Befesa S.A.

Good morning and welcome to the preliminary full year 2021 of BFESA. I am Rafael Pérez, Head of Strategy and Investment Relations of BFESA. And today, as usual, we have with us Javier Molina, CEO of BFESA, and Wolf Lehmann, CFO of BFESA. Javier will start with an executive summary of the full year, covering the main highlights of the period. Then Wolf will review the full year financials in total and by business unit, as well as cash flows. Javier will close the presentation providing an update on our growth plans as well as a preliminary view on the outlook for 2022. And finally, we will open the lines for the Q&A session. Before getting started, let me remind you that this conference call is being webcasted live. You can find the link to the webcast and the preliminary full year results presentation on our website, www.befesa.com. Now, let me turn this call over to our CEO.

Javier, please. Good morning. 2021 has been certainly a very good year for BFESA in many aspects. We have delivered the strongest result in the history of BFESA and made great developments in the execution of our growth strategy that will enable us to grow a double digit in the coming years. The fourth quarter of 2021 has been the strongest quarter in the year with a total EBITDA of more than 60 million euros. In the full year, we have achieved a total EBITDA of 198 million euros, above the last guidance we provide of around 195. This represents an increase of 56% compared to last year, but more importantly, 24% more than 2019, which was the last year before the COVID pandemic started. The main drivers for this growth have been a combination of a strong increase in volume, combined with positive metal price development through the year. Volume of steel dust recycle increased by nearly 30 percent, especially in the U.S., driving by the acquisition of American zinc recycling in Novos, as well as a recovery in the plant utilization in the rest of the business, reaching nearly 85% in the case of steel gas. In the aluminum solid slag business, plant utilization was around 90%. Average seam price in 2021 was 2,544 euros per ton, which represents an increase of 29% compared to the previous year. Similarly, average aluminum price in 2021 was 2,137 12 euros per tonne, which is 48% higher than last year. Also, the lower treatment charge of zinc in the year contributed positively to earning growth last year. The main industries and markets where we operate have seen during 2021 a gradual recovery in their level of activity. As such, the production of steel in Europe in the last year increased by 15% compared to 2020, with an unstrong production level from electric car furnace steel makers. Steel production in USA increased by 18%, while it decreased by 3% in China last year. On the other hand, the automotive industry in Europe suffered a weak last quarter, ending the year with a small decrease of 2% on car sales compared to last year. This compares with China, where car sales increased by 7% or the U.S. with 3% increase. In 2021, we have taken advantage of the strong SIN price to extend our hedging book until October 2024 at increased prices. And today, we enjoy around three years of hedging going forward, which provide high visibility and predictability. In the second part of last year, energy prices in Europe increased significantly, which has a negative impact, especially in our aluminum business, which use natural gas and electricity as main energy sources. This impact in 2021 was limited and was offset with higher metal prices. From the strategy execution point of view, last year has been an extraordinary year. We have entered in one of the most important markets of steel dust recycling in the world, like the North American market, of which we now have around 50% of the market. Also, we have been able to complete and start operations in our first plant in China in the province of Jiangsu, as well as make great progress in our second plant in the province of Henan. These two developments in the US and China will set the foundation for double-digit growth for the coming years. From the capital market's point of view, 2021 has also been a very positive year. We successfully carried out a sizable capital increase to fund the position of American Zinc Recycling, which was greatly welcomed by our investors. The market cap increase enabled Bethesda to enter MDAX last September. The generation of cash during the year has been very strong, and this has enabled us to finish the year with more than $220 million of cash on hand. and leverage ratio below 2.2 times. Finally, on ESG, 2021 has been a year where we have made significant progress. It is very clear that society and investors push more and more for sustainable solutions, which is very much aligned with Bethesda. What we do is a vital part of the circular economy. We recycled 2.2 million tons of hazardous residues for our customers in the steel and aluminum industries to extract valuable natural materials like zinc, aluminum, and salt. We are very proud of the progress we are making on ESG, which is a recognition from the market of the contribution that FESA makes to a more sustainable world. Now Wolf will explain the financials in more detail.

Thank you, Javier. Please turn to page six, the 2021 consolidated financial highlights. As explained by Javier, Befisa delivered record earnings in 2021 with 197.6 million adjusted EBITDA, up 56% for 71 million euros year-over-year, with 2020 at 127 million euros. Also, well above the pre-pandemic levels, up 24%, or 38 million euros, versus 2019, which was 160 million euros of EBITDA. The main drivers of the year-over-year 71 million EBITDA improvement are price and volume, including the acquisition in the US. On price, the overall 64 million positive price year-over-year impact has the following components. 24 million from the reference zinc treatment charges settled favorably at $159 per ton versus $300 per ton in 2020. 25 million euros from higher zinc prices at 2,544 euros per ton, up 29% year-over-year. Negative aid from lower zinc hedging prices Those were at 2,151 euros per ton in 2021 versus 2,239 euros per ton in 2020, which partially offset the zinc LME price increase. Also, 25 million euros increase from higher aluminum alloy pre-metal building prices, which averaged 2,112 euros per ton, up 48% year-over-year, as well as better aluminum metal margins. On volume, the volume lever was also positive by 14.5 million euros year-over-year. 14 million from electric arc furnace dust throughput, higher year-over-year by 29% for 199,000 tons, including the positive contribution from the acquired U.S. operations, delivering as expected from mid-August onwards. Also half a million positive from higher secondary alloys partially offset by lower salt flecks and spent pot lining volume due to the UK plant closure at year end 2020. Overall, good volume performance with overall solid plant fertilizations at pre-pandemic levels. Steel dust at around 83%, aluminum salt flecks and spent pot lining at around 90%. On cost, another. The $8 million Negative impact from cost other reflects the higher inflation energy cost trends, as well as China expansion costs, which then are partially offset by operational excellence. Adjusted, a quick comment on adjusted with this reported EBITDA. The reported EBITDA amounted to $189.6 million, up $66 million, or 54% compared to the $123.5 million reported EBITDA in 2020. After normalizing for two items, $14 million for add-back for the one-time American Zinc Recycling acquisition cost, and then $6 million negative deduction from the one-time cost recovery referring to the Hannover plant as a result of the fire occurred in November 2021. So, net-net, an $8 million add-back for, ultimately, for the AZR one-time acquisition cost. As a result, the adjusted EBITDA in 2021 amounted to $197.6 million, as represented on the page, and which very well represents the run rate of EFESA in 2021. On a fourth quarter standalone view, we continue to deliver strong earnings growth with Q4 adjusted, as mentioned by Javier, at 60.8 million, which is the highest quarter on record, up 43% or 80 million euros year-over-year, also growing 43% compared to the fourth quarter 2019 pre-pandemic. In summary, Bifesa delivered solid pre-pandemic plant utilization levels, successfully accomplished the acquisition of AZR, and benefited from a strong and favorable market price environment in 2021, which enabled us to deliver our all-time high EBITDA of $198 million at a strong 24% EBITDA margin. Referring to the lower half of page six, net profit more than doubled year-over-year from $47.6 million to $99.7 million in 2021, equal to two 6.68 euros earnings per share based on weighted average number of shares of 37.3 million in 2021. We also improved our strong cash to a new high level of 224 million euros, which I'll explain later together with a net depth and leverage performance on page 9. We're proposing a dividend distribution of 50 million euros or 1 euro 25 per share. which is 3 million above the 47 million distributed last year and representing 50% of our 2021 roughly 100 million net profit. We are very pleased with our 2021 results, the successful acquisition of AZR. As such, we feel comfortable suggesting the 50 million euro dividend distribution and sharing the success with our shareholders. On a three-year basis, we have distributed €117 million total dividend, which over the three-year total net profit of €221 billion represents 53% dividend distribution, thus approximately at the upper end of the 40% to 50% of our dividend guidance, normalized for one-time effect, certainly within the range. We are very pleased to propose to continue to distribute also this year's dividend at the upper end of the 40% to 50% range. Please note, in the appendix of this presentation, you will find various financial and operational data tables with quarterly, annual, and multi-year views for your reference. Turning now to page seven, the Steel Dust Recycling Services results. Steel Dust Recycling Services continued to perform at strong earnings levels and achieved 148.3 million adjusted EBITDA in 2021, up 51 million, or 52% year-over-year, as well as 18% or 23 million up versus 2019, clearly demonstrating the recovery to above pre-pandemic levels. The corresponding adjusted EBITDA margin amounts to 33%. The net price level was positive by 39 million euros year-over-year. The volume level was positive by 14 million EBITDA year-over-year impact, as explained, driven by the higher electrical and stuff throughput year-over-year, and the positive contribution from the U.S. operations, the acquired XAZR business. The cost other lever had a minor 2.5 million year-over-year negative impact, which is the higher inflation, including energy and China expansion costs were partially offset by operational excellence and other. Looking at selected operational metrics on the lower part of the page. Volume for electric aqua and steel-dust throughput increased 29% year-over-year to 886,000 tons, mainly driven by the contribution from the acquired US recycling plants, but also by the better performance of existing operations year-over-year. Overall, plant utilization continued at solid pre-pandemic levels of around 83% of the extended circa 1,555 kiloton installed annual recycling capacity which includes about 620,000 tons annual capacity contributed by the acquired U.S. recycling assets. Taking a more detailed look at the price side, the zinc LME market price continued at high levels and averaged 2,544 euros per ton in 2021, up 29% year-over-year. Our zinc hedging price in 2021 were 2,151 euros per ton lower than year-over-year versus the 2,239 euros per ton in 2020, also lower compared to the strong LME spot price in 2021. Combined, the resulting zinc blended price came in at 2,275 euros per ton, up 139 euros per ton, or 6.5% year-over-year. Correspondingly, the positive EBITDA effect from the higher zinc LME market prices of cross-positive 25 million was partially offset by negative 8 million due to the lower hedge prices. In addition, the zinc reference treatment charge favorably impacted our polio EBITDA by 24 million euros year-over-year. As you know, treatment charge was settled at $159 per ton in 2021, being valid 1st of January. Overall, steel dust recycling services delivered a record €148 million adjusted EBITDA in 2021, with a strong 33% adjusted EBITDA margin and solid plant utilizations at around 83%. Going now to page 8, the results of our aluminum salt flex recycling services segment. Aluminum salt flex recycling services delivered 48.8 million adjusted EBITDA in 2021. Also, a new record high level, up 20 million euros or 69% year-over-year, compared to 2019, up 16 million or 48%, clearly demonstrating the recovery well above pre-pandemic levels. On price, the aluminum alloy pre-metal bulletin market prices showing a 48% year-over-year increase, as well as better aluminum metal margins, which combined drove a positive net 25 million EBITDA effect year-on-year. On volume, the volume level was slightly positive by about half a million EBITDA effect year-over-year. Overall, higher secondary aluminum lawyers were partially offset by lower source tax volume due to the UK plant closure at year-end 2020. was negative by about 5.5 million EBITDA effectively over a year, which was driven by the higher inflation and energy cost trends. Overall, aluminum salt tax recycling services delivered the highest EBITDA on record at 49 million, benefiting from the strong base metal price environment, which more than offset the higher inflation energy cost trends. Plant fertilization continued at solid pre-pandemic levels at around 90%. Turning to page 9, the cash flow, net debt, and leverage results. On the EBITDA total cash flow bridge, starting with 197.6 million adjusted EBITDA on the left and walking to the right. Working capital was up by 48 million euros, which was very much driven by the one-time impact of our AZR acquisition in the U.S., about 14 million of the mentioned one-time AZR acquisition costs, and about $34 million working capital for the acquired AZR operations. Interest and taxes with $17 million and $15 million respectively, both as expected, resulting in an operating cash flow of $117.9 million in 2021, also the highest on record, up 25 million or 27% year-to-year versus $92.5 million last year. In 2021, we spent 32 million maintenance capex plus 46 million growth capex, equaling a total of 78 million total capex, partially funded through approximately 27 million China local loans for our two plants at Changsu and Hina. Also, as you know, on 17 August, Befisa successfully completed the acquisition of 100% of American Zinc recycling. at a purchase price of $450 million and a minority stake in its refining business for $10 million, with an option to acquire the remaining business once certain operational and financial performance milestones are fulfilled. The AZR acquisition was financed through a capital increase of new ordinary shares from the existing authorized equity offering and a term loan B add-on of $100 million. 46.8 million dividend was distributed in July. After funding working capital, interest tax, capex, the AZR acquisition, and also the 47 million dividend, total cash flow amounted to a positive 69.5 million in 2021. Hence, our cash on hand improved to 224 million.1 euros at year end 2021. A new high and record for buffets are up from the $154.6 million at year-end 2020. The cash on hand of $224 million, together with our entirely undrawn $75 million revolving credit line, provides Befesa with a strong liquidity of around $300 million. Net debt increased to $471 million at year-end 2021 versus $394 million at year-end 2020. mainly due to the 100 million term loan B add-on to partly fund the AZR acquisition as well as China local loans. The 218 million last 12 months rolling EBITDA incorporates full 12 months rolling months of the U.S. operations. The 471 million net debt with the 218 million last 12 months adjusted EBITDA results in a 2.16 net leverage at year-end 2021. improving from 3.1 at year end 2020. Normalizing and including synergies leverage is even lower for debt covenant reporting. We continue to be compliant with all debt covenants and have no applicable covenants. The capital structure remains unchanged and long-term, all set to July 2026, and we cannot be charged more than 2% interest rate. Turning to page 10 on hedging. In 2021, we continued our hedging rigor and extended our zinc hedge book further, up to and including October 2024 for the classic or non-U.S. operations, and up to and including July 2024 for the U.S. operations, thus with approximately two and a half to three years of hedges on the books. The acquired zinc U.S. operations came with a hedge book in place up to and including first quarter of 23, at hedging price of around $2,500 for the remaining of 2021, and around $2,750 for the full year 22 and first quarter 23. Following the closing of the acquisition and Underway Fisher's more competitive hedging program, we extended the hedges for the U.S. operations up to and including July 2024, locking in 15,000 tons of zinc equivalent output per quarter at approximately 2,950 to 2,975 per ton. We continue to work on extending the Hatchbook for the U.S. operations by one more quarter to be fully synchronized with the hedging of FIFISA's European and Asian operations. Overall, considering the combined global Hatchbook, Europe plus Korea plus U.S. operation, the year 2021 was hedged at around 2,151 euros per ton, sold-forward prices the year 2022 at around €2,250 per ton, the year 2023 at around €2,350, and the first three-quarters of 2024 at around €2,400 per ton. The hedging provides the face-off with improved pricing earnings and cash flow visibility to allow to fund our growth initiatives organically. Our hedging strategy remains unchanged. We hedge one to three years out. We target 60 to 75 percent of our global zinc equivalent volumes, and if it provides no collateral, the risk is transferred entirely to our hedging partners. Referring to our zinc blender prices, the lower left section on page 10, in 2021, our zinc hedges were locked in at approximately 2,151 euros per ton on average. below water compared to the strong zinc LME spot prices, which averaged approximately 2,554 euros per ton. Overall, the zinc blender price in 2021 averaged 2,275 euros per ton, up 7%, or 139 euros per ton. Summarizing the financial section before we turn to the growth and outlook, three points. Bifesa delivered in 2021 the highest earnings in the history of the company, at 198 million adjusted EBITDA, up 56% over last year, which translated into very strong developments in terms of operating cash flow, cash and leverage. Secondly, our financial backbone is strong. We extended our hedges out to October 2024. Our capital structure is efficient and long-term, resulting in a stable and strong liquidity. And three, based on this strong backbone, we funded our global expansion In China, even during this challenging pandemic, we go full speed and are progressing on target. In addition, we entered the U.S. market through the acquisition of AZR. Now, back to Javier, who will provide you the latest on our China expansion, our Zinc U.S. operations, and an initial outlook for the year 2022.