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Edited Transcript of AMAG.VA earnings conference call or presentation 30-Oct-19 8:00am GMT

Q3 2019 AMAG Austria Metall AG Earnings Call

BRAUNAU AM INN OBER Nov 15, 2019 (Thomson StreetEvents) -- Edited Transcript of AMAG Austria Metall AG earnings conference call or presentation Wednesday, October 30, 2019 at 8:00:00am 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 - 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'm Haley, your Chorus Call operator. Welcome, and thank you for joining the AMAG Austria Metall AG Q3 Results 2019 Conference Call. (Operator Instructions)

The forecast, budgets and forward-looking assessments and statements contained in this presentation are complied on the basis of all information available to AMAG as at 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 obligated to revise these forecasts in the light of new information or future events. This presentation was prepared and the data contained in it verified with the greatest possible care.

Nevertheless, misprints and rounding and transmission errors cannot be ruled out entirely. In particular, AMAG and its representatives do not assume any responsibility for the completeness and correctness of information included in this presentation.

This presentation is also available in German. In cases of doubt, the German language version shall be authoritative. This 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. Welcome to our conference call for the third quarter of 2019 of AMAG Austria Metall AG. Today, Gerald Mayer, CEO of AMAG, will present the development and results of the third quarter 2019.

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 - Chairman of the Management Board [3]

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Thank you, Felix. A very warm welcome from my side. Good morning, ladies and gentlemen. Our highlights of the third quarter, I guess you have our presentation in front of you. So in general, in our industry, we still have positive growth prospects and this is valid for the global demand of primary aluminum and of rolled products, and the main driver is still unchanged, is transport. The current demand and price trends are influenced by the economic slowdown and trade conflict. This is what you will see a little bit later. So we had definitely impact here in the last quarter.

In Q3, however, we had a very good result. It was up 10% compared to the prior year. And so the EBITDA was EUR 37.2 million compared to EUR 33.9 million in the third quarter 2019.

In the first 3 quarters, year-to-date, EBITDA was EUR 109.2 million. As you know, in the first half, we were behind the, let's say, the EBITDA of prior year. So the comparative figure is EUR 120.1 million for the EBITDA in the previous year, year-to-date.

We had a very strong operating cash flow in the first 9 months. So it is 4x the value we saw last year. So we have a quarter, let's say, EUR 108.3 million of operating cash flow. This is roughly the EBITDA, as I mentioned before.

And the last bullet here is our outlook. The EBITDA range is between EUR 125 million to EUR 140 million. It's still somehow unclear as it's more or less very interest rate volatile, what we see right now in the market. Therefore, we still have EUR 50 million range. It's still too early for us to give you a guidance for the year 2020 for the same reason.

On Slide 5, you see the global demand for primary aluminum. So what you can see here is on the left chart that we had a nice growth in the last years. But it was a flat development in the year 2019. In the beginning of this year, we didn't expect that. We were expecting a growth for the year 2019 and this has to do, again, let's say, with the slowdown in the economy and the trade conflict, which I will talk a little bit later about that.

In the year, on the right chart, if you look to the right, you see the development of the global stocks. They came down also in the year 2019. We had a deficit of 1.4 million tonnes. This is what we expect for the whole year 2019, means that the demand is higher than the annual production of the year 2019.

What we expect for the next year is a slight surplus of 0.4 million tonnes and the consumption will grow by, again, by 2.4% to roughly 67 million tonnes for the year 2020.

So all in all, I would say, again, you should see a growth next year, but also production will increase on a global scale.

Slide 6, the aluminium price. What you see here starting roughly mid of the year 2018 is a sharp downward trend of the aluminium price. Here at the 30th of September '19, the aluminium price was at $1,720 roughly. In the prior year, we have, let's say, $300 roughly higher at USD 2,030 per tonne of aluminum. Of course, this is reflected then in our, let's say, figures. Also for the, let's say, year-to-date number and the average number for the first quarter, we had roughly a USD 300 decrease in the sales price of primary aluminium, at the LME.

On the other side, if you turn to the next slide, Slide 7, you'll see that alumina price, the main raw material to produce primary aluminium also decreased significantly. And as we say, and I mentioned it in this slide, normalized. If we go back 1 year, you definitely have still learned from our slide last year that one of the biggest or the biggest refinery worldwide where the capacity was reduced to 50% last year. So it's, again, up and running. So things changed. Then last year, we had sanctions against Russia, a major supplier in this field against Russia. And so also the sanctions are eliminated again. So things normalized in alumina, and we are right now at the level of roughly or even below USD 300 per tonne or roughly 17%, which is in a -- let's say, and if you go back some years, it's quite a normal. I would say a normal price for alumina right now compared to the aluminum price.

So this is positive impact. Slide 8, you see the market and growth in rolled products. So the global consumption will expand roughly 3% or a little bit below 3% in the year 2019. The base again for this growth is, in particular, transport industry and within the transport industry it is the automotive industry, where we had a sharp or see still good increase in consumption.

On the other side, as I said, auto body sheet is increasing on the one side, but on the other side, of course, also, our industry is impacted, let's say, by the current developments of the automotive industry and markets.

But in general, we see growth, global growth on rolled products 2019 and also it's expected for the year 2020.

So the market is, in the mid and long run, definitely, okay. For Slide 9, what you see here is in Slide 9, this is the overall sentiment, I would say, of the market. It's a heat map of the purchaser manager -- purchasing manager indices for some countries, let's say, some regions. And what you see here is that we had in the year 2017, also 2018, everything is green and positive. So the development was quite positive there, and it's just what you see in year 2019, month by month, we go more and more into the red, which means that the overall environment is somehow worsening. And this is 10, and then we'll show it in the next slide also translated a little bit into, let's say, our industry, the demand there and also then, to a certain extent, to the Q3 results.

Yes. If we go to the results now. Slide 11 or perhaps a general introduction from my side here is that what we saw in the first half of this year was that we had -- it was very difficult first half for Metal Division for the upstream business. Aluminum price came down. Raw materials still very high, and we had an impact of -- negative impact of tariffs. This changed in the third quarter. So the tariffs were eliminated and raw material normalized, as I mentioned before. So for Q3, in upstream, we saw a very good first, let's say, third quarter. In the downstream business, the first half was better in terms of general, let's say, environment and it -- let's say, it slowed down a little bit in the third quarter.

So let's have a look at Slide 11. What you see here is the total shipments, revenue and EBITDA. Total shipments for the year-to-date are up 21,000 tonnes roughly. It's up 10,000 tonnes in rolling. It's up in casting, and it's also roughly at the level of the prior year, a little bit up -- slightly up in Metal Division.

So everything looks positive here. On the other side, as I mentioned before, the aluminum price came down by roughly USD 300 per tonne. If you add this up and say, increasing number of total shipments, decreasing aluminium price and the result is that the revenue is more or less flat compared to the prior year. In the EBITDA, you see a decline of 9%. If you go to the details, you see that let's say, in the upstream business, we are up compared to the prior year and in downstream, definitely, we are -- somehow if you add up Ranshofen business, then we are slightly down compared to the prior year.

If you turn the page to Slide 11 -- Slide 12, sorry, we have the EBITDA reconciliation, the bridge for the first 9 months. Aluminum price had an impact, as I mentioned before, this is clear. So EUR 20 million roughly. The premiums are down compared to prior year, also an impact of roughly EUR 14 million. And then we are supported by, let's say, a decrease in raw materials of roughly EUR 20 million. And then there are some other impacts and the bridge closed from EUR 120 million to EUR 109 million.

If we go to the third quarter, Slide 13, where it is just a look to Q3, you see that the volume is roughly flat. We are slightly up in rolling. So there's still growth there. We are down in Metal Division by 2,000 tonnes roughly. But this is just a reporting date, let's say, issue. This is nothing operating because the operations are working quite well in the Metal Division. So all in all, we are roughly flat in terms of shipments.

Again, combined to a decreased aluminum price, the revenue goes down for the first quarter by 7%. The positive side is now our EBITDA. We -- as I said -- we mentioned before, we had a very strong development for the upstream part of our business, the smelting, let's say, the smelter is supported by lower raw material prices and the tariff elimination between Canada and the U.S. And so the third quarter was EUR 12.4 million for Metal Division, very positive and a strong increase compared to the prior year.

If you have a look at the numbers for Q3 in rolling and in casting. So in rolling, we had an increase of roughly EUR 1 million. In casting, we are slightly down by EUR 1 million. So all in all, we had an increase from EUR 34 million to EUR 37 million.

And let's have a look to the bridge on the next Page 14. So the starting point of the Q3 2018 with an EBITDA of roughly EUR 34 million. Right now, we are at EUR 37 million. We lost, of course, ground because of the lower LME and aluminium price, roughly EUR 9 million. The premiums are also down compared to the prior year, EUR 1 million roughly the price/premiums. And the raw materials supported the result with EUR 17 million, raw materials and energy.

And as you know, we have an electricity contract in our primary division, which is more or less a formula of the LME. It goes up and down with the price of aluminum. Yes, and so we end up at EUR 37 million, a quite positive third quarter.

Look -- a quick look to the key figures, on Slide 15, it is more or less the summary. So the normal depreciation on our side per quarter are roughly EUR 20 million. So this is between EBITDA and EBIT. And so our EBIT year-to-date is roughly EUR 48 million and net income after tax is at EUR 30 million for the first 3 quarters.

Slide 16, I think this is a highlight for this first 9 months. So a very strong operating cash flow. So it's roughly at the level of EBITDA. So the increase is EUR 82 million compared to the prior year, so really strong to a certain part. It has to do with the reduction of working capital, also partly driven by lower prices for aluminum. It has also to do with some tax implications with advanced payments, which we are still, let's say, which [was down] perhaps to the next year. So there are still some implications in it. But all in all, also from the operating side, very strong. And so 4x the value of last year.

In terms of investing activities, roughly at the level of last year. And if you add up the cash flow from operating activities and cash flow from investing activities, you see a free cash flow of plus EUR 50 million for a 9-month period, which is really strong.

A quick look to the divisions. Metal Division, to summarize it again after a difficult start into this year, a very strong first quarter with EUR 12.4 million. The second quarter was EUR 5 million rough, then the third quarter was around [0]. So you see that things are getting better here. And I would expect also for the fourth quarter, a very good fourth quarter for the Metal Division, of course, always depending on tariff discussion, sanctions, trade barriers. But what we see is that the fourth quarter should be quite good also for metal again.

Look to the Casting Division. Casting Division, main industry which is supplied by casting is the automotive industry. We can read it in the papers on a daily basis that there are some issues in this industry right now, in particular, in Europe, of course. We see it in the volumes, also in the margins. So we are slightly down here in the fourth quarter. All in all, I would say this type of run rate will continue also in the last quarter of 2019.

And a quick look to the Rolling Division. Again, after a good start into this year, it was definitely more difficult in Q3 and what we expect for Q4 is also, let's say -- an interesting, let's say, Q4 because what we see right now at the market, or what we saw in the last weeks and months are somehow lower activities in terms of order intake and also some pressure on the prices.

So what we expect for Q4 is definitely a difficult fourth quarter for rolling. But all in all, we are quite positive in the mid and long run here. The volatility is high right now and the visibility is low. I think this is how it can be summarized. All in all, our -- let's say, our ramp-up is well on track. I think we are developing quite positive with the new plant. So a lot of positive things are also to mention here.

Yes, some words to the outlook, I tried to include it also when I talked about our divisions. All in all, in the mid, long run, attractive growth rate -- growth rates also and I showed it for the year 2020, but we expect also what the expectation is, in principle, a positive one. As the order intake now defines very much also, let's say, the level of earnings next year. In particular, in the downstream business. We know that is price-wise, margin-wise, it will be definitely more difficult than this year. The visibility is right now low, but we will have, on the other side a quite positive from today's perspective, year 2020, let's say, for many industries like the aircraft but also for the upstream business, means primary metal. So we also expect a good year 2020. So yes, interesting times, I would say, right now and I mentioned that our EBITDA forecast for 2019 is between EUR 125 million and EUR 140 million. And for the next year, it's still too early. We are now in the budgeting process. It's still a little bit too early to talk about that, and we will give you some guidance here when we publish our Q, let's say, our full year results end of February next year.

So this was our overview about, let's say, our Q3 results, and I'm happy to answer your questions. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And the first question comes from the line of Markus Remis of RCB.

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division - Chief Analyst [2]

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First question, please, on the rolling segment. Firstly, if you could maybe quantify the decline in the order intake that you have observed in the last quarter? And also I would be interested to hear about, say, the end market where you currently feel the most intense price pressure? And I would also be interested to hear if that is only coming from lower demand or if that is also kind of induced by the rising imports from volumes outside the EU.

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

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Yes. Markus, thanks for the question. For what we saw in the last quarter is that, let's say, some -- it was a little bit, let's say, below the prior yearly order intake. It was not too much away, but it was a little bit below in terms of volumes. The areas where it is weaker is, in particular, I would say, the distribution business. And then -- and what we think is that in distribution, you saw the PMI heat map. And it is perfect. The short-term business, what we have is normally the distribution business. What we feel is that they are destocking somehow and are also reducing the lead times, which is for us, a clear sign that we -- for this, let's say, a slight downturn we would see right now. So it comes mainly from the distribution business and the distribution business goes into many, many industries. And of course, also to the automotive industry.

What is -- you also asked about the China, and let's say, this is clearly mentioned it in the last, I think earnings call, where -- the release for the first half. What we saw in this first, let's say, up to now in 2019 was the metal -- that the flow of metal was changing. So in the past, we had more, let's say, exports from China to the U.S., this changed, it decreased. On the other side, we saw increases into Europe. And this, of course, added pressure to the prices also, in particular, for the distribution type of business and for the, let's say, standard type of products and less for specialty type of products. But we also saw some input from Russia. And on the plate side, which also put pressure, let's say, on prices and margins. So this is simply the case. So the price level, in particular, for distribution is right now definitely below if I could compare to the first half of 2019.

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division - Chief Analyst [4]

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Okay. So to just get it right, the distribution essentially means the wholesalers, right?

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

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What again?

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division - Chief Analyst [6]

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The distribution -- when you said distribution business that actually means the wholesalers?

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Gerald Mayer, AMAG Austria Metall AG - Chairman of the Management Board [7]

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The wholesalers, the distribution from -- in our business, we sell roughly, I would say, directly to OEMs, let's say, who are including packaging, perhaps 60% -- 50%, 60% go directly to these producers and the rest is normally done via distributors. And distributors will fulfill logistics functions, stock gains, some service centers and so on. And so they have certain functions in our industry. And yes, normally, and they also have the purpose, let's say, for the producers. And then what we see right now is that they are -- we see a downturn, in particular, in this side. On the other side, we also have some positive developments like aircraft and so on is still very positive. So it's a mixed picture.

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division - Chief Analyst [8]

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Okay. Then can I also ask you regarding the volumes you expect for the current year? I think you mentioned that 240,000 tonnes would be realistic. Is that probably a bit too ambitious now? Would you say 235,000 maybe? Or...

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Gerald Mayer, AMAG Austria Metall AG - Chairman of the Management Board [9]

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I think it's even below. So what we see right now is that I wouldn't even expect 230,000. We will definitely, from today's perspective, below this number.

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division - Chief Analyst [10]

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Okay. Okay, got it. Very clear. And then on your upstream business. I've looked at the kind of alumina price as a percentage of LME in the history. And would you say that a level of [17%, 18%] would result on an annualized basis (inaudible) particles roughly EUR 40 million as an annualized EBITDA contribution? That kind of the run rate would you see realistic, after all this realigning process that has been done in the recent past...

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Gerald Mayer, AMAG Austria Metall AG - Chairman of the Management Board [11]

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Markus, what I can tell you here is that we saw roughly EUR 12 million in the third quarter. As you know, the smelters run 24x7. The annual production is roughly our stake, 120,000 tonnes, very stable. And if the alumina price stays where it is, the aluminum price, of course, energy is depending on the aluminum price. If this is as it is right now and stay where they are, then the run rate mostly what we saw in Q3, roughly, plus/minus something but up [to 5 8]. So it's quite good right now.

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division - Chief Analyst [12]

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Okay. Last question on your investment budget. Can you update us for '19 and maybe also already for 2020?

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Gerald Mayer, AMAG Austria Metall AG - Chairman of the Management Board [13]

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I would say, around -- for the year 2020, around EUR 18 million. But this is at the area of the depreciation, I would say, so somewhere, under there.

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division - Chief Analyst [14]

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And for the current year, it's...

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Gerald Mayer, AMAG Austria Metall AG - Chairman of the Management Board [15]

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Also [up to 5 8] Yes, similar.

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Operator [16]

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The next question is from Christian Obst of Baader Bank.

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Christian Obst, Baader-Helvea Equity Research - Analyst [17]

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Just have 2 questions. First is operating cash flow. You mentioned that several times, very strong, some tax payment postponed into the next year. Can you give us an indication for that amount? And the working capital reduction, is that also like the entire distribution channels that you see some kind of destocking, which will go up again in the next year? Or is there some kind of structural working capital reduction? So it's not that kind of high fluctuation going forward. So what will be the impact on working capital? And on the free cash flow, what will be the working capital impact on free cash flow in the next 2 quarters? And then on casting, is it going mainly to the automotive industry? And of course, there are some structural changes. Do you experience some kind of structural changes in the demand from the automotive industry? And maybe if that is the case, you have to adjust maybe your production there on that side or looking for new customers.

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

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For your first question, taxes. I would say the impact of advanced payments, which are postponed. It has to do with our tax group structure in Austria. So we changed it last year, and we did not [up to now]. In general, normally, of course, you expect to pay taxes at the same time during the year, for the current year. And as we changed this structure, up to now, we did not pay advanced payments in Austria for this year. So -- and the impact, I would say, is roughly EUR 10 million to EUR 15 million, so which we have to expect in the next year. This is tax.

Regarding inventory. Our inventory, we have 2 aspects here. The first thing is price. The second thing is volume. Price came down and, of course, significantly impacts the working capital. On the other side, we had volumes. Volume is not down compared to the prior year. It's even up compared to prior year. And what we expect for Q4 that it goes down a little bit because this is a seasonal anomaly effect that at the end of the year we have less than during the year.

So I would say the bulk of the impact is more, let's say, a price issue then or not an issue. It's positive in this side than the other way around. So -- and now as long as the, let's say, LME or the aluminum price stays as it is, there's no plus and no minus from the price side. And as I said before, until year-end, I would say, inventories normally should go down a little bit and then normally goes up a little bit with the production catching up in the first quarter next year.

Sorry, second question, casting. Sorry. Thank you. For Casting, of course, yes, we supply. Of course, it goes -- we supply foundry alloys for engines, for gearboxes and so on and so forth. With the new trends let's say, for electrical vehicle, in general, in the very long run, we definitely know that this is an area which we have to address what to do, let's say, and what are the main products in the future. But there are good chances to go into, for example, structural parts, which are still in the auto and you need them, the foundry alloys for structural parts, for example.

And right now, what we also see is or expect is that in the next years we don't see a structural downturn in the mid-run, at least because all the plug-in hybrids, they have both, there's an electrical engine and, let's say, a normal combustion engine inside with all the equipment. So what we expect, let's say, for the next minimum 5 years, is not a big impact. What we see the downtrend right now has to do with today's market and the general discussion right now and the production levels in the automotive industries are down. Yes, so -- but in general, I would say, also for the next year, it just stays stable.

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Christian Obst, Baader-Helvea Equity Research - Analyst [19]

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Okay. Maybe one additional one related to concerning free cash flow, working capital issue. So if we say everything is almost equal when it comes to prices and volume, what kind of free cash flow generation one can expect for AMAG, having in mind that, of course, you have an ongoing volatility in pricing and volume going forward. Do you have some kind of a normalized...

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Gerald Mayer, AMAG Austria Metall AG - Chairman of the Management Board [20]

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Normally, you have the model and I have my model and that...

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Christian Obst, Baader-Helvea Equity Research - Analyst [21]

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What is your model?

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Gerald Mayer, AMAG Austria Metall AG - Chairman of the Management Board [22]

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This is what we normally don't share and you know that. But EBITDA minus slight, let's say, changes in working capital, minus interest in taxes and you are anyhow there. So it is definitely not the level of EBITDA, which we see right now. It is below that, of course. Excellent. Very good.

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Christian Obst, Baader-Helvea Equity Research - Analyst [23]

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Maybe just one last question is on the cost side. Do you see any impact where you have structural long-term increase on the cost side above some kind of normal rates, be it on personnel costs? I think there will be some relief because you are now ramping up as you have the personnel. So there might be some relief. But on the energy side or on the distribution side, is there any cost item where we should have a closer look at?

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Gerald Mayer, AMAG Austria Metall AG - Chairman of the Management Board [24]

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I would say, personnel, you are not wrong, so this is definitely okay. And for next year, we just learned yesterday in Austria and with the pack of our people here, we expect an increase of 2.67%. So it's okay. And this is also what we expect, I would say, in the long run. If you talk about energy, I think it will be a general discussion situation. We are also curious how things will develop here. And if we talk about CO2, for example, how this will impact and influence our cost structure in the next year. But this is, I would say, unsourced. And right now, and up to now, it is okay and not too bad. And energy, in general, it's also the bulk in energy cost, the CO2 from today's perspective. So it will be interesting how this develops. But all in all, I would say, it should stay roughly stable.

As you know the plant is built, we know roughly what we have per tonne of maintenance, OpEx and CapEx. So this is quite, quite stable. We are capital intensive. The plant is invested. And so this is what we'll roughly know. So the cost structure itself, I would say, it's quite stable and the extraordinary impacts is still the current discussion, which we all follow daily in the news. It's how things developing regarding CO2 in the environment.

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Operator [25]

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The next question is from the line of Michael Marschallinger of Erste Group.

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Michael Marschallinger, Erste Group Bank AG, Research Division - Research Analyst [26]

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The first one is on the outlook and the volatile markets as you mentioned, if you could talk a little bit more about automotive just to get an understanding of when you talk to all the OEMs, what is the sentiment at the moment? Is it getting better? Or do you think we reached [top of gains] for '19 and what is expectation for 2020? This will be the first. And the second, just to clarify, the 6% decrease in shipments in the Metal Division it's just an accounting effect possibly, (inaudible) this effect on the fourth quarter, if you could explain that?

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Gerald Mayer, AMAG Austria Metall AG - Chairman of the Management Board [27]

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I start with Metal Division. Yes, it is a reporting date effect. You have to understand, we shipped the metal -- let's say, in a continuing way from settle in Canada to our customers, and we have certain income terms, input terms, and we are on one, let's say, in 1 quarter, the ship leaves, let's say, settles at the 31st or at the last day of the month and the next month it could be -- for the next quarter, it could be, let's say, on the first of the prior, let's say, month. And this, of course, has an impact. All in all, the run rate is good. We are at the run rate right now, I would say, of 120,000 annual tonnes. And this is what -- so this does not mean on a monthly basis if you would say. We will be right now after ramping up the plant at 120,000 tonnes run rate right now. So no, operations are going well. And in case, we managed to ship everything produced by 31st, it will be compensated to offset, let's say, in the fourth quarter. In case the ship left, let's say, settles 1 or 2 days later, then you have a similar impact again. But this is the normal game, I would say, in our business there in settle. But the message is, everything is up and running 24/7 on a run rate now of 120,000 tonnes roughly. So this is upstream.

Your question regarding automotive, what we saw up to now this year, and that we also expect in automotive production and automotive shipments, but from our side, with our new plant, we managed to get new contracts, let's say, from automotive. So on the one side, we have a downturn in the market. We are definitely below our expectations because of this downturns. But in reality, if you compare year-to-year, you see an increase in automotive volumes, and this is what we also expect for next year. So we have denominations. To a certain extent, we are also affected by, let's say, a lower what is actually then placed.

And what you also -- perhaps one thing also to mention here is, if you are a serious startup, new cars to go to the market as we saw it this year, in particular, this is one important model for us. If you have some postponement there, and we saw some postponements there. Then, of course, it immediately results in lower volumes and this is also something we had this year. And just -- but I would say a normal development. And if you are in new models, then it's of course, interesting how these models are sold and are they a success story for the producer or not because we are participating in success stories, and we're also suffering if it's not a success story, and this is the difficulty, I would say, in this market. But it is, in general, I would say, of course, given the fact that, let's say, the general technologies I discussed. It's -- and with all the trade issues we have, the Dieselgate still a discussion. So it is -- it's not easy right now in this market, but the overall, let's say, expectation from our side is that we will see growth in the mid and the long run. And for us, definitely also next year. We have contracts in place.

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Operator [28]

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We have a follow-up question from the line of Markus Remis of RCB.

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division - Chief Analyst [29]

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Yes, just a bookkeeping question, actually. In the earnings bridge, you presented, can you maybe detail a bit, the other block is EUR 12 million, Page 12?

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Gerald Mayer, AMAG Austria Metall AG - Chairman of the Management Board [30]

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One second, I'll just flip to the page. It is Slide 12, if I guess you mean the Q1 to Q3. And in other, there are some valuation effects in it, which we -- where we had positive effects last year. You definitely remember that we had, I think roughly EUR 4 million, EUR 5 million that we had to change. We were forced to change the way to -- how do we account for. I think it was spare parts and so on. So this is there. It was positive last year, and then this did not [a Q segment] in this year. And then we had some evaluations, in fact, regarding personnel costs, we have different interest rates right now, for example, surely let's say, provisions, which we have to do and this go into the P&L. So I would say, half and half, roughly, is this valuation effect regarding as I said spare parts and the other things, refer mainly to personnel.

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division - Chief Analyst [31]

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All right. Okay. So that I guess that's a provision that is...

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Gerald Mayer, AMAG Austria Metall AG - Chairman of the Management Board [32]

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Part of it is this provision, but it's not cash...

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division - Chief Analyst [33]

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In the cash flow statement?

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Gerald Mayer, AMAG Austria Metall AG - Chairman of the Management Board [34]

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Yes.

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Operator [35]

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(Operator Instructions) And there are no further questions at this time. I'd like to hand back to Felix for closing comments.

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Felix Demmelhuber, AMAG Austria Metall AG - Head of IR [36]

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Okay. Thank you very much for joining this call, and we wish you all a nice day. Thank you.

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Operator [37]

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