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.