high-margin and stable sales growth. The second example comes from Steel Europe. Here, we have identified further potential in marketing by products from steel production, such as granulated blast furnace slag. It is a byproduct for blast furnaces and is used in the construction materials industry, especially in cement and concrete production. At Marine Systems, leasehold contracts for shipyard capacities that are not permanently utilized in full due to the order situation have been renegotiated. Initially, until the beginning of 2025, this flexibilization will deliver significant savings. Materials Services is expanding its business with value-added services in the areas of supply chain management and optimization, material procurement and raw material supply as part of the extension of a long-term contract with a leading aerospace company. These four examples alone will generate a total effect of over €50 million. Now you might ask, is that really a lot? However, please keep in mind that these are only 4 examples of the more than 2,500 measures we have identified so far. With that having said, I would like to hand over to Klaus for the Q1 financial highlights.
Klaus Keysberg: Yes. Thank you, Miguel, and also a warm welcome from my side to today’s Q1 conference call. Overall, looking at the financials, I’m happy to state that we made a rather straightforward quarter in an ongoing challenging market environment. The solid set of numbers that I will present to you met our expectations for the quarter. It is a confirming start for our full year goals and support our guidance, at least for our two most important KPIs, EBIT adjusted and free cash flow before M&A. And I’m happy to state, as Miguel already mentioned the first positive effects from the APEX program – performance program made their way already into our profit and loss. Now let us have a closer look at our financial highlights for Q1. Sales came in at €8.2 billion with 9% below last year’s level. This development is primarily driven by the materials businesses. Here, mainly the lower spot market prices resulted in our sales whereas shipments at Steel Europe and the stockholding business and SMEs came in stable year-on-year. With regard to earnings, EBIT adjusted of €84 million in Q1 came in as expected and met our guidance. In line with sales, the year-on-year earnings development was also affected by lower spot market prices, mainly at our materials businesses, but also driven by a momentary decline in Decarbon Technologies. On the positive side, the first positive effects resulting from APEX had an offsetting effect and stabilized group earnings. On the back of typical seasonality at the beginning of our fiscal year, free cash flow before M&A was in a negative territory at minus €531 million. This, of course, will reversed during the fiscal year, and we are striving for an again, positive free cash flow before M&A with a figure in the low three-digit million euro range. But let us continue now with some further balance sheet highlights, which you can see on the next slide. So overall, our balance sheet continues to show a very solid picture and provides resilience with while navigating through a really challenging market environment. Moreover, our balance sheet enables us to tackle strategic opportunities whenever possible. Looking at the details, year-to-date, driven by the free cash flow before M&A our net cash decreased by €0.4 billion, resulting in a net cash position of €3.8 billion for the group. Pension liabilities increased by €0.6 billion to €6.1 billion from end of September. Here, the recent decline in relevant interest rates became noticeable as we have to use the pricing and yield data from long-term AA corporate bonds as of 31st of December 2023. In light of increased pensions as well as further impairments that resulted in a net loss for the quarter. Our equity ratio decreased to 36.2%, still a very comfortable level. These impairments represent mainly technical effects as Europe included by an increased risk free rate for valuation purposes that seems to currently decrease again. Let us now jointly take a more detailed look on the financials and start with the Q1 performance of the group. On the top line, we saw a decrease in sales as listed before by minus 9% year-on-year, mainly driven by softer spot market prices at our materials businesses, namely Material Services and Steel Europe, partially weaker demand with somewhat muted market dynamics, for instance, for the direct-to-customer business at Materials Services. In light of a persistent challenging market environment, EBIT adjusted was down to €84 million. Here, the spot market price levels also weighed on the performance of our materials businesses even though Materials Services was able to more than compensate those effects mainly due to positive effects from cost-cutting measures. The efficiency measures counteractive top line price decline to a large extent, not only as Material Services, but throughout the group. The implementation of APEX is very well progressing and already supported the performance of our businesses in Q1. Free cash flow before M&A came in as expected at minus €531 million with typical seasonality on the back of net working capital buildup at the beginning of our fiscal year, but fully in line with our guidance. Please also note that Marine Systems had some significant milestone payments in the previous year as well as also some earlier-than-expected customer payments in Q4 that resulted in a respective rebound in Q1. EBIT adjusted on the next page, let us have a closer look on the composition, namely EBIT adjusted by segment in our new structure and let us start with Automotive Technology that improved year-on-year earnings slightly in an overall robust market environment. EBIT adjusted increased by €3 million to €48 million. Our colleagues would benefit from lower material costs especially electronic products, however, had to process inflationary driven higher personnel expenses. Decarbon Technologies EBIT adjusted temporarily came down by €36 million year-on-year, grew minus €17 million. Despite good contribution from performance and efficiency measures, all businesses were pulled down by various partially non-persistent reasons. At Rothe Erde, our bearings business competition, especially in the wind industry in China keeps going on, Uhde had to deal with non-conformity costs and Polysius with higher cost base. Thyssenkrupp (ETR:TKAG) nucera invested in growth initiatives with currently higher costs that will bear fruit, of course, later. Materials recorded an EBIT adjusted of €26 million, an increase of €6 million year-on-year. The satisfying year-on-year development was supported by ongoing efficiency measures, for instance, further network optimization but also tailwind from freight costs. On the opposite, market demand, especially in Europe remains weak year-on-year. At Steel Europe, EBIT adjusted came down by €21 million year-on-year to €69 million. Again, the ongoing normalization of spot market prices compared to last year drove earnings development and overshadowed favorable cost development, for instance, for energy and raw materials. Shipments, on the other hand, were almost stable year-on-year. Consequently, EBITDA per ton also decreased €50 per ton. Marine Systems is almost stable with earnings down €2 million year-on-year to €17 million. The focus remains on performance improvements and project execution. In addition, we strive to further stabilize the older and less profitable orders and thus benefit from the higher margin orders in the pipeline. Please also note that our order backlog stood at €12.7 billion, at the end of Q1. Last but not least, our headquarters and others came in lower by €33 million year-on-year due to higher administrative costs and mainly due to a positive one-timer including the others, meaning a one-time reconciliation effect in the prior year.
high 3-digit million euro: Overall, we also increased earnings at Automotive Technology, Materials Services and Marine Systems. For free cash flow before M&A, we are again striving to end up in a positive territory. That means that we expect free cash flow before M&A with a figure in the low 3-digit million euro range. Please note that the macro environment and the payment profile in our project businesses, especially at Marine Systems, both have an essential impact on that development. Let us now look at the top line here. We now expect sales at the prior year level compared to slightly up as expected before, mainly driven by lower shipment expectations at our materials businesses, giving the ongoing challenging market environment. But that also implies that we have effective countermeasures in place to tackle those market and top line headwinds. Having said that, I would like to hand over to Miguel again.
Miguel Lopez: Thank you, Klaus. Please let me take this opportunity to also confirm our view beyond the current fiscal year. Here, you can see our midterm targets on group level until fiscal year ‘24/’25 that we confirm with our annual report in November last year. As the AGM is just behind us, I would also like to highlight that we again paid a dividend of €0.50 per share and thus, underline our clear ambition to pay a reliable dividend going forward. Please also consider that the midterm targets are just the milestone on our journey. Beyond the midterm, the upside potentials for instant through the progress in our transformation also leading to much better operational performance, leveraging the potential of our leading technology positions, further reducing restructuring cash out and normalized but still above the D/A invest levels will support our cash flow generation in the longer-term. And with that, we are at the end of our presentation. Thank you, and now we are ready for your questions.
Operator: Thank you. [Operator Instructions] And our first question does come from the line of Jason Fairclough from Bank of America (NYSE:BAC). Please go ahead. Your line is now open.
Jason Fairclough: 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 €8 million. Also, the capital employed in this business was most recently reported is €5.4 million, and it’s dropped to €3.6 million. So I’m just wondering what’s driving that.
Klaus Keysberg: So maybe I can start with the questions regarding capital employed, the €5.4 million you referred to, this was the capital employed before the impairment of the last fiscal year. You might recall that in Q4 of the last fiscal year, we had an impairment. And with this impairment, we reduced capital employed from €5.4 million to €3.6 million. And then you were referring regarding the capital expenditure. Here, you see the positive €8 million this is a net number because we received funds from the government. And then you see the net number, the net number is because we received more funds than our CapEx number.
Jason Fairclough: And sorry, Klaus, is that related to decarbonization sector or?
Klaus Keysberg: Of course, you know that we told you that we get funds or subsidies of roughly €2 billion until the end of the erection of the direct reduction plant. And of course, we already received payments. And this is one payment we received in this Q1. This is €193 million, which we received.
Jason Fairclough: Okay, thank you. Then the write-down and disposal timing?
Klaus Keysberg: The write-down, which we see now – which we saw in the Q1 was just a technical one. When we are calculating the work, we know that we do quarterly in impairment testing on the asset base. And what we saw in the first quarter the end of September until the end of December, if you calculate the WACC, there is one interest rate, which is a risk-free interest rate, which was increasing. And this increasing effect led to the phase that also the WACC increased. And just this technical effect led to the situation that we had to impair the asset value of the steel. Just for information, this risk-free interest rate, meanwhile, is decreasing again. So, we cannot exclude that we see the opposite [indiscernible] this is something [indiscernible], which we might see in the next quarters coming. So [indiscernible] we enter the disposal...
Miguel Lopez: So it’s clearly, Jason. It’s clearly not a prelim of a disposal. It’s the effect that Klaus just mentioned, are in the calculation of the WACC.
Jason Fairclough: Okay. And so just so that I’m clear, so what is the carrying value of the steel business today? Is it €3,563 million? Or is it something close to that? Or is it €3,563 million minus €200 million for the write-downs.
Klaus Keysberg: It is meanwhile, €3.6 billion. So including the write-downs, it is roughly €3.6 billion.
Jason Fairclough: 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, yes?
Klaus Keysberg: It is the way, yes.
Jason Fairclough: Okay, thank you. Appreciate the color. Thank you.
Operator: Thank you. [Operator Instructions] And our next question comes from the line of Alain Gabriel from Morgan Stanley (NYSE:MS). Please go ahead. Your line is open.
Alain Gabriel: 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 time line 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.
Miguel Lopez: Well, the current status of the conversation is we are building a new business plan. And with this new business plan, then we will continue the discussions with our partners, potential partners. There is no limit that we have imposed because we want to be going for a good agreement.
Alain Gabriel: Thank you. And then my second question is on your EBIT guidance for the full year. You would need to lift your quarterly EBIT run rate by threefold to keep and keep it there for the next three quarters to meet your full year guidance or to meet where consensus sits today. What are the biggest moving parts that will boost your profits at the group level, if you were to think in the next 9 months ahead. Thanks.
Klaus Keysberg: I mean if you look at our development here, normally in a seasonal pattern, you normally see in spite of any, let’s say, overall economic developments, you see the first quarter is always weak. We definitely see an improvement in EBIT development in our Decarbon Technologies and also in most – every of the segments here because still just a function of the sales numbers, which is going to increase during the year. And you know that starting from January or February, volumes are always growing. And of course, this is what the market perspective is. And of course, you know that we have this APEX program and with the APEX program, we are really contributing to this development also.
Alain Gabriel: Thank you.
Operator: Thank you. [Operator Instructions] And our next question comes from the line of Bastian Synagowitz from Deutsche Bank (ETR:DBKGn). Please go ahead. Your line is open.
Bastian Synagowitz: 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.
Klaus Keysberg: Yes. You got it. Absolutely. So this is clearly what we said, we can confirm with your statement is here.
Bastian Synagowitz: Okay. So basically – but just maybe coming back on the deals – so where are you able – to what led you to cut the – to 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?
Klaus Keysberg: Yes. As we said before, so of course, we saw in the first quarter some sales effects, which were some driven by volumes, but also by prices. And then bringing up what the normal seasonal pattern is regarding volumes, regarding pricing. We don’t see too much optimistic pricing, if you – we can now say that we are optimistic with pricing in the materials business, it’s not the case. We don’t see that too much dynamic, but if we calculate this in comparison with raw material costs, in comparison with energy costs, in comparison with the APEX things, which we see and also some developments in other business areas. We are confident that with this slightly lower sales number, we will be able to deliver this EBIT guidance.
Bastian Synagowitz: 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?
Klaus Keysberg: Well, you know that with the gross margins, we normally do not comment on the gross margins, we know because it’s a function of our sales or price and also on raw material customer, things like this. So, we are only guiding, let’s say, full year numbers. But I think you know this.
Bastian Synagowitz: 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?
Miguel Lopez: Yes. So, first of all, you just mentioned it. I believe we made a very, very important step in getting the next phase of analysis where the KfW have been asked to analyze a potential take of a stake in Marine Systems. So, this is a very, very important step, because as you know, and we have been commenting in previous conversations, it is about to be on the same level of competitiveness as our European competitors because they have not the need for the same level of guarantees as we do have. So, this is a very important step in order to now get a result in the next months around the decision to whether a stake is possible or not. So and we are confident and positive about it. So and then from – as soon as we have this confirmation, we will then take the next steps, and we will keep you then informed.
Bastian Synagowitz: Okay. Thank you.
Operator: Thank you. [Operator Instructions] And our next question comes from the line of Moses Ola from JPMorgan (NYSE:JPM). Please go ahead. Your line is open.
Moses Ola: 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?
Klaus Keysberg: Yes. Exactly what you said, this has nothing to do with a short-term decision or just for the next quarter, this is a principal decision we take that we do not guide the next quarter any longer. So – but first to say, which does not imply anything regarding our full year guidance, so we are very, let’s say, convinced that we will achieve our full year guidance is just, let’s say, a principal decision to do that not any longer.
Moses Ola: Why is that please?
Klaus Keysberg: Because it makes – for us, it makes more sense and it makes really – to be very clear, to say that we just do the full year guidance and not have so much discussions around what the next quarter is and what not.
Moses Ola: 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?
Klaus Keysberg: Can you repeat this? So, what is the…
Moses Ola: 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.
Klaus Keysberg: Yes, you know that we do these contracts on the first of January, some half year, some full year, 12 months and 6 months contracts. We do this also in April and also in January. What we can say so far that we, of course, were able to fix the contracts regarding our estimation. And the estimation also is – what the outcome is that we, of course, we are able to fixed prices above spot markets, but we are not commenting any further on pricing issues just to understand.
Moses Ola: That’s clear. Could we assume maybe a step down year-on-year given where we saw spot prices in 2023 versus 2022?
Klaus Keysberg: We don’t comment on prices. Sorry for that.
Moses Ola: 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.
Klaus Keysberg: If you look at the pension liabilities in total is €6 billion, and you can consider 50% of them to Steel Europe.
Moses Ola: Okay. Thank you very much.
Operator: [Operator Instructions] And our next question is a follow-up question from Jason Fairclough from Bank of America. Please go ahead. Your line is open.
Jason Fairclough: 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 €1.5 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?
Klaus Keysberg: Yes, I could clearly confirm this. So, there is a maturity from €1.5 billion, which will be due in February. And of course, we will repay, so clearly.
Jason Fairclough: 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.
Klaus Keysberg: Absolutely. Clear confirmation.
Jason Fairclough: 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?
Klaus Keysberg: We discuss this sometimes. So, as we have said before, so we consider, you know that we have so many moving parts at the moment. We bring our performance. We will show you that our free cash flow is on a positive sustainable level. And then we have some portfolio issues and within fixed dollars, then we can maybe some – make some decisions on some of the issues, but it’s not the right time to do it at that point in time.
Jason Fairclough: 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 €2 billion a year in EBIT or generating €2 billion a year in EBIT. And meanwhile, the market cap is only €3 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?
Miguel Lopez: Well, there is a clear position of ours that we will make our full year guidance. That’s what we have been mentioning a couple of times already. And this is our clear way forward. The Q1 was in line with our expectations. And of course, as mentioned before, in this call, we will see of course, then EBIT adjusted and free cash flow increasing over the next quarters, and that’s our clear mission and clear path.
Jason Fairclough: 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?
Miguel Lopez: Well, as Klaus mentioned before, this is not on our agenda right now. We are talking about our three priorities which is to find solutions for our portfolio initiated topics, and of course, also increase the performance and to drive the green transformation, as you know. So, these are the priorities right now. As soon as we are at a more mature level of achievement of these priorities, then we will think about what you just mentioned. For us, the priority right now is again to be paying a dividend at the end of the fiscal year and continue the path to be reliable on the dividend level.
Jason Fairclough: Okay. Got it. Thank you very much.
Operator: [Operator Instructions] And as there are no further questions registered, I will now hand it back to our speakers for any closing comments.
Andreas Trösch: Thank you very much for everyone – to everyone for participating in that call. If you have more questions, remarks then the Investor Relations team is always available. Thanks everyone and have a nice day.
Operator: This now concludes our conference. Thank you all for attending. You may now disconnect.
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