Eregli Demir Celik Un/Adr

Ladies and gentlemen, thank you for standing by. I'm Polina, your chorus call operator. Welcome and thank you for joining the Erdemir conference call and live webcast to present and discuss the full year 2025 financial results. All participants will be in a 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, Ereli Demircelik Fabrikalaritash may, when necessary, make written or verbal announcements about forward-looking information, expectations, 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 taken into account the fact they're 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 not longer achievable, such matter will be announced to the public and the statements will be revised. However, the decision to make revision is a result of a subjective evaluation. Therefore, it should be noted that when a party is coming to a judgment based on the estimates and forward-looking statements, our company may not have made a revision at this 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. Evil Onay Ergin, Investor Relations Director. Ms. Ergin, you may now proceed.

Thank you very much, Polina. Good afternoon, everyone. Welcome to our conference call and webcast of Erdemir for the last 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. Then at the end of this presentation, there will be a Q&A session, as usual. 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 the commodity prices. On page 3, you will see the prices of steel-related commodities and HRC. Let's take a look at coking coal, iron ore, scrap, and HRC prices. In the fourth quarter of 2025, the coking coal markets experienced their strongest price period of the year, despite weak steel demand and low profitability. During this period, caulking coal prices averaged around $200 per quarter, while closing the year $218 per ton, above the annual average. Iron ore prices showed more resilience in the fourth quarter compared to the previous quarter, fluctuating between $102 and $109 per ton, and stabilizing at an average of $106 per ton. Uncertainty regarding demand from China and straightening global supply, the ability of Chinese producers to maintain production at a certain level, along with the speculative pricing, kept prices mostly above $105 per ton. It is expected that iron ore prices will remain sensitive to stimulus expectations and policy news from China in the short term. Despite buyers' cautious stance, seasonal supply constraints enable suppliers to maintain a firm position resulting in Turkish imported scrap prices closing Q4 at an average of $359 per ton above the annual average. While there was no sharp decline in scrap prices throughout the quarter, a clear wait-and-see sentiment prevailed in the market. On the bottom right, we show HRC prices in Black Sea, China, and South Europe. The global HRC market has left behind a period in which protectionist measures and trade policies became more decisive. The European Union's steps to reduce import quotas and uncertainties surrounding sea import appetite while gradually increasing the bargaining power of European producers. In Asia, HRT prices remain fragile due to low demands from China and policy uncertainties, while a flat positive but cautious outlook prevails in the global HRT market. Q4 market expectations converge and reveal that as we enter 2026, The impact of protective measures will be felt more clearly, and prices will be shaped by a cost-based search for equilibrium. On page 4, you will see the production, consumption, exports, and imports figures of 30 steel markets. In December, Turkish crude steel production rose to 3.5 million tons, representing a 7% increase compared to the previous month, and 19% rise year on year, reaching the highest monthly output of the past 15 years, according to the official data from the Turkish Steel Producers Association. This growth reflects resilience in domestic outputs despite the challenging global student market conditions. Going back to the slide, while production and consumption rose by 3%, exports of steel products grew by 13% in volume during the year and reached 15 million In the January-December 2025 period, the European Union continued to be the leading export destination with a 37% annual growth, while the MENA region ranked as the second largest market. Imports also increased by 9% to 19 million tons over the same period. As a result, the export-import coverage ratio, which was 74% in 2024, increased to 78% in 2025. It was observed that the total imports were largely realized under the inward processing regime, As we shared in the last quarter's call, with the circular published by the Trade Ministry on September 16, 2025, it was made mandatory for 25% of the input of products processed to export to be supplied domestically. This change was welcomed in terms of domestic silk production as a result Total flat product imports in December decreased to 653,000 tons, down 23% compared to the previous month, and 12% compared to the December 2024, marking the lowest monthly level recorded in the past nine months. In the context of global steel trade policy, the European Union and other major markets have implemented or proposed enhanced safeguard measures to counteract increasing import pressures. The European Commission has moved forward towards tightening steel import quotas and increasing out-of-quota duties, including potential reductions in tariff-free quota levels and higher tariffs for excess shipments, steps aimed at protecting domestic industries and reducing reliance on imports. Asian countries, which have been the most negatively affected by this policy, increased their exports to unprotected markets. So let's take a look at the financial results and the operational metrics. On page six, you will see the summary of our 12-month results. We achieved $5.3 billion revenue. Also, we generated $501 million EBITDA and $13 million net profit. On page seven, you will see the operational indicators of our company. Following the commissioning of the last two investments in our current investment package in the second quarter of 2025, our crude steel capacity utilization ratio, which was 75% in the second quarter and 90% in the third quarter, increased to 95% in the fourth quarter. Accordingly, sales and production levels returned to their normal levels. For demand, we achieved sales of 2.2 million tons in the last quarter. Sales volumes of over 8.2 million tons in 2026. So let's take a look at segmented breakdown of domestic sales and export volumes on page 8. As you can see from the pie chart, there has been a slight change between sectors when we compare it to last year's breakdown. There has been a transition from general manufacturing and auto to pipeline profiles and distribution chains on a percentage basis. We see similar changes between sectors in the long product, although its share in total sales is relatively small. We achieved an export volume of 1.5 million tons in 2025, representing 20% export share in total sales. Although our main focus is the domestic market, we also consider export as an alternative market. On page 9, you can find a breakdown of revenue for domestic and export sales. 79% of the revenue comes from domestic sales in line with the domestic volume. Despite import pressure in the domestic market, we achieved to generate $501 million EBITDA. We generated $64 EBITDA per ton in 12 months. Our EBITDA per ton guidance for 2026 stands in the range of $75 to $85 per ton. In 2026, We expect EBITDA per ton to increase through cost reductions and increased efficiency resulting from newly commissioned facilities, increasing HIC prices, and our companies increasing sales volumes. We generated $13 million net profit in 2025. As a result of legislative amendments stating that statutory financial statements will not be subject to inflation accounting, the deferred tax income recorded in March, June, and September financial statements was reversed. Despite the increase in EBITDA, this non-cash item had a negative impact on net profit in Q4. On page 10, you can see how we reached net profit from EBITDA. One of the largest items was depreciation, which was $278 million in 12 months. The other major item in this chart was financial expenses of $206 million. Due to the increase in deferred tax expense following the cancellation of inflation accounting, The tax expense amounted to $76 million. Excuse me, $76 million. And other expenses, net profit was, after the other expenses, net profit was $13 million. The inventory provision release of $26 million is not included in the EBITDA calculation since it is a bonus adjustment. While calculating the net profits, $26 million of the consolidation classification arrives from additional inventory provision release. In the graph below, you can see EBITDA to change in CashBridge. Our net working capital increased due to the expansion of the trade payables maturity, as we shared in our previous quarter calls. Additionally, a dividend payment of $43 million was distributed in the third quarter. Also, we spend around $483 million to investment activities in 12 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 historical trend of financial borrowings and net debts. As you can see in the financial borrowing chart, the share of short-term debts in total debts decreased to 25% in Q4 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 payables maturity. We succeeded in keeping net debt EBITDA below two multipliers at the end of the year. As a result of increased capacity and efficiency following the commissioning of our investments, EBITDA has increased. Therefore, capex decreased and the multiplier remains below two. We expect to keep the net debt EBITDA ratio around two multipliers in 2026. Slide 12 represents our cost of sales breakdown in 2025 compared to 2024 due to the decrease in coal prices. The percentage of corking coal costs decreased in the raw material basket, which is in line with the trends in raw material markets. Since we can see the costs in first quarter, will increase in the first quarter of 2026 due to the rising coal prices. This cost increase will be offset by an increase in sales prices. Page 13 represents the historical capital expenditures. Total capex was $1.1 billion in 2024 and $775 million in 2025. As a reminder, the new first blast furnace initiative The goldmine, as you already know, we announced the inferred resource in November, November 2025. We expect that the reserve announcement for the goldmine to be made at the beginning of the second quarter. Investment decisions will be made after this announcement is shared. We expect that CapEx will be approximately $800 million in 2026. with maintenance and other ongoing investments. Maintenance will be around $58 million per year as usual. Investments such as solar power plants, port and crane investments, and energy efficiency investments are included in the CAPEX figure of 2026. As you already know, this figure is accrual-based, and the cash outflow will be lower due to the advance payments. On page 14, just as a reminder, we announced our net zero roadmap in 2024. There are no changes to this roadmap, the details of which we previously shared. The first investment in this package, solar power plants, are planned to be partially commissioned by the end of 2026. Now we may continue with the 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 headset when asking your questions 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 FairCloud Jason with Bank of America. Please go ahead.