Acerinox Sa

Good morning, everyone, and welcome to the Acerinox first quarter 2026 results presentation. As you well know, the global landscape is defined by numerous uncertainties, including regional conflicts and ongoing tariff wars. The results obtained in Q1 2026 confirm that the situation is improving, despite the continued uncertainty. For this presentation, we have here with us our Chief Corporate Officer, Miguel Ferrandis, our Chief Financial Officer, Esther Camos, and the IR Communication, Consolidation and Reporting Director, Carlos Lora Tamayo, who will explain our Q1 results. Before we start with our presentation, let me remind you that this conference call is being broadcast on our website, atherinox.com. And now I will hand you over to our Chief Corporate Officer, Miguel. Go ahead, please.

Thank you, Borja. Thank you, all of you, for attending this presentation. Just 10 weeks ago, we were presenting the year 2025 figures. We defined year 2025 as the year of uncertainty, and we were hoping that the year 2026 should provide us a much more comfortable scenario. But having said that, the day after our results presentation started the conflict at Iran, So since that time, we are keeping the uncertainty. In a nation, we have an energy crisis and a substantial higher volatility than the one we were experiencing at that time. So now the whole world is in tension. But having said that, we have been honoring our commitment, honoring our word, and we are bringing today an improvement in our quarter figures. improvement in sales of around 6%. What's relevant is improvement in the melting production that has been growing 22% quarter-on-quarter. And as a consequence of all of this also, an improvement in the adjusted EBITDA growing to €119 million, which is an 18% growth compared with that of the fourth quarter last year. The discipline that we are benefiting in the working capital allows us that even though this increase in volumes of 22 percent, the. Operating cash flow has been positive in this first quarter of the year because the working capital increase has been only 47 million euros. So this area is also under control. And thanks to all of this, in this first quarter of higher volumes of dividend payment, as well as huge CapEx expenditures in the coming investments of 73 million euros, But our net financial debt has only increased around 100 million euros. So we are also satisfied about that. It's not by coincidence that we have chosen today for the image the Artemis II launching and leaving the ground. All the world has been excited following this in the last month of April. In our case, you know that we are growing and investing in aerospace. Hanes has been present since the starting of the Apollo projects in every mission on the NASA. And consequently, for us, it's obviously part of our proud and part of our commitment and also showing that we are in the process of taking off. So we are leaving the ground. The success, obviously, is not the launch of the rocket. The success is the completion of the mission. But we are on track, and this is the idea we want to give today. We are leaving the ground. If we go market per market, let's start by the most relevant market for us and the best performer, which obviously is the stainless market in the States. The market remains solid. And being solid is a fact for being more than satisfied, keeping in mind that the demand year on year is going down 11%. So in the current environment, no single customer now gets – comforted in making investment decisions or expanding their activities and so on. So the demand remains low. The demand is obviously affected by all these circumstances. But having said that, the market remains robust. Fortunately, The effective American administration measures are in place. The Section 232 is protecting the local steel production. The tariff remains at 50%. There are no quotas per country. There is no exclusion. And it's being prioritized the melted and poor. So this is having its proper effect in the consistency on the market, which gives stability. to customers, to producers, to distributors. And in addition of all of this, the imports are going down and the imports have get down in America 33% and currently represent a 21% of the total market. So the play field is correct, even though the the challenges and the uncertainties, but at least the play field is correct in order that we can keep consistency performing in that market, which, as I said before, is a proper frame for all the stakeholders that participate in the stainless steel market industry. When we go to Europe, the situation is improving, but still is different. The market sentiment now is better in Europe. The market still, the demand is down, and year-on-year basis, the demand is down 7%, but there is a better market sentiment. At the end, after obviously all the commercial trade crisis that we are experiencing everywhere, finally the European Union has taken effective measures. There are new... more relevant measures coming on and shall be in place on the 1st of July, with quotas per countries, with increase of the duties from 25% to 50%, no country exclusions, and this shall finally provide probably more protection against unfair imports in the European market, and this shall be by far benefiting the industry. This is to be in place on the 1st of July. Normally, the months prior to the entrance of these measures are driven by the imports willing to land in Europe prior to the measures being implemented. But this, fortunately, is not taking place this year. Why? Because since the 1st of January, the C-BAN is in place. And consequently, with the C-BAN, we obtain the compensation for all the efforts in the carbonization that the European players are making. So with these measures in place since the very beginning of the year, we have obtained that the imports also have remained under control. and we have reached current market share of the imports around 14%, which is still slightly above the level that the European Union wants to establish for the imports, roughly speaking around 13%. So what at least we have is that with this more consistent and effective protection, we have also a proper play field, combined with the fact that the distributors or the stocks at the distributors are below the average, we have the proper play field for whenever the demand reacts, we shall be in the better position for taking advantage of the market recovery. But still, this is to come because, as we have said before, still the demand in Europe is not reacting properly. For a proper understanding of the differences between the market in Europe and America, we want to present this chart in which we are showing the effects in the prices of the stainless steel of the circumstance that we are mentioning. This is the summary of why we are trusting and investing more in the North American market than in the European one. Historically, it's a consistent gap between prices in America and in Europe. Normally, prices in America are $300 to $400 above those prices that we experience in the European market. But more relevant than that gap in final prices is the differences in the base price. In the chart, you can realize how relevant this, obviously, the extra alloys will change, which is the green part of the chart, which is the pass-through of the nickel. This structure of the price divided in base price plus extra alloys is effectively working in the States. and is benefiting the market. But the situation in Europe is that after the rally of the imports in the last year, reaching 30% or 35% of the European market, the pass-through has not been so effective. As a consequence of that, still certain part of our final products is more driven by effective transaction prices. So the extra law is not working so efficiently. And then what's also more relevant is the effect in the vice press. And in that regard, you can appreciate the difference in the stable frame we have in America, in which more or less is obviously with its ups and downs, but the situation is healthy by all the stakeholders, customers, distributors, producers. conveying with the rolling caster that we have in Europe. In the year 23, in four months, we passed from the highest base prices ever achieved in Europe to the lowest prices ever achieved in Europe also. It's very difficult to keep a consistent performance and positive profit margins in a market with these ups and downs. And still... two or three years later of that crisis, we have not recovered the average of the prices that has been the driver of this period of the last 10 years. So still we are substantially below the average prices. Consequently, it's not simple to become being yet optimistic regarding the prices with the measures in place, we shall be able to increase prices in Europe, but for being substantially profitable, clearly, we also need a reactivation of demand. Having said that, the differences between the American and the European are so obvious, and this is the reason why we are clearly expanding in North America. In the first quarter of this year, 26, we have put on place all the investment program in North American stainless of 249 million euros. And with this, we are growing our core role capacities in America in terms of a 20%. This is the reason why we are trusting and investing more in America than in Europe. If we move to the high-performance alloys market, For us, it's also the time to restress again that our main virtue and our main strategy is the diversification. For getting less exposed to a single market, we diversified in the stainless between America and in Europe. But also for not getting only exposed to the stainless, we have been in the last five years growing and investing more in the high-performance alloys. We started investing in the high-performance alloys which also is a cyclical market, but it's a complementary market to the traditional stainless one. But once we invested in growing in the HPA... through BDM, mostly for having a relevant presence in sectors such as oil and gas or chemical process. We decide also to invest in America and especially investing in the aerospace. How are now the cycles for the HPA? First of all, The recovery that we are seeing in the stainless and we are seeing a lot of recovery, as mentioned, still is not there in the HPA. Probably the ballet of the cycle that we were commenting, we passed through in the fourth quarter for the stainless, the tough part of the market in the HPA probably is the one in which we are currently involved, mostly the first quarter, 2026. So the ballet of the HPA is the one that has been taking place in this year. because we have a combination of facts. If we start by our European HPA, what we are seeing is that in the low part of the cycle of the oil and gas or of the chemical process industries. In addition, now we have the energy crisis and all the uncertainties that the tensions in Iran and the tensions are still not solved in Ukraine with the additional tensions around Venezuela and so on. Always the tensions are taking place and the hotspots now are in the markets more active. energy related which are all of these and this is creating that there is now a single new decision of investment investing there taking place so we have the low part of the cycle combined with the known science yet of recovery because of the war on place and the tensions taking place there we are confident that anytime in the future whenever the situation is stabilized There shall be more necessities to investing in the reconstruction of all the facilities that have been damaged, but this still is not coming. This probably shall provide a better scope for our presence in the oil and gas industry for the coming two years, but this is going to be difficult to experience in this year. This is the main driver why the contribution of the HPA in Europe is being low at this part of the cycle. But with the diversification, we also, as explained before, have been willing to expand not only in other countries, mostly in America, but also in other sectors. such as the aerospace and the industrial gas turbine. The industrial gas turbine is doing a fabulous performance, driven mostly by the data centers, but the lead times for the industrial gas turbines have moved from 26 weeks to a level of 60 weeks. So this is a sector in which we have a guarantee for a proper performing in the future. And then in the aerospace sector, where we are investing more For growing, and especially for growing more in the long products, you know that Heinz is more focused on the flat products, and we are also, with the new investments, with the rotary forge, with the BIM furnace, we are growing also in the long products. The recovery started earlier in the long products. At the end, for the aircraft engines construction, the first part is the rotating part, which is mostly covered by the long product players directly through the mill orders. And the shortage in the supply chain on that sector increases. create that there has been an anticipation of orders for taking warranty of all those components. So because of that, the recovery starts some months ago, and finally the recovery has come to the flag product, which is the second part in the construction of the aircraft engines, which is the case, the engine cases. And this now is coming. We are... At this regard, highly satisfied by the strong increase in the order book that came in the month of March. And in the month of April, Heinz has experienced its best order book entrance ever in its history. So this is a clear demonstration of the improvements in this sector. this is something due to the lead times that should materialize in higher profitability for the second part of the year because at the end we are obviously contemplating lead times of six to eight months so so the recovery is there our order book is full the production figures are growing and this shall materialize in better profits in the second semester

Okay, now let's move to the effects of the Iran conflict having in our business and also in the market. We think that the most important thing that we should highlight is that we haven't had any disruption in our supply chains. Thanks to our geographical situation, we are able to buy the raw material locally, both in the United States, in Europe, and also in South Africa. Also, we diversify the origins of our consumables. And with this successful strategy, we haven't had any break in the supply chains. So we think that this is another demonstration of Atherinox operational resilience in such a difficult environment. Saying this, no doubt that we have some direct impact, mainly in the logistics and in our cost base. We quantify this impact in 2 million euros for the first quarter. mainly related to increasing in the gas price in Spain and also in a less extent due to the increase in the freight costs for the whole group. On the other hand, we have some indirect impact in the market mainly related to the behavior of our customers. At the end of the day, this conflict is creating more uncertainty in the market and delays the recovery in the demand. So we are seeing our customers still in a wait-and-see position. Maybe the positive note is in the import situation. This logistic and cost impact that we are having also, this is affecting the importers at the end of the day. With longer delivery time, with increasing the freight cost, all of this is putting more pressure to these imports. And as Miguel mentioned, also join this with C-BAN. Imports are moving down in Europe and also in the U.S. And now I'll give you the floor back, Miguel. Thank you.

Well, the quarter evolution is a proper explanation of all the things we are mentioning. So we could just explain the huge improvement in the beta figure, 32 million for the quarter to 95. So multiplying per three times, 200% increase. But what this should give us an unfair, probably, and also transparent explanation of things that are taking place. And probably for understanding better the current situation, let's go to the adjustments in place. At the end of the last year, due to the circumstances we mentioned, the The ballet on the stainless steel market, we make strong adjustments at the year end, and we made adjustments reaching the figure of 60 million euros in inventory write-down. the range of the adjustments have been substantially reduced. Still, there is necessity of some, but substantially reduced. The situation is by far improving compared with that time, but still we consider convenient to provide some adjustments. Why? We have mentioned it. We have Some areas, mostly the HPA in Europe, in which still the situation is tough and the demand is very tough and still that market is to recovery and is exposed, obviously, to the current oil and gas. So the contribution and the margins in the HPA in this first half of the year is not high. So this justifies to make some correction in inventory. And also still the situation in Europe, even though prices are moving up, but still needs certain adjustments because prices are moving up. We have seen some increase in prices during the quarter of around 200 to 300 euros, which is positive. but in the same time in which also the nickel has been experiencing its rally as a consequence of the volatility in the current days. So nickel has been going up, reaching levels of around $19,000 per ton at the London Metal Exchange. As I said before, it's not so simple yet that the pass-through of the nickel is operative in Europe. Still, there are certain orders which are under effective transaction prices or orders previously committed. And as a consequence of that, we also made some adjustments for covering the European sales regarding the inventories there. that we are having in place for the European sales. The range of the adjustments is substantially below the one we made for the year-end. This is a good demonstration of the recovery of the market. Still is necessary some part of it. We hope that gradually this shall be disappearing and we hope that we shall be in position in the future presenting the semester figures for not experiencing the necessity of making any adjustments. We are in the track, but let's see what happens from now to the month of July when we shall release the second quarter figures.

So we are now just, we are presenting our results for the consolidated group. As you have seen, we have presented and we present a higher EBITDA in this quarter despite the uncertainties and the difficult situations. What is true is that despite these geopolitical tensions, the uncertainties and the low demand, what we have been seeing during the quarter is an improvement month by month. And we even see better signs for the second quarter. These better signs are materialized in January. different factors. First, there's been a strong reduction of inputs, both in the US market and in the European market. The new measures in place, CBAM started 1st of January. We expect new measures, new protection measures also in Europe, which will positively, we expect they positively impact our markets. We have seen an increase in the order books The alloy surcharge is increasing, and this has a positive effect, especially in our main market, the United States. And we are seeing also some higher prices in Europe and in the United States. Consequently, our margins have been increasing, and we expect it to increase further in the second quarter. We are also seeing some pockets of recovery in certain sectors, especially gas turbines and aerospace. And with all this, the adjusted EBITDA for this first quarter is 119 million, and the margin in this adjusted EBITDA has increased to 9%. We have also achieved positive and better results in terms of operating result and also the result before taxes. And one of the things we are more proud about is our operating cash flow. We continue being focused on cash generation. Despite the increase of activity, as you see, our melting production has increased by 22%. And despite the higher prices of the raw material, our operating cash flow remains positive. And this reflects our strong compromise in keeping the working capital under control. The net financial debt has increased by 100 million, but this is after payment of dividends and the capex, as we will also explain later. Going by divisions and going to the stainless, definitely stainless has been the profit driver this quarter. The diversification of our business between stainless and high-performance alloys allows us to balance the cycles between these two divisions and thereby achieving a more stable business model. Production volumes have increased by 22%, despite our production has been limited in Europe due to the fire that we have in one of our pickling lines. Now this is completely fixed, and we have again started production in April. The adjusted EBITDA has been of 97 million, and with this adjusted EBITDA, we are returning to the two-digit margin. We are proud of our operating cash flow positive in both divisions, also in stainless and in high performance alloys, as we will see later, due to the strong control of our working capital. And going to high performance alloys. Again, we can see that the strategy of diversification in regions and in products within the high-performance alloy divisions has allowed us to compensate the contraction in demand in certain sectors, like oil and gas or chemicals, which are most exposed to high investment projects. to other sectors like aerospace or gas turbines, which are being in a better shape. As Miguel mentioned, the recovery in aerosprays in the flat products has been slower than log products. But we can say now that this has stabilized. The supply chain for the flat products has stabilized. And we are seeing a significant increase in the order book. And therefore, we expect this will materialize mostly in the second half of the year. But we will see also some recovery in the second quarter. both melting production and sales are high in that fourth quarter, but fourth quarter is always affected by the seasonality. And the adjusted EBITDA has been in this division of 23 million and a reported of 13, which has been affected by 10 million of stock adjustment in this division, mainly in Europe, due to the difficult situation of certain sectors and the lack of demand. And again, I insist on the operating cash flow because this is one of the things we are more proud about and we have a very strong focus on working capital control.

Let's give you now a bit of color on the cash generation. As we mentioned during this presentation, we are very proud of our operating cash flow. We achieved 34 million euros of operating cash flow in Q1. Look, with increasing in volumes of 22% quarter on quarter and with raw material prices going up, we think that it's very remarkable that the operating working capital only increased in 47 million euros. So this demonstrates that we have a very strict control of our working capital. As you may know, we have a two-year plan trying to reduce working capital. Last year, we released about 400 million euros. And as we mentioned, this 47 million euros of built-in Q1 is another demonstration that we are doing things correctly in this sense. And we continue with our CapEx, with our expansion programs, you know, that we are investing intensively in the U.S., in Heinz, in NASA. And also in Europe, in BDN and in a less outstanding Acerinos Europa and Columbus. So we spent in this quarter 73 million euros. It's not big differences with the previous quarters. And also in January, we paid 77 million euros on dividends. With all of this, we only increased the net financial debt in 106 million euros, and the net debt started at 1.3 billion euros.

Okay, and just to conclude the most relevant parts, first of all, we have honoured our commitment and we have demonstrated improvements in our results in a scenario with lack of demand and with high uncertainties and even with an energy crisis. We are proud of that. We are able to deliver our strategy, which each time gets more evident and justified. We have the financial strength. We are long-term runners and we are able to To keep our long-term strategy plan, we are seeing the advantages of bringing new capacity in the North American stainless market, and we are seeing also the evidences and the relevance of growing more in the aerospace industry in America, and especially in the long-produce sector. In addition, we have a unique position. Our diversification of all our facilities all over the Western world allows us to have a strategic autonomy and also be affected by the current difficulties in the market, especially, for example, by the energy crisis. So we are We are solving in some areas the shortages that we are experiencing in the others, and this is obviously justified. And in addition of this, each time the program in place, the Beyond Excellence, take more sense. We are obtaining strong savings on that, and as has been, as you remember, we explained in the in the last quarter presentation has been so successful that we have increased to 120 million euros the experience savings for the period 25 and 26. For the next quarter, the outlook still is not so clear. The uncertainties are there. Still, some of the conflicts have not been solved, but we can commit ourselves that we shall present better figures in the coming year. The sustainable prices in America combined with the gradual recovery in the European market shall allow us to present proper figures and we consider that keeping this track it shall not be necessary to provide relevant adjustments for the second quarter results. So as a conclusion we understand that the adjusted EBITDA for the coming quarter should be higher than the one we are presenting today. Thank you very much.

Thank you very much. Now we can start the Q&A session. Operator, please go ahead.

Thank you very much. To ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. Our first question comes from Francisco Riquel from Alantra. Your line is open, Francisco. Please go ahead.

Yes, thank you for the presentation and for taking my questions. I have two. My first is on... Capacity utilization, if you can update on the progression since the beginning of the year and into this Q2. In Europe in particular, you mentioned that imports are down 42% year on year. I understand safeguard measures will reduce quota volumes by 55%. So how we can uplift in capacity utilization, shall we expect from Q2 levels before demand improves? And then my second question is on your comments this week about that you are considering a U.S. listing. So you can comment on this when and how. Thank you.

I take the first question, Paco. Well, the capacity utilization is going up in the different plants of the group. In Spain, in the Spanish plant, keep in mind that what we mentioned during the call, that is our fire in one of our lines in the P4 plant. that this will allow us to increase for the second quarter the capacity utilization. In the first quarter, we were in the level of 70%, roughly speaking, and we expect to improve this capacity utilization for the second quarter. In the States, we are in levels of about 80% without taking into account the new line that is already working. And in South Africa, that is where we are below the rest of the plants, we are in levels of 60-65% capacity utilisation.

Well, in regard of the U.S. listing, this has been taking place in all the press releases in this week as comments coming from our shareholders' meeting. This is mostly something that appeared to be obvious and this has been commented on. in the last years. Our best performance, obviously, is in the North American market. We are probably leaders of a market in which we have a strong relevance. It's clearly the driver of our profitability. It's clearly the driver of our sales. More than 50% of our sales is coming in North America. and is the market in which really the investors highly appreciate the steel industry. This is something that we always have been looking, let's say, jealous for being a European listed company, looking how our American peers are highly valued by the investment community in the States. So there is a... consistent gap between the valuation metrics for steel players in America compared with the lower valuation multiples that the European companies are getting listed. So as a consequence of that, getting better followed, valued and understood where the market values more our sector niche is an absolutely logical movement. And as a consequence of that, what we are is obviously making all the analysis for how could it be. And in that basis, it's considered to be be studying or starting all the preparation for what could be a potential listing of the American platform of the business. In this regard, when and how? Well, the when is difficult to precise. Obviously, there is a lot of issues involved. but thinking on the way of clearly preparing and combining our different companies for being in position of presenting an American platform to access the American stock market is something that has all the rationale, and we are working in that direction. So this should mean... Mostly the possibility of making anytime in the future an IPO or partial of that part of the business. But focus mostly on an IPO for business and obviously keeping and remaining keeping the majority participation of it whenever it's come. But it's not decided yet. when and on the process. Obviously, keep in mind that there is certain integration of different companies to be done. So this is not something that is going to occur in the short term, but we are in the way of starting the work, analysis, the preparation for deciding in a later stage the convenience and the most convenient time for that.

Our next question comes from Tristan Grecher from BNP Paribas. Your line is open, Tristan. Please go ahead.

Yes. Hi. Thank you for taking my questions. I have a couple. My first one is, can you explain very simplistically the inventory adjustment of $25 million you made in Q1, how you calculate it, and if it has a cash impact? I start there, but I have other questions.

Thank you, Tristan. Okay, the way we calculate the inventory adjustment is just by comparing the final inventories at the end of the quarter. We compare the cost versus the net realizable value. Okay, so This adjustment that we are doing is for inventories that are in our stocks and not yet sold, and that are valued at a higher cost than what we can realize from those inventories. Obviously, there are always some obsolets and some materials that can be standing. The important thing there is it's been reduced a lot compared to the fourth quarter, but still there are markets in which... in which it's necessary to make this kind of adjustment. Of course, it's not cash. It doesn't impact the cash because it's only for material that has not been sold. Currently, the 25 million of inventory adjustments that we have is divided between the high-performance alloy division and the stainless division, more or less half and half, and it's more focused in Europe. Of course, in Europe, as we have explained, the high-performance alloy division... is lacking of orders. It's more exposed to sectors like oil and gas and chemicals, in which there is a lack of orders, and therefore the prices are not in the best moments. So that's why we have needed to make an adjustment there. And the other part of the adjustment is in the stalemates. asset is much less than what it was in the fourth quarter it doesn't have any cash impact and it is only to reflect the the difference between the the sale price and the cost price okay the the the increase on the raw materials has also an impact there but it's much less than what it was

Okay, but that's clear. But in the past, if I look back 2022, 2023, I mean, those inventory adjustments, they were including in the EBITDA. And I think last year you started to make them as excluding of the EBITDA, but only at Q4. Now you're doing it in Q1. So what a change in the reporting and just... trying to really understand what it is. Why is it treated as exceptional? If your cost of raw material increased more than your selling price, that's normally more sorts of margin squeeze, and that's operational. So yeah, I'm trying to understand what I'm missing there.

No, nothing is missed. The fact is providing as much transparency as possible. The current circumstances are not normal. The effects that are taking place in the market are also not normal. We are facing challenges in different markets as a consequence of three years of consecutive negative demand. This is a situation unique. What we tried is that it's better understood, more or less, the performance of the market and the metrics of our business. Consequently, for comparing figures quarter one with four quarter last year, we were just presenting a 200% increase in EBITDA. we shall probably be creating confusion because the situation has not improved by 200%. The situation has improved around 18% and 20%. And because of that, we are giving some color. The HP market in Europe for the oil and gas and for the CPI is in bad shape. And consequently, we are having low capacity utilization of So, obviously, this is having its effect on cost. Relevant sectors for the company are not doing well, and we are conveying the product mix to other sectors which are not so profitable, and consequently, this also has its impact in margins. What we are presenting is more or less this issue, as well as what we are presenting is the situation in Europe, which currently, as we explained before, the pass-through of the nickel is not properly working. And in the current situations that we are having in Europe, still there are some sectors driven by Transaction prices in which the current nickel rally is not so easily to place, we also consider that this is an adjustment that justifies that we report it separately. What we want to give is more transparency on you of how is the evolution of the business, but also which is the part that we are adjusting in inventories on a quarterly basis. We hope, as I said before, that this should be not needed in the second quarter results presentation because the momentum should be better and the prices also should be moving up. But at the current month of March, April, it appeared that this still was convenient. So it's not a change in the policy. It's just providing you some color of what's taking place in each of our areas and in the market basis.

Okay. All right. Maybe if I can ask a last question on the outlook, I think – we were expecting maybe better ASP, so sales divided by melt shop production. I think you mentioned in your prepared remarks, you expect higher ASP in the US, but then the press release is stable. So how should we think about the price appreciation in both Europe and the US, and what's the implication then in terms of margins as well into Q2, given you have some cost element there? Thank you.

We think that we are confident on keeping a stable base price in America. So this is out of question. So the sustained business in America shall remain healthy. We gradually are considering that the situation should be improving on Europe. In addition, we are now solving the fire that we experienced in the European plant last year. So the annealing and picking line number four now is in place. So this shall also provide more stability. We had to cover that at a certain level, bringing material from South Africa, but this created... Obviously, some overdue and so on. So now the situation is getting normalized. As I said before, we are seeing improvements in the volumes. And this is more or less the most clear fact that we have for the coming future. The volumes are improving. We are being able in... market driven by the uncertainty and the low demand for taking market share from the imports because now the imports are under control. So this gives to the industry and to the local industry possibilities of increasing volumes. That increasing volume should give a logical effect on certain increases on prices. But for having an effective increase in prices and trying to get close of the normalized level of prices, what we need is a reactivation of demand. But just with the increase in volumes, the situation should be improved. So it's going to be an improved but not yet radical. For a radical improved, we need a reactivation of demand and After three years of construction, the play field is well prepared for whenever the demand reactivates, we shall have a quick effect and a proper rally. But still, the demand is not there. All right. Thank you.

Our next question comes from Bastian Sinegowitz from Deutsche Bank. Your line is open, Bastian. Please go ahead.

Yes, good morning all and thanks for taking my questions. My first one is also coming back on the inventory impact and sorry to come back to that. But Miguel, from what you said, there were transaction prices which had been committed earlier as metal prices went up, which suggests you were really running with open metal price exposure. Can you confirm that we understood that correctly? And if so, have you now hedged this exposure to manage the risk? And then also maybe related again to the inventory effect. Now, again, when we look at the market, a large part of the products you're selling, they've increased significantly in price. So our synthetic plant vanilla 304 has been up by as much as 20%. In the normal environment, that's actually been positive on your inventories and the valuations. And some of your peers have also confirmed that they had similar positive effects, which is what you would expect. So can you confirm, is the 25 million impact the net impact? which you have incurred. Those are my first questions. I have two more, please, but maybe I'll stop there.

Yes, for the business in Europe, as I said, we have been experiencing certain overdues. We are in the way of reducing our orders which are taking on term basis and this was taking on effective transaction prices and gradually we consider that the scope should allow us to be less dependent on effective transaction prices and more focused on more or less the Going back to the normal formula of the base price plus extra alloys. But still, in the material that actually we are still pending to supply in the second quarter, there still were certain orders that were covered on effective transaction prices. That was that one. that at the end of last year more or less were the basis that were to be discussed with the customers. As far as the situation is improving, as far as the volumes are growing, there is obviously a better sentiment that we explained that there is in the market. This shall be gradually reduced.

Of course what you are saying Bastian about the effect of the increase of the raw materials and in prices it's It's a fact in the States. The pass-through in the States is working perfectly and, of course, is bringing us some benefits, but it is not really the same in Europe. These 25 million that we have been talking about is in Europe. And this is a total adjustment that we have done to the inventories that we are holding in stock. As I said, this is not really a cash effect. And it is the total of the adjustments that we are doing to the inventories, both in HPA and in stainless, but this all focuses in Europe.

Okay, understood. Thank you. And then just briefly also in Europe, maybe zooming in a little bit on the performance of that business. You obviously had the fire, but I guess looking at your production numbers, it does suggest that things are obviously improving here and you confirmed that. So any color on when you think you'll be back to break-even? Do you think maybe break-even is possible in the course of the second quarter? Maybe not for the full quarter, but in the course of it possibly? And then also just on your outlook, and you're obviously guiding for a better second quarter, and you said volumes will be improving. Clearly, European prices should be improving. I guess maybe from what I understood, some improvements in the mix in the U.S. as well. So putting all of this together, do you at least feel broadly comfortable with market expectations, which are around, say, around 150 million every day for the second quarter?

Well, the situation in Europe, as you say, is improving. We remain confident that we shall be reaching breakeven in the year 26. I don't think it's something that is going to probably take place in the second quarter because... The prices are going up, but mostly it's the final prices, those that were going up. It's good that the nickel increase as much as possible is being passed through the customers when possible. There are some parts in which, as we mentioned, has not been so simple. But having said that, still, if you look at the base prices, still we are seeing base prices of 450, 500 euros base price. So this level is ridiculous. We are able to reach the break-even substantially below the level of base prices that we had before for getting break-even, but still this is not there. So consequently, I don't think we are going to reach that level in the second quarter, but we think that we may reach it in the third quarter. So gradually, just with the volumes increasing, with the measures in place, we are getting closer to it. Maybe we are able to match it maybe for the third quarter, but I don't think it's coming in the second quarter. So I think we probably need to wait a bit more.

and on your guidance?

Yeah, well, the guidance is for us in the levels we are, I think we give a clear color that we are going to be better performing in the second quarter. what is a good demonstration of comfort with all the issues taking place. So in the energy crisis we are in, with all the uncertainties that are all over the market, a cyclical company giving indications of improvement, we think it's a good sign of trust on our recovery. I... I am not uncomfortable with this level you are giving. We may be there. Let's see what happens. Let's see when the situation is solved. But now we are seeing all the contingency plans that all the industries, all the countries are having with the absolute uncertainties of how is going to be the energy situation. So it's difficult to be more precise in giving an exact number. But we are comfortable with an improvement. If the field where we are now is the 120 million, I have no problems on you keeping that figure. But I cannot be more precise purely because still a lot of issues are in place and who knows what may come in. But I am not uncomfortable with that figure.

Okay, very clear. Thanks so much, Miguel.

Our next question comes from Dominic O'Kane from J.P. Morgan. Dominic, your line is open. Please go ahead.

Hello. Thank you for taking my questions. I have three short questions. So just maybe on the commentary around the pricing structure for Europe and the base plus transaction, Could you maybe just clarify what percentage of your order book currently is on a base plus transaction basis? And as you said, your comments are that you're looking to change the structure so that it's more skewed back towards base. If you could just help us think about the structure of your order book currently.

Yes, in a market where the imports have been reduced at levels of 14%, it's much more simple now that in the new negotiation for future deliveries, the European structure of the base place plus extra is respected. So the point is clear in the orders that we're taking in the second half of last year when everything was tough and still the imports were there. That was much more difficult. Nowadays it's more simple. So gradually we understand that we are going to be rich there. So this is something that clearly is improving because, as we have said before, the feeling, the sensation is positive in the market. And with the new volumes in place, with the reduce of competition from imports, this is much more simple now.

Okay. I mean, if I estimate, is it less than 30% or is it around 30%? Is it possible to quantify it?

I don't have the figures. I don't think we have the figures currently. We are in that mood. So let's say that we are there, but we cannot quantify it. Okay, cool.

I just have two other questions. You made the comment around about the Middle East impact at €2 million in March. Arguably, the backdrop has maybe improved since March, given lower gas prices. Is that the same type of number we should maybe expect for April and May?

Yeah, well, yeah, we think that for your numbers, you can estimate between mid single digit to high single digit for the whole quarter.

Excellent. Thank you. And then final question on just on the outlook, specifically digging into high performance alloys. So the Q1 13 million headline EBITDA was maybe a little bit weak. As we think about the outlook for Q2 and for the remainder of 2026, do we think we can return to the same level of reported performance of maybe Q4 or Q1 2025, so in a range 30 to 40 million? Should we think about that being a kind of a realistic run rate for the next couple of quarters?

Gradually, yes. Maybe for the second half of the year, yes. In transitioning for the second quarter. So the contribution in HPA in the last year was highly covered by the European HPA, lower contribution from the American one. This year is going to be just the contrary. So So the European more exposed to the oil and gas is contributing less. And gradually, the American contribution is going to be higher. So it's going to improve. As we said, the top of the cycle probably has been the first quarter. It shall be improvement in the second quarter and reaching equivalent figures to the ones you are mentioning for the second semester.

That's really helpful. Thank you.

Our next question comes from Maxime Kogue from Otto BHF. Your line is open, Maxime.

Please go ahead. Yeah, good morning. Good morning, Glenn. So two questions on my side. Yeah, the first is about the Middle East conflict and its implication on the oil and gas end market within HPA. Since the conflict is driving higher oil and gas prices, it will also trigger reconstruction needs in the Middle East. So do you expect HPA to potentially benefit from that and when, if that's the case? Okay.

Well, I would say the Middle East conflict is very uncertain. So it's very uncertain when it will end. And still, all these projects on oil and gas are long-term projects. We are not yet really seeing a recovery on the oil and gas. All with regards to investments, I think it's in a wait-and-see. Of course, when it comes to the end of the conflict and all of these needs to restore, we expect a benefit from that. But we cannot say now that we are yet seeing it. Of course, it will come, but not at this moment.

Okay, that's clear. And just a second and last one is on CAPEX. So I think the Q1 numbers still included a big last payment for the NAS expansion line. So from now on, should we expect CAPEX to step down from Q2 onwards, given that this big project is now behind?

Well, really the CAPEX, because of all the CAPEX that we have in place right now, with the combination also of Haines starting the buildings and constructions, more or less the figure that we expect for the second quarter will be more or less similar. As we said, we are in a strong phase of CAPEX. Last year we did 311. This year we will be maybe a little bit lower than the 300, but that's more or less stable. And we will be moving some of the CAPEX that now has been focused on NAS and is finishing in NAS. We will be moving to our high investments that we have in Haines with the starting of the buildings and structures. So we don't expect the CAPEX to reduce a lot for the second quarter.

Okay, thank you.

I would now like to hand back to Borja for any written questions.

Thank you very much. Most of the questions coming from the website were answered during the presentation and the Q&A session. So with all this, I just want to thank all of you for coming and joining us on this call. And as a final note, also take into account that our Q2 results presentation will be on July 24th. Have a good day and thank you very much.