Befesa S.A.

Good morning and welcome to the preliminary full year 2022 results conference call of BFESA. I am Rafael Perez, head of strategy and investor relations of BFESA. Today we have with us Javier Molina, executive chair of BFESA, Asier Zarranandia, CEO of BFESA, and Wolf Lehmann, CFO of the company. Javier Molina will start with an executive summary of 2022. After that, Asier will explain the business highlights of the period, covering steel dust and aluminum solid slag recycling. Walt will review the financials in total and by business unit, as well as cash flow as an update on our hedging program. Javier will close the presentation providing some thoughts about the outlook for 2023 and the new five-year growth plan. 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 the preliminary full-year 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. In 2022, we have achieved record levels of revenue, EBITDA, net profit, and operating cash flow. mainly driven by the positive contribution of the US operations, as well as higher metal prices, which have been partially compensated by much higher inflation. Despite these record results, 2022 has been a very challenging year for Bethesda, impacted by very high general inflation, especially energy prices, weak economic environment, and a difficult COVID situation in China. Until Q3, we were able to compensate all the inflation and increasing energy price with higher commodity prices. However, the last quarter of the year has been more challenging than what we originally expected. And as a result, we have closed the year with an adjusted EBITDA of 215 million euros. The main reason for this result in the last quarter has been high energy prices, especially coke, which account for about 50% of the total energy cost in Bethesda, as well as a lower seam price and weak steel production in the markets where we operate. As a reference, steel production has decreased in the last quarter of 2022 by 18% in Europe, 24% in Turkey, 12% in South Korea, and 11% in North America on a year-on-year basis. Our aluminum business has performed well, and despite the high energy price, we have been able to transfer a big part of this increase to the market. As such, aluminum has delivered on a strong year in this challenging environment. Total revenues have been 1.1 million, up 38% compared to the previous year. Adjusted EBITDA has been at 215 million, up 9% compared to 2021. And net profit, 106 million, up 6%, equal to 2.66 euros per share. In North America, the integration is progressing well, and the execution is according to plan. We are working in the integration of the zinc refining business, which we acquired in September last year. As we explained, the zinc refining business provides Bethesda with a strategic vertical integration opportunity in U.S., addressing the shortage of smelting capacity in North American markets. Furthermore, the refining facility is the only one of its kind in the world producing green zinc for 100% recycled raw materials. In China, the plant in Henan is completed. The planning in uncompleted is commissioned in December, and we are ramping up operations. Today, we have two plans completed and ready to operate as soon as the market shows signs of recovery from COVID post-Chinese New Year. Both Asir and I were able to travel to China last week for the first time in almost three years. We have the opportunity to meet with existing and potential customers as well as local authorities in the province where we have operations. In Enam, we carried out the official opening ceremony of the plan with representatives of government. Also, we signed the investment agreement with the government where the third plan will be located in the province of Guangdong as part of our five-year growth plan. In the trip, we could see in person that the country is really opening and going back to a more normal post-COVID environment, which makes us be confident about the positive development of China. Today, we have the two plants in Jiangsu and Henan fully ready to operate in 2023. Although it is early to say how the year will progress, we are confident about the positive developments. As explained at our Capital Market Day, we are already executing our five-year growth plan. We are working on the refurbishment of the U.S. plant in Palmerton, as well as the third province in China, at Guangdong. On dividend, we will propose a dividend of 50 million euros for 2022, which is stable compared to the previous year and equivalent to 1.25 euros per share, close to 50% of net profit. Finally, on the ESG side, for our year, we have been able to reduce our lost time in euro rate by 32% year-on-year to new lowest level. We are executing our CO2 reduction plan about we will provide more details in the next ESG report that we will publish in June. Now, Asiel will explain the business performance in more detail.

Thank you, Javier. Good morning to all. I will provide an overview of the performance of the business during the fourth quarter and the fourth year of 2022. The fourth quarter has been a challenging quarter, as explained by Javier, impacted by high general inflation, high coal prices, weak steel production across all markets, and a difficult COVID situation in China. For the steel dust in the full year 22, total steel dust throughput was up by 35%, reaching 1,194,000 tons. driven by contribution of the recycling plants in the U.S. In the Q4, steel dust throughput has been up by 11% compared to Q3, driven by less maintenance shutdowns than in the Q3, as we used to remark. However, steel dust throughput in Q4 was slightly lower than expected and down by 8% compared to the last year, driven by lower steel production in the markets where we operate. In Turkey, where we have a plan in the Escaleron region. As you all know, two terrible earthquakes took place on the 6th of February. We are grateful that none of our employees and contractors were injured. However, the humanitarian situation is really dramatic, with many people's lives lost and many houses ruined, and with utility problems with effect to the less damaged houses and industries. The earthquake's impact on the region around the plant has been severe. The full recovery of the area will take time, but there are now some industries coming back to work gradually, among them some steam makers in that area. At the time of the earthquake, the plant was temporarily shut down for a scheduled maintenance work. An assessment shows that the plant has only received minor damages. We are now receiving dust at the premises and planning to restart the operation during March. From the price point of view, Brenda's steam price Considering the weighted average of the LME, our hedging has increased 15% in the full year. However, LME price decreased by 9% in the Q4 compared to the Q3. As such, plendency price in Q4 went up by 9%. These positive effects of volume and prices have been partially offset by high inflation across the business in the full year, mainly in energy prices, and more specifically, coke, which today represents about 50% of the total energy cost in Bethesda. As a result, total EBITDA in the steel dust business has been 169 million euros in the full year, up 14% compared to the previous year. However, in the Q4, EBITDA in the steel business has been down by 18% as a consequence of higher coal price and lower volume of steel dust. In the U.S., the integration of the ACR into BFESA is developing well across all fronts. The team is working well, and we are delivering the results that we expected. The refining facility, which we acquired last September, is also being integrated into BFESA. The plan is still in ramp-up mode, and we expect positive EBITDA contribution in 2023. Additionally, in the U.S., we are working on deficiency projects that will drive synergies to be captured in 2023. And at the same time, we have prepared the plan for the to free up capacity and be able to capture future growth in the market. In China, the Chinese government has completely changed its strategy to fight against COVID. Last year, we have been suffering from the zero COVID strategy, which created a very challenging environment to operate. Because of that, at Yanshu province, we have not been able to operate the plant properly in the Q4 as the COVID-19 made the Chinese economy to slow down, impacted the stealing production and our utilization rate. Our second plant in the province of Henan is completed and commissioning of the plant was finished in December last year. As Javier has explained it, we were in China last week for the first time after three years. We had the opportunity to meet with the team, the authorities, and customers, and we are optimistic about how the country is developing. In the traditional business of the FESA, we are achieving good volumes. Although Q4 has been a very weak quarter from the steel production point of view, driven mostly by our stocking effort, we have started Q1 seeing healthy levels of production through the markets, which will support our utilization levels. Moving now to our aluminum salt stack and secondary aluminum business, Our aluminum business has delivered another good quarter in a very challenging macroeconomic environment, which is quite remarkable. In the full year 2022, we have recycled 322,000 tons of salt slag, representing an 18% decrease compared to last year, driven by the temporary shutdown of the plant in Hanover, which under-repaid after the fire last year. Normalizing for this one-off operating effort, the volume of salted slag will be 7% up year-on-year. Within the Q4, the volume of salted slag has been down by 11% or up 3% on a normalized basis. The production of secondary aluminum alloys in the full year 22 has been 161,000 tons, a decrease of 14% over the last year, also impacted by the shutdown of the Hanover plant. The plant has been fully refurbished, and we are now in the ramping up of operations. From the prices point of view, the aluminum price has increased 15% in the year, although in the Q4, the price of aluminum has decreased by 8% compared to the previous year. The high inflation of energy has had a total impact of more than 26 million euros in the year, the majority of which we have been able to pass to our customers via increase of prices, collection fee, and median. As a result, In the aluminum business, we have achieved a total EBITDA of 46 million, down 6% compared to last year. In the Q4, total EBITDA has been 12 million, down 20% versus last year. So all in all, a very challenging quarter and end of the year impacted by market conditions and a challenging environment. Now, Walt will explain the financial in more detail.