Acerinox Sa

Good morning, ladies and gentlemen, and welcome to the Atherinox fourth quarter and full year results presentation. My name is Carlos Lora Tamayo, and I am the chief investor relations and communication officer at Atherinox. The year 2023 was a very difficult year. with a strong de-stocking process that has resulted in a decline in apparent consumption in our main stainless steel market, the United States and Europe. Nonetheless, we have shown that the strategy that we set years ago is bearing fruit, and we have achieved solid results and a strong cash generation. Acerinos has managed to reach a new level of profitability. As Miguel said in last year's Capital Markets Day, the group's EBITDA in the previous cycle was around 380 million euros. But this year, even with the difficulties we have experienced, we achieved an EBITDA of 703 million euros. But this does not end here. Our strategy continues. We are building our new future, rebalancing the product mix to more added value products. In this sense, we announced organic investments in NAS and BDM. And last month, as you all know, we reached an agreement to acquire Heinz International, a US-based producer in high-performance alloys. To discuss these topics in depth and many more, we have here today our CEO, Bernardo Velazquez, our COO, Hans Hendricks, and our CFO, Miguel Fernandez. Before getting started, let me remind you that this conference call is being broadcast on our website, atherinsource.com, in which you can find also the audited integrated annual report that includes the annual accounts management report and the statement of non-financial information. Without further ado, I give the floor to the CEO. Please, Bernardo, go ahead.

Thank you very much, Carlos, and thanks all of you for attending to this conference. result presentation. We are very happy to be here and very proud to present a very strong set of results. We call it, we say here, 2023, another milestone. Why a milestone? Because we think that it's a very interesting year that we will remember because we are validating our strategy. You know that we like to say that we want to be reliable and we want to be predictable. And now we are validating what we are First of all, because we have reached a new level of profitability, and this is due mainly to the improvements that we have made during the last years, but also thanks to our growing strategy, growth strategy, with the acquisition of BDM and our development of the HPA materials. So this is very important because, as Carlos mentioned, We have a new level of profitability. In the lowest part of the cycle, we will speak later about this, but in a tremendous low cycle, we got an EBITDA of $703 million with a very solid financial situation, with a very solid cash generation, with a very reasonable debt, and with an adjusted ROKI of almost 18%. We have been growing in our strategy. VDM, in the fourth year of incorporation to our group, more than doubled the ABDA that they had when we bought the company, $175 million. We're speaking about repeating this experience in the United States, creating a platform there with our offer for Heinz. We are still having ideas how to grow with our traditional organic growth. with the CAPEX that we announced in NAS and in VDM. And we are releasing a new excellent plan. We are fulfilling what we offer to the financial community. And everything, all these activities always SURROUNDED OR EMBATHED WITH OUR TOTAL COMMITMENT WITH ESG VALUES, AS YOU CAN SEE HERE. WE'VE GOT, AGAIN, THE PLATINUM AWARD WITH ECOBUDDIES. WE GOT A FANTASTIC 24% REDUCTION IN THE ACCIDENT RATE IN OUR FACTORIES, AND WE ARE REDUCING OUR SCOPE 1 PLUS SCOPE 2 CARBON EMISSIONS IN 3%. WITH MORE DETAIL, HANS WILL EXPLAIN YOU OUR ESG COMMITMENT.

Thank you, Bernardo. Good morning, everyone. So we continue to be really a great contributor to the circular economy and sustainable development. We remain committed to our 2030 goals and our 360 positive impact plan. Let me take you through some of the most important improvements in 2023 towards those 2030 goals. We continue to support the fight against climate change through the reduction of greenhouse gases. We have achieved an 11% reduction of CO2 emissions in scope one and two, versus our baseline of 2015. In 2023, we reduce our water withdrawal by 18% as well versus that 2015 baseline. One of the areas I'm personally most proud of, evidently, is the reduction of our incidence rate, with a 24% year-over-year reduction in lost-time incidents in our factories across the world. We have also received several recognitions through the year that confirmed that focus that we have on safety. In women diversity, we achieved more than 13% in our company, well above most of our peers in the steel industry. On our 360 positive impact plan, I would like to mention three elements. We have increased by 50% the supply of renewable energy in our factories. We have received the CE marks for our slack for different commercial applications that will provide a good solution for one of the most important elements that we have in our factories today, as it is the slack. And finally, we have implemented through all our locations our health and safety and environmental cardinal rules.

So let's speak about the environment in Q4 and in 2023. go back in the history to remember what was the situation because with the pandemic remember that we we leave what it was called the whip effect the super cycle of the materials because all the supply chains were totally empty and we enjoyed the best years of our history in 21 and in 22 but the situation started to turn and the flexion point was probably may 2022 when Speaking about the interest rates and speaking about the economy and trying to cool down the economy in most of the major markets, the situation has started to slow down. In a market like the stainless steel market, where more or less 50% depends on distributors, the market normally moves more with the sentiment of the economy, the sentiment of the real consumption, more than with the real consumption. and the stock levels that looked low at that time, and distributors were importing a lot of material, especially from Asia, the same stock levels started to be too high when the situation started to slow down. So since May 2022 to probably September, October 2023, we have been suffering a terrible low cycle never seen before. When you speak about The economy, you speak about the recession, you can be scared because the recession can be minus 0.5, minus 1%. In industrial production, a bad year can be minus 3%. In stainless steel, in 2023, the apparent consumption was minus 20% in the United States and minus 22% in Europe. Terrible figures, never seen before. In this situation, we have been resilient, we have been making the most of the situation and trying to apply everything that we have learned in the previous crisis and trying to manage our factories, our stocks, releasing working capital, reducing the level of our inventories. And I think that we have demonstrated with this exercise that we manage the business, that we manage our working capital and that You can trust on us because we have reached a new level of profitability. 700 million EBITDA I think is very, very important and very good numbers for the current situation. As you can see in the graphs, everything in Q2 2022 has started to go down. What happened with this situation? Of course, everything went down. Also, imports went down in the United States and in Europe. Base prices were more or less stable in the United States due to Section 232, of course. But in Europe, we have suffered the lowest prices in our history, for the first time in our history. I mean, I've been 34 years in this industry. We saw negative base prices in Europe, negative base prices. So we were not charging even the alloys of charge to our customers. The cost of the raw materials was a disaster, terrible situation, and we have survived in this situation. The good thing is that after this de-stocking period, the stock levels are normalized now. Normally, when speaking about inventory levels, if you speak about rotation, the number of months that you have in stock, still are in normal levels. It's a little bit high in Europe. We have 64 days more or less. 60 is the average. In the United States, three months is average, and now we have 2.9. But if you look, instead of referring to the amounts of consumption, just volumes, to absolute values, The inventory levels that we know due to the stockist associations in the United States are now minus 10% compared with historical levels, with average historical level, and minus 19% in Europe compared to historical levels. What does it mean? That again, if the situation changes, the stock levels that today are considered normal can be low. And we can live again a restocking period. And after two years, almost two years of a low cycle in the stainless steel industry, most probably when the society is speaking about a recession or the negative effect of the economy is appearing in the families, So now the stainless steel that we are normally advancing the cycle, we're going to start recovering. And I think this is the positive message. We have been almost two years suffering this stocking period, and now at least we have started to produce and we have started to sell at the rhythm of the real consumption, not the apparent consumption, not the apparent consumption reaction. So generally it's going to be better in volumes. And now our other book is... is very reasonable now. So the situation can be again in a fraction point. The situation in HPA in high performance alloys is totally different because there's a lot of projects long-term projects, big projects that do not depend too much in the interest rates because they are planning this kind of petrochemical complex or a refinery, this kind of project, normally have been prepared in many years, getting the approvals, getting all the certificates, and they don't stop for this. And now we have a lot of projects. We are supplying a lot of projects in the chemical industry and in oil and gas. Not in Europe, of course, but oil and gas is booming in Brazil, in India, in the Far East. And this is keeping our factories working totally at full capacity. So we are proud to say that under these circumstances, we have got a very resilient EVDA. By the way, the best in the industry. and a great operating cash flow. But for speaking about numbers, I prefer Miguel to explain. Nobody like Miguel can explain these numbers.

Thank you for putting the pressure on me. Well, first of all, let's try to go through the four-quarter results. As Bernardo stated, clearly it's a big demonstration of resilience. We have obtained an EBITDA of 96 million euros. The worst quarterly EBITDA this year is 96 million euros. Three years ago, this was the average of a standard quarterly EBITDA figure. So it's obvious that as we have stated, we have been improving our threshold of profitability. And actually, more or less, this is the demonstration that in the low part of the year, we are achieving what was the normality in not too far ago from now. What's more relevant probably in the quarterly figures is the cash flow. We have had a strong operating cash flow of 260 million. which is mostly driven and is fully aligned with the operating working capital reduction of 260 million also. So I think this is something clearly to reinforce. We know our business. We control the controllables. There are quarters for taking the most of the profits, but there are quarters that when the profits decline, we take the most of working capital improvement and cash generation. This is our strategy, and we are more or less keeping it as we normally are announcing in the first semester. Some of you were concerned regarding the increase of working capital. We clearly stated... that this was something that should be normalized in the second semester, as has been already the case. THE FIGURES THAT AT THE END WE ARE REPORTING, WE ARE TAKING THE LOWEST DEBT FIGURE FROM REACHING CLOSING THE QUARTER AND THE YEAR AT 341 MILLION EURO. THIS IS THE LOWER DEBT FIGURE SINCE 2001 WHEN WE JUST ONLY WERE DRIVING A FULL INTEGRATED PLANT WHICH IS THE ONE AT CAMPO DE GIBRALTAR. EXPAND BY FAR, BUT WE ARE GOING BACK TO THAT SAME LEVELS OF DEBT WE HAVE AT THAT TIME, WHICH AT THE END MEANS NET FINANCIAL DEBT OF 0.5 TIMES. SOMETHING THAT IS RELEVANT OBVIOUSLY TO EXPLAIN IN THE FOURTH QUARTER IS THE IMPERMENT OF BARU STAINLESS. THIS IS SOMETHING THAT WE ARE EXPLAINING REGULARLY EVERY YEAR. AS YOU REMEMBER, LAST YEAR WE EXPLAINED THAT WE MADE A STRONG IMPERMENT ALSO OF 200 MILLION environment stainless in accordance with the new strategy of running the plant at almost 50% capacity utilization, concentrating our production on the niche of produce of higher margin. The area is obviously experiencing from the last year strong difficulties the over capacity in china moved into indonesia the aggressiveness and price the disorder in all of the market is creating that each time the circumstances are getting worse so in view of this what we finally have decided this year is making the highest impairment that can be done so consequently It shall not be further comments on impairments from now on because we have almost done what can be done in order for not being in this regard creating further troubles for the coming future. We are analyzing all the strategical possible decisions and we are contemplating every decision on that as has been clearly stated. But on the time being, keeping also that the rhythm of decision taking in Asia sometimes is longer than our standards. What we prefer is to make the maximum improvement possible in Baru and in that regard provide you comfort for the coming future that everything that could be done has been already done. If we move to the full year figures, as every year I want to TO REINFORCE THE MESSAGE WE HAVE DONE A STRONG EFFORT INTERNALLY FOR PRESENTING TODAY THESE FIGURES, BUT IT'S NOT ONLY THE FIGURES OR THE RESULT REPORTS THAT WE ARE PRESENTING. IT'S A VERY RELEVANT, STRONG PACK OF VALUABLE INFORMATION. available in the web page. We are talking about the annual financial statements, the management report, the sustainability report, among others. All of them fully audited by PricewaterhouseCoopers as every year we bring at this time for you the possibility of going through our financial statements and understanding the basis of our business. We always receive comments that our financial statements are among the best in the industry. So I greatly stress to you that reading and going through them allows to understand much more better the picture of what's going on in our business and especially in our group. Having said that, let's concentrate on the yearly figures. Bernardo introduced it. We come from all the comparisons are related with 2022. In 2022, as we explained last year, was a year of records in almost every single magnitude. So we have records at every part of the P&L. At that time, when we analyzed our figures, the figures, the sales of 8.7 billion euros, we We explained that this creates certain vertigo and we commented this is similar, the similar figure than the altitude of Mount Everest. So we feel certain vertigo and we made some jokes comparing with Tenzing and Hillary. When we go through the figures of 2022, let me give the image just for explaining. Mountaineers always say that the most difficult part is to descend and the most risky part in mountaineering is by far is descending. So what 2023 brings us is a descent in sales of 24%. Last year we were proud of a figure of EBITDA 1.3 billion euros, our pride And our strong pride this year is that after a 24% descent in sales, we are presenting a reported EBITDA figure of 703 million euros. As we have been explaining, this is the new threshold for the group. We have been stating that this is the... the new EBITDA level through the cycle, but this year it's even probably the low part of the cycle as we are seeing from the business and for what our competitors are reporting. So in a low part of the cycle, we are able to present these figures. This is a strong fact of pride for ourselves. In fact, for those of you who follow more or less as a Spanish as a Spanish company but are not so used to follow our peers or the industrial other companies playing in this business. If we compare it with our benchmark with the two listed European groups that have recently presented their figures, Our 703 million euros is exactly the aggregation of the results of both competitors. So I think this is a strong demonstration of more or less our strategy, how all the continuous work in not only improving efficiency but reducing costs is highly appreciated, especially when the market circumstances are poor. This is, for us, something extremely relevant. We have reported A four-quarter EBITDA of 96 million euros. And some of the preliminary comments that some of the analysts have been reporting this morning is lower than expected and some disappointing. In any case, I want just to reinforce, as you can see in the chart, it's true, 96 million euros is the EBITDA of the fourth quarter after making an inventory adjustment of 68 million euros. We shall talk about that later. But please keep an eye on the chart that this EBITDA figure of the fourth quarter is higher than that one of the last year. The year of the records, the maximum year ever in profitability of Atherinox, four-quarter figure was 90 million euros EBITDA with a margin of 5%. This year has been with a margin of 6%. It's a seasonal slowdown in the fourth quarter. It's a seasonal slowdown in our main market, which is North America. It's a quarter of two months from Thanksgiving to the year end, this slow activity in the American market. Also in the high-performance alloys, normally December is the more quiet month in that regard. But having said that, still we are in better position, in better profitability than the one we reported for the fourth quarter last year, the year of every record. And this 96 million euros EBITDA is after an inventory adjustment of 65 million euros in the Q4 and in the year. You know, we normally, we always try to anticipate and when we present figures, we analyze every single item that we have on our stocks and we put it in neutralizable value and we anticipate the expected loss and we make an improved adjustment in the quarter when we are presenting result. In the third quarter, we make an adjustment of 75 million euros, so this has contributed to proper margins in the fourth quarter, but reaching the quarter end and reaching the year end, It's obvious that still Europe is in big pain, still the prices, even though improving, are extraordinarily low, and consequently what appears more prudent is make an additional inventory adjustment of 65 million euros. As the one that was done in the third quarter already has been neutralized, that material has been sold, we are now presenting this inventory adjustment we see is, I insist, for the quarter, and for the whole year because all the others previously have been neutralized as far as they have already been sold that material. And then basically I think for the group figures, I think probably it's enough. Let's move to analyze it by our different segments. First of all, the stainless steel. It has been already mentioned. In our main market in Europe and in the States, it has been a declining consumption of 20 or 22 percent. So the stainless steel sector is experiencing a strong pain, no doubt. In the fourth quarter, we have presented a figure of 50 million euros a bit. It's a low EBITDA, no doubt. But for putting it in context, we are the only player in the stainless steel Western world that is having profits in the fourth quarter. And I can only mention of the Western world because in the Eastern world we cannot compare because there is no public data. But no other player in the Western world is presenting profits in the fourth quarter. In fact... No other was presenting in the third quarter. So two consecutive quarters, our comparable peers are experiencing losses, and we are bringing profits. We should appreciate that they were higher than 50, but it's true that we are there, and we keep being profitable even in these circumstances. When we move this profitability in the stainless world in a year of 22% correction in consumption to the year figures of 533 million euros, With a double digit EBITDA of 10%, you can realize how proud also we are of the performance of our stainless steel division in these circumstances. In addition, we are talking of efficient working capital management. It's true that in the year we have reduced our inventories in stainless steel in a figure of more than 300 million euros, 304 million euros, which is by far a strong figure, and this drives the reduction in the whole working capital that has been 206. So extremely efficient work done in the working capital all through the stainless operations in the group. And now let's compare with the high performance alloys. When we acquire BDM in the year 2020, one of the virtues that we were explaining you for moving to the alloys was that we are a cyclical company. We know it. We understand the cycles. The high-performance alloys also is a cyclical company, but with different cycles. And this was one of our key targets at that time, trying to neutralize our cycles with Introducing ourselves in a growing sector as the high-performance alloys by acquiring the best in class in that sector, the world leader, which is BDM, but this also should contribute to moderate and neutralize our own cycles. We have been talking about the cycles of stainless, 22% correction, In apparent consumption, 25% correction of sales. When we move to the high-performance alloys, the sales of BDM in this year have going up 14%. So we are compensating the poorer performance on the stainless by a better performance in high-performance alloys. Last year, we obtained in the alloys a record EBITDA of 125. And this year, we have gone by far much more higher even and reaching 175 million euros. On the year 23, the High Performance Alloys Division has provided 25 percent of the total group results. This is something to keep in mind not only to putting on value what has been the success on BDM acquisition, but also for understanding what's coming next, that we shall talk later on, obviously, with expanding and expansion through the high-performance alloys. In fact, also, the cycle of the alloys world, and especially of BDM, has been different. They have been working with a full order book in a proper cycle during the year 2023. In the first quarter, it was appreciated that obviously the working capital needs to accomplish the necessities of the market. and the strong performance of the demand. Now the situation has been normalized, so you can see that the operating cash flow of BDM in the fourth quarter has been 81 million euros, so the total figure is slightly positive, seven million, but normalizing in the second half, and especially in the fourth quarter, also it's been consistent in providing an operating cash flow. If we If we go to the capital allocation figures, more or less just to reinforce the previous message, in the upper chart, a quarter of a lower EBITDA, 96 million euros, at the end is compensated in a strong cash generation, and you see that at the end we have had a decrease in working capital of 258 million euros. And this is our understanding of the business. Okay, when the market goes down, We lose partial profits, but at the end, we are strong cashmakers for presenting these figures of 260 million euros of operating cash flow and 214 of free cash flow. If we move to the year, at the end, it's clear we, on a yearly basis, still the working capital, we have decreased it in 79 million euros after Last year, our year of records in which the working capital went up 479. So at the end, we are more or less accompany the cycles. When the cycle goes up, it's clear that we need to be there. We need to run full. We need to have our material flowing for supplying to our customers. When the market goes down, we generate cash. This is our basis.

So let's move to a study. We don't need to insist very much in the study because we have been presenting a very detailed explanation in the Capital Markets Day at the end of last year and also when we announced our offer for Heinze International. But just to remember that this is a success. Our new strategy is a success and it's based in four pillars. One is added value. added value because we are moving our business, we are transforming our business to added value products focusing on customers and users, customer centric. supplying a big variety of products from stainless steel, commodity stainless steel, to the most sophisticated high-performance alloys. We are keeping our traditional excellence. We have been running our excellence plans since 2009, and still we have found the room to improve. And thanks to this excellence, thanks to the new level of competitiveness that we've reached, we can be resilient in our numbers in the bad cycle. Of course, committed with ESG values, sustainability is one of our main values, and everything has to be based in a prudent and efficient, and in our financial strength. None of these movements that we are announcing could be done without our financial strength. We bought VDM, we increased our debt-to-BDA ratio close to two times, Then we have digested it to 0.5 and we are now ready again for more acquisitions. So I think we are in a great moment of our history with this new level of profitability and building the new Atherinox for the future. Because the HPA business for us is transformational. You have seen this pyramid of materials before, the pyramid of what we call the pyramid of heat-resistant and corrosion-resistant materials. starting with the low part of the pyramid, of course, with higher volumes, but more commodity rates, normally our sales to distributors, then it's sales to end users of our traditional stainless steel grades. This is not so simple. They need to approve you. You need to have a special chemical composition, so special mechanical properties designed for the customers, on-time deliveries in certain dimensions and these things, so that's becoming... more difficult to supply. Then we have the more special and superior stainless steel. And then we have the HPA that in the top of the pyramid is less volume but with very sophisticated hours. And this is what we are doing now. We are filling the gap between the two sections, the two divisions. developing super stainless steel, developing more sophisticated stainless steel to be more closer to the customers looking for the loyalty and partnership with our customers, and being probably the only supplier in the world that can offer this range of products from flat to long, from commodity stainless steel to sophisticated high-performance alloys, and including supplying mild steel in South Africa to our local customers. The widest portfolio of products in the industry. And, of course, strengthening our position in the United States. That is the place to be now. The United States is the economy to be, and we want to accompany our customers in the growth of the market. That's where we are investing in the United States, in North American stainless. Focus on specialties and trying to duplicate the platform that we are building in Europe, in the United States. It's going to be something... I'm very excited with this new project. Focusing on our major markets, we have been very proud to say that we are the most global supplier in our industry, but the world is changing. I think that we are de-globalizing the economy, or at least regional businesses are becoming more important. We are speaking now about strategic autonomy and some other concepts that we didn't hear before, but this is what is coming and we are concentrating our efforts in our major markets. That is Europe, United States and South Africa. Not many companies can say they have more than 50% market share in the whole continent and this is what we have in South Africa. To do this, we need technology and we need R&D. And with the combination between Acer Inox, VDM, and Heinz, most probably we'll have the most powerful R&D team in the industry. And this is very important because we needed to fill the gap between the stainless steel and the high-performance alloys, as we mentioned before. And then we'll be able to say that we are supplying solutions for our customers, not only materials. We are not supplying just materials to distributors and these things. An engineering company can come to Athenos saying, I'm going to build a refinery, I'm going to build this petrochemical complex, whatever. Tell me what materials I have to use. And then we'll be able to supply from a normal 304 for something not very aggressive to a cobalt nickel alloy for something with a high temperature, very high temperature or special characteristics. So we will insist in this pyramid of materials because as you say here, moving to this part of the business, moving to the most difficult part of the business with less competition, especially with less competition from Asia, we think that we can increase or we believe that we can increase our profitability from 2.5 to 3.5 points. And this is very interesting because that will be in top of the new level of competitiveness, the new level of EVDA that we are announcing today.

So when talking about the strategy and growth, it's always important to keep in mind as well the organic growth. And we have been talking in the last presentations about investments that we are going to be doing to support that organic growth. And as we said, there are two that we want to take your focus on. One is the increase of capacity in North America. So after more than two years of working very hard, all the teams in NAS and the support of those excellence plans that we had from the past, we have managed to increase our hot rolling capacity and finishing capacity by more than 20%. Those of you that know how factories work, it's not easy. to get a 20% increase in capacity. And the use of regular continuous improvement activities, but as well combined with digitalization tools, like digital twins of our factories, AI, allowed us to get that. So when we finished that activity and we were sure that we could sustain that level of performance, we identified opportunities to rebalance the factory again. And that's why we decided to have that minor investment of $244 million to aggregate and generate that capacity for the market. Adding our seventh coal rolling mill and some support from cranes to material movement in our mill shop. And the outcome of this is really having the opportunity to deliver this increased 200,000 tons to serve our customers in North America. They were asking for more capacity from North American stainless as the number one supplier in the marketplace and the growth of the market that is going to be taking place in North America. So this investment will be ready by the end of 2025 and will be, we think, a really important step forward in our presence in the most important market in the world, as was mentioned by Bernardo and Miguel before. Second, very important as well, our presence in our high-performance alloys business. As you all know, we are the number one supplier in the industry. We have announced this investment of 67 million euros to increase our capacity in vidian metals in Germany, in our remelting capacity mainly. reinforcing that leadership that we have and being able to add another 15% more capacity and, evidently, more sales by increasing that remelting capacity and providing, as well, very high-quality products to our customers because remelting is critical in the high-performance alloys business. And secondly, something also that we think is important for the future is almost tripling our capacity in our high-performance alloys powder generation manufacturing. And this is mainly used for, we think, a growing business in this area, which is the use of that capacity for 3D printing and really supporting our customers that are really working into additive manufacturing. and providing HPA solutions for that growing market going forward. This investment will be around 2026 ready for getting into production in Germany. So Bernardo mentioned the focus from Serinox over the last years and since 2009. with all the excellence plans that we have been presenting to you over the years. Excellence, as Bernardo said, is one of our strategic pillars, but it's also one of our values in the company. And we have it really in our DNA, looking to excel everything we can in everything we do. In 2024, we are launching a new program called Beyond Excellence, and I will explain why beyond there. And we have targeted to generate 100 million euros of cost improvements, which will help us improving our BDA performance. And this new excellence plan called Beyond Excellence is going to be focused in six main areas. First, the carbonization and environmental projects that will help us improving our CO2 footprint and helping us in that area that is very important to many of our customers going forward. Operational efficiency projects is more of the things that I explained before with the improvement in NAS and the continuous improvement activities that have been part of the company since many years. Research and development and added value products and commercialization of those. So as explained by Bernardo, filling the pyramid and providing new solutions to our customers beyond just products. Productivity and automation projects and the use of those digital tools helping us improve the efficiency of our lines, as explained in the case of the NAS expansion. Having more customer-centric projects that definitely will position ourselves as being the leader with the support of R&D and good efficient factories with best-in-class quality, and supply chain cost reductions through the reinforcement of collaboration with suppliers and third parties. So all these projects will impact not only production, but it will impact all the operations in the company and every single department is fully aligned and collaborating in all these activities, achieving that excellence in everything we do.

Hence, we trust it will be the new baby in the group. We made an offer. It was approved by the board of directors of Heinz and Atherinos, of course. And we are waiting for the approval of the shareholder meeting of Heinz and also for the authorities' approval in the United States. It has to be submitted to Antitrust. It has to be submitted to CFIUS, the Committee of Foreign Investment in the United States. But we are very excited with this new project. We want to duplicate, as I mentioned, the success that we have with the acquisition of BDM and with integration of BDM that is even more important. I want to develop this stainless steel and HPA platform in the United States. spreading the portfolio of products, combining the R&D capabilities, combining the different products or using the different lines in the two companies. So we will increase the portfolio of products. We expect to have scenarios of 71 million, and of course we want to develop solutions for our customers. I have to name who's the owner of the copyright, the AAA investment, but this is AAA investment, it's Miguel, you know. That is the best place, the best business that we can do. Alloys, American, and aerospace. In VDM, we are more European focused, and aerospace with... was less important in the portfolio of customers, and now we are moving and we are balancing, as nobody else, our customers list. It is important and we are excited. I think the matches hence will match perfectly with the Acerinox organization, and I know that they are also excited and willing to be part of the Acerinox family. So I hope very soon we will welcome Heinz people to help us to develop the new Athenos and to help us to grow accompanying all the businesses, all the companies in this adventure. Everything is here. I mean, it's value creation, it's synergies, it's ESG values alignment. It is balancing the portfolio of customers and sectors and coming with a 200 million US dollar capex that will help us to explore the synergies, modernize the company, and help us to grow. So that's something that we have to develop further once we have the ownership of Heinz. But we are really excited with the project.

For us, it's relevant just to share with you the global footprint that this possibility brings us. Talking about regions, as we have explained, BDM is the world leader in high-performance alloys, but most of the revenues come from Europe. So 65%, two-thirds of BDM revenues are generated in Europe. In the case of Heinz, the situation is just the contrary. So Heinz is mostly an American company focusing on the American market. 60% of the revenues comes from the States, and then a minor presence in Europe of around 23%. When we combine the both companies, at the end we reach to this global figure of 53% of revenues coming from Europe and 28% in the States. Keep this figure in mind because those of you who follow us know this is exactly the opposite of the GEOGRAPHICAL DISTRIBUTION WE HAVE IN THE STAINLESS IN OUR GROUP, SO MORE OR LESS AROUND 53. SOMETHING BEFORE, SOMETHING ABOVE 50% ALWAYS IS OUR PRESENCE IN THE STATES, AND AROUND 30% IS OUR PRESENCE IN EUROPE. SO WHEN WE ARE TRYING JUST TO COMBINE AND ESTABLISHING A PROPER BALANCE, ALSO THE ALLOYS PROVIDES US NOT ONLY THE BALANCE FOR FIGHTING AGAINST THE CYCLES, BUT ALSO OUR GEOGRAPHICAL EXPOSURE. 53-55% sales in the stainless in America and in the European market, 30%. In the case of the alloys, it's just the contrary. So the balance fits perfectly with our structure and the fit probably shall work and shall improve this resilience that we are mentioning, not only as a geographical expansion, but also, obviously, in the case of the sectors. BDM is mostly focused especially on the chemical process industry, which takes 39%, and also a very strong relevance of the oil and gas sector that actually is one of the sectors driving its good profitability in the year 23, which is the oil and gas, but has less presence in a relevant sector such as aerospace. When we move for integrating Haines in organization, clearly our goal, as appears in the AAA rating, is aerospace. So 50% of the sales of Haines goes to the aerospace industry. What we reach now is a diversified portfolio in which more or less, with the integration of the both companies, we shall be 33% in the chemical process, oil and gas 22, aerospace 20. So 75% of the presence even could be above 80 if we include the industrial gas turbines at the end are going in specific strategic sectors relevant for us and clearly with good margins. This chart and this explanation also has its relevance. Heinz is a strong and very good company. It has been explained. We have taken our time for deciding this deal. And in the last year, in this results presentation, there were several questions regarding what was coming. the further inorganic growth or the expansion and also there were very recurrent questions on why we're not putting in place a new buyback program and the answer has been this. We were working on this and consequently we were putting our efforts on this acquisition. It's clear and obvious that Heinz is a great company, but we must understand that it's a good company trading at American multiples. And unfortunately, in our European industry, the multiples are low, but the multiples in America are high. in accordance with the excellent momentum and prospects for the American market for the coming future. It's clear where the market is more expected to grow. It's now It's appearing the consequences of a lot of manufacturers coming back to the States because of the regionalization or geopolitical issues. In fact, we have extremely competitive energy. In addition to all of this, we have the infrastructure program in America that still is coming soon. So there are strong facts for being in America. And at the end, we... We understood that, but for being in position of making the strategy movement of acquiring an American company, trading at American multiples, what we needed is to have the certainty that were synergies that more than far justify such an acquisition. And the synergies are extremely relevant. We are talking about 71 million euros of synergies. It appears in the bottom of the slide. It's realistic and reliable synergies. And this has not been done in a helicopter view for some advisors or consultants. OK, let's assume some savings in the procurement supplies. Let's assume some sales percentage increases. No. We have had teams in VDM, in NAS and in Atherinox working on this, trying to precise item by item the areas that we could obtain. Our track that we have been able to demonstrate in the scenarios achieved in the acquisition of VDM, higher than what we announced, probably should allow you to understand that we are more than conservative normally, but we are absolutely confident on the 71 million euro synergies, and because of that, when we clearly have this absolutely precise, is when we start the move to making the acquire of Heinz, and we start with the diligence processes and so on. So this is the driver for the acquisition. From these synergies, several of them shall be appearing, coming soon, but it's true that as has been previously stated by Bernardo, Our aim is to grow in Heinz. Our aim is also to allow Heinz to invest in further developments, and consequently we are making an investment program of $200 million that shall be self-funded by Heinz. But at the end with this, we shall be able, especially from years 29 and 30, to achieve the most of this $71 million.

These 200 million capex is the key of the success of this opportunity because with the new equipment in melting and in forging and in hot rolling in North American stainless, we will be able to increase our production, modernize the equipment in Haynes, and we will be able to grow, we will be able to to process some of the material coming from Germany, from NASS. We'll be able to process some stainless steel plates in Haines. It's only two hours away from NASS in Indiana, just crossing the river a little bit more. We'll be able to hot roll HPA round materials in NASS with the competitiveness of a plant of one million tons compared with Haines that is around 15,000 tons per year. We'll be able to use NAS and the Athenos group purchasing power to support a hands-on operation. We'll be able to develop more customers to jointly sell patents or material with patents coming from the two groups. So it's an amazing story of synergies and an amazing development. Let's go to the end, conclusions. will insist in the first three messages. Athenox is reaching a new level of profitability. Just to remember the problem that I think of being so much time in the industry is that we have a long memory. And the last time that Athenox produced less than 2 million tons was in 2009. In 2009, we had a very negative EBITDA compared with this year. Second, that we are building a new Ethereum NOX. All these movements in HPA is not just adding companies and adding good companies and profitable companies. This is a transformational project that will let us move to high added value products. And of course, never forgetting what we are experts, that is the excellence in operations and is the organic growth. Third, that we don't forget that we must be prudent. This is a cyclical business. The debt is very difficult to manage. It is more difficult to reduce. And in our sector, EBITDA can move very much from year on year. So we are keeping our financial strength and keeping, of course, the focus on returns to our shareholders and increasing our dividend. And now moving to the short term. As I mentioned at the beginning, the other book is improving because apparent consumption now is moving at the same rhythm that the real consumption as inventories are normalized. I'm not speaking about restocking. I'm not speaking about new booming in this sector, but the restocking period is over. And let's see when the economy brings us new expectations and we can change the cycle again. but we are waiting for this inflection point. The other book is strong, it's getting better in stainless steel, but it's strong in HPA, strongest than ever. And with these circumstances, why not to mention with a strike in the factory in Spain, we are still expecting a slightly better Q4 EBITDA. Sorry, slightly better Q1 than Q4 EBDA. And this is the situation for today. I would like to say that it's going to be better, just better, but the situation in Algeciras makes us be a little bit more conservative. And that's all from our side.

Yes, thank you. Bernardo? Just comment that we will be on the road in the following weeks. So if you are interested to meet us, please contact the broker and it will be a pleasure for us. Now let's move to the Q&A session. First, we will start here in the room. So please raise your hand and state your name and company before the question. Thank you.

Francisco from Alantra. Thank you very much for the presentation. Two questions for me. The first one is if you can share with us the contribution to the main P&L lines in 2023 so that we can better assess so that we can better assess the underlying earnings of the group and how big a track has been Baru in 2023 and have a better view of underlying margins. And related to the strategic alternatives, before triggering the decision of a shutdown, I wanted to confirm that you will be open to initiate a selling process now that you are under less pressure and with the right time. My second question is about the U.S. market. Base prices fell in the fourth quarter of 2023. I wanted to ask if you have seen another letdown in base prices now in the start of 2024, now that you are rolling over contracts, or if you think that this is the type of adjustment in base prices that we should expect in the U.S. market. And if you can also comment on the demand imports underlying trends in the U.S. market. Thank you.

Yes. Regarding the contribution by companies, our segments are stainless steel and high-performance alloys. So we provide figure for all of the segments individually. And we do not disclose company by company. It's obvious that, as has been stated, more than 50% of our sales come from the States, as you know, and the best performer market on comparative basis is America. So it's obvious that the situation and even the prices is... is better in America, better being stable. So in Europe, after the recovery of the COVID crisis, it was a rally in prices that allowed all the players to trespass to the customers, the high energy prices, or consequently at the end. That obviously at that time helped, but prices reached a level that then the market collapsed. The situation in the States have remained more flat, so never went to the party in 2022, but have remained flat and consequently in that basis the market has remained almost stable and clearly our highest contributor is the States, as you know, but we do not segregate the figures by company. Having said that, when you are asking about Baru, as we said last year, that we were running Baru at 50% capacity utilization, concentrating on certain niches, and just thinking about 9,000 tons per month, probably speaking. Baru is not a big, or has never been a big profit maker for the group, but in this situation also is not a relevant loss maker. So the issue of the impairment now is At the end, the clear conclusion that for a reroller in Malaysia with overcapacity existing in China with the supply of cheap slabs for transforming nickel pig iron in Indonesia, at the end, the margins are so squeezed that it doesn't make sense. So in this view, probably the strategic alternatives that are to be contemplated make sense. And what's better for us is to drive to that conclusion on the strategic alternatives with the company having done a full impairment. And this is what we had. It really has not been a pain maker for the year. The situation in Asia is terrible, but their production is low. So it's not as a consequence of huge losses. It's purely as a consequence that it's not good business. And we are not confident that the situation in Asia is going to improve. So consequently, it was the best decision to take.

Is that something? In the previous meeting, we already said that Baru was not part of the core business. I think it's very much related with the regionalization of our business. We want to be a strong United States in Europe, in South Africa, and we cannot be the smallest in a very aggressive Asian market. So the situation is clear. And after this impairment, any solution that we can find will not be painful for the group. suffer this experience and I think we are ready now for selling or whatever solution we can find. Related to the United States, I'd like to mention that we cannot speak about market prices. It's a concept that at the end doesn't exist. We cannot speak about our prices. And at the beginning or the end of last year, we decided to adjust our customer prices just to let them compete in the international business. We have a very close relation there. It's very clear that with higher prices than the rest of the world, imports went down in the United States. So that means that we have a strong partnership with our customers, and we wanted to make some adjustments just to To let them compete in the international world, but the situation today is very stable Next question

Good morning, gentlemen. It's Robert Jackson from Banco Santander. My question is related to VDM, bearing in mind the relevance it has in the group. So looking at the production volumes, melting and cold rolling, we've seen a correction year on year, but the EBITDA is up 40% in net sales. We're up, I think, 9%. Can you tell us if there's a major difference in terms of mix or any other issues in terms of the production capacity and whether we're going to be seeing any changes as well during this year as well, during 2024? Thank you.

Thanks, Robert. It's not really a change of mix. I mean, the production went down because we had some internal... operational problems, nothing serious, but made us reduce the production during the year. But on the other hand, we were able to increase our prices, the market is performing very well, and we could control our costs, of course, as Miguel mentioned before, with a lower energy cost, and our margins went up. There is no magic in this.

Any further questions here in the room? So we can move now for questions for the conference call. So please, operator, go ahead.

Thank you. Ladies and gentlemen, the question and answer session starts now. If you wish to ask a question, please press star followed by one on your telephone keypad. If for any reason you change your mind, please press star followed by two. Once again, to ask a question, please press star followed by one. Our first question comes from the line of Tristan Gresser from BNP Paribas. Please go ahead. Your line is now open.

Yes, hi, good morning, and thank you for taking my questions. Two, please. The first one is on the guidance. Could you please a little bit elaborate about the moving pieces there for the slightly higher EBITDA? Given the large delta, we can see with the buy side, sell side consensus. More specifically, do you expect a similar kind of inventory adjustment if raw materials stay where they are today? And also, do you bake in any strike impact there on cost volumes?

Thank you, Tristan. You know that we never disclose very much our outlooks. We only move in quota-on-quota basis. And what we see is the result of all these movements. On the one hand, we have a better order book, but still we have a seasonal effect in January, Christmas and also the holidays in South Africa. So normally, we start the – Quarter 1 is not our strongest quarter. Second, inventory adjustment, something that we don't know. That will mainly depend on the prices of raw materials and prices of the market at the end of the quarter, not today. The effect of the strike, I think that we have previously mentioned, or at least I read it in the newspapers, can be around 5 million per month. But we were working normally in January and we have lost February. And let's see if we can find a solution soon.

My second question is another question on the U.S. market and trying to understand a little bit what's happening there. I know you're not talking about prices, but what we've seen is that base prices have stabilized, but low searchers have been going down just as crap prices are going up. So I can understand that the margin compression is taking place in the U.S. We just wanted to see if you can confirm that. And now entering March, do you expect this kind of price normalization we've seen? I mean, total prices has ended, or is there still a little bit of further pressure to come, or do you think the market has kind of reached a stable level now? Thank you.

This is a very difficult question. We don't have the crystal ball to know what's going to happen with prices in the future. I think that today they are stable. Today raw materials are more or less stable. And in the last week, nickel prices have been moving up again. So probably the in February is going to be the lowest in the year. But I don't know. I mean, now we know that It looks like March is going to be a little bit higher, but we don't know. And today markets are stable. Let's see what happens. I think the American economy is a little bit more flexible or agile than the European one, and we are expecting an earlier recovery in the United States. But who knows?

All right. That's really helpful. I'll jump back into the queue. Thank you.

The next question today comes from the line of Ionis Mousoublas from Morgan Stanley. Please go ahead. Your line is now open.

Great. Thank you very much for the presentation. Good morning. First question from my side. You've been talking about recycled libido in the order of 700 million euros recently, but that was before Heinz, before the VTM expansion, and I guess before the excellence plan. Could you perhaps provide an update on where you see this third cycle EBITDA level, assuming Heinz deal concludes? Thank you.

Well, the Heinz integration still is pending, obviously, to final decision taken by Heinz shareholders, the board, of Haynes approved the offer and is submitting it to a shareholders meeting that shall take place in April. Still it's pending from some regulatory issues and therefore this may be integrated in a group and we expect it to take place in the third quarter. So still it's a bit premature on this basis. The work that has been done with Haynes obviously has been at due diligence, that we have been working hard on that. It has been done by KPMG. We know a lot of fact, more or less, what available and public data from Heinz, but still we have not started to work together. So on this basis, as when we announced the deal, what we are contemplating is establishing some normalized figures in relation with those that the analyst consensus are projecting for Heinz in this year. We feel comfortable with that after the due diligence process and we are talking about maybe the annualized figure of around 96 million dollars. This is obviously Heinz by itself as it is today. In addition, we obviously As soon as we are able, we shall start to work together. And then, obviously, it shall appear the rhythm of the synergies that we are talking. But the starting point from Heinz is this annualized EBITDA figure in the range of $100 million, which is something that when we acquired also BDM, you remember that we were mentioning that the figure of 2019 appear to be high, but we were more comfortable in the range 80 to 90 million. Euros, more or less, for Heinz, shall be something similar. Obviously, we have the possibility to expand through these synergies that we are mentioning, but this shall be gradual. Still is a lot of work to do among both teams altogether. So up to now, this is the best information we can provide you. After all the approvals are obtained and we start working together, we shall give more light. But on the time being, we should not make any further comments until the decision is approved by shareholders and by all the regulators.

Thank you. Thanks for that. Second question is around the Spanish plant, where you're pursuing to regain productivity and flexibility. Could you elaborate whether you're looking at outright footprint reduction at the plant or mainly pushing for greater flexibility with the workforce? And ultimately, if you can comment on during the strike, how are you looking to fulfill customer orders to ensure you keep your market share within Europe, that would be very useful. Thank you.

Thank you, Ioannis. So at this morning time, as we said, we are open for all conversations and negotiations with the unions. And for us, productivity, flexibility is very important. We are not talking about the footprint reduction at this stage in the case of the Spanish facility. And the collaboration with our customers is very close. We are trying to find... and work with them very closely to make sure that they have their business continuation, mainly when we talk about European customers that have been in the past already validated by any of the other of the facilities that we have. So this is the collaboration. We have been with some of the facilities that we have, the service centers in Europe, supplying them at this moment in time, and this is what we're working. So straight collaboration, open communication, so that they know where we are, since we don't know how long is this going to take.

Thank you very much.

The next question today comes from the line of Tom Zhang from Barclays. Please go ahead. Your line is now open.

Hi. Thanks very much for the presentation and taking our questions. First one from me, just on CapEx next year, any sort of early expectations? Because I guess the VDM and the NASD bottlenecking should start coming in. It's probably too early for Hanes.

just sort of early indications of what you think capex spend could be this year you know that in in our business the maturity time of our capex is around three four years so if we have announced the new investment in in nvidia and in us we are now closing the contracts with the the suppliers Then we will make a down payment of around 20% to 30% of the cost of the equipment. Then we will have this year and next year, or we'll start this year making the civil works. So probably we'll have to, part of our capital will go TO BUILD AND CONSTRUCTION AND THEN THIRD YEAR IS WHEN NORMALLY THE EQUIPMENT COMES TO OUR FACILITIES AND WE START BUILDING THE NEW LINES AND HAVING THE PAYMENT FOR THE RECEPTION OF THE EQUIPMENT. SO IT IS VERY MUCH DILUTED DURING FOUR YEARS. SO WE DON'T EXPECT A TREMENDOUS CAPEX WITH ALL THE ANNOUNCEMENTS THAT WE HAVE DONE. BUT, MIGUEL, MAYBE YOU CAN GIVE US MORE LIGHT IN THE CAPEX FOR THE YEAR.

COMBINATION OF CAPEX AT THIS TIME, THE COMBINED EFFECT OF THE STRONG INVESTMENT PHASE WE'RE HAVING IN NAS AS THE ALSO EXPANSION IN BDM WITH OTHER CAPEX, MAINTENANT CAPEX, BUT ALSO SPECIFIC FURTHER CAPEX FOR KEEPING ALL THE PLANS AT THE STATE OF THE ART, AT THE END PROVIDE US AN AGGREGATED FIGURE FOR THIS YEAR OF 260 MILLION EURO.

And then just another question, sorry to push you again on the sort of strike action, but you know, how much, I mean, first, can you just clarify, is it a total shutdown of the European sites or is it just upstream? Whether you have any issue getting sort of any inventory out and how, how much volume can you send in basically from the U S and South Africa to help? Cause I guess you haven't announced sort of force majeure or anything yet. You know, it, How long do inventories last? Do you have any issues getting material over from South Africa and NASA?

Thanks. So this is, as you said, this is a total shutdown of the facility, what we have today. We only have the minimum services that have been agreed with the unions to keep some of the basic and mainly health and safety environmental activities running at the facility so that we can ensure that it's a safe environment. safe environment, but there are no activities in the factory. That, we have activities in our service centers around Europe that are taking place to supply the customers with material that we had in those service centers at this moment in time.

Understood. Thank you.

Cheers. The next question today comes from the line of Bastian Szenagowicz from Deutsche Bank. Please go ahead. Your line is now open.

Yeah, hi and good morning all. I've got a couple of questions if I may. Maybe just firstly starting on actually Heinz. I guess when you announced that acquisition a few weeks ago, you were talking about getting down your net debt to EBITDA to 1.2 times in I guess less than two years. Now you're giving a guidance which is at least materially below street expectations at the short end for the first quarter. So how comfortable are you to still get your balance sheet down to the levels which you're targeting with the organic cash generation and your everyday, or I guess maybe in other words, Is the first quarter basically a transition quarter for you just because of the strike action and maybe some lagging metal headwinds, but you're already building much more confidence for getting back to what you see as your normalized run rates in the second quarter? That's my first question.

Well, in regarding to the net financial debt, it's clear that this year the status quo is going to change substantially. If we were running the group as it is today, obviously we shall be reducing our debt, no doubt, this year. And even though actually we finished at the level of 340, you know, it's a level of 4.4, but we should have a further strong reduction of debt taking place in the year 2024. It's clear that in the middle of the year or in the second half, not only we are paying for Heinz acquisitions, but also integrating Heinz debt. We still feel confident that in the maximum time of debt, just after the day after the deal is done, we have paid for the acquisition and we have integrated debt, we shall be more or less at equivalent figure of 1.4%. which, in addition, for our sector, having a net debt to EBITDA of 1.4 is fully acceptable. Years ago, 10, 15 years ago, when we still have covenants in place linked to results, fortunately our treasury team made an excellent performance avoiding all of them and actually we have no finance subordinated to a specific covenants on results but when we had that covenant we were talking about three and a half times so even though making such a relevant deal as it is it's going to be around 1.4 in the in the year 2024 so having said that it shall be gradually normalized and we understand that in four or five years shall be in the actual levels but in addition obviously We need to go through the process and obtain all the improvements coming from Haines. This is not a headache for us. So fortunately, we are in a strong finance position that allow us to make such a relevant acquisition in this part of the cycle. And consequently, we are not seriously more or less uncomfortable with that. It's just to accept that, as we said, when you buy a good company, you must pay for it, and especially if it's in the American market where the multiples are high. But in the financial strength of the group, this is not going to be an issue. IN REGARDING OF THE Q1 UNFOLLOWINGS, AS WE UNDERSTAND THE BASIS FOR YEAR 2024, IT'S GOING TO BE AN UPWARD TREND. SO WE CLEARLY UNDERSTAND WHEN WE MAKE THE BUDGET THAT THE LOWER QUARTER SHOULD BE THE FIRST ONE AND GRADUATELY SHOULD BE IMPROVED. IN FACT, IT'S GOING TO BE OBVIOUSLY EXPERIENCING, AS RENARDO MENTIONED, THE ISSUE OF THE STRIKE. BECAUSE OF THAT IT HAS BEEN PRECISE THAT SHALL BE SLIGHTLY BETTER BUT GRADUALLY THE PROFITABILITY SHALL BE HIGHER AND OBVIOUSLY WHENEVER THE SITUATION IS NORMALIZED IN ALGECIRAS ALSO THAT SHALL BE IMPROVING BUT EVEN THOUGH IN THE REST OF THE PLANS RUNNING THE 2024 IS GOING TO BE SORRY QUARTER AFTER QUARTER IMPROVING THE SITUATION THE BUDGET SHOWS IMPROVEMENT QUARTER PER QUARTER STARTING FROM from Q1 going to Q4.

If I can add something, just a part of the strike in today, there's no wind in the market.

I was asking because you sort of downplayed the strike impact with, I don't know, maybe 10 to 15 million this quarter. I guess if we look at the underlying performance in Q4 stripping out the inventory effect, you had 160. You say volumes are getting better. If we look at nickel prices, they're actually rising. You say apparently the market is not getting worse. So I guess we are all a little bit puzzled where you may be not showing a little bit more conviction on your first quarter guidance. But yeah, let's see what is coming out there. My second question is just coming back maybe on the bigger picture for your company. And the different units. So if we look at the disparity between your regional performances, I guess they have never been larger. You're generating pretty much all of your EBITDA in the stainless business in the US and I guess you're losing a lot of money elsewhere. So I'm wondering, how do you plan to fix these issues, particularly in Spain and South Africa? You're obviously now negotiating with unions. But I guess the question is, don't you need an even much more drastic restructuring or even a strategic review here? And then secondly, I understand you're pushing back on a more detailed disclosure, Could you at least give us maybe the fourth quarter and full-year EBITDA numbers for now? Because I guess the big question is here, is it not the time for you to start reporting these numbers to show the value you have in Kentucky and then also put pressure on the other businesses because cross-funding obviously the loss-makers can't really be a sustainable strategy as we've seen for Baru?

You're asking too many questions in one. The situation is as it is. We have flat prices in the market. Activity is getting better because of the end of the stocking period, but we never give numbers for more than one quarter. The rest is part of your job, I think. The situation is stable. It is enough that we are We have announced the end of the stocking process. Let's see what happens with the general economy. It can be better or worse. Also, we never disclose numbers between the different areas, the different factories. Restructuring is a continuous process. exercise that we are doing in all the plants I can I can tell you believe me that we are always monitoring the right level of of labor you know for the activity of all the plants so this is something the normal exercise we are not speaking about the restructuring in in Algeciras we are speaking about adapting the labour contract to something more related with the new business model that we want. We are speaking about flexibility, basically about flexibility and its mobility, because something that I think you will understand very easily. We want people to work in different lines of the same section, when the situation let us or drive us to stop one of the lines and keep the other one at full production. So we need this kind of flexibility in order to adapt the business model to our strategy and to adapt the Arquitidas business model to something that we are doing in the rest of the plants and something that is very normal in the rest of the industry in Spain as well. Because, you know, it's exaggerating a little bit, but in the past we were used to have one cycle every five years, and now we are having five cycles every year. So we need this kind of flexibility to adapt our production to our other book and to adapt our performance to our other book and adapt also our payments, something that is going to be more positive for our employees, to adapt the production bonus. to the new alloys that are more exigent from the quality side, more exigent from the customer side, but also they have less productivity. So we will adapt our formulas for this new situation and try to modernize our things. We have been using the same formula for, I don't know how much, 40 years. I think it's time to change it. I think it's time to adapt to the new situation, something that everybody can understand today. We are not speaking about restructuring in any of the plans. We think that we are making the most of all the equipment, facilities, people and markets that we have. A good situation, very stable in the United States. In general, I think the United States is the place to be, not only in stainless steel. Europe is a little bit more doubtful. to move in this new economy and to resist to the imports and pressure from other areas and this is what we are trying to do. South Africa in this new future that is going to be a less global market, a more regional market, we are moving South Africa to be a fully regional player. In the past, we were depending more or less 70% in exports. Now we are targeting to go to only 30% of exports. The rest will be for the South African market, and that's why we have developed mild steel in South Africa. We are increasing our customer base there, promoting the use of stainless steel, and also being the platform to supply to the whole African continent. So I think we are in the right places, and sometimes markets are going better or worse depending on the times and locations, and we are very well positioned in our three major markets. And that's going to be a part of our strategy, and this is part of our risk diversification that we want to.

Thanks, Bernardo. Thanks for clarifying that. Briefly on Algeciras, I think the plant is in a good location. Have you, for example, looked at a possible repurposing of the mill slightly away from stainless over to green calm steel? Because I guess there are a couple of projects in Spain and at least in Columbus you've obviously done a slightly similar strategy.

No, we are trying to transform Algeciras. It's already a good plan and in a good location, and we are transforming Algeciras to be the best green stainless steel producer and to be the greenest and better specialty stainless steel producer. This is what we are targeting.

Okay, understood. Thank you.

The next question today comes from the line of Patrick Mann from Bank of America. Please go ahead. Your line is now open.

Good day. Thank you very much for the presentation and for taking our questions. A bit of a high-level question. So the nickel market looks like it will be an oversupply for the foreseeable future with this additional supply coming out of Indonesia. And, you know, the price of nickel goes into the calculation of your alloy surcharge, but it can also affect the transaction price and the base price. What do you think the impact is going to be on the stainless steel market? And do you think CBAM, the carbon border adjustment mechanism, means it's not going to be too big of an issue and will effectively have two different markets? That's the first question. And then a second question. In Europe, do you think we need to see a reduction in capacity for the market to recover? I mean, as you pointed out, we've seen negative base prices. Imports have not been that high to explain that. Do you think there's structurally too much European capacity or is this just a very low demand period and you expect us to come out of it? Thank you.

It's a good question, because normally in the good times, we are able to restructure all the tariffs and apply the allowsor charts. In the difficult times, normally we lose all the references and we are working with effective prices. The situation is changing. It's changing in the ferrochrome industry. Now China is the biggest producer of ferrochrome, of course with South Africa and Cromor. but they are normally the daily business in China is affecting to the ferrochrome prices and business in the rest of the world. Nickel, of course, something that is disturbing the market. You know that we are very focused on scrap. We are probably more than 90% of our raw materials is scrap. At the end, it's the same. I mean, in Europe, we have four players. for players with their own Alloy Short Charge formula. So at the end, we are speaking about effective prices. You cannot have a higher Alloy Short Charge and a higher base price as well, because the market is paying what is acceptable. So we don't mind at the end if it's going to change or not. It is good and it's comfortable for us and gives stability for the market, and this is happening in the American market. It's easy for us because you negotiate a base price for the quarter, and then the alloys of charge is what it is, and nobody discusses these numbers. But we don't care if we lose the reference of the alloys of charge. Speaking about what is the second question, Capacity in Europe. I can tell you in Europe we are now the steel producers. I was feeling very close to the the tractors coming to Madrid and the agricultural problem because I wake up in the morning looking at the sky to see if it is a sunny day and we have solar power or if it's a windy day and we have wind power and that's going to affect the energy prices and also complaining that we are going to be the greenest in the world but not because the green production is because we are going to close the plants if we cannot be competitive. So what we are asking to the The European Commission is the answer that probably also the agriculture industry is asking for. The answer is CBAM. CBAM is a good answer if it works. We have to monitor it before we apply, and we'll have several years to get adapted to the CBAM process. Until now, we are only monitoring the CO2 emissions of the importers. Some of them do not want to provide numbers. And then I think it's a little bit weak, the European Commission here, because they are applying what is called a reference, but the reference is a European reference. And normally these players that do not want to disclose the numbers is because they are dirtier than we are in Europe. So we'll need some adjustment there. I think what is really interesting for this process is scope three. No, it's not the first time that you hear our explanation. Atherinox is normally producing 30% CO2 emissions less than the world average. The world average that we have today is without China because they are not participating in the associations. So I assume that normally our emissions are 30% less than the average. speculate with this. And a vessel coming full of stainless steel from Asia to Europe has emissions for more or less around 30% of what Atherinox is producing in our normal production. That means that if you are using or you are importing material from Asia, your CO2 emissions are at least 60% higher than the Atherinox one. So if our customers, our society, start taking this responsibility. We are asking for sustainability, have to be at all levels, not only for factories, not only for plants, also for customers, families, and everybody. And finally, we will buy a washing machine, not only with the energy efficiency, but also with the certificate of how how friendly is it with the environment, if they are using recycled material, if they are using low CO2, emitting the power, this kind of things. And Scope 3 is going to be very interesting for this. So we start reporting Scope 3. I think that will help, will support this previous idea that the world is becoming more regional. Because the cost of emissions in transport are one of the highest.

you the next question today comes from the line of maxine coach from odoo bhf please go ahead your line is now open hi everyone so i have the first question on the long products this is a segment that has been declining very significantly over the past quarter it's fallen to a historical low so can you help us explain What's the situation there? And what's it doing even worse than flat products? Or is it a question of end markets, of competition? I mean, this is a segment where you're the only European player, at least of the three big ones. So any clarification would be helpful.

Yes, the loan products market has been affected globally by it. As you well said, it's mainly very much affected in Europe. We have started to see some recovery step by step, but it's still very far from what it was. And imports have been a key player to that in the marketplace in Europe and in North America. But we really think that with new products for the future, we will be able to provide better solutions to our customers, and that market should be recovering step by step.

Okay. And second one is on Heinz. Have you started to have discussions with local politicians, local unions, and convince them that a European group can be the best owner for the company?

No, not yet. We cannot do it. We are waiting for the result of our offer and we cannot take actions in Haines. Of course, we have discussed potential synergies, we have discussed this CAPEX or necessary CAPEX, but we cannot go further on this. I think what we have been speaking is with our friends in the the same that Haynes is speaking with the friends in the Indiana government because I think we are too close, very close, and we have been both companies very supportive of the community, of the local community. I can tell you that NASA is a good example, and they are always taking NASA as a good example of a good factory, a good business that is good with the community and integrated with the community, with employees, and developing the economy of Kentucky. Hence, it has a similar position in Indiana. And I think that a deal between two American neighbor plants is probably very welcome between the American politicians and unions.

Okay, thank you. And perhaps the last one. It's on your carbon footprint. So you point out, and you're right to do that, that your performance is way above that of your two main competitors in Europe. But if I look at your carbon footprint, it's higher actually than the two other reference players. So what are you doing actually to reduce that gap and how are you confident that you can close the gap in the coming years?

We are intensifying the use of renewable energies, but we cannot go to 100% of these renewable energies because we are also working during the nighttime. This is in the case of Spain. In the case of South Africa, in the case of the United States, we are affected by the country mix. Both Kentucky and South Africa are areas where coal is important for their economy, and most power stations are coal power stations. So that's the only reason, because in scope one, that is the real one where we can take our decisions and we can manage, we are the lowest in the industry.

Okay, very good. Thank you. The next question is a follow-up question from Ionis Mazboulis from Morgan Stanley. Please go ahead. Your line is open.

Yes, thanks very much. Just a couple of follow-ups from my side. First, I appreciate you don't disclose divisional breakdown of earnings, but can you give us a sense of the utilization rates in NAS during Q4 and what you expect for Q1?

Ioannis, I would say NASDAQ is around 80% and is slightly growing now in the Q1.

Perfect. Thank you very much for that. Second point, just on working capital, you made good progress in 2023, especially in the last quarter. Is there potential for more progress with further unwind in 2024? Or shall we expect something more stable, especially now that Nickel prices have also started to lift.

As of today, working capital is not going to be a big driver in 2024. So we understand we are finished with a record, as I mentioned previously, mostly in all the stainless steel divisions. So we are working on a historical minimum of inventories. So in that regard, the situation shall be depending of the ups and downs that may occur in the market. But from our side, we don't consider that this year is going to be a year with big relevance of working capital movements. So it shall be quarter on quarter, but not such relevant as has been in the last two years.

Very clear. Thank you. And just the last one on CapEx. You talked about 260 million euros this year. Does that include the contribution from Heinz once it closes in Q3 or is that excluding Heinz?

No, no, it's fully excluding Haynes. This is the CAPEX that has been approved and decided for the group this year. It still is not including Haynes. We do not know when shall be Haynes finally integrating, and consequently at that time we may adjust the figure, but this is excluding Haynes. It's 260. You know, more or less, our standard has been aligned capex historically with depreciation. It's going to be around 100 million more because the expansion programs were taking place. But this does not include hails.

Perfect. Thanks again. Thank you.

The next question comes from the line of Christian Agarwal from Citi. Please go ahead. Your line is now open.

Hi, thanks a lot for taking my question. Most of them have been answered. A quick follow up from, you know, Bastian's question on the conservative guidance for the Q1. It's more of a clarification. Is there any kind of impact you have considered from negative inventory valuation for the Q1 guidance?

all the adjustment that could be done has been done. So we feel very comfortable that all the stocks, all the material we have on the stock that could have experienced a loss in NRV sale already shall be done. So it shall be depending on the market evolution. We are seeing improvement in terms of brand consumption. Let's see if prices start to go up. So it still is a bit premature, but we feel comfortable with the INVENTORY ADJUSTMENT ALREADY DONE AND WE HAVE NO YET NO FEELING OF WHAT SHALL BE NECESSARY TO DO AT THE END OF MARCH. STILL IS A BIT PREMATURE BUT WE DID WHAT WAS REASONABLE TO TAKE PLACE AT THAT TIME. IF THERE IS NO FURTHER DETERIORATION IN in the prices should not be necessary such a big one as as you have seen it has been decreasing quarter per quarter but still is a bit soon the market has a start a bit late this year so let's see how is the evolution and how is the the prices to be allocated to the order book at the end of march so it still is very early for us for for having such a such a view very clear thanks a lot thank you

are no additional questions so i'd like to hand the call back over to the management team okay thank you very much for all of your questions and for joining us today that concludes our presentation for the full year results thank you very much thank you very much