Befesa (Xetra:BFSA) Q2 2026 Earnings Call

0:00 Good morning, and welcome to the first half of twenty twenty six results conference call of Befesa. I am Rafael Perez, CFO of Befesa. And this morning, I'm joined by our group CEO, Assier Saravanandia. Assier will start with an executive summary of the period, and then he will cover the business highlights of the steel dust as well as aluminum salt slag recycling businesses. I will then review the first half financials by business and cover the evolution of commodity prices, hedging program and finally, cash flow, net debt leverage and capital allocation. Assier will close the presentation providing an update of the outlook for the rest of 2026 and an update of our growth plan. Finally, we will open the line for the Q and A session. Before getting started, let me remind you that this conference call is being webcast live.

0:50 You can find the link to this webcast on our website. Now let me turn this call over to our CEO, Achille Pris. Thank you, Rafa. Good morning, all. Moving to Page five of the financial and business highlights.

1:07 Befesa has delivered strong second quarter results, resulting in a remarkable first half results with solid volume growth, especially from our operations in The U. S. Total adjusted EBITDA in this half has been EUR 124,000,000, up 11% compared to the same period last year, reflecting a strong performance driven by solid volume and a favorable development of the zinc LME price, especially during the second quarter. EBITDA margin of the group has significantly improved to 22% in Q2 twenty twenty six versus 19% in the second quarter of twenty twenty five. The deleveraging trend continued with financial leverage that yields to 2.18 in June 2026 compared to 2.7% in June 2025.

2:03 The increase in net income and EPS of $0.13 per share year on year reflects our improving profitability. In the steel dust business, we delivered a strong EBITDA in the first half, driven mainly by higher zinc spot prices and volume growth. Our secondary aluminum business remains operating in a challenging business environment. The continued high scrap leakage in Europe with desperate volumes of alloy scrap results being currently at a record height in a challenge for the interior sector and the supply side. Regarding the group outlook for the full year 2026, we confirm our EBITDA guidance in the range of EUR $250,000,000 to EUR $270,000,000.

2:51 This outlook is mainly based on higher steel dust throughput, especially in The U. S. After a solid performance in the first half of the year, we remain optimistic for the second half of the year. Zinc prices are on an elevated level, which is favorable for us. However, the macroeconomic and geopolitical framework remain volatile. We will continue to execute our selective growth projects with high returns. This results in a limited growth CapEx requirement, while at the same time laying on foundation for future growing growth and continuing reduction of our financial leverage. We continue strengthening our balance sheet further with a targeted leverage ratio below 2.0 by the end of the year.

3:43 Moving now on to Page six with the business highlights for the steel dust business. European steel production continued at a five year low level in H1 with a flat development year on year caused by weaker end market demand. Despite this, the load factor increased by 6% to 91%, driven by strong gas deliveries, especially in the second quarter. Steel production by 6% in The U. S. Consequently, our business in The U. S. Benefited from this development through the higher gas deliveries. The load factor increased by 11% to an average utilization of 75% in Q2.

4:29 In Asia, volumes in Turkey were weak and Korean operation remained at a similar level than last year, and we expect both markets target at Korea to improve in the second half of the year. Finally, China. Utilization remained subdued. Earnings, however, were still at breakeven levels. Moving on to Page seven, business guideline for the aluminum sold to slag recycling and secondary aluminum recycling business. On sold to slags, volume were flattish year over year in the second quarter as volume have normalized. We expect normalized production for the rest of the year. In secondary aluminum recycling volumes are still under pressure caused by challenging market environment, which is characterized by lack of fallow scrap, as discussed earlier, and a continued weak demand for automotive customers.

5:22 However, the metal margin improvement seen in the Q2 is a good sign up that is expected to continue during the second part of the year. Now I hand over to Rafael, who will explain the financials in more detail. Thank you, Asir. Moving on to Page nine, the financial results for the steel dust segment. The adjusted EBITDA increased in the first half of the year by 8% to EUR 104,000,000 and the accordion margin improvement by two sixty basis points to 27%. The €8,000,000 improvement adjusted EBITDA was driven by higher LME price, volume growth as well as lower coke prices and was partially offset by unfavorable FX and general inflation. Our global load factor improved by close to 4% year over year, providing better operational leverage.

6:15 On price, single LME increased strongly year over year and was the main contributor to profitability growth. Hedging was a slight headwind in euro terms. The combination of LME price, hedging and FX resulted in an increase in the blended SIM price in euro terms by more than 3% year on year. The increase in zinc treatment charge from US80 dollars to US85 dollars per ton was a very minor headwind, which was almost neglectable in the reporting period. The impact from FX movement, namely euro to U. S. Dollar, was negatively negative in the first half of the year, whereas the headwind was significantly less pronounced in the second quarter compared to the first quarter of the year. General inflation in contracts accelerated in the second quarter sequentially driven by fuel cost.

7:07 Moving on to Page 10, financial results of our Aluminum segment. Aluminum solid slag grew revenues by to €61,000,000 and EBITDA to EUR 80,000,000. Both revenues and EBITDA improved year over year by 10%. While volumes declined by 4% and were a headwind to revenues, price increased and compensated for the volume related headwind in both top and bottom line. In secondary outlook, revenues and EBITDA were at the prior year's level. The decline in volume was compensated by higher aluminum prices. EBITDA was furthermore supported by better metal margins. Moving on to Page 11, zinc price and treatment charges. The average LME zinc price during the first half of the year was $3,353 per ton, which is 22% above the same period of last year's average.

8:02 The average of the second quarter of twenty twenty six was $3,463 per ton compared to $3,243 per ton in the first quarter. The euro to dollar exchange rate increased from $1.09 to 1.17 representing a headwind in the period. On the right hand side of the slide on treatment charges, nothing new. In 2025, treatment charges for zinc were up $80 per ton for the full year. This year, treatment charge was settled at $85 per ton. This is the impact on profitability can almost be neglected. Turning to Page 12, hedging. We have to continue to take opportunities in the market to extend our zinc hedging book until January 2029.

8:53 Our hedging book today covers close to thirty months of hedges and does the entire fiscal year of 2027 and 2028. We have done this at record high levels of $3,100 for 2027 and 2028. We continue to monitor the market to close volumes for 2029. Now turning to Page 13, Befesa's energy prices. The page shows the evolution of the three energy sources that we have at Befesa, natural gas and electricity. Regarding coke prices, which today represent around 50% of the total energy bill in the company, the normalization trend continued and the war in The Middle East have no so far no impact on prices on supply. Average coke price in the second quarter was around €144 per ton, which is roughly 10% lower than the same period in last year.

9:48 Regarding electricity, which today accounts for around 40% of the total energy expense, prices were approximately on last year's level. Natural gas prices, however, were slightly upward sloping and were driven by the arising uncertainty resulting from the war damages on natural gas infrastructure in The Middle East. Turning to Page 14, cash flow results. Operating cash flow in the first half reached $71,000,000 which represents an increase of 10% compared to last year. On the EBITDA to cash flow bridge, starting with €124,000,000 of adjusted EBITDA and to the left, working capital related cash out amounted to €44,000,000 in the first half of the year, about €12,000,000 higher than in the first half of last year.

10:38 The main reason for the increase in working capital in the first half was predominantly due to inventory buildup of works, which I have addressed earlier. In the second half of the year, we expect a normalization of the working capital following a similar trend that in the previous years. Taxes paid in the first half of the year came in at EUR 5,000,000 compared to EUR 12,000,000 in the first half of last year. Operating cash flow was €71,000,000 compared to €64,000,000 the previous period. On CapEx, in the first half of the year, we have invested €31,000,000 in regular maintenance. Growth CapEx this year is relatively front end loaded and was €15,000,000 This is related to the expansion of our Bembourg plant in Germany.

11:25 In summary, total CapEx was EUR 46,000,000 in the first half compared to EUR 37,000,000 in the same period of last year. For the full year, we continue to expect total CapEx to be around EUR 70,000,000. Total interest paid amounted to EUR 50,000,000 and total bank borrowing amounted to EUR 18,000,000 in the first half of the year. For 2025, the AGM approved in June 2026 to pay a dividend of EUR 40,000,000 in July, equivalent to EUR 1 per share or 50% of 2025 net income.

12:01 In summary, final cash flow amounted to minus EUR 8,000,000 in the first half. Cash on hand stood at EUR 134,000,000, which together with the 100,000,000 fully undrawn revolving credit line provides Befesa with almost €240,000,000 of liquidity. Gross debt at the end of June twenty twenty six stood at €690,000,000 and net debt stood at €555,000,000 compared to $6.00 €1,000,000 in the same quarter of last year, resulting in a net leverage of 2.18 at the closing of the quarter, a strong improvement compared to the 2.7 at June 2025. Turning to Page 15, debt structure and leverage.

12:48 The deleveraging trend continued for the ninth consecutive quarter in a row with financial leverage reduced to 2.18% in June 2026 compared to 2.7% last year. As a reminder, two years ago in June 2024, leverage stood at 3.4 This development underlines the strong cash generation capabilities of our business and the capital allocation discipline in the period. Following the refinancing back in July 2024 and the repricing in March of last year, Befesa today has a strong long term capital structure with optimized financial cost. We will continue reducing the leverage to a level or below two times by the end of the year. To do so, we limit the growth CapEx on these projects that will deliver immediate cash flow upon completion.

13:40 Also, we will keep the annual regular maintenance CapEx around €45,000,000 in the coming years. On dividend, we are committed policy to pay between 40% to 50% of the net income to shareholders. Moving on to Page 16, Befesa has entered into a new cycle of low CapEx and growing earnings, which results in a strong free cash flow generation growth and shareholder value creation. During the last years, we have improved our international exposure of the company to a truly global player, which did not come without the required investment. This step is now concluded, and we are now entering into a cycle of structurally lower CapEx requirement below €80,000,000 per year, alongside the earnings growth from the concluded investment in the past. This results in a stronger free cash flow from now onwards.

14:32 After three years of negative total cash flow, 2025 last year marked an inflation point, and we anticipate our total cash flow to follow a positive trajectory, reflecting the company's improved earnings growth and stronger underlying cash generation. As I already mentioned, we aim to keep leverage between below two times for the coming years, enabling grading optionality in future capital allocation decisions. Now back to Assier on outlook and growth. Thank you, Rafa. Moving on to Page 18, 2026 guidance. The first half of the financial year 2026 was in line with our expectations.

15:19 We expect 2026 to be another year of earnings growth and confirm our guidance for the full year. On EBITDA level, we continue to expect to the end of the year between EUR $250,000,002 70,000,000, which translates into a growth between 311%. We expect total CapEx in the year to be around EUR 70,000,000. On the back of our expected growth in operation cash flow between 19%, this will enable us to further reduce leverage to around 2% from last year's level of 2.3% to around two times by the end of the year.

16:00 Moving on to Page 19, going through the main elements of our outlook for fiscal year twenty twenty six. We expect the steel dust volumes in Europe to remain at solid levels and The U. S. To grow as we are already seeing in H1, driven by new contracts with the steel producers. In the rest of the world, steel dust volumes are expected to develop broadly in line with last year. Salted slag is expected to mainly broadly stable volumes compared with the second part of twenty twenty five, enjoying some tailwind from higher collection feeds. Domestic margin for secondary remaining is expected to improve gradually over the course of the year, particularly in the H2. We are already seeing an improvement in the business environment in the second quarter, which makes us confident about a further recovery in second part of the year.

16:55 For energy costs, we expect a mixed development in 2026 with coal price and electricity improving stable and natural gas prices increasing in Europe.

17:06 General inflation is expected to be a headwind due to ongoing higher energy and fuel prices. This impacts maintenance, ancillary material and personnel costs across all regions, creating a negative pressure point in the cost structure. We should be aware of the development in The Middle East that is still ongoing and have already impacted on energy and fuel prices and as such, overall inflation. We anticipate that this inflationary environment will remain for the rest of the year.

17:37 As explained by Rafa, due to ongoing tightness in the zinc concentrate market, the benchmark treatment charge settled at $85 in 2026 was slightly up compared to last year $80 Hedging activity foreseen remains stable with the average 2026 hedge price set at approximately $2,990 per metric ton, consistent with 2025 levels, suggesting a neutral hedging contribution.

18:09 FX is expected to continue to be a headwind for the remaining of the year. Total CapEx for the year will be around €70,000,000 with around €45,000,000 for regular maintenance and the remaining for growth in the expansion of bareboat. We're continuing following our disciplined capital allocation strategy and ongoing focus on free cash flow generation. We therefore anticipate further deleverage with net leverage declining to around 2x by year end. Moving on to Page 20, our expansion project in Bergvu. Execution of the project is on track to start production at the end of August. Bergvu will add 60,000 tons of capacity to our existing recycling capacity of 200,000 tons.

18:59 We diversify our customer base towards end market with lower demand volatility. Given the planned production starting late August, the contribution of Befesa will mostly be visible in the fourth quarter of twenty twenty six.

19:15 Moving on to Page 21 about the expansion of the European electrical furnace steel industry. Europe is accelerating its transition toward electrical furnace steelmaking, largely driven by the decarbonization targets and supportive policy frameworks. Between 2026 and 2030, in total, 13 new electrical furnace projects were announced to come online.

19:42 This represents more than 22,000,000 tons of new electric arc furnace capacity, which equates to a 24% increase comparing to the sixteen ninety million tons of electrical arc furnace capacity in Europe. As a result, EAF penetration is expected to rise from the current 45% over the next five to ten years, supported both by these new projects and the progressive replacement of blast furnaces. Given our strong market position, established customer relationships and ongoing business development efforts, Befesa is strategically well positioned to capture the significant volume growth expected from this structural shift. We are already engaged in advanced negotiation with key customers to support this expansion phase in the coming years.

20:31 Moving on to Page 22, the development of The U. S. Steel industry. In The U. S, electrical furnace steel capacity is projected to increase by more than 25% by 2028, a kilogram to around 21,000,000 tons of new steelmaking capacity.

20:49 This expansion translates into over 300,000 tons of additional steel dust, creating a substantial opportunity for our steel dust recycling operations in The U. S. With a total installed capacity of 650,000 tons, we are well positioned to leverage this growth. Our goal is to progressively ramp up utilization from below 70% last year to around 90% by 2028 as new electric car furnace capacity comes online. The combination of our modernized Palmerton facility, long term customer relations and strategic geographical footprint near key steel producers ensures that Befesa is ready to capture business phase of growth in The U. S. Market.

21:35 In summary, we are pleased with our first half performance, which keeps us firmly on track to deliver another year of earnings growth. Our outlook remains unchanged, and we are reaffirming our guidance of $250,000,000 to $270,000,000 of EBITDA for 2026, equivalent to growth of 3% to 11%. We remain focused on disciplined execution and are confident in our ability to deliver on our commitments for the year. Thank you very much. Thank you, Achir. We will open the line for the Q and A session.

22:12 The first question comes from Adana Echoku from Morgan Stanley. Please go ahead. Hi, good morning. Thank you very much for taking my question. I've got one on secondary aluminium. So utilization of metal margins improved year over year, but EBITDA was still slightly below last year. So could you just walk through what's preventing this improvement in pricing and utilization from converting into stronger EBITDA?

22:40 Is it scrap costs or kind of contracts or lags we should be aware of?

22:47 Thank you, Arama. Well, the fact is that the secondary aluminum, what we have is sometimes some delay to apply the increase of pricing in our sales comparing with the pricing to the scrap purchases. So normally, what we are watching is that the margins are going to increase. But basically, we think that the Q3 is going to be more and more strong than the Q2 and especially the Q4 by the contract that we have in a quarterly basis. So yes, the volumes are still on

23:20 well, under pressure, but the margins clearly are going to be recovered. That's why we are very confident that in the second part, the difference with last year is going to be very remarkable.

23:32 Perfect. That's very clear. Thank you. The next question comes from Lars Stubben from Berenberg. Please go ahead. Hi, good morning. You mentioned the buildup in the inventory on the WOX or in the production of WOX. Can you just mention kind of what drove that in the quarter? And this is something we should expect to reverse in Q3.

23:57 And then I guess a follow-up on the aluminium soft slacks. Just trying to understand the dynamic between the F and B price and your kind of revenue generation. I think the F and B price was up close to 30% in the second quarter, but your revenues in aluminum salt slags are only up, I think, about 9%. So just trying to understand the kind of dynamics there. And then finally, could you give a brief update also on The U. S. Smelting asset in terms of how the cost savings program is going and what we should expect in terms of EBITDA contribution for this year? Thank you.

24:33 Thank you, Raziel. Yes, the inventory buildup in works in a regular situation, we will everything that we will treat as steel dust and produced works will be sold to customers.

24:48 Every often, it happens that we have processed all the steel dust, and we are filling a ship and a vessel and it doesn't arrive to the customer. So we don't accrue the sale, okay? So it's just a it's a timing effect. And as you say very well, in Q3, we will see the reversal. It's just a pure timing

25:11 theme. Yes. And with regard with the aluminum sold slag and the evolution in comparison with the F and B, Well, basically, we have to consider that the aluminum is a good just one of the parts of the income that we have in the business together with the fees and the sale of the salt. So depending the weight is not a direct correlation for the increases of the income. Having said that, we have part of that as well in a tooling basis that we developed an income fee. So we are always or very clear benefiting for the rally in the FNB, which now is more normalized.

25:50 But I think that the work that we have done increasing the fees for the year together with these peaks and moreover with the normalized production will make that the salted slag business is going to be probably in the highest results that ever has. And with regard to The U. S. Smelting, nothing to add that we are telling in the

26:09 last calls. The plant is running very stable. The cost started finally, as we announced a couple of calls ago, control and the production is stable, providing by the works availability for our kiln productions. Having said that, The U. S. Operation, in general, are going even better than we were expecting.

26:31 And well, despite the first quarter that was some deliveries on the steel production in general and then send less dust now is in the levels that we expected with the new contracts. So the whole U. S. Business is going to contribute with a very nice profit.

26:51 Okay. Thank you. Thank you, Gracias. The next question comes from Juan Rodriguez from Kepler Cheuvreux. Please go ahead. Juan, Camilo. Hi. Good morning. Thank you for taking the questions. I have two on my side, if I may. The first one is on guidance after the first half of your performance. You already almost reached 11% for the first half and you already signaled that you expect an even stronger second half. So what are you bending in? We know there's

27:23 a lot of macro uncertainty, but I would like to better understand how you're keeping this conservative stance on the guidance. And then the second one is on the development of EAF expansion in Europe that you see on slide 21. How are you viewing this from a planned point of view? On the short term, are you expecting to further increase utilization rates and then increase capacity maybe from the twenty twenty nine-30s?

27:51 What will be needed on your side for discussions to move forward that is to increase capacity? And how we expect to do it on a leverage level? Should we keep the leverage target of around two times from the once the

28:07 new volumes or new capacity is engaged? Thank you. Thank you, Juan. Well, the guidance, yes, we have in the first half 11% and everything comes to think that we are going to be in the from the midpoint to the high part of guidance. This is basically where we consider now. Of course, depends on the evolution on all the items which affect with zinc prices and general inflations and so on. But we do think that we are really on track to

28:43 go to the high part of the guidance. This is how we see this today, right?

28:48 Regarding the Europe, well, Europe, basically, we are in full capacity with the maintenance. The difference between among the quarters is depends sometimes when you do the maintenance stoppages. So increased capacity in the medium term comes from the on hand of the Resitec or the French plant increased capacity through the construction of a second kiln there. Timing, well, I think there's something in the 2829 probably could fix with the delivery of the steelmakers' projects. But again, we are monitoring this in order to have the plant very close to enter into production, very close with the steel production plants new plants coming into the line.

29:35 And on leverage, Juan, basically, as we have said many times, we are fully committed to keep the leverage below two times over the coming years. And if you consider leverage as part of our capital allocation priorities, we have very clear

29:53 priorities. On the first hand is maintenance CapEx, which will be around $45,000,000 per year. Then it's leverage. We want to keep the leverage, and we are committed to keep the leverage below two times.

30:05 Then it's growth projects. And as Assir mentioned, the only growth projects that we have pending to invest is expansion of Rositec to capture the growth in Europe. And then any excess cash that we may have in the balance sheet will be distributed to shareholders as a extra dividend or share buybacks, okay? But clearly, we can invest in Resitec and yet keep the leverage below two times. Quite useful. Thank you. The next question comes from Olivier Calvert from UBS. Please go ahead. Yes. Hi. Good morning, Assi and Rafa. Thanks for taking my questions. I have maybe a follow-up on second aluminum EBITDA for this year. I think you previously said something about EUR 10,000,000 as an expectation.

30:54 Do you think this is still realistic? And can you maybe talk about the exit margins you had in secondary ALU perhaps in June? Second question would be for you, Rafa, just on the hedges, if you could remind us what you've done incrementally in the second quarter. I mean, obviously, you're extending the hedges to early twenty twenty nine, but just if you could refresh us on where you were before. And thirdly, just on still dust utilization, it'd be helpful if you could talk again about the utilization levels you saw, but specific to the second quarter by geographies as your comments were mostly on H1, if I'm not mistaken.

31:45 Well, thank you very much, Olivier, for the question. In terms of the secondary aluminum and the idea of EBITDA, I think that EUR 10,000,000 was named with thinking on the in a good part of the guidance, helping us to get to that part. We are still saying that it is possible, perhaps even a little bit more. But in that range, probably something manageable at the levels of the margins and production expected for the last part of the year. Regarding the hedging, Rafa, on hedging, Olivier, basically what we have done in the last quarter is to extend the hedging until January 2029. Before that, we have the hedging until July 2028. So basically, we have taken the opportunity to hedge and to cover the second half of twenty twenty eight, okay, taking the opportunity of the rally in the SIM price. So basically, it's the second half of that year. And now we're focusing on the first quarter of twenty twenty nine, okay. That as I said, that provides thirty months of visibility of prices, which is and this is made at $3,100 per ton, which is record high for the company.

33:03 On utilization, Assir will comment. Yes. I think it's utilization. The idea is that we will move forward or increase the utilization rate for gradually for the last years. Last year, we finished in 69%. I think this year probably could be in the level of 76%, 77%, driven basically by U. S. And then probably we move forward as well depending on the confirmation of contraction '27. The idea is to come to all the markets, stay above 85% in three years, and this is the well depending more in U. S. As I said before, in U. S, we are now 75% sorry, yes, 4%, and this is a remarkable 11% more than the last year. So we follow like that. I think that ending this year in 76%, 77% would be a good level to go further with the increase of utilization levels.

34:03 Okay. So sorry, just the 76%, 77% you're talking about The U. S. Or No. On both, U. S. Q2 and Bulk Casualty, we are thinking in the total utilization rate for the forecast of the year for the total business in that level too. Okay. If I can just follow-up on that, maybe just the Asia part of the business. Do you expect this to be sort of flattish in terms of utilization? And I mean by that, Turkey and South Korea, do you think that's going to be at similar utilization levels as last year? Or you were flagging sort of weak volumes in Turkey? No. I think it's Yes, quite similar, it's quite I think it's more or less the same level.

34:54 And even including China because there are not improvement there. And China, well, is not a big contribution. But in terms of production, it will similar. And Turkey and Korea, I think it will be finally in the year, the same level of last year, slightly up and down, but it's basically the same level, yes, flattish. Okay. Thanks. Thank you, Olivier. The next question comes from Fabian Piazza from Jefferies. Please go ahead. Hey, good morning, gentlemen. Thanks for taking my questions. I've got three. The first question is on maintenance shutdowns. I think these were fewer in the second quarter. Do you have any visibility for the remainder of the year, potentially the phasing throughout Q3 or Q4, and how much these maintenance shutdowns would be as a percentage in the full year as compared to the ones that we've already seen.

35:52 The second one is on CapEx. So new CapEx cycle of just below EUR 80,000,000. So for 2026, we can expect maintenance plus burn book. And then for '27, 2028, just below EUR 80,000,000 in total for the Recytek brownfield. Is this then going to decline towards EUR 45,000,000 maintenance in 2029? Or is there anything else on the plate that you already see? And the third one would be the Bembroke expansion you referred to, a EUR 6,000,000 to 7,000,000 EBITDA run rate. Is that only for the incremental piece with the beverages cans? Or is that as a total to be understood? Thank you, Fabian. Interesting question. Maintenance shutdown, well, traditionally, and this year, is no different. The Q1 is lower level production because we try to accommodate to the stoppage of winter in Christmas and January of the steelmakers across all the geographies.

36:58 So Q2 is a good reference. We have still some stoppages in Europe and some in U. S. As well. And it's a good reference for the Q3 that we do hope the same level of maintenance at Q2. Perhaps we expect a little bit more production in Q3 than Q2, but around similar quantities. And the Q4 is, as always, we can confirm that is the period where we have less stoppages and it's going to be higher in a range of 10% or something like that, 15% more production at the end of the year. This is something that we are doing in the last year. And if nothing, especially like some unscheduled stoppages or whatever is happening, and this year is not going to be different. So that's why we think that the second part of the year is going to be strong because based on the normal level that we are having in Q3 with those maintenance stoppage and the highest utilization rate that they will have in Q4.

38:03 On CapEx, Fabienne, basically, you summarized well, we expect over the coming years a cap in CapEx of $80,000,000 and that is $45,000,000 for maintenance CapEx, recurring CapEx to maintain our asset base. And then the only additional growth project that we have in the pipeline is the expansion of our operations in France to capture the growth of the European market, as Achir explained. That will be roughly EUR 60,000,000 total CapEx investment. If you divide that into two years, that is EUR 30,000,000 per year on top of the EUR 45,000,000. That's why we said, okay, maximum EUR80 million of total CapEx over the coming years, considering the expansion in Resitec. Beyond that, at the moment, we haven't got anything on the pipeline. Obviously, we're monitoring many markets. But as we have already said, we are keeping our commitment to maintain discipline in capital allocation. Part of that is our growth projects.

39:07 If we don't invest in new projects, we obviously will generate a very healthy free cash flow that we can distribute to shareholders. And with your third question, Fabian, the yes, $67,000,000 is that we expect the contribution for the increased capacity at the higher rate utilization. And this is basically what we still wait and is the whole capacity in the terms that the main capacity utilization is going come for food business more than the automotive. But at the end, the full capacity will come with altogether. But yes, we are still seeing that €6.7000000000 is possible with higher rate utilization that we have to confirm. Well, we'll come in more to 27% and see what the market is.

39:54 But the number is there, yes. That's great. Thank you very much. Thank you, Fabienne. The next question comes from Anis Daya from ODDO BHF. Please go ahead. Yes. Thank you very much for taking my my question. Good morning, gentlemen. So I have only one question. It's on The US tilde's volumes, which increased strongly by 33% in Q2. I'm wondering how much of this growth came from new contracts? And what utilization rate do you expect for The US operation now at year end twenty six? And more broadly, could you provide the expected utilization rate split by geography for the total group? Thank you.

40:48 Well, thank you for the question. Basically, The U. S. Market is coming from the new contract as expected. We are now seeing a very high increase in the normal production rates for the rest of the customers itself. I mean, I do think that the economy in general in U. S. And Europe and other countries is not booming. So basically, the production is in the level now. So the one thing is different that the Q1 came lower than expected because the start date for the steelmakers, they took more time to not only the new contract, but the rest come in some delays in the reopening of the year. For the rest of the year, in U. S. In particular, we see the Q3 and Q4 very similar to the levels that we have seen in the Q2. This is the idea.

41:42 For the rest, as I say, I mean, is in maximums. Asia probably split, flattening and The U. S. Is coming to 75%. So in total, we do hope that the capacity utilization at the end of the year for the steel dust business, it will be around 7677%. Thank you very much. The next question comes from Lars von Kleef from Deutsche Bank. Please go ahead. Yes. Thank you very much. Good morning. Two questions left, and I will ask them one by one, if I may. I mean, I heard you saying you rather expect to end the year in the upper end of your guidance range. What would be the biggest risks to achieve that?

42:31 Well, it's the key question here. Thank you, Lars. Yes, I said that, that I said that if the conditions are like we see now with the zinc prices in a good level with the rest of the cost and so on, nothing really been crazy from now on. With the margin expected in the recovery in aluminum, yes, we see that we are comfortable in that part of the range. This is the idea. Of course, everything has to fix it, but we don't see now a very big tailwind that can do that we are going to be below the midpoint. This is the idea that we have not. Hopefully, I have not to tell other thing in the Q3 results. But at the end of the day, it's how we see now, and we are really optimistic that we can get this part of the guidance.

43:20 Okay, perfect. And then you just mentioned secondary aluminum again. I mean impressive, the secondary aluminum utilization rate rose by two ninety basis points in Q2 to 75.3%. Could this partly also reflect the geopolitical tensions in The Middle East currently constraining primary aluminium production? And if so, is there a risk that utilization rates normalize lower if Iran and The U. S. Reach a resolution and more primary aluminum comes to the market again? Well, I think that the relation between primary aluminum and secondary aluminum sometimes is not so obvious, right? I mean the secondary aluminum is more in geographical zone. In our cases, for what happens in Europe and the volumes clearly depends or rely on the automotive productions in use. It's true that whatever happens in Middle East affects basically to the aluminum primary prices that was happening months ago or two months ago. And this is a reflection on the prices of the free market bulletin and the market value. But it's not a big correlation and a very clear correlation at the end of the day. So for us, the aluminum is more in connection with the volumes that we do hope because the contract in place and again, the margins, which are coming very more strongly in the second part of the year.

44:45 Understood. Many thanks. I'll go back to the line. Thank you, Lars. Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Rafael Perez for any closing remarks. Thank you all for your questions. You can also contact the Investor Relations team of Befesa for any further clarification. We will now conclude the conference and the Q and A session. Let me remind you that you can find the webcast and the dial in details to access the recording of this conference call in our website. Thank you very much to all of you, and have a good day.