Befesa S.A.

Good morning and welcome to the third quarter 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, Acierza Raonandía, CEO of BFESA, and Wolf Lehmann, CFO of the company. Javier will start with an executive summary of the first nine months of the year. After that, Acier will explain the business highlights of the period, covering steel dust, and aluminum solid select recycling. To all, we'll 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 and the five-year growth plan, which we will explain in detail in the upcoming Capital Market Day on the 8th of November. 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 third quarter results presentation on our website, www.defesa.com. Now, let me turn this call over to our chairman. Javier, please.

Thank you, Rafael. Good morning. During the third quarter, we have continued to deliver solid growth for Defesa in a challenging market environment. As anticipated, Q3 has been the weakest quarter in the year, driven by a combination of planned maintenance shutdowns in Europe, lower metal prices compared to the second quarter, and high overall inflation, especially energy prices. In the third quarter, we have achieved 46 million euros of EBITDA, which is 8% higher than last year. As such, in the 91st month of the year, total EBITDA has been 164 million euros, or 20% growth year on year. Overall, despite the challenging macroeconomic environment and the volatility in the commodity prices, we have delivered another good quarter supported by the contribution of the North American plants. In China, we expect to complete the commissioning of the second plant in Henan in the last quarter of this year, and we continue to experience a challenging environment to operate caused by the zero-COVID policy that the Chinese government is imposing. Later, our CEO will review the business performance during this quarter in more detail. Based on the results of the third quarter and our expectation for the last one, we are confirming the guidance that we provide at the beginning of the year towards the lower part of the range of 220 to 270 million euros. We are living in a very challenging macroeconomic environment, which is translated in high levels of volatility and uncertainty over the coming months, with concerns about an economic recession in Europe and globally. In September, we signed the decision of the remaining 93% stake in the US chain refining asset. Prefesa already owns 7% of the assets as part of the acquisition of a fair deal. The current environment dominated by the high inflation and energy prices has provided us with the opportunity to renegotiate favorably the terms and conditions of the agreement, reducing the acquisition price by 65% to $47 million. The zinc refining business provides Bethesda with a strategic vertical integration opportunity in the U.S., addressing the shortage of smelting capacity in the North American market. Furthermore, the refining facility is the only one of its kind in the world producing green zinc for 100% recycled raw materials. Next week, On November 3, we are celebrating our five-year anniversary on the Frankfurt Stock Exchange. In the past five years, we have developed the FESA from a leading European-focused company to a truly global market leader with a diversified and balanced footprint. We are excited about the next growth plan of the FESA for the next five years, in which we plan to invest between 400 to 450 million euros. to target double-digit earnings growth in a globally balanced expansion. Now, as CSR R&D, I will explain the business performance in more detail.

Thank you, Javier. I will provide an overview of the performance of the business during the third quarter and the first nine months of the year. Overall, the third quarter has been a good quarter. As we expected, and some the same than previous years, planet maintenance shutdowns across our plants in Europe during the summer season have impacted volume in the third quarter. Metal prices have been lowered in Q3 compared with Q2, while inflation in general and especially energy prices have remained high. As we already saw in the first half of the year, we keep being able to compensate the higher inflation with higher metal prices. In summary, overall good results in a challenging environment, which position us to achieve the lower part of the guidance. Going into the details and starting with the steel dust recycling business. In the Q3, we have achieved 268,000 tons of throughput, up 20% compared to last year, mainly driven by the contribution from the U.S. plan, supported by a strong performance in the rest of the markets. Similar to previous years, Q3 is affected by plan and maintenance advance in our European plans. In Q3, the contribution from the U.S. operation has been strong, while in China, we continue to be impacted by the set of COVID policy of the Chinese government at the speed of the economy recovery. Total steel dust volume growth in the first nine months has been 60% compared to the previous year. Brand exchange price, considering the weighted average of LME and hedging, has increased 17% in the quarter and 18% in the first nine months of the year. These positive effects have been partially offset by higher inflation across the business in Q3 2020. mainly in energy prices, and more specifically in the coke, representing a negative impact. Total EVDA in the steel dust business has been 36 million in Q3, up 7% compared to the previous year. In the first nine months of the year, total EVDA in the steel dust business has been 131 million, up 28% over last year. In the US, The integration is developing well across all fronts. The team is working well, and we are delivering the volume and the results that we expected. Also, in the U.S., as explained by Javier, we have now full ownership of the zinc refining assets. The refining facility is the only one in the world producing green zinc from 100% recycled raw materials and will be fed with the works that we produce in the U.S. in our recycling facilities. In China, the state of COVID strategy that the Chinese government is implementing to fight against the still-present COVID-19 pandemic has created a very challenging environment to operate as the recovery is going very slow. At Jiangsu 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. The situation during the nine months of the year has been quite challenging. The COVID strategy and the slow recovery speed made the Chinese economy impacted the steel production and our utilization rate. Our second plan in the province of Henan is completed, and we are finishing the commissioning of the plan, which will be completed over the coming weeks. In the traditional business of Prefesa, we are achieving strong volume supported by a strong EAF steel production from our customers. Despite all the news about the steel production declines in Europe, the level of deliveries from our customers continues to be close to normal levels. Moving now to our aluminum salt slag and secondary aluminum business. Our aluminum business has delivered a good quarter in a very challenging microeconomic environment. In the third quarter, we have recycled 67,000 tons of salt slag, representing a 9% decrease compared to last year. The production of secondary aluminum alloy has been 37,000 tons, a decrease of 13% over the last year. These volume decreases are explained by normal plant and maintenance shutdowns over the summer season, both in the solar plant as well as secondary aluminum plants. The aluminum price has increased 16% in the period, which has more than offset the high inflation in the business during the period. In this business, we have been able to pass most of the cost inflation to our customers via increase of price, fee, and merge margins. As a result, we have achieved 11 million of EBITDA in this segment, which represents a 14% growth over last year. So, all in all, another good quarter in a challenging environment. As explained, Q3 has been the weakest quarter driven by maintenance shutdowns driving down volume and high inflection levels. We expect Q4 to be a strong quarter with all our plans operating as normal. A final word about China. As I mentioned, the situation during the last quarters has been very challenging and difficult to operate. So far, we are not starting to see some relief in the measures and economy recovery speed. But despite a certain challenge in China, the opportunity to grow remains strong. The environmental authorities are committed to enforcing and fulfilling the environmental regulations, with the steelmakers saying recycling is a real solution. We are working on several new projects to build a new plan that could materialize in the near future as soon as the negotiation with authorities and steelmakers reach to an agreement. We will explain more about this in the coming Capital Market Day. Now, Wolf will explain the financials in more detail.