Befesa S.A.

Good morning and welcome to the first half 2022 results conference call of BFESA. I am Rafael Pérez, Head of Strategy and Investor Relations of BFESA. Today, we have with us Javier Molina, Executive Chair of BFESA, Asier Zarraonandia, recently named CEO of BFESA, and Wolf Lima, CFO of the company. Javier Molina will start with an executive summary of the first six months of the year. After that, Asier will explain the business highlights of the period, covering steel dust and aluminum solid slag recycling. WOLF will then review the financials in total and by business unit, as well as cash flow as an update on our hedging program. Javier will close this presentation providing some thoughts about the outlook for the rest of the year, the new five-year growth plan that we announced a few days ago, as well as energy. Finally, we will open the line 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 to the first half results presentation on our website, www.befesa.com.

Now, let me turn this call over to our chairman. Javier, please. Thanks, Rafael. Good morning to all of you. Before getting started with the results of the second quarter and the first semester, I would like to introduce to all of you Asier Paranandia. recently appointed CEO of Bethesda. Some of you have already met him. Asir has been with Bethesda for the last 20 years. Over this time, he successfully developed and managed the steel dust recycling business, which represents around 80% of Bethesda's area. He has played an instrumental role in the recent development of the business in China and USA. As CEO, he will be responsible for the day-to-day management across all the FESA's business. I'm completely sure that he will develop this new role with the same leadership he has shown today. During the second quarter, we have continued the same growth path that we saw in the first quarter, with 26% EBITDA growth year on year. Overall, despite the challenging macroeconomic environment and the volatility in the commodity price, we have delivered by the contribution of the American plans, as well as high average metal prices, which have been offset by high inflation, especially in energy prices. Compared to the first quarter, the volume has been lower, mainly driven by maintenance shutdowns in our classic markets, and to less extent, to a lower contribution from China. Later, Asiel will review the business performance during the second quarter in more detail. We are living in a very challenging microeconomic environment. On the one hand, the war in Ukraine is creating great instability in the global economy. In Europe, We are suffering an energy crisis in which security of supply of gas and normal energy price are not guaranteed. Furthermore, China is imposing a zero-COVID strategy, which is making very difficult the transportation inside the country, reducing a natural down in the economic activity. This volatility is reflected in the business results on the first half of the year. And we see a lot of uncertainties for the second half of the year. Commodity prices have come down significantly in the last weeks from high levels, breaking the correlation between energy and metal prices that we saw in the first quarter. And concerns about economic restrictions in Europe are rising. I will comment about the outlook for the rest of the year and the new five-year growth plan at the end of the presentation. Now, Axel will explain the business performance in more detail.

Thank you, Javier. I will provide an overview of the performance of the business during the second quarter and the first half of the year. Overall, the second quarter has been another good quarter with a strong performance across the business, continuing the same path that we saw in the quarter one. We have delivered a strong volume performance, and we have benefited from positive price dynamics in the second quarter, which has more than offset the high inflation we have experienced in the period. Starting with the steel dust recycling business, in the Q2, we have achieved 292,000 tons of throughput, up 83% compared to last year. mainly driven by the contribution from the U.S. supported by a strong performance in the rest of the markets. Similarly to previous years, compared to the Q1, the volume is lower due to annual plant maintenance shutdowns as well as lower contribution from China. In Q2, we have sold 110,000 tons of works, more than double compared to last year. Blended SIEM price considering the weighted average of LME and hedging has increased 23 percent in the quarter. Although SIEM price has come down significantly over the last weeks, the second quarter average price has been better than the Q1. These positive effects have been partially offset by higher inflation across the business in Q2, mainly in energy prices and more specifically in coke. totaling a negative impact of around $13 million in the quarter. Total EBITDA in the steel dust business has been $40 million in the Q2, up 23% compared to the previous year. In the U.S., the integration of ASET R into the FESA is developing well across all fronts. The team is working well with the rest of the organization, and we are confident to capture the short-term synergies over this and next year. We have developed a daily action plan in order to capture all the synergies of the operational area, mainly, but also in the general expenses and commercial fields. This year, we will benefit from the full year of operation in the U.S., which will represent a significant EVDA growth. In China, the set of COVID strategy that the Chinese government is implementing to fight against the still-present COVID-19 pandemic is creating a very challenging environment to operate. At Yansu Province, we have been operating the plant since the beginning of the year. The plant is technically operating well, and we have contracted more than 80% of the volume. However, the situation during the Q2 has been quite challenging, which required to stop and restart the plant constantly. Our second plant in the province of Henan is completed, and we are finishing the commissioning of the plant. We expect to start commercial operation in the coming months. We are starting to see some release in the strike measures which make us be more optimistic for the coming months. In the traditional business of the FESA, we are achieving a strong volume supported by a strong ESF steel production from our customers. Moving now to our aluminum salt slag and secondary aluminum business. Our aluminum business has delivered a very strong quarter in a very challenging macroeconomic environment. In the second quarter, we have recycled 85,000 tons of salt slag representing a 6% decrease compared to last year. The production of secondary aluminum alloys has been 42,000 tons, a decrease of 12% over the last year. The aluminum price has increased 28% in the period, and general inflation has represented around 6 million headwinds in the business. As a result, we have achieved 16 million of the BDA in this segment, which represents a 28% growth over last year. All in all, another strong quarter in a challenging environment with a strong volume performance and positive price dynamics that have more than compensated the high inflation. Let me give a final word about China. As I mentioned, the situation in the Q2 has been very challenging and difficult to operate. We are starting to see some relief in the measures, but very slow. Despite the short-term challenge in China, the opportunity to grow remains strong. The environmental authorities are committed to enforcing and fulfilling the environmental regulations, with the steelmakers seeing recycling as a real solution. At the moment, we are working on several new projects to build a new plant that could materialize in the near future as soon as the negotiation with authorities and steelmakers reach to an agreement. Now, Bob will explain the financials in more detail.