Acerinox Sa

Good morning everyone and welcome to our second quarter 2025 results presentation. The call will be hosted today by Bernardo Velazquez, our CEO, together with Miguel Ferrandez, CCO, and Esther Camoz, CFO of the group. As you all know, this has been a challenging second quarter and first half of the year. marked by significant geopolitical uncertainties, regional conflicts, and of course, the tariff war. With no doubt, all of this has impacted the global landscape. During this call, we look forward to discussing the progress we have made in navigating this complex situation. But before getting started, let me remind you that this conference call is being broadcast on our website at erinox.com. where you can also find the financial statements and the management report for the first half of the year. With that, I now give the floor to our CEO. Bernardo, please go ahead.

Thank you, Carlos. Good morning, everyone, and thank you for attending this presentation, and thank you, Carlos, for the interaction. It is really been an uncertain year. We expected a recovery for 2025. Remember, after two consecutive years, with the PMI below 50 in the United States, we expected the situation to improve, and that really improved in January and February, but then in March we again went back to below 50, with all the uncertainties that are affecting all the markets all around the world. Basically, we have a lot of uncertainties in our lives, but in this case I think the tariff war is affecting strongly to our business. Imagine how difficult it is to organize your strategy if you don't know if your customers are going to grow or not based on the different tariffs. You don't know how your supplies are going to be affected by the tariffs. And you don't know how your competitors and import competitors will be able to compete or will be feasible to sell in the market. So all this situation is what is finally happening is that everybody... is in the situation of wait-and-see, even in the United States. It looks like the situation in the United States is better, and it is, but all these uncertainties are also affecting this market. Nobody is buying more than what is really needed. As we say, the market is from hand to mouth. We don't buy more than what is really needed, and many projects are being postponed. So the situation is also affecting to... So this is basically the general situation and this is basically what has affected our results. We expected a better behavior in the year and a better behavior in the future, but still we haven't defined what's going to be the new rules of the game. Still we are waiting for negotiations between the different countries. We expect a soon agreement between the United States and Europe, but still the situation is not coming. And this is what we are putting in our numbers and in our forecast. We are not predicting anything that cannot be predicted today. We are based on today's information. This is what we expect for Q3. What is not bad, taking into consideration that we are in the summer period and normally a slowdown of our markets. Fortunately, USA is our major market and also we have been diversifying in the last years with BDM and things in HPA and this diversification allows us to have more standard results. Remember that one of the reasons to enter in HPA was because trying to avoid or trying to reduce the volatility and the cyclical condition of our business and this is really, really happening today. We believe that once the situation clarifies and once we have a clear picture of what are going to be the tariffs, the Section 232 tariffs, the reciprocal tariffs and all these things, markets will find a way to work with the new rules of the game and the situation will come back to normal. It is important to explain the situation, particularly of ASEAN-North Europe. In the last six years, we have lived and expected a different crisis. Remember 2020, COVID. 2021 and 2022, we had a tremendous energy crisis in Spain. Our energy prices multiplied by times four. 2023, apparent consumption in the United States and Europe went down by 20%. 24, we suffered a five-month strike in Spain. And 25, we have this tariff crisis. Five totally different origins, but at the end, we are living for six consecutive years in a low scenario. And according to the Spanish accounting principles, we have to consider crisis as the new normal. And in this situation, we have made an impairment on the tax credits in Spain that is affecting our result. It's no cash related and it's reversible, but we have to follow the accounting principles and trying to be prudent with our accounting numbers. Having said this, I will not enter in the numbers because later Esther and Miguel will explain in detail, just to consider the strong effect of the US depreciation in our numbers. And of course, again, insisting that our geographical and product diversification is putting Atenos in the best position, in the full position for the new economy and the new situation once all these uncertainties clarify. And with this, I will pass the floor to Miguel.

Thank you. The next slide is called Modern Resilience. At the end of performance, clearly in the first semester has been much more than resilient. Resilience was probably one of the most used words in the COVID year in the previous low part of the cycle. The word that probably defines better the actual scenario is uncertainty. We have uncertainty everywhere. Uncertainty is not only in our sector, but uncertainty is also driving our customers. Nobody regarding the tariffs, nobody still knows in every of our sectors. Any of our customers has yet a clear view of what's going to take place in terms of tariffs, when they are going to be finally fully implemented, where, who is going to be affected, how much is going to be. So as has been explained by Bernardo, no one is taking any specific position, everyone, all of our customers is in our agency. So we need to face that in addition to three tragic wars in different parts of the world. So Europe is affected. This is clearly having its consequences on Europe. We have also the wars in the Middle East, which also provide uncertainties regarding oil and so on. So this is the This is the year we are facing, fully uncertain. In that basis, we have proven to be more than resilient. We have increased our sales compared with the previous first year semester at 10%. We have achieved improvement, 10% improvement in the Q2 compared with the Q1, and we have obtained our first half semester a bid of €214 million. This is This is our first half EBITDA in this environment. Just analyzing it, if you realize that not many years ago, this was even above our EBITDA through the cycle. So clearly, all the efforts done in the last years have proven to be effective. And once again, and this is relevant in our sector, with a strong operating cash flow in this environment even, we have been able to obtain 148 million euros of operating cash flow. So we are more than resilient to the actual uncertainty era, but in addition we are keeping our program, we are keeping our strategy. We have devoted 125 million euros to CAPEX in the first half. Gradually this shall have more relevance in the second half of the year. because we are keeping our organic growth, we are developing our strong programs of investments in our Kentucky plant for the stainless in mass, as well as we are doing our investment programs in . So this is clearly our focus. We are in position of keeping that. And we are obviously increasing our value added and not only the plant of Spain but also we are through this diversification we go to the high part of the parameters you know of the added value contribution and this is clearly appreciated first with the acquisition of EDM and later on more recently with Haynes in addition we keep with our homework for improving or operating expenses and we shall talk later on about our beyond excellence I'm not forgetting any case because it's also part of a DIM sustainability. We have launched, we shall talk later on, we have launched the new eco-acidic knobs. We have more than six types developed in this eco-stainless. We keep being well-recognized in terms of our sustainability merits. We keep the gold award by eco-buddies. We should have been in the platinum again if we're not by the social conflict we experienced last year so this moved down our platinum to gold and with the normalization coming for the next year we are pretty confident that we shall be back again in the platinum and in health and safety also we have obtained an improvement of 8% in addition to filling more or less all our targets in terms of carbon emission reduction so So we must be proud about keeping sailing on the actual circumstances with a strong profitability, being able to keep our strategy and also maintaining our focus on sustainability.

Let me give you some highlights of how is the market today. The general explanation is what I already said. We are in the situation of wait and see. Nobody is investing, is postponing investments, and this is affecting all the markets, and all the markets are depressed. The different conditions of the different markets show, as I was going to mention, a big difference in results in the two groups. In stainless steel, in the USA, the situation is pretty much the same than in Europe. But with the low demand, remember that demand went down 21% in 23, was flat in 24, is flat in 25 now. But with the protection of Session 232, we can keep our prices stable in the area. Now, with the new 232, that is not only going to 50% of tariffs, but also is protecting our biggest customers, protecting customers like appliances, sinks, tubes and other products where stainless steel is a big portion of the cost. Of course, we think that the demand finally will grow. Once we have more visibility and the situation is stabilized, the demand will grow. If you add that the situation in the stock levels is low, we are now 18% below historical average, That means that once we have a more clear picture, the situation for sure will improve and the United States is going to be the best market, the place to be. In Europe, the market situation is more or less the same, but with the low demand and low prices, imports have been growing close to 75% in the year, and with this imports growth, This material is going to stocks. Stocks are increasing, so basically we have a lot of pressure in the market, low demand, high inventories, so prices are going down. The same conditions, same market conditions, different situations and different behaviors of our companies in Spain and United States. I would like to remember that we are waiting for the post-safe world measures, and I hope that finally the European Commission will take the necessary measures to protect the European market if we want to have our strategic autonomy. In high-performance alloys, it's pretty much the same. Oil and gas is projects. Projects are being postponed. Chemical processing is more of the same. Electronics and automotive are stable. And thanks to our last investment in Heinz, we are in aerospace. Aerospace is the best sector today in the economy. If I said this, Miguel, could you explain our profit and loss account?

Yeah, let's go to the group figures later on. Our CFO shall explain in detail by our business segments. In any case, relevant facts for the group. First of all is As we anticipated in our first quarter presentation, the results of the Q2 were going to be higher as they have been. They have been a 10% higher than that of the first quarter. It could even have been bigger if the dollar-euro should maintain stable. So because of the dollar weakness, which for us obviously is a relevant fact, we have experienced an effect of around 10 million euros, so it could have been 20% improvement in a more stable scenario. And also in addition, at the quarter end, what we have done is an inventory adjustment of 28 million euros due to the absolutely poor situation of the European market. Still the prices have been the prices are going down, the money is extremely weak, increased imports of 80% are going through our distribution. So in that basis, it has been up here very prudent to make such inventory adjustment for preparing ourselves to the third quarter. So this has been done at the end of the quarter in terms of these 28 million euros. When we compare with the first semester last year, there are two circumstances. One, obviously, is at that time we have the strike in Spain, so most of the contribution was coming for our most profitable business. But also when we take our most profitable business, which is North America, we must keep in mind the product mix, especially in the Spanish steel. We are more or less running clearly our mill, but in these uncertainty days, There are sectors which for us are high-margin sectors that are less active. So, for example, in the long products or in the hot material, which for us are better-margin sectors, there is no activity, there is no investment. Everyone is waiting for taking a specific decision. We are concentrating our production more in the ferritic types, in the appliances, and all these other sectors, which at the end, their margin contribution is lower. This combined with the effect of a lower extra alloy surcharge create this effect of the lower contribution in very good margins, but lower contribution than the previous year by North American stainless. This is something that gradually, as soon as more visibility, the market normalizes, shall be improving. But this is also something that has been taking place during this first semester. We have made the non-cash tax impairment that Bernardo mentioned, so because of that at the bottom of the P&L it appears some loss, which again is not a cash out, it's just a clear over prudent scenario for assuming difficult circumstances in Europe and also following the laws for being not only more than prudent but also having a limit on all their recovery of the tax credits that can be done on an annual basis. This obviously is an adjustment that should be reversed as soon as the conditions improve. We're reaching a net financial debt. You know that this for us is really not a headache. When you compare at the bottom of the second file, one year ago our net debt was 191 million euros. We should be probably on cash if we should have not decided to make the strategic investment of Haines. As a consequence of that, we are showing this net debt of 1,222. Obviously, it's also affected by the depreciation of the dollar against the euro, which has around 120 million euros impact. It's something that does not concern us. As you know, we have no... structural problem regarding debt, regarding covenants. All our debt is covenant-free in terms of profitability. It's just more or less showing that at the end we are in position of making aggressive strategy investments and acquisitions in the low part of the cycle. Because of that, the debt appears to be high, but as I expressed before, this is not an issue. We understand that with a normalization of the market and higher contribution of the EBITDA, we should be able, obviously, to reduce as scheduled.

Going to divisions, okay, if we focus on stainless, we are presenting a better EBITDA, 20% better EBITDA than in first quarter, okay, and it would have been even better if we take out the effects of the conversion to the US dollar and the depreciation of the conversion of our US dollars into euros. Okay, we continue with the comparison between quarters. We see that with similar production volumes, we are just reducing by 2%, we are getting these better margins. We are growing in margins from 6% to 7%. And this is basically... due to the higher contribution from our U.S. markets, and we are progressively increasing the margins in the United States. Regarding Europe, the market situation as they have explained is weak, but the main effect in this quarter is the pressure of the imports. The pressure of imports in this quarter is affecting not only volumes, but also the prices, okay? There is a strong price pressure in Europe, which is negatively contributing to our resource. In terms of operating cash flow, we remain with our program of reducing working capital, okay? And we are maintaining an operating cash flow of online of the 40 million, same as we achieve in quarter one. despite this challenging momentum. When comparing with the figures with 2024, we cannot forget the effects of the strike. It is important to take into consideration that because of the strike in 2024, we were selling more in those markets with higher margins. That's the explanation of the reduction of market margins compared to 2024. But as I said, we are increasing margins from first quarter to second quarter, and we expect to continue on that line. And regarding cash flow, there is also an effect when comparing to 2024, and it is also caused by the strike, okay, because we were reducing inventories and selling from inventories because of the non-production in Europe. If we go to high-performance alloys, okay, in this section and in this division, The operating EBITDA really has been flat. It's true that they're reporting we have 3 million left compared to first quarter, but this is purely an accounting effect. Because of the purchase price allocation when acquiring NAS, we did revaluation of inventory super value. and now we are releasing that revaluation, and it has affected in 3 million. So if we take out that effect, the result would have been the EBITDA would have been exactly the same as for first quarter. I think that it is important to remark the strategy, okay? I think our strategy of diversification and growing in new markets and new sectors with the acquisition of Haines is really allowing us to compensating negative with positive effects. Okay, on one side we have this low down on oil and gas and chemicals. Okay, but in the other side we can compensate that with the progressively growth on the aerospace. Okay, and the aerospace and the gas tubing, which is where we are more exposed now in the United States. Okay, so this is really, really, we are really proud of our strategy and how we are able to compensate. Another effect to take into consideration and that's especially when comparing to 2025 is the effect of the nickel. We cannot forget the nickel has strong impacts in these high performance alloys for two reasons. One is the content of nickel of the material that we produce and the second is the higher level of inventories. And in that sense, We were still positively affected last year by the nickel tail winds, okay, while in this year we are slightly on a headwind. Okay, so that's also a factor to take into consideration. And lastly, on the operating cash flow, okay, which has been reduced in this division from quarter one. mainly impacted by the payment of taxes, okay? We have had a payment of 37 million of taxes in this second quarter, and that relates to results that we had in 2023, okay? So really was the best year in history of medium, and that is what is causing the cash flow in the second quarter to get down. And now going into the capital allocation and our cash flow, okay? We have generating and operating cash flow in this quarter of 48 million. Okay. Starting by the EBITDA, we had an EBITDA, as mentioned, of 112 in this quarter. Okay. We are continuing, as mentioned, with our plans to reduce working capital, and this has had a positive effect in this quarter of 73 million. It is true. that these 73 millions are also impacted by the depreciation of the US dollars, okay, which is what you see on the column other. Out of these 77 million, 52 is the conversion differences of the working capital, okay, by the field reducing our working capital in the quarter. We have paid taxes, and if you compare to the half, okay, all of the taxes are paid in this quarter. We are paying $47 million of taxes, and with all that, our operating cash flow of $48 million in the quarter, $148 in the semester. Going into CAPEX. We are growing in capex. We have mentioned that we are in a strong year of capex, and it will be increasing along the year. In this quarter, we have had 68 million, which is compensated with the 68 million that we have received from the sale of Baruch. Remember that we had a delayed payment in this quarter, and this has been received. so mostly it is compensated. That is why our free cash flow is 49 million, which is the same as the operating. And then it comes the effect of the depreciation of the US dollar, okay? Because of our strong position in cash in US dollar, which remains solid, remains strong, we have an effect when converting into euros, and that's the 76 million that we are showing in the last column, and which makes our debt stronger. to be increasing 27 million in the quarter and achieve the figure of 1.2 billion. Okay, if we go to the half of the year, the effect is even stronger. Okay, we have had a negative effect on the debt of 116 because of that conversion factor, and that has been 116. Okay, so out of the 102 of increase of net financial debt, $116 is cost because of this conversion defense.

Sustainability, once again, we are proud about our safety improvement of 8%. Remember, last year we committed to reducing all those minor injuries that were taking place as a consequence of the continuous interruption in production. We have achieved that. In terms of our targets on waste reduction, we are fully committed to the circular economy and we are getting close to our target of valorization of 90% of our waste. We are already almost in 80%. So we still have five years for fulfilling that target. So we are sure we are going to be there earlier than expected. In terms of the emissions, we have reduced 25% intensity of our reduction from the base year of 2021 and also in terms of water footprint we have over performed our our aggressive initial targets and this motivates us to establish even a more ambitious targets and now we are making in terms of of water fruit footprint specific targets for each of the plants according to their local circumstances So this is a program that we are actually developing and shall be in place in the second semester of the year. At the end, also, we are proud of the great success of the EcoAcer Inox. We have gone through more than six types of things now, done in these bases with 100% renewable energy use. and with more than 90% recycled material from its source. So with this, we are able to commit and verify and certify to our customers also a 50% reduction in the CO2 intensity. So it has been a great success. We are developing. It's getting well introduced to our customers, and this is something that clearly deserves our recognition to our team for developing and putting it in place.

According to the Beyond Excellent Plan, it's important to say that despite all the organic growth that we are facing and despite all the new investments, we know very clearly how important it is to keep our customer control in our business. And this is the origin of the Beyond Excellent Plan. In this case, we predicted... a 100 million euro saving starting in 24 until 26. The target for 25 is 45 million and in the first half of the year we have achieved 23 million. That is 50% of the target. Just to remember how are we following this plan. This is based on individual projects in all the mills. All these projects are not repeated between the mills because one which is exceeding one of the mills is extended to the rest of the units and is based in six pillars. Efficiency, that is basically optimization of raw materials and consumables, trying to find all the time the cheapest raw material for our basket to produce stainless steel and high-performance alloys. Productivity, that is basically working time. We are applying the new maintenance technologies. Customer-centric, that is quality and service adapted to customers. And R&D, that is a new grade that we are developing, adapted to the necessities of the market. Supply chain, that is purchase and store optimization and decarbonization, that is the way that we are following our targets in decarbonization. reducing energy consumption, gas and electricity to reduce our CO2 footprint. Of course all these things are not only based on our experience and our benchmark between the units that we did in the past. We are applying all our knowledge and we are applying all the new technologies in digitalization and artificial intelligence to take the right decision to anticipate problems to have a kind of predictive maintenance but also predictive quality control and we are happy to to say that this new methodology for our excellence plans is performing really well and it's a way to implement a culture of continuous improvement in the company and I will keep on reporting what is happening in this field.

In regarding of the controllables we have demonstrated that we are properly sailing in these southern waters of the uncertainties in this year but in addition We are clearly focusing on our strategy. And then when you see the main chapters, it's easy to understand. If we go to the upper line, we are investing and we are making relevant investments in that part of the business where we are obtaining higher results, higher margins, and consequently where the return is warranted. to be achieved quickly. This is in the case of North American stainless. We are increasing production capacity by 20%, probably starting from the end of this year, so in an excellent time, according to the expected conditions in the American market, especially with more visibility that is gradually coming in the second semester. The timing is adequate for NAS. In addition, we are also expanding and investing in media metals, as has been announced, increasing its capacity almost for a 10%. So we are concentrating our relevant CATEXs in these areas with high-guess warranty returns. In the areas which are facing more difficult conditions and more market uncertainties, We are making virtue out of necessity. In the case of Atherinos Europa, as you know, we have been developing a new business model in which with no huge investments we are able to increase the value added of our production, approach directly more final customers and so on. It has taken a bit more time than expected and obviously we need to pass through the strike last year in order for having the implementation in the wage agreement of all the measures that were necessary. finally the other and in the case of Columbus also what we have been is focusing our strategy on diversifying its range of products and making it the most flexible plants in the group and mainly in the world for creating not only stainless but also creating carbon steel and producing also electrical steel and now covering the whole range which is probably the best position for Columbus for not being exposed to exports and also being focusing on covering the necessities on different type of steels at the local market. And then in addition, at the same time we are doing that, we are clearly excited and extremely satisfied of the integration process of Hales. There is a great success on the 22 work streams that have been around the whole group working together in that integration. We have confirmed that more or less even the initial synergies figure established at 71 probably can be and we recognize in the last resource presentation that we are now focusing on 75 and maybe it shall be a period more and they are actually in place. We have been very agile also in the The allocations of the investments to be done and most of the equipments already are in the final process or already have been allocated and in that regard has been very satisfactory working together and integration of the local team. at Haynes with the expertise in expansions and investments of our people in Kentucky, in us, with obviously with the know-how and expertise in that segment with my team in Germany. So the combination and the integration is running fabulously and consequently we are going to be probably obtaining earlier success even than expected. In addition, an area that is obviously our key focus, as we assume the level where we are, the debt that we have incurred for making this strategy approach, and we are focusing in controlling the working capital, which is in our sector, and especially for the cash generation is one of our drivers, and as has been appeared in the slides, we are also in these circumstances obtaining a great casual generation.

Coming to the end, just to remark that we are controlling the controllables and going ahead with our strategy. Under this situation, I think the results that we are delivering is the best that we can do and that will improve because we are doing our homework. I think having been in this position as CEO of Acerinos for the last 15 years, together with this team, I think that we have already demonstrated that we know how to serve in these waves. It's not the first time that we have to go back to our trenches and try to control our working capital, deliver a good cost reduction and at the same time trying to improve and do our best to take advantage of our diversification, our localizations. and what is happening in the new economy, adapting to the cycles and adapting to the new economy. And in this sense, this expansion in the United States with organic growth in us and with HPA in things was a really good decision and we are proud of our study. Of course, this is something that we cannot do if we don't have our traditional financial strength. It's also, I think, very important to say that we are investing in the low part of the cycle. And so in the low part of the cycle, with the lowest results, we are capable to afford all this shareholder remuneration and all the capital that we have mentioned before. So we think that we are in a very good situation. We are in the good position for the new good cycle. And in stainless steel, we are sure that, of course, the conditions in the American market are going to mitigate our exposure to the European market, but also will improve. In HPA, we have a weak order book, especially in Europe, but we are compensated with a better situation in aerospace. With this low visibility, with all these uncertainties, and trying to consider the facts that we have today, and we are calculating our forecast, we don't have a crystal ball, but according to today's conditions, we expect Q3 to be in line with the ABDA of Q2, despite the seasonability of this period. Of course the situation changes, the situation improves. We believe that once the tariff situation is stabilized and once we have a clear picture of what are going to be the new rules of the game, the markets will restart again and the situation is going to be better. And in this sense, being in the United States, being in Europe, being in South Africa, our three strong markets and also being diversified in HPA and all the sectors of HPA from chemical to aerospace, we are in the best position. I think our strategy is the best in the market and we have a more clear future. So thank you very much.

Okay, thank you. Esther, Bernardo, Miguel for the presentation. So let's move now to the Q&A session. So please, operator, go ahead.

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. If you would like to withdraw from the queue, please press star 2. The first question is from Adana Ekoku from Morgan Stanley. Please go ahead.

Hi, thank you very much for the presentation. Just on the guidance, as you mentioned at the end, could you help us with the building blocks? Are you assuming kind of broadly stable volumes and prices across Europe and the U.S., or is there any kind of price recovery assumed in the U.S., and maybe some lower volumes given seasonality? Thank you.

We are forecasting a stable situation for Q3. Places in Europe are low, we don't expect a recovery or it can go down more in Europe during the summer season. In the United States, we are trying to increase our prices, which is not easy under the current circumstances, but we are working on that, but also considering a stable scenario, more or less considering the seasonability of our business, more in July in the United States, more in August in Southern Europe. We are considering a stable market, and that's why we are forecasting that Q3 is going to be very much in line with Q2.

Thank you. The next question is from Tom Zhang at Barclays. Please go ahead. Yeah, hi, thanks. Two questions for me, please. So the first one, just a follow-up around the U.S. So we understand, you know, you've been trying to push price increases. We've seen some pretty hefty attempted hikes, I think north of $300 a ton on base price. I guess, yeah, just any color around how much of that you're baking in into your Q3 guidance? I mean, are you being sort of quite prudent or, yeah, just sort of any color around what we can see into Q3? And then the other question, just around a potential U.S. listing, I mean, you've been probably a little bit more open about talking around looking at options for the first time. Could you just talk about how far along you are in terms of those considerations and and controlling the controllables, how high a U.S. listing might rank in your list of priorities, please. Thank you.

You know that prices is a very sensitive issue. We cannot speak in general about prices. The concept of market price is something that I always insist that doesn't exist. Prices are negotiated customer by customer, grade by grade, order by order. And in this sense, we see the good condition, we will try to push prices up, also defending our customers. We cannot abuse of our customers, but we are trying always to get the better price for the condition in which we are working. We are now... trying to identify that there's an opportunity in the United States to increase some prices, not all the market, and we are working on that. This is basically what I can say about this. Regarding the U.S. listing, of course, we have to study every possibility that is creating value for our shareholders. In this case, now we are involved in the Haines integration. It's our most important topic. and hence it must be integrated and the best way to have a good integration process is when you own 100 of the company in this sense is we have the next two years three years that will be a focus and a hundred percent focus in the integration of hands once we finish with this integration we can consider the possibility to be listed in the United States. We don't trust very much in the dual listing, so we are thinking maybe in listing some of our business, part of our business, especially the American part in the United States, but this is something that still we don't have on the table.

Thank you. Our next question is from Tristan Gressa from BNP Paribas Exxon. Please go ahead. Yes, I thank you for taking my questions. I have two as well. The first one, maybe if you can discuss a little bit the free cash flow outlook, if you can confirm if there's been any change to the capex for the year, what would you expect in terms of working capital into Q3 or Q4? And I think previously you had expected to decrease net debt by year end. Is it still the plan? Are you going to be able to bring it down on a year-on-year basis? And the second question is just going back to the U.S. I was wondering, I think one of your competitors in Ohio was ramping up a bright and kneeling line, notably targeting the appliance market. So I was wondering if you're seeing any impact of that or what are your expectations around that? And regarding the tariffs, more generally speaking, on the downstream products, We've seen some reshoring announcement as well. So, I'm just wondering if you could comment a little bit on the demand picture there and the potential impact on reshoring. Thank you.

Okay. Thank you, Tristan. Regarding free cash flow and net financial debt. As we announced and we continue on that line, we are on expansion phase and we think that our CAPEX is going to grow also in the second half. We expect in the year to be in the range of the 300 million, which is what we have announced over the quarters. We are almost closing, and some of them have already been closed, the contracts for the investments in Haines. And that will be payments that will be raised in the second half of the year. So we continue with our expansion in the capex and increasing in the second half, probably more than in the first half. Okay, so about net financial debt, we do not expect many changes on the debt. We will try to keep on with the similar levels as where we are now and using our working capital to really compensate those increases on the capex for the second half We also expect higher tax payments. We had some postponements on the tax on the U.S. because of the flows in Kentucky State. So most of the tax payment will come also on the second half of the year. So in the end, of course, we have factors that we cannot control, which is the U.S. dollars and things like that. But at similar levels of U.S. dollars, what we are now, we expect to keep the keep the net financial debt in the level where we are now.

Regarding your question about the competition in Brighton in material in the United States, what I can say is that VA in the United States is a good business. That's why we invested in the VA line there. We came first. But it's a good movement. I think there's room for the two of us. Appliance is a sector that is growing in the United States. with the current tariffs to appliances with the different countries, plus being included appliances in Section 232, it is normal to think that imports will go down in the future and that the American consumption will increase. So in this sense, Most probably Cleveland and Cleves will take a portion of imports of BA material and there's room for everybody. We are fully booked in BA material and probably market needs some more American production.

Thank you. Our next question comes from Christian Agarwal from Citi. Please go ahead.

Hi. Thanks a lot for taking my question. One question on Europe. So, the markets have been weaker and the prices have been lower. So, can you confirm as in what level of profitability the Europe is operating? Is it breaking even or is it lost looking at current price-cost dynamics? And then are you looking for any kind of a cost optimization into the second half, particularly in Europe?

Thank you, Christian. I'm sorry, but I cannot speak about prices, and also we do not disclose the profitability per company. So we cannot answer the first two questions. Cost optimization, of course, we have a very strong program of cost optimization in Europe, in North Europe, and not only the cost reduction but also increasing in the top of the profit and loss accounting, improving and increasing our sales or our turnover. looking for more end users, looking for more difficult sectors, looking for new stainless steel grids and especially stainless steel that can give us with higher added value and a better margin. We are working hard on this and this is what I can say.

Thank you. Our next question comes from Dominic O'Kane at J.P. Morgan. Please go ahead. I've got two questions. If I could ask the previous question in a slightly different way. Are you considering capacity curtailments or closures in Europe at the moment? And then my second question, if I just go back to recent comments and the comments you made on the US listing, if I understand correctly, are you also considering rather than a straight change of the primary listing to an option to de-merge your U.S. steel assets, so a separation and a de-merge of U.S. assets only. Thank you very much. Bye.

No, asking the second question, still we are not considering anything. Still we are busy with integration of Hanes. If there's different possibilities to release it in the United States and that can give us more value, for our shareholders who were thinking in the different possibilities. Remember that multiples in the past were more or less the same in Europe and United States. Since 2018, when multiples started to grow in the United States and to go down in Europe. I remember that traditionally our EBITDA multiple was 8 or 9 times. Now we are probably in 5 and some of our American competitors are above 10. But this is something that came after 2018. Who knows? in a couple of years how it's going to be the situation. There are different possibilities. We think that for the size of the market, and this is just the impression because we haven't analyzed and studied this issue in depth, but have a listing for a medium company as a therianosis, I think we can lose liquidity. Moving to the United States is a difficult operation, but we can make an IPO of the American assets in the United States. Probably this would be easier, but still it's very preliminary. There's nothing decided and we are not studying seriously this issue. I forgot to answer the first question, capacity in Europe. The situation in Europe is not of capacity, of course the inputs are not limited and doesn't change. We have to study some capacity reductions or some consolidation, I don't know, but until now we have this possibility. has not been considered in the European Commission. I remember the last time that one of the European players wanted to acquire another one. It was not allowed. They were forced as a remedy to sell one of the assets. This is not easy. I think what we have to do Europe is a good market. Europe has good stainless steel producers. We don't have a clear overcapacity in the business. What we have is an excess of low-price imports in the area.

Thank you. Our next question is from Tommaso Costello at Jefferies. Please go ahead.

Good morning, everyone, and thanks for the opportunity. Maybe as a follow-up to Bernardo's last comment on imports, I was wondering whether, like from a macro standpoint, I mean, in carbon steel, we are hearing about rumors regarding China cutting over capacity by, I don't know, like 50 million tons potentially. towards the end of the year. Is there any similar discussion happening for stainless as well? And if you could, again, give some color on where are imports mostly coming from?

Thank you. I remember that it was more than 10 years ago when the WTO implemented a group to discuss the excess of double capacity in the steel sector. Since that time, China started promising to reduce capacity. They are closing some of the old plants, but they are building new plants. So what I think is that we have to consider that we have to protect our markets. And if China, in the case of China Steel, China plus the Chinese players in Indonesia are now responsible of 72% of the production of our sector, somebody has to put a limit. If China doesn't want to tackle this point, I think that with the markets, with the different markets, we have to protect. I don't believe that there's a serious discussion in carbon. I hope that it really happens, but still it's not the reality, and I don't think that it's going to happen in this time yet. What I expect is a reaction in the European Union, strengthening conditions to try to import unfair competition from imports. The main source today is basically Indonesian material that is rolled in other areas such as Vietnam or basically Taiwan. But this is Chinese or Indonesian materials, an origin. That's why we also want to change the rules of origin in Europe. I'm moving to this methane put. Because if you produce slabs in Indonesia and China and you control these slabs in another country, the origin changes to the new country. So we cannot control the anti-subsidies that were implemented in the EU against Indonesia, for example.

Thank you. Our next question is from Maxime Koga from OdoBHF. Please go ahead.

Yeah, good morning. So two questions on my side. So the first is regarding the new cold rolling yield in the US. So you have hit certain milestones and the startup is getting near. So I was wondering if you could speak about the ramp-up profile of this new unit. Do you need to go through some certification process with the clients? Or can it be relatively fast? And can we bank on something like 20% increase in cold rolled output already next year? And the second is, question is about the tariffs in the US. So it seems that the activity is held back by the fact that everyone's counting on these tariffs to go down possibly to 25% or 0%. What's your view on that? Do you think that the government will stay firm in maintaining this 50% of tariffs or will it make some concessions like it has already done with the UK? Thank you.

Okay. So we are going ahead with our CAPEX in the United States. We are now, we finished the foundations of the new coal rolling mill and we expect that we'll start the first coil in December, at the end of the year. When we made our plan for this CAPEX, we are considering an enormous growth of the american market of around two percent that basically will with this new new corollary mill so we will keep our market share so this is going going ahead not really we don't really need special certifications for the new material normally most of the customers has already the plants in all the aspects and a new cold rolling mill in this case maybe some of the very special end users would like to have a special certification but something that is not going to take a long time to be done. And regarding tariffs in the United States, what I can tell you is that today is totally unpredictable. I cannot say what is going to happen. I know that the negotiations, apparently the negotiations between the European Commission and the United States are very close. Apparently, they are going to put a general 15% tariff for all the European goods. no idea how can this affect to section 232. What we think is that it's important that we don't have any exemption into So only with these two things, the American market is going to be very well protected. 50% is already too much for the Europeans to pay in the United States, so I don't mind if it's 25% or it's 50%. We are happy the way it is. For the rest of the items, of course, if we protect the rest of the industry, we will protect our customers. So there is no way that we have a protection in the steel industry and then our customers cannot compete with imports of their products. So in this sense, I think that the United States is moving in the right direction.

Thank you. Our next question is from Sebastian Senegal. It's from Berger Bank. Please go ahead. Yes, good morning all, and thanks for taking my questions. My first one is coming back on your guidance, actually, for the third quarter and the billing blocks there. And again, just focusing on the, I guess, the 28 million negative impact from metal charges in the second quarter, and then I guess also the very big price increases which you have announced in the US. Those are two pretty big tailwinds, in theory at least, assuming that those are unwinding and Please correct me if the assumption is no longer valid, but from memory, I think you have like one-third of your U.S. business in spot and then another 30% in quarterly contracts. So, in principle, you should get pretty decent translation from the higher prices as long as these are at least being accepted. So, just from your guidance for flat epic day in the third quarter, can we assume that your base case basically assumes that the $28 million metal headwind will pretty much continue in the third quarter? and that the U.S. prices are not really sticking or impacting in the third quarter? Or is there anything which goes meaningfully worse against you, which is basically absorbing these two effects? I guess you said that European prices are pretty much stable, and I guess with current low profitability, I don't think that the volume which you're losing because of the third quarter feasibility in Europe can weigh that much, but it would be great to get a bit more color on that. That's my first question.

Thank you, Bastian. Obviously, as we are saying, there are several uncertainties. We are giving this guidance at the 24th of July. So there is not probably a big room to changes from the info we have today. So as normally say, in the summer season, is normally not the common season for thinking on price increases. So in a business as usual, or in a business as we're usual, once upon a time in Europe, normally the improvements in prices and so on took on September. So in the actual circumstances, it's very difficult to see that it's going to be a change in the feeling and in the business climate to accelerate the reaction of of our customers and accelerate the overall improvement. So we are not considering relevant prices taking place during the third quarter. As a consequence of that, we have made an inventory adjustment because we understand that with all the pressure on prices, the situation is not going to change. Because of that, we have made that inventory adjustment for putting our inventory in the realizable value at the actual basis. And this covers probably the reality for August and September. At the end of September we shall see. If there is more visibility, if finally it appears that there is an agreement between the European Union and the States. If there is more clarity of what takes place in the Russian-Ukrainian war. All these facts may contribute. So maybe when we present the results of the third quarter, we can give some color for the fourth quarter in Europe. But on the actual basis, we cannot expect any changes. If the market remains as it is, we are more or less to be considered to be in line. If the market shall improve, shall be for the fourth quarter. And also, if still there is a huge deterioration of the circumstances in Europe, which we hope not to be the case, maybe we need to make another inventory at the end of September. But in principle, with this, we are okay. In regarding the states, at the end, everything is as expressed consequence of the same. Still, we are lacking from our customers visibility on investing on going through projects this sector is a as I said before is a high margin sector so we are running a mill with types which at the end are enough for running a mill enough for having good profits and as has been indicated the discussion on prices is customer per customer we appreciate that we are well based in a market in which the the local supply is appreciated, so the Buy American works, and obviously this is our advantage, and fortunately we do not need to compete with the commodities because this is a part that is covered by imports, and also imports have raised in the States, so we have our niche, and we are running properly in our niche, but actually we think that more or less the The discussion per customer that may be moving to move prices up shall be gradually during the second semester, but not necessarily for August or September being in print changes. So on that basis, the most clear picture we can say is that the third quarter shall be in line with the second quarter. We hope that in the results presentation of the third quarter, we can give a more positive color.

Thank you. Next question is a follow-up from Tom Tsang at Barclays. Please go ahead. Yes, thanks very much for taking the follow-up. Just one quick one from me. So you're obviously putting a lot of CapEx now into the U.S., I guess $240 million or so into NAS and then the $200 million into Hanes. Do you know if any of that investment is eligible for 100% expensing or deductibility under the Big Beautiful Bill? And could that be a sort of tax tailwind that we might see this year or next year?

Thank you, Tom. Yes, of course. We are searching for any tax benefit from those expenses. And, of course, most of them will qualify. And this will help us just to make the 100% deductibility and extend the payment. So, for sure, a lot of it might qualify for the deductions.

Thank you. So this now concludes the Q&A session. I will hand back to Carlos for any closing remarks.

Thank you. We have one question from the webcast. The question is coming from Robert Jackson from Santander and it's as follows. Could you give an overview of Columbus in the current environment? Once CapEx plans in BDM and US are coming to a completion, any plans for Columbus considering you invest in the low part of the cycle?

Columbus is following our strategy that is, in this case, focused on the African market and diversification. In this sense, this year, the steel market is not in the best situation, as is happening in the rest of the world. I think our parent consumption is down by 4%. And we are going here to win our diversification plan. So we are in carbon steel selling to some South African customers this year with some pressure coming from imports and trying to specialize in ferritics and other special grades. This is the idea to reduce the dependency on exports. In this sense, Columbus is more or less having a good margin and good profitability in South Africa and suffering a little bit because of the conditions of the European market. But everything is going ahead and Columbus is in a good position. I mean, we have a very strong position in the African markets and there is no cash burning. I mean, it's okay. Second question is capex plans. First of all, Robert, we have to finish our capex plans. expansion of our plants is a project itself. We are used to have to be always successful with our investments, but every investment is a challenge and we have to finish the capex, the growing capex in VDM, the organic growth in the United States, the new investments in Haines to modernize the plant, increase capacity and increase also the quality of the equipment and of the product. We have to work with that to align with North American stylists. to combine the assets of the two mills to enter in new products and spread our portfolio. So we have many things to do. Colombo has some plans. We have some CAPEX that we are considering, but still they are not mature enough to be announced.

Okay, thank you, Bernardo, Miguel and Esther. As there are no further questions, that concludes today's conference call. Thank you very much again for joining us. And we hope that you enjoy your summer holidays and have a nice day. Thank you.