Earnings call transcript: Acerinox Q1 2025 results show strong cash flow amid market challenges

Acerinox reported its Q1 2025 financial results, highlighting strong cash generation and significant production increases. The company faces challenges in the European market, leading to a stock price decrease of 1.02% to 10.27. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculation, with a beta of 1.48 indicating moderate market sensitivity. The launch of the EcoAtherinox product and high capacity utilization in the U.S. were noted as positive developments.

Key Takeaways

• Acerinox generated €99 million in cash, nearly matching its EBITDA of €102 million.
• Production increased by 29% compared to the previous quarter.
• The European market remains weak, with increased import pressure and tariff uncertainties.
• The company launched EcoAtherinox, focusing on sustainability and innovation.

Company Performance

Acerinox demonstrated resilience in Q1 2025 with significant production gains and strong cash generation, despite facing a challenging European market. The company’s strategic focus on sustainability and innovation, highlighted by the launch of EcoAtherinox, positions it well in the North American and African markets, where it holds a strong competitive edge.

Financial Highlights

• EBITDA: €102 million
• Cash generation: €99 million
• Net debt: €1.2 billion
• CapEx: €57 million, an increase from €36 million in Q1 2024

Market Reaction

The stock price for Acerinox fell by 1.02% to 10.27, reflecting investor concerns over the weak European market and increased import pressures. This decline situates the stock within its 52-week range of 8.3 to 11.96.

Outlook & Guidance

Acerinox anticipates a higher EBITDA in Q2 2025 compared to Q1 and expects the first half of 2025 to perform similarly or slightly better than the first half of 2024. Analysts tracked by InvestingPro predict profitability this year, supporting management’s positive outlook. The company aims to achieve breakeven in its European operations by Q3 and targets a net debt/EBITDA ratio of 1.2x in two years, maintaining its overall FAIR financial health score.

Executive Commentary

"We are doing what we have to do. That is a focus on controlling the controllables," said CEO Bernardo Velasquez, emphasizing the company’s strategic focus amidst market volatility. Chief Corporate Officer Miguel Fernandez highlighted the company’s commitment to sustainability, stating, "Sustainability is in our DNA."

Risks and Challenges

• European market weakness and depressed prices.
• Increased import pressure and tariff uncertainties.
• Inventory adjustments impacting EBITDA negatively.
• Potential delays in recovery of the aerospace and industrial sectors.

Q&A

During the earnings call, analysts raised questions about potential market share gains from U.S. tariff protections, the delayed recovery in certain sectors, and the company’s working capital management strategies. Executives addressed these concerns, emphasizing their focus on managing volatility and strategic optimization.

Full transcript - Acerinox (ACX) Q1 2025:

Conference Moderator, Atherinox: Good morning, everyone, and welcome to the Atherinox First Quarter ’twenty five Conference Call. Today, the presentation will be hosted by our CEO, Bernardo Velasquez our Chief Corporate Officer, Miguel Fernandez and our CFO, Esther Camus. After our prepared remarks, we will open the line for questions. Before getting started, let me remind you that this conference call is being broadcast on our website at erinos.com. Now I would like to give the floor to our CEO, Bernardo.

Please go ahead.

Bernardo Velasquez, CEO, Atherinox: Good morning, everyone, and thank you for attending this presentation. Before I came here, I was reading the reactions in the newspapers saying something like, Afreno’s results are shrinking because of tariffs. This is not reflecting the reality. Stede and Miguel will explain later our financial data on why the profits are below Q1 ’twenty four, but this is not the situation. Remember, there was a correction in the market in Q4.

And as expected, we started this quarter recovering gradually, recovering step by step. March was a good month in order book. Our order book is in a healthy situation. And in the April 2, with the announcement of the Liberation Day with the tariffs, that created a lot of confusion. It doesn’t mean that the market shrunk again or that the market went down again.

The market remains stable at the level of March, for the news, waiting for the negotiation and waiting what’s going to be what can happen with the situations, supply chains and how the tariffs will affect the different markets. What can we do in this situation, in this scenario? First of all, as we present in this slide, is control the controllables. So we have to serve these big waves, and the best way to do it is monitoring our supply chains, keeping control of our business and keeping control of our working capital. I think this is something that we always try to show that we have experience in managing the volatility and the working capital is very tight control.

This is important. And once we have this, so we are always in a cyclical business, long term oriented and with a huge experience in this industry, focusing in our long term strategy, as you can see here. So we have released a plan to control our working capital that is working well. We will focus on this to reduce our debt. We are very happy and very busy integrating things in the organization.

Until now, it’s a real success. We are focusing in the strategic plan of Athenos Europe, trying to move to more added value material, the same that we are working in diversifying the production of Columbus to reduce the dependency of in our exports. We have a privileged position in United States where we are investing to accompany the American market. And we are growing in HPA, in BDM also because it’s a good business and it’s very healthy. So in general, the situation, so we don’t have to panic.

There’s a lot of news. There’s a lot of volatility, but we are very calm. I I think we have our business under control and it’s in a better situation. So we have been improving from January to March. March is at a good level.

Our order book is solid and this is what our results will reflect in Q2. So having said this, I will pass the floor to Miguel that will explain the situation in the different markets.

Miguel Fernandez, Chief Corporate Officer, Atherinox: Thank you. The most remarkable bullet points for this first quarter of the year. First of all, we must express the satisfaction on the EBITDA of €102,000,000 in the actual business climate as compulsive as it is. We have demonstrated once again our resilience. We are establishing at the bottom of our profitability of our quarterly profitability.

These trends of €192,000,000 in this quarter, 91,000,000 as the EBITDA adjusted EBITDA in the Q4 last year. So we are clearly given the consistency that what was previously our normalized EBITDA three, four, five years ago, now is more or less the sustained EBITDA we are keeping in the lowest part of the cycle or in the difficult times as has been this challenging first quarter. So this for us is extremely positive as is also extremely satisfaction our strong cash generation in the quarter. We have generated €99,000,000 of cash flow in a quarter in which production has increased 29%. In addition, we have been even able to reduce the working capital around €6,000,000 so which normally means a first quarter of normally increase our working capital, especially with such increase of production.

In our case, even we have been able to reduce it. So we are extremely committed for our working capital reduction program, and we are fulfilling all our targets. And this is something that obviously is going to keep consistency in the coming quarters. In addition, the net debt of the group, 1,200,000,000.0, you know that net debt never has been our strong headache. Our debt is extremely competitive.

We are obviously just including in all our debt all the acquisition of Heinz International. So we are there, but in this first quarter as a consequence of this strong cash flow, net debt has slightly increased around €75,000,000 keeping in mind that it’s a quarter with a dividend payment of €77,000,000 keeping in mind the strong CapEx in which we are involved with €57,000,000 keeping in mind also the conversion difference effect, which is strong in this quarter because, as you know, we have a strong cash position in The States. So the pure accounting conversion difference of our cash in dollars to the euros now in a stronger euro weaker dollar is creating this effect. So in this basis, there is nothing to be concerned about and this is the basis of the business. Gradually, as we announced, the net debt shall be reducing during the year.

In addition, it’s more easy to appreciate actually our strategic advantage compared with the industry in regarding the geographical diversification of our assets. We are producing in three different continents. We are not exposed to a single area recession, so consequently we can compensate with this. We are stronger obviously in America, which is the one keeping the better performance market in these days. But having this geographical diversification of assets in the new world, we are entering on with this strong relevance of the regionalization issues.

This is a unique opportunity probably among in our industry that we are having. As a consequence of all of these and especially keeping on in mind that with all these convulsive months we have experienced gradually in the quarter, but the situation is improving especially since March, We can very comfortably state that no doubt the Q2 EBITDA shall be higher than the Q1. If we go to the market highlights in this period, It’s very easy. We try to express in a visible way with dots more or less the favorable or the unfavorable fact taking place in each of our markets. So it’s very visible to appreciate that our main market, which is America, is where we have more positive dots.

We are probably neutral in the HPA business and definitely in the European market is where still we are not appreciating the green shots. If we go to America, basically there are three relevant facts. The inventories remain at very low levels. The prices remain stable and this stability for business climate is the most adequate also for the comfort of our customers. So this is a very positive fact in America.

And in addition, the Section two thirty two has been reset. So as a consequence of that, no exclusions and also introducing more final products. This is a very positive fact for the confidence of our customers. So these facts obviously are there. It’s true that the demand remains flat in The States, but any case with this demand we can leave easily and we probably shall be increasing our productivity in the remaining quarters of the year.

And the margin negative effect is that even in this basis, but at the end still the imports are gaining market share in The States. But for us, we are easily now growing the business in America and we are comfortable on that basis and improving. In the high performance alloys, depends on the final products. It’s more or less a stable market. There are strong sectors such as the electronic and automotive.

We are seeing a wait and see in the oil and gas. We understand that this is something that is more coming for the second semester as we are participating in relevant tenders and projects that probably shall materialize in the second semester. So in this regard, we keep comfort. And the sector that is obviously relevant as is the aerospace, the order book remains strong. The profit for the future is very solid.

But it’s true that the recovery after the disruptions in the supply chain shall be corrected gradually. So in this regard, we also feel comfortable. The sector that probably is more now painful on the HPA is the chemical process industries. As a consequence that the actual uncertainties on the market are postponing any decision on capital investments. And as I previously said, still we are not seeing green shots in Europe.

The prices remain extremely low. There are some markets that have been increasing imports mostly to markets. We have been appreciating imports in Italy and Poland. So in these markets, the inventories are a bit high, but in the rest of the markets, the inventories the European markets, the inventories remain more or less controlled. And still we are not seeing a reactivation of the demand in Europe, which is something that at the end is needed.

It should come. But still we have not seen the great shots in reactivation of demand. Esther shall explain now the figure for quarter.

Esther Camus, CFO, Atherinox: Okay. So going to the consolidated results of the group. Okay. As we announced when we presented the fourth quarter results, we are showing a recovery, a recovery in terms of EBITDA when we compare to the operating EBITDA that we have in the fourth quarter that we will come later. Going just line by line, if we start by production, we are increasing our production in the group by 29% compared to the last quarter, which is a significant figure.

But we have been experiencing a recovery in all our plants, but very remarkable the one in Europe, which has increased in almost 80%. If we go to sales, the sales increase has been lower than activity and this is mainly marked by two things. One is the reduction on the alloy surcharge in The States, okay, which is also affecting the margin. That is also compared to Q1 last year and also to this Q2 to the previous quarter. And also the higher sales in Europe, which are much lower prices and still depressed prices.

Okay? So that’s two effects that makes the sales to increase a little bit less. In terms of EBITDA, remember that our fourth quarter operating EBITDA was 91,000,000 It was affected by the reported EBITDA was different. It was affected by a lot of extraordinary effects, which amounted €59,000,000 being the main one, the sale of Baru. So comparing to that, we are increasing our EBITDA by 12%, okay, which is a recovery.

And what is very remarkable in the EBITDA is that if we when we look at EBITDA month by month, we are experienced an increase from January to February and being the best one March, both in sales, in margins and in EBITDA, okay? So and we are finishing March, as Bernardo said, with a solid order book, okay, which makes us be positive for the next quarter as well. Okay. In terms of EBIT and I think that is important to explain because in terms of EBIT we are reducing a little bit and that’s impacted by depreciation because of the acquisition of Haines, okay? If you in that regard, it is not only the depreciations of the pure depreciations of Haines, Haines is being consolidated fully this quarter, okay?

But it’s not only the depreciations of Haines, but it’s also the accounting standard, okay, that makes us evaluate the tangible and intangible assets at fair value. And that creates more depreciations for us. That’s impacting the EBIT. And in terms of results before taxes, we have also been impacted by the higher net financial debt, okay? That is reducing our because of the cash that we paid for the acquisition of HINGS, we are reducing our cash and therefore reducing our financial income, okay?

And that is making also the result before taxes to be reduced. But in general, we are presenting, we are seeing a recovery, we are seeing a recovery for the next quarter. And what’s more important is and what we are more proud about is the operating cash flow, okay? We are generating a cash flow of €99,000,000 in this quarter despite the increase on the activity, which is very remarkable. We are even reducing working capital in these circumstances and this is due to the success of the working capital management program that we are that we have launched in the group and that we are very committed with.

If we go to our divisions, okay, starting by stainless, production has increased, this 29% that already explained. Sales are affected, as I mentioned, by the lower lowest orders in the state and the low market prices in Europe. But even though compared to last quarter, we have increased 10%. The EBITDA of the fourth quarter is when we see the reported EBITDA is 126,000,000 but if we go to the operating EBITDA of the last of the previous quarter, it was €57,000,000 So we are also achieving a recovery in this quarter in terms of EBITDA. We are ending with a solid order book in The U.

S. For March that, as I mentioned, the activity has increased month to month and that is something very, very remarkable. We still see that for the next quarter. We continue focus on our strategy and cost efficiency plans, okay? And that’s enhancing our competitiveness and allow us to get better results in all the plants.

And the operating cash flow both in stainless and later we will see in HBA has been positive in both units ending with €41,000,000 operating cash flow this quarter. If we go to HPA. In HPA, this quarter fully incorporates Haines, okay? Remember that in the last quarter, we just incorporated one consolidated one month, okay? So that makes the figure not 100% comparable.

The decline in nickel prices is also impacting the margins in the HPA division. In terms of demand, the demand in Europe has been weak based on what Miguel has said. More or less, the customers are postponing all the capital investment projects, okay? So that’s affecting the sales in the European market. And in The U.

S, as Miguel has also mentioned, the recovery in aerospace has not yet comes, but this for us is not a concern, okay, because due to the long term order book that there is in the sector, we are still committed and prepared to deliver whenever the recovery comes that we expect possibly most for the second half of the year. Again, positive cash flow in that in this division as well and very remarkable the reduction in the working capital, okay, despite also the increase of activity by the 29%. And now going to the capital allocation and the cash flow, okay, we can see which is very positive that the full amount of the EBITDA is almost in the operating cash flow, has materialized in operating cash flow. The working capital has decreased in €6,000,000 which is remarkable as we have all said in an increase with that big increase of activity. Also, want to highlight the financials and others, okay?

Despite the increase on net financial debt and the reduction of cash, we still have six only a consumption of €6,000,000 of our cash in interest. We have not this quarter has not been affected by significant payment of taxes. And therefore, we have had an operating cash flow of this €99,000,000 that we are announcing. Regarding CapEx, our CapEx has been €57,000,000 which was €36,000,000 in the Q1 twenty twenty four. We are on an expansion phase.

And our strong balance sheet allow us to continue with big CapEx despite being the lower part of the cycle. So we are investing also in the lower part of the cycle and being prepared for when it comes to recovery. The free cash flows have been €42,000,000 We have paid €0.31 per share in January, okay? The next payment will come on dividends. The next payment will come in July.

And these €40,000,000 that we also need to explain, this our cash in North American stainless have been negatively impact when converting into euros due to the weaker to the weak U. S. Dollar, okay? And all with that, we have ended with a net financial debt of €1,200,000,000 So I think that proud of capital cash generation, okay? And that’s more or less what we have achieved in the quarter.

And going sustainable development, Miguel?

Miguel Fernandez, Chief Corporate Officer, Atherinox: Yes, sure. We shall report on semester basis all the KPIs in sustainability. In any case, we wanted to include, yes, 10 programs developed in the first quarter on different sustainability areas, sustainability is on our DNA. But the one today we are probably want to give also more relevance is the successful penetration in the market of the Equatorinox. So at the end in this product adding the traditional virtues of the stainless of quality, durability and recyclability.

In addition, we are reducing the carbon footprint. So this EcoAtherinox is the first stainless steel in the world that covers the three scopes of the greenhouse gas emission carbon protocol. So at the end, it’s covering the Scope one with more than 50% reduction in the CO2 emissions. It’s covering the Scope two in the using of 100% of renewable energy and is covering the Scope three with more than 90% recycled material for its production. So it’s a unique product and it’s being appreciated by our customers.

We are dealing we have activities and introduction in more than 40 customers and this area probably is expanding and as much as soon as the demand also mostly in Europe reactivates probably shall be a much more appreciation and expansion of this product.

Bernardo Velasquez, CEO, Atherinox: Okay. Just to finish and summarize the presentation. Of course, we are waiting for negotiations between countries with United States to put some more rationality in the systems and to clarify what’s going to be the situation. We need the stability. And I’m sure that it will come sooner than later, but probably sooner.

And in between, we are doing what we have to do. That is a focus on controlling the controllables, controlling our business. And you know that there’s nobody more experienced in this industry than our team that we have been managing crisis in 02/2008. So we know how to do it. We know how to work with this volatility.

We are trying to keep our working capital under control and inspiring confidence in the way we manage our business. This is important. Tariffs at the end or not tariffs, this protection of the industry will be positive for the Atherinen Group. Remember that we are leaders in United States and that United States, North American stainless is the engine of our group. So more stability in The United States and better industry protection will give us more benefits.

We are more Americans than Europeans today. But also, I think that Europe will wake up and will consider seriously to protect the industry because it is necessary. And of course, as I said, controlling our working capital, this solid operating cash flow giving us a healthy financial position. So this is more or less as we see the business today at the end of the quarter. This is stability, quiet, but not panicking and waiting for the negotiations and waiting for more visibility with the tariffs because the recovery the expected recovery has been postponed, but it will come.

And now for the second quarter, we are optimistic because we have a very solid order book in stainless steel. So we are better now. We’re in a better position than we were in January when we started the year. So our order book is strong. Also in HPA, it’s also strong.

It’s very stable in United States with some wait and see in Europe, especially in oil and gas and chemical processing industry projects. Normally, you’d say that in stainless steel, consumer goods are performing better. That capital investment is very logical with this situation and this is also affecting a little bit to HPA, but our order book in both sections, in both divisions is solid. So having said this, and I will repeat again, our Q2 is going to be better than Q1 and Q2 is going to be better than Q2 twenty twenty four. And most probably, the first half of the year is going to be at the same level or slightly higher than the first part of the year in 2024.

So that’s it, Carlos.

Conference Moderator, Atherinox: Thank you very much for the presentation. Let’s move now please to the Q and A session. So operator, please go ahead.

Q&A Moderator: Thank you. We will now start today’s Q and A session. Q Our first question today comes from Adana Akoku from Morgan Stanley. Your line is now open. Please go ahead.

Adana Akoku, Analyst, Morgan Stanley: Hi, good morning. Thank you for taking my questions. My first is on Europe. Could you share some more detail on the progress of the strategic plan? So you mentioned the volume uplift, but how did profitability look in Q1?

And are you still confident that you’ll reach breakeven by Q2?

Bernardo Velasquez, CEO, Atherinox: Thank you for the question, Adena. So the strategic plan is going well, it’s going ahead, focusing in end user business, focusing on more added value products, and we are doing well. We are doing better than expected with new grades, with new customers and with, as Miguel mentioned, with the Ecoa three NOx. We’re moving in the right direction. With the current situation of prices, as we mentioned in the last presentation that we expect it to be breakeven at the end of Q2, Now we have to say that this situation is also postponed a little bit, but we are close to this.

Adana Akoku, Analyst, Morgan Stanley: Okay. Perfect. Thank you. And just second on alloys and Haynes in particular. Could you help us understand how Haynes contributed to the results in q one?

And are you still expecting an inflection in the aerospace aerospace supply chain disruptions from the second half, or do you expect some delays here as well?

Miguel Fernandez, Chief Corporate Officer, Atherinox: We have more visibility in higher volumes in the aerospace, gradually recover for the second semester and especially in the oil and gas. Those are the ones which appear with the two dots especially because of that circumstance. Still weak beginning of the year, but gradually in the second semester we wait for recovery in both areas. The area that’s for us is also relevant and is the area that still needs more certainty and a more relaxed climate for investing again on specific projects is the chemical process industries. But in the others, are comfortable.

As it appears, automotive and electronics are doing well and we gradually see the recovery for aerospace and for the oil and gas.

Bernardo Velasquez, CEO, Atherinox: These disruptions were last year. Now the situation is improving. It’s not debottlenecking. Still they have some bottlenecks in the supply chain of the industry, but our deliveries are very stable and most probably will remain stable for the second half of the year.

Adana Akoku, Analyst, Morgan Stanley: Great. Thank you very much.

Q&A Moderator: Our next question comes from Tristan Gresser from BNP Paribas Exane. Your line is now open. Please proceed.

Tristan Gresser, Analyst, BNP Paribas Exane: Yes. Hi. Thank you for taking my questions. Maybe on The U. S.

Market, if you can comment a little bit of what you’ve seen in recent weeks in terms of order activity and demand. I guess the recovery that you expected in Q2 has now been a bit postponed. What kind of operational support do you see in coming quarters? You can try to to quantify that maybe on the higher volumes. We’ve seen CRU saying that base prices have started to increase.

Can you confirm that? You also mentioned increased productivity. Is that something we should see in Q2 or is more H2? And if you could discuss that a little bit as well.

Bernardo Velasquez, CEO, Atherinox: Thank you, Tristan. In United States, as I mentioned during the presentation, we see better activity in consumer goods than in capital goods. And this, in our case, is in our business, that means that we have a better order book in cold rolled than in hot Heavy gauges are more focused on the capital investments, while the cold rolled is more for washing machine, supply chains in general, automotive industry. So our order book is full in cold rolled and still waiting for some more orders in hot rolled because of this project that has been postponed. But this means that our order book is solid, is good.

The more added value products are full. And that will give us more production and that means in our business, in our line also more productivity and more competitiveness. Price increase, I think that there’s enough noise in the system to put more. So we have to take care of our customers. I think we are not only the biggest in The United States, but we are the leader and we want to be a good leader.

We want to take care of the market and now we have to give stability. The level of prices is enough to compete. And let’s see what’s happening in the coming months if there’s something that we can do. But until now, are quite and we are happy the way the prices are.

Tristan Gresser, Analyst, BNP Paribas Exane: Okay. That’s very clear. And maybe just on the tariffs impact, I’ve seen that you started to put again some surcharge on tariffs. They’re relatively small. But can you just let us know where you impacted on the raw material side and what’s the customer reception of those higher surcharge?

Bernardo Velasquez, CEO, Atherinox: Still it’s soon to stand because we know what are the tariffs today, but we don’t know what are going to be the tariffs tomorrow. But what is clear is that everything related with raw materials will pass through the customers because it’s a raw material cost. And we are normally in our business through the alloy surcharge, we pass this cost to the customers. But let’s see what happened until now. For example, ferrochrome is important for us and is out of the tariffs.

Scrap is local scrap, so we don’t have tariffs. So it’s not affecting. That’s why the impact in surcharge is so low.

Tristan Gresser, Analyst, BNP Paribas Exane: Okay. That’s clear. And maybe a last one on The U. S. To wrap up.

We’ve not seen too much of a decline in imports on the flat roll side in April. Have you seen Asian competitors, which were already paying the tariffs, taking share maybe from European players or other exporters, and is that putting pressure on the market? And I think you mentioned in your remarks that you’re negotiating with The US maybe, or if I understood that correctly. Do does that mean that you you think there’s potential additional trade measures that could be implemented near term?

Bernardo Velasquez, CEO, Atherinox: Imports are in a stable way now. Mean, some of the European players or some of the importers try to accelerate the orders that they had in the ports in order to take this material before the tariffs were applied. Today, with the ninety days of impasse that we have now, everybody has a 10% loss more or less, more or the same. Yeah, negotiations, it’s something that we cannot control. And additional trade defense measures, it is totally out of the tariff system.

If we I think following the WTO rules in all the areas where we are applying, if there’s an importer that is not fulfilling these rules and we can consider this an unfair competition, we will think we’ll study to place or try to send to the trade court these cases of anti dumping or anti subsidy or anti circumvention. And we are studying several cases in United States.

Tristan Gresser, Analyst, BNP Paribas Exane: Okay. Perfect. I’ll leave it there. Thanks a lot.

Q&A Moderator: Our next question today comes from Tom Zhang from Barclays. Your line is now open. Please go ahead.

Tom Zhang, Analyst, Barclays: Yes. Good morning. Thanks for taking our questions. Two for me. The first one, just again on the guidance and around the building blocks.

So you kind of said you have solid order books, so it sounds like there’ll be some volume increase into Q2. It sounds like pricing can be fairly stable in The U. S. And Europe. Europe could be at a lower level.

I was just wondering if there’s anything you can say around cost movements into Q2. Do you think that will be fairly stable again? I guess we’ve seen European stainless scrap prices come down a little bit in the last month. And also if you could clarify if there’s any inventory valuation effects in the Q1 print that might reverse in Q2, please? That’s the first question.

Esther Camus, CFO, Atherinox: Thank you, Tom. Yes, in terms of order book, as we said, we have a solid order book, okay, especially in the state, and we are comfortable with the levels that we are achieving. We are increasing which are continuously increasing both month by month. We will as I said, we have been increasing from January to February to March. March has been the best month for us in the quarter, and we expect continuing in that level for Q2 or even increasing, okay?

So that’s more or less what we expect with the volumes. We will have a slight increase. It won’t be the 29% that we are presenting compared to full quarter, but we will have an increase for the next quarter again in terms of volume. In terms of cost, you know that very much depend on the prices of the raw materials as well, okay? But we will continue with our we are continuing with our programs and our efficiency costs programs that we are working on scrap on higher percentage of utilization.

So that will help also with the costs as well, okay, as well as continuing with our programs for variable and fixed. But of course, there are uncertainties on the raw materials and in our side sometimes on the electricity, which has also improved in the last months. But of course, there is always some volatility there. But everything that is our under our control will be managed correctly and trying to reduce. And regarding inventory variation effects, if there is a stability on the nickel, which we don’t know, We won’t expect inventory variation for next quarter.

In this quarter, I think I mentioned, but we have had a negative inventory impact of €23,000,000 for the €24,000,000 for the in this quarter, okay? And this is part of the EBITDA as well. If the nickel and everything remains in flat levels, then that effect will not be happening in the next quarter.

Tom Zhang, Analyst, Barclays: Thank you. And then just the other the second question was around you mentioned the chemical processing in some areas you’re seeing CapEx being postponed. Sorry, just to clarify, is that as a result of tariffs? Or is that something that’s already kind of been in the market? And are you seeing any of that now spill over into stainless?

Or at the moment, is, yes, order intake still largely unchanged from what you can see in April?

Bernardo Velasquez, CEO, Atherinox: This is very clear. Imagine that you are an American customer and you are importing a car from Europe and you don’t know if the tariff is going to be $25.20 or nothing. So, normally, what do you how do you manage the situation? You postpone it and waiting to clarify. And once the situation is clear, you will decide if you want to pay the tariffs or not or buy from another area.

And this is what is happening. It’s only postponing the decision waiting for the to clarify the situation.

Miguel Fernandez, Chief Corporate Officer, Atherinox: Keep in mind also for the capital projects in chemical process industry, it’s a combination of obviously the tariff which is highly relevant, but also with the geopolitical uncertainties. We are still having conflicts, and therefore, there is no certainty of when Europe is more or less reactivating. And as a consequence of that, this part of the business is the one remaining more in a wait and see prior to taking further investment decisions.

Tom Zhang, Analyst, Barclays: Understood. And since you mentioned electricity, maybe if I can just sneak one in. Could you just clarify there was no sort of impact on the business from power outages in Spain earlier or

Maxime Kog, Analyst, ODDO BHF: last month?

Bernardo Velasquez, CEO, Atherinox: Okay. No, no, no. We were lucky. I think that was good luck because we were not melting at that time. That day at the moment of the block out in Athenos, were not melting.

So we have a very clear protocol how to manage the situation because something normal in the industry, we call it in Spanish, Normally, have a contract with the system, the electrical, the company that is managing the system that is they can cut the industry when it’s necessary. This time, they didn’t have time to call us. That was a cut without any information in advance, but we were not melting so the damages were very small, very limited. One day of production.

Tristan Gresser, Analyst, BNP Paribas Exane: Got it. Thank you. I’ll turn it back.

Q&A Moderator: Our next question today comes from Dominic O’Kane from JPMorgan. Your line is now open. Please go ahead.

Dominic O’Kane, Analyst, JPMorgan: Hello. Thanks for taking my question. I just have two quick questions relating to Haines. Could you maybe just clarify specifically what the Haines EBITDA contribution was within HPA during q one? And then on the synergy, estimates that you’ve previously provided, obviously, you’ve you’ve previously increased the synergy estimates to $75,000,000.

Is is there opportunity as you get further into the business for upside potential on a longer term due to that $75,000,000 And how are you thinking about the timing of those synergy realizations? Thank you.

Miguel Fernandez, Chief Corporate Officer, Atherinox: Dominik, in regarding we are now presenting as a business unit the HPA. So in that regard, as Esther mentioned, we are including the full quarter of Haines this time. So obviously, this the comparison with the previous year, this is not there. And Haines only registered one month in the previous quarter. So this is a normalization period of three months for Haines.

In general basis, as has been precise, the evolution in the American market and for relevant sectors of Haynes as for example the aerospace is rather recovering, so the contribution should be higher. And in the case of VDM this year, it’s more easy to appreciate that there are effects on the nickel more or less affecting also the profits of VDM, are slightly lower than those of previous year. You remember there were certain headwinds at that time. And the chemical process industry is a sector which also for EDM is relevant as well as it’s the oil and gas in which as I mentioned before, we are involved in certain projects. So the contribution of Haynes is expected to be increasing during the year.

In regard of VDM, it’s true that with the better prospects we are seeing now for the second semester, especially in oil and gas, which is also a relevant sector for BDM, we are comfortable. But we must remark as we have been making in the last months that at the end for the last year and a half and the previous year, VDM was strongly supported by tailwinds. And at the end, reference level, our reference contribution for BDM is substantially above the one that we initially contemplated when the acquisition, but we cannot establish that the standard of BDM contribution is going to be in the next term the €70,000,000 that we were able to do two years ago. So this is something obviously below that level. But it’s absolutely in line and has been in line with the forecast we have for the year.

So in this regard, there have not been surprises. So our HP division has been absolutely consistent with the forecast and the budget established for the year.

Bernardo Velasquez, CEO, Atherinox: Regarding the synergies, it’s good news that when we presented the acquisition of Heinz at the beginning of twenty twenty four, We estimated synergies of €71,000,000 but at that time we didn’t have access to the HENS books. So now once we entered HENS in November 24, We have been double checking all these synergies and the result of that is that we have confirmed that the €71,000,000 of synergies are there. And also there’s some room to improve it, so that’s why we changed the number to €75 Of course, there’s no potential, but that will come. Remember that we have announced with the HENS acquisition also a CapEx of €200,000,000 to increase upstream production, to put a vacuum induction furnace, a beam to install a forge that will give us more capacity, that will give us also the capacity to process some of the enhanced materials in North American stainless. So the potential is huge, but we haven’t quantified it yet.

Maxime Kog, Analyst, ODDO BHF: Thank you.

Q&A Moderator: Our next question today comes from Basijn Sinovitz from Deutsche Bank. Your line is now open. Please proceed.

Bernardo Velasquez, CEO, Atherinox0: Yes. Hi there. Hi, and thanks for taking my questions. So I just have two quick ones left, actually. The first one is on The U.

S. Market, where you seem to be pretty confident on the demand side. So I’m wondering what is driving the order book strength. Is this basically mostly improving because your clients are basically taking market share following their inclusion into Section two thirty two? Or is there any tactical inventory billing as far as you see it?

Because at least the direct tariff impact on stainless has been pretty small so far and clients don’t know whether that could be changing in about three months from now? That’s my first question.

Bernardo Velasquez, CEO, Atherinox: This is a mix of it’s a mix of everything. Until now, I think the effect of import reduction hasn’t come yet. We cannot see this yet. Probably will come in the future. There’s more activity and we are not more or less the market is stable.

The thing is that we are recovering the normal business. Now this is where at the beginning I mentioned that we have been gradually increasing because Q4 last year was a correction quarter. We are correcting, so we are increasing our order book. We have what is normal today. I cannot say that the market is booming.

So we said that the recovery has been postponed, but we are in a stable situation. Remember also that the stocks in the American market are still much below the historical average. So there’s no stock reduction. Last year in 2024 and 2023, there was a stock reduction. So apparent consumption went down in order to digest this excess of stocks.

Now that the stocks are in a normal level or even lower than normal, the customers are or distributors are buying what they need and customers are buying with what they need. So that’s why the market is strong.

Bernardo Velasquez, CEO, Atherinox0: Okay. Got you. And maybe just to round this off, can you maybe give us a quick update on where utilization rates are for you in The U. S. At the moment and where this may be trending in the course of the second quarter and maybe same situation or same picture on Europe?

Miguel Fernandez, Chief Corporate Officer, Atherinox: Yes. The capacity utilization rates in this time in Europe is around 74%, seventy five %. This is obviously keeping on mind more or less with the new optimizing plan in Europe. We are concentrating our efforts in specific products, high value added products and also in final customer. But in this basis, we are running at 75%, which in the actual basis of the European market is fine.

In America, we are slightly below the 90%. So we are around 88%. And in South Africa, are in the range of 61%. Keep in mind that in America as difference America from Europe, the driver of America sorry, for Europe in these days is most driven by the demand still is very soft and has not reacted. But the driver of the American market in this time is that America still remains being a net importer market.

So there is no local production more or less to match the consumption. So consequently, on that basis, our position in America is advantageous because we are in the highest part of the pyramid of the value added of the steel is making there. And there is an increase in imports. This has its effect, but it’s true that the imports are placed in the specific niches of the markets and most of North American stainless production goes to the upper niche of the produce. So on this basis, what is gradually is coming is increase and strength in the order book for North American stainless.

The Buy American works in the actual uncertainties. The Buy American for the American customer each time is more relevant. Because of that passing over the uncertainties of January, February since March the order book is going up. So our priority and our preference in North American Steeles is running full the plant and this is a target. So we are absolutely being more affordable by a gradual increase of the productivity rather than the effects in places that shall be consequence of all the other market dynamics.

But yes, running full North American standards for us is a great advantage.

Bernardo Velasquez, CEO, Atherinox: That’s a position one position. Sorry. Just let me clarify something, because I mentioned it before. In cold rolled, we are working at full capacity.

Bernardo Velasquez, CEO, Atherinox0: Got you. Okay. And just following up, I mean, 75% capacity doesn’t sound too bad actually given where the current market is. Does this mean that you may be back to breakeven actually in the second quarter in Europe?

Bernardo Velasquez, CEO, Atherinox: No. As I said before, this recovery we’re working in the right direction. Now all the parameters that we control are improving, but this breakeven will be postponed to quarter three.

Miguel Fernandez, Chief Corporate Officer, Atherinox: But having said that, sorry, Bastian. Keep in mind, the breakeven obviously is a psychological effect on being in positive breakeven EBITDA. But when you are slightly below or you are slightly above the difference of €3,000,000 4 million 5 million euros in our business is not so relevant in the actual market basis. So the fact of being slightly positive by far has a strong motivating effect for all of us, but the distance is so short that it’s not relevant.

Bernardo Velasquez, CEO, Atherinox0: Understood. Okay. And then last question, just on the metal effect as well. Ista, you said that, that will pretty much neutralize the EUR 24,000,000 in the second quarter. ’1 of your peers today has actually guided for a positive metal effect in the second quarter.

Could they be positive for you as well, given where the current market, I guess, parameters are? Or you think it’s more likely just neutral?

Miguel Fernandez, Chief Corporate Officer, Atherinox: It shall be neutral in the stability of the circumstances. So at the end, this is for us is the normal adjusting to market prices and net realized value. So we have made the adjustment of around €23,000,000 as Esther mentioned. With this, we are comfortably matching the Q2. If there are no further turbulences and going down of the market, it shall be enough.

If the market reacts, obviously, we shall be able to revert that, but still is a bit soon to determine that. What we are is comfortably covered with this net relational value adjusted in our inventory, having it been done at the end of the quarter and amounts as was previously said €23,000,000 We prefer not to talk about adjusted or non adjusted, but it’s true that this EBITDA obtained of €102,000,000 has been after making inventory adjustment of €23,000,000

Bernardo Velasquez, CEO, Atherinox0: Okay. Thanks so much.

Q&A Moderator: Our next question today comes from Tommaso Castello from Jefferies. My

Bernardo Velasquez, CEO, Atherinox1: question is on Europe. And I know you can comment much on prices. But I was curious, you know, in your opinion, what what needs to happen to see to see some pricing inflection? Because prices, were declining well before the tariffs announcement. And so I wonder whether, like, a low base price, which is leading to low margins, especially in Europe is mostly related to a misbalance in the supply and demand dynamics.

If it’s just a matter of high imports, continuous destocking is just a slow economy. And then whether you comment on pension plan and the Germany funding announcements, whether you see and you think those could have a meaningful impact on stainless? Thank you.

Bernardo Velasquez, CEO, Atherinox: For the question. Thank you for the question, but we cannot answer everything. We cannot speak about prices. We’ll explain what is the general dynamics of pricing in our business. It’s when we have a full capacity utilization, we have to extend our delivery times.

Normally, it’s time to start thinking in a price increase. This is not happening at the moment because the market is still not depressed, but it’s still flat and the import pressure is strong. So we have to do something to protect the industry because these imports that are growing now because we have passed from fourteen percent first quarter last year to 24% this year are putting a lot of pressure in the market. And we don’t know what can happen now with the tariffs, but the pressure is there. But anyway, the prices are stable and let’s see what happen.

Tristan Gresser, Analyst, BNP Paribas Exane: Thank you.

Q&A Moderator: Our next question today comes from Robert Jackson from Santander. Your line is now open. Please go ahead.

Bernardo Velasquez, CEO, Atherinox2: Hi. Good morning. Thank you for taking my question. I wanted I just wanted to get your thoughts on on The US market and the potential for capturing import market. I mean, listening to auto suppliers, some some have been talking about the the the opportunities for coming from relocation of production to The US.

And I think in your in your AGM, you mentioned that you’re increasing your you’ve increased your market share in in in The US. So I just want to see, you know, I guess it’s probably too early, but if you can give us your any your thoughts, what the potential what you’re seeing or what what what could you see in in the future from from this this this Thank you.

Bernardo Velasquez, CEO, Atherinox: Thank you, Robert. As an estimate, the size of the market of that imports were imports subject to quotas in the past were more or less kind of like 15% of the total American market. Now 15% of the American market were imports that were subject to quotas. Now without quotas in the new system, the new Section two thirty two, this 15% of the market will be charged with a 25% duty. That doesn’t mean that this 25% or sorry, this 15% of the market is going to pass automatically to the local producers because some of the materials are not made in The United States or some of the customers prefer other suppliers.

And also in some of these sectors, you cannot change from one supplier to another in one day. You need to certify to qualify in which stainless steel is a significant part of the cost are included in Section two thirty two. For example, beer barrels, sinks, for example, screws or tubes and that means that they will have having a protection of these sectors in The United States. Most probably with a 25% duty, this production will improve in the country. That means that we’ll have more customers in a better situation and that the American market will grow.

And this is very important for us because we are bidding for the American market and it’s a good market. Now it’s in the best position and the industry is important for the country. They are taking care of the industry and not only steel and now they are moving up, moving down in the supply chain and also supporting our customers. And this is very important because that means that our plants will be successful there because the American market is going to grow. I think last question was related to?

Bernardo Velasquez, CEO, Atherinox2: That was the main question. Just the other question I just wanted to ask, the timing of the ramp ups of your investments in Ness, Can you give us an update on what that would be?

Bernardo Velasquez, CEO, Atherinox: We expect the new production to come at the end of the year. And the ramp up curve, as usual will be around one year, one point years.

Bernardo Velasquez, CEO, Atherinox2: Okay. Thank you very much.

Q&A Moderator: Our next question on today’s call is from Maxime Kog from ODDO BHF. Your line is now open. Please go ahead.

Maxime Kog, Analyst, ODDO BHF: Yes, good morning. No, I’m referring to the objective to bring down net leverage to 1.2 by the end of twenty twenty five. That was an objective announced as part of the acquisition of Heinz last year. And yes, now given that the start of the year has been a bit slower than expected, where do you see that figure trending at the end of the year? I can see that the working cap was very good in Q1.

And are you expected to pursue that trend over the coming months too?

Esther Camus, CFO, Atherinox: Okay. Thank you. Thank you very much, Maxim. Regarding net financial debt, it is true that we have an objective of 1.2 times EBITDA, okay? And that will most probably come more or less we were projecting in two years’ time, okay?

So it possibly won’t come end of this year. But we are hardly committed on working capital, okay? Because as we announced, we are making higher investments in CapEx in this year that we will try also to compensate with this working capital. We need to consider also the increase on the activity, which is a big effort just trying to keep the working capital at a normal level. So for end of the year, we will still be on figures less than less probably we will try to achieve a debt more or less like last year even a bit lower, but we won’t be on levels of 1.2 yet until two years’ time possibly.

So we must possibly be on a range of 1.7 or something like that at the end of this year.

Maxime Kog, Analyst, ODDO BHF: Okay. No, that’s clear. And just a second and last question is on South Africa, because I’m wondering about the business model of this entity because we have seen recently trade tariffs being erected all over the world. In Europe, they are bound to increased as well. So how do you see South Africa trending in that environment?

Because its model is still heavily dependent on exports, how does it track actually in terms of reducing its share of exports and increasing its share of domestic revenues?

Bernardo Velasquez, CEO, Atherinox: We don’t have the crystal ball. We don’t have the crystal ball, but we can say that we started announce kind of deglobalization many years ago. And since that time, we have been trying to adapt our business model to a regional business model. So that’s why United States is making a stainless steel and high performance alloys for the American market basically, including Mexico and Canada. Athenos Europe is totally focused on the European market.

And as we have mentioned many times, Columbus is has a lot of R and D activity because we are in specializing in various special ferrochrome the local the chrome South Africa has the biggest chrome reserves in the world. And Columbus is taking advantage of this and also started to make carbon steel and is starting and very soon we will have electrical steel and even high performance alloys. The reason of this is because so at Columbus will have to be concentrated in the African market mainly. We are the market leaders in all Africa. We have close to 50% market share in the whole continent.

This is a unique position, very strong. And Africa is starting to grow. Many countries in Africa are waking up. And this is the strategy being local in the international markets and nobody with a better location of assets than the Atherinox Group.

Maxime Kog, Analyst, ODDO BHF: Okay. Helpful. Thank you.

Q&A Moderator: It looks like we have no further questions in the queue at this time. So that does conclude today’s Q and A session. I’ll now hand you back over to the management team for some closing remarks.

Conference Moderator, Atherinox: There is just one last question coming from the web. The question is from Dario Jose Sanchez Junko from Bia Buena in Versiones. And the question is regarding the shareholder remuneration and is has the company considered the possibility of offering scrip dividend?

Bernardo Velasquez, CEO, Atherinox: Not really. So we have a very clear remuneration policy. I think it’s even written in our website that we are keeping the amount of the total amount of money of the dividends. In the past, we were we have a fixed dividend per share. Now we have fixed the total amount of money, so we will reduce the number of shares.

The dividend per share will improve or even we’ll make an scrip dividend will be the opposite. We are not considering at this time an scrip dividend. We are considering to pay cash all this in two payments, one in advance as we did in January. And then now the dividend of €0.62 has been approved at the shareholder meeting and the second payment will come in July. And as it is also included in our policy, if our debt to EBITDA ratio is below 1.2, will consider the possibility to make another buyback of shares.

But until now, we think that all the investments that we are facing now including the acquisition of Heinz will give us a better return and will be a better return to the shareholders than the buyback of shares, but not considering a scrip dividend today.

Conference Moderator, Atherinox: Thank you very much. That concludes today’s conference call. Thank you for joining us today.

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