Acerinox, S.A.

Good morning, everyone, and welcome to the Acerinox First Quarter '25 Conference Call. Today, the presentation will be hosted by our CEO, Bernardo Velazquez; our Chief Corporate Officer, Miguel Ferrandis; and our CFO, Esther Camos.

After our prepared remarks, we will open the line for questions. Before getting started, let me remind you that this conference call is being broadcast on our website at acerinox.com.

Now I would like to give the floor to our CEO, Bernardo. Please go ahead.

Good morning, everyone, and thank you for attending this presentation. Before I came here, I was reading the reactions in the newspapers saying something like the Acerinox results are shrinking because of tariffs.

This is not reflecting the reality. Esther and Miguel will explain later our financial data and why the profits are below Q1 '24, but this is not the situation.

Remember, there was a correction in the market in Q4. And as expected, we started this quarter recovering gradually, recovering step by step.

March was a good month in order book. Our order book is in a healthy situation.

And in the 2nd of April with the announcement of the Liberation Day with the tariffs that created a lot of confusion, it doesn't mean that the market shrunk again or that the market went down again. The market remained stable at the level of March, waiting for the negotiation.

I think what's going to be -- what can happen with the situation, supply chains and how the tariffs will affect the different markets. What can we do in this situation, in this scenario?

Well, first of all, as we present in this slide is control the controllable. So we have to serve these big waves and the best way to do it is monitoring our supply chains, keeping control of our business and keeping control of our working capital.

I think this is something that we always try to show that we have experience in managing the volatility and the working capital is a very tight control. This is important.

And once we have this, so we are always in a cyclical business, long-term oriented with a huge experience in this industry. We're focusing on our long-term strategy as you can see here.

So we have released a plan to control our working capital that is working well. We will focus on this to reduce our debt.

We are very happy and very busy integrating things in the organization until now is a real success. We are focusing in the strategic plan of Acerinox Europe, trying to move to added value materials the same that we are working and diversifying the production of Columbus to reduce the dependency of -- in our exports.

We have a privileged position in the United States where we are investing to a company in the American market. And we are growing in HPA, in VDM also because it's a good business and it's very healthy.

So in general, the situation, so we don't have to panic. There's a lot of new, there's a lot of volatility, but we are very calm.

And I think we have our business under control and it's in a better situation. So we have been improving from January to March markets at a good level.

Our order book is solid, and this is what our results will reflect in Q2. So having said this, I will pass the floor to Miguel that will explain the situation in the different markets.

Thank you. The most remarkable bullet points for this first quarter of the year.

First of all, we must express the satisfaction on the EBITDA of EUR 102 million in the actual business climate as composed as this. We have demonstrated once again our resilience.

We are establishing at the bottom of our quarterly profitability. These trends of EUR 90 million, EUR 100 million, EUR 200 million in this quarter, EUR 91 million as adjusted EBITDA in the Q4 last year.

So we are clearly given the consistency that what was previously our normalized EBITDA 3, 4, 5 years ago, now is more or less the sustained EBITDA we are keeping in the lowest part of the cycle or in the difficult times as has been this challenging first quarter. So this for us is extremely positive as is also extremely satisfaction our strong cash generation in the quarter.

We have generated EUR 99 million of cash flow in a quarter in which production has increased 29%. In addition, we have been even able to reduce the working capital, around EUR 6 million.

So what normally means a first quarter of normal increase of working capital, especially with such increase of production in our case even we have been able to reduce it. So we are extremely committed for a working capital reduction program, and we are fulfilling all our targets.

And this is something that, obviously, is going to keep consistency in the coming quarters. In addition, the net debt of the group, EUR 1.2 billion, you know that net debt never has been our strong headache.

Our debt is extremely competitive. We are obviously just including, in all our debt, all the acquisition of Haynes International.

So we are there, but in this first quarter. As a consequence of this strong cash flow, the net debt had a slight increase, around EUR 75 million.

Keeping in mind that in third quarter with a dividend payment of EUR 77 million, keeping in mind the strong CapEx in which we are involved with EUR 57 million, keeping in mind also the conversion difference effect, which is strong in this quarter because, as you know, we have a strong cash position in the state. So the pure accounting conversion difference of our cash in dollars to the euros now, in a stronger euro, weaker dollar is creating this effect.

So in this basis, there is nothing to be concerned about and this is the basis of the business. Gradually, as we announced, the net debt shall be reducing during the year.

In addition, it's more easy to appreciate, actually, our strategic advantage compared with the industry regarding the geographical diversification of our assets. We are producing in three different continents.

We are not exposed to a single area of recession. So consequently, we can compensate with this.

We are stronger, obviously, in America, which is the one keeping the better performance market in these days. But having this geographical diversification of assets in the new world, we are entering on with this strong relevance of the reorganization issues.

This is a unique opportunity probably among in our industry that we are having. As a consequence of all of this, and especially keeping in mind that with all these convulsive month we have experienced rather in the quarter, but the situation is improving, especially since March.

We can very comfortably state that no doubt, the Q2 EBITDA shall be higher than in Q1. If we go to the market highlights in this period, it's very easy.

We try to express in a visible way with dots more or less the favorable or the unfavorable facts taking place in each of our markets. So it's very visible to appreciate that our main market, which is America is where we have more positive dots.

We are probably neutral in the HPA business and definitely in the European market is -- we're still -- we are not appreciating their regions. If we go to America, basically, there are 3 relevant facts.

The inventories remain at very low levels. The prices remain stable, and the stability for business climate is the most adequate also for the comfort of our customers.

So this is a very positive fact in America. And in addition, the Section 232 has been reset.

So as a consequence of that, no expressions and also introducing more final products. This is a very positive fact for the confidence of our customers.

So these facts obviously are there. It's true that the demand remains flat in the States, but in any case, with this demand we can win easily, and we probably shall be increasing our productivity in the remaining quarters of the year.

And the most negative fact is that even in this basis, but at the end, still the imports are gaining market share in the States. But for us, we are easily now going the business in America, and we are comfortable on a basis and improving.

In the high-performance alloys, depends on the final products, it's more or less a stable market. There are strong sectors such as the electronic and automotive.

We are seeing a wait and see in the oil and gas. We understand that this is something that is more coming for the second semester as we are participating in relevant tenders and projects that probably shall materialize in the second semester.

So in this regard, we keep comfort. And the sector that is obviously relevant as is the aerospace.

The order book remains strong. The prospect for the future is very solid, but it's true that the recovery after the disruptions in the supply chain shall be corrected gradually.

So in this regard, we also feel comfortable. The sector that probably is more now painful on the HPA is the chemical process industries.

As a consequence, the actual uncertainties on the market are postponing any decision on capital investments. And as I previously say, still, we are not seeing green shoots in Europe.

The prices remain extremely low. There are some markets that have been increasing imports mostly to markets.

We have been presenting imports in Italy and Poland. So in these markets, the inventories are a bit high, but in the rest of the market, the inventories, the European markets, the inventories remain more or less controlled.

And still, we are not seeing a reactivation of the demand in Europe which is something that at the end is needed, it should come. But still, we have not seen the [indiscernible] in the reactivation of demand.

Esther shall explain now the figures for the quarter.

Okay. So going to the consolidated results of the group, okay, as we announced when we presented the fourth quarter results, we are showing a recovery, a recovery in terms of EBITDA when we compare to the operating EBITDA that we have in the fourth quarter, that we will come later.

Going just line by line if we start by production, we are increasing our production in the group by 29% compared to the last quarter, which is a significant figure. But we have been experiencing a recovery in all our plants, but very remarkable, the one in Europe, which has increased in almost 80%.

If we go to sales, the sales increase has been lower than the activity, and this is mainly marked by two things. One is the reduction on the alloy surcharge in the States, okay, which is also affecting the margin.

That is also compared to Q1 last year and also to the Q2 -- to the previous quarter. and also the higher sales in Europe, with much lower prices and still depressed prices, okay?

So that makes the sales to increase a little bit less. In terms of EBITDA, remember that our fourth quarter operating EBITDA was EUR 91 million.

It was affected by -- the reported EBITDA was different. It was affected by a lot of extraordinary effects, which amounted EUR 59 million being the main one, the sale of Bahru.

So compared to that, we are increasing our EBITDA by 12%, okay, which is a recovery. And what is very remarkable in the EBITDA is that when we look at the EBITDA month by month, we are -- experienced an increase from January to February and being the best one, March, both in sales in margins and in EBITDA, okay?

And we are finishing March, as Bernardo say, with a solid order book, okay, which makes us being positive for the next quarter as well. Okay.

In terms of EBIT, and I think that it's important to because in terms of EBIT, we are reducing a little bit, and that's impacted by depreciation because of the acquisition of Haynes, okay? In that regard, it is not only depreciation of -- the pure depreciation of Haynes.

Haynes is being consolidated fully this quarter, okay? But it's not only the depreciations of Haynes, but it's also the accounting standard, okay, that makes us evaluate the taxable and intangible assets at fair value.

And that creates more depreciation for us that's impacting the EBIT. And in terms of result before taxes, we have also been impacted by the higher net financial debt, okay?

That is reducing our -- because of the cash that we paid for the acquisition of Haynes, we are reducing our cash and, therefore, reducing our financial income, okay, and that is making also the resources for taxes to be reduced. But in general, we are presenting, we are seeing a recovery.

We are seeing a recovery for the next quarter. And what's more important is -- and what we are more proud about is the operating cash flow, okay?

We are generating a cash flow of EUR 99 million in this quarter despite the increase on the activity, which is very remarkable. We are even reducing working capital in these circumstances and this is due to the success of the working capital management program that we have launched in the group and that we are very committed with.

If we go to our divisions, okay, starting by stainless. Production has increased, it's 29% that we already explained.

Sales are affected, as I mentioned, by the alloy surcharge in the States and the low market prices in Europe. But even though compared to last quarter, we have increased 10%.

The EBITDA of the fourth quarter is when we see the reported EBITDA is EUR 126 million, but if we go to the operating EBITDA of the previous quarter, it was EUR 57 million. So we are also achieving a recovery in this quarter in terms of EBITDA.

We are ending with a solid order book in the U.S. for March that, as I mentioned, the activity has increased month-to-month, and that is something very, very remarkable.

We still see that for the next quarter. We continue to focus on our strategy and cost efficiency plans, okay, and that's enhancing our competitiveness and allow us to get better results in all the plants.

And the operating cash flow, both in sales and later we will see in HPA, has been positive in both units, ending with EUR 41 million operating cash flow this quarter. If we go to in HPA this quarter, fully incorporates Haynes, okay?

Remember that in the last quarter, we just incorporated -- consolidate one month, okay, so that makes the figure not 100% comparable. The decline in nickel prices is also impacting the margins in the HPA division.

In terms of demand, the demand in Europe has been weak. Based on what Miguel has said, more or less, the customers are postponing all the capital investment projects okay?

So that's affecting the sales in the European market. And in the U.S., as Miguel has also mentioned, the recovery in aerospace has not yet come, but this for us is not a concern, okay, because due to the long-term order book that there is in this sector, we are still committed and prepared to deliver whenever the recovery comes, that we expect possibly most for the second half of the year.

Again, positive cash flow in this division as well and very remarkable the reduction in the working capital, okay, despite also the increase of activity by 29%. And now going to the capital allocation and the cash flow, okay?

We can see which is very positive that the full amount of the EBITDA is almost in the operating cash flow, has materialized in operating cash flow. Working capital has decreased in EUR 6 million, which is remarkable as we have all said, in an increase -- with that big increase of activity.

Also, I want to highlight the financials and others, okay? Despite the increase in net financial debt and the reduction of cash, we still have only a consumption of EUR 6 million of our cash in interest.

We have not -- this quarter has not been affected by significant payment of taxes, and therefore, we have had an operating cash flow of this EUR 9 million that we are announcing. Regarding CapEx, our CapEx has been EUR 57 million, which was EUR 36 million in Q1 2024.

We are on an expansion phase. And our strong balance sheet allow us to continue with big CapEx despite being the lower part of the cycle.

So we are investing also in the lower part of the cycle and being prepared for it when it comes to recovery. The free cash flows have been EUR 42 million.

We have paid EUR 0.31 per share in January, okay? The next payment will come on dividends.

The next payment will come in July and being EUR 40 million that we also need to explain is our cash in North American stainless have been negatively impacted when converting into euros due to the weak U.S. dollar, okay?

And all with that, we have ended with a net financial debt of EUR 1.2 billion. So I think that -- proud of the capital cash generation and that's more or less what we have achieved in the quarter.

And going to sustainable development, Miguel?

Yes, sure. We shall report on semester basis of the KPIs and sustainability.

And in case we wanted to include, yes, 10 programs developed in the first quarter on different sustainability areas, sustainabilities in our DNA. But the one today, we probably want to give also more relevance is the successful penetration in the market of the Eco Acerinox.

So at the end, in this product, adding traditional virtues of the stainless of quality, durability and recyclability. In addition, we are reducing the carbon footprint.

So this Eco Acerinox is the first stainless steel in the world that covers the 3 scopes of the greenhouse gas emission carbon protocol. So at the end, it's covering the Scope 1 with more than 50% reduction in the CO2 emissions, is covering the Scope 2 in the using of 100% of renewable energy, and is covering the Scope 3 with a more than 90% recycled material for this production.

So it's a unique product and being appreciated by our customers. We are building -- we have activities in introduction in more than 40 customers, and this area probably is expanding.

And as much -- as soon as the demand also mostly in Europe reactivates, probably shall be a much more appreciation and expansion of this product.

Okay. Just to finish and summarize the presentation.

Of course, we are waiting for negotiations between countries with United States to put some more rationality in the systems and to clarify what's going to be the situation. We need the stability.

And I'm sure that will come sooner or later, but probably sooner. And in between, we are doing what we have to do.

That is a focus on controlling the controllables, controlling our business and you know that there's nobody more experienced in this industry, but our team we have been managing crisis in 2008. So we know how to do it.

We know how to work within volatility. We are trying to keep our working capital under control and inspiring confidence in the way we manage our business.

This is important. Tariffs again.

On tariffs, this protection of the industry will be positive for the [indiscernible]. Remember that we are leaders in the United States and that United States, North American stainless, is the engine of our group.

So more stability in the United States and better industry protection will give us more benefits. We are more Americans than European today.

But also, I think that Europe will wake up and will consider seriously to protect the industry because it is necessary. And of course, as I said, controlling our working capital.

This solid operating cash flow, giving us a healthy financial position. So this is more or less where we see the business today at the end of the quarter.

This is stability, quite, but not panicking and waiting for these negotiations and waiting for more visibility with the tariffs because the expected recovery has been postponed, but it will come. And now for the second quarter, we are optimistic because we have a very solid order book in stainless steel so we are better now.

We're in a better position than we were in January when we started the year. So our order book is strong.

Also in HPA is also strong. It's very stable in the United States with some latency in Europe, especially in oil and gas and chemical processing industry projects.

The same in stainless steel. Consumer goods are performing better than the capital investment is very logical with this situation.

And this is also affecting a little bit to HPA, but our order book in both sections, in both divisions is solid. So having said this, we'll repeat again.

Our Q2 is going to be better than Q1 and Q2 is going to be better than Q2 2024. And most probably the first half of the year is going to be at the same level or slightly higher than the first part of the year in 2024.

So that's it. Carlos?

Thank you very much for the presentation. Let's move now, please, to the Q&A session.

So operator, please go ahead.

My first is on Europe. Could you share some more detail on the progress of the strategic plan.

So you mentioned the volume uplift, but how did profitability look in Q1? And are you still confident that you'll reach breakeven by Q2?

Thank you for the question, Adahna. So the premise is going well, is going ahead, focusing in usual business, focusing on more added value products, and we are doing well.

We are doing better than expected with new rates, with new customers, and as Miguel mentioned, with the Eco Acerinox. We're moving in the right direction.

With the current situation of prices, as we mentioned in the last presentation that we are expected to be breakeven at the end of Q2, now we have to say that the situation is also postponed a little bit it, but we are close to this.

And just second, on alloys and Haynes in particular. Could you help us understand how Haynes contributed to the results in Q1?

I know you're still expecting an inflection in the aerospace supply chain disruptions on the second half or do you expect some delays here as well?

We have more visibility in higher volumes in the aerospace, gradually recover for the second semester and especially in the oil and gas. Those are the ones which appear with the two dots, especially because of that circumstance, still weak beginning of the year.

But gradually in the second semester, we wait for recovery in both areas. The area that for us is also [indiscernible] and it's an area that still needs more certainty and a more relaxed climate for investing again specific on projects is the chemical process industries.

But in the others, we are comfortable as it appears automatic when returns are doing well, and we gradually see the recovery for aerospace and for the oil and gas.

These disruptions were last year. Now the situation is improving.

It's not debottlenecking, still they have some bottlenecks in the supply chain of the industry, but our deliveries are very stable, but probably will remain stable for the second half of the year.

Maybe on the U.S. market, if you can comment a little bit on what you've seen in recent weeks in terms of order activity and demand.

I guess the recovery that you expected in Q2 has now been a bit postponed. What kind of operational support do you see in coming quarters if you can try to quantify that maybe on the higher volumes?

We've seen -- hear you saying that base prices have started to increase. Can you confirm that?

You also mentioned increased productivity. Is that something we should see in Q2?

Or is it more H2? And if you could discuss that a little bit as well.

Thank you, Tristan. In United States, as I mentioned during the presentation, is we see better activity in consumer goods than in capital goods.

In our case, in our business, that means that we have a better order book in cold roll than hot roll. Heavy gauges are more focused on the capital investments, while the cold roll is more for washing machines, suppliers in general and automotive industry.

So our order book is full in cold roll and still waiting for some more others in hot roll because of these projects that have been postponed. But this means that our order book is solid, is good.

The more added value products have been -- are full. And that will give us more production, and that means in our business, in our land also more productivity and more competitiveness.

Price increase, I think that there's enough noise in the system to put more. So we have to take care of our customers.

I think we are not only the biggest in the United States, but we are the leader and we want to be a good leader. We want to take care of the market, and we have to give stability.

The level of prices is enough to compete. And let's see what happen in the coming months if there's something that we can do.

But until now, we are quiet and we are happy with the way the prices are.

That's very clear. And maybe just on the tariffs impact.

I think that you started to put again some surcharge on tariffs. They're relatively small.

But can you just let us know where you impacted on the raw material side? And what's the customer reception of those higher surcharge?

It still is soon, Tristan, because we know what are the tariffs to date, but we don't know what are going to be tariffs tomorrow. But what is clear and everything related to raw materials will pass through the customers because it's a raw material cost.

And we are normally in our business through the [indiscernible], we pass this cost to the customers. But let's see what happens until now.

For example, ferrochrome is important for us and is out of the tariffs. Scrap is local scrap so we don't have tariffs.

So it's not affecting. That's why the impacting of such is so low.

That's clear. And maybe a last one on the U.S.

to wrap up. We've not seen too much of a decline in imports on the flat roll side in April.

Have you seen Asian competitors which were already paying the tariffs taking share maybe from European players or other exporters? And is that putting pressure on the market?

And I think you mentioned in your remarks that you're negotiating with the U.S. maybe, if I understand that correctly.

Does that mean that you think there's potential additional trade measures that could be implemented near term?

Imports are in a stable way now and some of the European players or some of the importers to accelerate the orders that they have in the ports in order to take this material before the tariffs were applied today. With the 90 days of impact that we have now, everybody has said 10% was more or less -- more of the same.

So negotiations, it's something that we cannot control, and additional trade defense measures, it is totally out of the tariff system. If we -- I think following the WTO rules in all the areas where we are applying, if there's an importer that is not fulfilling these rules, we can consider this an unfair competition, we will think we'll start to place or try to send to the trade court these cases of antidumping or anti-subsidy or anti-circumvention.

And we are starting several cases in United States.

Two for me. The first one, just again on the guidance around the building blocks.

So you kind of said you have solid order books that sound like there'll be some volume increase into Q2 in terms of pricing can be fairly stable in the U.S. and Europe, Europe can be at a lower level.

I was just wondering if there's anything you can say around the cost movements into Q2. Do you think that will be fairly stable again?

I guess we've seen European stainless scrap prices come down a lot in the last months. And also, if you could clarify if there's any inventory valuation effects in the Q1 print that might reverse in Q2, please.

That's the first question.

Thank you, Tom. Yes, in terms of order book, as we said, we have a solid order book, okay, especially in the States, and we are comfortable with the levels that we are achieving.

We are continuously increasing voice month by month. We will -- as I said, we have been increasing from January to February to March.

March has been the best month for us in the quarter, and we expect continuing in that level for Q2 or even increasing. So that's more or less what we expect with the volumes.

We will have a slight increase. It won't be the 29% that we are presenting compared to full quarter, but we will have an increase for the next quarter again in terms of volume.

In terms of costs, you know that very much depend on the prices of the raw materials as well, okay? But we are continuing with our programs and our efficiency cost programs that we are working on scrap on higher percentage of utilization.

So that will help also with the costs as well, okay, as well as continuing with our programs for variable and fixed. But of course, there are uncertainties on the [indiscernible].

But everything that is under our control will be managed correctly and then trying to reduce. And regarding inventory variation effects, if there is a stability on the nickel, which we don't know, we want to expect the inventory variation for next quarter.

In this quarter I think I mentioned, but we have had a negative inventory impact of EUR 23 million for the -- EUR 24 million in this quarter, okay? And this is part of the EBITDA as well.

If nickel and everything remains in flat levels, then that effect will not be happening in the next quarter.

And then the second question was around you mentioned the chemical processing in some areas. You're seeing CapEx being postponed.

So just to clarify, is that as a result of tariffs? Or is that something that's already kind of been in the market?

And are you seeing any of that now spill over into stainless? Or at the moment, this year, order intake still largely from unchanged what you can see in April?

This is very clear. Imagine that you are an American customers and you are importing a car from Europe.

And you don't know if the tariff is going to be 25, 20 or nothing. So normally, how do you manage the situation?

You postpone it and waiting to clarify. Once the situation is clear, you will decide if you want to pay the tariffs or not or buy from another area.

And this is what is happening. It's only postponing the decision, waiting for the -- to clarify the situation.

Keep in mind also for the capital projects in chemical process industry, it's a combination of, obviously, the tariff, which is highly relevant, but also with the geopolitical uncertainties. We are still having conflicts, and therefore, there is no certainty of when Europe is more evacuating.

And as a consequence of that, this part of the business, is the one remaining more in a wait and see prior to taking further investment decisions.

And since you mentioned electricity, maybe if I can just sneak one in, could you just clarify there was no sort of impact on the business from power outages sustained earlier or last month?

No, no, no, we were lucky. I think that was good luck because we were not melting at that time.

That day, at the moment of the lockout in Acerinox, we were not meeting. So we have a very clear protocol of how to manage the situation because it's something normal in the industry.

We call it, in Spanish, [Foreign Language]. Normally, we have a contract with the system, the electrical -- the company that is managing the system that is the industry when it's necessary.

This time, they didn't have time to call us. We saw a cut without any information in advance, but we were not melting, so the damages were very small, very limted, once-a-year production.

I just have two quick questions relating to Haynes. Could you maybe just clarify specifically what the Haynes EBITDA contribution was within HPA during Q1?

And then on the synergy estimates that you've previously provided, obviously, you've previously increased the synergy estimate to $75 million. Is there opportunity as you get further into the business for upside potential on the longer term due to that $75 million?

And how are you thinking about the timing of those synergy realizations?

Dominic, in regarding -- we are now presenting as a business unit the HPA. So in that regard, as Esther mentioned, we are including the full quarter of Haynes this time.

So obviously, in the comparison with the previous year, this is not there. And Haynes only registered one month in the previous quarter.

So this is a normalization period of 3 months for Haynes. In general basis, as has been precise, the evolution in the American market and for relevant sectors of Haynes as, for example, the aerospace is gradually recovering.

So the contribution should be higher. And in the case of VDM, this year, it's more easy to appreciate that there are effects on the nickel, more or less affecting also the profits of VDM, which are slightly lower than those of previous years.

You remember there were certain tailwinds at that time. And the chemical process industry is a sector, which also for VDM is relevant as well as in oil and gas in which, as I mentioned before, we are involved in certain projects.

So the contribution of Haynes is expected to be increasing during the year. In regard of VDM, it's true that with better prospects we are seeing now for the second semester, especially in oil and gas, which is also a relevant sector of VDM, we are comfortable.

But we must remark as we have been making in the last months, that at the end, for the last 1.5 years and the previous year, VDM was strongly supported by tailwinds. And at the end, our reference level, our reference contribution for VDM is substantially above the one that we initially contemplated with the acquisition, but we cannot establish that the standard of VDM contribution is going to be in the next term, the EUR 170 million that we were able to do two years ago.

So this is something obviously below that level. But it's absolutely in line and has been in line with the forecast we have for the year.

So in this regard, there have not been surprised. So our HPA division has been absolutely consistent with the forecast and the budget established for the year.

Regarding the revenue synergies is the news that when we presented the acquisition of Haynes at the beginning of '24, we estimated synergies of EUR 71 million. But at that time, we didn't have access to the Haynes book.

So now once we enter in Haynes in November '24, we have been doublechecking all the synergies and the result of that is that we have confirmed that EUR 71 million of synergies are there and also there's some room to improve it. So that's why we changed the number to EUR 75 million.

Of course, there's more potential, but that will come. Remember that we have announced with the Haynes acquisition also a CapEx of $200 million to increase upstream production to put a back induction furnace cabin to install forge that will give us more capacity, that will give us also the capacity to process some of the Haynes materials in North America and stainless.

So the potential is huge, but we haven't quantified it.

Yes. So I just have two quick ones left actually.

The first one is on the U.S. market where you seem to be pretty confident on the demand side.

So I'm wondering what is driving the order book strength. Is this basically mostly improving because your clients are basically taking market share following their inclusion into Section 232?

Or is there any technical inventory billing as far as you see it because at least the direct tariff impact on stainless has been pretty small so far and clients don't know whether that could be changing in about 3 months from now? That's my first question.

No, it's a mix of everything. Until now, I think the effect of import reduction hasn't come yet.

We cannot see this yet, probably will come in the future. There's more activity and we are not -- more or less, the market is stable.

The thing is that we are recovering the normal business. This as -- at beginning, I mentioned that we have been gradually increasing because Q4 last year was a correctional quarter and we are correcting.

So we are increasing our order book. We have what is normal today.

I cannot say that the market is booming. So we said that the recovery has been postponed, but we are in a stable situation.

Remember also that the stocks in the American market are still much below the historical average. So there's no stock reduction last year.

In '24 and '23, there wasn't a stock reduction. So apparent consumption went down in order to digest the success of stocks now that the stocks are in a normal level or even lower than normal.

The customers or distributors are buying what they need and customers are buying with what they need. So that's why the market is strong.

And maybe just to round this off, can you maybe give us a quick update on where utilization rates are for you in the U.S. at the moment and where this may be trending in the course of the second quarter and maybe same situation or same picture on Europe?

Yes. The capacity utilization rates in this time in Europe is around 74%, 75%.

This is obviously keeping in mind more or less with the new optimizing plan in Europe. We are concentrating our efforts in specific products, high value-added products, and also in final customer.

But on this basis, we are running at 75%, which in the actual basis of the European market is fine. In America, we are slightly below the 90%.

So we are around 88%. And in South Africa, we are in the range of 61%.

Keep in mind that in America -- difference America from Europe, the driver of America -- sorry, for Europe in these days is most driven by the demand still is very soft and has not reacted. But the driver of the American market in this time is that America still remains being a net important market.

So there is no local production, more or less, to match the consumption. So consequently, on that basis, our position in Americas is advantageous because we are in the highest part of the pyramid of the value added of the stainless making there, and there is an increase in imports.

This has its effect, but it's true that the imports are placed in a specific niche of the market, and most of North American stainless production goes through the upper niche of the products. So on this basis, what this gradual is coming is increase and the strength in the order book for North American stainless, they buy American works.

In uncertainties, they'd buy American for the American customer, each time is more relevant. Because of that, passing over the uncertainties of January, February since March, the order book is going up.

So our priority and our preference in North American stainless is running full the plant and this is the target. So we are absolutely being more affordable by a gradual increase of the productivity rather than the effect in places that shall be a consequence of all the other market dynamics.

But just running full North American stainless for us is a great advantage.

Sorry, let me just clarify something because I mentioned it before. In cold roll, we are working at full capacity.

And just following up. I mean Europe sales capacity and capability doesn't sound too bad, actually, given where the current market is.

Does this mean that you may be back to breakeven actually in the second quarter in Europe?

No, as I said before, this recovery, we're working in the right direction. Our parameters that we control are improving, but this breakeven will be postponed to quarter 3.

But having said that -- sorry, Bastian, keep in mind, the breakeven, obviously, is a psychological effect on being in positive breakeven EBITDA. But when you are slightly below or you are slightly above the difference of EUR 3 million, EUR 4 million, EUR 5 million in our business is not so relevant in market basis.

So the fact of being slightly positive by far has a strong motivating effect for all of us, but the distance is so short that it's not relevant.

And then last question, just on the metal effect as all. So you said that, that was pretty much neutralized with the EUR 24 million in the second quarter.

One of your peers today has actually guided for positive metal effect in the second quarter. Could that be positive for you as well, given where the current market, I guess, parameters are or you think it's more likely just neutral?

It shall be neutral in the stability of the circumstances. So at the end, this is for us is the normal adjusting to market prices and net realizable value.

So we have made the adjustment of around EUR 23 million, as Esther mentioned. With this, we are comfortably matching the Q2.

If there are no further turbulences and going down of the market, it shall be enough. If the market reacts, obviously, we shall be able to revert that but still is a bit soon to determine that.

What we are comfortably covered with this net realizable value adjusted in our inventory, having it been done at the end of the quarter and amounts as was previously said, EUR 23 million. We prefer not to talk about the adjusted and nonadjusted but it's true that this EBITDA obtained of EUR 102 million has been after making inventory adjustments of EUR 23 million.

My question is on Europe. And I know you can't comment much on prices.

But I was curious, in your opinion, what needs to happen to see some pricing inflection? Because prices were declining well before the tariffs announcement.

And so I wonder whether like a low base price, which is leading to low margins, especially in Europe, is mostly related to a misbalance in the supply-and-demand dynamics, if it's just a matter of high imports, continuous destocking, is just a slow economy. And then whether you thought of some action plan and the Germany funding announcement, whether you see and you think those could have meaningful impact on stainless.

Thank you for the question, but we cannot answer everything. We cannot speak about prices.

I will stay with the general dynamics of pricing in our business is -- well, we have a full capacity utilization. We have to extend our delivery times.

Normally, it's time to start thinking in a price increase. This is not happening at the moment because the market is still not depressed, but it is still flat, and the import pressure is strong.

So we have to do something to protect the industry because these imports that are growing now because we have passed from 14% first quarter last year to 24% this year are putting out of pressure in the market. And we don't know what can happen now with the tariffs, but the pressure is there.

But anyway, the prices are stable, and let's see what happens.

I just wanted to get your thoughts on the U.S. market and the potential for capturing import market.

We're listening to auto suppliers. Some have been talking about the opportunities for coming from relocation of production to the U.S.

And I think in your AGM, you mentioned that you've increased your market share in the U.S. So I just want to see -- I guess it's probably too early, but if you can give us your thoughts what the potential, what you're seeing or what could you see in the future from this opportunity.

Thank you, Robert. As an estimate, the size of the market of that imports were imports subject to quotas in the past were more or less in terms of like a 15% of the total American market.

15% of the American markets were imports that were subject to quotas. Now without quotas in the new system, the new Section 232, this 15% of the market will be charged with a 25% duty.

That doesn't mean that this 25% -- sorry, this 15% of the market is going to pass automatically to the local producers because some of the materials are made in the United States. So some of the customers prefer other suppliers and also in some way these sectors, you cannot change from one supplier to another in one day.

You need to certify, to qualify the supplier. The appearance have to be very similar.

The behavior of the material in the production process have to be certified. So at the end, there's a potential there, but this is not a skill.

What is very important to us is that in the new Section 232, some other sectors, some that -- in which Spanish steel is a significant part of the cost are included in Section 232. For example, beer barrels, sinks, for example, screws or tubes, and that means that they will have having a protection of these sectors in the United States.

Most probably with a 25% duty, this production will improve in the country. That means that we'll have more customers in a better situation and that the American market will grow.

And this is very important for us because we are bidding for the American market and it's a good market. Now it's in the best position and the industry is important for the country, taking care of the industry and not only steel and now they are moving up -- moving down in the supply chain and also supporting our customers.

And this is very important because that means that our plans will be successful there because the American market is going to grow. I think the last question was related to?

That was the main question. Just the other question I just wanted to ask, the timing of the ramp-ups of your investments in NAS, can you give us an update on what that would be?

We expect the new production to come at the end of the year. And the ramp-up curve, as usual, will be around 1 year, 1.5 years.

I'm referring to the objective to bring down net leverage to 1.2 by the end of 2025. That was an objective announced as part of the acquisition of Haynes the last year.

And yes, now given that the start of the year has been a bit slower than expected. Where do you see that figure trending at the end of the year?

I can see that the working cap was very good in Q1. Are you expected to pursue that trend over the coming months, too?

Thank you very much, Maxime. Regarding net financial debt, it is true that we have an objective of 1.2x EBITDA, okay, and that will most probably come more or less we were projecting in two years' time, okay?

So it possibly won't come end of this year. But we are happily committed on working capital, okay, because as we announced, we are making higher investments in CapEx in this year that we will try also to compensate with this working capital.

We need to consider also the increase on the activity, which is a big effort just trying to keep the working capital at a normal level. So for end of the year, we will still be on figures less.

Probably we will try to achieve a debt more or less like last year, even a bit lower, but we won't be on levels of 1.2 yet until 2 years tax possibly. So we must possibly be on a ratio of 1.7 or something like that at the end of this year.

And just a second and last question is on [indiscernible] tariff because I'm wondering about the business model of this entity because we have seen recently trade tariffs being erected all over the world. In Europe, they are bound to be increased as well.

So how do you see South Africa trending in that environment? Because its model is still heavily dependent on exports, how does it track actually in terms of reducing its share of exports and increasing its share of domestic revenues?

So we don't have the crystal ball, but we can say that we started to announce kind of deglobalization many years ago. And since that time, we have been trying to adapt our business model to a regional business model.

So that's why United States is making stainless steel and high-performance alloys for the American market, basically, including Mexico and Canada. As you know, Europe is totally focused on the European market.

And as we have mentioned many times, Columbus is -- have a lot of R&D activity because we are specializing in very special [indiscernible] grades with having the advantage of the local ferrochrome, the local chrome. They have the biggest chrome reserves in the world.

Columbus is taking advantage of this and also started to make carbon steel and is also starting [indiscernible] electrical steel and even high-performance alloys. The reason of this is so Columbus will have to be concentrated in the African market mainly.

We are the market leaders in all Africa. We have close to 50% market share in the whole continent.

This is a unique position, very strong and Africa is starting to grow. Many countries in Africa are waking up.

And this is the strategy in being local in the international markets and nobody with better location of assets than the Acerinox Group.

There is just one last question coming from the web. The question is from Dario Jose Sanchez-Junco from Villabuena Inversiones.

And the question is regarding the shareholder remuneration. Has the company considered the possibility of offering a scrip dividend?

Not really. So we have a very clear remuneration policy.

I think it is even in written in our website because we are keeping the amount of the total amount of money or the dividends. In the past, we have a fixed dividend per share.

Now we have fixed the total amount of money. So we will review the number of shares the dividend per share will improve or even the dividend will be the opposite.

We are not considering at this time a scrip cut dividend. We are considering to pay cash or this into payments in advance as we did in January.

And then now the dividend of EUR 0.62 has been approved at the shareholder meeting and the second payment will come in July. And as it is also included in our policy, if our debt-to-EBITDA ratio is below 1.2, we will consider the possibility to make another buyback of shares.

But until now, we think that all the investments that we are facing now, including the acquisition of Haynes, will give us a better return and will be a better return to the shareholders than a buyback of shares. I'm not considering a scrip dividend today.

Thank you very much. That concludes today's conference call.

Thank you for joining us today.