Befesa S.A.

Ladies and gentlemen, welcome to the BFESA third quarter 2025 results conference call. I am Yota, the call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a question and answer session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Rafael Perez, CFO of the company. Please go ahead.

Good morning and welcome to the third quarter 2025 results conference call of Befesa. I am Rafael Perez, CFO of Befesa. This morning, I am joined by a group CEO, Asier Zarraonandia. Asier will start with an executive summary of the period and then he will cover the business highlights of the steel dust as well as aluminum salts like recycling businesses. I will then review the third quarter financials by business, and we'll cover the evolution of commodity prices, of hedging program, and finally cash flow, net debt, leverage, and capital allocation. As here we'll close this presentation, providing an update to the outlook of the rest of 2025, as well as an update on our growth plan. Finally, we will open the lines for the Q&A session. For getting started, let me remind you that this conference call is being webcast live. You can find the link to the webcast of the third quarter 2025 results presentation on our website, www.defesa.com. Now, let me turn the call over to our CEO. Asir, please.

Thank you, Rafa. Good morning. So moving to page five of the business highlights. Defesa has delivered strong third quarter results, continuing the solid trend seen in the first half of the year. Our performance demonstrates once again the resilience of our business model and the benefits of our diversified operations. Adjusted EBITDA for the first nine months of 2025 reached 174 million, up 15% year-on-year. EBITDA margin improvement significantly to 21.3% in Q3 2025, compared to 16.6% in the same quarter last year, reflecting a strong operational efficiency and discipline cost management. Financial leverage was further reduced to 2.6 times in September 2025, compared to 3.0 times a year ago, highlighting our continued focus on the leverage. Net income and earnings per share also increased subtly. EPS rose 143% year-on-year to 1.52, reflecting strong profitability and improved financial performance. In our steel dust business, we achieved a strong recovery in Q3 volumes following the maintenance shutdowns carried out in the first half of the year. Performance was further supported by lower ZIN treatment charges and favorable ZIN prices. Our secondary aluminum business continues to be impacted by a persistently challenging environment, driven mainly by weak automotive market in Europe, as well as the usual summer period maintenance activities in the auto industry. The Palmerton expansion project is developing as expected, with the second kit successfully hot commissioned in July 2025. Looking ahead, we confer our full year 2025 ABDA guidance in the lower part of the initial range of 240 to 265 million, as we already commented in July. We expect a strong Q4 driven by higher EAF task volumes across all markets. Our financial leverage is expected to fall below 2.5 times by year-end, supported by solid cash generation and disciplined capital allocation. Growth capex will continue to focus on the Berbun project. following the substantial completion of the permanent door expansion. I will comment on the outlook in more detail later. Going to the page six, steel dust business highlights. In Europe, steel production in the third quarter of 2025 remained depressed, down 4% year on year, mainly due to the weak manufacturing activity and soft demand in the automotive and construction sectors. Despite this, our steel dust deliveries from EAI steel customers continued to align with the 2024 average and solid levels. Operationally, the European plants performed strongly, achieving a 94% low factor in the quarter. We expect strong volumes to continue into Q4, supported by healthy inventory levels and no major maintenance stoppage planned. In the US, steel production increased by 4% year-on-year in the third quarter, driven by infrastructure spending and tariff supporting domestic steel demand. Our U.S. plants operated at an 80% low factor in Q3, the highest level since the acquisition and reflecting a gradual improvement. The two new kilns in Palmerton have been fully operational since July 2025. A new AF EAS steel supply contracts are ramping up progressively through the Q4 following some initial startup delays. At the same time, cost reduction measures of the U.S. zinc refining plant continue to deliver expected improvements in asset profitability. In Asia, volumes in Turkey increased by 40% year-on-year in Q3, recovering strongly after a week's second quarter affected by maintenance shutdowns. In Korea, the low factor reached 77% in the first nine months of the year, up 11 percentage points year-on-year, given by higher domestic deliveries and strong operational evolution. In China, operations continue at low utilization levels, with earnings around break-even reflecting ongoing market weakness. Moving on to page 7, business highlights for the aluminum sold as life-restricting business. In our aluminum business, performance has remained mixed in the third quarter. Starting with the salt slag recycling business, operations have continued to perform strongly, running in line with previous quarters. Utilization levels remain around 90% for the first nine months, demonstrating the robustness and efficiency of our assets. As in the previous years, we carried out a scheduled maintenance stoppage during the summer months in Q3, and we expect a stronger operational performance in Q4 driven by higher volumes. In our secondary aluminum segments, the market environment continues to be very challenged. The European secondary aluminum industry remains under pressure with tight metal margins and limited production activity, largely as a consequence of the ongoing weakness in the automotive sector. Q3 is typically a softer period due to seasonal maintenance shutdowns in the industry and this year was not the exception. Despite these headwinds, we continue to focus on operational discipline, cost efficiency, and customer diversification to preserve profitability and position the business for recovery once market conditions improve. Now, Rafael will explain the financials in more detail.

Thank you, Asir. Moving on to page 9, the financial results for the steel dust segment. The steel dust delivered 154 million euros of adjusted EBITDA in the first nine months of the year. which represents a 25-27% year-on-year improvement compared to the nine months of the previous year. EBITDA margin improved from 20% to 26% in the period, mainly driven by better pricing environment on treatment charges and sink hedging. The 33 million EBITDA improvement has been driven by the following factors. The year-on-year impact from volume has practically no impact, with similar plant utilization at group level of around 69%. As we already highlighted, there are no major maintenance stoppages in the second part of the year in large assets. We enjoy high EAS inventory levels across all our assets, and we expect an increase in customers' deliveries in the USA for new contracts that are gradually starting in this quarter. On price, a strong positive EBITDA year-on-year impact of around 28 million euros. with the two main price components being around 15 million euros of positive impact from higher zinc hedging prices, 5% higher year-on-year, and secondly, 13 million euros positive impact from the lower treatment charges, which was set at $80 per ton for the year 2025. On costs and others, a net 4 million positive impact is largely driven by the lower operating costs in the zinc smelter in the U.S. as well as lower average coke price in the period. These two positive effects have been partially offset by higher inflation costs in the recycling business, as well as unfavorable effects. Moving on to page 10, financial results of our aluminum segment. Aluminum solid slag delivered 23 million years of EBITDA in the first nine months of the year, which represents 26% year-on-year decrease compared to the 30 million euros in the same period of the previous year. The year-on-year 7 million euros negative EBITDA development was mainly due to the lower aluminum metal margin, as well as slightly higher operating costs and energy prices. On volumes, overall margin negative EBITDA year-on-year impact during the nine months, with a decrease of 1 million euros. Our recycled volumes of salt slag remain pretty much in line with the previous year. With these volumes, we operated our plants at a strong capacity utilization rate of about 89% in salt slag and 77% in secondary aluminum. With regard to prices, negative EBITDA year-on-year impact of about 4 million euros, as explained, mainly driven by the pressure aluminum metal margins versus the previous year. Discompression 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 aluminum scrap away from Europe. And secondly, a very weak automotive industry in Europe, which impacts the mass of secondary aluminum from automakers. However, this was partially offset by higher aluminum F&B price, with an increase of 2%, averaging 2,372 euros per tonne. On cost and others, increased pressure from higher operating energy related expenses, mainly through the higher energy prices of electricity, as well as natural gas. Moving to page 11, SIN prices and treatment charges. Regarding SIN price during the nine months of 2025, SIN has been trading in the range of $2,520 to $3,020 per ton, showing particularly positive trend in the last months of 2025. The average of nine months seeing LME prices have been $2,768 per ton, which is 3% above the same period of the last year average, being the average of the Q3 $2,825 per ton, compared to $2,640 in Q2. On the right-hand side of the slide, treatment charges. In 2025, treatment charges for seeing were set in April at $80 per ton for the full year 2025. compared to the $165 of the last year, marking an all-time low record level. This deduction is driving earnings significantly in 2025. Turning to page 12 on hedging, our hedging book covers until the first quarter of 2027. Close to 15 months of hedges in our books at increasing hedging average prices of €2,640 in 2025 and €2,655 per ton in 2026. This level of hedging represents an all-time high level of hedging for BFESA, providing stability and visibility over the coming quarters. We are taking the opportunity of the recent rally on the SIN price to close bullings for the first quarter of 2027, and we continue to monitor the market to close bullings for the remainder of 2027. Turning to page 13, BFESA energy prices. The page shows the evolution of the three energy sources that we have in BFESA. coke, natural gas, and electricity. With regard to coke price, which today represents around 60% of the total energy bill, the normalization that started in the second quarter of 2023 continues throughout the first nine months of 2025. Average coke price in the third quarter was about 153 euros per ton, consolidating its downward trend compared to the previous quarters. Regarding electricity, which today accounts for around 30% of the total energy expense, prices have rebounded to 103 euros per megawatt hour in the third quarter of 2025, after a significant correction in the second quarter of 2025. Gas prices continued their normalization in the third quarter of 2025 to 46 euros per megawatt hour, reversing the upward trend observed in the last year. Now turning to page 14, the cash flow results. Operating cash flow in the nine months of the year has reached 115 million euros, which represents a decrease of 3% compared to the same period of last year, due to a positive tax effect that we enjoyed last year. On the EBITDA to cash flow bridge, starting with 174 million euros of adjusted EBITDA and walking to the left, Working capital consumption amounted to 42 million euros in the first nine months of the year, mainly driven by the usual first quarter working capital consumption, as well as the usual Q3 impact on secondary aluminum, driven by the slowdown in the auto industry. As in previous years, most of this working capital will revert into the fourth quarter. Taxes paid in the nine month period came in at 17 million euros. as a result of a final tax assessment of previous year, in comparison with the 4 million collected in the period of last year, resulting in an operating cash flow of 115 million euros in the first nine months of the year. On capex, during the period we have invested 30 million euros in regular maintenance capex across the company, 23 million euros of growth capex related to the refurbishment of Palmerton Plant in Pennsylvania, which is now practically completed, and then good expansion project in Germany. In summary, capex of 53 million euros in the quarter. For the full year, we expect total capex to be around 80 million euros, which is in the lower part of the range of 80 to 90 million euros. Total interest rate amounted to 26 million euros in the total grant, borrowing amounted to 22 million euros in the first nine months of the year. For 2025, the EGM has approved in June to pay a dividend of 26 million euros in July, equivalent to 63 cents per share, or 50% of the net income. In summary, final cash flow amounted to minus 13 million euros in the first nine months of the year. Cash on hand stood at 19 million euros, which together with our 100 million euros undrawn revolving credit line provides Befesa with almost 200 million of liquidity. Gross debt at the end of September stood at 700 million euros. Net debt stood at 610 million euros compared to 662 in the same quarter of last year. Resulting in a net leverage of 2.59 at closing of the quarter. A strong improvement compared to the 3.36 at September 2024. Turning to page 15, debt destruction and leverage. Following the refinancing back in July 2024 and the repricing in March this year, the face of today has a long-term capital structure with optimized financial costs. We will continue reducing the leverage throughout 2025 to keep it between 2 and 2.5 times by the end of the year and going forward. We expect net leverage to be below our target of 2.5 times by the end of the year. To do so, we are prioritizing growth capex in those projects that are delivering immediate cash flow upon completion, like the approved projects of Vermont and other market opportunities for Putapur. Also, we will keep the annual regular maintenance capex around 40 to 45 million euros in 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. Now, back to Acero outlook and growth.

Thank you, Rafa. Looking at the full year, we confirmed our EBDI guidance in the lower part of the range of 240 to 265 million, as we previously communicated and in line with the current market consensus. This will be achieved through increased utilization driven by a strong volume in EAF across all markets, along with currently favorable market conditions. low treatment charges, supportive hedging price, declining code prices. Total capex in the year will be between 80 to 90 million euros, with around 45 million on regular maintenance and the remaining on growth. Nail leverage will be below 2.5 times by the end of the year, and EPA is expected to be higher than 2, representing an increase of at least 57% in the year. Moving on to page 18 on Palberton. In the United States, our Parmelton plant has been successfully refurbished, marking a key milestone in our strategy growth roadmap. Both kilns are now fully operational, positioning Befesa to capture the significant growth expected in the U.S. EAF steel dust market over the coming years. U.S. electric car furnace steel capacity is projected to increase by more than 20% by 2028. equivalent to around 18 million tons of new steel-making capacity. This expansion translates into over 300,000 tons of additional steel dust, creating a substantial opportunity for Befesa's recycling operations. With a total storage capacity of 643,000 tons across our U.S. plants, we are now well-positioned to leverage this growth. Our goal is to progressively ramp up utilization from below 70% today to around 90% by 2027 as new electrical furnace capacity comes online. The combination of our modern design Palmetto facility, long-term customer relationships, and a strategic geography footprint near key steel procedures ensures that the facility is ready to capture this next phase of growth in the U.S. market. Moving to page 19. This is another important milestone in BFESA's growth journey as we continue to strengthen our aluminum business and expand our recycling capacity in Europe. From a timing perspective, all permits have now been obtained and construction officially started in August 2025. We expect a 12-month construction period followed by a six-month ramp-up phase in the second half of 2026. On the commercial side, we have already secured strong customer support. Overall, the bedroom expansion is progressing fully in line with plan. Thank you very much. Thank you, Asir. We will now open the line for your questions.

Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touch-tone 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 when asking a question. In the interest of time, please limit yourself. The first question comes from the line of Sasi Sekhar with City. Please go ahead.

and thank you very much for this opportunity. I have a couple of questions. My first question is on capital expenditure. Could you please guide us which project or projects are you planning to undertake post the burn bar expansion project? And what is the total capex guidance for 2026? My second question is on China.

uh can we expect any improvement in the utilization rate in 2026. thank you shashi i i will take the question on capex and as here we explain you the china market environment well on capex as i said palmerton is almost completed or completed and the focus at the moment is on benbur benbur is a 30 million euro total capex I would say probably 40% this year, 60% next year. On top of that, you have to consider the regular maintenance capex of 40 to 45, okay? It's still early to say guidance for next year, but with these numbers, you can figure it out. Beyond that, there are two projects in Europe. One is the expansion of ReciTech. to capture the growth of the EAF market in Europe. And the other one is a brand-new salt slag plant in Poland. Those two projects, we still haven't got a timeline. These are market opportunities that we envision in the market, but they still haven't been approved by the board, and we still haven't got a timeline for those. Anasir will comment on that.

Yeah, thank you for the question, Sasi. Yeah, the question for China is always there, and... Well, we have to say that basically the 25 years coming basically the same than 24. The utilization level of the mini mills, the electrical furnace at the areas are very, very, you know, low, and we are at a break-even point. Question for 26. Again, it's early, as Rafa said, with the CAPEX, but I think that it's not final that it's going to change a lot. But, well, the year is long, and probably we need a little bit more time to see if the real estate of the construction business start to, to grow a little, and that means more volume. So it's still early, but I cannot say that it's going to be a change, a very significant change in 26 right today, you know. We will update further later.

Thank you very much.

Thank you, Sashi.

The next question comes from the line of with Berenberg. Please go ahead.

Hi, good morning. Just a question on the secondary aluminium business, just to get a feeling for kind of the near-term outlook. You know, it seems to have, you know, sort of rolled over in the third quarter, so I'm just wondering if, you know, is there going to be somewhat of an improvement in Q4 or also generally into 26? You know, I guess structurally there's some problems with European automotive at the moment, so just wondering... to get some comfort on the outlook also for 26 and beyond. And then also on Bernberg, you know, following on from the weakness in sector aluminium, you know, what are thoughts? You know, clearly you're pressing ahead here, but I'm just wondering, you know, given the issues in European automotive, can you give us some comfort here that that's kind of the right move and you're not investing into something which is going to struggle for years to come? Thank you.

Thank you, Lasse. Fair question. Well, obviously this year the secondary aluminum business is very challenging for us and is obviously affecting to our results. The fact is that the automotive sector in Europe is forcing this situation in the secondary aluminum because pressing the volumes, pressing the margins down, and it's a difficult situation. It's not something new. It has happened in the past as well. And well, finally the market has started to to absorb this level and be back on better margins and so. So, starting with the two things, for quarter, well, we don't see a very strong quarter in terms of result, but I do think that probably it's going to be better than the Q3 because the volume even in the Q3 is nowhere because the maintenance stoppage and now we are going to have more volumes and the last part of the year normally for inventories or other matters is going to be better than than the Q3, probably in line with the Q2 or something like that. I mean, it's like we don't hope a big recovery. 26 is a different history. I think that 26, the situation is going to be definitely, you know, better. Not like a very good year, but probably some recovery in the normal activity of the automotive. But, you know, linking with the question of Melbourne, which is a logical question, is like... The verbal project, the increase of capacity, is linked to not automotive demand. It's linked to the food demand, cans and other, with a customer, with a tooling contract with a new customer. So this is going to deliver positive results for sure because the volumes are there. So all in all, Verbal new contribution, even if it's going to be half a year and some recovery, we do think that in the 26th year it's going to be clearly a better year than 25 in the secondary aluminum. Not at the best of the series, for sure, but it's going to help us to keep, you know, keeping with the good results in the global BFESA, EBDA, and the rest of the matters.

Just one additional comment regarding , which is a logical question to have. Let's not forget that the demand for secondary aluminum in the long term is very positive, and everybody agrees that there's going to be a more than 50% growth demand of secondary aluminum over the next 10 years. This is a structural trend. And what we want to do with them is to capture on that train. And as I said very well, it's about diversification from the auto industry into the beverage cancer industry, which is also a good thing to have in a company.

Understood. And if I may, just to follow up on Carthex, I mean, based on your comments, I mean, could it be that Carthex next year is, you know, well below 80 million, just based on your comments? Or is there something potentially that could come through which kind of pushes you up to, you know, that kind of 80 million that you mentioned?

Fully agree, Lasse. I think campus next year will definitely be lower than this year. We still are in the middle of the budgeting process for the next year, which we do bottom up. but clearly below these years, and I think, yes, 80 will be a cap on the cap for next year, definitely.

All right, yes, thank you.

Thank you, Lasse.

The next question comes from the line of Olivier Calvet with UBS. Please go ahead.

Yes, hi, Rafa, good morning. I hope you can hear me well. I have a couple of follow-ups. Firstly, on the CAPEX budget from 2026, can you help us think about, you know, your pecking order of projects or growth? You know, are you rather looking more to AES expansion in Europe or salt flag expansion in Europe? Or are you rather looking at potentially using your cash flow for further deleveraging or returns to shareholders? That would be the first question.

Thank you, Olivier. I think I have already tried to answer that, no? Yes. Basically, the focus at the moment is on free cash flow generation and the leveraging and those growth projects that we have clear visibility, like Palmerton is almost completed and Benburg, as we have been commenting before. On top of that, you have to consider the recurrent maintenance cap. We don't envisage any investment in the expansion of EAF in France or in or in the soils like Planting Europe in 2026. So that's what we can say. That will definitely help the leveraging within our target of between two and two and a half times, and maybe we will get closer to two times rather than two and a half times.

And then the second question would be on the EBITDA guidance for this year. I guess mostly on the high end of the EBITDA guidance, what would you need to see basically to get to that level?

Well, definitely the high end is really not realistic for today, I want to say like that. The question here is that we are going to be in the range of 240 to the midpoint depending on the final, you know, production, which are coming very strong in October. Of course, the pricing, I mean, you have seen the prices in October, so depending on how they develop, could help us to get more. And again, the recovery of aluminum, that for sure in the salt slag, which is another important business, is coming for sure better because there are not the maintenance stoppage. So, well, we have to determine what is the final, the final, you know, ABDA level in this range. What is true is that you think in the very high part of the range, what we explained there is that at the beginning of the year when we do the guidance, well, depending on basically those things, how the aluminum business will perform, same prices during the year, and other matters that are not happening. So at the end of the day, I think that that's why we are confirming the guidance, and the guidance is the reference, but probably among the low part, you know, between the loan Sorry, the low part and the medium part. This is the idea.

Which is, Olivier, in line with the market consensus at the moment, as you know very well. There are three main elements that will make, as I said, be on the higher part. Secondary aluminum is weaker than what we expected. Also, FX is unfavorable. And then, obviously, in the higher part, we always consider a much higher same price environment, okay?

Makes sense. Okay, cool. And just the last one. Could you give us an update on the operating issues of one of your competitors in Mexico? Have you seen additional still dust contracts as a result of their issues?

Well, yeah, we listen about that, and we cannot comment about the problems of those guys, but more than what we can read, the same than you. It's not a big, you know, effect at the beginning. They are more or less operating well, and there are no changes in the market. It is going to come more change because the problems persist or not, we will see. But in this moment, it's not a big issue and not affecting us in a positive way, obviously not in the negative because it's not our task, no.

Yeah.

Okay.

Thanks. Thank you, Olivier.

The next question comes from the line of Fabian Piazza with Jefferies. Please go ahead.

Hi, good morning, Jens. Thanks for taking my question. Just had a question on the treatment charge going forward. I mean, on the chart you were showing Zinc prices is increasing or favorable this year that points towards like more stable treatment charge, but spot treatment charges have increased rapidly. Do you have any visibility on where we might move? So what would be the swing factor? Are we thinking about the 10% increase, 20% increase? What are you seeing in the zinc market? Second questions would be given the inventory levels, do you expect any spillover effects into the first quarter of 2026? That would be it for now. Thank you.

Thank you for the question, Fabian. Three-man charge. Well, I would like to know exactly what is going to be the fixture for next year. What the rumours of everything is commenting in the Olympic Week in London and so on is that obviously nobody knows what happens, but based on, as you say, in the sport and everything, perhaps levels of 120, 130, 150 max could be on the place there. We will see. I mean, are still very good, you know, treatment charts for us, for the miners' position, because obviously they are one of the lowest, but probably definitely are going to be higher than this year because it is the lowest ever, right? And probably to keep 80 would be very, very difficult. So we'll see. I mean, probably, as you say, 20%, 10%, 20%, more 20% of increase over this year probably is a headwind that we are going to have next year. And

Can you remind Fabian the second question, please?

Yeah, the second one was basically on your steel dust inventories, whether you were expecting some spillover effects into 1Q2026. Because, I mean, when I'm looking at consensus numbers on full-year sales, that would imply a revenue increase of 27%. in the fourth quarter, so is there still like some dry powder for 1Q, even if you get these volumes through in the fourth quarter?

Well, once again, we will see how we finish the year, but I think that the production of the steelmakers is still under pressure, but depending on the geographies, there's starting to be a little bit more positiveness for the next year in terms of orders and so. And the inventories are now normalized because we increased the level in the second quarter because the maintenance stoppers now are normalized. So I don't think the first quarter is going to be affected, but nothing very strange. So, well, again, 26 is, we were expecting question about 26 because we are in October. That is logical. But at the end of 26, we need a little bit more time to develop. But no reason to believe that it's going to be a big change. over the normal production. Out of, we have to start to include some maintenance stoppages because yearly basis for those are normally affecting. So all in all, we will see what is the level, but nothing very crazy or very strong.

All right, thanks guys.

Thank you, Fabian.

The next question comes from the line of Jorge Gonzalez with Hawk of Hossa Investment Banking. Please go ahead. Mr. Gonzalez, your line is... Hello, good morning, Asier and Rafael.

I have a couple of questions. And the first one, Asier, on regards of the expectation for Q4, I think you have just mentioned that the stocks that you have are now normalized after the strong Q3. This means that we should not expect a Q4 above Q3 in terms of the works sold or the process for the quarter, or Q4 could still be above Q3? That would be my first question, please.

Thank you, Jorge. Now, clearly, it's going to be above Q3. I mean, the factory history was affected more than the Q3 because normally the owner's years, we have some maintenance stoppage. And you see the series, Q4 always is the strongest of the phase, and we hope the same. I mean, now, with the deliveries and the normal inventories, we are willing to run very strong in Q4, and the reason is, as always, because there are no maintenance stoppages. So the Q3 has been very strong, and I think that we think that the Q4 is going to be even more. Not a lot, because we are running a very high utilization rate, rates, but no, no, definitely it's going to be higher than the Q3 in steel dust. And as well, we have to consider that the maintenance stoppage in the salt slag, which is our other strong and profitable business, is going to come higher, which is different for the Q3 because it was some maintenance stoppage that are not going to happen in Q4. So you put together, it's going to be definitely the Q4. As usual, it's gonna be our strongest, every day our strongest activity period, and we can confirm that. That's why we expect a strong Q4 and to be where we are gonna end in the range. But definitely a strong higher utilization rate than the Q3.

Okay, thank you for the color. And then my last question is in some regard the secondary aluminum profitability. Can you help us to understand where the profitability could be for next year? Do you have any targeted range for the profitability taking into account some stabilization in the auto industry and the new assets starting to contribute? That would be very helpful.

For me too. No, seriously, Jorge, it's a good question. Well, I think that probably you have in front of you the last years. Getting an average could be a good reference. Other is to be back for the 24 level and then again because it's a kind of cyclicity in the business. So you can take probably the reference of the 24 or an average or something like that. That's what we see now. Probably we need a little bit more color as well on the market in the last months. But I think that is a good referral, getting the 24 or something like that. That is what we expect in 26 because it's difficult to see a full recovery because we know all of us read about the automotive sector with the problems at production levels that are showing, you know, European carmakers especially. So not a full recovery, but some recovery at the levels of 24 or average of the last year probably could be a reference.

Are you expecting any adjustment of capacity in the sector that could help the margins to go up at some point? Or there is not any noise?

This is basically the point. There are starting to be some players under troubles, financial troubles, and probably the capacity is going to be, as always in the crisis periods, adapted. It's not the case, obviously, of the FESA because we have this business As always explained that for us it's supporting the salt slag. Financially, we have no problems to survive there, but there are guys that probably they can get out of the market or reduce some capacity and everything is going to be more balanced. That's why the logic of the markets that has to be organized as well, and that's why we understand that it's going to happen better 26 outlook for the aluminum business. early to say, but again, I think that probably a recovery 24 levels or average of the last two, three years probably would be a good, you know, level.

Perfect. Thank you very much. I'll go back to the line. Thank you, Jorge.

As a reminder, if you wish to register for a question, please press star and 1 on your telephone. The next question comes from the line of Anis Skaya with Odo. Please go ahead.

Hello, Rafael. Thank you for taking my question. Sorry, I have only two. First one is on hedging. When we see the current zinc LME, 27 forward prices are which are at $2,900 per ton or slightly above. That's not bad. Why don't you accelerate hedging for the whole 27 years at this level? And my second question is on treatment charges. The current spot prices in China increased to around $120 per ton after a very low level in the beginning of the year. Does this seem to you to be a good indicator for the future benchmark level of treatment charge to be set next March? Thank you.

Thank you, Anis. I will take the question on hedging. Obviously, we are doing that. Actually, this week we have closed a very interesting volume of hedging for the first quarter. of 2027. You cannot go at once all the way through to the entire year because the core is in backwardation which means that the forward prices are lower than the spot prices. So yes, you see the spot prices but when you want to lock in prices 12 months, one and a half years, two years ahead, the prices are decreasing, okay? And we have internally certain targets that we don't want to miss, okay? So, but yes, we are taking the opportunity and we are moving forward with the hedging in the first quarter. So we will take one quarter at a time. And here we'll take the question on treatment charges.

Thank you, Anis. Yes, I think it's a good reference, the spot, normally in China, because it's basically the only part of the world which runs on a spot basis in a massive way. Yes, it's a reference, definitely, but always we can talk about reference. There have been periods where there is strictly the same of the spot CCs or the others is similar or not. But as I said before in a previous question, Yes, this is the 120, 130 is the level that now they are considering. So, well, the reference on the trend, the spots is a good light to see where it's going to come, no? But still, again, early to say, no?

Thank you, Azir. Thank you also.

Thank you. The next question comes from the line of Adania Ekoku with Morgan Stanley. Please go ahead.

Hi, good morning, both. Thank you for taking my question. I've just got one follow up on the 2026 EBITDA, especially for steel dust. And maybe could you help us with what utilisation you're targeting in the US? I think you've got 90% for 2027. And in Europe, would you expect any upside from the recently announced steel safeguard measures? Or is it still too soon to say on this front?

Thank you for the question, and yes, I think the answer is yes to both. I mean, we have in the pipeline for the U.S. more tonnages than this year, definitely, and, you know, one of the reasons, again, that we are not moving in the low part of the range is the volume in U.S. that we have already contracted because there are some delays in the ramp-up are coming, you know, later than we expected, but definitely are starting to come, and we hope that next year are going to be on our or facilities during the whole year. So yes, I think it's an intermediate year to capture the 90% utilization probably in 27, but next year is going to be higher than this year and probably in the range of 80 or we will see exactly, but it's U.S. It's going to be, you know, the more volumes in U.S. is one of the In the boxes that we have in mind for 26, the headwind of the treatment charges probably is going to be compensated by higher volumes in U.S. and probably in other geographies like in Europe. In the case of Europe, the answer is yes. We are starting to capture some projects that are going to come into picture in 26, not many. that there are some in Spain and others that we have under the contracting period now and that's going to help to be a little bit less pressure to keep the 90%. I think here in Europe to grow from the current levels is difficult because basically you have full capacity and the only thing which is pressing is that probably transportation costs for the dust and other are going to be benefit. If all those projects, you know, starting to see that are coming really, then we will start the increase of capacity in Europe probably in 27. So 26 is going to be a good year in Europe to see how the projects are delivered. But definitely, it's going to help if we are continuing to have more dust in 2026.

Thank you. That's really helpful.

Thank you, Adana.

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 Teams 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 in our website.