Eregli Demir Celik Un/Adr

Ladies and gentlemen, thank you for standing by. I am Paulina, your chorus call operator. Welcome and thank you for joining the Erdemir conference call and live webcast to present and discuss the first quarter 2026 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, Erli Demir Celik Fabrikalaritas Erdemir 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 Soud's 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 arguing 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's 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 subjective evaluation. Therefore, it should be noted that when a party is coming to a judgment based on estimates and forward-looking statements, our company may not have made revision at the particular time. Our company makes no commitment to make regular revision, 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, Investor Relations Director. Ms. Ergin, you may now proceed.

Thank you very much Fulna. Good afternoon everyone. Welcome to our conference call and webcast of Algenist for the first quarter of 2026. 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 two related commodities and HRCs. Let's take a look at Colt & Cole, Arvinor, Scrap and HRC prices. In the first quarter of 2026, the cotton coal market displays a volatile outlook, caused between weak steel demand and seasonal supply-side developments. Throughout the quarter, the slowdown in steel production in China, weakness in the construction sector, and lower than expected end-user demand, limited demand for cotton coal. Accordingly, Coca-Cola fluctuates in the range of $218 and $253 per ton and close the quarter at around $240 per ton. I don't know if prices followed a similar trend to the previous quarter in Q1 2026, but fundamental dynamics remained weak. While prices remained resilient around $105 per ton, they fluctuate between $96 and $110 per ton throughout the quarter due to the impact of geopolitical uncertainties. High port inventories in China which are still production compared to the previous years and new supply expectations puts downward pressure on prices. Turkish scrap import prices gradually increased throughout the quarter ranging from $370 and $398 per ton and rose about $400 per ton by the end of the quarter due to the impact of tensions in the Middle East. On the bottom left, we show HRT prices in Black Sea, China and South Europe. The global outlook for the first quarter of 2026 was shaped by geopolitical risks, uncertainties in trade policies, and monetary policy expectations. Regional divergences became more pronounced in the global HRC market during the first quarter. In Europe, prices were determined more by regulations and supply expectations than by demand. Seabank and freight measures made imports more difficult, raising the price expectations of domestic producers. On the Chinese side, the market is caught between policy expectations and weak domestic demand. On the other hand, in Turkey, the cost-demand balance determines the pricing. While the upward trend in the Turkish market is expected to continue as uncertainty persists in global markets, it also seems likely that changes in trade flows due to the war will support the Turkish steel market. Turkey's trade advantage and access to nearby markets supports its competitiveness. On page 4, you will see the production, consumption, exports and import figures of Turkish steel market. In the first two months of 2026, Turkey maintains its position as Europe's largest and world's seventh-largest crystal producer. In the January-February period, crystal production increased by 5% to 6.4 million tons, and this growth reflects resilience in domestic output despite the challenging global steel market conditions. Going back to the slide, while production remains at the same level as last year, domestic spill consumption continues its upward trend, rising by 3% to 6.7 million tons in the first few months of the year. Imports and exports decreased by 13% over the same period. As a result, the export-import coverage ratio remained at 74% in the first two months of 2026, the same as the previous year. The UAE remains Turkey's largest export market in the first two months, followed by MENA and CIS. Despite the annual decrease, China faced the largest supplier of flat steel products in the first few months, and China was followed by South Korea, Russia, and Malaysia. The increasing impact of the EU's carbon border adjustment mechanism, CBAM, in 2026 has made carbon intensity a more prominent striking factor in steel imports. The new safeguard measures expected to come into effect on July 1st are anticipated to be detailed on a country-by-country basis in the coming days, which is expected to eliminate uncertainty. So let's take a look at the financial results and operational metrics on page 6. You will see the summary of our first-class results. We achieved $1.4 billion revenue, also we generated $137 million EBITDA and $9 million net profit. On page 7, you will see the operational indicators of our company. Following the commissioning of the last two investments in our investment package in the second quarter of 2025, Our crude fuel capacity utilization ratio has gradually increased since then and reached 96%. Accordingly, sales and production levels returned to their normal levels. Supported by strong demand, we achieved sales of 2.1 million tons in the first quarter, and we aim sales volumes of over 8.2 million tons in 2026. So let's take a look at the segmental 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 distribution chains, general manufacturing, and auto to Python profile on a percentage basis. We see similar changes between sectors in the wrong product, although its share in total sales is relatively small. Our export volume was 312,000 tons in Q1, representing around 15% export share in total sales. Although our main focus is the domestic market, we also consider export as an alternative market. This year we aim to keep the share of exports in total sales in the 10-15% range. On page 9, you can find a breakdown of revenue for domestic and export sales. 84% of the revenue comes from domestic sales, which is in line with the domestic volume. Despite import pressure in the domestic market, we achieved to generate $137 million EBITDA. We generated $73 EBITDA per ton in three months. Our EBITDA per ton guidance for 2026 stands in the range of $75 and $85 per ton. In the coming quarter of 2026, We expect Elisa Percon to increase through cost reduction and increase efficiency resulting from newly commissioned facilities, also increasing HIC prices and our companies increasing sales volumes. The company returned to net profit once the impact stemming from cancellation of inflation accounting disappeared. We generated $9 million net profit in the first quarter of 2026. On page 10, you can see how we reached a net profit from Edista. One of the largest items was depreciation, which was $82 million in the first quarter. The other major item in the chart was financial expenses of $54 million. The tax expense amounted to $11 million, and after other expenses, net profit was $9 million. In the graph below, you can see a bit of a change in cash bridge. Our net working capital increased compared to the fourth quarter due to the decreasing inventories and increasing trade payables. Also, we spend around $70 million to investment activities in three months. This amount also includes capex and advances paid for capital expenditures as well. The reason for the change in credit payments is that we paid off our maturing financial debt to reduce our credit interest costs. On page 11, we will see the historical frames of financial borrowings and net debts.

As you can see in the financial borrowing chart, our financial borrowings have decreased by the amount of our credit payments.

When we look at the first quarter, our net working capital decreased compared to the fourth quarter due to the decreasing inventories and increasing trade tables. We managed to achieve a net debt EBITDA of 1.25 multipliers at the end of the quarter due to the decrease in working capital and the increase in LTM EBITDA. We expect to keep the net debt EBITDA around 1.8 multipliers in 2026. Slide 12 represents our cost of sales breakdown. There has been no significant change in our cost breakdown since Q4. In the second quarter, our cost of sales will increase due to the energy and freight costs and insurance costs. However, sales price increases will offset these increased costs. Page 12 represents the historical capital expenditure. Total capex was $775 million in 2025 and $147 million in the first quarter. We expect that capex will be approximately $600 million in 2026 with maintenance and other ongoing investments. 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, the figure is grill-based and the cash outflow will be lower due to the advance payment. And lastly for the goldmine, as you already know we announced the inferred resource in November 2025 and we expect that the reserve announcement for the goldmine to be made in the second quarter.

Investment decisions for the goldmine will be made after the announcement is shared.

So, 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 plant, is planned to be partially commissioned by the end of 2026. So 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 1 on their telephone. If you wish to remove yourself from the question queue, then you may press star and 2. Please use a headset when asking your question for better quality. Anyone who has a question may press star and 1 at this time. One moment for the first question please. The first question is from the line of Alain Gabriel with Morgan Stanley. Please go ahead.

Yes, good afternoon, and hi, Idil. A couple of questions from my side. Firstly, on the guidance which you've just referenced of $75 to $85, we have seen a very steep increase in Turkish steel prices across both flat and long products. And given your relatively shorter lead times, one would have expected a quicker pass-through to your margins, and yet the guidance has remained unchanged. Can you share with us a bit more color on the building blocks of the average selling price going forward versus the cost movement that you have referred to in your presentation? That's my first question. Thanks.

Hello, Alem. So, thanks for the question. Yes, I just shared the EBITDA guidance as 75 to 85 dollars per ton, which is exactly the same what I shared at the end of the year. So we decided to keep that EBITDA personal guidance just because we can only see the second quarter results right now. So yes, it looks that EBITDA will be higher in the second quarter. As you already know, our sales order book is full for two and a half months. So it means that we already closed the second quarter. That's why we have enough information About the sales prices in the second quarter and the cost for the second quarter. So I can easily say that in the second quarter our EBITDA per ton will be higher. And of course from the spot market we follow the spot prices for the third quarter. But yet, we didn't start to sell for the third quarter. That's why we didn't revise the guidance, so we just would like to see the third quarter results, or at least when we start to selling the third quarter, we will be more relaxed, we will be more comfortable when we decide to revise our edict approach on guidance. Just to be cautious or just to be conservative, let's say, we decided to keep our Ebitda personal guidance, same as we shared on the last part of this conference call. So, the second part of your question, yes, we are expecting higher sales prices, and actually we expect gradually increasing in each quarter during the year, but also we expect higher costs. Due to the war, we will see increasing energy prices, we will see increasing the freight and insurance costs. But because the freight price is increasing more than the cost increase, we believe that we will offset the increases in the cost. So we believe that EBITDA per ton will also increase gradually. But again, we have only the visibility for the second quarter, but we didn't start sell the third quarter yet. So we just try to stay on the cautious side.

Thank you, that's very clear. And to follow up on that question, I guess, on the conflict in the Middle East with energy costs, consumer retrenchment, and the broader impact on your business, can you give us a bit more color on how you're seeing this impacting El Demir? And on the flip side, are you seeing any opportunities to gain market share now that some of your competitors in the region, like Iran, for example, they have been cut off from the seaborne markets? How are you seeing this conflict shaping your business? Thanks.

Normally, at the beginning of the war, I was saying there will be no negative or positive impact due to the war for the Turkish steel producers. I'm not only speaking on behalf of our company, but also for the Turkish steel producers. But when you look at our results, especially the export ratio and the amount of exports, Actually there is a decrease when you compare with the Q4 results. So the increase comes from the semi-finished Gur, actually Slav, requests from the MENA region and we believe that this demand comes from the war because there is a demand for Slavs from the MENA region but because Iran lost its steel factories so We just increased our export share due to this slab demand from the MENA region. So that's the only thing I can say that maybe positively affected our results. But other than that, most of the analysts were asking if Chinese imports decreased due to the closing strike of Hormuz. But actually, no, there is no change because most of China's importers are not using straight-up polymers, same as our raw materials suppliers. So we also didn't have any magazine packs because of the Iran war. None of our raw materials suppliers use straight-up polymers, so there wasn't any problem. Thank you. That's very clear. I'll go back in the queue. Thank you. You're welcome.

The next question is from the line of Krishan Agarwal with Citigroup. Please go ahead.

Can you hear me? Yes, Kristen, we can hear you. Yeah, thanks a lot. Can you update me with the CAPEX guidance for the full year? I'm assuming that the CAPEX is continuing to come down also the last year. And also on a related note, how much of the EBITDA improvement we should expect because you are in the phase of commissioning the previous capacity expansion which you have done?

Oh, sorry, I just missed the second question.

How much of the EBITDA improvement we should expect from the commissioning of the new capacities in 2026?

Last year, after we commissioned the new facilities, we were saying that we are going to have a positive impact on our EBITDA per ton. Additional $20, $30, and $40 in each quarter starting from the third quarter of last year. So actually we are seeing the full impact of our newly commissioned investments, the plans, last term it's called batteries. So actually right now we are at the full impact of the Ebitda Proton You know, additional, we separate all from the new investments. And the first question, I'll just use the correct guidance. It seems to have around $600 million in 2020 speaks. So in the first quarter it was $147 million, which is in line with our yearly expectations of $600 million for the whole year.

I understand. And then also the steel shipments into the Q1, they were up 12%. So how should we think about the full year expectation for the steel production and the shipments for 2026?

So production and sale, they are highly correlated. So they are almost the same. So we produce and sale, I mean our order book is full for two and a half months. So everything we produce we directly sell it. So we said that we are expecting to have above 8.2 million tons for the whole year. So in the first quarter it was 2.1 million tons and we can just expect very similar figure for the second quarter as well. 2.1 million tons.

I understand. Thanks a lot.

You're welcome.

The next question is from the line of Paul Kirianos with Bank of America. Please go ahead.

Hi, Idil. Thanks for the presentation. This is Paul Kirianos from Bank of America. I just want to follow up on free cash flow. So free cash flow in the quarter was driven in part by working capital. Could you give us some color on how you expect working capital developing the rest of the year? Or asked another way, do you think there's more room to improve working capital from here? Thank you.

Thank you for the question, Paul. So, we expect working capital to remain stable, becoming quieter. In addition, we anticipate a slight increase in net debt due to the dividend payments and capital expenditures. But for the working capital, we expect to see this figure to remain stable and becoming quieter.

Okay, that's clear. And maybe another one if I can squeeze it in quickly. We noticed utilization has stepped up quite a bit from last year into quarter one. What would you say is the normal level of utilization ratio going forward?

What about utilization ratio you mean?

Yeah, correct.

Actually, our normal is above 95%, so we work with full capacity. But last year, there were some holes in the second quarter because of commissioning our new investments and uncommissioning the old facilities. So we lost a couple of days in the production. But other than that, our normal level is above 95%. So we can just assume that we will keep this level during the year.

Okay, that's very clear. Thank you.

You're welcome.

The next question is from the line of Evgenia Bistrova with Barclays. Please go ahead.

Yes, hello, good afternoon. Thank you for the presentation. I have just a few questions. My first one, could you please say again, repeat, what was your net leverage target for this year or where you see the ratio this year and also given that the company has been generating Thank you very much. Thank you very much. And EBITDA, for example, if there is like a 10% change in energy cost, what would be the impact on your EBITDA thinking? The impact in our costs from the increase in energy cost is around $7,000 roughly. So it's a manageable amount of increase actually. And first question, the leverage ratio, the target. Actually, we expect to keep the net net risk around 1.8 months by 2026. Right now it's 1.25 multiplied at the end of the first quarter and we did it due to the decrease in working capital and of course the increase in LTMX.

Thank you.

The next question is from the line of Cemal Demirtas with Arte Invest. Please go ahead.

Thank you for the presentation. My first question is about the sales volume trends. As you mentioned, in the first quarter, we have 2.1 million, and in the second quarter, it could be 2.1. Going forward, in the third and fourth quarter, should we expect some acceleration, or could we have an upside to that sales volume? up to 8.5 or 8.6, any possibility on that front. And I want to know related to this, did you import any flat at this moment in first quarter? And again, related to this, the pricing trends, we see that in your working capital, your inventory level is coming down and it's helping your net debt reduction. because of the lower net worth in capital. I want to ask inventory sites. In this environment, the prices are not declining. Are the amounts declining? What's the justification for this decline, especially on the inventory side? So I'm trying to see for the second quarter. And again, in this, related to this, do you think any pull-forward demand on the skill side happened so far as your order moves out here for 2.5 months, I understand. Could you give just some indication about the trends because the prices are increasing by 12%. Is it the maturity assume some significant improvement in second quarter or should we just assume that we are going to benefit in the, you know, It's a combination of questions. And the last one is about the management change. Recently you announced yesterday that two members of the board were replaced. And as far as I know the CFO and the acting executive The CEO, I guess, like Serdar, also resigned. Who's going to be the replacement? And could you give us the, you know, what's going to be the direction? I know that you're not, I'm not talking about the strategic direction, but who's going to be leading the company from now on? Thank you very much.

Hi Gemma, thank you for the question. So I'll just start with the first question. So yes, we sold 2.1 million tons in the first quarter and we expect to sell very similar amounts, 2.1 million tons in the second quarter. So when I gave the guidance for the whole year, I said we are expecting to have about 8.2 million tons. So it means that we might keep the level same as 2.1 million tons or we might have even higher challenges. Normally in the last quarter of the year, every year, we have the highest level of sales quantity in the whole year. So most probably the first quarter again will be the highest We didn't import any slabs. That was your second question. In the first crisis, there is no slab import. The inventory, yes, I mean our finished goods inventories are at historically low levels. We are also starting from inventory because the demand is strong. Therefore, our inventory levels have decreased. For the second quarter, you can see a few stable figures, very similar figures to the first quarter. And the sales prices, yes, we are seeing increasing sales prices in the Turkish market, same as you. So, as I shared earlier, we already closed the order book for the second quarter, but we haven't closed it for the third quarter. We are just trying to be conservative. That's why we're not getting any light from social expectations. But, again, I can simply say that we are expecting gradually increasing sales prices and EBITDA during the quarter for 2026. And the management change, yes, these kind of things happen in a corporate, so it's a professional decision of our management. There won't be any change in doing the business in In the working style, so the company, actually we already announced who came for the changes, who is the new executive manager. So it's going to be exactly the same business, doing business for others.

Thank you, Idil.

The next question is from the line of Maywas Zenandeh with UBS.

Please go ahead. Hi, can you hear me okay?

Yes, Zenandeh, we can.

Thank you for taking my question. I just wanted to clarify your comment about working capital remaining stable. It will remain stable and then we'll get a similar level of release in the coming quarter. And then just looking at your inventories which are near record lows as well as your payables increasing, should we expect a little bit of a release in the coming quarters, especially given the fact that you're planning on increasing your production and also given the fact that your inventories are currently at low levels?

I think we're not going to increase the production, so we are at the maximum levels. Our capacity utilization ratio is 96%, so we are already working with full capacity. And yes, our finished goods are at historically low levels, but because You will see very similar figures in Manchuria for the second quarter. So we expect working capital to remain stable in the coming quarters as well.

Okay, and I just wanted to clarify, maybe I missed it at the beginning, and then from the 1.3 times net debt that you have at the moment to your guidance for the four years, 1.8 times, what drives that?

We are facing a slight increase in net debt due to the dividend payments and capital expenditures.

Okay. Okay, that's fair. Thank you.

Good luck. Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Ms. Ergin for any closing comments. Thank you.

Thank you very much for joining us. We hope to meet you again at our second quarter conference call. Have a nice day. Thank you.

Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you for calling and have a good afternoon.