Befesa Sa · XETR:BFSA
Befesa Sa — 28th ODDO BHF Forum (November 2024)
49 slides from Befesa Sa's conference presentation, November 2024
Slide 1: Business & strategic update
Business & strategic update November 2024
Slide 2: Key Highlights
Key Highlights FY24 EBITDA of €210-215m, or 15% - 18% YoY, within the previous guidance range of €205-235m For 2025 expecting strong double-digit EBITDA growth Recycling operations in US improving profitability as planned Zinc refining focus on cost reduction China operations at break-even Expansion
Slide 3: Executive Summary 1/2
Executive Summary 1/2 Current trading pointing towards €210-215 FY EBITDA within the guidance range of €205-235m despite macro situation Current ▪ Expecting FY24 EBITDA between €210-215, representing 15-18% EBITDA growth year on year Trading • Q4 expected to be the strongest in the year driven by hi
Slide 4: Executive Summary 2/2
Executive Summary 2/2 China focus on improving existing operations. Expansion plan stop China ▪ Befesa invested in China in 2020 to capture the business opportunity that increased EAF steel and environmental regulation presented • Total capex invested €90m in two EAF dust recycling plants in the pro
Slide 5: Agenda
Agenda Current Trading Resiliency Resiliency USA operations USA operations China operations China operations Business Plan Business Plan Growth Strategy Growth Strategy 5
Slide 6: Current trading pointing towards €210-215m FY EBITDA within guidance
Current trading pointing towards €210-215 FY EBITDA within the guidance range of €205-235m despite macro situation ▪ Expecting FY24 EBITDA between €210-215, representing 15-18% EBITDA growth year on year – Q4 expected to be the strongest in the year driven by high volume and almost no maintenance st
Slide 7: Strong Q3, up 16% YoY, despite challenging macroeconomic environment
Strong Q3, up 16% YoY, despite challenging macroeconomic environment Q3 2024 Financial Highlights Revenue ▪ Small revenue increase of 2% driven by higher Salt Slags activity Q3: €294m 2% YoY ▪ EBITDA margin increased to 17%, mainly driven by Steel dust (20%) and Salt Slags (32%) 9M: €915m 1% YoY ▪ S
Slide 8: Q3 Steel Dust business highlights
Q3 Steel Dust business highlights Strong Steel dust recycling operations in Europe and US partially offset by zinc refining contribution EUROPE USA ASIA Steel production in Europe at 5-year low Good utilization levels in the steel dust EAF dust volume throughput impacted by impacted by weak de
Slide 9: Q3 Aluminium business highlights
Q3 Aluminium business highlights Strong salt slags recycling performance partially offset by weak secondary aluminium metal margin Salt Slags recycling 2nd aluminum Strong volume of salt slag recycled with plants Very weak European automotive industry Highlights running at 90% capacity utilizati
Slide 10: Steel Dust Recycling Services Financials
Steel Dust Recycling Services Financials Favourable blended price and TC together with lower coke and energy price, partially offset by zinc refining in the US YoY change EBITDA 9M 2023 to 9M 2024 9m 2023 9m 2024 (%) 19% Revenue €m 605.3 603.5 0% 8 -16 Adjusted EBITDA €m 101.8 121.6 +19% 122 27 Adju
Slide 11: Aluminium Salt Slags Recycling Services Financials
Aluminium Salt Slags Recycling Services Financials EBITDA impacted by compressed aluminum metal margin, partially compensated by lower energy prices Salt slags volume growth. YoY change 9m 2023 9m 2024 (%) EBITDA 9M 2023 to 9M 2024 Revenue1 300.4 315.4 +5% -14% – Salt Slags €m 60.4 79.4 +31% 36 – Se
Slide 12: Zinc LME price trading sideways; Treatment Charge settled at $165/t
Zinc LME price trading sideways after mini rally in May; Treatment Charge settled at $165/t for full year 2024 Befesa has demonstrated resilient volumes and capacity utilisation levels during the latest crises (April ‘22) Peak: $300 4.485 (2008 & 2020) 320 (Feb ‘18) 300 3.590 280 (Sep‘24) 260 (March
Slide 13: Zinc price hedging extended until H1 2026
Zinc price hedging extended until H1 2026 at all-time high level of €2,650. Focus on H2 2026 with 50% already closed 1 Befesa’s hedging strategy unchanged • 1-3 years forward Zinc LME1 • Targeting 60% to 75% of zinc equivalent volume Befesa’s blended2 €2,627 • Befesa provides no collateral €2,425 Be
Slide 14: Coke price normalisation; gas and electricity prices stabilised
Coke price continued further normalisation in YTD; Gas & electricity prices stabilised around 2021 levels Coke ▪ Befesa’s coke price Befesa’s energy price evolution by source continued further normalisation in Q3’24 to levels below the 2022 and 2019/20 2021 2022 2023 YTD 2024 2023 average ▪ 9M 2024
Slide 15: EBITDA to Cash Flow
EBITDA to Cash Flow Operating Cash Flow in 9M at €118m, up 39% YoY. Cash on hand at 9M 2024 amounted to €86m. Adjusted EBITDA to Total cash flow in 9M 2024 (€ million) 152 -37 Total capex = €105m 118 4 -42 -23 -40 -5 -29 -21 Adj EBITDA WC Change Taxes Operating CF Maintenance Growth Capex Recytech B
Slide 16: FY 2024 guidance narrowed to €210-215m
▪ Expecting FY24 EBITDA of €210-215m, or 15% - 18% YoY, within the previous guidance range of €205-235m – Expecting strong Q4, supported by strong volume in Europe, despite weak steel sector – China at break even with no contribution; Jiangsu positive offset FY 2024 by Henan guidance – Zinc refining
Slide 17: Agenda
Agenda Current Trading Current Trading Resiliency USA operations USA operations China operations China operations Business Plan Business Plan Growth Strategy Growth Strategy 17
Slide 18: Unique business model with high barriers to entry
Unique business model with high barriers to entry resulting in high margins over time and strong performance through the cycle ▪ Strategically located plants near customers and long-term service relationships providing high barriers to entry ▪ Proven track record of resilience through cycles and vol
Slide 19: Unique business model with high barriers to entry
Unique business model with high barriers to entry resulting in high margins over time Strategic locations and strong performance through the cycle Locked-in captive demand as Befesa’s plants strategically located in close proximity to client locations Short distance Plants located nearby EAF produce
Slide 20: Befesa's Resilience During Latest Crises
Befesa’s Resilience During Latest Crises Befesa has demonstrated resilient volumes and capacity utilisation levels during the latest crises 2008 / 2009 / 2010 2019 / 2020 / 20213) 600 1000 2019 2020 2021CE 240 >1.1Mt Incl.240US acquisition 550 900 Befesa EAFD 220 500 474 482 220 800 throughput, kt 6
Slide 21: C90 growing at 6% CAGR as a solid floor of the zinc price
C90 growing at 6% CAGR over the las 15 years, consistently acting as a solid floor of the zinc price C90 as solid floor for zinc ▪ C90 represents the zinc price level at which 10% of the most expensive mines break even ▪ Historically as floor for zinc price ▪ Supply is cut upon breaking the C90 ▪ Zi
Slide 22: Agenda
Agenda Current Trading Current Trading Resiliency Resiliency USA operations China operations China operations Business Plan Business Plan Growth Strategy Growth Strategy 22
Slide 23: Operational improvement of US recycling assets on plan
Operational improvement of recycling assets on plan, ready to capture market growth. Stabilizing refining plant ▪ Steel dust recycling operations increasing efficiency according to initial plan based on operational synergies and best practices – Resulting in an increase of EBITDA/ton of 57%, from €7
Slide 24: US recycling operations improving profitability as planned
US recycling operations improving gradually profitability as planned Steel dust throughput & Plant utilisation 90% 60% 70% 580 Gradual recovery of EAF volume since 2021: 450 * 437 Customer 100 ▪ Loss of an EAF steel dust supply contract with a major steelmaker loss before acquisition 350 ▪ Volume b
Slide 25: Synergies focused on operational efficiency and coke consumption
Synergies focused on operational efficiency and coke consumption Coke consumption US plants (Kt) 133 128 113 Coke consumption reduced by 24% driven by operational efficiencies. 94 Coke-to-throughput ratio decreased from 33% to 23% by implementing best practices Coke average price in the US increased
Slide 26: Palmerton plant refurbishment progressing well
Palmerton plant refurbishment progressing well to seize market growth in 2025 and beyond Plant overview ▪ 2 kilns with c. 163 kt → 220 kt (post-refurbishment) EAF steel dust recycling capacity Palmerton, Pennsylvania ▪ Producing WOX as a marketable product Indicative timing and status H1 2025 EPC co
Slide 27: New EAF announcements supported by strong infrastructure programs
New EAF announcements supported by strong infrastructure programs requiring steel 60kt additional EAF steel dust already contracted Steelmaker Location New capacity, Mt Start up 1 Calvert, Alabama 1.5 H2’24 Arcelor 2 Hamilton, Ontario, Canada 2.4 2026 3 Kingman, Arizona 0.6 Q3’24 4 Lexington, North
Slide 28: Zinc refining asset being turned around
Zinc refining asset being turnaround to improve profitability Zinc refining plant: Key facts Implementing a 3-phase plan since acquisition ▪ Vertical integration in the US which makes sense as there is Improving the quality of the product to the SHG zinc specification to 1 lack of smelting capacity
Slide 29: Turnaround plan to improve profitability of zinc refining plant
Turnaround plan to improve profitability of zinc refining plant Quality improvement Plant Utilization Cost Reduction % In Spec SHG over total production % Load factor +18% +36% 100% 100% 82% 86% 82% 65% 50% Q4’23 Q1’24 Q2’24 Q3’24 Q4’22 FY23 YTD24 Note¹: Q3’24 refers to July & August 2024 ▪ In Spec
Slide 30: Agenda
Agenda Current Trading Current Trading Resiliency Resiliency USA operations USA operations China operations Business Plan Business Plan Growth Strategy Growth Strategy 30
Slide 31: China focus on improving existing operations. Expansion plan stop
China focus on improving existing operations. Expansion plan stop ▪ Befesa invested in China in 2020 to capture the business opportunity that increased EAF steel and environmental regulation presented – Total capex invested €90m in two EAF dust recycling plants in the provinces of Jiangsu and Henan
Slide 32: Befesa invested in China in 2020
Befesa invested in China in 2020 to capture the business opportunity that increased EAF steel and environmental regulation presented Total capex invested €90m in two EAF dust recycling plants in the provinces of Jiangsu and Henan 1 Key milestones 2 Environmental Regulation ▪ In 2017, steel mill dust
Slide 33: Real estate crisis in China driving low EAF utilization
The real estate crisis in China is driving low utilization on EAF steel makers, resulting in low EAF dust generation 1 EAF steel output is being impacted by the real estate crisis, with a low utilisation rate 2 2024 represents the fifth year with a double-digit decline 3 Long products production is
Slide 34: Differences between Jiangsu and Henan drive performance
Differences in EAF steel production and regulation enforcement between the two provinces drive performance Jiangsu Henan Tier 1 province with strong enforcement of the Tier 2 province, with utilisation rate expected to remain environmental regulation, high plant utilisation rate and subdued for a wh
Slide 35: Investment plan in China stop until clear market recovery
Investment plan in China stop for the coming years until a clear market recovery Despite de challenging short term, in the medium term the opportunity in China remains very attractive Investment plan stop: Positive trends still in place for the mid-term ▪ The two main drivers for the investment appr
Slide 36: Agenda
Agenda Current Trading Current Trading Resiliency Resiliency USA operations USA operations China operations China operations Business Plan Growth Strategy Growth Strategy 36
Slide 37: 5-year Business Plan to be executed keeping leverage around x2
5-year Business Plan presented in CMD in November 2022 to be executed keeping leverage around x2 ▪ Growth going forward maintaining leverage between x2.0 and x2.5 – Only committed capex is Palmerton and Bernburg expansion, which are ongoing – Reducing leverage as a top priority – European projects (
Slide 38: What we said at the CMD in November 2022
What we said at the CMD in November 2022 38
Slide 39: Befesa is adjusting its business plan to macroeconomic challenges
Befesa is adjusting and adapting its business plan to the temporary macroeconomic challenges CMD Nov 2022 Today Outlook Capex Total capex: €410-450m 20% invested, €87m: US refining and Recytech 30%: Europe steel dust & salt slags, €120-140m 20% being invested, €90m: Palmerton & Bernburg 30
Slide 40: Capex already invested will deliver growth
Capex already invested will deliver 1 Total invested before 5Y Growth Plan €480m growth over the coming years • Today delivering €50m • Potential to deliver €80-90m EBITDA EBITDA Project Capex • >15% ROCE today potential US recycling €390 €50 €70 2 20% of the 5Y Growth Plan invested • €80m invested
Slide 41: Leverage reduction as a top priority
Leverage reduction as a top priority. Focus on disciplined capital allocation Capital structure Net debt / EBITDA Historical average x2.7 • TLB of €650m x3.4 • Maturity in July 2029 x3.3 • E+275 bps (25 bps reduction when leverage <x3.0 and <x2.5) • Covenant-lite terms • RCF of €100m Target x2.0 – 2
Slide 42: Remaining 50% of Recytech acquired
Remaining 50% of Recytech acquired in a highly-accretive deal, advancing strategic global growth plan in Europe Befesa’s EAF steel dust recycling plants in Europe 1 Fouquières-lès-Lens/Recytech Key facts about Recytech: 2 Duisburg 2 1 ▪ Former 50/50 JV between Befesa and Recylex, 3 3 Freiberg 4 Asúa
Slide 43: Bernburg expansion: permits and commercial contracts
Bernburg expansion: Moving forward with permits and commercial contracts Plant overview ▪ Expand alu alloy production capacity at existing Bernburg plant from current 75 kt to 135 kt (+60 kt) • 2 rotary furnaces (and 2 holding furnaces) ▪ Total 2nd Alu capacity from 205 kt to 265 kt Bernburg, German
Slide 44: Agenda
Agenda Current Trading Current Trading Resiliency Resiliency USA operations USA operations China operations China operations Business Plan Business Plan Growth Strategy 44
Slide 45: Growth strategy driven by favourable mega trends
Growth strategy driven by favourable mega trends of decarbonization, energy transition and environmental regulation ▪ The strategy of Befesa remains unchanged, focus on the two-core business – Steel dust and salt slags recycling services to the steel and aluminium industries as well as secondary alu
Slide 46: Industries benefited from decarbonization and energy transition mega trends
Befesa’s industries are benefited from favourable mega trends driven by decarbonization and energy transition FAVOURABLE MEGA TRENDS Rising population Focus on circular economy Increase in middle classes in emerging countries / urbanisation Stricter environmental regulations Resource scarcity STEEL
Slide 47: Decarbonisation megatrends driving EAF steel growth
Decarbonisation megatrends favouring and driving the electric arc furnace (EAF) steel growth Global crude steel production1 Key takeaways million tonnes, 2016—2030e CAGR CAGR 2016—21 2022—30e 2,064 +3.6% +1.0% ▪ Ongoing swift from BOF to 1,951 Total EAF steel — Global EAF crude 1,633 564 steel produ
Slide 48: Energy transition megatrend requiring incremental zinc
Energy transition megatrend requiring incremental zinc, in addition to regular GDP related growth Key takeaways Zinc annual demand from wind, solar & batteries 1 thousand tonnes ▪ Global zinc demand grew with GDP at 2-3% CAGR over the L10y ▪ Zinc consumption expected to be supported as governments i
Slide 49: BEFESA
BEFESA