Salzgitter's Full-Leverage Bet: Owning HKM's Green Rebirth at a EUR 100 Million Net Price
H1 results confirmed the turnaround, but the real story is a sole-owned HKM, a contracted EAF, and a trade-defense tailwind finally landing.
SZG.DE · Earnings Call · 2026-08-11
The half-year headline for Salzgitter was deceptively plain: a "positive first half of 2026." But beneath that understatement sits the most consequential strategic act in European steel this year—full, sole ownership of HKM.
From JV Partner to Sole Owner: HKM's Green Rebirth
For three years, HKM was the haunting question in every Salzgitter call. The 2025 Q&A is littered with analysts pressing on closure scenarios, cash injections, and restructuring cost exposure. In May 2025, CFO Birgit Potrafki still could only say it was "in process": “in HKM we are right now in process, very intensively evaluating the different options we are having” — Birgit Potrafki, Chief Financial Officer · 2025-05-13. By March 2025, CEO Gunnar Groebler had been blunt about where the company stood: “we are not in a position to take over the entire HKM and run it as is” — Gunnar Groebler, Chief Executive Officer (CEO) · 2025-03-21.
That position has been overturned. On June 1, Salzgitter became the 100% owner of HKM, buying out thyssenkrupp Steel and Vallourec. Groebler framed it cleanly on the call: "We have been able to strike a deal with the 2 co-owners... We are now since 1st of June, July, 100% owner of HKM." The electric arc furnace at HKM was contracted in July, targeting 90% CO2 reduction by late 2029. The headcount plan is stark: 3,000 people today, roughly 1,000 by 2029, with the bulk of the reduction coming only when the second blast furnace goes offline—a decision Groebler stressed is irreversible:
once the coking unit and the blast furnace are switched off, it's impossible to switch them on again.
The public funding around HKM is what makes the arithmetic work. The EAF costs roughly EUR 900 million gross—EUR 700 million net after EUR 200 million in public funding. CFO Birgit Potrafki's reassurance to investors was the single most important number on the call: “within the next 3 years, the net additional cash over all of these items... we will need EUR 100 million over the next 3 years” — Birgit Potrafki, Chief Financial Officer (CFO) · 2026-08-11. That includes all restructuring, maintenance, and transformation investment, funded by shareholder contributions, HKM's own operations, and public money. It is a deliberately contained bet for control.
Delivering: Margins, Program, and a Raised Bar
The financials back up the confidence. Sales came in at EUR 4.6 billion, down only 1.6% year over year, while EBT more than recapitalized at EUR 258 million (EUR 76 million including the exchangeable-bond valuation). Working capital ticked up to EUR 2.6 billion on receivables, but operating profit held at EUR 59 million. The Performance Program (P28) hit EUR 97 million in six months—80% of the EUR 122 million full-year target—and Potrafki expects to overachieve again.
Guidance was raised to sales of up to EUR 10 billion, EBITDA of EUR 725–825 million, and pretax of EUR 325–425 million. Groebler's closing line on guidance was blunt: “we are clearly in the black, and we remain in the black in '26” — Gunnar Groebler, Chief Executive Officer (CEO) · 2026-08-11. Analysts will note the EUR 20 million one-time effect in H1 flagged as non-sustainable—but the structural cost takeout looks durable.
The Regulatory Tailwind Finally Lands
Beyond HKM, the market backdrop is shifting. The trade defense measures—the carbon border adjustment mechanism, the new steel safeguard (effective July 1), and fresh antidumping cases on cold-rolled and hot-rolled steel—are visibly moving prices. Hot-rolled coil ex-works Italy has already gained EUR 30/tonne, with HRC around EUR 715 ex-works. Groebler noted the intended effects are already visible even as importers front-ran the safeguards before July 1, so the value chain is still working through pre-safeguard inventory.
The water levels on the Rhine are a real near-term irritant—a global theme echoed in Low water levels across European energy markets in Q2 2026. For HKM in Duisburg, Salzgitter has shifted coal to rail and built stock to keep production plane; the cost slides into logistics, partly pass-through to contract customers like thyssenkrupp Steel. No production impact yet, but it is a live watch item. And on ETS reform, the EU's first proposal leaves first movers under-rewarded—Salzgitter's near-term regulatory priority.
Assessment
Salzgitter's story this quarter is not about showing incremental earnings—it's about converting a multi-year JV ambiguity into a decisive, fully-controlled blast-furnace-to-EAF transformation with a bounded cash cost. The HKM acquisition, the contracted EAF, the EUR 100 million net exposure, and a rising price floor from EU trade defenses together form a coherent, name-moving narrative. The prior-year analyst worry—“you may need to inject some cash into HKM for restructuring or potential closure” — Alain Gabriel, Analyst · 2025-08-11—has been answered with a funded, deliberate plan.