Befesa Sa · XETR:BFSA
Befesa Sa — Investor Day (November 2022)
54 slides from Befesa Sa's investor day presentation, Nov 8, 2022
Slide 1: Sustainable Global Growth Plan (SGGP) 2022-2027: Growing through the cycle
Strictly Private and Confidential Sustainable Global Growth Plan (SGGP) – 2022-2027 Growing through the cycle Capital Markets Day 2022 London – 8 November
Slide 2: Disclaimer
Disclaimer This presentation and the information contained herein (unless otherwise indicated) has been prepared by Befesa S.A. (Befesa) solely for informational purposes. This presentation contains forward looking statements and information relating to Befesa and its affiliates that are based on th
Slide 3: Agenda
Agenda UK time Befesa highlights & current environment 10:00 Sustainable Global Growth Plan (SGGP) 10:30 - Steel Dust Recycling - Aluminium Salt Slags Recycling Break 11:30 Financials 11:45 ESG 12:00 Closing remarks 12:15 Q&A 12:30-13:30 3 Befesa Capital Markets Day – 8 November 2022
Slide 4: Befesa highlights & current environment
Befesa highlights & current environment
Slide 5: Leader in circular economy for >30 years
Leader in circular economy for >30 years Environmental Favourable Global Strong solutions mega trends leader regulation in high demand supporting secondary steel in Europe, Asia & US, getting stricter and for the steel and and aluminium markets in niche recycling markets, expanding into aluminium in
Slide 6: Proven resilience & growth through cycles
Proven resilience & growth through cycles Attractive growth track record with proven margin resilience despite volatile environment – driven by a successful service-focused business model & prudent financial practices Key COVID pandemic Global European macro financial crisis debt crisis Global suppl
Slide 7: FY'22 guidance confirmed at ≥€220m EBITDA, +11% yoy, a new record result
FY’22 guidance confirmed at ≥€220m EBITDA, +11% yoy, a new record result • Confirming FY’22 guidance ≥ €220m EBITDA, +11% yoy LTM Q3’22 at €225m EBITDA • Acquired US Zinc Refining asset at $47m (vs. original $135m) on 30 Sep; All cash transaction • Total capex guidance adjusted for US Zinc Refining,
Slide 8: Zinc prices & hedging strategy
Zinc prices & hedging strategy Hedge book fully extended up to Jan’25, c.2.5 years; Improving earnings & cash flows visibility Zinc LME vs. Befesa’s hedges & blended prices (€ per tonne) Zinc LME1) Befesa’s hedges2) c.€2,600 c.€2,500 €2,317 c.€2,375 €2,239 €2,275 +€125/t x 151 kt +€225/t x 152 kt €2
Slide 9: Preliminarily expecting 2022 as "floor" for 2023
Preliminarily expecting 2022 as “floor” for 2023 Key EBITDA drivers for 2023 (vs. 2022) + Zinc hedging - Inflation: • Base volume: Monitoring energy price Europe, US, ex China; development and + Decarbonisation / EV + Acquired US zinc refining general inflation post-COVID –vs- + US synergies - Reces
Slide 10: Strong financial backbone
Strong financial backbone Long-term and efficient capital structure with no maturities up to Jul-26 → Resilient earnings & cash flows … to self-fund growth Prudent zinc hedging roadmap in the approach → Stable & high liquidity US, Europe & Asia → Moderate leverage at c.x2 Rigorous cash management 10
Slide 11: Proven track record since IPO; Megatrends driving growth over next 5 years
Proven track record since IPO; Megatrends driving growth over next 5 years EBITDA (€m) +6% CAGR €160m growth capex + €380m AZR (Ex Zinc Refining) €225 Committed & delivered since IPO: ✓ Growth: Global #1 in Steel Dust €172 + + ✓ Dividend: > 50% net profit payout ✓ Conservative financial management:
Slide 12: Ready to execute next 5-year Sustainable Global Growth Plan (SGGP)
Ready to execute next 5-year Sustainable Global Growth Plan (SGGP) Around €410-450m investment, similar expansion focus & size like last 5 years Targeting +€125-155m incremental run-rate EBITDA from 2022 baseline, +8% to +10% CAGR growth; >20% IRR Globally balanced expansion, c.1/3 in the US, Europe
Slide 13: ESG: Enhanced transparency & performance
ESG: Enhanced transparency & performance Transparency / reporting External ratings Health & safety Detailed ESG Report Lost Time Injury Rate (LTIR)1) improved by 85% since 2015 LTIR CO2 holistic approach CO2 intensity targets Sustainability Committee Saving >2mt CO2eq -20% by 2030 vs. virgin product
Slide 14: Sustainable Global Growth Plan (SGGP)
Sustainable Global Growth Plan (SGGP)
Slide 15: Decarbonisation megatrend favouring & driving EAF steel growth
Decarbonisation megatrend favouring & driving EAF steel growth Global crude steel production1), 2016-2030e CAGR CAGR (million tonnes) 2016-21 2022-30e 2,064 +3.6% +1.0% 1,951 Total crude 1,633 564 37%2) +6.2% +4.2% 29% EAF 26% Primary steel (BOF) consumes c.7x more CO2 per tonne BOF +2.7% -0.5% vs.
Slide 16: Energy transition megatrend requiring incremental zinc
Energy transition megatrend requiring incremental zinc, in addition to regular GDP related growth Zinc annual demand from wind, solar and batteries (thousand tonnes) • Global zinc demand grew with GDP at 2-3% CAGR over the L10y • Zinc consumption expected to be supported as governments invest in gre
Slide 17: 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
Slide 18: SGGP Steel Dust Recycling Services
Sustainable Global Growth Plan (SGGP) Steel Dust Recycling Services
Slide 19: Decarbonisation investments & Infrastructure Programme will support EAF growth by 2030
Decarbonisation investments & Infrastructure Programme will support EAF growth by 2030 c.$9-10 Bn capex equal to c.13-14 Mt EAF announced; Plus, $1.2 T infrastructure program requires more steel overall in the US → generating >300 kt incremental EAFD Overview of selected steelmakers (€ billion capex
Slide 20: SGGP – Steel Dust – US
SGGP – Steel Dust – US EAFD generation in the US expected to increase >0.3 Mt by 2030 … Befesa to fully utilise existing c.620 kt annual installed capacity EAF steel production EAFD generation (million tonnes, EAF % of total crude steel output) (million tonnes) >0.3 x1.2 60 70 $1.2 T infrastructure
Slide 21: US Zinc refining asset acquisition: Transaction highlights
US Zinc refining asset acquisition: Transaction highlights Zinc refining plant Location: Rutherford County, NC Installed capacity: c. 140 kt SHG zinc p.a. • Acquired remaining 93% of zinc refining asset on 30 Sep ’22 for $47m cash transaction; 65% or $88m below original purchase option of $135m • At
Slide 22: Refurbishing Palmerton to drive efficiencies and increase capacity utilisation by 2026
Refurbishing Palmerton to drive efficiencies and increase capacity utilisation by 2026 EAFD recycling assets • c.620 kt nameplate recycling capacity; c.70% current utilisation 1 Barnwell, SC 2 Rockwood, TN • Targeting c.200 kt incremental throughput to fully utilise Befesa’s capacity and maintain ma
Slide 23: Accelerating decarbonisation investments in EU will support EAF share growing to >50% by 2030
Accelerating decarbonisation investments in EU will support EAF share growing to >50% by 2030 c.€14-15 Bn investments in new steel EAF projects in Europe announced … Representing c.20-21 Mt incremental steel EAF capacity → generating c.350 kt EAFD Overview of selected steelmakers (€ billion capex, m
Slide 24: SGGP – Steel Dust – Europe
SGGP – Steel Dust – Europe EAFD generation in Europe expected to increase >0.3 Mt by 2030 … Befesa adding 140-160 kt new EAFD recycling capacity to maintain its current c.45% market share EAF steel production EAFD generation (million tonnes, EAF % of total crude steel output) (million tonnes) x1.2 >
Slide 25: Adding new EAFD recycling capacity and WOX washing expansion
Adding new EAFD recycling capacity –and– WOX washing expansion c.€105-115m total investment; c.€30-35m total incremental EBITDA p.a.; Low-risk & high-return projects New EAFD recycling plant • Grow with EAFD addressable market and invest in a new 140-160 kt state-of-the-art EAFD plant • Construction
Slide 26: Largest producer of steel, rapidly transitioning from BOF to EAF
Largest producer of steel, rapidly transitioning from BOF to EAF; a strong growth opportunity >60 Mt new EAF capacity announced, representing c.1 Mt EAFD incremental generation; Befesa strategically located in provinces with high EAFD generation Overview of selected steelmakers (million tonnes of ne
Slide 27: Largest producer of steel, rapidly transitioning from BOF to EAF
Largest producer of steel, rapidly transitioning from BOF to EAF; a strong growth opportunity >60 Mt new EAF capacity announced, representing c.1 Mt EAFD incremental generation; Befesa strategically located in provinces with high EAFD generation Overview of selected steelmakers (million tonnes of ne
Slide 28: SGGP – Steel Dust – China
SGGP – Steel Dust – China EAFD generation in China expected to increase about 1.6 Mt by 2030 as it transitions from BOF to EAF; Befesa to add 3x 110 kt = 330 kt new capacity which will increase market share to 15-20% EAF steel production EAFD generation (million tonnes, EAF % of total crude steel ou
Slide 29: Befesa strategically located in provinces with high EAFD generation
Befesa strategically located in provinces with high EAFD generation EAFD generation in China Xuchang (Henan) Changzhou (Jiangsu) BEFESA EAFD recycling sites in China EAFD generation – Chinese market < 60 kt 60-100 kt 100-200 kt GuangDong 200-400 kt LOI signed >400 kt 29 Befesa Capital Markets Day –
Slide 30: SGGP Aluminium Salt Slags Recycling Services
Sustainable Global Growth Plan (SGGP) Aluminium Salt Slags Recycling Services
Slide 31: Decarbonisation trend drives transition to Electric Vehicles (EV)
Decarbonisation trend drives transition to Electric Vehicles (EV) Automotive industry switching from combustion to EV EV unit sales in Europe1) (million units) • EU approved plan to ban sales of vehicles x5 with combustion engines (ICE) by 20352) 10.9 • EV unit sales forecasted to grow x5 from c.2 m
Slide 32: EV requiring higher aluminium content per car to achieve light-weight targets
EV requiring higher aluminium content per car to achieve light-weight targets Average aluminium content per vehicle1), net weight (kg per passenger car) • Average aluminium content per vehicle +75 kg per car (passenger cars) has steadily been increasing, from 121 kg/car in 2006 to 193 kg/car in 2022
Slide 33: Driving higher aluminium demand with increased needs for 2nd alu & salt slags recycling
… driving higher aluminium demand with increased needs for 2nd alu & salt slags recycling Aluminium demand from Auto1) in Europe, net weight (million tonnes) • Automotive aluminium demand will continue to grow to address light-weighting needs +2 million tonnes alu demand • OEMs aim to reduce their c
Slide 34: Expansion of 2nd Aluminium and New Salt Slags recycling plant
Expansion of 2nd Aluminium –and– New Salt Slags recycling plant Expansion of 2nd Aluminium New Salt Slags recycling plant • Expand 2nd aluminium production capacity • Invest in a new c.120 kt state-of-the-art salt by c.90 kt at existing site (Bernburg) slags recycling plant in line with incremental
Slide 35: Sustainable Global Growth Plan (SGGP)
Sustainable Global Growth Plan (SGGP)
Slide 36: SGGP indicative timeline; Befesa in control
SGGP indicative timeline; Befesa in control; Adjusting timing to macroeconomic developments €410-450m total capex requirement over next 5 years Steel Dust Alu Salt Slags SGGP Timing EBITDA Pay- Capex €m IRR2) growth projects 2022e 2027e run-rate €m back1) 1 Zinc refining Refurbishing / €110-120 €35-
Slide 37: Well defined growth roadmap driving +€125-155m EBITDA growth
Well defined growth roadmap driving +€125-155m EBITDA growth, 8-10% CAGR, globally balanced, c.1/3 US/EU/Asia c.€350-380m c.8-10% CAGR +€45-55m +€45-55m +€35-45m ✓ China I & II ➢ China III (✓LOI) €225m • New EAFD plant • China IV • WOX washing expansion • China V ✓ Zinc refining • 2nd Alu expansion
Slide 38: Break
Break BEFESA
Slide 39: Financials
BEFESA X © cS) c © ‘= LL
Slide 40: Maintaining strong financial profile through focus on core-business growth
Maintaining strong financial profile through focus on core-business growth EBITDA LTM 2022 to PF Post SGGP, Illustrative management walk (€m) c.+€125 to +€155 €225 Expecting energy prices to normalise Growth & metal prices to correlate, projects post energy crisis LTM 2022 Volume Price Cost / other
Slide 41: Zinc & alu metal prices directly correlated with electricity & gas prices
Zinc & alu metal prices directly correlated with electricity & gas prices over the last >20 years Indexed annual price trend1), 2000 – Oct YTD 2022 (Index, 2000 = 100) 1500 European energy crisis 1200 Natural gas, Europe ($/kWh) 900 600 Electricity, DE/ES/FR ($/kWh) LME Zinc ($/t) 300 LME Primary Al
Slide 42: Zinc hedging strategy unchanged & providing favourable earnings support for 2023 & 2024
Zinc hedging strategy unchanged & providing favourable earnings support for 2023 & 2024 Zinc LME vs. Befesa’s hedges & blended prices (€ per tonne) Zinc LME1) Befesa’s hedges2) c.€2,600 c.€2,500 €2,317 c.€2,375 €2,239 €2,275 +€125/t x 151 kt +€225/t x 152 kt €2,280 €2,151 = +€19m = +€34m EBITDA vs 2
Slide 43: Befesa can self-fund SGGP while keeping leverage ≤x2 and distributing dividends
Befesa can self-fund SGGP while keeping leverage ≤x2 -&- distributing dividends EBITDA to Cash flow management walk, Illustrative conceptual annual view within SGGP period (€m) +125 to +155 225 LTM 2022 WC change / Interests Taxes Op. cash Maintenance Growth Dividend Cash Flow EBITDA other flow PF c
Slide 44: Diversifying Befesa's global footprint
Diversifying Befesa’s global footprint … 2017 IPO LTM 2022 PF Post SGGP Capacity, kt 41% 30% 28% 32% 27% 63% 29% 40% +140 kt Zinc refining Steel Dust 780 1,555 2,1451) Salt Slags 2nd Alu 205 205 295 509 450 570 Total Alu / 3202) Salt Slags 714 655 / 5252) 865 kt Utilisation Steel Dust 85% 78% c. 85%
Slide 45: Core-business focus drives portfolio growth
… core-business focus drives portfolio growth 2017 IPO LTM 2022 PF Post SGGP Revenue, €m Total1) €725 €1,105 c. €1,650-1,800 Steel Dust incl. Zinc refining 685 332 Salt Slags 85 91 2nd Alu 353 376 EBITDA, % margin % margin % margin €m Total1) €172 24% €225 20% c. €350-380 19-23% Steel Dust - - incl.
Slide 46: Committing to growth through the cycle
Committing to growth through the cycle € € Strong financial backbone and high cash flow generation B … allows to self-fund SGGP €€ €€ € % € Targeting to continue dividend distribution at 40-50% of net profit Prudent risk and liquidity management; Modular SGGP growth initiatives timing in control of
Slide 47: ESG
s u w w w oO
Slide 48: ESG: Enhanced transparency & performance
ESG: Enhanced transparency & performance Transparency / reporting External ratings Health & safety Detailed ESG Report Lost Time Injury Rate (LTIR)1) improved by 85% since 2015 LTIR CO2 holistic approach CO2 intensity targets Sustainability Committee Saving >2mt CO2eq -20% by 2030 vs. virgin product
Slide 49: Sustainability at the core of Befesa
Sustainability at the core of Befesa Befesa’s operations have a direct net positive environmental impact as well as multiple positive indirect effects by enabling EAF steel and aluminium recycling BEFESA Direct environmental benefits Indirect sustainability benefits Circular Avoidance of GHG emissio
Slide 50: Climate action plan
Climate action plan Committing to a 20% GHG emissions intensity reduction by 2030 and aiming at net zero emission by 2050 Baseline 2030 commitment 2050 vision -20% Net zero emission 0.56 Scope 2 0.06 0.45 Scope 1 0.50 0.45 tonne of CO₂ equivalent per tonne of waste treated - 2021 pro forma 2030e 205
Slide 51: Selected ESG targets
Selected ESG targets Environmental Social Governance 1) 3) >2.4mt -50% IT improve CIS assessment waste recycled by 2025 LTIR by 2024 rating until 2023 >1.8mt 2) new materials admin employees trained recovered by 2025 BEzero maintain zero fatalities ≥90% in compliance each year ISO ISO certification
Slide 52: Closing remarks
Closing remarks BEFESA
Slide 53: Why invest in Befesa
Why invest in Befesa Proven resilience & growth track record through last cycles driven by leadership position in environmental services focused business model Confirming FY’22 guidance at lower end, ≥ €220m EBITDA & +11% yoy growth; Targeting further expansion in 2023 despite volatile environment D
Slide 54: Q&A
Q&A