Aperam S.A.

Hello, everybody, and thank you very much for joining our conference call today. All our comments were contained in the podcast that we published this morning, which you know supports our quarterly financial reporting and where applicable, our disclosure of regulatory information.

We also save more time for your partner question during this call. As you know, this is my last quarterly conference call as CEO of Aperam.

I'm proud of the work we have done to the stronger resilient pattern during the last 11 years. Just like in the podcast, my colleagues, Sud Sivaji and Nicolas Changeur are here, and together, we are working forward to answering your questions.

Let's start straight away with the Q&A, please.

I have two, the first one, in your outlook presentation, you mentioned some price pressure from imports in Brazil. Can you discuss a little bit the situation there.

I thought that you had received recently a renewal of the antidumping duties from China and Taiwan on CRC. Is that enough?

Do you need more? Usually, we talk a bit more about Europe input pressure and not so much Brazil.

So has anything changed recently?

Tristan, Sud here. So because it's Brazil, let me answer, and I think it's important, and your understanding is correct.

There is price pressure is not on our stainless product portfolio. It's actually the non-stainless part, specifically the commodity electrical steel grades, which is the NGO part and some carbon steel part, so to speak.

We just mentioned that just to be clear what are the different moving factors for your model, so to speak. It has nothing to do with stainless.

And there, your understanding is correct. There is a proposed antidumping revision, and we are waiting for the results of that one on stainless.

This is just the non-stainless part. And the effect is not very significant, but still the effect is there.

And the reason we wanted to mention that is because, as you know, Brazil goes into a summer quarter in Q4, and it has been our most profitable contributor compared to Europe, which is positive but slightly positive. So when volumes disappear, smaller changes become visible, and that's the reason we gave that guidance.

So it's no concern on the stainless market. Demand remains stable margins have not unchanged.

The import pressure has not changed to post the minus in stainless in Brazil.

Okay. That's very clear and helpful.

And my second question is on CBAM. So in the presentation, you mentioned that CBAM is on track.

Can you mention a little bit the details of what you expect from the policy would be a good outcome, a more neutral outcome and a more negative outcome? Do you firmly believe that Scope 3 on NPI will stay?

Can Scope 2 be included? And does that even matter?

Do you think the commission will be able to assign a carbon intensity by company or by country? And finally, if you have a view on the benchmark, I believe there are differences depending on the grades of scale less steel you look at.

So any color there would be greatly appreciated.

Okay. It's a complex question, knowing that not everything is clear today and because the commission has not decided seems like the benchmark deal value, which has an impact in term of numbers.

Now what is clear as of today is first the application from the first of January. The second thing that is clear is that for stainless steel, there will be the inclusion of the precursor.

Precursor, meaning the raw material, the most important arrays that are in the scope of stainless steel like ferronickel, pure nickel or nickel pig iron or ferrochrome. The third point, it is clear and that you have mentioned is that Scope 2 is not considered.

Okay, I will not be considered the application of the CBAM for the time being. The other point, which is clear is that CBAM will have a progressive ramp-up.

This has been already disclosed many times. And so it will start in January 2026 and will have the full effect in the next 7 years.

This is what is clear today. Another part that is clear is that considering the very high level of CO2 of the producer, which are the most competitive because they have a [nickel pig iron, this will have a big impact on all producers, which are used on nicely.

The other part, which is also clear is that the commission is putting in place the melt report just to avoid the non-traceability or improve the traceability. All this is positive.

The numbers are not yet communicated and in particular, all as you mentioned, all the management and the default values are not for the moment known.

Two questions on my side. The first is on volumes, actually and the bridge from Q3 to Q4.

So reading between the lines, I understand that you expect volumes to increase in Europe in line with your seasonality, which I equities in contrast what has been guided by your two main competitors. And in Brazil, this would be lower, but in line with seasonality.

Can you confirm that? And perhaps a bit more color on the trends you're seeing.

No, no, I fully confirm that. The seasonal effect in Europe and in Brazil, plus months.

The Europe will increase their volumes because in Europe typically in the month of August is very low because of the closure of all this out of Europe or France, et cetera. And then for Brazil, you start this summer.

And so there will be a summer in Q4. So all in all, I confirm that Europe will be a increase of volumes and Brazil will be some decrease in volume, but in line with the seasonality.

Okay. Very clear.

And second question is on the aerospace end market, which has actually quite soft, like your initial expectations. So perhaps can you shed more light there on your customer portfolio, your exposure between the market and new equipment or kind of information that can be useful to appreciate the potential of upside in 2026.

Okay. So fundamentally, we are exposed to aerospace in universal and a little bit in some activity of recycling but these are minor compared to nines our exposed to aerospace.

What has been here in aerospace, and we have discussed in previous cold is that there has been a long phase of destocking in which we are still now. What is clear also in aerospace is as a market, the market is very solid and the order book of all the producers that we are addressed producer, which are the typical Boeing, et cetera, but all the supply chain of this producer with motors with landing gears, et cetera, they have a very solid order book.

Now once we'll be stocking is finished and we see that this is going to the end in the next few months, the market will go back to the performance that they have shown in 2024 and the beginning of 2025. It's clear that this market is a bit different from the commodity market that we address with the standard steel where the stock and inventory are between 2 to 3 months, 4 months.

Here, we are discussing of inventories, which are along the supply chain of many, many more months and we are at 12, 15 months. And so whenever there is a disturbance in the demand, this has a very long, let's say, consequence and this is what we are experiencing.

On top, we have had some maintenance during Q3. But as I repeat, we are very confident on 2026.

Just one for me, actually. On the CBAM, I think we discussed before, there's clearly a lot of potential loopholes and specific issues of sales, whether that's different grades, whether that's sort of default values?

And is the global market these as a quite smart guys are going to try and slide ways around it. So in my mind, with CBAM, it's not just about getting the policy right.

It's about being very quick to react to examples of circumvention and changing the policy, which is why I think the delays that we're going to have in even if there's something like benchmark and default values has made a bit of a concern. From your discussions in Brussels, is there anything that gives you confidence the commission is going to be more flexible and a particular to react to adjust the CBAM in the future, try and shut out circumvention?

Sort of any thoughts to go around that would be interesting.

For sure, they have I see you are very well informed. So for sure, they have fully understood about the benchmark and they know personally the story of the grade, and they have bonded us that this will be fully considered because not only the grades are sent end of CO2.

And so typically, the highest content of CO2 is in austenetics, which represent 75% of the market. So they are fully aware and they are supportive on this point.

We look also that you are referring are they well known they are on the capacity sharing and this circumvention. And all this has an answer, which is the melt and pour and the implementation of both melt and pour, the benchmark and the default values is part of what the commission is working on, knowing that it miles a very clear view on what are the loopholes and the possible measure, at least we have given them all the possibility to put in place leisure with our totally satisfactory.

Okay. Maybe if I can just wish you slightly.

I mean, we've had some stories of Asian producers basically melting slab and then immediately scrapping that slab and remelting it and basically just calling it scrap as one way of circumventing CBAM. Maybe this is a very small scale, but just give us an example.

I guess the question is more, once bans in place, do you think the commission is going to faster going forward in the tour do you think it's still going to be quite a slow European process when we see circumvention, maybe it's going to take 1, 2, 3 years for them to go out and pick it.

I don't think you can change dramatically the speed of Europe. Now what is clear is that all what is described here is very well known and it is not discovered tomorrow mony they will not start to work on all these problems from more and more, okay?

On top of the question, the question is also the fact that you have let's say, refer to things which are relatively heroic. So scrapping a sub and then remelting this lab is something which has a cost the end you have a very low interest to the debt.

So I'm confident that progressively, the CBAM will be a strong support for a level playing field. Then we will see.

My first one is also coming back on the plan policy changes. I guess as a starting point, no one at the moment is really making any money in Europe this way easily EUR 100 away from what used to be previous mid-cycle margins.

would you be confident enough to say that with what is coming in, what planned, we should be going back to mid-level margin levels before demand rebound, which we've been waiting for, for some time, I guess, which we can't really think on? That would be my first question.

Yes. The answer is clear, yes.

Now the answer is not if we are confident or not to make this will level. The question can be in which month, we will see the effect because it's a question of months.

We don't know exactly when the commission will put in place. We have asked the first of January a lot of member states are supporting the first of January.

But at the end, when the level of the imports will be reduced at a sustainable level, which was the level of 2012, 2013, when the utilization rates of the plants in Europe will be let's say, much better in close to the 80%, 85%, yes, the market will be different. Then and this will be different even in a moment where the final demand is still lagging behind because as you have seen also in our podcast for the moment, the markets are not yet recovering.

So we can expect a double effect. Which is on one side, the full, let's say, ramp-up of the circuit and the other side, the fact that some policy like the German plan, will enter in effect and the demand will be stimulated and go back to a more normal level.

Now as I repeat and as to be clear to everybody, it's a question of months. Not a question on years, not question quarters.

I think it is a question of months, can be 1 or 4, I don't know. But it will come.

That's been very clear. Then my next question is on alloys.

Can you maybe help us understand how, I guess, the former business pre-Universal is doing? And are you still confident we'll be hitting the EUR 100 million EBITDA target this year?

Or has this become out of reach. I guess you obviously have the maintenance situation here, which is constraining you a little bit.

And then maybe also give us a bit more color on how much Universal is contributing relative to the, I guess, previous EUR 60 million pre-synergy earnings aspiration level is used to have. Those are my questions on alloys.

So on the question, Yes. So we've given you two points, which is that we have this temporary weakness in the oil and gas market, which I'm sure the entire industry is going through, right?

And based on that, on an annual run rate level, the previous alloys business would be awarded about 10% less level, so to speak. So that's an upside, and we still stick to the EUR 100 million goal for the previous alloys business.

And the Universal business, if you remember, we are actually only taking this year, and that's something we kept in mind only 11 months, right? So the first one was before.

Just to keep run rate in mind. We had guided close to EUR 60 million for the year in a steady-state run rate.

And the weaknesses, which Tim has explained in the market and the maintenance issues between alloys before Universal will traditionally bring Universal probably to around 50%, 60% of that number this year, so to peak. So this is the broad level we expect this year.

Starting next year, it should be full run rate for Universal because we'll have it 12 months in our portfolio and alloys as well and then synergies have to start kicking in Remember, we guided to 27 million synergies also. So because this is a year of ramp-up of synergies, so there should be a run rate of the first year of the ramp-up, which we promised this split across the next 4 years, should also start flowing in, just to give you alloys.

That's great color. Just briefly on , are you seeing any same signs that this is now starting to come back for the next year, I guess, in terms of earlier call-off rates and indications?

Or is it just too early to say?

It's too early to say because also there's a lot of year-end-related store loan, a lot of equipments, which get called off end of the year, as you know. It is not just simply a Brent price compared to the investments or calculation.

So it's too early to say.

Okay. Great.

My last question is on your financing line, which was slightly higher this year. Can you maybe just quickly update us on how much of the financing costs were related to things like advisory and also hedging and what would be an assumption here for, I guess, the recurring run rate.

You mentioned EUR 50 million cash cost in the report, but what can we use as a P&L item for the next quarter?

Nicolas speaking, so for the interest rate, you can use for your model, EUR 15 million basically per quarter. The rest of the cost is indeed the derivatives.

We are looking here at a timing effect, and this effect would be neutral over a period of time.

Okay. So EUR 60 million annualized is basically the financing line in the current situation with the balance sheet and financing costs as it is?

For this year, Bastian if I can jump in. But I think the broader guidance is look at our debt, and we have the 4% to 5% rate plus you add a few utilization fees and everything.

So you have to understand, you've announced this time refinancing of $790 million. So that refinancing, obviously, the older lines were probably at 3% to 4% because they came in from 5 years ago, right?

So that will probably have a smaller hit a very, very, let's say, high single digit or low double digit, and I'm talking now 10 million or 11 million ] to that number starting next year, if you want to look at long-term ones.

Okay. Thank you very much for attending and participating to our Q3 call today.

As I opened, this is my last quarter conference call as the CEO of Aperam. However, you know that I will remain close connected to Aperam, not only as a shareholder, but also as a future member of the Board of Directors.

I also intend to continue supporting Aperam and will continue as a strategic adviser on public affairs for Europe, for example, so that we can build a clean steel industry in Europe. I am confident that our open transparent dialogue with the capital market will continue, thanks to my successor.

And that you will continue to have confidence on the fact that the headwinds that we have faced in the last quarters are going to be partially sold or totally sold in the next future. So thank you both on the corporation and CEO and have a fantastic start to the Christmas and holiday season.

Bye-bye to all of you.