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Befesa SA (ETR:BFSA)’s recent earnings call for the fourth quarter of 2024 highlighted robust financial performance, leading to a 6.26% increase in its stock price. The company reported a significant rise in adjusted EBITDA and a reduction in net debt, signaling effective cost management and strategic growth initiatives. According to InvestingPro analysis, Befesa is currently trading below its Fair Value, with analysts setting price targets up to €47.09. The stock has shown a strong YTD return of 10.82%, despite market volatility.
Key Takeaways
- Befesa’s full-year adjusted EBITDA increased by 17% year-over-year.
- Net debt decreased, improving the leverage ratio from 3.4x to 2.9x.
- European steel production remains weak, impacting sector demand.
- Stock price rose by 6.26% following the earnings report.
Company Performance
Befesa SA demonstrated strong financial resilience in 2024, with a notable 17% year-over-year increase in adjusted EBITDA, reaching €213 million. The company also reported a reduction in net debt from €662 million to €619 million, enhancing its leverage ratio. Despite challenges in the steel sector, particularly in Europe, Befesa maintained high utilization rates in its recycling operations. InvestingPro data reveals a healthy gross profit margin of 40.75% and an Altman Z-Score of 4.93, indicating strong financial stability. Get access to detailed financial health scores and 5+ additional ProTips with an InvestingPro subscription.
Financial Highlights
- Full Year 2024 Adjusted EBITDA: €213 million (+17% YoY)
- Q4 Adjusted EBITDA: €62 million (+27% QoQ)
- Operating Cash Flow: €192 million (+30% YoY)
- Net Debt: €619 million, reduced from €662 million
Market Reaction
Befesa’s stock surged by 6.26% following the earnings announcement, reflecting investor confidence in the company’s financial health and strategic direction. The stock’s current price remains well within its 52-week range, indicating a positive market response to Befesa’s performance and outlook.
Outlook & Guidance
Looking ahead to 2025, Befesa expects strong double-digit earnings growth, projecting a 10-20% increase in EBITDA. The company aims to further reduce its leverage ratio to below 2.5x and plans to invest in approved expansion projects, with a total capital expenditure of approximately €100 million annually. With a PEG ratio of 0.92 and strong cash flow generation, InvestingPro analysis suggests the company is well-positioned for growth. Discover comprehensive valuation metrics and access the detailed Pro Research Report, available for over 1,400 US equities, to make more informed investment decisions.
Executive Commentary
CEO Asier Ramonandia expressed optimism for 2025, stating, "We expect 2025 to be another year of strong double-digit earnings growth and further deleverage." CFO Rafael Perez highlighted the importance of the company’s hedging strategy, saying, "Our hedging strategy remains unchanged and continues to be a key element of the VESSA business model."
Risks and Challenges
- Weak European steel production could continue to impact demand.
- Rising electricity and gas prices in Europe may increase operational costs.
- Moderate utilization rates in China pose a challenge to maximizing output.
- Macroeconomic pressures could affect commodity prices and demand.
Q&A
During the earnings call, analysts inquired about the potential recovery in steel production and the expected EBITDA contribution from the Palmerton plant. Executives also discussed cost-saving measures in U.S. operations and the company’s capital allocation strategy.
Full transcript - Befesa SA (BFSA) Q4 2024:
Youssef, Chorus Call Operator: Ladies and gentlemen, welcome to the Bethesda preliminary year end results twenty twenty four conference call. I am Youssef, the Chorus Call operator. I would like to remind you that all participants will be in listen only mode and that the conference is being recorded. The presentation will be followed by a Q and A session. At this time, it’s my pleasure to hand over to Rafael Perez, CFO.
Please go ahead.
Rafael Perez, CFO, VESSA: Good morning, and welcome to the preliminary full year twenty twenty four results conference call of VESSA. I am Rafael Perez, CFO of VESSA. This morning, I’m joined by our group CEO, Asiercer Ramonandia. Asier will start with an executive summary of the period, and then he will cover the business highlights of the STILL DAS as well as aluminum solids lac recycling business. I will then review the financials by business and will cover the evolution of commodity prices, our hedging program and finally, cash flow, net debt and capital allocation.
Assier will close this presentation providing an update on the outlook for 2025 and an update of our growth plan. Finally, we will open the lines for the Q and A session. Before getting started, let me remind you that this conference call is being webcasted live. You can find the link to the webcast and preliminary full year twenty twenty four results presentation on our website, www.defesa.com. Now let me turn this call over to our CEO.
Assil, please.
Asier Ramonandia, Group CEO, VESSA: Thank you, Rafael. Moving to Page five of the business highlights. Evesa has delivered a strong fourth quarter and full year results despite a challenging macroeconomic environment, which demonstrate the resiliency of our business model. Total (EPA:TTEF) adjusted EBITDA in the fourth quarter has been EUR 62,000,000, up 27% compared to the previous quarter and making a record level for quarterly results, reflecting a strong year on year performance. For the full year, adjusted EBITDA reached EUR $213,000,000, an increase of 17% compared to the previous year.
Operating cash flows has increased by 30% year on year, driven by a strong cash conversion. Leverage at year end reached 2.9 times, below our initial target of three times. We have delivered solid performance during the year with solid steel dust volume in our two main markets, Europe and The U. S, despite the challenge that the sectors steel sector is suffering. In our aluminum business, we have delivered a strong performance in our salt slat recycling business, driven by the Hanover plant back to full operations and a strong volume received from our customers.
On the other hand, our secondary aluminum business has been impacted by a challenging automotive industry in Europe. I will elaborate later all these aspects. On outlook, we expect 2025 to be another year of strong earnings, strong annual growth and further deleverage during the year. We are adjusting our business plan and capital allocation to focus on reducing deleverage and investing ongoing approved expansion projects. As such, the expansion plan in China is strong due to the current market conditions.
Our growth CapEx will focus on finishing the refurbishment of Palmerton and expansion of Berndbu, both low risk projects from execution, technology and commercial point of view. Moving on to Page six. Overall, our steel diverscycling business has delivered strong results in 2024 in Europe and The U. S. In Europe, the steel sector is going through a challenging period with the steel production in Europe at the five year low levels impacted by weak demand.
In Europe, despite this challenging environment, the level of steel dust deliveries from our EAF steel customers is stable and solid. We continue to run our plants at a very high capacity utilization with an average of 92%. In The U. S, in the steel dust recycling business, we are running the plants at full levels of utilization similar to previous quarters around 70%. The measures that we have been taking and best practices that we have been applying to improve the recycling operations are on track and delivering good results, achieving higher EBITDA per tonne gradually.
The zinc refining plant in The U. S. Is in final stage of the ramp up and turnaround process with a strong focus on cost reductions. In 2024, the unfavorable combination of TCs and premiums for special high grade zinc produced around $15,000,000 negative contribution. In our Asian operation, we have delivered robust Q4 in Turkey and South Korea, reaching a strong level of utilizations.
Our Chinese plants continue running at the utilization level of 50% impacted by weak electric car furnace steel production. Moving on to Page seven, business highlights for the aluminum salt slag recycling business. In the aluminum business, we have delivered a strong volume of salt slag recycling, which has been partially offset by weak secondary aluminum results. On Salter Slacks, the strong volume has resulted in a very high capacity utilization of the plants, driven by the Hanover plant in Germany back to operations at full capacity. This strong operating results has been partially offset by lower FBM aluminum price.
On the other hand, our secondary aluminum segment has been suffering during the whole year from a very weak European automotive industry, which is affecting the demand of secondary aluminum. This is putting a lot of pressure in the aluminum metal margin, which is suffering compression compared to the levels of last year, caused by weak demand of secondary aluminum, coupled with difficult access to aluminum scrap in the market. Now Rafael will explain the financials in more detail. Thank you, Javier.
Rafael Perez, CFO, VESSA: Moving to Page seven sorry, moving to Page nine, financial results for our STILDA segment. STILDA delivered EUR 170,000,000 of adjusted EBITDA in 2024, which represents a 25% year on year improvement compared to 2023. EBITDA margin improved from 17,000,000 to 21,000,000 in the period. 36,000,000 EBITDA improvement has been driven by the following factors: The year on year impact from volume was flat with a total plant utilization at 70% similar to last year. On price, strong positive EBITDA year on year impact of about EUR 44,000,000, with the three main price components being EUR 7,000,000 EBITDA impact from higher LME prices, 5% in the year EUR 15,000,000 positive impact from high zinc hedging prices, euros 104 per ton higher year on year on average and thirdly, euros 22,000,000 positive impact from the lower zinc treatment charges, which was set at $165 per tonne for the year 2024 versus $274 per 2023.
On cost and others, Bethesda coke average price continued further normalization throughout 2024 to levels below the 2022 average price, driving EUR 11,000,000 of positive EBITDA impact in the year. Operational improvements in The U. S. Recycling operations also have delivered positive EBITDA contribution as well in the period, improving the EBITDA per tonne on the steel dust treated. All these positive impacts have been partially offset by general inflation and other effects, mainly attributable to EUR 15,000,000 negative contribution from the zinc refining operations in The U.
S, which is going through our turnaround plan. As I said, we are laser focused on executing our strong cash reduction plan. Moving to Page 10, financial results for our aluminum segment. Aluminum sold slag delivered EUR 43,000,000 of EBITDA in 2024, which represents a 10% year on year decrease compared to EUR 48,000,000 in 2023. The year on year EUR 5,000,000 of negative EBITDA development was mainly due to the lower aluminum metal margin, partially offset by lower energy prices.
On volumes, overall positive EBITDA year on year impact. Our recycled volumes of Solzilac increased by 18% to 426,000 tons in the period, driven by the resumption of operations at our Hanover plant. Our secondary aluminum alloys production volumes increased by 2% to 171,000 tons. With these volumes, we operated our plants at a strong utilization rates of about 91% in salt slag and 84 in secondary aluminum on average. With regards to prices, overall negative EBITDA year on year impact of around EUR 11,000,000, mainly driven by pressure aluminum metal margins versus the previous year.
This compression in the aluminum metal margin is caused by two main factors. On the one hand, there is a scarcity of aluminum scrap in the European market, driven by lower overall industrial activity as well as higher exports of aluminum scrap away from Europe. And secondly, by a weak automotive industry in Europe, which impacts demand of secondary aluminum from automakers. Aluminum F and B price was up 5% with an average slightly above per ton. The negative price effect was partially compensated with year on year lower operating costs, mainly through the lower energy prices of electricity as well as natural gas.
Moving on to Page 11, zinc price and treatment charges. Regarding zinc LME prices, during 2024, zinc has been trading with some volatility over the marginal cost of the producer, C90, trading sideways in the range of $2,300 to $3,100 per ton. The average of twenty twenty four single LME price has been $2,780 per ton, which is slightly above the last year’s average of $2,650 on average, up 5% in the period. In 2024, zinc prices have been trading well above the marginal cost of the producer, which is around $2,500 level. On treatment charges, on the right hand side, in 2024, treatment charges for zinc were settled in April at $165 per tonne for the full year 2024.
As explained earlier, this reduction had a positive impact of around EUR 22,000,000 in 2024. We have to wait until March or April to see the settlement of the treatment charges benchmark for this year 2025. As a reference, the spot treatment charge in the market is trading on the negative zone, which very rarely happens. This shows the current supplydemand dynamics in the same market characterized by reduced supply of zinc concentrates from mines, which is making spot treatment charges to be negative. It seems that this dynamic continues, which may imply annual treatment charges for twenty twenty five should remain at a low level.
Turning to Page 12 on hedging. We have taken the opportunity of the volatility in the zinc price since throughout 2024 to extend our hedging book further towards the end of 2026. With this extension, our zinc hedge book covers close to twenty four months of hedge at increasing hedging average prices of EUR 2,650 or $2,950 per tonne in 2025 and 2026. This level of hedging represents an all time high level of hedging for Bethesda and will provide around EUR 20,000,000 to EUR 22,000,000 of incremental EBITDA in this year 2025, regardless of what happens with the SIM price. We continue to monitor the market to close volumes for the first quarter of twenty twenty seven.
Our hedging strategy remains unchanged and continues to be a key element of the Pesa business model, providing earnings visibility and predictability, lowering the impact from SIM price volatility. This year is a great example of how our hedging strategy enable us to benefit from the volatility of the SIM price. While the average SIM price in 2024 has been $2,780 we have been able to hedge the second half of twenty twenty five and entire full year 2026 at an average price of $2,950 This is $170 higher than the average LME seen price in the year. Now moving to Page 13 on Bethesda energy prices. The page shows the evolution with the three main energy sources that we have in Odessa, coke, natural gas and electricity.
With regards to coke price, which today represents around 55% of the total energy bill, the normalization that is starting in the second quarter of twenty twenty three is continuing throughout 2024 to levels below 2022 average. Average coke price in 2024 has been around EUR 180 per ton, which is 20% lower than in 2023. This had a positive impact on our steel loss operations as explained in the bridge. Despite this positive trend, however, the average coking price in 2024 is still around 30 percent above the average levels seen in 2029 and 2021. Regarding electricity, which today accounts for around 25% of the total energy expense, prices decreased around 20% in 2024.
Gas prices stayed pretty much in line with previous years. Now turning to Page 14, cash flow results. The operating cash flow in 2024 has reached EUR 192,000,000, which represents an all time high level and an increase of 30% compared to the last year. On the EBITDA to cash flow bridge starting with EUR $213,000,000 adjusted EBITDA and walking to the right. Working capital consumption of EUR 26,000,000 in the year, down from EUR 37,000,000 in the previous quarter.
As in previous years, working capital improvements improved significantly in Q4 compared to the previous quarters. Overall, working capital consumption was pretty much driven by the increase in revenues and receivables. Taxes received in 2024 came in at EUR 4,000,000 as a result of a tax final assessment of the previous year, resulting in an operating cash flow of EUR 182,000,000 in 2024, up 30% compared to last year. On CapEx, in 2024, we have invested EUR 56,000,000 on regular maintenance CapEx, EUR 23,000,000 in growth CapEx, mainly related to the refurbishment of Palmerton in Pennsylvania and EUR 40,000,000 in the 50% acquisition stake in Resitec. In summary, total CapEx of EUR 118,000,000 in the year.
Total interest paid increased to EUR 42,000,000 in the year, mainly driven by the year on year higher year rebore as well as slightly higher margin spread. On dividend, a total dividend of EUR 29,000,000, equivalent to EUR 0.73 per share was paid to shareholders in the third quarter of last year. For 2025, the Board of Directors will propose to pay a dividend of EUR 25,000,000, equivalent to EUR 0.63 per share or 50% of the net income. In summary, free cash flow before dividend and M and A amounted to €65,000,000 Cash on hand stood at €103,000,000 which together with the EUR 100,000,000 undrawn revolving credit line provides Bethesda with more than EUR 200,000,000 of liquidity. Gross debt at the end of twenty twenty four stood at EUR $722,000,000.
Net debt at closing of the year stood at EUR $619,000,000 compared to EUR $662,000,000 at the end of the previous quarter, resulting in a net leverage of EUR 2,900,000.0 at the end of the year compared to 3.4 at the end of the previous quarter and better than our initial target of three times. Turning to Page 15, debt destruction and leverage. In July 2024, we extended the maturity of our debt until July 2029. The new financing, together with our consistent hedging policy and cash flow generation profile, provides the strong financial backbone to support the future growth of Bethesda, with a strong focus on capital allocation discipline and leverage management. The reduction in the leverage ratio from 3.4 to current 2.9 demonstrate our commitment to rigorous capital allocation.
We will continue reducing the leverage throughout 2025 to keep it between two and two point five times going forward. To do so, we will prioritize our growth CapEx on those projects that will deliver immediate cash flow upon completion, like Resitec and the approved projects of Palmerton and Bembu. Also, we will keep the annual regular maintenance CapEx around EUR 40,000,000 to EUR 45,000,000 in the coming years. On dividend, we are committed to maintain our dividend policy to pay between 40% to 50% of the net income to shareholders as dividend. Now back to Sierra on outlook and growth.
Asier Ramonandia, Group CEO, VESSA: Moving on to Page 17 on outlook. You can see in the page the main drivers of our view for 2025. As explained earlier, we expect 2025 to be another year of strong double digit earnings growth and further deleverage during the year. This is fundamentally based on better zinc hedging levels, as Rafael explained it, higher volume of steel dust recycled in The U. S.
Recycling plants and as well as lower zinc refining cost in The U. S. In the steel dust, we expect to continue running the plants at high capacity utilization and achieve a stable volume compared to 2024 despite current challenging steel industry in Europe. In The U. S, we expect higher EAF steel dust volume driven by volume from new contracts.
In China, we expect a slightly better situation than in 2024 with overall positive contribution in the country driven by a positive development in Jiangsu. On our aluminum business, we expect stable salt slag volume compared to 2024. However, on secondary aluminum, we expect stable to negative evolution as we continue to see metal margin compression caused by aluminum scrap, scarcity in Europe and a weak demand from auto sector. The scene refining plant in The U. S, we managed to stabilize operations in 2024, and we are taking a strong operational cost cutting measures in 2025.
We are aiming at a fixed cost reduction between million to million to be captured in 2025. The current environment characterized by low TCs and low premiums make it to be at the bottom of the cycle for the refining business. On energy prices, we expect a slightly lower overall coal prices for the group in 2025. However, we are expecting natural gas and electricity prices in Europe to be higher than 2024. On treatment charges for zinc, the zinc concentrates market remains very tight at the moment with spot TC in the negative territory, which will indicate that the trend for TC will be downwards.
As a reference, the last fifteen year low was at 143 For 2025, we are expecting 2025 benchmark TC to remain stable or lower than $165 which was the level for 2024. As explained by Rafael, average zinc price hedging for 2025 at EUR 2,640 will brief a strong earnings growth in 2025. On zinc prices, we expect some degree of volatility driven by global macroeconomical and geopolitical uncertainty. The marginal cost of the producers in IT is around 2,500 level acting as a floor of the zinc price. On leverage, we are expecting to finish 2025 below 2.5 times as explained by Rafael.
We are adjusting our business plan and capital allocation to focus on reducing the leverage and invest in ongoing approved expansion projects. As such, expansion plan in China is still due to the current market conditions. Our growth CapEx will focus on facing the refurbishment of Palmerton and expansion of Bergman. More low risk projects from the execution, technology and commercial point of view. Moving on to Page 19 of Palmerton.
The report is made of Palmerton plant in Pennsylvania is moving well on time and on budget. The first kiln of the project is already completed and in operation. The second kiln will be completed by the second half of the year and next year. We are signing new contracts with the steelmakers customers and so far we have secured more than 50,000 tons that are coming into operation during the 2025 year. Moving on to Page 20 on Bergund.
With regard to the expansion of the secondary aluminum production capacity in the 16 plant of Bergund, in Germany, we are moving forward with the permits, authorizations and commercial contracts with customers. This project is linked to the demand for the recycling aluminum, relocated from existing LaFeza customers in Europe. We expect to start investing in the second half of the year. In summary, our growth plan is flexible and we are adjusting and adapting it to the current circumstances, balancing leverage and CapEx, which results in a better growth and financial profile over 2025 and the next years. Thank you very much.
Thank you, Asir. We will now open the lines for your questions.
Youssef, Chorus Call Operator: You. The first question comes from the line of Brian Butler from Stifel. Please go ahead.
Brian Butler, Analyst, Stifel: Hey, good morning or I guess, thank you for taking my questions. Maybe we can start just where do you see like kind of the current environment relative on the steel production cycle? It looks like it’s very depressed and in a normalized kind of recovery or getting back to a normal level in steel production, what kind of incremental upside would that be to the VASA color wise?
Asier Ramonandia, Group CEO, VESSA: Thank you for the question, Brian. Well, I think it’s a very theoretical question about full recovery of the steel production over the last five years. But obviously, it’s different by regions. It’s a different picture. In Europe, basically, we are in the full capacity.
So no matter what they do, probably we are going to be again growing inventories, but not many differences in throughput. Of course, in The U. S, we were waiting for if there is an increase, we are going to fill the mining capacity that we have still in place, reminds that we have 70% of the illustration. And this is the same in the case of Asia. I mean, probably it’s in the race of 70%, and we have room to increase up to, of course, 100%.
China, well, no doubt that we have very low capacity utilization rate. So the effort, it’s a combination difficult to say. But at the end of the day, it depends where you want to move and multiply by a down the yield from x euros average euros per tonne and you can multiply whatever is that. But difficult to say an amount depending on the recovery, of course.
Brian Butler, Analyst, Stifel: Okay. And then I guess just one on modeling. Working capital was a use of cash this year. How should we think about working capital needs into ’25?
Rafael Perez, CFO, VESSA: Thank you, Brian. Well, basically, it’s the usual working capital outflow is driven by the increase in activity. Revenues increased 5% and accordingly, receivables. I think going into 2025, as you know, we will provide full year guidance once the treatment charges have been settled around March, April. And but I think from the working capital point of view, you can pencil in like $10,000,000 to $15,000,000 something like that.
Brian Butler, Analyst, Stifel: Okay, great. Thank you for taking my questions.
Rafael Perez, CFO, VESSA: Thank you, Brian. Thank you, Brian.
Youssef, Chorus Call Operator: The next question comes from the line of Sashi Shekhar from Citi. Please go ahead.
Sashi Shekhar, Analyst, Citi: Hi. Good morning, everyone, and thank you very much for this opportunity. I have three questions. The first one is on the utilization rate at the Steel Dust Recycling business. In the fourth quarter, it has increased to 74%.
Just wanted to know how did you achieve it and is this rate sustainable going forward? My second question is on Henan plant in China. How much is the current capacity utilization at this plant? And is there any plan to reduce cost there? My last question is on your cost.
What is your view on cost inflation, Francisco?
Asier Ramonandia, Group CEO, VESSA: Hi, Sassy. Thank you for the questions. Starting for the first one, the 4Q is a 74% utilization rate higher than the others. Basically, as you know, that is the utilization rate normally out of the deliveries by region is affected by the maintenance stoppage of the plants and as well, in the particular case of the Turkish third Q stoppage by a strike. So all in all, the fourth quarter is a good and a strong 74% utilization rate.
Moving forward, I do recommend more in seeing the yearly level because depending on the maintenance stoppage that we have to do to our plants, the quarters could be different. As an example, 1Q in 2025 could come a little bit lower in utilization because we are stopping a big plant and so on. But the full year, I think that in general, we are going to increase the capacity utilization slightly. I mean, level between 70 to 75 is a good reference. In the case of China, as you know, we have two plants.
One of those, Jiangsu, we are running the level of 60% of software that capacity. And what we expect in 25% is even a little bit higher in the level of sixty, seventy. Well, it could be the same. We are not being very optimistic unless we see a clear change in the market. So I think that repeating a slightly better situation in Jiangsu plant is something that we can consider.
And our plant is just running in the level of 20%, and we don’t see more than that in 2025. So overall, we are talking about 50% capacity more or less in China It could be a good reference 50% to 60% in 2025. Regarding cost to be in those lowest level, well, we can say that we have a Henan with a minimum people at the plant. And even we are using when we stop the other plant, when we have to run campaigns in Henan. So we are having the cost very controlled way, and that’s why even Henan being a stop is not delivering cash negative and later in the case of the two plants together.
Regarding the cost of inflation for next year, I think in overall well, you know that taking out the energy that Rafael has explained about the coal, but the electricity and what you have the typical fixed cost like personnel and maintenance and something like that. It is the inflation rate by countries, but in global, I think that something like $5,000,000 to $6,000,000 globally could be considered if you want to have a round number.
Youssef, Chorus Call Operator: The next question comes from the line of Yanis Marc Voulades from Morgan Stanley (NYSE:MS). Please go ahead.
Yanis Marc Voulades, Analyst, Morgan Stanley: Thanks very much for the presentation and well done on the results today. First question on Palmerton. Given the investment there, can you give us an idea on what sort of EBITDA uplift you anticipate for 2025 versus 2024? And then at full run rate ’26 versus ’25, just to get a sense on the EBITDA trajectory there? Thank you.
Asier Ramonandia, Group CEO, VESSA: Thank you for the question, Janis. Well, the Palmerton issue, I will suggest to focus globally in U. S. Because obviously, the we have a strong capacity currently. And when the Palmerton came back on track at the end of this year with the two kilns, well, utilization rate in general in U.
S. Will be affected by the availability of dust on our contracts and the production of our steelmakers’ contracts. But the key here is that the increase of volumes in general in all the plants, we are more or less thinking that with the new contracts which are coming for the new projects in $25,000,000 could be in the range of $5,000,000 to $6,000,000 additional. But I think it’s as we have explained during the presentation, Well, globally, we expect more achievement in The U. S.
Altogether with the refining plant savings. 26%, we are still we think that we are still seeing growing volumes and only to say the effect because there are many things that can consider, but another easily 50,000, 60 thousand tons more could arise for ’26 onwards. The idea is to be in two years with the project coming into I mean, into the market or running at the end in the next two, three years, coming to utilization rates of 80%, eighty five % for 2027% or something like that. This is the idea. And we will keep informing about the delivering and the how the things are going.
Yanis Marc Voulades, Analyst, Morgan Stanley: Okay. Got it. So basically, just to recap on The U. S, if we look at the increase, the volumes plus the fixed cost reduction at the zinc refining, you’re looking at something in the order of EUR 20,000,000 to EUR 25,000,000 improvement?
Asier Ramonandia, Group CEO, VESSA: Yes. At least EUR 20,000,000, I will be more comfortable to be a little bit more some result. But yes, I think it’s a good combination.
Yanis Marc Voulades, Analyst, Morgan Stanley: Very clear. And second question on the CapEx guidance, because I’m a bit puzzled here. You talk about EUR 100,000,000 for the coming years per annum, right? And within that, you talk about EUR 40,000,000 to EUR 45,000,000 of sustaining CapEx and a remaining spending in Palmerton Of Berndburg in the order of EUR 55,000,000 to EUR 60. That gets us to around EUR 100,000,000 or maybe slightly around EUR
Rafael Perez, CFO, VESSA: 100,000,000
Yanis Marc Voulades, Analyst, Morgan Stanley: for EUR 25,000,000, but I would have expected a meaningful step down from EUR 26,000,000 and something closer to sustaining CapEx levels in 2027, which is not what you’re indicating today. So could you perhaps elaborate what drives that and whether there are any additional projects that you are considering as part of this EUR 100,000,000 run rate? Thank you.
Asier Ramonandia, Group CEO, VESSA: Yes. Well, it’s true that you define very well about the 2025. Those are the Via, Palmerton and Bernwood in the part of the growth. For the next years, I think will depends The level of 100 is a good reference obviously. We don’t want to move a lot from that slightly up or down because what we want to do is the next projects in line, which are salt and slag plant in Europe or a second keel in the French plant for electrical furnace dust treatment.
I mean, we’ll come when we will see or when we see that the market is there, right? So in theory, in the pipeline, you could have those $100,000,000 considering that all the plants are coming one after the other. But again, we will inform how when we start the next plant like the Salterslak and the French kiln, right? So we’ll depend on that. But the $100,000,000 is a good reference because the idea is to do under this kind of cap or reference again those projects going and splitting one after the other during the years.
Yanis Marc Voulades, Analyst, Morgan Stanley: Okay. Got it. And just to clarify on Palmerton, there is no remaining ending in 2026 and on BEMBA there is a bit more to go, right?
Rafael Perez, CFO, VESSA: Yes, yes, yes.
Larsen Schruppen, Analyst, Berenberg: Excellent. Thank you very much.
Rafael Perez, CFO, VESSA: Thank you.
Youssef, Chorus Call Operator: The next question comes from the line of Larsen Schruppen from Berenberg. Please go ahead.
Christopher Blieford, Analyst, PNB Paribas: Hi, good morning. Just a follow-up on the Zincro finding asset. Just to confirm, so you’re expecting that to be broadly breakeven this year. Is that the right way to think about it? And then the second question is just on China.
Are you seeing any early signs of that improving? I mean, that seems to be a bit of a tailwind for the resi construction sector. So I’m wondering if there’s any early signs that maybe also into 02/2006 that that could be a bit better than it is now? Thanks.
Asier Ramonandia, Group CEO, VESSA: Thank you all for the question, Leslie. Well, in the case of the finding, yes. In general terms, it’s true that we can have in mind about $15,000,000 to $20,000,000 improvement and that could be directly on the profit and loss account of the group, which is going to be the results of the refining plant itself will depend on the TC evolution as well. And but on the other hand, this TC, we would collect in the refining plant of The U. S.
As well. So $15,000,000 is a kind of net contribution from one year to the other, no matter what is the final result about disease and so in the refining. So this is a little bit idea is to reduce cost in 2015 and capture this positive effect in 2025. Regarding China, yes, we see that it is a slightly better situation based on new contracts and will depend all the time about the capacity utilization that the steelmakers are. We are a little bit more positive than in 2024 with a contribution of, I don’t know, million, million, so what something like that among the two plants, which is better than the breakeven point at this point.
But it’s not a very important contribution, but it’s a good sign now that the plan in Janssen specifically when it’s running is delivering positive EBITDA as this was planned, how to say, and to see price levels, treatment charges and situation. But yes, we expect this contribution is not something very significant for the whole group operations, but there is a positive signal that the things could become better there.
Christopher Blieford, Analyst, PNB Paribas: Okay. Thank you.
Youssef, Chorus Call Operator: The next question comes from the line of Christopher Blieford from PNB Paribas. Please go ahead.
Kirit Kaya, Analyst, Kepler Cheuvreux: Yes. Good morning and thank you for taking my question. I have two follow-up questions on The U. S, please. Could you help me to better understand the timing perspective and to expect additional steel dust volumes to positively impact your operations?
So particularly in which quarter should we expect those positive contributions? And secondly, is my understanding correct that out of the million to million of cost savings, million will make it through the P and L in 2025 and then there’s a spillover effect for 2026? Thank you.
Asier Ramonandia, Group CEO, VESSA: Hi, Christopher. Well, starting for the second part of the second question, yes, it is there to be for all the years because it’s affecting to the fixed cost and all the operation cost of the plan. And I think that once we get this level, it is nothing to do with the payback on the levels that we are having, right? In the case of The U. S, well, the idea here always we have to explain or try to explain that our plans in U.
S. Was based on the current circumstances availability for the players that we are in that country or in the area because it’s North America affecting. But the reality is that there are projects for new electric car furnace plants that probably you have already monitored us that are coming into the picture. Samples is Arcelorone in ’25, Algoma in ’25, Nucor (NYSE:NUE), West Virginia is coming as well in ’26. So all in all, it’s depending on when those projects start to be on picture and tracking.
But our expectation is more or less clear than the twenty five thousand. Reference of 50,000 tons is the reference when we are in contact with those guys, the new guys that are coming into picture when they are going to finally start up operation with a good ramp up. But in that range, it’s secure in the near future. For ’26, we hope that is another 60,000 or 70,000 max could come with those projects and 2,070 and other something like that as well. So in the three years, probably the total idea is to have 150,000 tons more.
Timing and effort will depend as well of the evolution of the other parameters that are affecting our results. But to have an idea, so as I said before, you can get those kind of tonnages more or less have your numbers and multiply by the EBITDA level that you want about the and you’re going to have a kind of idea contribution. In our case, we will we like to be closer to the years where we are talking about to define more or less. That’s why $25,000,000 we see in the range of $6,000,000 or something like that contribution depending on the M and A evolution. But now it’s a good reference.
And we’ll see a little bit higher in $26,000,000 and so.
Kirit Kaya, Analyst, Kepler Cheuvreux: Okay. Thank you.
Youssef, Chorus Call Operator: The next question comes from the line of Kirit Kaya from Kepler Cheuvreux. Please go ahead.
Larsen Schruppen, Analyst, Berenberg: Yes. Well, I have two questions about The U. S. As well. So the first one would be, how is the integration of AZR in The U.
S. Developing? And the second one would be, what are your synergy targets for the region in 2025? Thank you.
Asier Ramonandia, Group CEO, VESSA: Hi, Tre. Thank you very much for the question. Well, integration in U. S. Is we can say that is done.
I mean, there was a couple of years we were discussing about the evolution of the synergies and things like that. But we can say that now where we are is more or less where we want to be, providing that we are always in a ongoing or improving systems for all the our plants. So I think there is room to do better things and so on. Information in general in the group is done for sure, and the cost efficiency in the furnace is already done. For not repeating a lot, the refinery is where we are now focused for the reduction of the cost.
This is what we see.
Jorge Gonzalez, Analyst, Houck of Hauser Investment Banking: Thank you.
Youssef, Chorus Call Operator: The next question comes from Jorge Gonzalez from Houck of Hauser Investment Banking. Please go ahead.
Jorge Gonzalez, Analyst, Houck of Hauser Investment Banking: Thank you for taking my questions. So two questions from my side. The first question on the very strong end of the year, especially for the works sold volumes in Q4. I was wondering with this very strong level of 108,000 tons in Q4. I was wondering if there is any narrative specific delta in Q4 for the steel dust that we should have into account as you have not offered this time the changes in the Q4, the isolated picture for Q4.
I was wondering if there were additional cost for the refinery that were booked in Q4 or any other thing that compensated a little bit the super strong sales of works in Q4? That will be my first question. And the second one, I’m sorry, if you have already answered this because I had problems with my connection is that if you can be more specific with the lingo you are using for the initial 25 target, if this double digit strong growth, we should think something like high teens percentage maybe in EBITDA or what do you have in mind with this target? Thank you.
Asier Ramonandia, Group CEO, VESSA: Thank you, Jorge. Well, in terms of volumes, I think I said I anticipated something in some previous questions as well. But Q4 has come very, very strong. We cannot say about the stability some periods in our activities because depending on the deliveries and depending on the maintenance and stoppage of the plants. Normally, the Q4 used to be a strong four if you get a city of four years.
But this is mainly because there are less maintenance stoppage because we want to be out of the peak season of Christmas, December, so difficult months and we tried to do the maintenance previous periods, which is true is that I would like to multiply the Q4 by four, but it’s not the case. That’s why the good reference is to have the
Jorge Gonzalez, Analyst, Houck of Hauser Investment Banking: four
Asier Ramonandia, Group CEO, VESSA: quarters and to see in the Q in the 2025 something similar depending on the quarters. As I say, we are having a strong maintenance in Spain in January in 2025. So it will depends on when we stop the plants. But the strong operation in the Q4 was or have been not for any specific region or special region. It’s just because we were not stoppage of maintenance.
And the other geographies like Asia and even China, they were running at a very good level because we have availability of that. Regarding the 25% evolution, you’d say, well, I think that we can say,
Rafael Perez, CFO, VESSA: I mean, what we have
Asier Ramonandia, Group CEO, VESSA: in mind obviously is that strong double digits starting for an EBITDA level of an increase of 10% to 20%. If you get the average 15%, probably is a good reference. It’s still early for us to say well, but we’ll be comfortable in that range. We will say strong. But it’s difficult for us to say that because one of the topics that used to affect a lot to us with this treatment charge is nowadays being settled or being at least anticipated now in meetings that are happening in U.
S. For the miners and smelting. So yes, I don’t know. In this level, we feel comfortable today. It’s true that we don’t see even risk that to be below that.
But on the contrary, probably, you get the medium point reference is a good reference to start to work before we provide the guidance range in the Q1 results conference.
Jorge Gonzalez, Analyst, Houck of Hauser Investment Banking: Thank you, sir. Let me catch up with the first question because maybe I did not make the right question. So I was referring more if this if there were also some additional cost in Q4, so there was this extraordinary volume in Q4, but were there also some extraordinary cost in Q4? Just to understand the margin, the total margin figure for Q4.
Asier Ramonandia, Group CEO, VESSA: No, sorry. I mean nothing extraordinary. Depending on the margin is the combination of the geographies that you know are different net margins where it’s coming from the operations, right? So we’ll depend on that. And I have the numbers on my mind, but nothing is extraordinary really.
Jorge Gonzalez, Analyst, Houck of Hauser Investment Banking: Okay. And then do you have already a roadmap for maintenance work in 2025? Is that as usual in Q3? Or you are thinking to make a different maintenance schedule this time?
Asier Ramonandia, Group CEO, VESSA: Well, depends on yearly basis because depends on the campaigns and obviously we take advantage when we are stockings for not having a lot of dust in some plants. But well, I will say that probably the weakest quarter in 2025 is the Q1 because we are going to have a couple of big stoppages in Europe particularly. And you know that European operations is the better margins contributors also. So obviously, the Q1 probably is the weaker and the remaining three quarters we’ll see. But I think that once again probably the 4.1 could be very high.
But well, I think the idea is this, Q1 a little bit weaker, but the rest in a good path.
Jorge Gonzalez, Analyst, Houck of Hauser Investment Banking: Okay. Thank you for the color. I’ll go back to the line.
Asier Ramonandia, Group CEO, VESSA: Thank you, Jose.
Youssef, Chorus Call Operator: The next and last question for today’s call is from Beltran Pazuelo from DLTV Europe. Please go ahead.
Rafael Perez, CFO, VESSA0: Hello. Good morning, Anshir, Rafa. Always a pleasure to be able to participate on the call. And congratulations for the strong results. I have a little question regarding capital allocation.
If you could give us more color on the dividend, especially seeing that the balance sheet is strong and getting even stronger and seeing that in I think it was not 2021, you should search to do the operation in The United States. Is it in the plans at some point if the market does not reflect the strong and growing EBITDA levels of this to implement a little buyback to show that you can also issue shares at 50 something, but also combine them at 20 something that I suppose it’s quite accretive to shareholders. Is that in the cards, seeing that the balance sheet is getting stronger and stronger? Thank you very much, Javier Rafa.
Rafael Perez, CFO, VESSA: Thank you, Eldram. Well, it’s something that we want to stick to our dividend policy, which is 40% to 50% of the to pay a dividend of 40% to 50% of the net income. We have been consistent with that since the IPO in November 2017. We have explored in the past alternatives and opportunities to do share buybacks. We have always came to the conclusion that the best thing for the company and for our shareholders was to stick to the 40% to 50% in dividend.
So in terms of capital allocation, it’s about reducing the maintenance CapEx, focusing the growth CapEx in in the projects that Assia has been explaining and then deleveraging the balance sheet and keep our dividend policy. That’s what I can tell you so far, Beltran.
Rafael Perez, CFO, VESSA0: Okay. Thank you. Thank you very much for the clarity, all the support. Thank you.
Yanis Marc Voulades, Analyst, Morgan Stanley: Thank you.
Youssef, Chorus Call Operator: Ladies and gentlemen, that was the last question. I would like now, therefore, turn the conference back over to Rafael Perez, CFO, for any closing remarks. Please go ahead.
Rafael Perez, CFO, VESSA: Thank you all for your questions. You can also contact the Investor Relations team of Efeza for any further clarification. We will now conclude the conference call and the Q and A session. Let me remind you that this you can find the webcast and the dial in details to access the recording of this conference call in our website, www.veesa.com. Thank you very much to all of you and have a good day.
Youssef, Chorus Call Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
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