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Edited Transcript of AMAG.VA earnings conference call or presentation 27-Feb-20 8:00am GMT

Full Year 2019 AMAG Austria Metall AG Earnings Call

BRAUNAU AM INN OBER Mar 19, 2020 (Thomson StreetEvents) -- Edited Transcript of AMAG Austria Metall AG earnings conference call or presentation Thursday, February 27, 2020 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 - CEO, Chairman of the Management Board

* Helmut Kaufmann

AMAG Austria Metall AG - COO, CTO & Member of Management Board

* Victor Augusto Laudano Breguncci

AMAG Austria Metall AG - Chief Sales Officer & Member of 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

* Rochus Brauneiser

Kepler Cheuvreux, Research Division - Head of Steel Research

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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 Stewart, your Chorus Call operator.

Welcome, and thank you for joining the AMAG Austria Metall AG Full Year Results 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 of the present time.

In the event that the assumptions underlying these forecasts proves to be incorrect, targets be missed or risks materialize, actual results may depart from these 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.

The presentation is also available in German. In cases of doubt, the 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 2019 financial year. On the call today are our CEO, Gerald Mayer; our COO, Helmut Kaufmann; and our CSO, Victor Breguncci.

After the presentation, we will have a Q&A session.

Before we start, I'd like to remind you that the press release, the presentation and our annual reports were published on our website at 7:30 a.m. this morning.

Now I would like to hand over to Gerald.

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

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Thank you, Felix. Good morning from our side to the presentation of our financials 2019, including an update about all the activities and strategy at AMAG this time.

I would like to start with the first slide of our presentation, with the highlights slide. We saw an increased number in shipments by roughly 4% in 2019 compared to 2018. Revenue was down a little bit, slightly below the prior year and the main reason was the aluminum price. So despite higher shipments, we were down in revenue a little bit.

On the other side, EBITDA was growing a little bit compared to the prior year. We ended the year, finished the year with an EBITDA of EUR 143 million compared to EUR 141 million in the year 2018.

Net income, income after tax, ended at the level of EUR 39 million. This was roughly expected, and so we are slightly below the previous year. What was very positive was -- were the cash flow numbers, so we had new records for AMAG for the cash flow from operating activities and also for the free cash flow number, and I will elaborate on this a little bit later.

On that -- based on that, we will propose a stable dividend of EUR 1.20 per share. And this more or less summarizes, I would say, the financial part of the year 2019.

On the operating side, what we did last year is we finished off, fully finished off and completed our sites expansion project AMAG 2020 successfully. And we talked a lot and discussed a lot about strategy, and we defined a new strategy for AMAG, which is called Al4future.

And last but not least, in the highlights page, guidance for 2020 is not possible now for us as it is way too early given the uncertain market environment.

Let us flip the page and go to Slide 3. We call it a magic story, the AMAG success story. And I would like to pick you up now and show you a little bit and bring you, let's say, to the strategy we defined.

So in terms -- let's say, let's go back 25 years. 25 years ago, AMAG was privatized. We have a 80-year history, roughly, and we were privatized in the year 1996. At this time, our volume produced in our, let's say, on the site in our rolling mill was roughly 60,000 tonnes.

2011 was a very important year for AMAG. We successfully IPOed our company. And this built the base for a stable ownership and shareholder structure.

In the following years, we managed to get good core shareholders for AMAG. And this, again, built a base for 2 big expansion projects. All in all, in the last decade, roughly, we invested roughly EUR 1 billion on our site in Ranshofen. And this is now the baseline for the future. And the future, as we define it and call it, Al4future, our new strategy, which we will start this year, and we will start this decade, as we say, with a firework of new products, so a new products firework. And my colleague, Helmut, will give you some more insight a little bit later.

Talking about strategy -- Strategy, Al4future, next page. I want to give you the base. The basic situation is that we still have attractive market growth in aluminum and for, let's say, semi-finished rolled aluminum products, in particular, in the world of specialties that AMAG is.

We have, based on our, let's say, expansion projects, which we completed. We still have capacity to be used, roughly 70,000 tonnes. We are internationally, let's say, a well-recognized quality supplier of aluminum products with a very high core proportion of specialty products. And we are definitely the top player in the market in terms of sustainability and recycling. In addition to that, as you all know, our raw material base is secured with our, let's say, stake in Alouette smelter.

On the other side, of course, there's always a flip side of the coin. We have challenges, I would say, not just us, there are uncertainties in the market, in particular, right now, are big. We have the sustainability requirements, which we can read all -- every day, more or less in the news. But this exactly fits to our DNA. So we are a company where, let's say, sustainability recycling is almost always and will always stay, let's say, in the top line of the strategy.

Yes. We have difficult times, I would say, in the automotive industry, we have trade conflicts. And of course, the increased, let's say, and changing global competition is what we have to bear in mind. So this is the base more or less for our strategy.

And what -- I would now give you an overview on Slide 6 of our presentation. Strategy, Focus On Sustainability And Specialty is the sub headline here. And this summarizes more or less where we see AMAG also in the future, means that 2 key elements for the future. And the 2 main pillars of our strategy is that we want to have leadership in terms of innovation and sustainability. And the main pillars we derive from these 2, let's say, main key elements are that we, first of all -- product innovation is very important. And what we do, specifically, is that we start this year. We're roughly in the middle of the year, we will have the inauguration or opening ceremony of a new Center for Material Innovation. Helmut will talk a little bit later about it.

Secondly, what we also will do is we want to streamline and strengthen innovation by, let's say, optimizing our portfolio through the direction of specialty products.

As I mentioned before, we will start this decade now, the year 2020 with fireworks or new product fireworks. This is what we will do. We will do a lot of innovations this year and start this decade that way.

As I said before and mentioned before, sustainability is and stays our DNA. We will strengthen that by constantly expanding our recycling center in Ranshofen. So this is also decided, we want to go into that direction. And all that innovation and recycling is also, let's say, more or less supported by a well-structured digitalization strategy. The go-to-market strategy is also well defined. We have a new CSO on board with Victor. He started roughly half a year or, let's say, 9 months ago. He is on the table with me today, and he will talk to you a little bit later regarding the market and what for us is very clear.

Next to, let's say, product innovation. Next to sustainability, it is really very important, given, let's say, our market position that we have to sustain and improve the high, let's say, service level in terms of customer service. Delivery, let's say, reliability, deliver with high delivery performance, high quality as we always call it.

So this gives you now an overview of how we see and how we want to develop, into what direction, our company and our group in the next years. And Helmut will now give you some more insight into that direction.

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Helmut Kaufmann, AMAG Austria Metall AG - COO, CTO & Member of Management Board [4]

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Good morning from my side. Helmut Kaufmann speaking. I will continue with Page 8.

Gerald already mentioned that in June of this year, we will open our new Center for Materials Innovation, CMI. The reason why we decided to go into an expansion here is that the focus is on material product, process development to fulfill our strategy of increased volumes of specialty products.

We have a larger number of researchers active in our team, currently roughly 150 employees working R&D. Specialty products, specialty companies, automotive, aircraft and so on require high level of material testing. So the testing portion of this center is growing. And all of this will support our new products firework.

And if you look at page 9, what does it mean? If we talk about the firework, within this year, we claim that we will bring 30 new products to the market, step-by-step, with maybe the highlight being the world's largest aluminum player in Dusseldorf in October of this year.

It is also important to mention that these 30 new products were mostly possible because of the new plant. So this is already the benefit of the new plant. We can offer different sizes. We have different new facilities of state-of-the-art equipment, and this allows us to develop and produce new qualities.

We also -- Gerald mentioned our digital focus. We have a digital strategy in place. And so we were always looking for enhancing our products with some digital services. And one of the very interesting things introduced to you on Page 10 is the so-called coilDNA. Our customers have the need to check, for example, where producers come from, when a product was produced, under which conditions it was produced. And AMAG last year patented a new technology. Looks simple with a code that is printed on the sheet or plate products. And as is indicated in the picture here, even after slicing or slipping or cutting across such a band of aluminum, the code allows anywhere in the world to find out where and when and how a product was produced. So we patented this. We offer this, starting now, also to other companies in the world, but especially as an add-on to the AMAG sheet metal, plate metal that we supply to our customers.

Page 11 focuses on aluminum recycling. We are still, to our knowledge, the largest single site of aluminum recycler in Europe. Last year, as you can see, we more or less kept the level of the year before with 364,000 tonnes of scrap. They went into high product -- high-quality product again. This was done with the help of state-of-the-art, again, new digital equipment for sorting -- for analyzing and sorting technology introduced in the 2 years before, the so-called XRT and LIBS technologies.

We are still capable, despite the growth of production volume in Ranshofen to keep the scrap rate high, somewhere in the range between 75% and 80%, which we defined as a target even for the further growth that we are aiming at. In order to ensure this, Gerald mentioned this before, we will grow our recycling center Ranshofen with additional state-of-the-art activities in this area, which takes me to Page #12.

Looking at energy consumption or CO2 emissions, we can also say that we significantly improved over the past couple of years with numerous activities that we took. And if we look at the diagram in 2007, we had roughly 0.3 tonnes of CO2 emission per tonne of production in Ranshofen, and basically, we could have only 50% of this last year. This was, on the one hand, done because of the latest state-of-the art investment in environmentally-friendly production facilities. Also, we purchased only renewable energy anymore. And in addition, we closed loops, for example, a utilized heat that was containing in cooling water in the cast house, for example, which was a very efficient activity of saving energy.

Alouette, indicated on Page 13 -- we informed you about this before -- is a very positive smelter with, let me say, very low compared to the global average or even compared to the smelters that run on coal-based energy. We use less than, let me say, 1/6 roughly of the global average in terms of CO2 emissions in our smelter rate, which is based on hydropower only.

So this was it from my side. And I would like to hand over to Victor, who will tell you now about the market and the shipments of last year.

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Victor Augusto Laudano Breguncci, AMAG Austria Metall AG - Chief Sales Officer & Member of Management Board [5]

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Thank you. Thank you very much, Helmut. And as Gerald said in the beginning, it's -- I've just joined the company 6 to 9 months ago. And I've spent this time having my personal diagnosis on how things are working and how we relate to the market and to the customers. And I have to share my positive and very strong appreciation for what I have encountered in terms of team. I have a very strong team working with me. And -- but as important as that, and together with the pillars of sustainability and innovation at its core, we have a very strong customer centricity at the core of our strategy. So the relationship we have with the customers and what we do together with them is something that in my 22 years of experience is something that really brings me a lot of proud.

So coming to the slides, on Page 16 we are talking about primary aluminum demand. The fundamentals are there. If you look at the next 10 years, there is an expectation of growth, a CAGR of 2% per year, which is very much pushed and pulled by the demand from the transport and packaging industries as we're going to see. So we are at the right place with our participation at Alouette. And when we go into rolled products, this is -- as I said before, the growth is there. The fundamentals are still there, despite short-term volatilities, short-term impacts we might have here and there. But we are at the right place at the right time with the right position and strategy in rolled products.

So to bring some numbers to what I'm saying, on Page 17, what happened with the market last year is, as we said, as you can see, it's 6% growth in the aluminum demand. As, yes, Gerry, you were saying, a 6% growth in transport, pulled by transport and automotive. And construction is also a very strong impact and packaging. So these are fundamental elements of the aluminum consumption.

So the CAGR consumption at 6% in transport is something that really puts us in a differentiation in terms of growth for the next years.

As Gerald said, we still have some room to grow in our ramp up. And this is one of the main targets we have for our strategic plan. And the fundamentals of the market are there to support us.

So what does that mean to AMAG? So as you can see on Slide 18, our shipments in tonnes are growing 4% versus last year, which from '17, '18, '19, you're seeing that the growth is there. We are ramping up as expected, but most importantly, respecting the pillars of our strategy. We have recycling sustainability as a core element, we have the specialties market as a core element. And as you can see, we grew versus '18, in all divisions that we have a go-to-market strategy. So the Metal Division, 3,000 tonnes more. In the Casting, we're almost 7,000 tonnes more than versus '18. And in Rolling, with -- where we are really ramping up and getting access to our capacity, we grew 5.5 kt.

So in other words, when you look in the -- how this growth happened, we grew, in Page 19, as you can see, 6,000 tonnes in aircraft. This is a strong pillar of our strategy. We are a very relevant supplier to the aircraft market, we grew last year around more than 25% versus '18, which is a representation of the agreements and contracts we have signed the year before. Interest -- in automotive, as you can see, also grew 6,000, which is around 30% growth year-on-year against 2018. These are 2 very strong pillars in our go-to-market strategy for the Rolling Division. Last but not least, also packaging is an important element. We grew 5,000 tonnes in the packaging division, so which brings us -- again, we are executing our strategy of respecting our specialty, our innovation and our recycling pillars.

Last but not least, and as a token of the representation of what does that mean to us? We are very honored to be awarded by Airbus, the Accredited Supplier award. This is -- this award is a transparent reflection of this excellent delivery of our strategy. So we were awarded this prize this year, which has to do with our delivery, reliability and excellence in product quality, and as I said before, our intimate relationship with the customer.

So I'd like to close the presentation, this part of the presentation with this note, and I hand it over to you, Gerald. So you can carry on.

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Gerald Mayer, AMAG Austria Metall AG - CEO, Chairman of the Management Board [6]

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Thank you, Victor. So now on the next pages, I would like to show you how this all translates into our numbers.

So the summary for me in the year -- as a summary for me the year 2019, it was an interesting year. And you could easily split -- interestingly split the whole year into 2, let's say, 6-month periods.

In the first 6 months, we had a very weak, let's say, upstream business, still struggling with low prices or high prices in raw materials, on the one side, and quite a strong first half for downstream. In the second half, it was somehow different. So upstream business recovered. On the other side, the pressure increased on our downstream business, and this is what we can see. Very strong, as I said at the beginning, where cash flow numbers and EBITDA was also quite good, given the environment with an increase of EUR 2 million.

So Slide 22 shows you the aluminum price trends. It is unfortunately down, the average number down compared to fourth -- to the prior year is minus 14%. This is also shown on Slide 23, where we show also in addition, a decrease, a sharp decrease of the average alumina price. And as you all know, it takes 2 tonnes of alumina to produce 1 tonne of aluminum. So this decrease, of course, was helpful, and this is reflected in the -- in particular, in the second half numbers of the Metal Division, when the overall numbers of the Metal Division at the end of the day.

If we flip the page to Slide 24, you see the revenue numbers. So our revenue, as I mentioned in the beginning, slightly down from EUR 1.1 billion, minus EUR 40 million roughly, despite the higher volume. The higher volume has an impact of roughly EUR 30 million, on the one side. On the other side, it is more than negatively compensated by low -- because of lower prices, and in particular, the price for aluminum, as it is shown on the graph at the bottom of this slide. So all in all, minus EUR 40 million in revenue.

Next slide, Slide 25, AMAG's group EBITDA. Yes, as I mentioned, it is slightly up, EUR 143 million. So I think, it was another successful year for AMAG in terms of EBITDA. And if you look at the bottom of this graph to the split, the divisional split, you see that in Metal Division, we were up EUR 11.5 million. You also see here that we are up roughly EUR 11.5 million in the Rolling Division. But I have to address here that this has also to do with an impact of you, let's say, of the introduction of IFRS 16, the new IFRS standard for leasing, accounting for leasing. And the impact is also mentioned here on the slide.

So you see more or less a flat development for rolling and for casting. This is what we have to mention here. And also in service, the negative deviation in service is more or less caused by this new leasing standard because it was just a shift from the operating -- from the Service Division to the Operating, Rolling and Casting divisions.

Slide 26, the EBITDA reconciliation. No impact from IFRS 16, of course, in the overall numbers. So the starting point was EUR 141 million, as I mentioned. We lost because of the lower aluminum price, roughly EUR 26 million. We lost another EUR 9 million because of lower premiums, aluminum price premiums. And again, as I mentioned before, alumina price, in particular, but also energy was cheaper for us. And so this compensated, again, or filled the gap and compensated for the negative development in the pricing situation.

Volume and mix is positive, it's plus EUR 11 million. And then, of course, we always have some other impacts. And this also add up to roughly EUR 10 million. So all in all, a slight increase from EUR 141 million to EUR 143 million.

Net income after tax, the reconciliation from EBITDA to net income is shown on the next slide. You see our depreciation more or less, this is the run rate depreciation or roughly, after we finished off the bulk of the -- our big projects, EUR 82 million. This gives an EBIT of EUR 61 million, slightly above prior year.

Net financial result, minus EUR 10 million, there's also included an evaluation effect of roughly EUR 2 million, EUR 3 million. Then we have the income taxes to pay. This, I would say, is a run rate income tax number. And this gives then EUR 39 million. What I would like to point out here is that in the comparing periods, 2018, the tax rate was lower for a certain reason.

In Austria, we have our tax regime, and we changed the tax group in Austria, and this had a positive impact in different -- on deferred taxes. So we are down compared to the prior year, which was a EUR 45-roughly million net income, in particular, also because of a lower tax line and because of devaluation effect in the financial result.

As I mentioned before, on Slide 28, you see the very positive development also in longer -- let's say, in comparing many periods. Now since our IPO, it was by far the best year in terms of operating cash flow. It was really strong. It was not far from our EBITDA. Also included here is one effect, roughly EUR 12 million or EUR 10 million because of income taxes, which we will pay for the years of 2019 in the year 2020. But also excluding this tax effect, it's still a record operating cash flow.

Slide 29, free cash flow also, top level free cash flow for AMAG. If we compare the last, let's say, 8, 9 years, definitely, top; it has the 2 -- on the one that, of course, the base is the operating cash flow and a normal run rate, I would say, more or less of CapEx gives you the cash flow of more than EUR 60 million.

Slide 30. 30 gives you an overview of the main key figures, KPIs, balance sheet, net financial debt, gearing. You see the balance sheet is sound, 41% of equity ratio. Financial debt was reduced to EUR 290-roughly million from EUR 311 million, of course, based the positive cash flow. And gearing is also down. Of course, this is -- shouldn't be then a surprise. Based on that, given the stable result, given the very positive cash flow, we decided to propose to our general meeting, which is held on 15th of April 2020, a stable dividend of EUR 1.20, which gives you roughly a return of 3.9% dividend yield.

In terms of dividend policy, perhaps one interesting thing to mention, we said and discussed it within our Board that in the future, as it was in the past, the policy should be to pay out half of our net income, a minimum dividend of EUR 1.20, so as we pay this minimum dividend of EUR 1.20 as long as we are not, let's say, really below this EUR 1.20 per share in the net income line item. So if you have a material, let's say, if we miss this target of EUR 1.20 materially, then we would adjust, of course, also the dividend proposal. But for this year, EUR 1.20 is the number.

Slide 32. I think this is the summary of the financials. I would like to skip it here and we'll have a quick view to the divisions.

33, you get, once again, an overview of the Metal Division. You see the year ended, the graph to the right shows you that it ended at EUR 34.5 million in EBITDA. It was significantly above a difficult year 2018. It was still somehow below 2017. But we are now, I would say, at a good run rate. And we are quite optimistic for the year 2020 as long as markets stay more or less, let's say, stable, of course.

Yes, the -- from the operating side, all, more or less, all the pots are running. We came through a cycle in the last year of pot relining activities. We finished all the pot relining activities of more or less by mid of last year. So the run rate in the second half was, I will say, reflect a normal performance of our Metal Division.

Casting Division, again, a good year, and this despite the fact that we had pressures from the margin side. Of course, it was very helpful that we modernized some facilities, in particular, in the year 2018, where we finished off some modernization activities. So it was possible to increase the volume, and the higher volume compensated, let's say, the pressure on the margins. And so we are at the level in terms of EBITDA of the comparing period 2018.

Regarding the Rolling Division, on Slide 35, you see that we end year at the level of EUR 107 million roughly. But please bear in mind that there is also a reclassification effect included. I mentioned before, the introduction of IFRS 16, the impact for Rolling is EUR 14 million. If you deduct the EUR 14 million from the EUR 107 million that you're -- then you are roughly at the level of the year 2018. Markets were difficult, in particular in the second half of the year with some pressure, in particular, in the distribution parts of the business. And I think all the situation in automotive has not to be mentioned here, of course, we're also supplying these areas. Victor told you before that we were able to increase volumes. But all in all, it is a market which is definitely changing right now and under pressure.

This brings me to my last section, means the outlook. All in all, what we heard and learned from Victor, we have attractive growth rates in our business, primary aluminum is growing, rolled products are growing by 2% or 3%. So -- and this is also roughly the level of what we expect in growth in terms of volumes for the financial year 2020.

We will see growth from today's perspective, also in the Rolling Division in the year 2020. I mentioned that we have spare capacity for roughly 70,000 tonnes. We have contracts in place, which should bring us to the situation where we also see additional volume 2020 in rolling.

All in all, given the current environment, which is, I would say, the visibility is very low. It's like traveling in the fog right now with all the let's say, extraordinary, let's say, things we see in the market from, let's say, changes in automotive from the pressure, I said from -- in distribution, which reflects a little bit uncertainties, in particular, let's say, from trade conflicts and so on, tariff situations. And now in the last days, we also learned about corona, where no one knows how it really will impact and influence our market. So it's still too early to give you an outlook.

So this was it for the time being. And now we are happy to answer your questions.

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Felix Demmelhuber, AMAG Austria Metall AG - Head of IR [7]

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Thank you very much. Now we can start with the Q&A.

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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 Rochus Brauneiser from Kepler Cheuvreux.

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Rochus Brauneiser, Kepler Cheuvreux, Research Division - Head of Steel Research [2]

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A few questions from my side. The one is on the actual performance of your business in Q4 versus your previous expectation. I think it was a bit confusing that you have just cut the guidance, not long time ago and now you're beating the guidance. So would be of help if you could give us a better sense, where you trimmed your expectations? And where you have come out finally better than expected?

And secondly, in this context, it would be also helpful if you can explain the strong services result in Q4, which was EUR 11 million, and it was the strongest quarter in the whole year so far? Maybe I have another question afterwards.

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

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Yes. Thanks for your question. So first of all, what this has to be included in the last quarter is that we have valuation effects of roughly EUR 3 million, which were included in the fourth quarter. So if you deduct that we are, of course, at the upper side of our bench. But yes, and as I mentioned before, the visibility, it was really low. And we also had quite a, let's say, somehow better performance in our Rolling Division than was expected. So we really pushed to bring out, let's say, the material, in particular, at the end. And this, of course, also supported. So we're really pushing and working hard, of course, to keep it up but it's very difficult. Normally, we have a pendulum of EUR 5 million, very easily, which is very difficult to foresee. In the comparing period 2018, it was the other way around. And this year, it was the pendulum went to the positive side. And then, as I said, we were successfully shipping more than we expected at the very end of the year. And this -- these are the main reasons.

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Rochus Brauneiser, Kepler Cheuvreux, Research Division - Head of Steel Research [4]

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Services result in Q4?

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

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Services. In services in Q4, first of all, if we compare, let's say, the 2, let's say, quarters, Q4 in 2018, we had EUR 5 million. In Q4 2019, we had minus EUR 1 million. The main reason is the change in IFRS 16. If you look at that, so we have an impact in one order of roughly EUR 4 million on the Service division. This is the one thing. The other thing has to do with provisions for -- where we have in the, let's say, in the fourth quarter 2018, we had to, let's say, release provisions, which had to do with long-term incentives for, let's say, in particular, for Board members. And this year, we built them. So we had a positive impact last year, negative this year.

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Rochus Brauneiser, Kepler Cheuvreux, Research Division - Head of Steel Research [6]

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Okay. Actually, I think the Q4 was a positive EUR 11 million in Q3. Q2 was a negative EUR 2 million, so you have a 10%...

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

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I compare from Q4 to Q4.

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Rochus Brauneiser, Kepler Cheuvreux, Research Division - Head of Steel Research [8]

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Okay. Maybe on the dividend. I'm not really sure whether I understood your comments on the dividend policy. So you paid out 110% of your net income and your EPS, you're not able to give a guidance at the moment. So where is the confidence coming right now to maintain the dividend? And yes.

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

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Yes. What I mentioned before, first of all I think we have, I would say, 3 major KPIs. One KPI is the net income. Yes. If you compare the net income to the payout, it is -- we pay out more than the net income.

Secondly, we have the comprehensive income. All in all, we are more or less at roughly 100% payout ratio, if you take the comprehensive income. And the third thing is that the cash flow is very positive. And we also, by the way, expect a positive cash flow for this year. So we are generating cash. And this is the main reason why we said we want to keep a stable dividend of EUR 1.20. So -- and then we were -- if you look to the last 2, 3 years, we always stay at this EUR 1.20, despite the fact we were sometimes roughly at this level.

So for the future, what gives us the confidence? Of course, on the one side, it is traveling in the fog. On the other side, I think we believe that we will not be too far away in the future. And what we say for the future, of course, is that the dividend policy should reflect, also, in future what you just said, means we say half of the net income, minimum EUR 1.20, but we go below this EUR 1.20, if you're significantly below this EUR 1.20, then significantly might be, I don't know, 10%, 15%. So then we will go below that. And -- but the requirement is that we generate cash, and this is what we did.

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Rochus Brauneiser, Kepler Cheuvreux, Research Division - Head of Steel Research [10]

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Okay. Got it. And maybe finally, on the guidance. If you are not becoming more specific, so you are also explicit in pulling out a lower EBITDA in 2020. So as of how much you see in the fog now, how likely is it in your view that the result could be below 2019?

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

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As I said before, for us, it is really -- I think it wouldn't be serious not to give you a number or a guidance. So what I can tell you, if I talk about the divisions. First of all, what we plan is when we published Q1, end of April, we will give the guidance. This is for sure. So this is number one.

Number two is, if you look at the Metal Division, the run rate right now is positive. The uncertainty in Metal Division comes, right now I would say, in particular, from the whole market uncertainties regarding corona. What we saw in the last days, in particular, is the rising alumina price. So difficult to forecast here. But we guess, it should be a good run rate. It should be a good result for Metal Division. And you saw the second half. That's a little bit below the second half, yes?

So for casting, I would say, also from today's perspective, casting is a business, which is a highly automotive-driven business. But I would say, a stable, roughly development plus/minus should be possible. Yes?

For [the] Rolling Division, very difficult to forecast right now. What we see is a lot of uncertainties in the market, not just coming from the -- today, from the discussions we have today regarding corona. This is perhaps also an additional reason. But if you look, let's say, the development in the distribution business, it is really tough right now. The visibility also for us and our customers is very low. And therefore, we actually -- it's really tough and hard to forecast.

On the other side, you know that we are in businesses like the aircraft business. No one really knows what happens with, let's say, the 737 issue at Boeing. So for us, there are many other things, let's say, next to the daily discussion regarding automotive, next to corona and next to tariffs, which we have and which influenced us also in the past months to give you a forecast. Give us another, let's say, 2 months, and then we have the end of April, and we try to fix a nice guidance for you.

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Operator [12]

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Next question is from the line of Markus Remis from RCB. Mr. Remis, please unmute your microphone.

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

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Yes. Apologies. A few questions from my side. I would like to take them one by one. So firstly, on the auto exposure, if you could remind us of the Casting and Rolling segments' volume dependence? So how much is the auto exposure in these 2 segments? And I would also be interested to get a sense on the call-off/demand patterns you observed towards year-end and also early into 2020?

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

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Yes. First of all, I'll start with Casting Division. Casting Division, I think, the exposure is roughly 60%, 70%. But the good thing, you know us, Markus, quite well, we have here some sort of flexibility. So we can -- if the demand goes down there, we can -- we have somehow flexibility to support with capacity, our Rolling Division. So this is -- therefore, it is not too tough for us in case there would be a downturn. That's what I can give you here -- what information I can give you here is that for the next, I would say, 2, 3 months, we are really very, well booked also from the automotive sector in the Casting Division. So it's quite good.

For Rolling Division, we have a 15% exposure, roughly. And you know that we supply automotive sheets, that we supply also other material brightening products (inaudible), for example. And what we saw here is, in the year 2018, we saw an increased for us, increased shipments because here, the new plant is helping us. And we bring the new capacity. We have the nominations from the automotive customers in place. And we are supplying out of these nominations.

For 2019, the expectation in our internal plan would have been even a little bit higher than what we, at the end of the day could supply because the demand, all in all, in automotive is a little bit down. What we expect for this year is another growth. And then Victor tried to explain that we expect, again, a good growth rate for our automotive shipments in the year 2019. What we saw in end of 2020, sorry, what we saw end of '19 and what we see right now is some postponements of new SOP dates, for new, let's say, models of cars, which will perhaps influence our, let's say, shipments compared to our internal plan. But all in all, we still expect growth here, I think. And this will be a significant one from today's perspective.

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

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Okay, very clear. Can I ask on -- sorry, on the volume outlook, I mean, what kind of incremental volume do you have in mind? And some sort of bracket might very helpful for the Rolling Division. I mean, do you think something like 235,000, 248,000 tonnes? Is that a...

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

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Markus, I think as we said before, this is exactly where the uncertainty comes from, I would say, right now, and therefore, it wouldn't be serious to give you now a 235,000 or whatever type of number.

As I said before, we see growth this year, yes, but I can't give you now the number into what direction we have. We have internal plans. We see this -- that people and customers started to reduce lead times for us. This is the place with spot-type orders. It is also, of course -- as I said before, Boeing could be a factor and so on. So there are many uncertainties. Let us do our homework in the next 2 months, and then we will come back with another.

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

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Sure. Then on the product initiatives, the firework, as you call it. Can you maybe just give us some more color if these new products are actually hitting the market? So they are actually beyond the R&D phase, ready to be shipped to the customers? Is that what you're saying? And if so, what would be kind of the volume share of these new products, say, in 1, 2, 3 years' time? So I guess the question would be, if we should then assume a tangible effect on the mix?

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Helmut Kaufmann, AMAG Austria Metall AG - COO, CTO & Member of Management Board [18]

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Yes. This is Helmut Kaufmann and I'll try to answer. Well, yes, it is true that this is beyond the R&D status so we are starting to market things now. As I mentioned before, one of the highlights or the highlight for marketing is the Dusseldorf Fair in October. So this is more or less already the end of the year. So we cannot count on big numbers within this year.

However, we think that this is the target that each market segments of rolled products, be it automotive, be it aircraft and so on, will have to present something new at the Fair, which really new products or patented, partly patented products and partly -- so our estimate, let me say, 1/3 of these products is a really new for the world, yes, because some things are new for AMAG, we can -- for the first time because of the new plant, because of, let me say, higher strengths in our rolling mills produce different products that we could not produce before and reach qualities that we could not reach before. So we are sure that with the marketing campaign, we will benefit in the years after, but not so much within this year.

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division - Chief Analyst [19]

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Okay. And can I ask you on this coilDNA? Is that something that was kind of requested by the customers? Or is this...

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Helmut Kaufmann, AMAG Austria Metall AG - COO, CTO & Member of Management Board [20]

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Yes. Our customers have a very strict quality control. And imagine -- and of course, think about an automotive company, producing maybe a hood or a fender for a car. And they, of course, don't have only one single supplier. They have several suppliers. And imagine if in their press shop, something goes wrong, then they would like to know why did it go wrong? Who was the producer of the sheet, when was it produced? Did it stay too long on stock? Whatsoever. And this coilDNA allows us to connect the code on the sheet with the information about the product, and globally. And we -- because we see a chance to market this globally, also not only for AMAG itself, but for steel, for copper sheet, for aluminum competitors and so on, we founded companies last year, and this is the coilDNA GmbH. And coilDNA GmbH will market the products.

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division - Chief Analyst [21]

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All right. Then on the investments, it seems that 2019, at least compared to my expectations was a bit lower in terms of capital spending. Is that more of a cut-off date effect, something that has shifted into 2020? Or was this kind of aligned with your budget? And I guess, the question would then also be, what kind of level of investments we should pencil in for 2020?

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Helmut Kaufmann, AMAG Austria Metall AG - COO, CTO & Member of Management Board [22]

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Yes. As we always have a big project, it's always cut off things, is always what you have. And it's also a cut off, of course, issue included. But not an issue for normal things, I would say. And as we said in the past, the run rate will be a little bit -- the annual run rate for CapEx and then expansion should be a little bit below our depreciation number.

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division - Chief Analyst [23]

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Okay. Very clear. Last question: Coming to energy and electricity costs, is it fair to assume that you should have some earnings tailwind in 2020? Well, asking about (inaudible) of course.

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

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Yes. We have -- we didn't get now the...

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division - Chief Analyst [25]

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An earnings tailwind because electricity prices have come down. So should that be an earnings tailwind for you in the current year?

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Gerald Mayer, AMAG Austria Metall AG - CEO, Chairman of the Management Board [26]

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It shouldn't be too significant. Because you know that we have a strategy to hedge or to cover, let's say, our needs with -- by contract. And this is what we did for the bulk, at least for the electricity before, let's say, price increases occurred. So I think it should be more or less. It should not be too bad.

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Operator [27]

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Next question is from the line of Christian Obst from Baader Bank.

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Christian Obst, Baader-Helvea Equity Research - Analyst [28]

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First of all, of course, most of my questions been answered. So some small additional ones. So if I got you right. So most of the investments for the innovation are done. And you're going forward to -- you're looking for the returns. And you don't have to invest for your innovation projects going forward. And CapEx should be below depreciation for the next 2 to 3 years, at least? This is the first one. Just a housekeeping. Then coming to renewable energy source, so you say that in Ranshofen you only use renewable energy and you have reduced the CO2 footprint approximately by half to 0.16 per tonne. So what is the remaining CO2 production there? Where does it come from when you are using 100% renewable energy and then the 80% of scrap there? And how can you reduce that further?

And then concerning growth. It seems that the overall growth estimates for the aluminum sector as a whole is, step-by-step, a little bit declining over the years. It's now 2% to 3%. Going forward, the highest growth, of course, is transport. But you always mentioned in the past that you don't like to change your share or your split of customers going forward. And now we're seeing that transport will grow double the entire market that maybe you ship more into the transport area going forward. So you're changing your mind a little bit?

And the last one is a very housekeeping one. Does it make sense that you changed maybe your guidance towards EBIT because in the end, the depreciation, asset costs and especially after the IFRS 16 changes, maybe we have some kind of better history when we're looking at EBIT. What do you think about that?

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Helmut Kaufmann, AMAG Austria Metall AG - COO, CTO & Member of Management Board [29]

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So maybe -- Helmut Kaufmann, again, speaking. Maybe I'll start with the question concerning CO2 emissions. So when we talk about buying from renewable energy, then we talk about electricity. However, we also utilize gas because most of our melting and casting furnaces or some of the heat treatment furnaces in the rolling mill are gas-fired. And this, of course, remains that way.

But as I mentioned in the presentation, we did some -- like heat that was included, in cooling water of the foundry, then we tried to retract this heat again and utilize it for heating purposes, where we in the past, also had other types of energies consumed. This -- and this will continue. So we will add more equipment in the future to this, let me say, closed-loop energy consumption. Yes. Of course, we consider other alternative energy sources like photovoltaic or so but we are checking, okay?

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

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Then your next question was regarding returns, depreciation, how the next period should be seen from our side. I can agree to all you said regarding the year 2020. 2021, perhaps it's a little bit too early. But I would say, also makes sense, what you said. So as I also mentioned before, I would not expect the CapEx to exceed from today's perspective, depreciation. All the projects we have should be under, let's say, under a cover by depreciation.

Then regarding the split, I think this is in line to what we said. We were also growing, for example, in packaging. Of course, automotive is growing and it's growing strongly. But this was for us -- it will not change too much. And then you will see at the end, where we are now at 15%, we have to go 20%, 20% plus. And it'll be -- it is how it will be in the future. And regarding the guidance, you say housekeeping, should we go to EBIT, EBITDA? We didn't think about it, but I think it's been very easy. You can simply change it because -- exchange it because the depreciation number should be stable at EUR 80 million, EUR 80-something million. What we see in our -- let's say, if we compare us to our peers, they normally use EBITDA. And this is the reason why we used the EBITDA in the past. We didn't think about it.

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Operator [31]

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Next question comes from the line of [Gunther Ica] from [Ica Trade International].

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Unidentified Analyst [32]

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You spoke a lot about your footprint, CO2, and customers are asking about your products. Then if (inaudible) confidence in companies from Australia and about bauxite. Can you influence? Or will you influence them also to do things more better to get a better footprint?

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Gerald Mayer, AMAG Austria Metall AG - CEO, Chairman of the Management Board [33]

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I think regarding bauxite we have, I would say, the best source is Alunorte in Brazil right now. And what we are doing is in the whole industry, we are working -- there is a so-called Aluminium Stewardship Initiative. It was founded, I think in the year 2012. AMAG is one of the certified or we will be the first integrated company to be certified under this new standard. And what we see there is that all the members of ASI of the stewardship initiative are certifying themselves. Also our suppliers, and in particular in the upstream part of the business, most of them and in particular, our suppliers are certified. So I would say we are on a good track there. And everything is okay here.

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Operator [34]

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There are no further questions at this time. And I would like to turn the conference over to Felix Demmelhuber, Head of Investor Relations for final comments.

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Felix Demmelhuber, AMAG Austria Metall AG - Head of IR [35]

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

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Operator [36]

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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.