Categories Earnings Call Transcripts, Industrials

thyssenkrupp AG (TKA) Q4 2020 Earnings Call Transcript

TKA Earnings Call - Final Transcript

thyssenkrupp AG  (Xetra: TKA) Q4 2020 earnings call dated Nov. 19, 2020

Corporate Participants:

Claus Ehrenbeck — Investor Relations

Martina Merz — Chief Executive Officer

Klaus Keysberg — Chief Financial Officer

Analysts:

Ingo Schachel — Commerzbank — Analyst

Bastian Synagowitz — Deutsche Bank — Analyst

Seth Rosenfeld — Exane BNP Paribas — Analyst

Carsten Riek — Credit Suisse — Analyst

Rochus Brauneiser — Kepler Cheuvreux — Analyst

Luke Nelson — J.P. Morgan — Analyst

Alain Gabriel — Morgan Stanley — Analyst

Christian Georges — Societe Generale — Analyst

Presentation:

Operator

Dear ladies and gentlemen, welcome to the conference call of thyssenkrupp. At our customers’ request, this conference will be recorded. [Operator Instructions]

May I now hand you over to Claus Ehrenbeck, who will lead you through the conference. Please go ahead.

Claus Ehrenbeck — Investor Relations

Yeah. Thank you very much, operator. Hello, everybody. Also, on behalf of the entire team, I would like to welcome you to our conference call today. The conference call will be on Q4 numbers, fiscal year numbers, and of course, the outlook for 2021 and we will also have a section in our presentation which — in which we will go through the value levers that our businesses have identified to drive the structural improvements going forward. The presentation will be held — the conference call will be hosted, of course, by our CEO, Martina Merz; and our CFO, Klaus Keysberg. Both will share the presentation and all the documents for this conference call, you can find on the IR section on our website.

And with that, I would like to hand over to Martina to start with the presentation. Martina?

Martina Merz — Chief Executive Officer

Thanks, Claus. Hey, all. Martina speaking. First, thank you for your participation in the call today. We will be leading you through the presentation which is rather a long one today and I’m looking very much forward to having a good discussion afterwards.

First, with the presentation, we want to provide a recap of what we’ve accomplished in the last 12 months. First and foremost, and by far, the biggest step in the strategic realignment of the Group was at the beginning of the year, the sale of the Elevator Technology business, which we closed successfully on July 31. This has, of course, transformed our balance sheet substantially and turned our net debt to a net cash position of EUR5.1 billion. In addition, we significantly increased our equity up to more than EUR10 billion. With this, we paced the path — the way for more restructuring and business development going forward. And I can ensure you that we continue to focus all our energies on substantially improving the performance of our business.

Moreover, realizing the best-owner concept for our earmarked businesses is also progressing. As you are all aware of, we received non-binding offer from Liberty Steel for Steel Europe, which we are examining at the moment with an open mind, of course, and ensure — and we are ensuring we achieved at the end of this process the best possible result for all stakeholders. That means, we continue to explore options for industry consolidation. We narrowed already the range of options and at the end of the day, we believe that we can come to a final decision in spring 2021.

For Plant Technology, we received indicative offers for different constellations. The due diligence is almost complete, particularly for mining and cement. It’s a bit different. I would say it’s different for the chemical business, as we’ve observed in the last months very strong dynamics in the market for hydrogen technologies which we will not — let me say, which we have not seen before being this strong, but yes, now, consequently, we are currently examining how we can strengthen our fundamentally starting position in this growing market through partnerships.

I think I can go with that further by saying, we believe that in the part of hydrogen technologies we are in, I think we have a very strong competitive position in large scale of water electrolysis plants. For AST, our steel — our stainless steel operations in Italy, we have been approached by numerous parties. This does not come as a surprise to us, because the business is well positioned. Nevertheless, for AST, it is far too early to draw concrete conclusions. But together with an investment bank, of course, we will thoroughly evaluate the expressions of interests received. On top of that, we are also making visible progress in restructuring of our business. Last year, throughout the entire organization, we reduced personnel by more than 5,700 FTEs and to cope with long-term market developments and the effect of the pandemic, we have accelerated our initiatives and thus ended our restructuring targets now in the next step from 6,000 FTEs to 11,000 FTEs.

Besides, our restructuring and portfolio initiatives enhancing performance is the essential part of our new Group of Company concept. Together with our businesses, we defined value levers which Klaus will later on — he will lead you through in detail. And also of course, we defined then together with the businesses structural improvements fiscal year, going on and beyond. We will provide you more details on that in the second half as said in the presentation.

All of this said, pace into our performance in this fiscal year and beyond, it reflects a step up in our operational performance on the back of the execution of our value levers and also it reflects a slight, of course, a market recoveries. Alongside, we will leverage our leading steel making expertise for ultimately working towards climate neutrality and green steel offerings with our strong concepts, tk, hydrogen steel and water and H2 electrolysis.

So on the next slide, it’s a little bit complicated, but actually the slide — you should see in front of you now this four phases. This is actually our transformation plan which we follow very stringently and disciplined. With this plan, we — we have a plan how to make thyssenkrupp ready for the future and we use, of course, this plan constantly for internal and external communications. Let me illustrate now what this sideways view, as we call it, what this means in detail. We divided our transformation into four phases. In the first phase, which we called fight, we dealt in particular with the impact of the coronavirus pandemic. We sold in a consequence the elevators business as a prerequisite for everything to come.

In the second phase, focus, we are now restructuring our portfolio, we made fundamental decisions as said before with the announcement of our new target portfolio in May and we are on the way to implement this portfolio structure which will make our company small, but more profitable. And in addition, of course, with this focus, we can much more discipline, allocate our capital to promising businesses generating value going forward.

In the third phase, which we consider we are on the way to this phase now. The third phase, improve, will run in parallel now, which it is — is about increasing competitiveness in all areas, regardless of whether we intend to develop the businesses as part of the Group or not. The restructurings, we have initiated and in part, already implemented as well as our value levers are an example of this. And let me say a few things in more detail. Of course, leadership makes in such a turnaround the difference. And in this first part, of course, in a leadership approach, it means that we try and we are working on beating the odds. We uniquely and ambitiously reframe what it means to win. We make multiples and we are making really multiple bold moves early and methodologically in this focus step, and we reallocate constantly, frequently to focus our resources on priorities, so leadership asset is absolutely key in this phase we are in.

And after all, when once we have — once achieved our path to competitiveness, of course, after that then, we can start about the process to scale the business up, that requires having competitive businesses in order to achieve profitable growth again besides in itself is not a relevant measure for us, it’s the profitability of course at the cash and value generation of the Company. And as you can imagine, the phases mentioned will not necessarily run sequentially as our businesses. Our business segments are different and the phases they are in, of course, are different with that too. But one thing is clear. We will make further substantial progress along the curve over the next 12 months.

We all know, and let me mention this at this point too. Of course, the question, can we center on the long-term why for thyssenkrupp, everybody’s asking for that. We believe, I believe, it’s very important for the organization to focus now to clearly focus on delivering a positive free cash flow at this point in time and not using too much resources for thinking beyond. That’s our clear priority and this is why you do not hear us talking constantly about this long-term why. We want our people to understand that we have a clear priority at this moment in time. This is to optimize all what we are doing, top, profitability and positive free cash flow. So we’re really focused fundamentally and with all we can, our resources on turning the Company around.

So in — once we are through this part of the process, of course, as everybody in this market is well aware that thyssenkrupp has a promised technological capabilities, everything needed to scale up the businesses, at that moment, once we are there with our competitiveness, we are totally committed, of course, to making a positive big picture impact and then we would prioritize, of course, our internal resources towards positive growth again. But at this point in time, we believe it’s about beating the odds.

So then, now we can be a little bit quicker and you saw the documents talking about on the next page in order to make a difference on the leadership of the Company, of course, we formed below the Executive Board and Executive companies to drive the transition from a centralized group to a powerful group of companies, and I think, you read it yourself. I will not lead you through the details. I think it speaks for itself. What’s very important to us here is, we, of course have — we have a comprehensive multiyear agenda. We want the CEOs of our units that they own the total company performance of their group company, and we expect an experience in transforming their business and a relentless focus on priorities in leading the company’s asset back to value generation.

So with this, as we come to the implementation of our initiatives and this is then, Klaus, your part of the story.

Klaus Keysberg — Chief Financial Officer

Okay.

Martina Merz — Chief Executive Officer

Thank you.

Klaus Keysberg — Chief Financial Officer

Thank you, Martina. So let’s have a closer look at the milestones that we have achieved and the restructuring completed or initiated in the past fiscal year. When we started the transformation, we said that we will turnaround every single stone in our company and as you can see with the numerous initiatives across all segments, we kept our word. About a year ago, we initiated restructuring at Systems Engineering involving 550 FTEs. However, with the market situation in automotive system engineering remaining extremely challenging, further restructuring was needed. Hence, we recently commenced the operational realignment, splitting the businesses into two independent companies for body and powertrain, and bringing structures and administrative costs in both part businesses in line with market levels, resulting in additional restructuring of around 800 jobs in the current fiscal year.

Moreover, with the presentation of the Steel Strategy 20-30 in March, we announced cost reductions and job cuts of 3,000 jobs and of which 1,000 will already be achieved until the end of 2020. This was followed by an extensive restructuring plan for the German Springs & Stabilizers sites. Under the plan, around 400 jobs will be impacted by closure of Olpe by the end of 2021 and streamlining the Hagen site in Hagen-Vorhalle [Phonetic]. The corporate headquarters restructuring also progressed as planned. As of April, the 1st, around 200 FTEs decided to join a transfer company or leave directly, bringing us closer to our target of the lean holding.

One of the last announcements in August affected adjustments in our cement business, including the reduction of 460 FTEs worldwide. Despite the substantial programs that are finished, underway or announced, all of our businesses will have to accelerate their initiatives going forward. Consequently, we increased the previously announced target of 6,000 FTEs to 11,000 FTEs to be accomplished by fiscal year 2020, ’21, ’22, ’23. Another important step was the introduction of our Group of Companies concept in May, sharpening our target portfolio with a clear focus on industrial logic, competitive profitability and cash flow. With that, we also announced the newly created Multi Tracks segment including businesses, for which we see no substantial future prospects within the Group, or might do better in partnerships, of which closure might be the best solution. But Multi Tracks will also be an entity, managing our investment in businesses such as our stake in our former elevator business.

And last but not least, a big step was the termination of our disproportionate balance sheet data-driven net working capital measures towards an ongoing continuous management, which is an essential contribution to turnaround our cash flow. As already said, we only accept targets from our businesses if there is a consistent and solid concept behind it and in the past 12 months, we already cut some 3,600 jobs in the previous fiscal year and in — in our existing restructuring plant layoff, roughly 1,600 jobs in Germany and around 2,000 jobs in the rest of the world. And in fact, we have actually gone further as of September 30, a total of 5,700 employees are no longer are on payroll compared to the previous year. It’s simple math, we will have to cut another 7,400 more jobs over the next three years to reach our new target of 11,000 FTEs by ’22, ’23, with the majority of cuts specifically 5,200 FTEs in Germany and the remaining 2,100 in the rest of the world.

While at first, we have to incur the costs and payoffs, this will ultimately support our performance through sustainable savings, ramping up from a high two-digit million euro amount in the past year to a low to mid three-digit amount in the current fiscal year and in the total, a mid to high three-digit million until fiscal year 2020. Again, let me be clear, the target of 11,000 employees is only a snapshot from today’s perspective, heavily depending on our further growth of businesses. Hence, this figure can also change upwards. This is a largest restructuring process and the largest plant reduction in the number of employees since thyssenkrupp was founded and we will work permanently on further measures and also add them during the year if necessary.

Coming to the financials for this fiscal year of our continued operations. Unsurprisingly, the pandemic had a clear impact on the top line, especially pronounced in absolute terms, raw materials, as well as on our current truck components business. However, we see indications for an ongoing demand recovery, especially from the automotive side, giving us reasons to be cautiously confident. Q4 already showed sequential improvement at almost all businesses, which is very likely to continue in fiscal Q1. Unfortunately, this is not reflected in last year’s bottom line, with EBIT adjusted significantly weaker year-on-year, despite extensive measures to reduce cost and safeguard our business including short-time working.

With slower development, prevalent in the materials and automotive components businesses and the beginning of the fiscal year, the impact of the pandemic on demand and capacity utilization additionally burnt. Added to this were the structural changes in the steel sector. To quantify the Steel Group, ex-Heavy Plate, accounted for EUR820 million EBIT adjusted loss in fiscal year ’19 and ’20, while the new created Multi Tracks segment added a further EUR593 million EBIT adjusted losses. Consequently, free cash flow before M&A was sharply down year-on-year. Besides, the operating performance and the normalization of net working capital up to EUR3 billion, as well as cartel fine at Steel Europe weighed down. Again, Steel Europe and Multi Tracks were the largest trucks with together EUR2.5 billion negative business cash flow in the past 12 months. Here you can see where our problems lie.

And with that, let us have a look at the development of our balance sheet that experienced a strong push by the realized value of proceeds of the Elevator sale, thus far outweighing the loss incurred by our continuing operations. Thus, net income for all — for the full group jumped to EUR9.6 billion. The continuing operations were, besides the operating performance, heavily influenced by provisions for restructuring. In addition, we took risk out of our balance sheet through asset and goodwill impairments amounting to roughly EUR3 billion, especially pronounced at Steel Europe and Automotive Technology considering a potentially slower than so far anticipated development in the auto sector.

At the year end, our equity stood at more than EUR10 billion, which now is more than ever important, resulting in an equity ratio of 28%, up from 6% 12 months earlier. At the same time, the cash inflow from the transaction turned our net debt to a net cash position of EUR5.1 billion, providing us a decent safety cushion and we will be enabler for our operations and portfolio restructuring, aiming at returning thyssenkrupp to sustainable positive financial KPIs.

Looking at our operational performance in more detail, especially in Q4. As the automotive production was restarted in many countries towards the end of third quarter, the fourth quarter saw sharp quarter-on-quarter growth in order volumes, thanks partly to state stimulus packages and other initiatives and other incentives. Consequently, EBIT adjusted at the Automotive Technology marked a gradual improvement quarter-on-quarter in almost all businesses and we also saw some one-time, which negatively impacted the results of Automotive Technology. However, Springs & Stabilizers and System Engineering was still significantly negative.

Industrial Components delivered a positive earnings contribution, yet lower quarter-on-quarter, while components for heavy-duty engines increased, the EBIT adjusted significantly by recovering sales. Earnings and bearings were temporarily slightly low, but on a high level. EBIT adjusted at Plant Technology came in stable quarter-on-quarter remaining negative on the back of lower utilization and ongoing construction site costs that couldn’t be charged to customers. However, we see improvement year-on-year since the robust service business and stringent G&A cost reductions are bearing fruit.

Marine Systems came in positive, and up year-on-year as well as quarter-on-quarter. Its efficiency measures and cost reduction and project execution continued to take effect. Nevertheless, earnings continues to be held back by low margins where all the projects build. In line, with recovering markets, Materials Services saw an increase in its main products groups quarter-on-quarter with significant higher warehousing shipments, especially in auto-related service centers in both regions, Europe and North America.

Overall, utilization at a mix remained below prior-year level with respective effect on margins. And at Steel Europe, we saw stabilizing market prices in the fourth quarter, where shipments was significantly higher quarter-on-quarter on the back of an improved utilization and better product mix, EBIT adjusted improved quarter-on-quarter, yet remained negative and lower year-on-year. Last but not least, cost of corporate headquarter was stable quarter-on-quarter but with significant improvement year-on-year, mainly due to lower G&A costs.

With the pandemic still dominating and implications and durations of the second wave still uncertain, forecasts for global economic growth and the impact on our business, particularly materials and components for cars and trucks are still subject to major uncertainties. For fiscal year 2021, we expect sales growth in the low to mid-single-digit percentage range, well below the pre-pandemic level. Our expectations are, of course, dependent on the recovery of the global automotive plant. But to make it clear, with this level we anticipate for 2021, we are more than 20% — 10%. Sorry to repeat, we are more than 10% below pre-corona level. EBIT adjusted is expected to improve significantly with structural advances being by far the biggest driver, additionally supported by sales growth on the back of recovering market, and as I explained before, with the assumption I just made before regarding the top line development. All businesses are expected to contribute positively with the exception of Steel Europe and Multi Tracks keeping the Group’s EBIT adjusted in the mid three-digit million euro range negative.

Across all of our businesses, the strongest driver for the envisage upside for 2021 and beyond are the value levers that the leadership teams of our business has developed and committed to. These value levers are aiming at pushing bottom line as well as top line in addition to the expected recovery of our markets. The summary of these levers are exhibited on the right side of the slide, we will walk you through each segment in a minute.

Before that, I would like to touch free cash flow before M&A, which is expected to be significantly better, but still negative in a range around EUR1.5 billion, determined of course by the step up in operational performance in all segments and the elimination of the burden from normalization of working capital as well as defined in the antitrust proceedings, ongoing payments for restructuring and depending on the payment profile for incoming orders as well as milestone achievement in the project at Marine Systems despite engineering and considering higher payouts for restructuring as already shown. Important to mention here also is that as of October 01, we tightened our guideline for the recognition of special items by aligning it more closely with IFRS rules, so it will be more conservative and strict to make here adjustments to the EBIT [Phonetic].

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Now, let us have a closer look together at our segments and how they will drive the aspect we brought [Phonetic]. See, on this slide, just for your reference, you can see how we transitioned our portfolio to the new Group of Companies structure, which will also be our reporting structure for the current fiscal year start. Let’s start with Material Services, which we returned to positive territory in the current fiscal year. For the segment, excluding AST and some other small companies, infrastructure, we expect EBIT adjusted to improve to a mid-to-low two-digit million range. On the back of tailwinds from market, meaning higher volumes, albeit from a low level and not yet returning to the pre-corona crisis to be more precise, over to Martial Service with this assumption of top line will be more than 10% below pre-corona level. However, the largest contribution will come from structural improvements, for example, we will drive G&A efficiency along the value chain by optimization of our footprint and logistics concept. In addition, we want to further reduce complexity by streamlining our portfolio and closure of sites.

In order to push the top line, we will roll out sales initiatives with materials processing offerings aiming at becoming a more service-focused business, especially our new growth strategy, Materials-as-a-Service will provide us with additional revenue streams bearing higher margins and lower volatility. That’s why we also target small-scale M&A activities in the north — the attractive North American market where customers clearly recognize and appreciate the extra value from our processing or supply chain management offering. Nevertheless, our traditional materials warehousing and distribution activities will always be substantial in the overall business model. Overall, having all these measures in place makes us very confident for the new fiscal year and as always, if market turns more dynamic, we will see what’s happening.

Industrial Components; as Industrial Components, we want to foster our leading market positions on the back of an efficient cost base on the one hand and with the support of a robust growth for our market. For the current fiscal year, we expect a slight increase in earnings coming mainly from the significant improvement of our Forged Technologies business and also from the stable high contribution of ball bearings business. Industrial Components is expected to grow slowly but steadily mainly driven by three markets. First, the wind energy sector, which showed promising growth, potential longer-term. However, we will see a temporary slowdown in 2021 as a result of pull forward effects in China from expiring subsidies. Second, the auto market, which is expected to recover significantly, however, not yet back to pre-pandemic levels. And last but not least, the market for construction machineries which probably remains stable globally, the only exception being China, expected to grow.

Besides, the potential from — by nature, uncontrollable market Industrial Components will work on the controllable internal drivers such as offering an improved product mix and new products and services for instance, at bearings by extending our existing production lines, mainly in low or best cost countries and continuously improving our products together with our customers and at our forged business by catching additional market share with the introduction of new services line for undercarriage components or with our new and powertrain independent product for trucks, the front axles.

Industrial Components leadership teams are fully committed to continuing their path of constant and consequent cost control over the next years by improving everyone’s productivities and therefore, reducing personnel cost which is — which also includes restructuring program, optimizing production costs and preparation with a debottlenecking or reducing purchasing cost by securing flexibility via multiple suppliers.

Let’s turn to our automotive components business, Automotive Technology, which is now operating in the new set-up, excluding the Springs & Stabilizers as well as a powertrain and battery solution businesses of the former, Systems Engineering business, which moved to the Multi Tracks segment beginning October 01. Automotive Technology was hit hard by the pandemic and will therefore do everything in their power to return to profitability supported by stricter cost control and comprehensive effective measures. If you take a closer look on our expectations for the current fiscal year, you would see that we are targeting a mid to high two-digit million earnings contribution which represents a significant recovery from last year.

As fiscal year ’19, ’20, was severely affected by the significantly lower demand from customers, we had to reflect these new market circumstances in our business plan, leading the revaluations of the impairments, not all being adjusted and thus included in our EBIT adjusted figure, as I said before. We therefore expect earnings also to improve by the omission of these non-recurring effects. In line of the currently highly uncertain environment also in the global automotive market, we are cautious about the upside from the market recovery at the moment and to also give you an indication, the top line we estimate for the current fiscal year, it will be more 20% or in the direction of 20% below pre-corona level. And therefore, concentrate more on the levers as we actually can influence the further ramp-up of our new projects and plants, mainly at Steering and continues and consequent cost control by improving personal productivity, for example, via restructuring. Here we are planning to reduce about 800 FTEs in the next or current fiscal year. And with that target, annual savings in a low two-digit million range and also by enhancing the operational excellence, for instance, by reducing production costs while improving the quality or by carefully choosing the best quality, but also best processing plants.

Marine Systems, we are quite positive on the operating perspective, also on the back of Q4 order intake with frigates for the Brazilian Navy, as you have already heard giving us top line growth over the execution time of this order. Moreover, a further perspective will open from the submarine program for the Norwegian and German Navy and as a subcontractor to the Italian shipyard, Fincantieri, where we are also part of a promising bidding process for an intended submarine program. We except to receive both orders in the current fiscal year. In order to safeguard our margin, we won an even more diligence calculation and strict cost control over the construction time of each and every new order. And in addition to that, we implemented a number of efficiency matters addressing among others performance and naval electronic systems, push performance and service, excellence in procurement, utilized efficiency gains from integrated project teams. For the current fiscal year, we will see our first slight uptick in EBIT adjusted for Marine System from both kind of levers, top as well as bottom line, which will become more dynamic going forward.

Steel Europe; Steel Europe will also show a significant improvement in the current fiscal year. However, still remain negative. Heavy Plate now being part of Multi Tracks, we expect EBIT adjusted to be negative low three- digit million figure. Main drivers will be expected market recovery, leading to about 10% increase in shipments year-on-year, but also of course being far behind the pre-corona, with a clear ramp-up of course, or also more high-margin focused products for the auto sector. However, despite a substantial recovery in volumes, pre-crisis levels will be far not yet be reached as I said before. This in turn, will result in a better utilization of aggregates with a significantly improved cost base in up and downstream operations as well as an improved raw material consumption. Moreover, the still high level of the iron ore prices could be likely potentially push for steel prices.

In addition to market tailwind, we expect already sizable effects for our Steel Strategy 20-30 with priority on accelerating of restructuring, leading to a saving of mid two-digit million range this fiscal year, although, we identified additional efficiency measures within — with additional savings potential on top of already identified measures related to our Steel Strategy 20-30. Much more important, all these levers will provide substantial upside also after 2021. On the long side, of course, we will work towards climate neutrality with strong concepts like our in German, tkH2Stee.

So talking about new concepts, we see ourselves well positioned to capture opportunities arising from the green transformation, as we are competing and partly leading attractive future markets and areas. Our bearings business, for instance, is technology leading in doing bearings and wind energy turbines. By this, we contribute to the energy transition. In addition, we intend to make full use of the enormous greenhouse gas reduction potential, with hydrogen in steel making processes to be able to offer green steel to our customers. In order to transform towards the climate neutral steel production, we plan to use hydrogen in direct reduction plants and electric motors.

Also our powercore non-grain oriented electrical steel is a high-tech core material used throughout the entire energy value chain from generators to electrical engines for e-mobility, thus offering us attractive growth opportunities. We are pioneering not only the use of hydrogen, but also play a leading role in its production process, as Martina said earlier. Our joint venture, Uhde Chlorine Engineers is technology and market leader for high-efficient electrolysis plants specialized on hydrogen production via alkaline water electrolysis. Demand for hydrogen is growing significantly and we intend to profit from the expected expansion of production capacities. In this year alone, project announcements for our hydrogen technology has doubled. In light of these effects, we are currently evaluating the continuation of the business with the one or several partners. From today’s perspective, we believe this to be a valuable option.

Before we jump into the Q&A, let’s wrap up and see what lies ahead. In the current financial year, we have three strategic priorities. First, Europe, where we explore all options for industry consolidation and secure financing to carbon neutral-steel production transformation. This is flanged by all the restructuring initiatives, securing and pushing fundamental value. Of course, restructuring and enhancing performance is not limited to Steel Europe, but applies to the entire organization, or our second priority. We will stringently improve performance across all businesses into high-performing Group of Companies, supported by the defined value levers that are to be consistently backed up by concrete action plans. Moreover, we will work towards realization of best owner concept for our Multi Tracks businesses, that Martina already explained. And towards climate neutrality including our hydrogen-based steel climate strategy, tkH2Steel, while exploring financial options.

To sum it up, we can’t drive the market, but we can drive our own performance, and that’s what we focused on.

And with that, we are ready to take your questions. Thank you very much.

Claus Ehrenbeck — Investor Relations

Yeah, thank you very much, Klaus. Thank you very much, Martina. And with that we want to go over to the Q&A session. And for this, operator, please take over for the moderation.

Questions and Answers:

Operator

Thank you very much. Ladies and gentlemen, we will now begin our question-and-answer session. [Operator Instructions] And the first question is from Ingo Schachel, Commerzbank. Your line is now open.

Ingo Schachel — Commerzbank — Analyst

Yeah, thanks for taking my question. The first one would be on the next steps that we should expect for the Steel Europe business. I think on the press call, you were saying that you expect clarity on the way forward by spring next year. Just wanted to understand what that means in case of a standalone solution, where you would decide you have to develop the business on your own. If that’s the way forward, would that imply that by spring next year you would give us a more comprehensive announcement on your green steel strategy, including an exact price tag and size of investments and source of financing and explanation whether potentially the state would inject equity or file a participation or guarantee more debt or would it rather be that in spring you would announce that you keep it and then develop a new standalone strategy on the back of that?

Klaus Keysberg — Chief Financial Officer

Yeah. Well, thank you, Mr. Schachel for the question. Let me — I think, let me start with the [Speech Overlap].

Martina Merz — Chief Executive Officer

[Indecipherable]

Klaus Keysberg — Chief Financial Officer

It’s a big one. Yeah, it’s a big one. Yeah, as I said before, as we said this morning, you know that we are in a process of examining what kind of industrial concepts would fit best to our steel. We have this, of course, the standalone strategy. And to be honest, we have the Steel Strategy 20-30, which we think is a good one. We, of course, believe in it, but of course with the corona going forward or let say, having corona in place, we have to face with strategy maybe with lower volumes and at least for certain period of time. And this is something we have to work on. So this is the one thing. The other thing is, of course, we always said that we are looking for the best consolidate value and this is, of course, the reason why we are talking also to other producers for potential cooperation.

And this is a status where we are in and we think that we cannot do this too long because we have to have clarity for capital market, for ourselves, for employees and therefore, we decided that we have at least in spring next year that we know in which direction to go. The precise question you asked whether we are then able to give you a number, what kind of subsidies or what kind of money you get from state to finance the transformation. This is not what we intended to say when we said we will be ready at spring 2020. It’s more to give you a direction and a decision which direction it will go.

Martina Merz — Chief Executive Officer

Maybe — thanks, Klaus. Maybe, Schachel, two more comments to avoid misunderstandings. In order to focus our teams, we consider it’s being two steps for the time being. Step number one is to restructure the steel business as is in today’s environment more or less. Step number two is to transform our steel plants to green steel production. For step one, of course, as Klaus mentioned, we have to realize that the capacity is required in the market might not be the same as the corona, as they have been before. This will lead from today’s perspective in a standalone approach to questioning of our today’s capacities installed, which you can imagine is a kind of holy cow discussion, but in this holy cow or as we called it this morning, no taboo anymore, of course, the steel team is evaluating such options now which they have not done before. With such an approach, of course, we compare external offers for our steel business. And then at the end of the day by March, we can come to conclusion whether we believe a thyssenkrupp-focused standalone restructuring is more promising than another one, because as we always said, we consider this group as a very valuable asset and of course to generate the value which can be expected from such an asset, we will decide then do we go — do we — in the dual tracks approach will we follow the external approach or will be follow the internal approach, that we will be — that should be delivered by March, including then of course the kind of half business plan, but that covers the restructuring phase, not the green transformation as Klaus mentioned. So this is the step one approach. Green transformation to green steel will then follow.

Ingo Schachel — Commerzbank — Analyst

Okay, that’s very clear. Maybe, then just a shorter one on Steel Europe and I’ll, yeah, skip the free cash flow question for this time, but on Steel Europe, I think you were saying you want to ramp up the shipments of focused products by 20% and the way you said, it’s only quite simple, but it’s probably not. Can you explain a bit more? I guess, you were trying to tell us that you are aiming to regain market share automotive steels. Which drivers are behind that? Is it really specific client wins, quality initiatives or more aggressive marketing and pricing push, because our impression was probably that you lost market share in the last years, and now you’re — seems like confident to regain. Just wanted to understand what’s changed or what is changing here.

Klaus Keysberg — Chief Financial Officer

I mean in the first place, it is that we invest in our equipment and that we are able to go in the niches which customer are asking us to do and so we will be one of, not so much the producers who can really produce, then this kind of grades and this kind of products. And that’s the reason why we — why our investment program goes into this direction, but also we, of course, we see — and this is one thing. If you look at the development of the last 50 years [Phonetic], the volume development, we had a big reduction, a very big reduction of more than 30% roughly in this area of products. And I think the main reason why we now think that we can go in this direction is that we clearly only catch up more or less the volumes we lost last year.

Ingo Schachel — Commerzbank — Analyst

Okay.

Klaus Keysberg — Chief Financial Officer

I understood your question to go more in the mid-term range. In the mid term, I think you know our strategy and of course we will also increase our, let’s say, share in automotive special grades and this is, of course, the reason why we do the investments here. But this is not of course in the current fiscal year. This is going more mid-term.

Martina Merz — Chief Executive Officer

And as you mentioned, Klaus, I think we are somewhat convinced in all the discussions and this was also mentioned probably in one of the previous calls, the relative market positioning of thyssenkrupp in these high swings steels required for electro mobility going forward is a relatively good one. Stronger than — so this is — let me say, this is our crown jewel. And the market demand for this crown jewel is growing.

Klaus Keysberg — Chief Financial Officer

I mean, compared to other competitors we lost volumes and quite a lot of margin and it’s because our automotive exposure and what we see now it’s coming back. And if I look at the current situation in the current fiscal year, we can commit that we are in a good way here.

Ingo Schachel — Commerzbank — Analyst

Okay. Understood. Thanks very much.

Operator

The next question is from Bastian Synagowitz. Your line is now open.

Bastian Synagowitz — Deutsche Bank — Analyst

Yes, good afternoon. I have got one question and just again to follow up on the steel business. So if I just try to keep track with the restructuring effort here, I guess relative to the size of the business, the amount of restructuring effort needed and the amount of restructuring effort needed, I guess your restructuring provisions in the business are pretty low, just considering the headcount impact as well, which you had maybe from the corona measures. I think there was not much change on the employee side either. Now, I guess for our business which is burning EUR1.5 billion in cash and more than 50% of the Company’s market capitalization, speed of restructuring here doesn’t seem to be so high. So is the reason for that that you’re basically waiting for the possible strategic solution for the business or is the union pushback which you’re facing at the moment still just too strong and does not allow you to basically pick up speed?

Martina Merz — Chief Executive Officer

I think if I would say no to your question you would anyhow not believe it. So, of course —

Bastian Synagowitz — Deutsche Bank — Analyst

So what is the answer?

Martina Merz — Chief Executive Officer

I do not want to create unnecessary tensions. But I think we see normally — and this is the case, of course, we consider managing through a fundamental crisis like we are in requires in itself a co-management between the key stakeholders. And I think the paths shown in the last year show that we were able to go in a relatively high speed through this entire program. On the steel community, we had to face, and I’d say myself, because I was new with the Company in a way, the steel guys they went through this catastrophe of five-year standstill almost in the negotiations with the Tata joint venture. And this led to difficulties when we wanted to renegotiate the steel 20-30. We signed the contract directly after the sale of elevators. And we were all in the Executive Board together with the steel board totally convinced that in order to upgrade our steel production to a more valuable product portfolio to market and to — of course to a much better operational efficiency in the plant, that is the right thing to do. But we did it with 11.5 million tonne capacity. And of course our guys indeed both they tried to protect this capacity.

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And as I said before, we are now on the way to renegotiate these contracts, which we discussed yesterday with our Board, and this is a kind of [Indecipherable], yes. And you could say, yes, we will innovate bound by these discussions about external auction for steel. But we the Executive Board felt to investigate a consolidation in Europe makes sense as a first step before we decide what kind of capacity we would want to invest in finally. This might not be — this might look now as if it was the union which led to this, let me say, to this time needed now. But actually it was a Metals prioritization to say, okay, we have to accept that capacities will not be needed anymore, maybe but it’s valuable to investigate whether a consolidation creates more value than a standalone path. So it was not the unions, it was also us. But it was not so easy after the five-year standstill, yes. So maybe we could have been a month quicker, but not one month — it could have been one month quicker or two, but not five or six. And now we are there, it’s now okay.

Bastian Synagowitz — Deutsche Bank — Analyst

Okay. Thank you. That is very good color. Thanks for the background. I have one more question on capex and capital allocation. So if we just look at your financials on a high level, your depreciation line, obviously now it drops towards like EUR1 billion post the write-downs and your capex obviously rises to EUR1.6 billion. And I guess if we look at the situation overall, the spending above the depreciation level or significantly above the depreciation level obviously lifts the bar for the businesses to generate any cash. Is there just any prospect as to how the capex line and I’m talking about the current structure before any further portfolio reviews is actually coming down in the next, say, two or three years rather than in the next 12 months or it’s just the EUR1 billion depreciation level, maybe slightly misleading in terms of what will be the sustainable requirements of capex spend for the next two to three years?

Klaus Keysberg — Chief Financial Officer

Yeah, this is a good question. First of all, of course, the EUR1 billion in depreciation is after the write-down of the assets and so on. This is clear. And what we see so far is the following. So, we’ve said we will divest the elevator business to enable the rest of the business and not the whole bunch of the rest of the business, but the focus business we described. And I think it’s — this is why we started so. So we now see good investment opportunities and this is what we, let’s say, considered in our way forward in the plan so — and in the number you said. We have some structural issues in that. We have the IFRS 16 effect of EUR100 million and we have, let’s say, other effects, which of course is — which leads to another view on it. But of course we also have in this number the additional investments from coming out from Strategy 20-30 which we want to do and other investments also, for instance, for bearings. And we released recently quite huge amounts in investments for further, let’s say, further investments in China and other countries to really serve the growing market here. So — then of course we know that this is, let’s say, more or less critical in the situation where we are in, but this is the reason why we said, we have the elevator deal and we are investing in this because most of the businesses in the past were underinvested. They were in the past underinvested and they invested less than depreciation, not for steel, but for the other business we are talking.

But then we come to the process. Our process, of course, there is a number now, yeah. During the year we will have a close look on this. And if a business is not performing — if a business is not performing the cash runs and the cash plan, they may not receive this amount of money we are planning. This is very clear. So we will be more strict to do so. But in principle we want to enable the businesses to do their logic, strategic investment. But the thing I want to make clear to you is that we will be very flexible in adjusting these numbers. And what is the amount of investments, the normal amount of investments, I mean having in mind these investments for Steel Europe, you know that it is EUR800 million in six years, you can imagine that this if you divide it by six years that this is of course an on-top investment, but if you, let’s say, deduct this we will come to a quite normal level of depreciation or a bit more also in other businesses.

Bastian Synagowitz — Deutsche Bank — Analyst

Okay. Okay. Thank you. That is helpful. Then one more question on the — on your hydrogen business or electrolyzer business, which I guess you started to talk about more just in the last couple of quarters, but generally it’s obviously still a business, which is probably not just under-appreciated within your group or I think certainly under-appreciated in terms of valuation. I mean if you look at a couple of the hydrogen companies out there, they are obviously trading at pretty crazy valuation levels now. However, at this point. I guess it’s still been falling much below the radar when it comes to thyssenkrupp and yet you’re obviously a world market leader in water electrolyzers by installed capacity. So what are the options you’re basically looking into to maybe create value for investors from this slide because it is absolutely clear that there is a lot of value potentially in that unit?

Martina Merz — Chief Executive Officer

Yes. So I think we took just recently the decision because you know that we — that the water electrolysis business is part of our CPT business segment and we were, let me say, trying to find out what is the value we might get for that business. So it’s part of our Multi Tracks. Interestingly, I have to say we are somewhat surprised by the offers we got considering what value people see in this business. So these all led us to the conclusion that we do not say that we will not sell this business. Instead we will be well off this business with us remaining at least a significant shareholder, if not to say the biggest shareholder.

But we are going to investigate several options how to develop the business, all possible ownership structures for the business because as you said, this is definitely a tool and we are — we will come back with more details on this also, say, in the spring. We have projects running now to evaluate, but yes, we believe we have a significant value upside in this business. Our investigation tell us that this is far beyond the EUR1 billion business value already now. And we are asking ourselves in what direction we could lead this business to really get this value uplift to its maximum. And to create a bit fantasy for all of you in this question for thyssenkrupp the long-term why thyssenkrupp would be — would have, if we would form a green tech segment we would already have a significant sale — a significant sales amount in a green tech segment. And you can imagine that Klaus and I have this in mind. But we believe that we at this point in time have to focus our entire organization to the restructuring process and push the organization through this painful process before we talk about a possible future in other segments. So we really definitely believe that we are not — it’s not a good time to share, let me say, our ideas. We want our organization to focus on the top priority and that is free cash flow positive and competitive — and margins in the business we want to hold. And next year in May if we come back to you at latest this is long-term perspective. But, yes, hydrogen is for us — is a value driver, a significant one. Let me know if you would not share this decision that we should prioritize on performance and restructuring now.

Claus Ehrenbeck — Investor Relations

Does this answer your question, Bastian? Okay, with that, I think then we can go over to the next one in the row. So, operator?

Operator

Yes, sure. The next question is from Seth Rosenfeld, Exane BNP. Your line is now open.

Seth Rosenfeld — Exane BNP Paribas — Analyst

Hi. Good afternoon. I think this is Seth Rosenfeld, Exane. If I can ask a couple of questions on orders, please. Your commentary on demand conditions, it strikes me as being a bit more cautious as we’ve heard from many of your peers impacting both auto technology and then of course Steel Europe. You touched on earlier from the challenges within steel, but auto technology in particular. Can you walk us through what perhaps contributed to this relative caution? In particular, I think you said earlier, you expected top line 20% below pre-COVID level. If you can give us a bit more color on demand and your feedback from customers that would be a great place to start, please. And then I do have follow-up. Thank you.

Klaus Keysberg — Chief Financial Officer

I mean if I start the 20% below I said in the direction, it’s not 20%. It’s a bit better. This is something like — but, yeah, below pre-corona nevertheless as indicated before. Do you want to say something about automotive [Speech Overlap]?

Martina Merz — Chief Executive Officer

Yeah, I think — yeah, I think the automotive market, we are, as Klaus mentioned, sales, I think our overall positioning is relatively good one. With our business segment in the automotive market, we are really — we have the share of market in several regions and this piece we showed already even in the last fiscal year growth beyond the market growth. So it’s always difficult to provide the details compared with corona because, yes, we were below the previous year, but still better than corona figures indicated. So we gained relative — we gained market share actually. So at the end the growth of the business is satisfying and we believe, as Klaus mentioned, that for the time being to plan this model with growth for the future is necessary for us because our first and highest priority with you as our shareholders is we promise what we deliver. So we did not want to now, let me say, pump sales into our figures which we would believe might be too high. So we have a relatively cautious planning going forward as promised and delivered and this step of regaining trust with our stakeholders is a high priority for us.

Klaus Keysberg — Chief Financial Officer

Yeah, I mean when we made this planning, I think it was spring or summer of something like this. And at that time we were, of course, like everybody a bit cautious and I think it was good that we were cautious. And now after the summer these volumes developed better than expected and this is also a trend we actually see that is a bit better than expected. But I will say really — but we are now in the, let’s say, last quarter of the calendar year and we know incentives and things like this. But nobody of us really knows what will be the demand in next year. So — therefore, we have to be cautious — still cautious. And that’s the reason why we stick with these numbers.

Seth Rosenfeld — Exane BNP Paribas — Analyst

Okay. And one follow-up please. Within the Automotive Technology I think there is a quite large one-time charge recorded in Q4. My understanding is this might reflect some quality issues in the business. Can you give a little bit more color on what drove that charge and how we should think about the ramp-up progress of various facilities that’s often be something of a growth driver moving forward? Thank you.

Klaus Keysberg — Chief Financial Officer

So this is — the one times was the effect on the percentage of completion. It was depreciation. And this was an R&D depreciation and the provision for quality was a minor one.

Martina Merz — Chief Executive Officer

Mainly the contraction on the R&D depreciation.

Klaus Keysberg — Chief Financial Officer

Which we did in the light of, let’s say, of the reflecting of the balance sheet items we saw at the last fiscal year end.

Martina Merz — Chief Executive Officer

So, I think you all know that we had a very kind of clean-up of our balance sheet which was clear to us since we sold the elevator business that we used this once in a lifetime opportunity to clean up all these extra items within our balance sheet. And one of this was this R&D depreciation Klaus mentioned. So this was no surprise to us.

Klaus Keysberg — Chief Financial Officer

And I think it should worse in the future.

Seth Rosenfeld — Exane BNP Paribas — Analyst

Okay. Thank you very much.

Operator

Your next question is from Carsten Riek of Credit Suisse. Your line is now open.

Carsten Riek — Credit Suisse — Analyst

Thank you very much. Two questions from my side. The first one on the free cash flow outlook around EUR1.5 billion for fiscal year 2021. Looks rather cautious. Did you include any potential order from marines and the prepayments for it just in terms of Norwegian submarine order? And step-up in capex do we talk about in 2021 from chart 38 that suggest somewhere around EUR200 million, but I might be actually wrong? That’s the first one.

Klaus Keysberg — Chief Financial Officer

Yeah. So first question, yes, potential payments are included in this number. And there are also included in this number higher capex volumes than in the current — than in the previous fiscal year. But as I said before, this is something which we will have to develop over the way. So this is something we at the moment plan, but let’s see how it will develop. So this estimation was quite okay.

Carsten Riek — Credit Suisse — Analyst

Thank you.

Klaus Keysberg — Chief Financial Officer

And be cautious or not, we will see at the end of the day.

Carsten Riek — Credit Suisse — Analyst

That’s fair. On the — the second question was actually on the electrolyzer business, the other business because my original question was where do you want to put it if you want to develop it yourself. But hearing now, it could be a own segment. I’m just thinking whether it would be a wise decision to do the second step before the first step because strategy-wise you need to clean up the portfolio before you add, because what the market needs to see is actually a turnaround in the cash flows and that would be a nucleus and it could be developed but we don’t know yet. So is not it too early to think about this and do the second step before the first step? What is your view here because I believe even if you get something for the business right now and for the other business, I think the market doesn’t actually reflect anything in your share price for any of the disposals of the Multi-Track businesses. So I would say, executing on the Multi-Track business should be right now the most important one. And then once this is done, we can think about what is left and do you develop it yourself or or do you wind it down or whatever you do with this.

Martina Merz — Chief Executive Officer

I think you put it rightly. We are executing on the Multi-Tracks businesses where we look — where we are looking for, what we call, the best owner concept. And the only exception is now — are now two. One is the participation of our share in the elevator business and the second one is the CPT business. It means the water electrolysis business. These two businesses are not in the process to be prepared for joint venture or sale. And what we do exactly, as you said, with this other business, we will see. But we are sure at this point in time that the value we can create possibly alone or together with somebody as a minority or majority shareholder has to be assessed.

Carsten Riek — Credit Suisse — Analyst

Okay. Clear. Perfect. I’d just jump back into the line. Thank you.

Martina Merz — Chief Executive Officer

And of course, as you said, to push these businesses under the line is one of the top priorities for this year. I mean the Multi-Tracks businesses to develop the M&A process is going on to a point that we push them below the line before the end of the fiscal year is of course one of our top priorities. But it’s an uphill battle this corona. And we do not want to have fire to do fire save if there is no need for fire save.

Carsten Riek — Credit Suisse — Analyst

Okay. Understood. Thank you very much.

Operator

Your next question is from Rochus Brauneiser, Kepler Cheuvreux. Your line is now open.

Rochus Brauneiser — Kepler Cheuvreux — Analyst

Yes, thanks for taking my questions. I have a follow-up on steel. I guess you talked in length about the strategic evolution and the stakeholder — influence of the stakeholder in the further development of the steel business. What I’d like to understand is the relative preference for consolidation or standalone option in steel. So you’re saying you plan to have a decision by spring. What we have seen in the last couple of weeks and months in the European steel industry that there has been a growing dynamic in terms of consolidation. Obviously some of the companies talked to — are talking to each other. How shall we think about the Liberty bit, if this is only being finally decided in spring, what is the risk that this offer is not there and would that point at in spring we would rather talk about kind of a standalone concept?

The second question is on the guidance you’re giving for this year. Is this given under the current scope of consolidation or are there any certain asset deposits already implicitly considered and following the impairment this year do we then need to consider further impairment risk for these multi-tracks businesses for Steel Europe?

Klaus Keysberg — Chief Financial Officer

So let me start with the business. So you know that this asset impairments, I mean, you know the system behind and they are, let’s say and evaluated by the current planning and the auditors are in discussions with us whether it makes sense or not. So we do not see a big risk to further make write-offs or something. This is a very actual evaluation. So this is how the numbers. So this is how it is. The other thing you asked, what is the preference, and what is the overall situation in steel. Of course every European player, I guess, has his own option like we do and everybody more or less is talking to everybody. This is how it works. And we also say that we really do not comment and you have to — I think you will appreciate it. And we do not really comment or let’s say make a comment on what kind of, let’s say, option is now the best one or which we prefer because it really depends on how it develops. So of course, yeah, we have this Liberty. We have also other options. At the end of the day we also have a stand-alone option and we will see during the time to spring next week what kind of option will be the one that creates most value and then we are going to decide. This is the plan. So it’s really too early to say so. And this is everything I can say to this.

Rochus Brauneiser — Kepler Cheuvreux — Analyst

Okay. On this impairment question, I think I understand that we need to be planning for the next years and you had lower expectation that has an impact on the devaluation of your assets. But when you’re in a disposal mode and many of this multi-tracks are potentially up for sale. So there could be still a difference between how you see business on a stand-alone on account of planning basis versus potential exit routes. So, I try to understand whether these impairments were closer to the next three years business planning or to what you’re going to see as a price tag in the market.

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Klaus Keysberg — Chief Financial Officer

So the impairments are more on the — as every time impairments are made more on the three-year business plan models. And at the end of the day when we are talking about multi-tracks divestitures, it’s very open to say whether we will have an equity or not. So this is something we clearly cannot say at this point of time or even, again nobody knows.

Rochus Brauneiser — Kepler Cheuvreux — Analyst

Okay. That makes sense. Maybe one final follow-up on these accelerated staff cuts to 11,000 and the incremental 7,400 [Phonetic]. Can you give us a rough split how it is impacting [Technical Issues] being affected by that?

Klaus Keysberg — Chief Financial Officer

The line was quite bad. Can you please repeat that?

Martina Merz — Chief Executive Officer

[Technical Issues].

Klaus Keysberg — Chief Financial Officer

Okay.

Martina Merz — Chief Executive Officer

So the impact on steel. [Speech Overlap]

Klaus Keysberg — Chief Financial Officer

The impact on steel — yeah, the 11,000 people — out of the 11,000 FTEs, 3,000 are coming from Steel Europe and so this is the number which is included there is the one we already identified or defined during the strategy 20-30, so this is the part of Steel Europe, which is included in this number. Yeah?

Rochus Brauneiser — Kepler Cheuvreux — Analyst

Okay.

Klaus Keysberg — Chief Financial Officer

Yeah, it’s an old one. So as we said before, we are in discussions and if you know when we are in discussions, we are not talking too much about the potential outcome, but we can confirm that we are in discussions for further measures.

Rochus Brauneiser — Kepler Cheuvreux — Analyst

Okay, that’s fair enough. Thank you very much.

Operator

Your next question is from Luke Nelson, J.P. Morgan. Your line is now open.

Luke Nelson — J.P. Morgan — Analyst

Hi, thanks for taking my question. Firstly, just on provisioning, you’ve guided to mid three-digit million impact for this current financial year. Can you give an indication on the additional restructuring charges required out to FY ’23 to achieve your savings targets?

Klaus Keysberg — Chief Financial Officer

So did I get you right, so that we — the question — the line was not good, so you asked what kind of — how much the restructuring we will have to bear in the next three years or in this year?

Luke Nelson — J.P. Morgan — Analyst

Correct, to get to the — your FY ’23 target — savings target.

Klaus Keysberg — Chief Financial Officer

If you talk about expenses, it will be roughly mid — low to mid three-digit million number. Yeah, starting this year and most will be this year and some of this also next, into following year.

Claus Ehrenbeck — Investor Relations

You can see depicted on our slide that we showed in the presentation, it give some kind of guidance what you can expect from us going forward. You see the number for 2021 and also you see then the numbers for the year thereafter. So we…

Luke Nelson — J.P. Morgan — Analyst

So the low to mid three digit in FY ’21 should be thinking at similar quantum in the year or two out to 2023?

Klaus Keysberg — Chief Financial Officer

Yeah, so the payouts for — the payouts in 2021 will be higher than last year. We paid out last year EUR200 billion [Phonetic], so we’re going to pay out in the current fiscal year for that something between EUR300 billion and EUR400 billion and the restructuring provisions for this headcount reduction is, let’s say, it’s EUR200 million plus from today’s point of view. Of course, it can go up depending on what we are doing also going forward. And if you know these numbers, then you can make your guess for the numbers then going forward.

Luke Nelson — J.P. Morgan — Analyst

Okay, perfect. Second questions, maybe one for Martina. You mentioned the new structure will make the business more profitable and specifically talked about turning the business to then free cash flow positive. Just based on these FY ’23 sustainable savings that you’ve outlined and in the context of the capex remaining about G&A, do you think it is enough to return the business to being positive free cash flow on that time horizon without any market tailwinds helping the business from what you’re expecting in FY ’21?

Klaus Keysberg — Chief Financial Officer

Maybe, I can start. So if you look, first of all, free cash flow is of course also made on how much COVID is going to impact us. And you know that we are planning in certain scenarios and we have a scenario which for us is the leading one. We have the better scenario and the worst scenario. But the one we are — we actually have with the leading is the one where we have in 2023 is sales volume with the top line, which is a bit more than pre-corona level and the big businesses, steel, MX and Forged Technologies in this scenario are not above pre-corona level in this scenario, but even in this market scenario, we will be able to earn positive free cash flow and in this period of time. But to be honest, we will be better and sooner, so this is something we clearly have to work on. So this scenario is only reflected what we at the moment have in the light of the given market scenario and the top line scenario and the restructuring measures. So in this scenario, there will be a positive cash flow, but we are also — we clearly want to enhance and to be quicker and better.

Martina Merz — Chief Executive Officer

So as Klaus said, you answer can be — your question can be answered with a clear yes and still, as time of the essence for us, we — as Klaus said, we call our current case a moderate case. And of course, and we announced it this morning to our organization and yesterday to all our stakeholder. Our current, what we call, plan shows what Klaus described and what you heard from him. But we feel it still takes too long. So we are working on an improved plan still, because we do not want to make promises, we make our plan built on concrete actions, on concrete measures. We do not pump hot air in anymore. And as we do not pump hot air in, we are planning until we reach our target. We will recall this process we plan until we reach the target, and this is why we have just started a next round of planning in all our segments and we have committed ourselves yesterday to our Supervisory Board that we provide an updated planning in the spring next year, because I think once we would lose momentum on this improvement path, we lose, of course then, as said, the momentum. So we want now really to stay resilient and in a way also very disciplined on this improvement path. So we plan with concrete measures until this plan reaches the target set. And as Klaus said, with this, we intend then to be better than what we have just recently announced as our plan. But we will not promise this to you today, because we have this holly statement to us saying, we promise what we deliver and we only promise what’s based on concrete measures, bottom up in our organization.

Luke Nelson — J.P. Morgan — Analyst

Okay, thank you. And maybe just one quick one, if I may. Just if you can comment in any way around the headlines a week or two go around a capital injection potentially from the German economic recovery funds. And maybe why that would be necessary, given obviously the balance sheet has been post elevators and your comments on free cash flow improving over the next two, three years.

Klaus Keysberg — Chief Financial Officer

Yeah. If you talk about what’s going on in the media, it’s true that you sometimes read there is a potential capital injection. What is true so far is that we are in talks with the government, with Berlin and also with Dusseldorf here. But of course, we are talking about several issues and we always said that for instance, the financing of the transformation to green steel is something nobody can know steel producer can pay by their own cash flow.

And of course, in addition, our restructuring investments, this is a very costly one. And therefore we are talking to — also to governmental places what kind of subsidies could be possible. By the way, other steel producers are doing these also because they can also not finance the green steel transformation. And therefore, it is — we don’t talk about capital injection if we talk to official places here, but we talk about — we talk with the government and everything is open. Everything is open and it has to be, let’s say, intelligent mix of finance aids, and we will see what at the end of the day will be done or not done. This is the story from our side.

Luke Nelson — J.P. Morgan — Analyst

Okay, thank you. Thanks a lot. Okay.

Operator

The next question is from Alain Gabriel, Morgan Stanley, your line is now open.

Alain Gabriel — Morgan Stanley — Analyst

Yes. Hi, good afternoon, everyone. Just two questions from my side. First is on the Steel Europe business, how much pensions and provisions, net of tax are attached to that business to be considered if you’re looking to potentially sell it? And connected to that business, what are the capex requirements for that business in isolation for the next three to five years, including or excluding the green steel investments? That’s my first question.

Klaus Keysberg — Chief Financial Officer

And it was very quick at the line. First question, how much pension is…

Alain Gabriel — Morgan Stanley — Analyst

Related to steel.

Klaus Keysberg — Chief Financial Officer

Is related to steel is EUR4 billion.

Alain Gabriel — Morgan Stanley — Analyst

That’s right. Okay. Is that net of taxes?

Klaus Keysberg — Chief Financial Officer

More or less. Yeah. This is, yeah, yeah, EUR4 billion net of taxes. The other question, can you repeat it?

Alain Gabriel — Morgan Stanley — Analyst

It’s — what are the capex requirements of steel in isolation for the next three years to five years? Just trying to get the sense of the [Indecipherable] business including or excluding the green steel investments.

Klaus Keysberg — Chief Financial Officer

We have — of course, in the next year, we have a normal level of investment, which is roughly EUR500 million. And in addition, for the next six years, we have EUR800 million of this investment which are linked to the Strategy 20-30. And also, EUR600 million or let me make a guess how much is in the next three years, I think take 50% of it or let’s say 40% of it. So this is the investment level and the investments in the transformation of steel, we do make investments in transformation, that we inject hydrogen into the blast furnaces and also this come to cam issues. We do — in this three-years period, we do not have considered an investment into a direct reduction machine technology, but this will come — we will do so and this will come, I think ’24, ’25, something like this. And — but of course we are going for state aids to finance.

Alain Gabriel — Morgan Stanley — Analyst

Okay. Thank you. And my second question is on the steel plate business. If you were to consider shutting down that business, what would be the cash outflows that will be linked to that and I presume this is not in your guidance for next year, is it?

Klaus Keysberg — Chief Financial Officer

Well, it is in the guidance. So, this is the first state. It is in the guidance and it is in the planning year. And it will be, let’s say, the question is, it is part of this in the guidance because it will be — because it’s two-year effort I think. This is something like this. And — but the number is — I don’t want to be too precise at this point of time. So, it is something you can count by yourself. So this is…

Alain Gabriel — Morgan Stanley — Analyst

Okay, thank you.

Operator

The next question is from Christian Georges, Societe Generale. Your line is now open.

Christian Georges — Societe Generale — Analyst

Thank you very much and good afternoon. On your steel scenario and under your moderate case you’re referring to, is it fair to assume that in the first fiscal half, you’re having a higher level of operating loss, but is it possible that you may come to breakeven from the second half? Is that part of your — of the possible scenario?

Klaus Keysberg — Chief Financial Officer

You mean for the whole group or for steel?

Martina Merz — Chief Executive Officer

For steel.

Christian Georges — Societe Generale — Analyst

For steel, for steel.

Klaus Keysberg — Chief Financial Officer

Well, I think, what should I say. This is…

Martina Merz — Chief Executive Officer

Very much. Steel is…

Klaus Keysberg — Chief Financial Officer

This is very, very…

Martina Merz — Chief Executive Officer

Cost-driven business.

Klaus Keysberg — Chief Financial Officer

We do this and we do this calculation of — with the numbers, which are conservative, and we don’t really want to give you so much of insight here at this point of time. If you talk about this moderate case, we will have, as I said before, a loss in the steel business and whether it’s possible at the end of the year to have a break-even, we will see. So sorry, I cannot say more.

Martina Merz — Chief Executive Officer

The market, of course, such a fixed costs, steel is very a fixed cost business, high fixed cost relative to variable cost. So, it’s extremely dependent on market developments. And as Klaus normally says, it is difficult to provide precise forecast actually.

Christian Georges — Societe Generale — Analyst

Great. But if everything being equal, it would be fair to assume that from the second fiscal half of the year, some of the restructuring and the cost-cutting steps you’re taking now, would have an impact for second half?

Klaus Keysberg — Chief Financial Officer

Yeah. Not impossible.

Christian Georges — Societe Generale — Analyst

Okay. And my second question is on your shipping — Marine Systems division, because you mentioned some potential offers or interest on the stainless steel and other part of the business. Is it not an area where you’re having also some discussions as possible merger and acquisition on the European scale?

Martina Merz — Chief Executive Officer

I mean the AST…

Klaus Keysberg — Chief Financial Officer

No, the Marine System.

Christian Georges — Societe Generale — Analyst

Marine Systems.

Martina Merz — Chief Executive Officer

That’s not a Marine System, sorry. Yes, of course, in the Marine System, we are, actually, from our point of view, there will be consolidation. There is — actually we do not consider the stand-alone case at this point in time being the one with the highest probability. So for the time being, we believe consolidation and it’s either a consolidation within Germany or it’s a European consolidation. I think it’s mostly known who it is. In the German consolidation, of course, that would drive a better market position towards the biggest customer which is Germany. So — and while in the European consolidation it’s definitely a better synergy case, there, of course, you have good synergies, but probably no improvement in market position. So, it’s — but we are comparing both. There is not yet any preference visible, but we are in very intense discussions now with the players involved. So…

Klaus Keysberg — Chief Financial Officer

It’s a political thing of course.

Martina Merz — Chief Executive Officer

Yeah.

Klaus Keysberg — Chief Financial Officer

And we wouldn’t be — we are quite self confident that we think that we can drive the business by all, but if the political dynamics are in this way as Martina said, a potential consolidation is small — is quite likely, but it’s — it always takes two to tango and the timeline is difficult to predict.

Martina Merz — Chief Executive Officer

Yeah.

Christian Georges — Societe Generale — Analyst

Okay. And then, my very last question is — sorry.

Martina Merz — Chief Executive Officer

I just wanted to say you might get the impression that we are cautious in everything. Actually it’s not that we are cautious. We are very cautious in not overpromising actually business results, considering the difficulties for preview with the corona cases, but with our strategic moves, it’s sometimes difficult for us to indicate because as Klaus said it’s always two or three we are dancing with and this has its own dynamics, but please remain — and rest assured that we are not — we are avoiding cases where we become a victim of dynamics of others. So, we try to remain in a position that we are — as we say, ahead of the curve and the curve is not turning in a way against us. This is why we are extremely cautious in sharing details about cases where we speak results.

Christian Georges — Societe Generale — Analyst

Yes. That’s very clear. Thank you. And my next question was going back to a previous question about all these articles in the German newspapers about participation and as the cash injections. You’re highlighting that you want to be intelligent on the mix of finance. Does this include the possibility of a — stake from Messe Berlin or Dusseldorf. And is this where the case — is it something that the Board and your main shareholders would be comfortable with?

Martina Merz — Chief Executive Officer

As we believe in free markets, I would say, and I think, Klaus, I can speak for the two of us. To us, an equity stake of Germany in a company is — to me, something where I would always say is not a good idea. So, I do not conceive that in any way, a kind of preference I have. So, to be very clear, it is — so, we of course want to develop the business and create value and if there would be a case that we see, let me say a temporary [Technical Issues] support might make sense in order to accelerate a trend formation.

So, it would create value because at this time nobody would finance what people call dirty steel. If we go to a bank and ask for a loan, everybody would say, thanks, Martina, it was nice to see you again and goodbye, but as we want to to accelerate the transformation for cost reduction, it might make sense, but please rest assured. To me, such a situation is what I try to — actually it’s not that I like stakes — equity of Germany in whatever company. So that’s — we might have a situation at the end of the day where we’ll discuss this, but this is not our preference.

Christian Georges — Societe Generale — Analyst

Great. Thank you for your very clear answer.

Martina Merz — Chief Executive Officer

But, please don’t tell anybody.

Christian Georges — Societe Generale — Analyst

I won’t.

Klaus Keysberg — Chief Financial Officer

Rest of the participants.

Claus Ehrenbeck — Investor Relations

Okay, and with that, I think we have come to the end of our call today. We would like to thank you very much for participating. We would like to thank you very much for your good questions and for contributing, and we look forward to staying in touch with you. And as always, for all the question you might have after the call, the IR team is happy to be in contact with you and we look forward to speaking with you next time.

Martina Merz — Chief Executive Officer

And thank you very much to helping us lead the Company through this very important phase. And I think I can speak behalf of Klaus, of all our leadership team, not only you and myself. We know that it’s a tough time for you of being a thyssenkrupp shareholder, and as I said, rest assured that we give our best to turn around this company as soon as possible. Thank you very much.

Klaus Keysberg — Chief Financial Officer

Thank you very much.

Operator

[Operator Closing Remarks]

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