Acerinox Sa

Good morning, everyone, and welcome to the Acerinox First Quarter 25 conference call. Today, the presentation will be hosted by our CEO, Bernardo Velázquez, our Chief Corporate Officer, Miguel Fernández, and our CFO, Esther Camos. After our prepared remarks, we will open the line for questions. Before getting started, let me remind you that this conference call is being broadcast on our website, atherinos.com. Now, I would like to give the floor to our CEO, Bernardo. Please go ahead.

Good morning, everyone. Thank you for attending this presentation. Before I came here, I was reading the reactions in the newspapers and saying something like, I think those results are shrinking because of tariffs. This is not reflecting the reality. Steve and Miguel will explain later our financial data and why the profits are below Q1 2024. But this is not the situation. Remember, there was a correction in the market in Q4. And as expected, we started this quarter recovering gradually, recovering step by step. March was a good month in other book. Other book is in a healthy situation. And in the 2nd of April, with the announcement of the Liberation Day, with the tariffs, that created a lot of confusion. It doesn't mean that the market shrank again or that the market went down again. The market remains stable at the level of March, waiting for the news, waiting for the negotiation, and waiting for what can happen next. with the situations, supply chains, and how the tariffs will affect the different markets. What can we do in this situation, in this scenario? First of all, as we present in this slide, is control the controllables. So we have to surf these big waves, and the best way to do it is monitoring our supply chains, keeping control of our business, and keeping control of our working capital. I think this is something that we always try to show, that we have experience in managing the volatility, and the working capital is very tight controlled. This is important. And once we have this, so we are always in a cyclical business, long-term oriented, with a huge experience in this industry, focusing on our long-term strategy, as you can see here. So we have released a plan to control our working capital that is working well. We will focus on this to reduce our debt. We are very happy and very busy integrating Heinz in the organization. Until now, it's a real success. We are focusing in the strategic plan of Acerinos Europe, trying to move to more added value material, the same that we are working in diversifying the production of Columbus to reduce the dependency in our exports. We have a privileged position in the United States where we are investing to accompany the American market, and we are growing in HPA, in BDM also, because it's a good business and it's very healthy. The situation, so we don't have to panic. There's a lot of news. There's a lot of volatility, but we are very calm. I think we have our business under control, and it's in a better situation. So we have been improving from January to March. March is at a good level. Our other book is solid, and this is what our results will reflect in future. So having said this, I will pass the floor to Miguel that will explain the situation in the different markets.

Thank you. The most remarkable bullet points for this first quarter of the year, first of all, we must express the satisfaction on a bid of 102 million euros. In the actual business climate, as compulsive as it is, We have demonstrated, once again, our resilience. We are establishing at the bottom of our profitability, of our quarterly profitability, these trends of 90, 102 million euros in this quarter, 91 as the EBITDA, adjusted EBITDA in the Q4 last year, so... We are clearly giving the consistency that what was previously our normalized EBITDA three, four, five years ago, now is more or less the sustained EBITDA we are keeping in the lowest part of the cycle or in the difficult times as has been this challenging first quarter. So this for us is extremely positive, as is also extremely satisfaction our strong cash generation in the quarter. We have generated 99 million euros of cash flow in a quarter in which production has increased 29%. In addition, we have been even able to reduce the working capital, around 6 million euros. So what normally means a first quarter of normally increased working capital, especially with such increase of production, in our case, even we have been able to reduce it. So we are extremely committed for a working capital reduction program, and we are fulfilling all our targets. and this is something that obviously is going to keep consistency in the coming quarters. In addition, the net debt of the group, 1.2 billion euros, you know that net debt never has been our strong headache. Our debt is extremely competitive. We are obviously just including in all our debt all the acquisition of France International, so we are there, but in this first quarter, As a consequence of this strong cash flow, the net debt has slightly increased, around 75 million, keeping in mind that it's a quarter with a dividend payment of 77 million euros, keeping in mind the strong capex in which we are involved with 57 million euros, keeping in mind also The conversion difference effect, which is strong in this quarter, because as you know, we have a strong cash position in the States, so the pure accounting conversion difference of our cash in dollars to the euros now, in a stronger euro, weaker dollar, is creating this effect. So in this basis, there is nothing to be concerned about, and this is the basis of the business. Gradually, as we announced, the net debt shall be reducing during the year. In addition... it's more easy to appreciate actually our strategic advantage compared with the industry in regarding the geographical diversification of our assets. We are producing in three different continents. We are not exposed to a single area recession, so consequently we can compensate with this. We are stronger, obviously, in America, which is the one keeping the – better performance market in these days, but having this geographical diversification of assets in the new world we are entering on with this strong relevance of the regionalization issues, this is a unique opportunity probably among in our industry that we are having. As a consequence of all of this, and especially keeping in mind that with all these convulsive months we have experienced rather in the quarter, but the situation is improving, especially since March. We can very comfortably state that no doubt the Q2 EBITDA shall be higher than the Q1. If we go to the market highlights in this period, It's very easy. We try to express in a visible way with dots, more or less, the favorable or the unfavorable facts taking place in each of our markets. So it's very visible to appreciate that our main market, which is America, is where we have more positive dots. We are probably neutral in the HPA business and definitely in the European market is where still We are not appreciating the green shots. If we go to America, basically there are three relevant facts. The inventories remain at very low levels. The prices remain stable, and this stability for business climate is the most adequate, also for the comfort of our customers. So this is a very positive fact in America. And in addition, the Section 232 has been reset. So as a consequence of that, no exclusions and also introducing more final products. This is a very positive fact for the confidence of our customers. So these facts obviously are there. It's true that the demand remains flat in the States, but in any case, with this demand, we can live easily, and we probably shall be increasing our productivity in the remaining quarters of the year. And the most negative fact is that even in this basis, but at the end, still the imports are gaining market share in the States. But for us, we are easily now going to business in America, and we are comfortable on that basis and improving. In the high-performance alloys, depends on the final products. It's more or less a stable market. There are strong sectors, such as the electronic and automotive. We are seeing a wait-and-see in the... In the oil and gas, we understand that this is something that is more coming for the second semester as we are participating in relevant tenders and projects that probably shall materialize in the second semester. So in this regard, we keep comfort. And the sector that is obviously relevant, as is the aerospace, the order book remains strong. The process for the future is very solid. But it's true that the recovery after the – disruptions in the supply chain shall be corrected gradually. So in this regard, we also feel comfortable. The sector that probably is more now painful on the HPA is the chemical process industries, as a consequence that the actual uncertainties on the market are postponing any decision on capital investments. And as I previously said, still we are not seeing green shots in Europe. The prices remain extremely low. There are some markets that have been increasing imports. mostly to markets. We have been appreciating imports in Italy and Poland. So in these markets, the inventories are a bit high, but in the rest of the markets, the European markets, the inventories remain more or less controlled. And still we are not seeing a reactivation of the demand in Europe, which is something that at the end is needed. It should come. But still we have not seen the grid shots in the reactivation of demand. Esther shall explain now the figures for the quarter.