Acerinox, S.A.

Thank you, Borha. I shall try to make some general comments on the first slides of the presentation, then Carlos shall give a color of the actual market situation.

And finally, our CFO, Mr. Camos should give a detailed explanations of all the figures involved in the quarterly and yearly figures.

If we go to the first slide, Q3 2024 at a glance. The title for these slides should be resilience.

Clearly, in the first statement, what appears is the consistency in a quarterly EBITDA despite the challenging market conditions and these challenging market conditions is what we must keep in mind. Two years ago, in 2022, we experienced a fabulous performance in our sector.

So all the companies were having a big profit records, we too. At this time, let me bring back the statement of President Kennedy when he say that a rising tide lifts all the boats.

So this is what took place at that time. So the demand was overperforming.

So all the industry obtained huge profits. In our case, we were the most profitable player.

And we reported also the highest margins among the industry. But at the end, the excellence is to keep on sailing when the low tide and especially when others run a ground, and this is exactly what actually is taking place.

We are reporting these quarterly figures of EBITDA of €114 million for accumulated year-to-date EBITDA of €350 million, but this has been achieved in the most challenging market conditions. We don't go back for the latest crisis of the covid years, we need to go back 15 years in the huge financial crisis in for reaching equivalent levels of demand in Europe in year 2009 or in America in the year 2011.

So in these circumstances, in the worst and toughest market, we are able to achieve in 9 months €350 million. This is in line with the -- through the cycle, we were selling not many years ago.

And I think it's an excellent demonstration of what we have been able to achieve. In addition, we were the highest profitable player in the good days, but also in this 2024, as you know, we have been among the industry the player reporting higher profits and also higher margins.

In addition to this, the second comment is related to specific circumstances in Q3. It's clear that probably is not so relevant as it's fully spoiled or influenced by the circumstances of the starting up of our plant in Acerinox EurPatric Thate after 5 months stopped by the strike.

And consequently, it has had a strong influence of the increase in inventories. We have needed, obviously, to normalize the inventories through all our distribution.

As well as in the increasing customers as a consequence of the startup of the activity. So this is clear that as a consequence of that on a purely quarter quarterly basis, we have increased our own capital, €122 million.

This issue is neutralized when we analyze the 9 months. And obviously, shall be also neutralize in the coming fourth quarter.

So the third quarter is distortion by this fact, but should be understood under that basis. In the third quarter also, we have made the announcement that we have finally reached an agreement for selling Bahru stainless.

And the selling shall take place during the fourth quarter. At this regard, 3 years ago, we were stating that Bahru Stainless was not core business anymore.

In May, we announced that we were stopping products. and that we were looking for the better options for Bahru Stainless.

In this regard, what has been prioritized in our running plant as well as our customers and our suppliers. So we have prioritized the best option for our stockholders and also as has been the year of the expansion and our bet of growing in the high-performance alloys in America through the acquisitions of Haynes.

When we made the Haynes deal announcement in the fifth of February, we mentioned that probably the completion date should be in the Q3. Unfortunately, the preliminary conversations with all the antitrust authorities have taken longer than expected.

In this regard, I want to stress again the differences among the different administration while the antitrust approval in the states -- as the CFIUS approval in the States was obtained easily and very quickly. the procedures in Europe with a different administration and jurisdiction has taken a while.

So in this regard, we have need to go passing through foreign direct investments in Italy, in France, in Spain. In addition, we have need to develop antitrust approval in Spain, also in U.K.

and Austria. The one in Spain was already achieved.

Fortunately, last week, we have obtained the final credence obtained in the U.K., and we are only pending in Austria. So it seems that our lawyers and advisers are confident that in the coming weeks, also this could be achieved.

So consequently, we still consider that the completion date should take place in the year 2024 and probably in the fourth quarter. Regarding to the outlook, it's clear that as a consequence of what we are facing in the seasonal slowdown of our most profitable contributors, which is the stainless in America and the high-performance alloys.

The seasonal slowdown of the fourth quarter normally makes that this contribution shall be lower in addition with still the uncertainties situation taking place the weak momentum also in the European market and the depressed demand what we clearly assume is that the adjusted EBITDA of the Q4, sorry, shall be lower than that of the Q3. But having said that, it's clear that due to the effect and the contribution of the to our results of the sale of Bahru Stainless, the EBITDA reported in the Q4 by far shall be the highest of the year.

So this is something obviously to keep in mind. And as I said before, we expect that the working capital shall be normalized as well as the net financial debt as a consequence of that.

shall also be neutralized in the fourth quarter. Most of this increase that already has been taking place.

So this is the Q3 at a glance. If we move to the definition of this slide, in our case, clearly should be committed.

We are by far fully committed with ESG. And in this regard, we are proud of the outstanding performance that we are achieving in several areas.

So it's clear that in terms of the sugar economy, not only most of our production in stainless is coming for recycling scraps but also we have obtained 100% recycling of all the consumables, and this is something to reinforce. In addition, we are also achieving more than expected valorization of all the waste reduction.

And this is an area that also we are overperforming. As we are by far, overperforming in terms of the water with robots.

So in all these areas at the end are more absolute parameters and indicators we are overperforming, and we are proud of that. We cannot be so overperforming in those parameters, which are related to production.

And at the end, when we refer mostly to energy as well as two emissions, our baseline taking, as is indicated in the slide, is the 2015 year. In the 2015 year, we were running our operations at 87% capacity utilization.

In this year, '24 January to September, we are running at 65% by the nature of our business, by the nature of our plants, it's clear that it's not possible. to keep the ambitious targets we have running at such low capacity utilization as an indication in the full year 2015, the base line, the production was 2.3 million tonnes.

In this year, January to September, we are up to now in 1.5. So this is the clear explanation for why in those areas.

Still, we put us our red dot, and this is something that gradually is improving. Keep also in mind in terms of energy, for example, and renewable energy that our plan who is more active on renewable energy is the plant of Spain that has been closed for more than 5 months.

So as much as this is -- has been put on stream in the quarter and gradually it's increasing productivity. We shall be obviously improving as or indicators in the energy parameters.

In addition to this, we have been also going through substantial initiatives that appear also in the slide. Obviously, the most relevant ones are -- for example, the carbon product footprint verification in Acerinox Europa, in addition also in the water, following the water mandate agreement of the United Nations.

This is an area that also in this quarter has been relevant as well as all the projects we are participating for the proper use of our slag. For example, also, yesterday, we were awarded by sponsoring the ESG [indiscernible] area in most of our suppliers.

So these are areas in which we specifically have been clearly focused in this year. One area that we have been also improved compared with last year, which is a relevant area is safety.

In regard of safety, we have experienced a 5% reduction compared with last year. Our target is much more ambitious.

And as you know, the target is a reduction of 26%. So we also think that it's remarkable that we have reached this 5% compared with the last year, especially in view of the circumstances that are coming in production.

So when the plants are running full, obviously, it's less risk of potential incident occurring. All these incidents that have occurred this year mostly are related to minor injuries.

It's cutting hands or fingers or some minor damages. But this is a consequence of the constant up and down in production, stopping production, closing partially part of the lines, obviously, the 5-month strike and then the reaction of the production again.

So in this year, in which has been such a big number of manual utilization or starts and working equipment on an annual basis for adjusting for putting in the stream or closing it. This is where these incidents taking place more than expected, and we are working also for reducing all of these incidents for the coming years.

If we move to the following slide, I apologize to Carlos and Esther, my colleagues in this presentation for today, but if I should choose one slide for today's presentation, this should be the slide. I think it's the most relevant slide to try to understand the title of this slide should be strategy, strategy and strategy.

At the end, these are relevant milestones that have been taking place during the year. In addition of selling, as we have been mentioning that we are selling successfully in this challenging times.

In addition, we are keeping the expansion plans in North American stainless as well as VDM metals. All of them are on schedule.

But in addition, we have passed through three key milestones. So it's -- we cannot be purely waiting for the market to recover.

In addition, we are by far, focusing our strategy on three key areas. In those as appear in the slide, First of all, I want to talk about Acerinox Europa.

Acerinox Europa, finally has been implemented, the Bergen agreement for the implementation of a new business model for the plant, and that was needed. So it's clear that has been a painful the passing through a 5-month trial has been painful for everyone.

Obviously, this has been spoiling the profitability of the company. But I want just to make some comments regarding the history of Acerinox those better than as myself, even though coming for the second generation, always having keeping in mind what has been the history of Acerinox Europa.

There have been two long strikes in Acerinox Europa in its 54 years of history. The first one took place in the year '77.

And that was as a consequence of the implementation of a new salary system in which 40% of the salary was to be variable according on productivity and quality of the production. The implementation of that system created a 3-month strike.

But finally, the system was implemented. So as I told before, we always remember the story is taking of our veterans of how terrible was facing a 3-month strike and shadow production.

But what is clear is that the implementation of that model created a period in which for 30 years, Acerinox in Campo de Giralda was the reference plant, the fully integrated plant and the most competitive plant in the world, and it works. So it was a painful strict also, but at the end, established the basis for a proper running of the plan for the following 30 years.

It was successful, not only for the company, but also it was also successful for the workforce as the continuous increase in productivity of our plant allow them to have a compensation which is above that not only of the area, but also the industry in Spain. But there will change.

And then, therefore, the world has changed in the last 10 years or in the last 15 years due to several non-circumstances. And then we need to readapt again.

So what was neither was to implement a new business model, bringing especially flexibility. And being able to prepare to working in these mini cycles that actually are taking place, sometimes quarterly, sometimes there are even cycles or different cycles during a quarter.

So we didn't to provide a new system, which allows us to work in a more flexible basis the plant. As well as changing the trend in moving to more customer-centric base, approaching a better market share for final customers.

as well as avoiding more commodities standards and focusing on high value-added products. So it was needed to implement that.

At the end, this flexibility brings us or work is the availability to be called, depending on the market circumstances and demand, the versatility to work on different parts of the plant, which also is something extremely relevant as well as an hours pool that also could be used in a special target of obtaining that flexibility. At the end, the agreement includes all these areas.

So we are very confident that with these new circumstances for the company and for the workers, we have developed the rubber system for we are running successfully as Acerinox Europa the coming years. In addition to this milestone, as we mentioned, we have been focusing.

We work most of last year, as you know, making the analysis and the study for Haynes acquisition, and we announced the deal in the fifth of May. We are clearly prioritizing the expansion in America.

For us, as you know, it's -- we always have been stating that this acquisition for us is a AAA investment and AAA means expanding in America. Expanding in alloys because we clearly addressed that the area to grow more and expand is in the High Performance Alloys division.

As well as AAA for aerospace because in our high-performance alloys division, we are more exposed to other areas such as oil and gas and such as chemical process industries, but especially Aerospace was a target area to be placed. As a consequence of that, we went through and we raised and finally made a offer to acquire Haynes that was accepted.

And with this, we position ourselves in the top of the pyramid of high value-added products. The integration is Obviously, waiting for whenever the completion can be done, we are working in any case in the meantime in those areas that we are able to work.

It's critical that, obviously, until finally obtaining all the antitrust, we cannot enter in certain areas, but we are preparing all the words for a proper finance integration. We also have the clean teams for working and special designing the future CapEx that shall bring most of the synergies of this deal.

So we are making all the preparation works for that, but we are very impatient for starting working altogether. In this regard, Acerinox Board of Administration that took place last week in Kentucky was invited and it was done Courts to Haynes, and we visit the facility of Haynes at Cocomo as well as we have proper explanation of all the research and innovation areas in Haynes as also having a courtesy first meeting with all the management.

So obviously, not only ourselves as a management team, but also our Board is very excited and very impatient for finally reaching the proper integration and start working altogether. And then the third milestone that has been achieving this year is the final sale of Bahru Stainless, as I mentioned before.

At the end, it's clear that we have failed on making a profitable business operation in Malaysia. In this regard, as far as I previously mentioned a quote President Kennedy as we are in the residential elections week in the states this year, having mentioned a quote of the Democrat President, let me bring a quote of a Republican president on fair value.

And this one probably should be that one of Theodore Roosevelt, it's hard failed, but it's worth -- never have tried to success. We tried to make state-of-the-art running plant efficient and profitable in Malaysia, but we have not been able to success there.

Why? Because at the same time that we were putting that plant on a stream.

It was then decided the ban at Indonesia for a -- ban for exporting raw material. And consequently, huge and massive investments by Chinese groups have been done in Indonesia for transforming the nickel pig iron, dirty nickel being refined for obtaining stainless steel slabs and Indonesia move for a production of 300,000 tonnes to a production of 5 million tonnes.

So this has changed the status of the stainless or all over the world and the rest of the world has been exposed to that in the last decade. But obviously, the ones who have suffered more, that issue has been the neighbor countries and especially those in the area.

And in this regard, it was almost impossible to keeping a roller in Malaysia being profitable. So it didn't take sense to expand through a melting shop in Malaysia.

But obviously, just remaining a enroller for us also was not core business. So as a consequence of that, as I stated before, we have looked for the best option and the best option for our stakeholders and the best option also for the group has been closing this deal.

And we understand that in the remainder of 2024, everything should be settled. As a consequence of this, we shall focus on our core markets.

It's obvious that our core market in this space is going to be the Western world. It's going to be the Western world for high value-added stainless is going to be the Western world for our high-performance alloys and also getting advantage of having such a flexible and polyvalent plant as is that one of Columbus Stainless.

So we are back to basic concentrating in this core markets for ourselves. Should you explain market, Carlos?

Yes. Thank you, Miguel.

Let's move now to plan, not the challenging market that we are living in. Maybe first, and as a way of introduction, I remind you that both the stainless steel market and the high-performance alloys market.

depend on the economic cycle. Unfortunately, today, it's not the best time for the cycle, maybe just the opposite.

We are living in the -- probably in the low part of the cycle. As a reference, you can see in the slide that we include the manufacturing PMI, the data for September is the lowest of the year in the European in Europe?

And is the sixth consecutive month of contraction in America. So this gives you a sense of how poor the economy is today.

But how is reflected all of this in the stainless steel market. Well, the apparent consumption declined last year, 20%, both in Europe and the U.S.

And this year, it's declining even more. This year, we are seeing a decline in the U.S.

of 1% and a decline in the European market of 0.5%. If we compare the estimates that we have for stern consultants for the year '24, with pre-covid levels, the year 2019.

We can realize that the apparent consumption will decline about 17% in the U.S. market and a 20% in the European market.

So as we are commenting, very weak and extraordinary and hopefully, temporary momentum, that was -- the one that we are living in. On the positive side, are the inventories.

Inventories in the hands of big distributors are very low, well below the normal average, both in Europe and the U.S. in the U.S.

are 21% below the normal average, while in Europe, 13% the normal average. The imports this year are moving up in the United States.

It's mainly imports of commodity grades in which we don't have a very big exposure probably our peers have more exposure and suffer a bit more than us in this sense. In Europe in the third quarter went up as well imports.

But are well below the previous years are below 20%, 18%, so well below the previous years. where we can find more differences is in the market prices, prices, base prices in both markets in Europe and the U.S.

are more or less stable quarter-on-quarter. But we were able, in the U.S.

to maintain this stability at a reasonable level, while in Europe are in a very low level. So to sum up, in the stainless steel market, the short term is very, very challenging.

But we are fully confident that this will be reverted and we will benefit for a recovery in the demand, not only due to the inventory levels are very low. But also, as Miguel explained before, because we did our homework, and we have a very solid and a clear strategy.

If we move to the high-performance alloys market, the demand remained solid. On the positive side, we highlight the oil and gas and chemical process industry and maybe in the other side, highlight the aerospace industry.

Do you know that today, we are not very active in this aerospace industry. but we will be when we complete the enaction.

Hopefully, all the disruptions that this sector is living today. will be solved by the time that we acquire Haynes International.

And now I would like to give the floor to Esther, who is going to explain the results.

Thank you, Carlos. Thank you, Miguel.

Okay. Let's talk about the consolidated group results.

If we first start by looking at the quarters, we had a first quarter with an EBITDA of €111 million. At second quarter with €125 million and a third quarter of €114 million, which once again proves the resilience of the group in that -- in the adverse market circumstances where we are.

. In terms of margins, we achieved a 7% margin in quarter 1, 10% in the second quarter, and we are still in 9% in the third quarter.

And it is important to mention that this 9% has been achieved and it's 2 points higher than first quarter, even though the actual low, especially in America has been going down month by month in this third quarter. Even though there are no significant changes in the EBITDA, looking at the quarters, the profitability in the profitability.

The quarter has been marked and it's important to mention by two factors. The first one is a weaker demand than expected in the American market.

And the second one is the increase of activity group in Acerinox Europa after the 5 months of strike. And in this sense, it is important to remark that the operations have been run and started without any incident.

We have not had any failures, but we need to still highlight that the weak demand in Europe continues to be a fact, especially in stainless. Not really in high-performance alloys, where it is a more long-term market and therefore, more stable and solid in this period.

Going to the 9 months, we have achieved an EBITDA of €350 million. We think we are in a unique position in the sector and to prove that, I just want to go back to history.

We are -- and remind you that we are in a level of demand of production similar to what we had in 2009. And remember that 2009 was the only year in history where Acerinox had negative EBITDA at a group level.

Now we are in a range of -- we are in the €350 million. And this €350 million has been for those ones that follow as Acerinox for many years.

This has been like through the cycle EBITDA not so long ago. Another point to remark is the net financial debt.

We have ended September with a net financial debt of €453 million, which possibly for some of you might think that this is a high level or a not expected level. But just to highlight like that this is caused by a temporary extraordinary effect due to the ramp-up of the Acerinox Europa and the consequence of the increase in the working capital that we later will explain.

But definitely, we expect a reduction in the net financial debt for the fourth quarter. Going to stainless and let's stop by production, okay?

If we look at the production, we will see that there's been a significant decrease of 90,000 tonnes from quarter 2, okay? And this is due to the ramp-up after the strike.

We needed to fill in all the supply chain, the group supply chain in Europe, and that has us for the quarter, an increase in inventories and the consequent impact in the operating cash flow that we will mention later. But this is -- this, again, we think -- it is a temporary factor that will be solved in the fourth quarter.

It's just a question of filling in all the supply chain. In terms of sales, okay?

They remain very similar as the levels of quarter 2, okay? And this is again due to the weak demand, the seasonality and the low recovery after the summer.

In terms of prices, and that's another point to remark, we are keeping base prices stable also in America and in Europe. We have mentioned it several times.

It's part of the strategy just to sacrifice volumes but keep the prices. And this is again what we are doing, even though I think this is a merit with the special we demand that we are suffering in this period.

And this allow us to keep the margins stable in a 9% and an even better than what we got in the third quarter of 2023. If the -- if we look at the year-to-date figures, the EBITDA for the stainless have been €258 million, which is lower than what we got in 2023.

But again, this has been affected by the 5 months of strike in Acerinox Europe. In terms of operating cash flows, we had -- in the 9 months, we had a positive cash flow , operating cash flow of €97 million.

Again, this has been affected by this quarter. and the ramp-up again of Acerinox Europa, the increase of inventories as Brad mentioned, to fill in the supply chain.

And some also in customer due to the increase of sales in Europe. But again, expected to revert in Quarter four.

Going to high-performance alloys, the situation is different than what we have explained for stainless. There's a good and stable level of demand, especially in sectors like oil and gas, chemicals, electrics, not really in aerospace.

But as you know, this is not the main market for VDM. So this has not had an impact in our case.

The order book is stable also in terms of volumes and in terms of margins. There is -- it is true that there is an absence this quarter of the tailwinds of the nickel effects, okay.

Remind you that last year, we had a very positive effect on that, and we have been remarking these all the time, okay? This is something that we at allowed us last year to have the best results ever in high-performance alloys, okay?

And currently, this is being neutral this year, okay? For the third quarter, we are having a slightly lower EBITDA than in the second quarter, but it is due to the seasonality and the reduction of production normally that we had in the month of July due to the holidays.

In the 9 months, we are achieving an EBITDA of €93 million. And here, I just want to remark that when we -- before we bought VDM, the first the main -- the biggest the result that they ever had in history and the best one was in 2019 when they got an EBITDA of €96 million.

We are now achieving €93 million in 9 months. And another -- and the last thing to remark is the operating cash flows.

The operating cash flow, VDM has achieved a positive operating cash flow in the 9 months of €106 million. and positive also in this quarter of '22.

And going to capital allocation and net financial debt, okay? As mentioned, one of the main factors in the quarter has been the increase in the working capital already mentioned due to the ramp-up of Acerinox Europa and mainly focused on the increase of inventories.

This is an extraordinary temporary effect, as I already mentioned. Other factors, other important things in the quarter has been the payment of the dividend of €77 million.

And I think it's very important to mention here the impact of the conversion differences of €71 million, okay? This is a pure accounting effect okay, due to the cash deposits that we have in the States, you know that part of our strategy is keeping some -- keeping big deposits in the U.S.

The exchange rate was at 1.12 actually is 1.08. So this is just a reference to explain that probably this effect would revert if the exchange rate continues in the same rates as they are today, okay?

But it's a purely accounting effect. It's not a cash out.

okay? In terms of -- if we go to the 9 months, okay, we see that the operating working capital, the increase is much lower than what we have had this year, and we expect it to be positive in the 12 months.

We have also in the 9 months paying off taxes of €93 million which again shows a contribution of Acerinox to sustainability and also the profitability of the group, which means paying taxes, they where you have the profit. In terms of CapEx, possibly you might expect it, and we have guided you to maybe a higher CapEx that we have had in the 9 months.

Here, I think important to mention that we expect due to the strike, we have also postponed some payments, but we expect the full quarter to have a stronger CapEx than what we have had in the third, first quarters, and we possibly will land in the range of the €200 million okay? We have the payment of dividends of €154 million.

And then the conversion difference as you see in the 9 months is much lower. All of it has made the debt to increase in €112 million, which is, as Miguel mentioned, also, we expect to reduce it in the end of the year.

And you go to that, Miguel?

Okay. Yes.

The title of this slide should be the end. At the end fortunately, we are now going quick to the Q&A.

But having said that, let’s repeat again some of the key messages of today’s presentation. First of all, the results obtained resilient EBITDA is something clearly to reinforce.

We have obtained equivalent figure of that one, which was the average through the cycle 4, 5 years ago. So – and in addition, we are the best-in-class in our industry.

So we have in the best-in-class in the good days, we are the best-in-class in the tough days such that of today. We are not specifically concerned about the increase in net financial debt up to September.

This has been neutralized. Obviously, we are focused, and we have trick and clear discipline for our working capital.

This should appear in the fourth quarter. So it shall be solved easily.

In addition, in terms of the shareholder return, in these days, we are having a remarkable 7% dividend yield. I also want to remind that during our history, we always have or maintain or increase the dividend.

Never ever, we have stopped dividend or canceling the dividend. So at the end, this is something obviously clear in terms of our policy and regarding shareholders.

And thinking on the outlook, it’s clear that we have not a clear visibility in the stainless for the coming quarter. The market is going to remain tough, and we assume that the situation in HPA is much more stable.

And this is, as we always has been stated, one of the beauties of moving to the performance alloys is facing different cycles in the low cycles of stateless, the cycles of the alloys are different. And consequently, we are also benefiting from that in these days.

Regarding the Haynes acquisition, we are impatient and let's hope that everything shall be closer. And during the Q4, we can announce the closing of the deal.

And in regarding of the outlook, the Q4 EBITDA shall be the highest of the year as a consequence of the sale of Bahru Stainless. The purely adjusted EBITDA as a consequence of the market circumstances as we have been repeating and repeating today shall be lower than that of the Q3.

And we shall neutralize the increase in net debt and probably keeping for similar levels of that one of last year. And probably this is most of the comments we wanted to convey you.

Thank you for your patience. And now let’s go to the Q&A session.

I'd start with two. First, on the U.S., we've seen the U.S.

pricing premium over Europe declined quite a bit year-to-date. What has been the main driver of that?

Is that supplies that demand? And do you still believe the U.S.

should trade at a premium on a normalized basis? And if you could also tell us how much of that weakness we've seen in the U.S.

is tied to the election. And once we get past the election, would you expect some restocking once buyers get more visibility?

Okay. Thank you, Tristan.

As we commented during our presentation, prices in the U.S. remain stable quarter-on-quarter base prices the thing is transaction price that due to the decline in nickel price and consequently, the alloys [indiscernible], it's moving down but base prices remain stable.

Now we experienced some slight decline at the beginning of the year, but then we were managed to maintain it as stable. It's true maybe that the alloy shorts impact faster in the U.S.

than in Europe. And this is why maybe you have this sense of that the gap in prices between both markets is squeezing.

But the base price that at the end of the day is what gives us the margin we were managed to maintain stable.

And the demand side, would you expect some restocking after the election? Or do you think most of the demand weakness is tied to something more structural and not necessarily temporary?

Not structural. Probably, it's a temporary fact.

Every four years, the election time always provides some additional uncertainty. This actually is taking place.

It's taking place in addition of depressed demand. As Carlos said previously, last year, the decline in demand was around 20%.

This year, there still is a slightly negative figure. This is a fact that is there.

For us, it's temporary. At the end, it's a similar phenomenon in Europe and in America in terms of demand.

So it's not the whole western world where the industry is disappearing. But what is clear is that there are different facts that are affecting the market.

But we understand clearly that this is temporary challenges. And at the end it shall recover.

The rhythm of that recovery still is pending to the turbine. We are actually negotiating with our main customers for the coming year.

So it still is a bit premature. Let's see how it works.

As Carlos mentioned before, everything is properly based for a quick reaction, whenever the demand wakes up, the recovery is necessary, the stocks share normalize, the apparent consumption sell reaction very quickly. So this is -- this still is pending to come.

We understand that this may come during '25 mostly in the states, which is where we have more visibility or especially more dialogues with the final customers and so forth. It's understood that it shall be coming, but probably it's not going to be a radical change from the it's something that probably shall be coming during the year.

So in this basis, at this time, our best approach to the market, mostly in America is that it's going to be a transition year, but gradually during the year.

Maybe just add one thing is that the fourth quarter, as you may know, Tristan, is by seasonal reasons, the weakest of the year with Thanksgiving, Christmas and so on. So maybe it's a bit soon, not to see a restocking at least a big restocking in this fourth quarter of the year.

And as Miguel mentioned, we should wait until '25, at some point in '25, you see this progressively reactivation of the apparent demand.

Okay. That's very clear.

And my second question is also on the demand side, but -- and also in the U.S., the aerospace weakness, you mentioned, obviously, the supply disruption that we've seen. Can you remind us what's the percentage of aerospace for -- currently for the HPA division?

And then when you look at Haynes, where it's a bigger chunk of demand, obviously, how do you see the operation of their -- does that put into question the EBITDA target. Last time we got a big disruption in the aerospace industry.

I think it was during COVID and then it took some time for the space to recover. So how are you looking at this?

Well, the aerospace for -- in our HPA business accounts for probably less than 10%. So as we commented, no, we are not very, very active.

But we are more exposed to the European market than to the U.S. market.

So probably, we are at least less affected than others in this in is with these disruptions that are suffering in the sector.

In this regard, the aerospace, as Carlos says, is around 10% in today’s structure of our production. Clearly, one of the goals for us to grow in the states through Haynes is moving more on the aerospace.

So on this basis, as has been stated in the quarterly results, made by Hans during the year. This is something that obviously actually is affecting the profitability of these days.

But at the end, let’s keep in mind that what Boeing is experiencing these days is clearly a momentum effect. And probably these delays, the initial we have combined by higher orders for the coming years.

So as much as our plan and clear strategies long-term oriented to develop this business and expanding in the states. It’s clear that all these delays that have been affecting the 2024 are maybe the start of 2025.

At the end, shall we move to higher demand in a later stage whenever we are not only fully integrated, but also obtaining the synergies and with additional capacity of the CapEx on plan. So on our strategy, this is nothing to be concerned about.

For few questions from my side, and I'll start with a follow-up to Justin's question around the U.S. alloys exposure that will increase both the Haynes.

What's your sense in terms of a potential for a more gradual recovery in the aerospace? How would that impact your production targets and some of the investments you're planning for Haynes.

And ultimately, could it lead to a slower realization of your synergy target?

The -- thank you, Ioannis. The synergies achieved after the expansion phase announced for Hanes and all the CapEx that have been already stated that are going to take place there.

Our CapEx that shall be put on stream for the years '28, '29, '30. So on this basis, the actual momentum and the disruptions that is actually taking place in that space used by the temporary issues affecting Boeing is something that we are absolutely comfortable that shall be solved for that time.

So this is not meaning for us a change of our views for those days. On the contrary, as I previously said, we understand that these delays taking place in the 2024 shall move to further increasing the order books for that period.

So we keep on fully convinced and committed that are our target for introducing us more in the aerospace industry is the strategy to follow.

Second question, just turning to Europe. So your commentary of the Q2 results suggested that the Spanish plant would be EBITDA positive by the end of Q3, which doesn't seem to have materialized.

What of the weakness there because my sense that European demand hasn't really deteriorated over the past 2, 3 months, it's probably stable at low levels. Some color there would be very useful.

It's true that we understood when we -- yes, we're coming back to activity, we understood that gradually during the quarter, we could be able to reach certain positive figures mainly in September. But the situation probably has not allowed that to take place yet.

First of all, still the market is -- the market remains been very weak. And in addition, it's true that after 5 months of a strike, we have not lost customers.

And especially, we have not lost the target customers. We already faced ourselves to be supplying to.

But in this very weak demand days, we are not obtaining orders for the remainder of the year because our customers mostly have focused other suppliers for keeping their necessities. So in this dormant demand, the normalization for Acerinox Europa has not been taking place at the same rhythm.

This is something that shall come for the 2025. And we expect it to come but has not been able to achieve it in the third quarter.

We are improving quarter after quarter, but the demand still is very weak in Europe. And we -- sorry, just to add, Ioannis, probably in the 12 days, it's not obtainable profitability in Europe for none of the players.

So still the prices are depressed. And the demand is very poor.

So in this environment, we don't consider that any of the players should have black figures at the bottom of the P&L. So it's probably everyone should need to wait, and we hope this is to come on the 2025.

So by itself, in these days, probably it's very difficult to achieve that.

Okay. Understood.

And last question for me on the Q4 outlook where you guide for lower underlying EBITDA quarter-over-quarter. Shall we look at Q4 '22 and '23 as a reference where we generate around 90 to 95 of EBITDA.

Is that a reasonable range? Or do you have some additional comments here?

.

Okay. The situation of the demand is not at the levels that we were in 2022 or 2023, okay?

So we really expect an EBITDA to be in a low rate for quarter two. Quarter four, especially Quarter four is also affected by the seasonality of the normal market, but especially by the American market, sorry.

But it is true that the levels of [indiscernible] said last year, there was a drop of 20%. And in this year, we are not recovering anything of the drop of last year.

So just looking at the external figures and at the macroeconomic figures that we are having this year. they are being worse, that was the situation in the past.

So we expect a lot here. It is true that, in our case, it will be positively affected by Bahru, okay, in terms of reported EBITDA, okay?

In the case of Bahru, you know that we made an impairment last year, which dropped all the value almost due to 0 to the value of the land, and we might have also at the end of the year, some extraordinary positive effects due to the accounting effects of the conversion difference. So that says part of the EBITDA that we could have as negative because of the lack of demand could be compensated in terms of reporting EBITDA by the sale of Bahru.

My first question is on precisely the accounting gain. You plan to achieve on Bahru.

I think the land was something around €40 million in your balance sheet. What the net proceeds are €95 million in draft.

So is in plan to realize in Q4, the difference between the two?

From an accounting perspective, it's not exactly that difference, okay? Because you need to take into consideration also the historical value of the investments that we have done over the years.

in Bahru, okay? So there is an effect also which is kept on according to accounting rules.

There is an effect which is kept on result, which is the conversion difference. In our case, those are positives, okay?

So -- and those will be released at the same time we lose the control of Bahru. Those conversion difference, it will depend on the date in which we do the transaction.

But for you to have an idea, the conversion differs -- the positive conversion difference that we have as of September are in the range of the €80 million, €90 million. So it will be a better profit difference between the €40 million and the €95 million.

Okay. That's clear.

And second question is situation in Europe. So I read in the press that you started a layoff scheme in Spain.

So could you shed some color on the related impact in terms of capacity utilization and perhaps cost savings? And can you share perhaps further color on the capacity utilization in all your plants through the world at least NAS and Columbus?

Well, in Spain, you know that we have this tool of the temporarily layoff that allow us to adapt to the demand, our production plant to the demand. In this sense, as you mentioned, we activated at the beginning of October.

Workers are already coming back to the plan is will be by phases. It depends on the necessities, but the malting hot cocoa rolling, it depends on the necessities 1 week or another.

But I repeat, this is a tool that we have to flexibilize our cost and our production plant in the plan. The capacity utilization for the third quarter, it's about 60%, roughly speaking.

And then for the fourth quarter, it depends on the market situation, we will adapt.

Okay. And just the last one.

So it's on your pro forma net leverage at the time of the acquisition of health, you plan to achieve 1.5x at the onset and bring that down to 1.2 in 2025. Since then, I think that EBITDA generation has been a bit weaker than your expectations, although free cash flow has been broadly in line despite the seasonal hiccup we have seen to three.

So what's your latest estimate for net leverage at the end of Q4 when the Haynes acquisition is supposed to close?

Well, it still is a bit premature in any case. As we have indicated, the debt was rise in the Q3.

We understand that this should be neutralized in the Q4 in equivalent terms. So probably as a rough indication, still is a lot of circumstances to take place.

We understand that should be in line with that net financial debt that we reported at the end of 2023. So having said that, I think that 2023, it was in the range of €340 million.

So probably should be in that range. In addition, we have the time of when we are closing the deal of Haynes.

It's obvious that the picture as much as we have to get close to the end of the year and the closing year if we are finally, any same late November, early December, just to close the deal of Haynes. By far, we shall not be able to contribute our EBITDA with a high contribution coming from purely almost 1 month, which also normally is the seasonal slowdown in the States, as we mentioned.

And we are putting all the debt in the same equation. So still the targets are reasonable on a medium term.

But to finish of the 31st of December, if the Haynes is finally taking place late November shall be spoiled by that. But in the normality of the developing of the coming months, still we think that this is achievable.

It's a bit that at the end, it's out of our control. So we control the controls.

But as I said before, dealing with all the different administrations mostly in Europe regarding all these procedures has been lengthy and at the end, we are prepared for making a quick closing as soon as we go to all the approvals. But this is still spending to come.

So we do not know if it shall be in November -- sorry, late November, mid-November, early December, we are prepared for that, obviously, for our Financial Director is something to keep in mind as we are moving $800 million for paying Haynes shareholders. But we are still pending from a third-party administration that has its own procedures, and it's on time.

Let's see when it comes. This assuming that finally, as we consider, it shall be approved in Phase 1.

If finally, it should be needed additional analysis or discussions, and it could be delayed. We should move to early 2025.

But let's hope that this does not happen, and we still are achieved in place. So we are not in this regard, concern about breaking our KPIs yes, because the deal is taking place at the latest part of the year.

We are long-term runners.

A few from me as well. I just wanted to focus first on shipments within the quarter, which were actually quite strong.

You previously in the past, tied or given us color on capacity utilization for the quarter. Could you speak to perhaps where utilization was for North America in the quarter?

Europe? And then also, what are your expectations on shipments into Q4, please?

That's my first question.

Well, we should precise that we are not reporting shipments. We are reporting milking production.

That is not the same as we explained during the presentation, we need to fill in our supply chain in Europe. So production in this quarter was higher than seen.

This is on one hand. And on the other hand, the capacity utilization in the quarter, we were at levels of about 60% in Spain, about 70-plus in the states and 65%, roughly speaking, in Columbus in South Africa.

Okay. And then secondly, just on, I guess, acquisitions on profitability in Europe if the previous target was to be towards breakeven in Q3, which was not achieved.

What are your current expectations into Q4. Is -- are you essentially guiding for as continuous improvement in the not breakeven.

It's going to be difficult at the end, keep on mind in Q4, the low level of passive utilization. We are also making some temporary layoffs, as Carlos mentioned, as a consequence of that flexibility that was brought in the wage agreement.

So we are normalizing, but I do not dare to say to what extent is normalizing should take place or shall take place in the Q4. In addition, obviously, maybe that situation is visible if we see a reactivation of the market in the Q1 of 25%, which still is -- still we have not that visibility.

So contemplating our quarterly figures, the fact that this regulation of the market in January or the fact that the market in January still is depressed has -- may have a big effect especially if it's needed or not to make further inventory adjustments. So at the end, we are getting close to the breakeven, but the actual market basis is not such a clear picture if we are going to achieve this in this period or we need just to wait for the coming year.

We are getting close to the breakeven that we still are not there.

Brilliant. And just finally from me, it seems broadly, there is this market expectation that post-U.S.

elections, we could see stronger trade protections and measures particularly in the U.S., which would obviously benefit producers such as ourselves. We've seen obviously discussions at the of this year as well for the import protection versus even neighboring trade partners in the U.S., such as Mexico and Canada.

Just broadly, if those realizations do not come through close to your elections, how do you see, I guess, the long-term prospects of the U.S. market we've seen this year, import penetration rise higher versus last year.

we look at investments ourselves and peers are making, which is to win back to more import share in the medium term. If we don't see that level of higher protection other measures, you still view that these investments can carry the same level of returns are you expecting, let's say, 1, 2, 3 years ago?

Well, our strategy in the states has made us obtaining an improving margins, even though this time, and this especially took place, for example, during last year in a time in which the imports were raising. But at the end, we have been able just to drive our production much to the high value-added types and being less exposed to the pure commodity types.

So the imports in the States are mostly related to the pure commodities. And we are not depending on purely such commodity types from our customers.

So consequently, in this regard, the status quo for us is fine as it is, obviously, at the end, if it were as [indiscernible] were our access of material, this could distort the picture. At the end, the states need imports because at the end it’s a net important market.

It’s true that in this circumstances as a consequence of the imports. But as a consequence of the demand is while we are running are planned as lower capacity utilization than what was historically our standards.

But this is a consequence of the demand. So for us, that concern is not so related to the import.

So in this regard, in terms of what may happen on the elections, we always have found a different than with the European administration that the American administration is very effective, and it has been effective the Democract administration and Obama put on place anti-dumpings to China. It has been also effective.

The Republican administration when Trump administration implemented a 232 section. And at the end of the macro administration of Biden also has been fully respected the 232 section.

So in that is not going to be big changes. At the end, obviously, when we analyze the pros and the cons of the two possible candidates it appears to be also more, let’s consider business-friendly Trump, but on the other side, still we need to really define all the infrastructure and the IRA program of the Biden administration still has not been materialized in pure amounts of stainless.

So Democrat administration maybe also should be sensible to the IRA and bringing additional investments that you need stainless for that, especially in users. So in general, what we must say is that our trust belief on the possibilities of the American market for the coming future is not depending on who really is going to win the elections.

So in both of the cases, the prospects for America remain very robust.

Just two short ones for me. Could you help walk us through some of the exceptional costs that you might have seen through Q3, by which I mean, did you have any inventory -- negative inventory valuations?

Are there any sort of catch-up maintenance costs for the Europe assets, if you have a sort of estimate on the strike impact or sort of strike impact in Q3? And then just what you're making to the Q4 guidance, both on the inventory valuation side and what kind of costs we should think are associated to this short-term working stoppage?

Okay. In terms of inventory valuation cost, okay, this has not been really a fact in this quarter.

It's true that we have increased inventories, but our cost of inventories is not been that high as to increase the -- to increase the provisions in the quarter. Of course, we always have that valuation effect, which in this quarter, I think the adjustment that we made is not really significant, was in the range of the €30 million.

So as long as the expectation for the fourth quarter is to reduce the inventories and the circumstances in terms of prices and costs should remain stable. We don't expect a very big impact in terms of stock valuation.

About [indiscernible] cost, there's not been really it's true that the run-up of the factory in Acerinox Europa has been extremely successful. We didn't have any extraordinary maintenance cost that makes us to mark or to change our provisions to Quarter four.

So it's been really very successful. So we do not expect any extraordinary cost affecting fourth quarter other than those related to the low demand.

But we do not really think there is going to be any exceptional thing other than our day-to-day business for the fourth quarter. And we do not expect any high impact of the stock valuations at the end of the year in the sense that we are putting all our efforts to reduce our stocks.

Got it. Sorry, that €30 million, that was a 9-month number or that was just in negative devaluation or the 30 million number?

Yes. The €30 million is the total adjustment that we have on our inventories at September figures.

So the inventories have been read it out by the €30 million in...

So it's for the year, not for the quarter. Yes.

Okay. That's fine.

And then -- sorry, just the other question, Miguel earlier, you mentioned just in Europe. Some of the -- you haven't lost any customers, but you're seeing some of them look at other suppliers to meet their needs.

So it does feel like at least for the end of this year, there's a little bit of market share loss. I mean what's the strategy to kind of win those back next year?

Is it on pricing? Is it on reliability of supply, what you've got Europe up and running.

Yes. Just curious about that.

Thanks.

Not in pricing. Clearly, it's more in terms of, obviously, the reliability of the supply as you are saying.

So we have not lost customers. We have lost orders.

And at the end Clearly, our customers have been needing to cover from other sources. And this combined with demand at the end of the year has created this effect that the volumes have been a bit lower than expected.

Having said that, through our conversations that actually are taking place for the supplying and the commitment agreements for the coming year, we are realizing that we have had that effect coming in the quarter, but we are not losing that order book for the coming years. So in this regard, we -- by far, we are not going to make any aggressive policy in terms of pricing.

This is not the solution for actual days. And as much as our goal is directly approaching the final customers and having more close and consistent participation of -- and working together with the final customers in the supplies.

We feel comfortable that all these customers remain confident when the solution is -- has been already there and is active. So we are negotiating on this basis for the coming year, and that's it.

We do not expect further impacts in these circumstances.

Okay. Makes sense.

Can I squeeze in one more, sorry. Just on U.S.

Aerospace, the Haynes acquisition. You've obviously seen one of your European peers now talk about making inroads into the U.S.

aerospace business. I understand U.S.

AP is for stainless engineering steel, but it feels like a stem opening the door to put more nickel alloy products into that market. How different is that product from what Haynes does are you worried at all about another competitor coming into the market?

Just any color there would be interesting.

Well, first of all, at the end -- obviously, we have a great respect for Aperam as we have a great respect for Universal. And at the end, the fact that their focus and strategy is in line with us, also for us is a clear reinforcing issue.

So we fully understand that Aperam in these days is contemplating the American market did its strength as a possibility for the future and mostly in the aerospace. Universal and Haynes are not competitors at all.

At the end, both supply to the aerospace industry, but in different areas. Haynes is more oriented to the whole part of the motor while Universal supplies to different components, the landing gears and hydraulic part of the systems and so on.

So on that regard, focusing on the aerospace industry, but it's different type of products. So more or less universal is more what we could call steel tools.

And Haynes is more oriented, as I said before, to the whole part of the motors due to its nickel alloys structure. So on this basis, we respect the strategy of Aperam.

We share the views on America alloys and aerospace, but we are not competitors. Haynes is not competing with Universal.

Universal is probably selling most of its products through distribution, while also Hanes going more to the final customers. And at the end, in the case of Haynes, obviously, with key participation of all the innovation and research and so on.

So in this regard, for us, it’s fine. Clearly, when we made moving to America, we always focus on Haynes and we have been following Haynes for a while.

In our case, the proper complementarity was through VDM and Haynes they have – the niche is common and the synergies are to be obtaining through VDM, Haynes. So in the case of Universal, should be a different scenario.

So for us, it's more a clear demonstration that not only we with our presence In America, but also other key players as Aperam understand that America is the place to be. And also the aerospace sector is a sector to cover and to improve the presence and has proper prospects for the future.

So we consider that this reinforced more our strategy rather than concerns us because it’s no real competitor.

Yes. Just a quick follow-up on Hans and the pending situation with Austria.

Obviously, it's taking a bit more time than expected. Could you confirm then the closing is still expected in Q4?

And is there any risk of disposals, I'm trying to understand why Austria has been such an issue given that the presence is limited. So if you could give us a little bit of color on the process and why you're confident on the closing, that would be great.

Thank you. Well, we are confident because our understanding, obviously, is that the combination of the two players is not really providing big changes to the Austrian market.

And this is something that has been stated. The VDM has a higher participation in the Austrian market because there are two key customers for VDM that are strong in Austria.

And in the case of Haynes, the presence is negligible. So we never expected that this could be an issue for the Austrian authorities, maybe the global picture of what could be the aggregated figure appear to be some figure that for some of the responsible administration deserve a further procedure or a more detailed procedure or analysis.

But this is not as a consequence of the combination. This is a consequence because two relevant customers are strong players in Austria and our customers for VDM.

Having said that, it's true that this has been probably the pending milestone that we have other countries where there were more participation of both players have been already passing with no difficulties. And the last one has been U.K..

So nowadays, it's only Austria. We are obviously in an open procedure, and we are just waiting to say finally, the decision is just to give us the allowance.

If we are not contemplating at this stage, that remedies could be taking if remedies could be taken, we should look for the remedies. But at the end, for us, is purely a matter of time.

We are impatient to do it as soon as possible. If it takes 1 month, 2 months, 3 months more, okay, should be painful, should be a delay of some of the participation in common analysis that we should be making together.

We have prepared, for example, if that were the case and if it were to be delayed, the specifications of all the equipment’s that need to be ordered to the equipment suppliers could be delayed 2, 3, 4 months, okay? We have already designed a clean team approved by the antitrust rules in order that should be that members of that clean team in both sides, the one that should start discussing this issue, but we understand that probably is not going to be needed and the key responsible on the technical areas had we -- they were participating on conversations from both sides.

It has been frustrating. And I think we also stated that in the previous presentation because we never foresee that Austria should be a problem.

But nowadays, they are the only one. And let's hope that the situation is finally approved as soon as possible.

We are prepared for closing as soon as we obtained the allowance and our lawyers are confident that this may come in the coming weeks. Let's hope that it occurs in this line.

Thank you very much to the three of you for the presentation and also for the answers given. And to all of you for your presence here in person or virtual.

We hope to see you soon in the full year 2024 results presentation. That concludes our third quarter 2024 conference call.

Thank you very much, and good afternoon.

Thank you.

Thank you.