Befesa S.A.

Good morning and welcome to the first half 2023 results conference call of BFESA. I am Rafael Pérez, CFO of BFESA. Today we have with us Javier Molina, Executive Chair of BFESA, and Asier Zarranandia, CEO of the company. Javier Molina will start with an executive summary of the first half. After that, Asier will explain the business highlights of the period, covering steel dust and aluminum salt slag recycling. I will then review the financials with a focus on cash flow, net debt, and our hedging program. As here, we'll close this presentation providing an update on our growth plan, as well as some thoughts about the outlook for the second half of this year. Finally, we will open the lines for the Q&A session. Before getting started, let me remind you that this conference call is being webcast live. You can find the link to the webcast and the first half results presentation on our website, www.befeso.com. Now, let me turn this call over to our chairman.

Javier, please. Thanks, Rafael, and good morning, everybody. The first half of the year has been characterized by a challenging macroeconomic environment. Despite these difficulties, BESESA has delivered solid results. Although revenue have increased by 8% compared to the last year, driving by the integration of the zinc refining operation in North America, EBITDA in the first half was 95 billion euros, 20% down compared to the previous year. The main driver for this decrease has been higher zinc treatment charge, up 19% compared to last year, lower zinc prices, same period of last year, as well as higher coal prices, which are up 25%. All these negative effects have been partially offset by higher sink etching prices and lower operating costs, driving by productivity improvements and lower natural gas and electricity prices. Our aluminum business has continued to show benefiting from strong margins and a decrease in the energy prices in Europe. Asier will explain the performance on the steel and aluminium business in more detail later. From the strategic point of view, during the first half, we have continued the integration in the US, including the steam refining plan, which is improving its performance gradually with higher utilization rates. Also, In the U.S., we continue with the refurbishment works on the plant in Palmerton, Pennsylvania. In China, where the steel production continues to be weak, we continue to progress with the third steel dust recycling plant in the province of Guangdong, one of the most prominent provinces in China. Nevertheless, as we explained in the past, we can module the speed of the investment and we are adapting to the current situation in China. With regards to the outlook for the rest of the year, overall, we expect a stronger second half of the year compared to the first half. This is based on expected overall higher volumes of the second part of the year, combined with a gradual decrease on code price through the year and some recovery on SIN price, which at the current level are scratching the C90 cost curve. Finally, on ESG, in June we published a way ESU report for 2022, which includes the reporting on European taxonomy, scope-free emissions, as well as a chapter on green metals, where we are very well positioned with low-carbon aluminum as well as green zinc. Before handing over to Asier, I would like to thank Wal Lehman for his contribution as CFO over the last year. As we are known, Rafael Perez has been appointed as CFO. Rafael has been part of the executive team of Bethesda for more than 15 years, reporting directly to me. He has the required knowledge, experience and leadership skills and will be supported by a highly experienced team. The change in CFO will have no impact on Bethesda our ability to deliver the global growth plan that we presented at the Capital Markets Day last November. Now, Axel will explain the business performance in more detail.

Thank you, Javier. I will now provide an overview of the performance of the business during the first half of 2023. Overall, the first half of the year has been a challenging one, as explained by Javier. impacted by lower steam prices, high treatment charges, high coal prices, and still a weak environment in China. Befesa's total revenue increased by 43 million, or 8% year-on-year, to $615 million in H1 2023, primarily attributable to the contribution from the U.S. steam refining operations. PFESA delivered and adjusted EBITDA of $95 million, down $23 million, or 20% year-on-year. This decrease was primarily driven by the lower think market prices. Reviewing the main drivers of the year-on-year $23 million EBITDA developed many more details. On volume, overall, approximately 2 million negative volume year-on-year impact mainly due to the 6% decline in electric car furnace steel dust throughput, primarily driven by the U.S. operation and the earthquake in Turkey. On price, overall, approximately $29 million negative price year-on-year, impact explained by lower zinc and aluminum market prices. About $27 million from the steel dust business, around $3 million from the aloe salt slag business. I will explain later in more detail. On cost order, the negative impact from high coal prices have been compensated with lower operating costs in our steel, dust, and aluminum, salt, and slag business. In this case, mainly through lower energy prices. Turning now to the results from our steel, dust, recycling business. Steel, dust delivered 67 million EBITDA in the first half, down 28 million or 29% year-on-year. Overall, the year-on-year 28 million decrease in EBITDA was mainly driven by the 25% decrease in SYNC LME market prices. The volume level was negative by around 2 million EBITDA year-on-year impact. As explained, mainly due to the earthquake impacting operation in Turkey and the U.S. operations beginning of the year. After the earthquake occurred in Turkey in February, we successfully restarted operations in March, and our plant in Iskenderun has been operating at normal levels since then. Total steel dust volume in the first half was 592,000 tons, which is 6 percent lower than the last year, and reaching an average utilization rate of 70 percent. Steel dust volume in Q2 has been 6% higher than Q1, and we expect this trend to continue. Overall, steel production globally has been weak during the first half of the year, as it sounds on page 11, with Europe down 10%, U.S. less 3%, or Turkey and Korea less 7%. Despite this, in Europe we achieved solid volumes, which helped us to run our European plans as strong utilization levels. In China, volumes were weak, driven by a delay in the recovery of the economy activity with still production below pre-COVID levels. The price level was overall negative by about $26 million year-on-year, with main price components being $27 million negative impact for lower SIN LME prices, down 25% or close to $900 per tonne year-on-year to around €2,600 per tonne on average for the period. The €6 million positive impact from higher zinc hedging prices, which is up 1% year-on-year to around €2,350 per tonne average, helped us to fully offset the unfavourable increase of zinc treatment charges, which was set at €274 per tonne for the year 2023. versus 230 per ton in 2022. Regarding the cost of the lever, the pressure from higher coal prices was offset by the positive impact through the productivity and synergies. With regards to Befesa's coal price, after reaching an all-time high level in Q1, Befesa's coal price started to moderate in Q2, 3% lower versus Q1, However, the first half average coal prices was 25% higher versus last year and is still around 90% above the 2019 to 2021 average levels. Revenue in the steel dust business increases by $49 million or 13% year-on-year to $403 million, mainly attributable to the contribution from the U.S. in refining operations. Consequently, the BDA as a percent of revenue stands at 17% in the first half versus 27% last year. The year-on-year profitability decrease is mainly driven, as explained, by the lower thin market prices. The unfavorable thin treatment charts increase, the higher co-prices, as well as the thin refining operation contributing to revenue but not yet to the BDA in the first half. As we saw on page 9, SIN LME prices have significantly decreased in the first part of the year. However, SIN prices have historically rebounded strongly upon touching the C90 curve. This is something that we have seen many times in the past during periods of strong economy stress. SIN price is currently trading around the C90 cost curve, which should balance supply demand and hence provide price support at these levels. Regarding co-prices, on page 10, you can see that after reaching an all-time high levels in the first Q2023, Befesa's co-price saw a small reduction in the Q2, 3%, versus Q1. However, the first half 2023 average co-price is still around 90% above the 2019 to 2021 average levels. In Q3, we are starting to see further normalization, which hopefully will continue over the rest of the year. Natural gas and electricity prices continue to normalize during the Q2 back to average levels of 2021. Moving now to the results of our aluminum salt slag recycling business. Aluminum salt slag delivered a strong first half with 28 million ABDA in the first half. up 17% or 4 million year-on-year. The year-on-year 4 million EBITDA improvement was mainly due to the lower cost, primarily through lower energy prices, partially offset by lower aluminum market prices. Regarding volumes, our salt slag and SPL recycling volumes slightly decreased by 1% year-on-year to 171,000 tons in the first half, primarily due to the ramp-up of the Hanover plant, which we completed in the second queue. Our aluminum alloy production volumes increased by 3% year-on-year to 87,000 tons in the first half. With these volumes, we operated our plant at solid utilization rate of about 85% in secondary aluminum and close to 75% in salted slag on average. Overall, as you see in the VDA work, no VDA impact year-on-year from the volume level. The higher secondary aluminum volumes were offset with lower salt slag treated. With regard to prices, aluminum allow F&B market prices showed a 12% or around 300 euros per ton decrease versus last year to around 2,250 euros per ton average in the first half. This negative price effect was partially compensated with year-on-year hydrogen-aluminium metal margins and resulted in about 3 million negative price effects that you see in the EBITDA work. The cost of the level of the EBITDA work solves around 7 million EBITDA positive effects year-on-year. This was driven by lower operating costs mainly through the lower gas and electricity prices. Bethesda's gas and electricity prices reduced further in the Q2, around 20-25% lower versus Q1, and back to 21 average levels. Bethesda's average price of gas in the first half was approximately 50% lower year-on-year. EBITDA, as a process on revenue in the solar slag segment, remaining strong at about 35%. Now, Rafael will explain the financial section.