Thyssenkrupp AG (ETR:TKAG) (TKA.DE) has revealed its financial results for the first half of the 2023/2024 fiscal year, with CEO Miguel Lopez and CFO Klaus Keysberg providing a detailed analysis of the company's performance and outlook. Despite a 10% decrease in sales to €9.1 billion, primarily due to lower material business performance, the company has shown resilience with an adjusted EBIT of €184 million.
The executives emphasized ongoing restructuring efforts, including the sale of a 20% stake in Steel Europe and a focus on cost reduction and efficiency improvements, particularly in the Automotive Technology division. They also confirmed that the company is on track to meet its full-year guidance, with a solid net cash position of €3.5 billion and an expected significant improvement in free cash flow in the second half of the year.
Key Takeaways
- thyssenkrupp's sales declined by 10% year-over-year to €9.1 billion, with adjusted EBIT at €184 million.
- The company sold a 20% stake in Steel Europe to EPE Corporate Group, signaling progress towards a joint venture.
- A standalone solution for Marine Systems and a spin-off solution are under consideration.
- Decarbon Technologies has formed its board and is exploring business opportunities.
- The company completed a transaction for its stake in TK Industries India.
- thyssenkrupp is on track with its APEX program and is actively supporting the green transformation.
- CFO Klaus Keysberg confirmed the company's solid balance sheet and net cash position, expecting an improvement in free cash flow in the second half of the year.
Company Outlook
- The full-year guidance includes an increase in adjusted EBIT to a high 3-digit million range and a positive free cash flow before M&A in the low 3-digit million range.
- Sales are expected to be below the previous year's level, mainly due to the materials businesses.
- Cost reductions and efficiency measures are anticipated to offset the decline in sales.
Bearish Highlights
- Sales in the materials businesses, particularly Material Services and Steel Europe, have declined due to lower prices and volumes.
- Impairments were reported in the Materials Services division, especially in the German business.
Bullish Highlights
- Decarbon Technologies and Marine Systems experienced stronger sales, partially offsetting the overall decrease.
- The company maintains a strong balance sheet with a net cash position of €3.5 billion.
Misses
- Free cash flow before M&A was negative at -€197 million, although this is in line with company expectations.
Q&A Highlights
- Executives discussed cost reduction measures and efficiency improvements, especially in the Automotive Technology division.
- The updated business plan for the Steel division is being prepared and will be integrated into the APEX program.
- Details on portfolio measures, the core framework, or CapEx plans will be communicated at a later date.
- Discussions are ongoing regarding bond refinancing, with no immediate pressure to decide.
thyssenkrupp's interim report showcases a period of significant transformation, with strategic divestitures and a focus on operational efficiency. The company's proactive measures to support the green transformation and adapt to market challenges reflect a long-term strategy aimed at financial stabilization and growth. Despite the current headwinds, thyssenkrupp's leadership remains confident in achieving their financial targets and strengthening the company's position in the global market.
InvestingPro Insights
thyssenkrupp AG (OTC:TKAMY) (TYEKF), a key player in the Metals & Mining industry, is navigating a challenging period marked by a sales decline and restructuring efforts. As the company focuses on cost reduction and efficiency improvements, it's important to consider several financial metrics and InvestingPro Tips that provide a deeper understanding of its current position and future prospects.
InvestingPro Data reveals a market capitalization of $3.34 billion, reflecting the company's scale in its sector. Despite recent performance challenges, thyssenkrupp holds more cash than debt on its balance sheet, which is a positive sign of financial stability. This liquidity could be crucial as the company continues to implement its restructuring plans and invest in its APEX program.
A significant metric for investors is the Price / Book ratio, which currently stands at a low 0.28 as of the last twelve months leading up to Q1 2024. This suggests that the company's stock might be undervalued compared to its book value, potentially offering an attractive entry point for investors.
While thyssenkrupp has struggled with profitability, with a negative P/E ratio of -1.24, analysts predict that the company will return to profitability this year. This anticipated turnaround is supported by the company's efforts to streamline operations and its commitment to the green transformation.
InvestingPro Tips also highlight that thyssenkrupp has a high shareholder yield, which could be appealing to investors seeking income in addition to capital gains. However, it's worth noting that the company's gross profit margins have been weak, with a margin of 6.24% over the last twelve months as of Q1 2024. This is an area where thyssenkrupp will need to focus on improvement to enhance profitability.
For investors interested in a more comprehensive analysis, there are additional InvestingPro Tips available, which can be accessed at https://www.investing.com/pro/TYEKF. Using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, gaining access to valuable insights that can guide investment decisions.
Full transcript - Thyssen Krupp Ag Dus (TYEKF) Q2 2024:
Operator: Hello, and welcome to the thyssenkrupp Interim Report First Half 2023/2024. [Operator Instructions] Please note that this call is being recorded. Today, I'm pleased to present Andreas Trosch. Please begin your meeting.
Andreas Trosch: Thank you very much, operator. Hello, everyone. This is Andreas Trosch from Investor Relations. Also on behalf of my entire team, I wish you a very warm welcome to our conference call on the Q2 results. With me in the room are our CEO, Miguel Lopez; and our CFO, Klaus Keysberg, and also my colleagues from the IR team. Before I hand over to the CEO and CFO 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 presentation, there will be the usual Q&A session. Please only ask 2 maximum 3 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 very much, Andreas. And also a warm welcome from my side to our audience today to thyssenkrupp conference call. Let me start with a recap of what we have accomplished in the past quarter. We all know about the challenges the volatile macro environment is presenting. However, we are actively managing the current situation. And again, we were able to clearly deliver on our 3 management priorities. Let's start with portfolio and our most to release a historic step for thyssenkrupp. We announced a 20% sale of Steel Europe to EPE Corporate Group, a significant first step towards our planned 50-50 joint venture. I will come to this in more detail in a minute. Apart from Steel Europe, we also made tangible improvements with regard to the standalone solution for Marine Systems. Here, we are in the due diligence phase that is very well progressing with both private equity and KFW Bank. In addition, we are also in elaboration about the spin-off solution. We will keep you, of course, informed as soon as there are relevant updates. Looking at Decarbon Technologies, after having created that promising segment at the beginning of the current fiscal year, the Board is now complete and has already started to intensify their work. Also, I'm happy to add that we were able to win several female board members with long-lasting business experience from inside and outside to scope for Decarbon Technologies, including a new female CFO for the DT Board, Karen Lynn Nabilo [ph]. Moreover, we were able to close the transaction of our remaining 55% stake in TK Industries India after the successful signing in Q1. Our second priority is performance. And today, we can present a satisfying second quarter that is in line with our expectations so that we can again confirm our full year guidance for EBIT adjusted and free cash flow before M&A. We are also very well on track with our APEX program and the incremental improvements across all businesses that are contributing to our overall performance and resilience. However, throughout the company, we are all aware that our performance is not where it should be and that all segments will have to increase the efforts. One example is Steel Europe. Here in mid of April, the segment announced first plans for a structural realignment to boost competitiveness and profitability, which they will specify in the near future. Another example, Material Services just recently published plans for a fundamental structural transformation of the business model at TK Schulter to acknowledge the changed customer needs and proactively act to secure and expand the market position. Our third item on our priority list is green transformation. And I would like to give you some examples of what we are doing to support and benefit from it. At Decarbon Technologies, we are leveraging business opportunities as an enabler of green technologies and decarbonization for our customers. For instance, at Uhde, where we have signed a pre-FEED, which stands for front-end engineering and design contract to contractually develop an integrated fertilizer complex for Genesis Fertilizers. In addition, Polysius officially started the construction of one of the world's first carbon-neutral Siemens plants for our customer, Holzer, and last but not least, I'm happy to announce that our efforts also pay off from an official side, thyssenkrupp is on the CDP Climate A list for the eighth time in a row. Let me emphasize again, thyssenkrupp wants to play a proactive role in the green transformation, and this will pay off for all our stakeholders. Besides this, there are also positive news from a governance perspective, we have just been nominated as MDOT's No. 1 and Union Investments corporate governance ranking, a confirming sign that also our corporate governance efforts are positively recognized by the capital market. As indicated before, I would now like to come back to the recent deal announcement. This is really an historic milestone for thyssenkrupp. During the conference call on the day of the deal announcement, I explained the deal rationale and some background information. Everything that can be said at this point in time is an ongoing M&A process. Therefore, I will keep it short. As you all know, we are in ongoing talks with EPCG to achieve the envisaged 50-50 joint venture. By the end of April, we could announce the first step towards the joint venture, EPCG will buy an initial 20% stake in Steel Europe and aims for another 30%, which we are currently negotiating on. Right now, we expect the 20% deal to be closed within the current fiscal year. As usual, and such transactions, the deal is subject to several approvals for instance, merger control approval. For us, the envisage joint venture will combine the materials capabilities of Steel Europe with the energy expertise of EPCG for capturing the potential of the decarbonization of the steel industry. Together, with the updated business plan, we will create a high-performing profitable steel company. Let's now move on to further insights on APEX. I've already mentioned that APEX is well on track with incremental improvements across all businesses. APEX is now more than 6 months in place, and I would like to take the chance for a quick recap as well as a status update. On the left-hand side, you can see our APEX targets, and it goes without saying that these are confirmed. That means that APEX drives for performance gains of up to €2 billion until fiscal year '24, '25 and therefore, is the key enabler to achieve our midterm targets. Throughout the company, everybody is working with full effort to reach these ambitious goals and make APEX a success. As of today, meaning 6 months after the launch, -- we've already identified more than 4,600 individual measures, adding up to a value of approximately €1.8 billion. Please note that we had approximately €1.3 billion at the end of quarter 1, a remarkable quarter-over-quarter step-up. So you can see that we are making good progress and have achieved significant momentum through various initiatives and segment-specific deep dives. That positive momentum gives us confidence that, especially in the worsening macro environment, we will be able to reach our targets by identifying and leveraging additional measures. With that having said, I would like to hand over today for the last time to Klaus for the Q2 financial highlights. And I would also like to take this opportunity to express my gratitude to you for your efforts and dedicated work for thyssenkrupp in the almost last 30 years. Working with you was a great pleasure, and I really appreciate it. Thank you very much, Klaus.
Klaus Keysberg: Thank you, Miguel, for the kind words and also warm welcome from my side to conference call, Q2. Please let me start our financial section with my conclusion first. We are on track to reach our full year guidance. This is, of course, important. Despite an ongoing challenging macro environment, I'm happy to again present to you a very solid set of numbers that fully met our expectations for both Q2 and H1. And I would also like to confirm that APEX performance program, as Miguel mentioned before, is very well on track with incremental improvements that find their way into our P&L. Now let us have a closer look at our financial highlights for Q2 and H1. In H1, sales came in at €17.2 billion with a 10% below last year's level. The same is true for Q2 with a decline of 10%, resulting in sales of €9.1 billion. As already visible in Q1, this development is mainly driven by the materials businesses. I will come back to this later in more detail. However, looking at Q2, we also see ongoing growth in Decarbon Technologies and Marine Systems, which is both, of course, satisfying. With regard to earnings, EBIT adjusted in Q2 came in lower year-on-year at €184 million. However, implying a quarter-on-quarter margin improvement of 1 percentage point despite persistent macro headwinds. For H1, this resulted in an EBIT adjusted of €268 million accordingly. Overall, the earnings development of all our businesses met our expectations. Looking at cash flow in Q2, our free cash flow before M&A improved by €20 million year-on-year and came in at minus €197 million. Please note that the negative H1 figure of minus €728 million we reversed during the fiscal year as it is driven by our typical seasonality at the beginning of our fiscal year. As usual, let's move on to our balance sheet highlights now. Altogether, we continue to have a very solid balance sheet that provides resilience in times of macro uncertainties and also enables us to take the strategic opportunities whenever possible and beneficial. Let's look at some details. Our net cash position stands at €3.5 billion, year-to-date decline is a result of our negative free cash flow before M&A in H1. And I've already mentioned in the quarters to come. Pension liabilities increased €0.4 billion to €5.8 billion from end of September, mainly on the back of the interest-driven surge in Q1. However, quarter-on-quarter pension liability has declined by €0.2 billion as we experienced some tailwind from slightly increasing interest rates again. Our equity ratio stands at a very comfortable 37.6% at the end of Q2. The year-to-date decline is mainly driven by the development in Q1, including the previously mentioned increase in pension liabilities. Please note that quarter-on-quarter, our equity ratio again increased by 1.4 percentage points. Let us now look at the Q2 performance of the group in more detail. On the top line, we saw sales of €9.1 billion, implying a decrease of 10% year-on-year, that is mainly driven by raw material businesses, mainly material services and Steel Europe on the back of lower prices, but also for volumes. On the contrary, we saw stronger sales in Decarbon Technologies and also Marine Systems that had a compensating effect on the group sales development. Overall, it was another quarter with muted market dynamics across several industries, such as, for instance, Automotive Technology and construction. EBIT adjusted came in at a solid €184 million for the quarter, please let me highlight the following considering that the prior year contained a positive onetime effect in Automotive Technology in the range of a mid-2-digit figure from a settlement with a supplier, you can clearly see that our performance improvements are gaining momentum. In other words, on the back of ongoing efficiency measures as well as increased resilience with our businesses, we are able to more than fully offset the top line headwind. Free cash flow before M&A came in at €20 million higher year-on-year at minus €197 million, which is fully in line with our expectations. That also implies that you will see, as I said before, a significant improvement in free cash flow before M&A in H2 in order to reach our target of an again positive figure below 3-digit million. Let's now look at Q2 EBIT adjusted in more details by the segments. Automotive Technology EBIT adjusted came in at €49 million, and that's considerably lower year-on-year with a decline of €60 million. Here, you need to consider that before mentioned positive onetime effects, hence, from that point of view, earnings came in rather stable year-on-year with some tailwind from lower material and transport costs, but also some headwinds, for instance, declining volumes and increased personnel expansions. Decarbon Technologies is back to positive territory with an EBIT adjusted of €50 million coming from an extraordinarily strong prior year. Overall, earnings are moving in the right direction in Q2. However, weaker demand in our Chinese wind business [indiscernible] as well as business ramp-up costs for [indiscernible] overshaded or persistent performance and efficiency measures. Materials Services recorded an EBIT adjusted of €69 million, a decrease of €16 million year-on-year. On the one side, we saw lower prices and also lower volumes, especially in Europe. On the other side, we also had tailwind from freight costs and further cost measures as well as further network [indiscernible]. At Europe, EBIT adjusted significantly increased by €83 million from a very weak prior year to €68 million. Our colleagues could benefit from cost improvements, especially with regard to energy and raw materials. This favorable development could more than offset softer spot price levels as well as lower shipments yields. Taking these developments into account, EBITDA per tonne came in at €46 per tonne. Marine Systems is up by €11 million year-on-year to €25 million. The earnings uptick followed a strong sales development and order execution with successful focus on performance improvements and initiatives to secure pleasant margin levels in new orders. Please also note that our order backlog stood at €12.3 billion at the end of Q2. Last but not least, our headquarters and others came in really stable at minus €42 million. And having said that, let us now take a look ahead on full year outlook. Let us start with the most important KPI, we been adjusted on free cash flow before M&A to make it short. Our guidance for these KPIs is confirmed that's unchanged, and I'm very confident that we will deliver as promised. That means on the earnings side, we continue to project EBIT adjusted to increase to a figure in the high 3-digit million range number. Thanks to the performance improvements across the group, for instance, at Automotive Technology, Materials Services and Marine Systems. We are very confident to compensate the lower guidance for Steel Europe, where we now expect EBIT adjusted to remain largely stable year-on-year. And free cash flow before M&A is further on, expected to end up in positive territory. To be more precise, we expect free cash flow before M&A to be a figure in the low 3-digit million range. Please note that the macro environment and the payment profile in our project business, especially at Marine Systems, both have an essential impact on that development. Let's move to the top line. Here, we now expect sales below the prior year level compared to at prior year levels before. Again, this is mainly driven by our materials businesses and also slightly reduced sales expectations in Automotive Technology. But this is important, that also implies that we continue to have efficient counter methods in place to tackle those macro and top line headwinds. And with that, we are at the end of the presentation. Thank you so far. But before coming to the Q&A session, let me say some words as this is my last conference as the CFO of thyssenkrupp. What shell I say was always really a sunrise with you guys for the last, I think, 5 for 4.5 years. I really enjoyed the open and fruitful discussions with you not only here in this call, but also in person on various occasions, roadshows over the world, in the U.S. and Europe. Thank you for being interested in thyssenkrupp and in our explanations on that. And thank you for challenging us. Of course, I wish all of you all the best for the future. And of course, I wish also my successor, Jens Schulte, who will join on the first of June, a very good and smooth start. And with this, we are now ready for your questions.
Operator: [Operator Instructions] And our first question comes from the line of Alain Gabriel from Morgan Stanley.
Alain Gabriel: You have booked more than €400 million of special items in the first half of '24, which is much higher than your adjusted EBIT for the period. How do you expect this figure to evolve into year-end? And what proportion of that figure would be cash versus strong cash. That's my first question.
Klaus Keysberg: Well, if you look at this €400 million, you recall it -- you know that we had, let's say impairments, which is the biggest part of this. And we also have some, let's say, maturation of fair value of CO2 forward contracts. And I think it is, let's say, 25% to 75%, something like this in the range. First of all, it is important if we look at impairments, asset impairments, which we saw in the first half year, it is for us important to really drive measures out of this and we saw asset impairments with Steel Europe. Interest driven, but not only, and we also saw asset impairments with Materials Services here especially in Germany. And as you also noticed from the media, is the areas where we, let's say, are really working on new business plans and the improvement of the business. Therefore, let's say, we do not expect, of course, on that kind more impairments, but you never know, and it's coming through the effects we saw from the fair value of the CO2 forward contracts, it's simply a function of the CO2 prices, which we cannot predict.
Alain Gabriel: So it's fair to assume that the run rate will diminish significantly into the second half, right?
Klaus Keysberg: Yes. It is not a cash item.
Alain Gabriel: Perfect. And my second question is on your guidance. So you brought down your revenue guidance for the year, but you've kept your profit guidance mostly unchanged. Can you help us connect the dots as to what is the real offset of your top line decline? Is it lower cost? Is it better earnings mix? Is it anything else? You mentioned Automotive Technology, but if you can give us a bit more color on that, that would be much appreciated.
Klaus Keysberg: I mean as we said also in the presentation here, it is, of course, lower costs because we are driving the APEX program with the cost reductions on that way. And therefore, you can see that we are, let's say, very comfortable that we are able to reach our EBIT protection. I think we are able to increase some of this as we originally guided, but we do not see it in the guidance, but the one which you see is that we said that the Steel EBIT is not going to be increased to the mid 3-digit number, but it will more or less stay on the same level, but we are able to compensate this in other areas here.
Operator: And our next question comes from the line of Tom Zhang from Barclays.
Tom Zhang: First one for me, just on APEX, the measures that you're finding, I mean can you give any comments on, I guess you brought it up sort of I think $1.8 billion from $1.2 billion or $1.3 billion for savings. Can you just give some color on how much might be restructuring related and how much is sort of other efficiency savings? I guess the reason I ask because if I look at the employee count for the group. And I know there's sort of bit scope changes in the last few years. We're back above 100,000 FTE. We're basically back to where we were in December 2021 despite the sort of restructuring push. So just curious if that number should be coming down again in the next couple of months. That's my first question.
Klaus Keysberg: Maybe I can start on this. So you know that we defined the restructuring program in 2020 was about laying off mix, let's say, more than 30,000 people we done it with this. We, I think, roughly 90% -- 85%, 90% is done. What you referred to that you saw an increase in headcount numbers again. This is clearly explainable because if you look at some businesses, whether it is the Marine business in Brazil, whether it is a business in the U.S. and things like this. It is more a shift of reducing in high-cost countries to, let's say, build up headcount in low-cost countries where also the business is growing. This is the story behind. And if you look at APEX and maybe can also add on this, too. This is, of course, in that phase, not purely or less strictly a restructuring case. This is about processes. This is cost avoidance. This is about let's say, purchasing and all these kinds of things, which are at the moment in work. But of course, as we said also, if you look at, for instance, Steel Europe and also Materials Services in Germany, there will be also some restructuring elements in this program coming up.
Miguel Lopez: Yes, indeed. Thank you, Klaus. The vast majority of the €1.8 billion is really top line and also procurement driven. So a reduction of of procurement prices. This is the very large 2 chunks of the APEX program, €1.8 billion so far. Having said this, we obviously will continue to add additional measures. And for sure, in Q3, we will see there another significant progress, and we'll report about then to you in more detail.
Tom Zhang: Okay. That's clear. And then just a second question, sorry, with the impairments that you made to Materials Services, maybe any color on what forced that change? I guess, Materials Services is the one division, which you've kind of consistently been hitting your targets already. Is that just similar to the view on Steel Europe that structurally European steel is impaired in terms of shipments or is it very specific to the assets that were impaired?
Klaus Keysberg: If we talk about asset impairments, you are talking about so-called asset penalties within cash-generating units. And we have a very, let's say, a small definition of what is a cash-generating unit here. And here, it is impacted, especially the German material services business here. And you know that the net impairment is done with you, let's say, look at the future earnings and compare this with the asset base. And here, we see, in this specific case, we saw weaker volumes and prices more on the year-end, which led to this impairment year.
Operator: Our next question comes from the line of Bastian Synagowitz from Deutsche Bank.
Bastian Synagowitz: So my first question is also just coming back on the outlook and mostly actually for the largest 3 business units and maybe we can split this into Materials and Autos. So just on the materials side, given the price pressure, which we've already seen pretty much in all of your core markets, and I guess then we obviously have another usually seasonally soft quarter ahead of us. Is there any risk where you may still see potential windfall losses just feeding through your P&L? And do you need a price improvement to really make your guidance? I guess it seems to be very comfortable. So I trust you're probably not backing on a price tick up in the market, but just wanted to double check on that. And then maybe similarly also in Autos, where likewise you seem to be very comfortable and confident despite the fact that usually Q3 is not a write-off, but clearly seasonally softer. So what's really driving exactly the strength particularly to the fourth fiscal year quarter? These are my first questions.
Klaus Keysberg: I mean if you look at Material Services or if you look at what you say, windfall gains or, let's say, increase in prices, this is not the assumption of our ongoing forecast here. So we are not really depending our focus on increasing prices or for windfall gains very clear. We have some ideas about volumes, and we have some ideas about our mix, both in Europe and also in Materials Services. And with this, we come to the numbers we are predicting here, maybe with Automotive.
Miguel Lopez: Well, I think we see in automotive, different developments over the geographies. As you have seen, the overall sentiment in the market is a slow growth compared to previous year. And we are, of course, doing a lot in terms of cost reduction and efficiency improvement. And there is also an element where we have been quite working a lot on, which is having some additional pricing. And this, of course, backed on quantities that were not fully fulfilled and need now to be negotiated. So this is included.
Klaus Keysberg: Nothing for the materials business are not coming from market so much, but also from cost side.
Bastian Synagowitz: And the price renegotiation you mentioned, Miguel. Are those already locked in? Or are you still in active discussions and that is still uncertain? Or is still -- is this already pretty much locked in your contract framework now?
Miguel Lopez: Well, that's -- as always, some things are already done and other things are ongoing. So it's -- as you know, we are working every day and never everything is done and never everything is open. So it's a mix, which is healthy.
Bastian Synagowitz: Got you. Okay. And then just moving on to APAC. It seems like you made pretty good progress there with like 90% of the, I think, framework budget largely covered with measures. Have you already casted the updated business plan in steel parts of it into the numbers here. And if so, how much?
Miguel Lopez: No, -- as we --, we have been communicating, we are now waiting for the Steel Managing Board to come up with the updated plan -- with the business plan and all the measures that will be described them in this business plan are not yet in the program. So this will be coming additionally into the program.
Operator: Our next question comes from the line of Moses Ola from JPMorgan.
Moses Ola: So just the first one for me is just on forward guidance into Q3. I know you don't give explicit quarterly guidance, but if you could just give your expectations broadly on volumes, raw material costs and on pricing, especially for the Steel division, if possible, please.
Klaus Keysberg: I got you right, you wanted to have a guidance for the next quarter for the price development. So what we see is that on the one hand, that the price development regarding sales prices, we do not see much dynamics in this price development. For the raw material price, we already saw, let's say, decreasing prices. So therefore, no major dynamics on these both items. And in the meantime, we are looking at cost services.
Moses Ola: And I guess a follow-up to that. So just on the APEX program, I think you previously guided that Steel Europe would be 30% of the savings from APEX, yet today, you've reduced still your adjusted EBIT guidance by call it around €200 million. So could you please just help to square that? Is the underlying result ex the APEX gains even worse than we can see? Or just trying to really wrap my head around that.
Klaus Keysberg: You mean, if you look at the APEX program, you have to take into consideration that it is a 2-year program. So if you look at this fiscal year, it is what you said. But of course, our, let's say, our estimation what will be the next year, of course, then includes the bigger part of steel growth.
Operator: Our next question comes from the line of Christian Obst from Baader Bank.
Christian Obst: Three questions. One is, can you remind us of the current status of portfolio measures within the Automotive group, and I'll take them one by one.
Miguel Lopez: Well, you know as thing stabilizes is one of the portfolio measures here. We are still in the process. We cannot confirm the outcome yet. And as soon as we are having significant progress, of course, we will let you know. The same also for the Automation Engineering business as such. So you get an update next quarter, quarter 3.
Christian Obst: Okay. Do you think you have come to some kind of a solution within this business year yet.
Miguel Lopez: Well, let's talk about this quarter 3. You want to remember your question and come back to it.
Christian Obst: Whether you see the main risk currently the core framework to achieve your next year's margin targets even at the low end.
Miguel Lopez: Well, the process in order to get into the detailed object numbers is about to start. And we will be ready by presenting this budget to the Supervisory Board and get it approved in the Supervisory Board meeting of September. So exactly, we are working on this. As mentioned before, you have heard about the business plan in Steel Europe that is currently prepared for [indiscernible]. This is a bigger one. But also, we are working on all the other plants. So this is something that we could really speak about then as soon as we have all the budget numbers ready, approved and confirmed. So I have to ask for your patience on this.
Christian Obst: As I guess this will be the answer also for my third question. It's about the -- a CapEx framework until the end of the Phase 1 transition, '26, '27. So what is your CapEx plan for these years on average. I guess you will give the same answer you gave before, right?
Klaus Keysberg: Yes. I have to say we are looking for having exactly this kind of processes discussed and decided with the different business areas with our segments. And this is not the right time to make statements on this one. We will be ready to give some orientation on this as soon as we have the budget process completed.
Operator: Our next question comes from the line of Alex Hong from Bank of America.
Unidentified Analyst: So the first one is, can you talk a bit more about the level of restructuring costs that you're expecting for this year versus last year? And second one is on the Marine business. I was wondering if you can provide more updates on the progress. I understand that you have reached the due diligence stage with the privacy and KFW. I was wondering if you can give more color on the spin-off solution as well.
Miguel Lopez: I can start with the question on Marine. I mean, of course, it's important progress that we have been able to report a couple of weeks back with the announcement that we are studying in digital. It's a very important step in the overall process, which is the due diligence that is now being conducted by Carlisle. So we will see the outcome within the established time frame. And of course, you would understand as this is M&A process that I keep the time line confidential for the moment. At the same time, we have been working on, as we also communicated on the spin-off track, so we are going for a dual track. And as soon as we are very clear about what one of the two options will be, then, of course, it will be communicated and then the time lines will be very clear. For the time being, both things are progressing like we wish for. And also to be positively mentioned, also KFW and the government is having here, a very good impact in terms of the progress in the whole thing. So to cut it short, as soon as we have a clear decision, of course, we will communicate and then the time lines will be clear.
Klaus Keysberg: Regarding your questions on restructuring costs, if you look at '22, '23, we had restructuring cost of a very low 3-digit number. And if you consider the restructurings, we have already placed or defined or even decided when we will look at restructuring costs this year as a 2-digit -- midterm 2-digit value. This is not including, of course, anything which is to come maybe from other business plans we just discussed.
Operator: [Operator Instructions] And our next question is a follow-up question from the line of Bastian Synagowitz from Deutsche Bank.
Bastian Synagowitz: And 2 more for me. Just maybe on the situation in the steel unit. Have you had any initial sounding with the labor representatives for the voting on the EPCG stake, which is now coming up in the next board meeting and is your expectation that this will be accepted? And maybe also on the new business plan, is your sense that the employee side has basically been accepting the new reality and the support for finding a new and competitive and sustainable setup instead of just defending the status quo and pretty much running behind the market.
Miguel Lopez: Well, I think in terms of the business plan, I believe that we need to give now the Managing Board of Steel Europe. The time is the important is so huge of this plan, the time to have a really detailed plan in the different aspects. And of course, we will then look together with the employee representatives to the plan and discuss how to proceed with it. It is now too early to make any comments because we first need to see the plan and then enter into the discussions. As long or as it refers to the current process around the 20% stake, the processes around the presentation to the bodies that are to be involved has been done. And now it's a decision of the Supervisory Board to take the decision for it in the next week. And that's what we can say about it.
Bastian Synagowitz: Okay. And then more maybe a technical question, maybe one for Dr. [indiscernible]. I guess you do have this upcoming bond maturity do your plans to refinance the bond also depend on the decision on whether the government will be happy to absorb the guarantees in the Marine business? Or is this an important decision factor for whether you -- or not you're refinancing the bond? Or basically, do you, in principle, already see less need to keep as much liquidity and hence, you're not really planning to go for refinancing of the bond as of now?
Unidentified Company Representative: You mean the bond we paid back in February? Or you mean generally. So..
Bastian Synagowitz: I thought there was -- if I'm not mistaken, I thought there was another one coming up, but...
Unidentified Company Representative: There's one coming up again in the next year. Yes, it is... No, of course, we are in a comfortable situation that we have the freedom to decide on this, how we're going to do. Of course, we do our, let's say, we do our discussions with the banks, and it is not decided yet what we do with this. So I only have to leave it open here. But we are already in discussions to do something. But we are not under pressure.
Operator: Thank you. Unless we do not have any more questions registered, I hand back to our speakers for any closing comments.
Miguel Lopez: Thank you very much. Thanks for participating, and thanks for your questions. In case of any follow-up questions, the IR team is, of course, available. Thanks again. Have a great day, and talk to you soon. Bye-bye.
Operator: This now concludes our presentation. Thank you all for attending. You may now disconnect.
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