Befesa S.A.

Good morning and welcome to the first quarter 2095 results conference call of BEFESA. I am Rafael Perez, CFO of BEFESA and this morning I'm joined by our group CEO, Asier Zarraonandia. Asier will start with an executive summary of the period and then he will cover the business highlights for the steel dust as well as aluminum salt slag recycling business. I will then review the financials by business and will cover the evolution of commodity prices, our hedging program, And finally, cash flow, net debt, and capital allocation. Here, we'll close this presentation providing an update on the outlook for 2025 and an update of our growth plan. 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 first quarter 2025 results presentation on our website, www.befeza.com. Let me turn the call over to our CEO. Asier, please.

Thank you, Rafa. We're moving to page five of the business highlights. Befesa has delivered a strong first quarter result despite a challenging macroeconomic environment, which demonstrates the resiliency of our business model. Total adjusted BDA in this quarter has been 56 million euros, up 15% compared to the same quarter last year, reflecting a strong performance driven mainly by a better price environment, partially offset by lower volume caused by plant maintenance stoppage across several plants. Operating cash flow has increased by 134% year-on-year, driven by a strong cash conversion. Net income and EPS also increased strongly by 97% year-on-year. Leverage at the end of the first quarter decreased to 2.78 times, continuing our quarter-on-quarter improvement. In a still, we delivered a solid performance in the quarter, driven by a positive price environment, partially offset by lower volume due to planned maintenance shutdowns. Our secondary aluminum business remains being impacted by a challenging business environment with a weak automotive market in Europe. Palmerton reinforcement continued as planned, with the second kill to be completed in the second quarter. I will elaborate on later all these aspects. On the outlook for the full year 2025, as already anticipated in the previous call, we are expecting a strong EBITDA growth in the range of 240 to 265 million euros. We will continue with our prudent capital allocation, with a focus on reducing the financial leverage and growth capex on ongoing approved capex projects of Palmerton and . On balance sheet, we are targeting a financial leverage ratio below 2.5 times by the end of 2025. I will comment on the outlook in more detail at the end. The page six still does business highlights. Overall, our steel recycling business has delivered strong results in 2024 in Europe and the US. In Europe, steel production continues at a low level caused by weakened market demand. Despite this, the daily steel dust deliveries from EAF steel customers continue in line with last year, 2024, at good levels. The average low factor in the quarter stood at 86% driven, as explained by scheduled maintenance shutdowns in large assets. In the US, in the steel dust recycling business, average utilization was also impacted by maintenance shutdowns in the steel industry. In Palmerton, the first kiln has gone through ramp-up during the first quarter, and the cost reduction measures in the zinc refining plant are delivering as expected. In Asia, Turkey and South Korea are operating at regular levels, and in our Chinese plants, continue running at utilization levels of 50% on average during the quarter, impacted by weak electric car furnace steel production. Moving on to page seven, business highlights for the aluminum salt slag recycling business. On salt slag, we have delivered a strong volume which has resulted in a very high capacity utilization of the plants at an average of 93%, pretty much in line with previous quarters. On the other hand, our secondary aluminum segment continues to suffer from a very weak European automotive industry which is affecting the demand for secondary aluminum. This continues to pressure the aluminum metal margin, which is suffering compression compared to previous year levels, caused by weak demand of secondary aluminum coupled with difficult access to aluminum scrap in the market. Now, Rafael will explain the financial details.

Thank you. Moving on to page nine, the financial results of the steel dust segment. still does deliver 49 million euros of adjusted EBITDA in Q1, which represents a 37% year-on-year improvement compared to the first quarter of 2024. EBITDA margin improved from 19% to 25% in the period. The 13 million EBITDA improvement has been driven by the following factors. The year-on-year impact from volume reflected a decrease in total plant utilization from 70% to 64%. driven, as explained by ASEER, by planned maintenance stoppages in some of our assets. Utilization is expected to recover over the course of the year. On price, strong positive EBITDA year-on-year, impact of about 15 million euros, with the three main price components being 3 million euros of positive EBITDA, impact from higher LME prices, up 16% in the quarter, 8 million euros of positive impact from high hedging prices, up 8% year-on-year, and thirdly, 4 million euros of positive impact from lower treatment charges on zinc, which was set at $80 per tonne for the year 2025 versus 165 per tonne for the last year. On cost and other, the general inflation cost was offset with the cost cutting from the zinc refining in the US, as the cost reduction plan is delivering the expected results and improving profitability gradually. Moving on to page 10, financial results of the aluminum segment. Aluminum solid slag delivered €9 million of EBITDA in the first quarter of 2025, which represents a 32% year-on-year decrease compared to the €13 million from the same period of last year. The year-on-year €4 million negative EBITDA development was mainly due to lower aluminum metal margin as well as higher energy prices. On volume, overall neutral EBITDA year-on-year impact during the quarter. Our recycled volumes of salt slag and the production of secondary aluminum remain pretty much in line with the previous year. With these volumes, we operated our plants at a strong utilization rate of about 81% in salt slag and 93% in secondary aluminum on average. With regard to prices, overall negative EBITDA year-on-year impact of about 2 million euros. mainly driven by pressure aluminum metal margins versus the previous year. As explained by ASEER, this compression in the aluminum metal margin is caused by two factors. On the one hand, there is a scarcity of aluminum scrap in the European market, driven by lower overall industrial activity, as well as higher exports of alloy scrap away from Europe. And secondly, by a weak automotive industry in Europe, which impacts demand of secondary alloy from automakers. The aluminum F&B price increased by 6%, averaging 2,416 euro per ton. This was partially offset by increased pressure from higher operating and energy-related expenses, mainly through the higher energy prices of electricity as well as natural gas. Moving on to page 11, seam price and treatment charges. Regarding seam LME prices during the first quarter of 2025, SYN has been trading with some volatility of the marginal cost C90, trading sideways in the range of $2,700 and $2,950 per ton. The average of Q1 SYN LME price has been $2,838 per ton, which is 16% above the same period of the last year. On the right-hand side of the slide, on treatment charges. In 2025, treatment charges for zinc was set on in April at $80 per ton for the full year 2025, compared to the $165 of last year, marking an all-time low record level. This reduction will drive earnings significantly in 2025. Recently, spot-zinc treatment charges bottomed out with a mini-rally, however still trading close to all-time low levels. Turning to page 12 on hedging. We have taken the opportunity of the volatility in the SIN price seen throughout 2024 and the first quarter of 2025 to extend our hedging book further to the beginning of 2027. With this extension, our SIN hedge book covers close to 20 months of hedging our books, at increasing hedging average prices of €2,640 and €2,655 per tonne for the years 2025 and 2026, respectively. This level of hedging represents an all-time high level of hedging for Befesa, and will provide around 20 million euros of incremental EBITDA in this year of 2025, regardless of what happens with the SIEM prices. We continue to monitor the market to close volumes for the remainder of 2027. Turning to page 13, Befesa energy prices. The page shows the evolution of the three energy sources that we have in BEFESA, coke, natural gas, and electricity. With regards to coke prices, which totally represent around 55% of the total energy bill, the normalization that started in the second quarter of 2023 continues throughout 2024 and the first quarter of 2025. Average coke price in the first quarter has been around 174 euro per ton, which is 6% lower than the same period of last year. Regarding electricity, which today accounts for around 30 percent of the total energy expense, prices have been reversed, their trend has been on the rise since the mid of 2024. Gas prices experienced a slight increase in the first quarter. Now, turning to page 14, the cash flow results. Operating cash flow in the first quarter has reached 34 million euros, which represents an increase of 134 compared to the last year. On the EBITDA to cash flow bridge, starting with 56 million euros of adjusted EBITDA to the left, working capital consumption amounted to 15 million in the first quarter of 2025, down from 34 million in the same quarter of last year. As in the previous year, the first quarter working capital was significantly impacted by seasonality, further influenced by lower sales compared to the previous quarter and higher sales year on year. Taxes paid in the first quarter of 2025 came in at 6.5 million as a result of final tax assessment of the previous year, resulting in a operating cash flow of 34 million euros in the first quarter of 2025. On capex, in the first quarter of 2025, we have invested 11 million euros in regular maintenance capex, 7 million in growth capex, mainly related to the refurbishment of the Palmerton plant in Pennsylvania. In summary, total capex of €18 million in the quarter. Total interest paid amounted to €9 million in the first quarter, aligned with the same period of the previous year. For 2025, the Board of Directors will propose to pay a dividend of €25 million, equivalent to 63 cents per share, or 50% of the net income. In summary, final cash flow amounted to €2 million in the first quarter, Cash on hand stood at 105 million euros, which together with 100 million euros and drawn revolving credit line provides Befesa with more than 200 million euros of liquidity. Gross debt at the end of March stood at 718 million euros. Net debt stood at 613 million euros compared to 622 in the same quarter in the last period. resulting in a net leverage of 2.78 at closing of the quarter, a strong improvement compared to 3.4 at March 2024. Turning to page 15, debt destruction and leverage. On the 20th of March, we successfully repriced our €650 million senior secured TLB, reducing the interest rate by 50 basis points to EU REBOR plus 225 basis points. which will lower our financing costs by approximately 3.3 million euros per year. We can further reduce to a rate of Euribor plus 200 basis points when we reduce our leverage below 2.5 times. Following the rate financing back in July 2024, the repricing represents another achievement to improve our long-term capital structure by optimizing our financial costs. We will continue reducing the leverage throughout 2025 to keep it between two and two and a half times going forward. To do so, we will prioritize our growth capex on these projects that will deliver immediate cash flow upon completion, like the approved projects of Palmerton and Benburg and other market opportunities that could appear. Also, we will keep the annual regular maintenance capex around the level of 40 to 45 million euros over the coming years. On dividend, we are committed to maintain our dividend policy to pay between 40% to 50% of the net income to shareholders as dividend. Now back to us here on outlook and growth.

Thank you, Rafa. Moving on to page 17 on outlook. As we already explained in the previous call, you can see in the page the main drivers of earnings on our view for 2025. We expect 2025 to be another year of strong double-digit earnings growth and further deliberation during the year. This is fundamentally based on better seeing hedging levels, lower treatment charges, higher volume of steel dust recycled in the U.S. recycling plants, as well as lower seam refining costs in the U.S. While we recognize that the political and economical environment has become less predictable due to the uncertainty that trade tariffs are creating, we expect limited direct impact in our business in the short term and we see the long-term drivers of the business as intact. Today, the FSA is self-sufficient in each of the regions where we operate due to its strong local-for-local footprint. In the still last, we expect to continue running the plants at high-capacity utilization and achieved a stable volume compared to 24, despite current challenging steel industry in Europe. In the USA, we expect higher EAS steel dust volume driven by volume from new contracts. In China, we expect a slightly better situation than in 2024 with overall slightly positive contribution in the market. In our aluminum business, we expect a stable salt slag volume compared to 24. However, as already explained, in secondary aluminum we expect a negative evolution as we continue to see metal margin compression caused by aluminum scarcity in Europe and a weak demand from the auto sector. In the seam refining plant in the US, we are taking operating cost cutting measures in 2025. We are aiming at a fixed cost reduction between 10 to 15 million euros to be captured in this year. On energy prices, we expect a slightly lower overall coal price for the group in 2025. However, as seen already in this quarter, we are expecting natural gas and electricity prices in Europe to be higher than 2024. On treatment charges for zinc, as explained by Rafael, we are having a very positive impact from the reduction from $165 to $80 per ton. Average SIN price hedging for 2025 at €2,640 will drive a strong earnings growth in 2025. On SIN prices, we expect to continue to see volatility driven by a global macroeconomical and geopolitical uncertainty. The marginal cost of the production SIN IP is around $2,500 level, acting as a floor of the price of SIN. on business plan and capital allocation to focus on reduction, the leverage, and invest in ongoing approved expansion projects. As such, expansion plan in China is stopped due to current market conditions. Our growth capex will focus on finishing the refurbishment of Palmerton and the expansion of Bourbon, both low risk projects from the execution, technology, and commercial point of view. Moving on to page 18, the financial guidance. Putting all the elements explained above into numbers. We expect full year 2025 EBDM to be between 240 and 265 million euros, which represents between 13% and 24% growth year on year. Total capex in the year will be below 100 million euros, with around 45 million on regular maintenance and 55 million on growth. Net leverage will be below 2.5 times by the end of the year, and EPS will grow at least by 40% in the year. Moving on to page 19 on Palmerton. The reinforcement of the Palmerton plan in Pennsylvania is moving on well on time and on budget. The first kill is already completed and has been in rampart during the quarter, and the second kill will be completed by the end of the second quarter of the year. Moving on to page 20 on Bergbult. With regards to the expansion of the secondary aluminum production capacity in the existing plant of Bergbult in Germany, we are moving forward with the permits, authorizations and commercial contracts with customers. This project is linked to the demand for recycled aluminum we are getting from the existing Befesa customers in Europe. We expect to start investing in the plant during the second half of the year. Our growth plan is flexible, and we are adapted to the current circumstances, balances with leverage and capets, which will result in a better growth and financial profile over this year, 2025, and the next years. Thank you very much.

Thank you, Asir. We will now open the lines for your questions.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchtone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use only handsets while asking a question. Anyone who has a question may press star and 1 at this time. The first question comes from the line of Ioannis Mosvoulas with Morgan Stanley. Please go ahead.

Hello. Thank you for the presentation and for taking my questions. First question on my side is on the zinc TCs where you flag the 50% decline year-over-year to $80. But what the TC level is baked into your Q1 results? Is there any lag effects where you could take some portion of last year's benchmark or not, just to get a better sense on the bridge into the second quarter? Second question, can you remind us what's the remaining growth capex in 2026 once you complete the two projects at Palmerton and Bernburg? And lastly, can you talk about the EPS guidance? Because it feels like EBITDA guidance was better than expectations, but EPS appears lower or more conservative. If you can build an EBITDA to EPS bridge for 2025, that would be very useful. Thank you.

Hi, Johannes. Thank you very much for the questions. For the first quarter, it's basically 80, because as a reminder, we have the contracts with the, you know, the to go back to the January 1st. So basically, once the things are confirmed, we are going with a new TC for the year. So this is done, no?

For the CAPEX 26, Rafa, on CAPEX, Yannis, basically, as you know, this year we set 100 million of total CAPEX. Out of that, 45 will be maintenance, 55 will be growth. Out of that 55, 20 million will come from Palmerton. So with that, the whole U.S. investment will be fully completed. And then the remaining 35 or so will be for the expansion of the secondary aluminum plant in Benburg. Remaining capital for 2026, I would say, is still early. Obviously, there will be the remaining of Benburg, which, depending on how much we spend this year, should be between 10 to 15 million. And then, as you know, the remaining growth projects are the new salt slag plant in Poland, in Europe, which hasn't started yet. And then the second kiln in the Resitec facility in Europe, in France. These two projects, they haven't been approved by the board yet. We haven't started the construction. So depending on how we see the evolution of the markets throughout 2025, we will have a better picture throughout the end of the year. But in any case, as we have commented, we have taken the commitment to cap the capex going forward for the next couple of years at $100 million. That will give you a rough estimate. Then on the EPS, yes, you're right. Below EBITDA to EPS, there are a number of elements. We have a strong view on financial costs, on the taxes. Our view is less secure under the 1.8 EPS level that you see in the presentation is a bottom. I agree with you. It may be a conservative, but we prefer to be conservative on this case. But you can see that 1.8 as a bottom for EPS this year.

Thanks very much. Thank you.

The next question is from the line of Shashi Sekhar with Citi. Please go ahead.

Hi. Good morning, everyone, and thank you very much for this opportunity. I have three questions. The first one is on the zinc prices. What prices have you assumed in your 2025 EBITDA guidance? Second, what is the expected capacity utilization at the U.S. steel dust business this year? I just wanted to assess the improvement in utilization versus the last year. And my last question is on tariffs. I just wanted to understand the impact of tariffs on zinc if applied in future on your business. Thank you very much.

Thank you, Sashi. I will take the first question on zinc, and then Asir will take the question on expected utilization for the steel business, which you need to look at data on a market by market, because the dynamics are totally different. And then we will also address the tariffs question. On zinc, well, as you can see on the presentation, I think it's on page 17. The guidance is arranged, 240, 265. Some of the elements that are in there are well known, like the hedging level or the treatment charge. Some of the things are unknown, like the same price. Last year, average SIM price was $2,780. I think the consensus of SIM price for this year is pretty much in line with that, but obviously we're seeing volatility around these levels, not driven by the geopolitical tensions caused by the tariffs. Obviously, in the lower part of the guidance, I cannot give you a precise number, but we consider a more negative scenario of SIN prices. On the upper side of the guidance, we consider a more positive SIN price scenario, but I cannot give you a precise number at this moment. What we have is a strong view on the floor of the SIN price, which is driven by the Sinaiticus score, which when you look at the last 20, 25 years, has been acting as a very solid floor for the same price, especially in economic recession periods. This level is around $2,500 pretty much today. We're expecting volatility driven by the macro environment, but the average we expect to be in line with last year. We'll address the utilization.

Thank you for the question. I think that we are confirming what we were discussing in the last presentations and contacts. The U.S. utilization rate that we are expecting this year is going to be more in the level of 75% to 80% production level. Keep growing in 2016 to above 80%, 85% and finishing in the next year close to the 90% that we see that is the target as we are doing like in Europe. It's a growth from last year in around 15% to 16%. based on that, based on new contracts that we have in place for new projects coming into the picture. And as well, we are starting to feel positive signals with the steel price in U.S. because the tariff probably and some increased capacity of the current customers that we are having. So we are confident that despite the year has started a little bit lower level of production for steelmakers now in the last month of March, April, the capacity utilization is growing and I think that we can reach this kind of level of 75 to 80 percent capacity utilization level this year. On tariffs, I think that we have already said something, but I would say in U.S. probably it's going to be a positive matter as I explained it. still to be confirmed, and there is big uncertainties, and we as BFESA are too small to have a real, you know, crystal ball what is going to happen, but I think that the main direct impact could be in US with a positive effect, and then it's more difficult to see indirectly how it can affect this to the other regions like Europe, China, if it is going to be yes for here and there, but in a, well, in a In our opinion, I think that because we are local for local geographic focus, I think it's very difficult to see that it's going to have a big, big effort in our portfolio. That perhaps even positive in the U.S. I think I would like to remark this, that if any effort comes, significantly probably is positive.

Got it. Thank you very much.

Thank you, Sachin.

The next question comes from the line of Jaime Escribano-Mais with Santader. Please go ahead.

Hi. Good morning. So following the questions regarding the guidance range, so aside from prices, What other variables move you from 240 to 265? Like, for example, the sinker smelter, what are you estimating there or in terms of volumes or China, for example? The second question is more qualitatively on Q1. So I see A strong margin recovery in distilled dust despite the maintenance volumes. And I was wondering what is behind that. Is it the recovery of the sinker smelter, for example? Similar question to salt and slag, the other way around. The margin last year was very high, 36%. Now it's 25%, very similar to T4. So what could we expect in terms of the salt slag margin? Yeah, and finally, a question on the secondary aluminum. So you mentioned about the high scrap prices, low auto demand, but maybe you can give us also a guide on how you see the evolution for the rest of the year. Thank you very much.

Thank you, Jaime. Well, on the different moving parts of the guidance, as I said in the previous question, there are a number of moving parts. Some of them are well known. Some of them are more estimates. On the volume of steel dust, as I said, we are seeing a strong momentum in the US, and you can think about around 5 million positives coming from that. On the other hand, as you said, on secondary aluminum, there's margin compression, which may be translated into something around 5 million years of headwind throughout the year. Let's see how the year evolves. On the scene refining, as I said, we are delivering the results on the cost-cutting exercise as expected. So we're expecting around 50 million euros on average. That's the midpoint. Then you can see a more positive and a more negative scenario. Energy prices on average are slightly increasing in Europe, natural gas and electricity. So you can think about another 3-5 million headwinds, whether with inflation. Then treatment charges, it's a positive effect of around 18 million, and then hedging is around 20. So these are basically the building blocks that will take you to the midpoint, and then you can pencil, as I said, a more pessimistic or more conservative scenario, and then a more bullish scenario. Then on the margin on steel, I will pass to him.

Yeah, thank you, Jaime, for the question. Always interesting. I mean, about the margin in steel, well, we are... We are observing this improving margins since the last part of the last year because all the calls more or less are controlled now in terms of coke and so on, not many changes. And the remaining, you know, inflation costs that we were expecting are there. But obviously what is affecting more to the margins nowadays is the treatment charge. As we say, it's recorded for the first quarter prices because as Rafa explained before, we do hope as an average probably in the range of last year with the consensus. But it's true that in the First quarter, the SIN price has been a little bit higher. Of course, the hedging, you know, that is a higher level. And as well, obviously, you know, we are improving the recycling, or sorry, the refining cost, and we are going to plan to do lots of things. So altogether, it's making clearly the increase of the margins, despite the sound of setting by lower volumes compared with last year. But basically, it's a matter of metering costs, no? Solters Block is true that it's a little bit below last year, you know, the 25 margin, but this is a combination of the first quarter, I think, that punctually, the beginning of the year was slightly, you know, the lower volume, slightly lower volume was focused at the beginning of the year because the, you know, restart of the customers for after the Christmas, and I think that is a consequence of the volatility in the aluminum business because the automotive and whatever And it's affecting us. But we see that we are going to have a recovery of this business in the next quarters, staying with the numbers that we have shown in 24 and the margins that we have shown. So there is a matter of some extra costs as well for the electricity prices that we'll see. Nowadays, you can see the prices in Europe, especially in Spain, are lower. So we will see what happens. But it's clear that it's affecting to the first quarter results. But again, we will recover this. In the secondary aluminum, for ending with this, is where more uncertainty we have. I mean, perhaps it's a little bit better now in the second quarter compared with the first one, but it's very difficult to see the whole year here. That's why, as Rafa explained, it's one of the books that we have less clear about the evolution. And in any case, we are having a negative view in general compared with last year, but nothing more than 5 to 6 million or 7 million maximum. And then moving on that level, up and down, we'll see the evolution. It is a situation regarding with automotive and regarding as well with the tariff issue, because we are watching that scrap availability, selling scrap from Europe to other parts of the world, especially U.S., it's not a has not the tariff and the aluminium yes so what is happening is now many scrap is going out of europe putting pressure on prices and and i'm pushing the margins a little but in any case once again it's nothing that is going to be a big issue more than well in the range of five to seven million up and down uh we will be thank you thank you very much

The next question comes from the line of Christoph Clifford with BNP Paribas. Please go ahead.

Good morning, and thank you for taking my questions. The first question is on the treatment charge. Could you explain, please, the negative impact of the treatment charge on your U.S. things, melting activities? And related to that, can you give us some idea of the revenue contribution of the treatment charge for the asset in 2024, please? The second question is related to FX, and here we have seen some weakening of U.S. dollars versus euros. Can you give us some idea about your FX hedging activities and your open position when it comes to U.S. dollars in terms of revenues and EBITDA, please? Thank you.

Thanks, Christoph, for the questions. Chairman Charles, U.S. Well, as I always try to explain, we are not considering effect in the smelting, unless internally we have in mind this, because whatever you get negative in the smelting, you are getting positive in the recycling, right? So the effect from the TC in Bethesda now is limited to the European and ASEAN operations. Out of the U.S., I mean, with the increase itself, no? More than the smelting and the others. Smelting is doing well, and I think that at the end of the year, out of the treatment chart evaluation should be basically in the break-even point. So once again, the smelting in the near term should be seen like the washing plants. I mean, it's a way of how we sell the product there, but not affecting really this increase. Obviously, the smelting business in general for our customers is suffering because this disease is the highest ever. and and what is happening here is that probably i mean it should have an effect we don't know if hopefully in the same price up or even in the premiums for the for the metal so so well in indirectly i think that this is not going to be negative for our weather smelting or for our operation in the us this change so regarding an fx rafa will explain to you

On FX, Crystal, basically a few thoughts and comments. Basically, first of all, we don't do any type of hedging on the FX. In the US, we have sales in dollars and cost in dollars. In Europe, we operate in Euros and in Asia in the different currencies. The same price hedging, we also do in different currencies. In the US, we hedge in dollars. For the European operations, we hedge the same price in euros, and we also hedge the Korean operations in Korean won. Obviously, the 30%, 30%, 35% which is not hedged, that is LME price which is trading in dollars. In general, we prefer a strong dollar, but the impact of the fluctuations on FX are not so important in the case of FSR.

Very clear. Thank you.

As a kind reminder, if you wish to register for a question, please press star and one on your telephone. The next question comes from the line of Jorge Gonzalez with Hochhoff Schauser Investment Banking. Please go ahead.

Hello. Good morning. Thank you, Nasir and Rafael, for taking my questions. I would like to follow up on some of my colleagues' questions before, especially in regards to the volume growth for the year, and just to avoid doing mistakes here with the utilization potential adjustments. I understand, taking into account the 5 million euros positive delta that you commented in EBITDA, that we are talking around 15,000 tons more of works. the year more or less if does that that makes sense for you that will be my first question please yeah it's around like that thank you for the for the for the question yes 15 16 17 something like that could be could be a good reference okay thank you and and then also following on the on this melting a progress that i think is quite interesting and and the performance uh obviously of the pitta This quarter, I think, has already some impact from there. Can you give us some color on how it compares the smelting EBIT performance in Q1 this year compared to last year at this point? And when you talk about break-even, do you refer to break-even run rate taking into account the last quarter or break-even for the full year?

Clearly it's a break even for the full year and it's a continuous basic program. So we are capturing in the first quarter as was expected, but progressively the results of the smelter are going to come, you know, better and better. So break even at the end of the year, first quarter there is not a big effort, you know, very big. I mean, it could be a comparison of three million or something like that from last year's comparison. That was a situation totally different, no? But at the end of the day it's a program that we are establishing new fixed costs and new lower consumption of variable costs and so on, which is very difficult to have a picture. But if we go through the progress of the plan, I think that we will capture the 15 to 20 million dollars, in this case 15 million, 16, 17 million euros at the end of the year. You can split along the year, well, some decreasing or increasing the savings, something like that.

Okay, thank you for that detail. And lastly, on the development of the margins per region, the first quarter is for taking into account the strong declining in the volume process looks really positive for me. And I was wondering, taking into account that some of the maintenance works or mainly the maintenance works was in Europe, And you are indicating only 3 million decline euros in EBITDA in the quarter. I am wondering if this means that the EBITDA per ton in North America has substantially jumped because of Palmetto started to work in the region and maybe the lower Coke prices. Can you update us a little bit on how are the different in the regions developing if there is already maybe a strong jump in Q1 in North America. Thank you.

Thanks, Jorge. You know that always this kind of information we try to don't release a lot, but in the case, particular case of the U.S., that it is obviously in the radar of all of you. I think that we can say that it's not a big difference still with the with the last part of the last year, so we are in the level of 115, 120 and growing. So I think that is what to say. The European and the stand stills happened with the Q1. What means is probably as we expected, this is the lowest quarter on results that we expect this year. And we anticipated this because The large asset that we are stopping this quarter, or we have stopped, is in Europe, which you know that is a higher margin, so this is affecting. So we are positive that the rest of the quarters of the year are going to be higher of this one, and that's why we will end in the range that we are indicating. So this is the worst quarter and still last that we expect this year.

Okay, thank you very much for the call. I'll go back to the line.

The next question is from Beltran Palazuelo with DLTV Europe. Please go ahead.

Hello, good morning. Thank you very much for getting my question and congratulations for the strong results and the strong guidance. My only question is regarding, I think, another analyst already asked it, but to have more color on the conservative guidance on the EPS. If you could give us a little bit more color on the financial cost, because clearly if you do the math, around 7.5 to 8 million per quarter should be the financial cost. And seeing the tax, it never has been over 28%. So it seems that it's extremely conservative. You have at least above 15%. Why put 1.8 and not 2? Because if you get the guidance and all the points you have, it seems that that part of the guidance is not included It has nothing to do with other things. Is there something in financial calls that are missing or something in tax that you have not disclosed in your numbers? Why Pompei 2, for example?

Well, you're totally right, Beltran. It's a conservative level, 1.8. We have internal discussions, but as you know, we don't usually provide the EPS guidance and we always focus on EBITDA and net leverage. We wanted to be more transparent with you, but we also wanted to take a conservative approach. I agree with you that being 1.8 the bottom of the expected EPS, probably a level around two is a much, or even above two, is a much more reasonable level. We will update the EPS guidance for a full year as we go reporting second quarter. But in essence, I agree with you, Beltran. Good comment.

Thank you very much and all the support from my side and thank you for the strong execution.

Thank you, Eldam.

The next question is from the line of Fabian Piasta with Jefferies. Please go ahead.

Hey, good morning, gents. Congrats to the strong print. Two questions from my side. You alluded on the positive green shoots in China. Could you maybe give some color on that, what this was driven by and how sustainable this is expected throughout the year? Second one is on the treatment charge for 2026. Are you expecting a slight reversal of the positive trend now due to smelter capacity decreasing again or do you think that smelter capacity in China is going to hold up and that we're going to see like a similarly similarly low treatment charge in 2026. Thank you very much.

Good question, Fabian. Thank you. I mean, in China, it is a difficult quarter to extract conclusions because you know that the Chinese New Year session makes that the steelmakers and even our plan is to stop for one month or even something like that. What we are serving is that, as expected, there is not a growth in the capacity utilization for the steelmakers. So we remain, you know, having the view for the year in the level of, well, you know, 70%, 60%, 70% capacity utilization at the end. But it's still to be confirmed. Obviously, there is not a big, you know, effect, again, here with China going to the 50% or to the 70%. But we still hope that we are going to end a little bit better than last year. But it will depend on the evolution of the Chinese steel production, basically, and the economy. At least for now, there are no big changes. But I think that we can stay, you know, expecting this because it's not a big issue in reality. With regard to the treatment chart of 2016, allow me to say that, well, let us enjoy the good level of 2025 and we will start to think in 2026. Because this year, in a logical answer of this question, normally when everything is down, should be on the contrary the next year, but the level of contrary, if happens, will depend on many things that with the current uncertainty in the economy, I don't know, I really don't know, and it's too early to think in nothing.

Okay, thank you very much.

Thank you, Fabian.

We have a follow-up question from the line of Johannes Mosvoulas with Morgan Stanley. Please go ahead.

Hi. Yeah, just a follow-up. Someone else asked it earlier around your FX exposure. And if you could perhaps quantify the net dollar exposure you have, I appreciate that it only relates to the unhedged LME portion. Is it around $200 million? And maybe if you can give us a rough sensitivity What's the P&L impact on perhaps a 1% change on the dollar versus the euro? That would be very useful. Thank you.

Hi, Yanis. Well, what I tried to explain was the different parts where we have exposure to the FX. On the hedging of zinc, which, as you know, represents 70% of the volume of the sales, in different currencies. In Europe, we hedge in the same price in Euros. In the US, in Dollars. And in South Korea, in Korean Won. Then the non-hedge portion is trading in Dollars. And then all the operations in the US, obviously we have a sales in Dollars and cost in Dollars and that EBITDA, when we consolidate with that, we have to translate those EBITDA in dollars into euros. If you want, I can follow up by email and I can send you. I haven't got a sensitivity of the FX in front of me, but I can follow up with you.

That would be great. Thank you so much. Thank you, Anis.

The next question comes from the line of Gaia Anis with Odo. Please go ahead.

Yes, good morning and thanks for taking my questions. I have three quick ones. First, two on the US and on EBITDA per tone target. What is your target in the US for EBITDA per tone, treated tone in 2025 and going forward? And secondly, you said that the impact of tariffs could be positive in the US. Could you please explain in more details why? And third one on the guidance, could you please repeat the building blocks to reach the guidance midpoint? Thank you very much.

Well, with regards to the media in Perton in U.S., as I always say, it depends on many things, but I think that we are not changing the idea to move from the 120 to 150 in a couple of years. This is the target, and we will move on down. In regard to tariffs, well, logically, one can think that if you put a tariff in U.S. and you don't get into or let still production from outside, prices there are getting up. and with higher margins the steel production are covering the imports that are coming and obviously with better prices so at the end of the day they are willing to produce more. This is something that is starting to happen and happens in the past. So that's why we do hope that the tourism use for the steel in production it is positive. Still again and repeating we don't know we cannot assure this is going to happen but I think that is the trend that we can see in the U.S. and has happened in the past with the new tariffs.

With EBITDA, I think, Rafa, the British Chinese, I already explained in a question to Jaime, but starting at the full year EBITDA of 2024, you can pencil around 5 million euros of better volumes in the U.S., around minus 5, and as I said, these are ranges, these are the midpoints, minus 5 for secondary ALU, but it could be slightly higher, slightly lower, On the senior refinement, you can pencil around plus 15 or so. Energy, we are seeing headwinds, which could be a headwind of around 3.5. Treatment charges of around 18 million euros of impact, and then hedging around 20 million euros of positive EBITDA. And then you have also some general inflation, which is a headwind of around 3 to 5.

Thank you very much.

Thank you, Anis.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Rafael Perez for any closing remarks.

Thank you all for your questions. You can also contact the Investor Relations Team of EFESA for any further clarification. We will now conclude the conference call and the Q&A session. Let me remind you that you can find the webcast and the dial-in details to access the recording of this conference call on our website www.defesa.com. Thank you very much to all of you and have a good day.