Acerinox Sa

Good morning to you all, and welcome to Atherinox's third quarter 2025 results presentation. As you well know, geopolitical uncertainties, regional conflicts, and tariff wars continue to affect world markets. Consequently, the third quarter has been another challenging quarter. However, as a group, we have demonstrated our resilience in the light of the difficult market situation. As we will explain in this presentation, we continue to focus on working capital reduction and solid cash generation. During this call, we will hear from our CEO, Bernardo Velazquez, our chief corporate officer, Miguel Fernandez, and also Esther Camoz, our CFO, who will explain our third quarter results and provide outlook for Q4. Before we start the presentation, let me remind you that this conference call is being broadcast on our website, atherinox.com. And now I'll hand you over to our CEO. Bernardo, please go ahead.

Thank you, Carlos. Good morning, everyone, and thank you for attending this presentation. We have released this set of results in the lowest part of a long cycle that is basically defined by the geopolitical conflicts, tariffs, negotiations, and uncertainty. If something can define this part of the cycle, it's uncertainty and confusion. How can you prepare a budget for next year? How can you organize your commercial strategy if you don't know whether you will have tariffs with several countries or not? You will be able to export or not. And then everybody is just working on a daily basis. It's what we call from hand to mouth. From hand to mouth means that our customers are only buying when it's strictly necessary for them to replace materials. So in this situation, logically, the consumption is quite low. and everything has been postponed. The recovery that we expected has been postponed. We have no doubts that this recovery finally will come and that the new trade measures will help the even stronger recovery of Acer Inox. We have new trade measures in the EU, or expect to have very soon new trade measures in the EU. We have the Section 232 and other tariffs in the United States, and we are also negotiating some tariffs in South Africa. But in the meanwhile, we need to concentrate our efforts in the short term, and that means that we need to concentrate in cost-cutting and cash generation. With uncertainty, with the current situation, with everybody preparing the end of the year, quarter four cannot be much better. It will be more or less the same rhythm than Q3, but with a shorter period, because the seasonality is very strong in the United States and Germany, and finally December is half a month. So this is what we are releasing this outlook that we expect a Q4 to be lower than Q3. And it's basically because of seasonality. Miguel.

The market, the main market highlights for 2025 clearly are driven by the uncertainty, as has been mentioned. We are a cyclical company working in a cyclical business. We are in the low of the cycle, and most of the specialists are considering that probably we have reached the bottom, but we still are in the bottom of a cycle, so we must accept that. The demand has not recovered and is in the third consecutive year in the Western world of not recovery after such a strong correction that was experienced in the year 2023 in which both America and North America and Europe corrected more than 20%, still we have not recovered that level, so still we are waiting, and the uncertainty is creating these unique circumstances that never in life three years, three consecutive years with no recovery in the market. And as a consequence of that, obviously, there is a clear effect in prices, mostly in Europe as well as in Asia. And consequently, this is having also its effect with a slowdown in some of the Asian countries for moving more production onto Europe, which clearly is not contributing. Our main advantage is clearly the diversification. Because of that, we try to explain it in a simple way. In this slide, just showing where there are green shoots, we are in advantage, clearly, to take the most of these green shoots when appearing. We are sailing in troubled waters, this is clear. But we are taking advantage for the green shoots appearing, for example, in our main relevant market, which is the North American stainless steel. You can appreciate in these traffic lights that where there are more green shoots is in America. The inventories are below historical levels. The imports have been going down. This is as a consequence of the probably commitment to the industry that is a driver of the American market. The American administration always has been committed to the industry. The Buy American also is a clear characteristic that differentiates the American customers. We are taking advantage of that. The imports have been going down. In addition, we have new measures. The increases of the Section 232 obviously has been having its effect. And as a consequence, the prices in the states are having a positive evolution. So this is clearly the market where we have appreciated a sooner improvement. In the high-performance alloys, this is a bittersweet. It's bitter because at the end also we are experiencing in this sector the absence of investment that is characterized by the uncertainty, so all the relevant projects are being delayed, so especially the chemical process industry is actually facing that. as well as the oil and gas in which these more or less relevant projects have been delayed. So as a consequence of that, our European produced high-performance alloys are experiencing that the order book now is getting slower, but the strategy of diversification and moving to other sectors, which made our decision to invest in the States, invest in Haines, and especially in moving also to the outer space, creates that now we are in position of taking advantage of the better momentum that is coming from the outer space industry. So as a consequence of this, the recovery is coming. We have appreciated already the the recovery in the in the long product nickel base we are more based in the flat products and this is now coming and shall start coming because the supply chain is a bit different but it looks that for the 2026 clearly this is a sector which is going to drive the profitability mostly of haines so so this is the the sweet part and then other other sectors like the industrial gas turbine also is taking a good momentum especially now driven by all the investment in data center for artificial intelligence, as well as more or less all the necessary uses for all the hydrogen transition. So this is the part that is positive and probably shall have a better momentum in the coming months and mostly in the 26th. where we are not seeing yet relevant green shoots is in the European stainless steel market, not in the conditions we have experienced up to now. Later on Bernardo shall explain the new reality. But up to now, It could be considered that the increase in the apparent demand of 10% is healthy, but clearly is not the case when it's coming as a consequence of an increase in imports of 36%. So the main effect of this, as I told before, still the Asian players are putting material in Europe, especially anticipating what could be the more commitment of the union to the industry. So this is driving this increase in imports. 36% in the current market condition is huge. And as a consequence of this, the inventories are growing. And the final effect is that still we have seen significant price pressures that has been characterizing the third quarter. So this is more or less the global escape of what has been the situation up to now. Let's analyze now what's coming.

For those of you following Acerinox for many years, you realize that it's not new to listen to me speaking about trade measures. But this time, finally, we can speak in a positive way. We are not claiming that we don't have measures. We can say, and it's the first time that we have the opportunity to disclose this to you, to spread this to you, that we are very close to have the protection that we were dreaming and asking for for so many years. In March, after the tariffs of the new Section 232 in the United States, the European Commission released what was called the Steel and Metals Action Plan, in which we identified that most of our petitions were considered. And finally, on the 7th of October, the European Commission released these new trade measures, still pending to be approved, but very, very positive. Just to... I will read you some quotes just to see the importance of our industry. A strong decarbonized steel sector is vital for the European Union's competitiveness, economic security and strategic autonomy. That was said by Ursula von der Leyen, President of the European Commission. And a strong future for Europe is impossible without a vibrant and resilient steel industry. That was said by Seyourne, Executive Vice President for Prosperity and Industrial Strategy. So we have to be happy and we have to be positive because at the end, the European Union is moving. You know that it's a slow movement, but finally they have accepted all our petitions and we are moving in the right direction. These new measures will bring a more competitive and a healthier steel industry in Europe with a drastic reduction of quotas. In the case of stainless steel, it can be at the level of 55% reduction in import market share. In steel, in general, it's 47%. Materials above the quotas will have a 50% tariff, double than what we have today. Every anti-dumping, anti-subsidy or anti-sin convention case will be added in top of these tariffs and will apply country by country without exemptions and the quotas will not have a carryover to the next year. to the next quarter. And what is also important is melted and poured will be considered. Melted and poured, that is the origin of the material, will be the place where it has been melted and poured. This is very important because we are suffering circumvention, very rapid changes in country of transforming the slabs or black coils coming from Indonesia or China. We have been invaded by materials re-rolled in Taiwan, in Vietnam, in Turkey. in other countries and this new situation will stop this unfair competition. What is important now is that the EU will have to implement these measures as soon as possible. Still, we need the approval of the European Parliament. We think that we will succeed because there's a strong support to these measures. And after that, the European Council will have to approve it. But generally, it's very good news for the industry. It's very good news, not for the next quarter, but it's very good news because that will give us... A level playing field. We will compete with fair rules, with fair competition, and then we are sure that the situation in Europe will improve. On top of this, we have to add what can happen with the carbon border adjustment mechanism that will start being implemented on the 1st of January, still with a lot of uncertainties, a lot of concerns. and clear rules, but will also prevent the lack of competitiveness of the European industry based on CO2 emissions, ambition, reduction, and some other measures. So, in general, I think that we have a better future. We are willing to receive the good news of having the These new measures implemented, the several measures will expire in summer 26. We are pushing or trying to accelerate the process as much as we can. Maybe it can be 1st of April. But as soon as possible, because it's urgent for the European industry to have this kind of measure in place. So this is good news for our future. This is what we have been claiming for many, many years. You perfectly know that we have been always trying to ask and speaking with the European Commission to develop this kind of measures. And finally, they listened to us and we have succeeded. And we are happy to announce that it will be very good for the European stainless steel industry.

we move to the results both of the third quarter as well as accumulated in these circumstances and in these days of uncertainty we are proud to be well understood we are told proud to be reliable as as as well as predictable when we presented the second quarter results. We made an outlook for the third quarter that should be in line with that of the second quarter. We have been in line with that of the second quarter, slightly below, but obviously... when you put it in the equation, the depreciation of the dollar, which obviously is our most relevant currency, as well as the situation and the evolution of the prices in Europe, You understand that the results on this third quarter are clearly consistent, and especially when you put them in the context of the results that other players in the industry are in these days presenting, it clearly demonstrates the success of the diversification and the strategy that we are facing in the last years. In addition, as a consequence of these weaknesses on the prices that we are announcing, we have made an inventory adjustment at the end of the Q3 for 31 million euros, preparing ourselves clearly for the more or less realization of our stock, mostly in the fourth quarter and especially in Europe. So on this basis, we are proud that at the end, if we analyze this 108 million euros a beta or the 321 million euros a beta of the nine months, at the end, we are in the Bottom of the cycle, we are clearly obtaining the average profits and contribution that we experiencing all during the whole last decade. So it clearly demonstrate that how we are now more resilient and we are able to keep this level of profitability. Also, in these days, it's extremely relevant to put on value the cash flow generation. We have obtained an operating cash flow in the quarter of 152 million euros. which is almost 300, 299 million euros up to September. And this is also one of the drivers. It's clear that in the current circumstances it's difficult to increase profitability, but we are able to generate cash and cover our cap excess and our dividends with the cash that we are generating. This is also one of the main values and principles of the company, and we are clearly following that. And then, in addition, what we have is this level of net financial debt at the end of the quarter of 1.2 billion euros. When we compare as appears in the chart with that of the third quarter in 2024, it was 453. So this brings again more or less what always has been our strategy and we feel proud that we are able to invest in any part of the cycle and keep our strategy plan or even develop a strategy plan in any part of the cycle. Our financial strength allows us to do that. So in these circumstances, in the current circumstances, we make such a relevant investment as the acquisition of Hanes. This is the main comparison with the net debt that we experienced one year ago. which fully takes sense. Clearly, our strategy goes there. And at the end, this financial strength allows us that not only we are facing that, we are not experiencing any troubles regarding our leverage. As you know, all our debt is covenant-free from every covenant related to profitability. So this is for us is obviously some KPI that follows our our policy but has no relevance in our depth and in addition we have a As always, we have had a high competitive debt that allows us that the finance charges are not killing in these days. The KPI of the debt to EBITDA this year obviously appears to be high, but this is something that clearly is as a consequence of the possibility of being able to make relevant investments even in the low part of the cycle. and a relevant acquisition has this effect, but it shall be diluted gradually and especially with a consistent and committed continuous cash flow generation.

Going to the stainless division, I think there are several factors that are characterizing this photo. Some of them have been presented along the presentation. First of all is seasonality in Europe. According to the collective bargaining agreement that we signed last year, we have closed production in Europe for 15 days only. in August. Second factor, I would say, is the weak demand. Weak demand has affected both Europe and United States, but more significantly, Europe. The third factor, I would say, is the input pressure, which has caused the prices to reduce even more in Europe. We are selling this quarter at the lowest prices in the year. And in the positive side, we have United States, which are much better situation of prices despite of the weak demand. Also positive is the cash generation of 82 million in the quarter and 165, which is a demonstration of our projects of working capital reduction that we have been mentioning along the year. Going to the figures, the figures reflect exactly the factors that I'm mentioning. On one side, we have a 10% reduction comparing quarter over quarter in production. We have also an 8% reduction quarter over quarter in sales, which is lower than production because of the higher prices in the United States. The EBITDA is lower by 2 million, but 2 million is exactly the effect that we have because of the depreciation of the US dollar in this quarter. This is the effect that we have in the EBITDA. And in the positive side, we have the increase of the margins. We are increasing margins in this third quarter despite the lower sales, and margin is 8%. instead of the 7% that we have in second quarter. Going to HPA. In the HPA, due to our diversification to different sectors, we are being able to compensate the negative impacts experienced in sectors like oil and gas or chemicals, which our group BDM is more exposed to. We are compensating this with a gradual recovery of the aerospace that affects mostly haze. The EBITDA is lower by 2 million. We are achieving an EBITDA of 32 million and 103 in the nine months, okay, which is true that nine months is also contributed with Haines this year. And again, the cash generation. We have an operating working cash flow of 70 million in the quarter, which is much better than the second quarter. Most of it is coming by the reduction of inventories. And it's 134 going to the nine months. And capital allocation, we continue generating cash through our working capital reduction plans, which are resulting to be very successful, and we are proud of it. In the quarter, we are reducing our working capital by 85 million, and we have been able to generate an operating cash flow of 152. We have had stronger capex this quarter of 88 million, as we already announced. We already announced that we were making down payments in this quarter of some of the investments for Heinz. The free cash flow is 64 million, and we have made the payment of dividends to our shareholders of 77 million, which in the end has made us to increase that only by 21 million. So we are maintaining the debt despite of the stronger capex and also despite the payment of dividends. Going to the nine months, which is also very significant, the cash generation through working capital, it is true that in the nine months is partially... impacted by the US dollar depreciation, which you see also reflected in the bridge, then it allows us to... The operating cash flow in these nine months has been of 299 million. We have had capex of 212, and the figure that I like the most is the free cash flow. Free cash flow achieved in these nine months has been which is exactly the amount of dividends that we are paying, which means that our debt would have remained flat in these circumstances if it wouldn't have been by the depreciation of the U.S. dollar and the effect that it has in our cash in the U.S. dollar. In this case, we have increased our debt in 123, which is exactly the effect that we had in the conversion to euros of our cash in US dollars.

In this regard, we are able to keep on focus on our clear strategy. As you know well, our clear strategy, if we start from the top to the bottom, we are clearly making relevant investments on growth, especially where we have a warranty return. This means clearly in the case of North American stainless, as you know, we are increasing our capacity at 20%. The new equipment shall be in place from the next year. This is an investment that we are taking place for the last three years. In addition also, as we have a warranty return, we are investing in increasing also production and efficiency in VDM by 15%. In those areas where actually are more exposed to the current circumstances of the market, which is Atherinosauropa and Columbus, we are... also making a huge effort not with so relevant investments but at the end we are making virtue out of necessity for transforming the business for being prepared for for for the current circumstances and especially for taking advantage of the market recovery when it comes. But with not relevant investment, because still this return is not so warranted, that is not only depending from ourselves, but also from market conditions. But in any case, we transformed the business model of Atherinos Europa. This is already... This is already prepared and working, as well as Columbus has demonstrated its ability to become the most diversified steel plant in the world, making not only stainless steel as well as carbon steel. as well as now moving to the electrical steel, and in addition is obviously prepared for processing HPA. So this is more or less what we have been doing most in these two areas. In addition, going to the bottom, we are not only successfully integrating Haines, our strategy of moving to this AAA investment, we always mention, America Alloys Aerospace, The integration is successfully more or less being done and accomplished. And in addition, we have already precise the additional investments to take place in Haines for the coming future as has been mentioned. So this already has also been fixed. And as a global consequence, but also keeping our driver of absolute control of the working capital as well as continuous cash generation.

Okay, so everything has been said. In the short term, we are living in this uncertain market, a certain scenario where the demand is still weak, has been weak for three consecutive years. And if this is happening with stainless steel, it's also happening with projects in oil and gas and in the chemical processing industry, because this lack of visibility moves to postpone investment, as have been mentioned. So the short term, it will be still weak. We'll have a fourth quarter basically the same rhythm that Q3. but with the seasonality that we mentioned, I'm very optimistic in the future. Very optimistic because all the situation of the group with the diversification in different countries and the different materials, the position that we have and all the projects that we are now facing will put it in a very good position to take advantage of the level playing field that is being created in Europe, the United States, and maybe why not in South Africa as well. So very optimistic for the future. Thank you very much.

Thank you for the presentation. Now we can start with 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 your question, please press star 2. Our first question is from Tristan Gresser at BNP Paribas. Please go ahead.

Yes, hi. Thank you for taking my questions. I have two. The first one is on the U.S. market. If you can comment a little bit on the weakness you're seeing. We're seeing that coal roll production for the group is down 5% year on year. Does that reflect the demand decline you're witnessing in the U.S. and any differences between flats and longs? And if I'm not mistaken, you should see in Q4 a greater positive pricing impact. will that be enough to offset the lower volumes?

The situation in the United States is more or less the same than in Europe. Of course, with a better price level, but the situation in the market is more or less the same. In 22, the demand went down by 5%. In 23, it was minus 20. It still is flat in 24 and will be flat in 25. So the situation is more or less the same in both long and flat. We expect a recovery once the situation is more clear. Normally in consumer goods materials, in the case of flat products, but we are also waiting for the reactivation of oil and gas that can help the long products, bars for drilling, and also can help all the infrastructure programs in the United States with our stainless steel rebars for bridges. And the situation is more or less the same, flat demand. but with a better level of prices and waiting for the recovery. In Q4, prices have been the consequence of what we announced in Q at the end of the second quarter results. We announced a price increase. We have been negotiating with our customers a price increase and we have been able to get this price increase in the in the customers on which we don't have a longer-term agreement. In some cases, we have six-month contracts or we have quarterly contracts. So we have been postponing these negotiations until the contract is finished. So Q3 has been the result of this price increase. Q4 will be more or less the same level. We expect a further recovery, a further increase in Q1-26. Thank you, Justin.

No, that's very clear. Thank you. But then if you have that pretty severe seasonality into Q4, if I look at group EBITDA for Q4, does it mean it could be lower on a year-on-year basis?

Well, the... Each time we are obviously more American driven. It's North American stainless. It's changed also in the HPA in Europe. Normally December is the slowdown. So as a consequence of that, we announced it's going to be lower basically from the seasonality. In America, from Thanksgiving to Christmas, it's very low activity. So at the end, the fourth quarter is not a quarter of three months normally in the States. It's substantially three, four weeks shorter. And this is more or less what shall appear in our figures. This is obviously still is too soon. We need to see more or less the evolution of the market we need to see how is how effective and successful is our working capital reduction as planned which shall be the effects obviously on this on the inventory adjustment so we feel comfortable stating that the q4 shall be lower and we feel comfortable saying that mostly due to seasonal slowdown then i invite you to take your conclusions on your model

Yes, I get it. It's a bit early. And maybe just one last question, if I may. Obviously, you talk positively about the import situation. Well, not now, but the measures have been implemented in Europe. But in Europe, we've also seen a surge in stainless semi-finished products, and those are not being covered by the quotas. So do you believe that semi should be included, could be included? And how big is it of a risk if you have CBAM, if you have the quotas on CRC, HRC, but then all those slabs are coming through? So we'd love to have your view there.

Yes, for sure that we are asking for semi-finished products to be... Sorry, it's not semi-finished products. Semi-finished products will not come to Europe because it will be affected by all the trade measures. What we expect is the measures to be extended also to products where stainless steel has a lot of influence in the cost. It means tubes, sinks, or this kind of products. But semi-finished will be included, will be covered by the quotas. And also semen will help to avoid circumvention.

Okay. All right. Very clear. Well, I jump back in the queue. Thank you.

Our next question is from Adana Ekoku from Morgan Stanley. Please go ahead.

Hi, morning. Thank you for taking my questions. I've got two. So first, just to follow up on the U.S. prices, could you give us a sense of how the contract negotiations are going for 2026, just given the kind of continued weak demand as well as the new volumes coming to market? And you mentioned you expect these to be higher kind of heading into Q1.

on apologies the line is very unclear Adana so we weren't able to get your question if you could kindly try dialing back in and then we can move on to you again in that case we'll take the next question from Tom Zhang at Barclays please go ahead maybe if I could understand hey can you guys hear my line is that okay

If I could understand something about in the previous call, it's speaking about the US contract negotiations for 26 and we are busy in these negotiations to today. There's nothing that we can add. Normally these negotiations happen earlier, normally start happening in July and many years in October we have already finished the negotiations. With the uncertainty and lack of visibility, everything is being postponed. And we are now negotiating and we expect that in November, December, we will close all these contracts. It's difficult for our customers to predict volumes. So in most of the cases, in this previous forecast, we were speaking about repeating volumes with 1026, but it's no idea. That can change in months when the recovery starts or once the rules will be more clear.

Thank you. And sorry for the interruption. So we'll now move on to Tom Zhang at Barclays. Tom, please go ahead.

Great. Thank you. Thanks for taking the questions. First one for me, just you mentioned in the presentation sort of inventories growing now in Europe. And I guess maybe that's a little bit of pre-stocking ahead of measures. How much further do you think inventories can keep going in Europe? I guess I'm just trying to figure out how much more import pre-buying we could see in the next couple quarters before measures come in and the market normalizes a little bit. That's the first one. Thanks.

Thank you, Tom, but this is very difficult to predict. As Miguel mentioned, some of the importers can think that it's better to import now, because next year will be more difficult, we have more protection, but it's going to be difficult to predict what is going to be the effect of Sivan on 1st of January, and if the new trade measures are going to be applied in April or in May, or when the several measures expire in January, at the end of June. So it is difficult to predict what's going to happen. If I were an importer, if I were a distributor, of course, I would keep my stocks in reasonable levels, not high because everything can change. The volatility is very high. And I don't think personally that it's a good time to increase the stock. But I cannot answer your question.

Okay, fair enough. And then could you just remind us about the kind of volumes that you send from South Africa? I think historically that was a very export-driven plant. I know you've brought the export volumes down a lot in the last few years. I think the last we heard was it was about 50-50 between domestic and export shipments. I'm just wondering, does that flow get affected at all by the European trade measures if you send any material from South Africa into Europe?

This is something that we predicted and we have been working in South Africa and Columbus stainless to change the situation because we always thought that in the future we'll be more regional and Columbus will not have the possibility to export big volumes to Europe or to any other region of the world. So that's why we started making mild steel in South Africa, and we are also prepared now to produce also electrical steel. So we are concentrated, Columbus, in the local market. In the past, it was at the beginning, it was 70% export, 30%. Now we are targeting to have more or less 60% local, 40% export. And in that case, all the volumes exported to the European Union will be into the quota. So we will not have to pay any extra tariff there because the material that will come to Europe will be included in the quota.

Okay, so sort of no change in terms of volumes going from South Africa into Europe. It's already well below the new quota level. And then maybe just final one for me, around NAS volumes, I guess, with the capacity expansion, I think you guys previously talked about first coil meant to come out by the end of the year. Do you have any visibility on that and maybe any early targets on how long the ramp-up period will be, if any, for the sort of NAS expansion?

The NASA expansion is going very well. We already installed the crane in the melting shop, but still we don't have this capacity increase because we are repairing or revamping one of the other existing cranes. But everything is ready. Hot rolling mill is also ready. We will produce the first coil in the coal rolling mill at the end of January. The ramp up will depend basically in the revamping of our AP number two, that is the aniline pickling line that we are modifying to absorb the increase of capacity. But that will be ready also first of January or early January and the ramp up can take three or four months. So we will be ready for the recovery of the American market.

Okay, very clear.

Thanks very much. Our next question is from Bastian Sinigowicz at Deutsche Bank. Please go ahead.

Good morning all and thanks for taking my questions. Hopefully the line is okay here. Maybe firstly on Americas, can I briefly ask, is the softness in the years which you're seeing here in the fourth quarter any more than the usual seasonality? Is this really very much in line with what you're usually seeing or is there anything more in it? That's my first question.

No, no, it's more or less, as I mentioned before, it's more or less the same consumption rhythm that they have had in second quarter and quarter three. We're more or less the same. There's not additional weakness in the market. No, no, it's just seasonality.

Okay, thank you. And maybe moving over to the HPA business, and I guess third quarter was... actually pretty stable, but you still seem to see a lot of softness in energy and also chemicals, as you're saying, I guess mostly in the former BDM business. Do you think that we've already seen the trough here in HPA and the contribution? Would you be comfortable to say that we'll stay pretty close to these levels and then rebound from here? Is there any color you could give us, any conviction? And then, I guess, secondly, on your investment strategy here, where you have a reasonably big pipeline for investments here, Are you confident that these investments still all make sense, or have you taken at least any action to pace those down and maybe adjust for the current market, also in the context of your net debt to EBITDA overly hitting around three times? I guess you clearly have a lot of comfort in that, and I think you expressed that, but are you still pacing down the capex side here? That's my question.

Thank you, Bastian. In regarding of the HPA, I think it's differentiated, obviously, by the areas. As we told before, the weakness of the chemical processing industry, obviously, the maturity and the lead times for this sector, as well as on the oil and gas, are also driving a lower order book than normal in the current days. So we clearly assume that the best semester of next year for these sectors are not going to be relevant. So more or less what we also consider now, and this is obviously the the consequence of our strategy is that the improvement in the aerospace could compensate, and obviously when we talk about the aerospace, it shall be more reflected in the states through Haines, should compensate this weakness that we are going to experience in the in the chemical process mostly, and in the oil and gas. In the oil and gas, there are some volumes more related to maintenance, but not for new projects. This is obviously for Heinz. as well as for NAS, for example, for all the drilling. This end use still is not there. In maintenance, there are some issues, but still clearly we must take in mind that BDM is mostly covering two-thirds of its production covering these both areas. The other areas, the automotive shows certain improvement. The electronics remains there. In the case of Heinz, we shall experience the growth and the clear recovery of the aerospace industry. And the gas generation also, as was expressed, is also doing well. So our understanding is on the global picture for next year, we think that probably shall be more or less compensated, the correction or the effect in a global year of this weakness with the other strength. But probably in the first semester, especially for oil and gas and CPI, we do not see now any recovery. So if it comes, it should be more in the second semester. In regarding of the investments, the... We are long-term driven. This sector is huge in investments, and it's not for thinking on a short-term basis. The investment plan in Haines, and especially the areas where it's focused, as well as also what we are investing in North American stainless for process HPA, takes full sense. It's a growing sector. and also the main driver of the synergies and the future synergies is coming from that, so it's not more or less any type of questioning of the timing of the investments, as also the same circumstances takes place in BDM. There are investments for increasing not only volume, but it's mostly for increasing efficiency as well as for avoiding dependence from three players and having the possibility of making the whole process as much as possible internally. And this is clearly the efficient also is coming through that. So it takes sense. So as I said, we are obviously following our depth carefully and making the best in cash generation. But we should not reconsider these investments as they are because of the current level of debt. As I told before, we are clearly investing on growth where we have a warranty return. And in these cases, it's evident.

Okay, perfect.

Thanks, Miguel. Our next question is from Maxime Koga at Oddo. Please go ahead.

Yeah, good morning. So, the first question is a follow-up on Tristan's one on semis. I think, actually, you are yourself sourcing some semis on the market, and that's quite recent, especially from Indonesia. So what has led you, actually, to adopt this strategy recently? And could you go further in that direction? And would there be a case for Europe, actually, to really focus on the hot rolling or even just co-rolling meal and source its slabs externally as well? given that Europe's production is bound to remain quite competitive compared to some other regions in the world, at least in the hot phase?

As we mentioned before, we are suffering from unfair competition, especially for materials that have been melted in Indonesia and rolled in other countries and entered in Europe with other origins than Indonesian. so that's making not only in stainless steel also in carbon steel is making another industry unsustainable so we cannot live in these conditions the european steel industry is in real danger and that's why the commission is now placing this this set of measures that are going to be very important for us but still we don't have these measures we have to do something so that's why many players started to bring a slabs from indonesia so we have to do things so we defend the european industry or then we close our melting shops and we start bringing material from indonesia in this case in our case we only have made a one one trial it's not a significant volume okay that's clear and second and last question is on south africa because there um

Historically, you had a big competitive advantage because you had access to quite cheap ferrochrome. But now the industry, the local industry is in disarray. And there could be a future when the whole industry would have disappeared. So how do you see the situation there? How does it impact Columbus? What's your view potentially on the export tax on chrome ore as well that is being envisaged? that would be helpful, yeah.

Did you know that very recently production of ferrochrome in South Africa was suspended because of the high electricity price, basically because of high electricity price. And the ferrochrome producer were asking for better conditions because otherwise they are exporting, instead of producing in the country, they are exporting the chrome ore to China. And China with South African industry Chrome ore has become the biggest ferrochrome producer in the world. They have around 56 or 60% of the world production. And that is why because South Africa in the last years has lost competitiveness. Now the situation is better in terms of availability of electricity. There's some negotiations between The federal producers, we are included in these negotiations and the government asking for better electricity price for the electro-intensive industries as well as an export tax or export duty for the exports of chrome ore that are damaging the competitiveness of the country. Having said this, we still have access to cheap chrome compared with the rest of the world. We can use it, as we have mentioned many times, in liquid form. We can use liquid ferrochrome because the ferrochrome is melted as an able company, less than one kilometer away from our plant. And this is a significant advantage because we don't need electricity to melt this ferrochrome because it's already liquid. and we also save a lot of money in refractories and in electrodes, so still very competitive. And basically, most of the materials that we are exporting to Europe from South Africa are ferritics, because it's our specialty and because we are more competitive.

Okay, thank you for the comprehensive insight, and jump back to the queue.

Our next question is from Inigo Escaziza from Kepler. Please go ahead.

Good morning. Thank you for taking my question. Good morning, Bernardo, Miguel, Esther and Carlos. So I have four questions, if I may. The first one would be on the European Union safe measures. If, Bernardo, you can share with us what are your expectations in terms of calendaring implementation? I think you have mentioned... April, May, but maybe we have to wait until June. If you can share with us what could be a potential calendar. I know it's tough. This is the first question. The second question would be on Heinz International integration. If you can also elaborate and share with us how is the integration going? How are the synergies, the number that you increase? How are things going on this front? The third one would be on stainless steel. If you can also elaborate a bit, how is the profitability of the US versus Europe? I guess Europe is again making losses, but I don't know if they are bigger or smaller than a year ago. And what could be the implications of... the new European Union safe measures for the European business profitability. Can we expect this facility to reach break-even if the new safe measures are implemented to reach break-even by 2026? And the final one, I'm sorry for being long, on the U.S.-based prices that you have mentioned, if you can quantify a bit how large has been the base price increase that you implemented during the summer of 2025. Thank you. Gracias.

Thank you, Inigo. I cannot answer the first question because it's not in our hands. The existing same measure will expire the 30th of June, so we are moving fast in this sense because we need to finish the process. You know that all the European processes are long, safe, but long, and have to be ready for the end of June. Of course, everybody is aware of the emergency that we have of this message. And everybody, including the European Commission, is making the best to accelerate the process. So this is nothing that I cannot. I have read that could be first or favorite. No, but we don't have any information on this. We cannot control this process.

Regarding the integration, we are there. We are satisfied. There has been a huge effort. The integration at the end is more or less with participation of relevant people not only at bdm also at nas also at three nos headquarters so it's a global team who is accelerating the process of the integration we are really satisfied of how the things are moving on regarding the synergies the estimation of the synergies obviously the We are in the year of the start of the process. The synergies fixed for this first year were 11 million euros, and we are there. So we have accomplished... what has been the analysis for the first stage, assuming that the scenarios should be gradually increasing year after year, but those for the first year, already we are there and we are very comfortable with that.

regarding stainless and the contribution of Europe. We are following our strategy in Europe, which is resulting to be positive. All the KPIs that we are measuring, comparing, going higher value added, going end customers versus distributors and so on, everything is positive. making us to trust on that strategy that we are following. The problem in Europe is being as set is, first of all, demand, and second, import pressure in prices. Okay, so these low level in prices I think is affecting all the industry. So we are positive in the future. We are positive with the measures because we think that those measures, we cannot predict what is going to happen with the prices. But we expect that with these measures in place, the market will be able to increase prices and that definitely will help in our strategy. The contribution compared to last year is being better. Okay, so it's a reflection of that all our measures are going on the good directions, but still suffering from these price levels and demand.

Inigo, when we are speaking about prices, normally we are speaking about prices that are published in several magazines, because we cannot speak about prices. We are very sensitive to this. So, as I mentioned, everybody is speaking that prices in Europe today are very low, around 100 euros per tonne below the average of this cycle, and probably below 300 euros per per tonne below the average of the previous cycle. We are not speaking about our prices, and in the case of the United States it is exactly the same. We are negotiating customer by customer, product by product, everybody has a different price, and this is something that we cannot disclose. We announced that we are increasing prices, but this is not an official tariff. Thank you, Bernardo. Thank you.

Our next question is from Tommaso Castello at Jefferies. Please go ahead.

Yes, good morning, and thanks for the presentation. Is the line clear? Can you hear me?

Yes, we hear you perfectly.

yeah sorry okay fine uh it was just just just checking i have one last question and thanks for taking it um so you have highlighted cutting costs and cash generation through the management of working capital as key priorities for your end so given the ongoing uh market uncertainty do you anticipate further opportunities to release working capital in q4 And if you could remind us of your cost-cutting initiatives to date and if there is any target number and date there. Thank you.

Well, we are pushing hard in terms of making the best of the working capital in the Q4, and this is a clear guideline that every division of the business is actually focusing. So this has been regularly restated from the headquarters, and all the group is committed. So in this regard, we understand that this is going to be a strong and relevant effect coming in the Q4. You also can see that that one of the Q3, for example, was substantially Higher than the Q2. So in this regard, we are clearly focused. I still introduced it previously. With the cash generated up to now, we have covered the relevant cap excess up to now, but also the dividend for the whole year. There is no cash out coming for dividend payment in the fourth quarter, but it's a strong tax cash out that also is going to take part. So on that basis, we consider that we shall reduce probably the net debt But a lot of the cash generated through the reduction of working capital also shall be for paying taxes. So on that basis, it's not going to be, even though we make our best and we are successful in the discipline of reduced working capital, we are not going to make our experience a huge reduction in the debt because of that. Because the taxes to be paid in the fourth quarter, according to the circumstances on the areas where we are profitable, are clearly there. In regarding of the other plan, we have now a clear public number of the cost reduction plan that we are involved, but also the Plants remain in place and we are healthy there, but obviously as much as productivity is higher, as much as they are better appreciated. So sometimes even though we make a huge effort for reduced cost that can increase our profitability in the current level of prices, not always it's so appreciated in the final P&L because at the end, as has been previously stated, The magazines are reporting base prices now in these days of around 450 euros. I remember in the old days, we considered it was not possible for the industry to be profitable below 900 or 950 euros. Then we develop or be profitable at levels of 700. Now we see this level of prices, so still the cost savings that we can obtain that are significant in our business and for our controls and benchmarks, but has less visibility when the market is so poor.

Sometimes we have mentioned that with the volatility of the cycles in the last decade, we have learned to run our plants like the cars. We have the eco mode and we have the sport mode. When we are full of others, we go to sport and we try to focus on productivity. We are in the low part of the cycle, we are not at full capacity, and then we go to the echo way. I mean, trying to focus on cost. And this is what we are doing now, trying to be effective and very efficient in all the production, trying to save in everything, in electricity, trying to save in refractories, all the consumables. trying not to make extra hours, trying to take holidays when it is possible, and also focusing in our excellent program, our Beyond Excellent plan. That is a scene. We published the numbers in quarter two for the first half of the year, and it's moving very well. So we are focused in all these projects that will help us to improve our profit and loss account.

That's clear. Thank you very much. All the best and good luck.

Tomaso, regarding this billion external plan, as Bernardo mentioned, we published twice a year in H1 and full year results. In H1, well, the target for that year is 45 million euros. And in H1, we achieved 23 million euros. So we are going on track and we expect to be close, very close to this target by the year end.

Thanks again, Bernardo.

Our next question is from Dominic O'Kane, JP Morgan. Please go ahead.

Hello, just one quick question. I just wanted to double-check. With the Q4 guidance for lower EBITDA quarter-on-quarter, does that also include any assumption for an inventory revaluation? Thanks in advance.

No, no, no. The guidance is only including what can be considered adjusted EBITDA. Okay, thank you.

At this time, we currently have no further questions in the queue.

We have two questions from the webcast. The first one is coming from Adana, from Morgan Stanley, and it's as follows. On HPA, conditions for BDM continue to be weak, which is getting partly offset by Haines. Can you help us with a split of how these two businesses are doing, or maybe how much lower BDM is tracking relative to its normalized EBITDA, which I think you previously said is around 120 million euros?

Well, I think we already have explained that. Obviously, still is a bit early. It shall depend on circumstances and it still is too early for considering what may take place in the 26th. We already have indicated that the order book appear to be weak for the first half, but let's see what comes later. And on the other side, the recovery in the aerospace industry is coming. So we understand that this shall compensate, but still it's too early to make any commitment in which shall be the profit contribution for that division. So we shall have more visibility probably the year or when we make the year-end results presentation in February. It still is too soon.

Thank you, Miguel. And the last question is coming from Marisa Hernandez from Times Square. What are your expectations for C-band impact on stainless prices in Europe?

Very difficult question. We still don't know what are the rules. We know the rules, but we still miss some information that is going to be necessary for this. Because still we don't know what is going to be the benchmark for the industry. So then we cannot compare prices or different CO2 emissions between importers and this benchmark. And still there's some uncertainties in the formula. So there's nothing that I can add here. And I also cannot give you information from consultant companies or whatever, because the range is so big that some people are speaking about 100 euros, some people are speaking about 500. But this is not a price increase. This could be the effect for importers. So there's no visibility on this. I cannot help you.

Okay, thank you. That concludes today's conference call. So thank you very much for all your questions and for joining us today. Have a good day.