Aperam Sa Ord

Ladies and gentlemen, welcome to the Aperam second quarter 2025 results conference call. I am Matilde, the chorus call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and 1 on your telephone. For operator assistance, please press star and 0. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Timoteo Di Maolo, CEO. Please go ahead.

Hello, everybody, and thank you for joining our conference call today. All our comments were contained in the podcast that we published this morning. So, please, let's start straight away with the Q&A. Operator, please open the lines.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use only headsets while asking a question. Anyone who has a question may press star and 1 at this time. The first question comes from the line of Tristan Gresser from BNP Paribas Exane. Please go ahead.

Yes, hi. Thank you for taking my questions. I have two. The first one, could you discuss a little bit what happened in the Alois division? Has the problem been solved? And which facility was impacted? if you can maybe quantify the cost impact into Q2 and into Q3, and let's say there were not any type of effect into Q3, would you still have seen some softness in the alloys division, and maybe if you can talk a bit about the demand environment? I'll start there.

Okay. Thank you for the question. We have had, indeed, a failure in one of the plants we are not disclosing too much the detail as you can understand but it is something in the range of of the 10 million and half of it is repair and half of it is the loss of production and this will show up in q3 now Concerning the global market in alloys, there is part of the market which is still extremely strong, part of the market which has been impacted, slightly impacted by the stocking phase, and in particular some pyrospace. So it is what we see. But also, we see that the ramp up of the production in aerospace is happening. And so, the destruction will soon end with better volumes for us.

All right. That's clear.

To add on to that, Tristan, for the second part of the question, when you were asking about the color on the Q3 numbers for alloys, so Tim has explained the impact of the, repair and maintenance right so none of this is coming in q2 this will be coming in uh mostly in q3 and some of it going into q4 and uh in alloys in terms of numbers the colors you've asked uh the q3 is not a weakness per se in evada but more the Typical seasonality, because as you know, in alloys, we are in a growth phase, and we are producing at quite a high rate. And so the annual maintenance requires that we deliberately take down a certain seasonality during summer. And that's the reason for the projection of alloys, which we give in our podcast. And just to be very clear.

Yeah, so that's very clear, and thank you for that. And my second question is on Brazil. I mean, the U.S. has hiked the tariffs from 10% to 50%. There is some exclusion. Can you discuss a bit broadly of any impact for you? I know directly there might not be too much, but indirectly this would have a broader economic impact. So if you can touch on that. And would you expect Brazil to improve half on half into H2? Thank you.

So as you have correctly stated, there is no impact for us because we have focused Brazil on Brazil and on Mercosur. So it's not the United States which will impact directly our results in Brazil. What we see is that Brazil continue with a strong order book and with the level of price which are the international price very low. and continue to perform very well also because they are very cost competitive. Now, concerning the global economy, at this moment, it is difficult to say, but Brazil is not, let's say, the growth of Brazil in this moment, from what we see, is mostly domestic demand, not so much with the export. They export a lot of raw materials. I think the raw material, whatever happens in the duties will be exported, especially because they are going to China or Asia. And also with the food, all the agricultural product, I think they will always find the market. So I am not an expert. of the macroeconomy and the impact data in Brazil, but we are not expecting so much. Also, it is really, really early to see if this duty will become a reality, will be only a negotiation, let's say, tactic as it is for everywhere.

The next question comes from Tom Zhang from Barclays. Please go ahead.

Hi, good afternoon. Thanks for taking our questions. Two for me as well. Just following on from Brazil, you talked a little bit about some pricing risk into Q3 and then volumes. I think you said flat despite usually better seasonality. Could you just give a little bit more color around both of those points? Is there anything around mix? Is there anything around import pressure that we should be aware of there? And then the second question, if I can give it now, is just in Europe, whether you are getting to a point where you would start thinking about taking any capacity out meaningfully in Europe. Because I guess, you know, the demand situation still feels very difficult. Pricing pressure, you say, continues into Q3. How far away are we from the level where you would sort of, yeah, look to actively take out capacity as I think some of your peers have talked about? Thank you.

Brazil, let's see, I don't see the question of volume so much. I mean, volumes were good in the second quarter. Brazil will remain at full load in Q3. The seasonality of Brazil will start in Q4, and the low season will be in Q1, as you know. It's a bit different from Europe. So prices also, you remember that the way prices are built in Brazil is in function of the international prices. So we have had for longer today very low international prices. And then you apply the premium and continue to add the typical internalization, and this is the price in Brazil. But we don't see a major change in this pattern in Brazil. Now, if we are going to Europe, you are seeing structural. The Europe is already at a level of low volumes. This is due to the fact that we have had during the last, let's say, several quarters now, a decrease of the demand and the level of imports, which has always been important. Europe has the good part of Europe is that we are based on . And so we can adapt switching on and switching off our . We can adapt to the level of production. And on top, we have always said that part of the leadership journey has been to develop a model in which we have increased a lot the flexibility of the downstream. On top of this level of variabilization of the cost, which grant us the strong cost performance and leadership in Europe. On top of this, we have plans to continue, as it is part of the leadership journey, to continue to decrease structurally the cost. But it is not because of temporary volumes. We continue to follow our philosophy of leadership journey and continue to focus on the most competitive footprint in Europe.

Okay, that's clear. Thank you.

Thanks. We now have a question from the line of Adana Ekoku from Margaret Stanley. Please go ahead.

Hi, thank you for taking my questions. So first, just follow up on this alloys kind of asset repair. Will this have any impact on reaching the 100 million standalone EBITDA from the alloys division, excluding USAP? And then maybe just a second on USAP and if you could give any guide on the performance in the quarter, should we kind of just extrapolate the two month contribution from last quarter? and would that be a fair run rate for the rest of the year, or will we start to see kind of tailwinds from synergies and maybe a bit of the aerospace recovery as well?

Thank you. Yeah, so in terms of alloys, ex-USAP, yes, the performance continues to remain strong, so we said about a run rate of close to 100, and I think we should not see anything different from it, plus or minus 5 million, depending on how you know, orders move from one quarter to another, right? So that's the high level of expectation, so to speak. And in terms of USAP, I think the past run rate is a very good indicator. Tim's already given a good guidance based on how aerospace is looking up and aerospace this year, and that was kind of Tim's message, and I'm repeating it. Seems to be still slow. The expected pickup seems to be in the supply chain not happening, so that continues to be, but Thanks to synergies, but also the operational measures which we put in as APRAM working together with the new colleagues, we do believe that the run rate of the previous quarters can be definitely secured. So on the alloys front, I'd say that that's the summary.

That's really clear. Thank you.

We now have a question from the line of Maxime Kogge from . Please go ahead.

So good afternoon. So first question on my side is regarding recycling and renewables. Actually, the division has made a quite soft start to the year. So there, are you still targeting a kind of normalized EBITDA rate of 80 to 85 million euros as in previous rates, as in previous years? Sorry. And can you perhaps shed more light on the weakness? Is it only due to weak and less crap markets in Europe and the U.S., or does it extend to bioenergy and recycle as well?

So, first of all, it's not at all standing to be Energia. Energia is really a very stable, let's say, business, and typically, the Energia has some seasonal effect at the end of the year, so you see that typically, part of the result of the Energia are in the end of the year. What is happening in the scrap market is very clear. So scrap prices have declined sharply during the last six months due to the impact of the gap versus the raw material entering in Europe or being used by the Chinese. So it is a business in which you have in between inventories, so you continue to buy at a certain level and to sell at a level which is below, and this is the typical effect from this kind of business. On top, the offtake has been low in certain region, in particular in the south, for what I said before, because other competitors have raw material semi-products have been imported in Europe. So this explains the temporary situation of recycling.

Okay. And regarding the run rate of 80 to 85 million for the year, perhaps Sud can provide some insight on that.

Yeah. So, Maxim, the thing is that besides the two factors Tim has mentioned, what is actually happening and, You remember last year we did say that there was a certain slowdown and this is turned around. It's on the aerospace recycling side, which is our business. So on the year on a run rate basis, I don't see anything which will deviate us from that around that 80 million mark, which you're saying, again, give or take the plus or minus 5, 10%. So there's no significant discussions on recycling and renewables. So that's a good run rate to assume.

Okay, that's clear. And just a second last one question on CBAM. So you mentioned a potential start in 2026, but that would be step-by-step. I'm not sure to understand actually what you mean with the step-by-step approach. Does it mean that CBAM will only start very minimally, including just Scope 1 emissions at the start, and gradually we will have Scope 3 emissions being included? Because I know this is quite crucial for you to have these Scope 3 emissions included. or resource shuffling and downstream markets will perhaps also not be included initially but will then be taken care of what's your view and what's your expectations on that okay so let's start from coming back to the story of the seabed

For us, C-Balm is only a plus in the sense that C-Balm is not for us something which is linked to huge investment that have to be done to the decarbonizer, okay? So whatever C-Balm will bring will be positive. This is the first concept . Second concept is C-Balm will start January 2026, so we left an impact in January 2026, but today the CBAM has still parameters to be defined by the Commission. The Commission has been probably very busy into this trade war with the United States and has not published yet what are the criteria of the decibel. So, but first January 2026, it will start, okay? From January 2026, the counter of every ton, which will come in Europe, is started. For standard fill, recursive are included. So, not only the scope one, but also the scope three. What will be progressive is the application because there are parameters to have a gradual abandoning of the ETS to the full, let's say, application of the DC-BAM. This is public, okay, has been already published by the commission. You can find it. So it will be a progressive ramp-up. We don't know the parameters. If we had all the parameters today, we can, let's say, have a good estimate, but I repeat, whatever happens, it will be positive, okay? Some points, like the capacity shaft, etc., have to be solved. Yes, there are some loopholes, but this will not prevent to have a sebum which is favorable to the cleanest which are the European.

Okay, that's clear.

So thanks for all, and back to the Q. I think that we will have a better view on CBAM during Q4, and that's for the moment. For the moment, take in mind that this concept for us is a positive.

As a reminder, if you wish to register for a question, please press star and one on your telephone. We now have a question from the line of Bastian Sinagowitz from Deutsche Bank. Please go ahead.

Yeah, hi, good afternoon all. I've got a couple of questions, please. Maybe first one, just a quick follow-up on the CBAM situation. Tim, you mentioned that you don't actually at the moment have a perspective on the exact parameters. So what are the precise parameters or key parameters which are missing, basically, in terms of the whole CBAM discussion, i.e., has the actual benchmark already been set, and what are the other key parameters you're really waiting for? That's my first question.

if fundamentally fundamentally what is uh the benchmark has not been established and second what what will be the um the level of declaration how they consider it it will be country-based product-based it will be audited etc so all these parameters are not not yet there so it is a You will go to the website of the commission. You will see that it is a complex formula, what they apply. The concept is extremely simple, but then there is a complex formula because you have grades, you have precursors which are different, for example, between ferritics or stenetics, et cetera. So this is for carbon is much simpler. It is only the direct emission, and so there is no big calculation. But even for direct emission, this should be in favor of the European.

Okay. Okay. Thank you. Then maybe at least relate to that, listening to the podcast, you sound very, very confident and positive on guess the possible implications of the upcoming um european steel and metal action plan um maybe could you just spend maybe 30 minutes saying like why are you that confident and then also um maybe share your your views as to whether you think it's really realistic to see something on that front already kicking in in early 2026 rather than replacing the safeguards mid-2026? Is this really realistic, given all of the stakeholder involved, I guess the Parliament approval, et cetera? That would be helpful. Thank you.

So, why I'm confident, because so many years that we are working with the European Commission, it's the first time that the European Commission has fully understood the magnitude of the problem and the issues that are into the industry, the global industry of Europe. So now they have understood. Not only they have understood, but they have also engaged. They have never engaged before, except in Sibam. Sibam, at the end, is come. They have never engaged at all in all the other parameters. You say you know that there are six, part of the action plan. All these action plans are exactly what this industry needs. Example. Now, what is the closest one for sure is CBAM and trade defense. On CBAM, I have already explained. On trade defense, what we are expecting is the renew of the safeguard. The previous one has been ineffective, at least for us. But the new one, and this has been supported by many important member states, has the potential to be really a game changer. When it will come, for sure it will come in 26. We will not have an impact in 2025, but we will have for sure an impact in 2026. We hope that it will be at the beginning of 2026 as the member states are asking to the commission. Let's see, but I'm confident that this will arrive. On top of this, we are working specifically for stainless steel on other files that are ongoing and that will address further the level playing field. I cannot promise anything on 25 because nothing will happen on this part, but I am really confident in 2026.

Okay, thank you. And then very last question, and I know it's very early, but I mean just already thinking about the possible moving parts also into the very last quarter of this year, I guess you clearly highlighted the operational issues in Alois. I think from my understanding most of that should be should be fixed. There's European seasonality in your favor, I guess. There's probably Brazilian seasonality slightly against you. And then from, I guess, perception, usually, I guess a lot of the other businesses were typically a little bit more back-end loaded, particularly maybe also recycling. So, I mean, are there any points we are missing? Are there any things where you would maybe correct us a little bit in terms of how things may be playing out this year or anything which you would like to bring to our attention?

But then I think you've covered most of the issues. So, stainless Europe, yes, the volumes may be slightly better. Typically, it's been 5% or something, right, from Q3 to Q4. Remember also that in Europe, for example, at least December is half a month not there, right? So, that's always been the reason for the slightly lower increase. Brazil seasonality, Tim's mentioned that. Alloys, there's positive seasonality. Hopefully most of the effects of any one-time occurrences have gone away by then in Q4. Recycling renewables have given a clear guidance to Maxime. I think we've covered all the bases, so if the market persists like that, I think you have a good scenario to get out of, right?

Okay, very clear. Thanks so much.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Timoteo Di Maulo, CEO, for any closing remarks.

Okay. Thank you very much for your participation to this call just at the beginning of the holidays for many of the European at least. So you know that there is a very persistent in particular in Europe, in the market, et cetera. But we are really focused on continuing strengthening our sprint, continuing realizing the leadership journey gains that we have launched this way that we have launched nearly one and a half years ago. So this grants us that our footprint will be competitive and ready for any rebound of the market. At the same time, we are happy with the development of our alloys business. We are happy with Brazil because it's not only a performing unit, but it's also on a market which can give a lot of, let's say, satisfaction and with the forest on top. So we have a lot to be said, and we will meet a lot of you on roadshow during September and the conference also. So I wish you good holidays for those who go, and please contact our investor relations department for any feedback or any need that you want. Thank you very much and bye-bye.

Ladies and gentlemen, the conference is now over. Thank you for choosing Coral School and thank you for participating in the conference. You may now disconnect your lines. Goodbye.