Befesa Sa · XETR:BFSA
Befesa Sa — Q3 2023 Earnings Presentation
37 slides from Befesa Sa's earnings presentation, Oct 26, 2023
Slide 1: Q3 2023 Earnings Presentation
Q3 2023 Earnings Presentation 26 October 2023
Slide 2: Disclaimer
Disclaimer This presentation contains forward-looking statements and information relating to Befesa and its affiliates that are based on the beliefs of its management, including assumptions, opinions and views of Befesa and its affiliates as well as information cited from third party sources. Such s
Slide 3: Today's presenters
Today’s presenters Javier Molina Asier Zarraonandia Rafael Pérez Executive Chair CEO CFO Leading Befesa >20 years with Befesa >15 years with Befesa for >20 years 3 Q3 2023 Earnings Presentation
Slide 4: Highlights of Q3 2023
0 1 / Highlights of Q3 2023
Slide 5: Executive summary of Q3 2023
Executive summary of Q3 2023 Revenue Adjusted EBITDA Operating cash flow €289 million €42 million €22 million +8% yoy -8% yoy +51% yoy — Lower zinc and alu prices — Lower zinc and alu prices — Lower earnings + US zinc refining operations — Unfavourable zinc TC — Higher interests + Higher zinc hedgin
Slide 6: Business & financial results
02 Business & financial results
Slide 7: Consolidated key financials
Consolidated key financials Total adjusted EBITDA decreased by 17% yoy to €137m in 9M 2023, mainly due to lower zinc and alu prices, unfavourable TC, and higher coke price, partially offset by volume, better hedges and synergies Adjusted EBITDA1 9M 2022 to 9M 2023 163.9 8 +5 Solid steel dust volumes
Slide 8: Steel Dust Recycling Services
Steel Dust Recycling Services Adjusted EBITDA decreased by 22% yoy to €102m in 9M 2023, mainly due to lower zinc LME, unfavourable zinc TC and higher coke price, partially offset by better hedges and synergies Adjusted EBITDA 9M 2022 to 9M 2023 9M 9M yoy 2022 2023 change Revenue €m 533.3 605.3 +14%
Slide 9: Aluminium Salt Slags Recycling Services
Aluminium Salt Slags Recycling Services EBITDA increased by 4% yoy to €36m in 9M 2023; Lower cost (mainly lower energy prices) and improved volumes (Hanover) partially offset by lower aluminium prices EBITDA 9M 2022 to 9M 2023 9M 9M yoy 2022 2023 change Revenue1 308.1 300.4 -3% — Salt Slags €m 57.4
Slide 10: Key volume drivers and impact on Befesa 9M 2023
Key volume drivers and impact on Befesa 9M 2023 Key volume drivers in 9M Befesa’s volumes in 9M % vs prior year • Strong performance in Europe Crude steel production • EAF steel dust throughput grew yoy at solid levels despite the challenging steel production 2% 0% • Aluminium salt slags volumes gre
Slide 11: The current decrease in zinc prices is one of the largest in 15 years
The current decrease in zinc prices is one of the largest seen in the last 15 years $4,530 (April ‘22) Peak $2,814 (March ‘08) $2,405 $2,467 Zinc LME1 (May ‘15) (Jan ‘20) $2,224 (May ‘23) C902 $1,774 $1,454 (March ‘20) (Jan ‘16) Trough $1,046 (Dec ‘08) Global financial Commodity COVID—19 Current cri
Slide 12: 2023 impacted by high TC in a very volatile zinc price environment
2023 impacted by high TC in a very volatile zinc price environment Zinc LME1 Zinc treatment charges (TC) Peak: $300 (2008 & 2020) $274 (2023) 9M 2023 $2,699 L3y $3,060 L5y $2,800 Trough: $143 L10y $2,580 (2018) L15y $2,360 • Zinc LME has decreased by 37% in 2023, • TC for 2023 was settled at $274/t,
Slide 13: Coke price remains high; gas price stabilised at 2021 level
Coke price remains high, despite slightly moderating in Q3; Gas price stabilised at 2021 level Befesa’s energy price evolution by source Coke • After reaching an all-time-high 2019/20 2021 2022 YTD 2023 level in Q1/Q2 2023, Befesa’s coke price slightly moderated in Q3 (-4% vs. Q2; -4% yoy) 250 250 •
Slide 14: Befesa's hedging strategy provides price visibility
Befesa’s hedging strategy provides price visibility and lowers impact from zinc price volatility • Befesa’s hedging strategy unchanged Zinc LME1 • 1—3 years forward • Targeting 60% to 75% of zinc equivalent volume • Befesa providing no collateral c. €2,650 / $2,9003 • Befesa’s hedging strategy has B
Slide 15: Cash flow, net debt & leverage
Cash flow, net debt & leverage Cash on hand at €81m providing >€150m liquidity; Net debt increased to €633m driven by lower earnings; Net leverage of x3.38 Adjusted EBITDA to Total cash flow 9M 2023 Total capex = €84m 136.7 Hanover recovery and -36.2 US operating -21.2 63.7 excellence Seasonality -1
Slide 16: Outlook & growth
| \ e : ey. | : | 1 aaa —— 0 3 / Outlook & growth
Slide 17: Outlook
Outlook Full year 2023 Return to growth path Positive mid-term challenging expected in 2024 outlook intact • Current macro and market • Pressures faced in 2023 Favourable specific challenges caused should revert in 2024 due to decarbonisation and a combination of temporary the temporary nature of th
Slide 18: Decarbonisation driving EAF steel production in Befesa's key markets
Decarbonisation driving EAF steel production in Befesa’s key markets EAF steel production 2022 2030e 200 Million tonnes 103 70 60 80 x2 56 x1.3 x1.3 % EAF share of total crude 69% >70% 40% >50% 10% 20% steel production • Significant infrastructure • Accelerating decarbonisation • #1 steel producer r
Slide 19: Decarbonisation and EV driving aluminium market growth in Europe
Decarbonisation and EV driving aluminium market growth in Europe EV unit sales in Europe1 Alu content per vehicle2 Auto alu demand in Europe2 million units kg per passenger car million tonnes +75 kg per car +2 million tonnes x5 249 4 5 11 174 3 121 2 0 2015 2020 2030e 2006 2019 2030e 2022e 2026e 203
Slide 20: Well defined growth roadmap in execution towards 2027
Well defined growth roadmap in execution towards 2027 Steel Dust Indicative timing & progress Capex EBITDA Growth projects Alu Salt Slags 2023 2027e €m run-rate €m 1 Zinc refining 110—120 35—45 2 Palmerton refurbishment 3 China III, 1st kiln Guangdong 4 China IV, 2nd kiln Jiangsu 115—125 30—35 5 Chi
Slide 21: Palmerton plant refurbishment progressing well
2 Palmerton plant refurbishment progressing well to seize market growth in 2025 Plant overview Palmerton, Pennsylvania • 2 kilns with c. 163 kt → 220 kt (post-refurbishment) EAF steel dust recycling capacity • Producing WOX as a marketable product Indicative timing and status Q1 2025 Other Befesa EP
Slide 22: Growth opportunity in China is attractive and plan remains unchanged
Growth opportunity in China is attractive and Befesa’s plan remains unchanged, despite current market challenges Challenging market environment • YTD steel output still up yoy driven by BOF; production cuts likely in Q4 to meet control policies • EAF mills (typically privately-owned vs state-owned B
Slide 23: Cautiously progressing in Guangdong province
3 Cautiously progressing in Guangdong province Plant overview • 1 kiln with 110 kt EAF steel dust recycling capacity • Option for expansion on site: 2 additional kilns x 110 kt = +220 kt capacity Indicative timing and status 2025/26 Yunfu, Guangdong Investment agreement signed Q1 2023 Other Befesa l
Slide 24: Investor agenda & appendix
04 Investor agenda & appendix
Slide 25: Investor's agenda
Investor’s agenda Financial calendar Next investor conferences November / December 2023 Q1 2024 Preliminary Year-End Results Paris – 6th MidCap CEO Conference Lyon – 27th ODDO BHF Forum 2023 & Conference Call 15 November – BNP Paribas Exane 11 & 12 January – ODDO BHF 29 February 2024 15 & 16 January
Slide 26: 9M 2023/22 – Key financials
9M 2023/22 – Key financials (€m, unless otherwise stated) Steel Salt Secondary Corporate & Total Dust Slags Aluminium eliminations Befesa Revenue1 605.3 60.4 271.2 -32.8 904.2 yoy change +72.0 / +13.5% +3.1 / +5.3% -15.0 / -5.2% +3.5 / - +63.6 / +7.6% Reported EBITDA 94.5 19.0 16.6 -€4.4 125.5 yoy c
Slide 27: Q3 2023/22 – Key financials
Q3 2023/22 – Key financials (€m, unless otherwise stated) Steel Salt Secondary Corporate & Total Dust Slags Aluminium eliminations Befesa Revenue1 202.3 19.1 76.0 -8.7 288.7 yoy change +22.8 / +12.7% +3.1 / +19.4% +7.5 / +10.9% -12.7 / - +20.7 / +7.7% Reported EBITDA 31.1 4.6 3.2 -4.2 34.7 yoy chang
Slide 28: Multi-year trend – Key financials
Multi-year trend – Key financials1 (€m, unless otherwise stated) 2017 2018 2019 2020 2021 2022 Revenue 667.42 720.1 647.9 604.3 821.6 1,136.0 Reported EBITDA 153.0 176.0 159.6 123.5 189.6 234.9 Reported EBITDA margin 22.9%2 24.4% 24.6% 20.4% 23.1% 20.7% % Adjusted EBITDA 172.43 176.0 159.6 127.03 19
Slide 29: 9M 2023/22 – Operational data – Steel Dust Recycling Services
9M 2023/22 – Operational data – Steel Dust Recycling Services 9M 2022 9M 2023 yoy change EAF steel dust 897.6 889.7 -7.9 / -0.9% throughput (kt) EAF steel dust 77.2% 70.3% -690 bps avg. capacity utilisation (%) Waelz oxide 311.4 301.0 -10.3 / -3.3% (WOX) sold (kt) Zinc LME price 3,422 2,493 -929 / -
Slide 30: Q3 2023/22 – Operational data – Steel Dust Recycling Services
Q3 2023/22 – Operational data – Steel Dust Recycling Services Q3 2022 Q3 2023 yoy change EAF steel dust 267.9 297.4 +29.5 / +11.0% throughput (kt) EAF steel dust 68.3% 69.7% +135 bps avg. capacity utilisation (%) Waelz oxide 97.5 103.8 +6.3 / +6.5% (WOX) sold (kt) Zinc LME price 3,245 2,232 -1,013 /
Slide 31: 9M 2023/22 – Operational data – Aluminium Salt Slags Recycling Services
9M 2023/22 – Operational data – Aluminium Salt Slags Recycling Services 9M 2022 9M 2023 yoy change Salt slags & SPL 239.8 257.8 +18.0 / +7.5% treated (kt) Salt slags & SPL 68.2% 73.3% +511 bps avg. capacity utilisation (%) Aluminium 121.9 125.8 +3.8 / +3.1% alloys produced (kt) Secondary alu 79.5% 8
Slide 32: Q3 2023/22 – Operational data – Aluminium Salt Slags Recycling Services
Q3 2023/22 – Operational data – Aluminium Salt Slags Recycling Services Q3 2022 Q3 2023 yoy change Salt slags & SPL 66.9 89.7 +19.9 / +29.7% treated (kt) Salt slags & SPL 56.5% 73.2% +1,676 bps avg. capacity utilisation (%) Aluminium 37.3 38.6 +1.3 / +3.5% alloys produced (kt) Secondary alu 72.2% 74
Slide 33: Multi-year trend – Operational data
Multi-year trend – Operational data 2017 2018 2019 2020 2021 2022 EAF steel dust 661.0 717.1 665.8 687.0 885.7 1,193.8 throughput (kt) EAF steel dust average 84.7% 92.0% 80.7% / 83.2% 83.3%2 76.8% capacity utilisation (%) 90.1%1 Waelz oxide (WOX) sold 217.8 240.9 217.6 239.2 291.0 407.4 (kt) Zinc LM
Slide 34: Consolidated key financials
Consolidated key financials Adjusted EBITDA decreased by 8% yoy to €42m in Q3 2023; Lower zinc & aluminium prices, unfavourable zinc TC, partially offset by improved volumes, better hedges, lower energy prices and synergies Adjusted EBITDA1 Q3 2022 to Q3 2023 Q3 Q3 yoy 2022 2023 change Revenue €m 26
Slide 35: Steel Dust Recycling Services
Steel Dust Recycling Services Adjusted EBITDA decreased by 4% yoy to €35m in Q3 2023, mainly due to lower zinc prices and unfavourable zinc TC, partially offset by improved volumes, hedges, lower coke price and synergies Adjusted EBITDA Q3 2022 to Q3 2023 Q3 Q3 yoy 2022 2023 change Revenue €m 179.5
Slide 36: Aluminium Salt Slags Recycling Services
Aluminium Salt Slags Recycling Services EBITDA decreased by 26% yoy to €8m in Q3 2023, mainly due to lower aluminium prices partially offset by improved volumes (Hanover back in operations) and lower energy prices EBITDA Q3 2022 to Q3 2023 Q3 Q3 yoy 2022 2023 change Revenue1 88.7 86.9 -2% — Salt Sla
Slide 37: Cash flow, net debt & leverage
Cash flow, net debt & leverage Cash on hand at €81m providing >€150m liquidity; Net debt increased to €633m driven by lower earnings; Net leverage of x3.38 Adjusted EBITDA to Total cash flow Q3 2023 42.0 Total capex = €31m -8.2 21.7 -7.7 -4.3 -20.1 -10.7 -3.7 Hanover Henan & recovery and US operatin