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Edited Transcript of AMAG.VA earnings conference call or presentation 1-Aug-19 7:00am GMT

Half Year 2019 AMAG Austria Metall AG Earnings Call

BRAUNAU AM INN OBER Aug 7, 2019 (Thomson StreetEvents) -- Edited Transcript of AMAG Austria Metall AG earnings conference call or presentation Thursday, August 1, 2019 at 7:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Felix Demmelhuber

AMAG Austria Metall AG - Head of IR

* Gerald Mayer

AMAG Austria Metall AG - CEO, CFO & Chairman of the Management Board

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Conference Call Participants

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* Christian Obst

Baader-Helvea Equity Research - Analyst

* Markus Remis

Raiffeisen CENTROBANK AG, Research Division - Chief Analyst

* Michael Marschallinger

Erste Group Bank AG, Research Division - Research Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by. I am Francesca, your Chorus Call operator.

Welcome and thank you for joining the AMAG Austria Metall AG First Half Year 2019 Conference Call. (Operator Instructions)

The forecasts, budgets and forward-looking assessments and statements contained in this presentation were compiled on the basis of all information available to AMAG as -- for the present time. In the event that the assumptions underlying these forecasts prove to be incorrect, targets be missed or risks materialize, actual results may depart from those currently anticipated. We are not obliged to revise these forecasts in light of new information or future events. The presentation was prepared and the data contained in it verified with the greatest possible care. Nevertheless, misprints and rounding and transmissions error cannot be entirely ruled out. In particular, AMAG and its representatives do not assume any responsibility for the completeness and correctness of information, including in this presentation.

This presentation is also available in German. In cases of doubt, the right -- German language version shall be authoritative. The presentation does not comprise either a recommendation or a solicitation to either purchase or sell securities of AMAG.

I would now like to turn the conference over to Felix Demmelhuber, Head of Investor Relations. Please go ahead.

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Felix Demmelhuber, AMAG Austria Metall AG - Head of IR [2]

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Good morning, ladies and gentlemen, and welcome to our conference call for the first half of 2019 of AMAG Austria Metall AG.

Today, Gerald Mayer, CEO of AMAG, will present the development and results of the first 6 months of this year. As usual, after the presentation, you have the opportunity to ask questions during the Q&A session.

Gerald, please start your presentation.

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Gerald Mayer, AMAG Austria Metall AG - CEO, CFO & Chairman of the Management Board [3]

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Thank you, Felix. And a very good morning from my side, to the first half 2019 financial presentation of AMAG.

All in all, the first half highlights. We started in a market environment on the one side where we saw growth in primary aluminum and for rolled product. On the other side, we have -- we are in the middle, I would say, of a market environment which is increasingly influenced by the trade conflicts, as you know, and also by an economic slowdown for us basically driven by the automotive industry. For AMAG, we successfully continued our growth path. We ramped up and continued to ramp up our plant in Ranshofen successfully. The revenue was up 550 -- to EUR 550 million roughly, and this is in particular due to shipment increases. You will see a little bit later that, of course, the aluminum price is down, and despite that, we had a growth in revenue. EBITDA was down to EUR 72 million from EUR 86 million in the prior year, mainly caused by lower aluminum price. And our outlook for 2019, we expect an EBITDA range of between EUR 125 million and EUR 150 million.

On the next slide, I would like to start with a general picture, the heat map how we see the economic sentiment. And then what you see here is -- just look at the colors. You see green is positive. It's the PMI. Red is, of course, not really positive. It's negative. And what we saw in the last months or last 2 years, 1.5 years is some sort of a downturn in the sentiment. And it's not just Europe. It's not just Germany. It is all over the world. Also in China, in the U.S., in Japan, everywhere the situation is slowing down a little bit, so we have many countries, many regions where we are below 50 now for the PMI.

On Slide 5, you see that in primary aluminum we still had the growth. However, the growth rate declined to 1.2%, this is the outlook for the year 2019, from 3% in the year 2018, but it's still an increase and not a decrease. It's not flat. It's still an increase. What you see on the right side of this graph is that -- the global stocks going down. So we are right now at roughly 10-point-something million tonnes of aluminum stock on a global scale. And what we expect, what CRU expects for the year 2019 is a deficit of 1.2 million tonnes, which means that the production -- or the demand is higher than the production on a global scale. And so this is basically a positive indication for the next months.

What you see on Slide 6, you see that aluminum price, it's the blue line, declined by 20% roughly in the last 18 months. This is a significant decline, of course, but it's not just aluminum. It's also other metals. We have clear path, I will say, of an overall development. And in our opinion, the main reason are trade conflicts, is lower economic momentum, and this has immediate impact on metal prices.

Next slide. You see that and perhaps you read that the U.S. removed tariffs on aluminum from Canada to the U.S. And if we look at the split, what does this mean for AMAG's business, for our divisions? You see we indicated it. For the Metal Division, it's definitely a positive that the tariffs were removed. For Casting, we have no exports to the U.S., so there's no impact at all. And for the Rolling Division, what we expect here is a slight, I would say, negative impact, but this highly depends on the development of the premiums. AMAG delivers roughly 35,000 tonnes to the U.S. This is our expectations -- or expectation or plan for the year 2019, but overall the removal of these tariffs were positive -- or are positive for AMAG, and we will see the impact then in the second half.

Slide 8. We did an analysis how the metal flow developed based on the -- let's say, on the input tariffs based on this conflict, trade conflict, between U.S. and China and so on. And what you can see here is that the exports from China to the U.S. decreased by roughly 60% in the first months of the year 2019, compares to the prior year. From China to the -- to Europe, you see an increase of roughly 40%. So we have additional metal from China in Europe, which adds some pressure on our margins. On the other side, we have higher exports from Europe to the U.S., plus 85%, and this despite the additional 10% trades tariffs but, as you may know from our prior presentation, that we managed to push these 10% additional tariffs to our customer. So the U.S. customer pays for these additional tariffs. But things changed dramatically with regard to metal flow all over the world.

Next slide, Slide 9, the growth in rolled products. What you see, that we still expect for 2019 growth of roughly 3%. And on a global -- let's say, on a global scale, it's 3.1% compared to 3.6% that we expect up to the year 2023 of -- if you look at the sectors, you see that transportation sector is still strong. So we expect a growth of 5.5%. Construction is strong, 2.2%. And also, in packaging, you see a growing market of roughly 3%. And based on that, we expect more than 28 million tonnes of rolled product all over the world which will be sold in the year 2019. So the overall environment, I would say, is still good.

If you look on Slide 10, you see the sales -- or shipments from our Rolling Division. And this -- we compare here the last 3 years. So after 110,000 tonnes in the year -- first half 2017, we shipped roughly 112,000 tonnes in the first half 2018. And we saw roughly a 7% increase or 8,200-tonne increase to 120,000 tonnes in the first half 2019. So the -- in other words, the ramp-up of our new plant is going well and we are well on track.

Next slide. You see the splits. Where does this growth come from? And actually, you see that we have additional 3,300 tonnes for the aircraft industry. We have additional 3,500 tonnes for the automotive -- or to the automotive industry. We had additional 2,500 tonnes to the packaging industry. And then there are some other markets that we saw a decline of 1,100 tonnes, but all in all, you see the ramp-up is going well. And we had an increase in volumes in the first -- let's say, in the first months despite, let's say, a more difficult market environment. Let's put it that way.

You may have read that we concluded a sales cooperation with Marubeni Corporation and Marubeni-Itochu Steel in Japan. The main reason for that is that with this cooperation we get the support for, let's say, in particular, the Japanese automotive market and Japanese OEMs. So this is the main target for this cooperation. And Marubeni, as you might know, is a long-term partner to AMAG since years now in our Alouette smelting operation.

Some words now to the results. How does this translate somehow, let's say, the trade conflict? It's a different market environment with growing uncertainties. We had a lower aluminum price. How does this -- or did this translate now into our, let's say, financials in the first 6 months?

First slide -- or Slide 14 in our presentation. You see that the quarterly, the average quarterly, aluminum price came down to USD 1,818. This is very low. It's the lowest -- let's say, the lowest value since, let's say, 2 years roughly. So very low. On the other side, you see on Slide 15 that also the alumina price came down so dramatically. You might remember that, in the last year, we had really big issues regarding alumina. We had a downturn capacity reduction in Brazil, of the biggest refinery of this world in Alunorte. We had sanctions against, let's say, Russia and RUSAL, which in addition put pressure on the alumina prices. They increased dramatically. And the situation, this is the good news, normalized. And this has a big impact also to our financials, but the big impact is expected, let's say, for the second half of this year, as we always have a delay of roughly 1 quarter in recognizing then the API of the [current demand for current quarter].

Slide 16. You see that revenue, of course, increased a little bit and -- despite a far lower aluminum price. So the aluminum price came down in average from USD 2,200 roughly per tonne to USD 1,850 per tonne. And if you multiply this roughly 6 -- difference of USD 360 per tonne times more than 200,000 tonnes, then you see that there's a significant impact, of course, to our revenue. On the other sides, we also saw good increases in volumes in all our divisions. In the Rolling divisions, we are up 8,000 tonnes. In the Casting divisions, we are roughly up 10,000 tonnes, and in Metal divisions, we are up 3,000 tonnes. So volume-wise, operation-wise, we are doing well; and this compensated or more than compensated the downturn from the aluminum price.

Slide 17. You see the revenue reconciliation, a bridge. The impact of the aluminum price was EUR 26 million roughly. 50% refer to the Metal Division, roughly. The rest downstream: Currency has a small effect, but volume/mix, you see it here, up, contributes more than EUR 40 million in additional revenue compared to last year. And so we end up at EUR 554 million, EUR 555 million compared to EUR 540 million in the first half of 2018.

EBITDA bridge on Slide 18 -- we get 2 pictures this time. So 1 on Slide 18; one on slide -- on the next slide, 19. On 18, you see that we are down, of course, EUR 14 million roughly. And if you look where it comes from by segment, you see that we are down in particular in Metal EUR 15 million. And for the other divisions, we are up in Casting, we are up in Rolling, and we are down in Service. So we end up at EUR 72 million EBITDA. There is one thing to add, this -- in particular in Rolling, in Casting and in Service, there is an impact of a change in IFRS standards, in IFRS 16. We added it here in our presentation, but if you eliminate this impact, it is still positive for Casting, for Rolling, and in Service we are a little bit it's down. That means, in other words, apples -- if you compare apples to apples, the reduction of the EBITDA refers solely to our Metal Division for the first half of this year.

Slide 19. We prepared another bridge for EBITDA for the first half. You see again aluminum price, minus EUR 11.5 million. So this is, of course, as we said before, a main reason for our reduced EBITDA. Prices, premium, in general, are down EUR 12 million roughly. On the other side, we compensate for higher volumes by EUR 13 million. And you might remember that, in the last year, we had a positive one-off valuation effect in our EBITDA of roughly EUR 5 million. This is also a reason why we are at EUR 72 million compared to EUR 86 million in the comparing period 2018.

Then we added for Q2 a bridge for the EBITDA. It's basically a copy-paste from the first half. There is just one exemption, and this is raw materials. Raw materials were -- the effect was negative in the first quarter. It's positive here. The rest is more or less just same reasons as I explained before with regard to the first half.

Slide 21, the summary. I don't want to talk about details. Just one thing or 2 things to add. Depreciation is at more or less the same level, slightly higher than in the year 2018. And then the financial result includes the minus 5 million compared to minus 2 million roughly in the prior year. And this includes evaluation (sic) [valuation] effects again from derivatives and so on, so -- but there is nothing special in it, and I would say it's [moving stats].

Very positive, Slide 22, is our cash flow. First half cash flow was EUR 64 million compared to 19 million -- from operating activities, compared to EUR 19 million in the first half of 2018. In times when aluminum price goes down, of course, result is suffering. On the other side, working capital gets tailwinds, and this is what you can see here. Our working capital, we have roughly 100,000 tonnes of materials somewhere in our production process. And of course, these 100,000 tonnes are way cheaper compared to a higher level of evaluated -- or a higher-level of aluminum price. And this is the positive effect here in this EUR 64 million. Cash out from investing activities are at the level of the prior year. And so it adds up to a free cash flow which is positive at EUR 25 million roughly.

Net financial debt, on Slide 23, also stable -- well, a little bit better than we actually expected and planned. Also the main reason here, on the one side, the result is down compared to the prior year. On the other side, we had positive working capital effect. And this contributes then and -- to the -- positively, of course, to our debt position.

A quick view to our divisions.

Once again, Metal Division. So for me, the highlight here operating-wise was that we did a very good job regarding pot relining. So all the -- more or less all the pots are up and running there. We are back to normal, more or less, as we said that this is the plan that we start into the second half more or less on a steady-state case with more or less all the pots up and running. So this is absolutely good news. The earnings, all in all, it was a difficult first half. As I mentioned before, alumina was still high. Aluminum was very low -- or declined. And for the second half, we expect definitely a better result for Metal Division, so we're very positive here. Volume-wise, we are doing good.

Casting Division. We saw significant earning growth compared to the first half 2018. Shipments are significantly up, but if you were -- did, let's say, participate in our call 1 year ago, you still have in mind perhaps that we were working on a new melting furnace at this time. We modernized an old one, replaced an old one. We got, of course now we are up and running and on a -- again on a steady state-case, the productivity gains out of this new furnace. And so this contributes, of course, to volume but also to results. And so we expect a stable, let's say, development in the Casting Division also in the next months. So things are quite okay there.

Rolling Division. As I said before, the ramp-up was successfully continued. We saw shipment growth, so volume-wise we are doing good. What we expect for the next months here is some additional pressure regarding rises -- prices. I mentioned the change in metal flows. We see more input from China that we see pressure on the margins. Then what we also expect is perhaps some higher, let's say, uncertainty from the automotive industry. You read it on a daily basis in the news, how things develop there, and we'll see how this impact will be for AMAG. So we are up, as I said before, compared to the prior year, roughly 30% for automotive volumes, on the one side. On the other side, yes, the expectation was even higher. So it is good. It is positive, but it could be better.

2, 3 words to our outlook. It's really difficult now, as we said, to change metal flows; the pressure from additional inputs from China, also partly from Russia, which we see right now in the European markets, on the one side. On the other side, we see some destocking also in the U.S. right now. These are things which, of course, do not support, let's say, the development of the next months, but no one knows how long this takes. Then we have the development in the automotive industry which we read on a daily basis. Up to now, we are -- as I said before, I mentioned before, we are up compared to the prior year. And we are also, let's say, in a mode where we are somehow, let's say, maneuvering in the fog and don't know how things will develop in future. All in all, I would say it is not bad what we see right now. It is not good. So there is -- it is a flat development right now, with some uncertainties for our forecast. And this is also the reason we said we stick to EUR 125 million on the low side in our guidance and reduce the upside from EUR 155 million to EUR 150 million.

So this was my presentation, and I'm now happy to answer your questions. Thank you.

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Felix Demmelhuber, AMAG Austria Metall AG - Head of IR [4]

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Thank you...

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of Christian Obst from Baader Bank.

He just disconnected. And the next question is from Michael Marschallinger with Erste Group.

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Michael Marschallinger, Erste Group Bank AG, Research Division - Research Analyst [2]

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My first question will be on the alumina prices. We've seen them coming down quite strongly again in June, July, below the $300 level now. And I was just wondering. Do you believe we will see a floor here at the $300, which are also said to be the production costs? Or do you believe we could also see a rebound in the second half of the year?

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Gerald Mayer, AMAG Austria Metall AG - CEO, CFO & Chairman of the Management Board [3]

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I think forecasting such prices is really difficult, from our experience. So we are right now, as you said, below $300. We see -- it's always depending. We look at we are slightly above $300 right now in -- but it's -- anyhow, it is a level which makes sense, in our opinion. It is low. However, in the past, we saw levels which were again that's even lower but, as we said -- as we saw last year, way higher. So no one knows in this situation we are right now how things develop if, let's say, our friend in the U.S. starts a new tweet and things change overnight dramatically. So no one knows. And from our opinion, just from a supply and demand perspective, we are convinced that there is -- and this is what we also said 1 year ago, that there is no physical shortage. We are physically long. And there is oversupply, in principle, available for alumina; and this supports a low price. And so we are confident. This is our internal view, that the price for alumina should stay low. And this is also part of our internal plans and planning for the rest of the year. So as I said before, in general, the outlook, and this is also highly supported by alumina, is definitely one which is even -- which is a positive one if you compare second half to first half for our Metal Division.

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Michael Marschallinger, Erste Group Bank AG, Research Division - Research Analyst [4]

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Okay. Very clear. And the second one will be on your customer Boeing. I was just wondering if AMAG was producing parts for the 737 MAX. The company said this week or -- that they are -- that the grounding will take -- at least will take till the end of the year and maybe beginning of next year. And so what -- I was just wondering how the -- how is the call-off situation with Boeing at the moment.

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Gerald Mayer, AMAG Austria Metall AG - CEO, CFO & Chairman of the Management Board [5]

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Yes. Normally we do not provide details regarding specific customers. The only thing I really can share with you is, up to now -- and of course, Boeing reduced the build rate for the 737, but there is no real impact for AMAG up to now. So it depends a little bit how things will develop in the next months. Will they really stop production at all? Or whatever will happen. So we are in a mode where we still produce for the aircraft industry as a whole quite strongly, so the development is really good. We are up 30% in the first half. And it's also -- a part of this also refers to Boeing. And we are supplying. Your question, was our -- let's say, our metal also in the 737 MAX we supply to Boeing, and we are convinced it's also for the 737 MAX.

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Operator [6]

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The next question is from the line of Markus Remis.

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division - Chief Analyst [7]

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A question on the Rolling Division. If I strip out the IFRS 16 effect, then earnings were just flat despite 7% growth in the first half and then arguably lower ramp-up costs and better fixed costs absorption. So I was wondering if you could maybe shed more granularity on the price pressure and on the mix development, how that impacted the first half? And I guess you indicated some more pricing margin pressure from rising imports going forward. If you could elaborate on in which business fields this is particularly true or which niches. And in that respect, I would also like to get a bit more understanding of the call-offs of -- from the auto industry. And if you could remind us of the revenue share of auto in the Rolling segment.

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Gerald Mayer, AMAG Austria Metall AG - CEO, CFO & Chairman of the Management Board [8]

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Markus, the revenue share...

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Felix Demmelhuber, AMAG Austria Metall AG - Head of IR [9]

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(inaudible)

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Gerald Mayer, AMAG Austria Metall AG - CEO, CFO & Chairman of the Management Board [10]

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This is unchanged. We said the cap for us is roughly 20%, if I add just ABS, it means body sheets; if I add trims; if I add bracing. So the MAXes, right now we are roughly at 20% in our portfolio, I would say, which is -- which refers to automotive in the Rolling Division. Comparing the 2 periods, we are slightly up, as you said and as I said in my presentation, excluding the IFRS effect, but as we also said, we had negative effects from prices and premiums. This is -- it's up roughly to minus EUR 3 million. It means that the pressure is there. And the pressure comes from -- in particular, I would say, from the Chinese additional imports to the European Union. And this is what we all feel now in the industry and see now in the industry, but on the other side, we had -- as far as last year, we had a valuation effect, if you might remember, of roughly EUR 4 million positively included in the result of the Rolling Division. I mentioned before EUR 5 million-plus, EUR 4 million roughly refer to Rolling; and this is what we did not get a second time. And this is also a main reason why we are down. So if I compare apples to apples, we are definitely positive. And the price effect is something which is here, and we are convinced that this will stay also in the second half.

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division - Chief Analyst [11]

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Okay. Very clear. On the hedging level, you typically provide all the different slides on the magnitude of the hedging in the Metal segment. If you could help us also here which level is hedged for '19 and how much you have already [wrote down] for 2020.

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Gerald Mayer, AMAG Austria Metall AG - CEO, CFO & Chairman of the Management Board [12]

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Yes. So there is -- for the year 2020, there are perhaps another way -- I think we are at the level of perhaps 10% real hedges, excluding natural hedges. As you know, that's roughly 20% or a little bit less than 20% we have natural hedge, in particular from our power contract. In addition to that, for the year 2020, we did hedges. If we had a total volume of 120,000 tonnes, roughly 10% of this is in addition hedged. So right now, I would say we are a little bit below 30% of prices which are hedged for the year 2020. For the year -- but there are also to a certain extent options included, so we are -- we are flexible, call-offs, put options and so on for, let's say -- it's always a plan for -- let's say, of instrument. For the year 2019, for the rest of the year, I would say roughly 50% or a little bit less than 50% is somehow hedged, again for -- if call-offs with puts and before the takes. And there's the natural hedge, of course, which is the bulk.

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division - Chief Analyst [13]

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Okay. And the last question, a bit of bookkeeping. Can you remind us of the CapEx level you would like to -- or you intend to spend in the current year? And also maybe some indications for next year.

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Gerald Mayer, AMAG Austria Metall AG - CEO, CFO & Chairman of the Management Board [14]

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Yes. For next year, we are -- right now, we started the budgeting process. For this year, it will be around EUR 100 million. For next year, I expect a lower number, of course, as we are right now finishing off the last, I would say, installations, which refer a little bit to the big, let's say, 2020 complex. We are right now installing very high-storage facility which is -- and some additional minor things, which should be finished off by end -- until end of this year. So this -- and as you know, our depreciation is at the level of EUR 80 million-plus. And this is what I would expect is a steady-state case for the future, excluding additional strategic things, yes, and -- but we are right now budgeting, but this is what I would expect.

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division - Chief Analyst [15]

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Okay. Final question on the -- again coming back to the upstream business and the effect of the revocation of the 10% import tariffs on -- in the U.S. How sticky is still the increase or the higher premium? What would be your expectations regarding the normalization of the premium? Has this already kicked in? And will this be kind of a process taking a bit long, or might there be a kind of a rather sudden decline...

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Gerald Mayer, AMAG Austria Metall AG - CEO, CFO & Chairman of the Management Board [16]

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Look, my personal view is, here, that you know that in the U.S. the demand is 5.5 million tonnes roughly on an annual basis. They produce on their own a little bit more now than 1 million tonnes per annum. So they have then available now from Canada theoretically 2.9 million, 2.8 million, I don't know, but there is also consumption, of course, somewhere else in the world. But the bulk goes to the U.S. right now. So there is still a lack and, I would say, a gap. And as long we see the gap, my personal opinion is that the premium will stay high. We will see if this is the case. What we saw in the last weeks is that the Midwest premium came down a little bit from perhaps USD 420 per tonne, USD 430 per tonne to now USD 390 per tonne. In my opinion, this is -- perhaps it goes down a little bit more, but this should be then the end of the storyline. But it is very difficult, of course, to forecast. As I said, this is my personal view. You can read many things. I read 1, 2 weeks ago from CRU that they said we should be there now and there will -- things should be included now at the premium. One day later, the premium came down a little -- again a little bit. So we'll see how things develop, but my gut feeling is that we will definitely have tailwind from this side. And this also what we indicated on Slide 7 with the green, let's say, arrow which shows up.

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division - Chief Analyst [17]

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And the long-term kind of average price premium level is at 250. Is that correct in that...

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Gerald Mayer, AMAG Austria Metall AG - CEO, CFO & Chairman of the Management Board [18]

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We cannot provide you a long-term outlook here for the future because we simply do not know. As soon -- in my opinion, as soon as the Trump administration gets rid of the whole, let's say, tariffs situation, we will see a normalization. And then it will go down perhaps by USD 200. I don't know, but you know what, the only thing I can tell you is that, by implementing these tariffs, the premium increased by roughly $200. This is what we saw. And what we saw in the last months is, since they announced that the -- they removed the -- let's say, the tariffs again, we saw a decrease up to now by USD 30, perhaps USD 40 per tonne roughly. So there is still some room downwards.

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Operator [19]

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(Operator Instructions) The next question is from Christian Obst.

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Christian Obst, Baader-Helvea Equity Research - Analyst [20]

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Sorry. I was kicked out at the beginning. So some minor questions are left over. First, is there any scheduled downtime for the pot relining in the second half of this year? Then the second one is concerning Marubeni. What do you expect from that kind of cooperations maybe in the midterm? And then I've made a calculation, please give me some kind of an indication if this is completely wrong or makes any sense. So we're going to take volume and mix impact in the first half which is EUR 41 million; and compare this to the volume and mix EBITDA impact, which is EUR 30 million, I come out with a margin of more than 30%. Does that mean that the new orders, especially for the automotive and airline industry, has a much higher margin? Or is that completely wrong?

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Gerald Mayer, AMAG Austria Metall AG - CEO, CFO & Chairman of the Management Board [21]

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So I -- so not -- I did not, not follow your calculation, but I would say it just can be wrong because we do not have super, super increasing margins in auto and then in aircraft. This is what I can confirm. So we are stable. And automotive is challenging, in particular, in times when they feel a downturn. Our belief -- is it's not easier. And also for the aircraft they are suffering, as we just discussed before, with Boeing and so on. They are really tough in negotiating. So it is not, let's say, super positive that we have increasing margins right now. So this is what I don't see. For relining, for your first question, relining in the second half: We finished off more or less the bulk of the relining activities in our Metal Division in the first half of this year. So we are now at roughly 490 pots up and running, out of 494 pots. This is a normal, I would say, a very normal positive. And on -- yes, we are right now actually operating, we're at the maximum capacity. This is what I would say for primary aluminum. So the second half operating-wise is -- operation-wise should be positive there. And with regard to Marubeni, what we expect here and what the main target is that we have access to, let's say, Japanese customers in the automotive industry. We target, of course, Japan, but we also target other markets. So this is our plan here, and we had also first successes. So it is -- this is -- this might be something special. We know that it's far away, but they have operations all over the world.

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Christian Obst, Baader-Helvea Equity Research - Analyst [22]

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Okay. Then the last quick question is, is the assumption model right? I mean in Metal you have done all the relining like you described it. And in Casting, we are also back on some kind of a normalized level going into the second quarter. We just have seen the increase in the first half. And in Rolling we see these ongoing increase in capacity and in production going forward. And this is the only remaining part which will increase going forward because we know Casting, Metal we are more or less on the level you can achieve, right?

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Gerald Mayer, AMAG Austria Metall AG - CEO, CFO & Chairman of the Management Board [23]

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What you will see also in the future, this is what we try to do, is by increasing amperage for the -- for example, yes, for the primary Metal Division, you do some creeping. So by not, let's say, having CapEx involved but by optimizing and doing steady optimization, we try to get step by step a little bit higher in capacity, but this is minor steps year by year, as we saw it in the past. For Casting, you are right. We are now at, let's say, a nameplate capacity roughly of a little bit below, I would say, 100,000 tonnes. This is also the level where we are up and running right now. I would say this is the direction where we should go in the next 2 years. And for our Rolling Division, you are totally right. As we said before, the capacity is roughly 300,000 tonnes, plus, minus, it -- always depending on the product mix. We have to -- we try to go there now step by step. The only thing which is a burden right now, I would say, is the general situation. You saw the heat map, and I also explained the automotive situation a little bit. And of course, we also build it for automotive, but we are doing well. So it is -- yes. You're right, yes.

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Christian Obst, Baader-Helvea Equity Research - Analyst [24]

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And the last one is you stated that you were going into the discussion for the budget, let's say, 2020 mainly. Is that also the first step when you are talking about or discussing further strategic steps? Or should we expect this not before 2020, '21?

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Gerald Mayer, AMAG Austria Metall AG - CEO, CFO & Chairman of the Management Board [25]

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We will -- we are right now preparing a lot of things in parallel. And we are working on strategy for some weeks and months now. And our internal plan is that we want to present our ideas to the Supervisory Board at our last meeting this year, which is sometime in end of November, I think. And after that, perhaps it's still too early in our Q3 presentation, but afterwards, we will also, of course, inform you.

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Operator [26]

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(Operator Instructions)

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Felix Demmelhuber, AMAG Austria Metall AG - Head of IR [27]

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Okay. It seems like there's no further questions, so thank you very much for joining this conference call. And we wish you a nice day. Thank you.

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Operator [28]

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Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephones. Thank you for joining, and have a pleasant day. Goodbye.