Eregli Demir Celik Un/Adr

Ladies and gentlemen, thank you for standing by. I am Geli, your chorus call operator. Welcome and thank you for joining the Ed Demir conference call and live webcast to present and discuss the second quarter 2025 financial results. All participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a question and answer session. Should anyone need assistance during the conference call, you may signal an operator by pressing star and zero on your telephone. Please note, Ergil Demir Celik Fabrikalaritas may, when necessary, make written or verbal announcements about forward-looking information, expectation estimates, targets, assessments, and opinions. Erdemir has made the necessary arrangements about the amounts and results of such information through its disclosure policy and has shared such policy with the public through the Erdemir website in accordance with the Capital Markets Board regulations. As stated in related policy information contained in forward-looking statements, whether verbal or written should not include unrealistic assumptions or forecasts. It should be noted that actual results could materially differ from estimates taking into account the fact that they are not based on historical facts but are driven from expectations, beliefs, plans, targets, and other factors which are beyond the control of our company. As a result, forward-looking statements should not be fully trusted or taken as granted. Forward-looking statements should be considered valid only considering the conditions prevailing at the time of the announcement. In cases where it is understood that forward-looking statements are no longer achievable, such matter will be announced to the public and the statements will be revised. However, the decision to make a revision is a result of the subjective evaluation Therefore, it should be noted that when a party is coming to a judgment based on the unestimates and forward-looking statements, our company may not have made a revision at that particular time. Our company makes no commitment to make regular revisions which would fully cover changes in every parameter. New factors may arise in the future which may not be possible to foresee at this moment in time. At this time, I would like to turn the conference over. to Ms. Idil Onay Ergin, Ambassador Relations Director. Ms. Ergin, you may now proceed.

Thank you very much, Geli. Good afternoon, everyone. Welcome to our conference call and webcast of Erdemir for the second quarter of 2025. First, I will go through our master presentation, which you can find on our website, and you can also follow it through the webcast. And then at the end of this presentation, there will be a Q&A session as usual. So I'll start with page three. Our presentation consists of two sections, as you already know. The first one is the market overview and then the financial results. So let's start with commodity prices. On page three, you will see the prices of two related commodities and HRT. Let's take a look at caulking coal, iron ore, scrap and HIC prices. In Q2, caulking coal prices ranged between $170 and $196 per ton. At the beginning of the period, prices were supported by gradually increasing steel production in China. Mine maintenance shutdowns in Australia and logistical disruptions which together caused supply constraints. Toward the end of the quarter, stimulus expectations and refund pledges from China created short-term optimism in the coking coal markets. Tariff-related actions also had an impact on the coking coal markets. I know prices moved between 92 and $105 per ton in the second quarter. This volatility was primarily driven by the global trade tensions, uncertainties regarding China's economy, and disruptions in the supply-demand balance. In recent weeks, Prices climbed back above $100 per ton, supported by China's announced stimulus measures and strong trade volumes. In the second quarter, Turkey's imported scrap market showed generally weak performance due to cautious purchasing behavior by producers and strong supply pressures. Scrap prices fluctuate between $325 and $379 per ton. On the bottom right, we show HIC prices in Black Sea, China, and South Europe. In Q2 2025, the global HRC market experienced a downward trend amid weak demand, rising cost pressures, and protectionist trade policies. Despite stimulus measures, signs of recovery in China remained muted, while high U.S. tariffs and protectionist policies in Europe suppressed global trade. In Europe, the CBAM, Carbon Border Adjustment Mechanism, implementation and restocking needs could support prices after summer. On page 4, you will see the production, consumption, exports and imports figures of Turkish steel markets for the first half of 2025. While production increased slightly by 2% and consumption decreased by 3%, exports of steel products grew by 18% in volume during the first half of the year and reached 7.7 million tons. Imports also increased by 13% to 9.3 million tons over the same period. mainly driven by higher semi-finished product imports. As a result, the export-import coverage ratio, which was 74% in the first half of last year, increased to 80% in the same period of this year, thanks to the upward trend in exports. The tariffs imposed by the US during the Trump administration have continued to offer Turkish producers a more competitive environment. The US reached agreements with some countries, with many countries, however still was generally excluded and remains subject to 50% tariffs. Asian countries have been the most negatively affected by this policy. These countries may increase their exports to less protected markets. In addition, there is an increasing momentum in the EU to expand and reinforce safeguard measures across a wider range of steel products. Although Turkey continues to hold the largest quota for hot-rolled coal and remains as a primary import source, the evolving policy environment may lead to more restrictive conditions for exporters in the near term. So let's take a look at the financial results and the operational metrics. On page 6, you will see the summary of our six-month results. We achieved $2.5 billion revenue. Also, we generated $217 million EBITDA and $46 million net profit. On page 7, you will see the operational indicators of our company. As we announced in the second quarter, we commissioned Erdemir's coke battery and the Istemir's blast furnace, which are the last two investments of the current investment package. Due to the nature of integrated production processes, output declined during the transitional period of decommissioning old facilities and the commissioning of new ones. Although our crude steel capacity utilization rates appear to have weakened due to the planned maintenance in the first quarter and transition efforts in the second quarter, these rates still remain above the global average. We expect capacity utilization rates to return to their previous performance by the third quarter. The main reason for the decrease in sales damage in the second quarter was that road transport could not be carried out legally due to the AIDS holiday. So we expect total sales to be close to 8 million tons in 2025. So let's take a look at the segmental breakdown of domestic sales and export volumes in page 8. As you can see from the pie chart, there has been a slight change between sectors when we compare to last year's breakdown. There has been a transition from general manufacturing to pipeline profile and distribution chains on a percentage basis. We see similar changes between sectors in the long product, although We achieved an export volume of 483,000 tons in Q2, representing 27% export share in total sales. This figure is the highest export rate in our history, despite the challenging market conditions. Although our main focus is the domestic market, we are also increasing the export share due to the attractive demand and good prices in the export markets. On page 9, you can find breakdown of revenue for domestic and export sales. 75% of the revenue comes from domestic sales in line with the domestic molding. We generated $64 EBITDA per ton in Q2. As there is a clearer outlook for the second half, we have revised our 2025 EBITDA per ton expectation to $70 per ton. Despite import pressure in the domestic market, we achieved to generate $217 million EBITDA and $46 million net profit in the first half of the year. On page 10, you can see how we reached to net profit from EBITDA. One of the largest items was depreciation, which was $129 million in six months. The other major item in this chart was financial expenses of $117 million. After other expenses, net profit was $46 million. The inventory provision release of $10 million is not included in EBITDA calculation since it is a one-off adjustment. While calculating the net profit, $10 million of the consolidation classification arises from additional inventory provision release. In the graph below, you can see EBITDA to change in cash bridge. Our net working capital increased compared to the first quarter due to the expansion of the trade payables maturity. Also, we spend around $242 million to investment activities in six months. This amount also includes capex, advances paid for the capital expenditures, and sale of commercial offices for investment properties as well. On page 11, you will see the historical trend of financial borrowings and net debts. As you can see in the financial borrowings chart, the share of short-term debts in total debt decreased to 21% in Q2 with the support of $950 million euro bond issuance. When we look at 2025, our net working capital decreased due to the expansion of the trade payables maturity. Despite high capital expenditures, we succeed to keep net debt EBITDA below 3, 3 multiplier in the first half. We expect to keep SNPED EBITDA ratio below 3.3 multiplier for 2025. Slide 12 represents our cost of sales breakdown. Due to the decrease in coal prices, the percentage of caulking coal costs decreased in raw material baskets, which is in line with the trends in raw material baskets, raw material markets. Page 13 represents the historical capital expenditure. Total capex was $1.1 billion in 2024 and $521 million in the first half of 2025. As I mentioned earlier, the new first-blast furnace in Üstdemir and No. 4 coke battery in Erdemir was commissioned in the second quarter of this year. Other than these, investments such as pelletizing plants, solar power plants, and energy efficiency investments are included in the capex figure of this year. We expect that capex will be around 800-806 million dollars as we shared earlier in 2025 with maintenance and other ongoing investments. So maintenance will be around 50-80 million dollars per year as usual. As we announced earlier if the reserve It could rise up to a billion dollars. As you already know, we announced our next year roadmap last year in January. We plan to spend 3.2 billion dollars by the end of 2030. 70-80% of that amount will be stored externally, utilizing easily accessible financial resources for the green transformation. Erdemir and İstemir's crude steel capacity will reach 13 million tons by 2030. Now we may continue with Q&A session. We will be delighted to answer your questions. Thank you for listening.

Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their telephone. If you wish to remove yourself from the question queue, then you may press star and two. Please use your handset when asking your question for better quality. Anyone who has a question may press star and one at this time. One moment for the first question, please. The first question is from the line of Faircloth Jason with Bank of America. Please go ahead.