Befesa Stock

Good morning, and welcome to the first half of 2026 results conference call of Befesa. I am Rafael Pérez, CFO of Befesa, and this morning, I'm joined by our Group CEO, Asier Zarraonandia. Asier 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. Asier 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 a Q&A session. Before getting started, let me remind you that this conference call is being webcast live. You can find the link to this webcast on our website.

Now let me turn this call over to our CEO, Asier, please.

Thank you, Rafa. Good morning all. Moving to Page 5 of the financial and business highlights. 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 million, 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 '26 versus 19% in the second quarter of 2025. The deleveraging trend continued with financial leverage reduced to 2.18x in June '26 compared to 2.7x in June 2025. The increase in net income and EPS of [ 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 export volumes of follow scrap results being currently at a record high 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 million to EUR 270 million. 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 triple by the end of the year.

Moving now on to Page 6 with the business highlights for the steel dust business. European steel production continued at a 5-year low level in H1 with a flat development year-on-year caused by weakened end market demand. Despite this, the load factor increased by 6% to 91%, driven by strong dust deliveries, especially in the second quarter. Steel production dipped 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. In Asia, volumes in Turkey were weak and Korean operations remained at a similar level than last year, and we expect both markets, Turkey and 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 7, business highlight for the aluminum salt slag recycling and secondary aluminum recycling business. On salt slags, volume were flattish year-over-year in the second quarter as volumes 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 aluminum scrap as discussed earlier, and a continued weak demand for automotive customers. However, the metal margin improvement seen in the Q2 is a good sign that is expected to continue during the second part of the year.

Now I hand over to Rafa, who will explain the financials in more detail.

Thank you, Asier. Moving on to Page 9, the financial results for the steel dust segment. The adjusted EBITDA increased in the first half of the year by 8% to EUR 104 million, and the according margin improvement by 260 basis points to 27%. The EUR 8 million improvement in 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.

On price, zinc 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 zinc price in euro terms by more than 3% year-on-year. The increase in zinc treatment charge from USD 80 to USD 85 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 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.

Moving on to Page 10, financial results of our Aluminum segment. Aluminum salt slag grew revenues by EUR 61 million and EBITDA to EUR 80 million. 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 Alum, 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. The average of the second quarter of 2026 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 at $80 per ton for the full year. This year, treatment charge was settled at $85 per ton. Thus the impact on profitability can almost be neglected.

Turning to Page 12, hedging. We have continued to take opportunities in the market to extend our zinc hedging book until January 2029. Our hedging book today covers close to 30 months of hedges and thus the entire fiscal year of 2027 and 2028. We have done this at record high levels of $3,100 for '27 and '28. 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: coke, 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 so far no impact on prices on supply. Average coke price in the second quarter was around EUR 144 per ton, which is roughly 10% lower than the same period in last year. 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 EUR 71 million, which represents an increase of 10% compared to last year. On the EBITDA to cash flow bridge, starting with EUR 124 million of adjusted EBITDA, and to the left, working capital-related cash out amounted to EUR 44 million in the first half of the year, about EUR 12 million higher than in the first half of last year. The main reason for the increase in working capital in the first half was predominantly due to inventory buildup of WOX, which I have addressed earlier.

In the second half of the year, we expect a normalization of the working capital following a similar trend than in the previous years. Taxes paid in the first half of the year came in at EUR 5 million compared to EUR 12 million in the first half of last year. Operating cash flow was EUR 71 million compared to EUR 64 million in the previous period. On CapEx, in the first half of the year, we have invested EUR 31 million in regular maintenance. Growth CapEx this year is relatively front-end loaded and was EUR 50 million. This is related to the expansion of our Bernburg plant in Germany. In summary, total CapEx was EUR 46 million in the first half compared to EUR 37 million in the same period of last year. For the full year, we continue to expect total CapEx to be around EUR 70 million.

Total interest paid amounted to EUR 15 million and total bank borrowing amounted to EUR 18 million in the first half of the year. For 2025, the EGM approved in June 2026 to pay a dividend of EUR 40 million in July, equivalent to EUR 1 per share or 50% of 2025 net income. In summary, final cash flow amounted to minus EUR 8 million in the first half. Cash on hand stood at EUR 134 million, which together with the EUR 100 million fully undrawn revolving credit line provides Befesa with almost EUR 240 million of liquidity. Gross debt at the end of June 2026 stood at EUR 690 million and net debt stood at EUR 555 million compared to EUR 601 million in the same quarter of last year, resulting in a net leverage of 2.18x at the closing of the quarter, a strong improvement compared to the 2.7x at June 2025.

Turning to Page 15, debt structure and leverage. The deleveraging trend continued for the ninth consecutive quarter in a row with financial leverage reduced to 2.18x in June 2026 compared to 2.7x last year. As a reminder, 2 years ago in June 2024, leverage stood at 3.4x. 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 2x 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. Also, we will keep the annual regular maintenance CapEx around EUR 45 million in the coming years. On dividend, we are committed to maintaining our dividend 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 a structurally lower CapEx requirement below EUR 80 million per year, alongside the earnings growth from the concluded investment in the past. This results in a stronger free cash flow from now onwards.

After 3 years of negative total cash flow, 2025 last year marked an inflection 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 below 2x for the coming years, enabling gating optionality in future capital allocation decisions.

Now back to Asier 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. 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 million and EUR 270 million, which translates into a growth between 3% and 11%. We expect total CapEx in the year to be around EUR 70 million. On the back of an expected growth in operation cash flow between 1% and 9%, this will enable us to further reduce leverage to around 2x from last year's level of 2.3x to around 2x by the end of the year.

Moving on to Page 19, going through the main elements of our outlook for fiscal year 2026. 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. Salt slag is expected to mainly broadly stable volumes compared with the second part of 2025, enjoying some tailwind from higher collection fees. The margin for secondary aluminum 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.

For energy cost, we expect a mixed development in 2026 with coal price and electricity broadly stable and natural gas prices increasing in Europe. General inflation is expected to be a headwind due to ongoing high energy and oil 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 developments in the Middle East are still ongoing and have already impacted on energy and oil prices and as such, overall inflation. We anticipate that this inflationary environment will remain for the rest of the year.

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. FX is expected to continue to be a headwind for the remaining of the year. Total CapEx for the year will be around EUR 70 million with around EUR 45 million for regular maintenance and the remaining for growth in the expansion of Bernburg. We continue 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 Bernburg. Execution of the project is on track to start production at the end of August. Bernburg will add 60,000 tons of capacity to our existing recycling capacity of 200,000 tons. We diversified our customer base towards end markets with lower demand volatility. Given the planned production starting late August, the contribution of Bernburg will mostly be visible in the fourth quarter of 2026.

Moving on to Page 21 about the expansion of the European electric arc 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 electric arc furnace projects were announced to come online. This represents more than 22 million tons of new electric arc furnace capacity, which equates to a 24% increase comparing to the existing 90 million tons of electric arc furnace capacity in Europe. As a result, EAF penetration is expected to rise from the current 45% over the next 5 to 10 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.

Moving on to Page 22, the development of the U.S. steel industry. In the U.S., electric furnace steel capacity is projected to increase by more than 25% by 2028, equivalent to around 21 million tons of new steelmaking capacity. 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 arc 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 this next phase of growth in the U.S. market. 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 EUR 250 million to EUR 270 million 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, Asier. We will open the line for the Q&A session.

The first question comes from Adahna Ekoku from Morgan Stanley.

I've got one on secondary aluminum. So utilization and 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? Is it scrap costs or kind of contract lags we should be aware of?

Thank you, Adahna. Well, the fact is that the secondary aluminum, what we have sometimes some delay to apply the increase of pricing in our sales comparing with the pressing 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 -- 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.

The next question comes from Lasse Stueben from Berenberg.

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? And then I guess a follow-up on the aluminum salt slags, just trying to understand the dynamic between the F&B price and your kind of revenue generation. I think the F&B price was up close to 30% in the second quarter, but your revenues in aluminum sulfides are only up, I think, about 9%. So I'm 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 to this year?

Yes, the inventory buildup in WOX in a regular situation, we will -- everything that we will treat as steel doesn't produce WOX will be sold to customers. 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 customers, so we don't accrue the sale, okay? So it's just -- it's a timing effect. And as you said very well, in Q3, we will see the reversal. It's just a pure timing thing.

Yes. And with regard with the aluminum salt slag and the evolution in comparison with the F&B, well, basically, we have to consider that the aluminum is 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, it's 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 develop an income fee, so we are always are very clear benefiting for the rally in the F&B, which now is more normalized. But I think that the work that we have done increasing the fees for the year together with this peaks and moreover, with the normalized production will make that the salt slag business is going to be probably in the highest results that ever has.

And with regards to the U.S. smelting, nothing to add that we are telling in the last calls. The plant is running very stable. The costs are finally, as we announced a couple of calls ago, control, and the production is stable, providing by the WOX availability for our kiln production. Having said that, the U.S. operation in general are going even better than we were expecting, and well, despite the first quarter that was some deliveries on the steel production in general, and then send less dust now is on the levels that we expected with the new contract, so the whole U.S. business is going to contribute with a very nice profit.

The next question comes from Juan Rodriguez from Kepler Cheuvreux.

I have two on my side, if I may. The first one is on guidance. After the first half year 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 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 on a plan point of view? In the short term, are you expecting to further increase utilization rates and then increase capacity maybe from the 2029, '30s? 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 2x from the -- once the new volumes or new capacity is engaged?

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 the guidance. This is basically where we consider now. Of course, it depends on the evolution on all the items which affect with zinc prices and general inflation and so on. But we do think that we are really on track to go to the high part of the guidance. This is how we see this today, right? Regarding the Europe, well, Europe, basically, we are in full capacity with the maintenance. The difference between -- among the quarters, it depends sometimes when you do the maintenance stoppages. So increased capacity in the medium term comes from the hand of the Recytech or the French plant increase capacity through the construction of a second kiln there.

Timing, well, I think that's something in the '28, '29 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. And the leverage, Juan, basically, as we have said many times, we are fully committed to keep the leverage below 2x over the coming years, and if you consider leverage as part of our capital allocation priorities, we have very clear priorities on the first hand is maintenance CapEx, which will be around EUR 45 million per year.

Then is leverage, we want to keep the leverage, and we are committed to keep the leverage below 2x. Then it is growth projects, and as Asier mentioned, the only growth projects that we have pending to invest is the expansion of Recytech 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 an extra dividend or share buybacks, okay? But clearly, we can invest in Recytech and yet keep the leverage below 2x.

The next question comes from Olivier Calvet from UBS.

I have maybe a follow-up on second aluminum EBITDA for this year. I think you previously said something about EUR 10 million as an expectation, do you think this is still realistic? And can you maybe talk about the exit margins you had in secondary all 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 '29, but just if you could refresh us on where you were before? And thirdly, just on steel dust utilization, it would be helpful if you could talk again about the utilization levels you saw, but specific to the second quarter by geographies because your comments were mostly on H1, if I'm not mistaken.

Well, thank you very much, Olivier, for the question. In terms of the secondary aluminum and the idea of EBITDA of, I think that EUR 10 million was named with thinking in a good part of the guidance, helping us to get to that part. We still think that this 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 2028, okay, taking the opportunity of the rally in the zinc price, so basically, the second half of that year. And now we are focusing on the first quarter of 2029. As I said, that provides 30 months of visibility of prices, which is -- and this is made at $3,100 per ton, which is a record high for the company. On utilization, Asier will comment.

Yes. I think the 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 contracts in '27. The idea is to come to all the markets, stay above 85% in 3 years, and this is the world depending more in U.S. As I said before, in U.S., we are now 75% -- sorry, yes, 74%, 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.

Okay. So sorry, just the 76%, 77%, you are talking about the U.S. or...

No, on both U.S., Q2 and by [ casual ], we are thinking in the total utilization rate for the forecast of the year for the total business in that level, too.

Okay. And 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...

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No, I think it's quite similar. I think it's more or less the same level and even including China because there are no improvement there, and China is not a big contribution. But in terms of production, it will be 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 at the same level, yes, flattish.

The next question comes from Fabian Piasta from Jefferies.

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, for rather Q3 or Q4 and how much these maintenance shutdowns would be as a percentage in the full year compared to the ones that we've already seen? The second one is on CapEx, so new CapEx cycle of just below EUR 80 million. So for 2026, we can expect maintenance plus Bernburg and then for '27, '28, just below EUR 80 million in total for the Recytech brownfield. Is this then going to decline towards EUR 45 million maintenance in 2029? Or is there anything else on the plate that you already see? And the third one would be the Bernburg expansion you referred to a EUR 6 million to EUR 7 million 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 the lower level production because we're trying to accommodate to the stoppage of winter in Christmas and January of the steelmakers across all the geographies, 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 that Q2. Perhaps we expect a little bit more production in Q3 than Q2, but around similar quantities. And the Q4 is as always, and 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, 10%, 15% more production at the end of the year.

This is something that we are doing in the last year. And if nothing special 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 we will have in Q4.

On CapEx, Fabian, basically, you summarized well. We expect over the coming years, a cut in CapEx of EUR 80 million, and that is EUR 45 million 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 U.S. -- of the European market, as Asier explained. That will be roughly EUR 60 million total CapEx investment. If you divide that into 2 years, that is a EUR 30 million per year on top of the EUR 45 million. That's why we said, okay, maximum EUR 80 million of total CapEx over the coming years, considering the expansion in Recytech.

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. If we don't invest in new projects, obviously will generate a very healthy free cash flow that we can distribute to shareholders.

With your third question, Fabian, yes, EUR 6 billion, EUR 7 billion is that we expect the contribution for the increased capacity at a higher rate of utilization. And this is basically what we still wait and is the whole capacity in the terms that the main capacity utilization is going to come for food business more than the automotive. But at the end, the full capacity will come with altogether. But yes, we still think that 6 million, 7 million is possible with higher rate utilization that we have to confirm. We'll come in more to '27 and see what the market is, but the number is there, yes.

The next question comes from Anis Zgaya from ODDO BHF.

So I have only one question, it's on the U.S. steel dust 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 U.S. operation now at year-end '26? And more broadly, could you provide the expected utilization rate split by geography for the total group?

Well, thank you for the question. Basically, the U.S. market is coming from the new contract as expected. We are not 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 standstill for the steelmakers, they took more time to not only the new contract, but the rest coming, 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. And for the rest, as I say, I mean, Europe is in maximum, Asia probably flatten 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 will be around 76%, 77%.

The next question comes from Lars Vom-Cleff from Deutsche Bank.

Two questions left, and I will ask them one by one, if I may. 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?

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 going crazy from now on with the market expecting in the recovery 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. Hopefully, I have not to tell other thing in the Q3 results. But at the end of the day, it's what we see now, and we are really optimistic that we can get this part of the guidance.

Okay. Perfect. And then you just mentioned secondary aluminum again. I mean, impressive, the secondary aluminum utilization rate rose by 290 basis points in Q2 to 75.3%. Could this partly also reflect the geopolitical tensions in the Middle East currently constraining primary aluminum 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 front. In our case, it's more what happens in Europe and the volumes clearly depends on the automotive production in U.S. It's true that whatever happens in Middle East affects basically to the aluminum primary prices that was happening months ago or 2 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 or 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 strong in the second part of the year.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Rafael Pérez 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&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.

Good morning, and welcome to the First Quarter 2026 Results Conference Call of Befesa. I am Rafael Pérez, CFO of Befesa. And this morning, I'm joined by our Group CEO, Asier Zarraonandia. Asier will start with an executive summary of the period. Then I will cover the business highlights for the steel dust as well as aluminum salt slag recycling businesses. I will then review the first quarter financials by business and we'll cover the evolution of commodity prices, our hedging program and finally, cash flow, net debt leverage and capital allocation. Asier will close the presentation providing an update on the outlook for 2026 and an update on our growth plan. Finally, we will open the line for a Q&A session. As always, this conference call is being webcasted live, and you can find the link in our website.

Now let me turn the call over to our CEO. Asier, please.

Good morning, and welcome also from my side. Please move to Page 5 with the financial and business highlights for the first quarter of 2026. We had a good start to the year despite a challenging macroeconomic environment. Adjusted EBITDA increased by 4% to $58 million, and the margin improved accordingly from 18% to 20%. This development was driven by both segments, steel dust and Alum. Net income and earnings per share increased by a double-digit rate, being up by 11% year-over-year. Both KPIs were driven by operational improvements as well as better financial results.

As last year, Q1 was impacted by maintenance activities, resulting in overall steady steel dust volume against a volatile market backdrop. In aluminum, we are seeing signs of recovery, especially at the end of the first quarter despite challenging business environment. Regarding 2026, we expect another year of earnings growth and with adjusted EBITDA ending the year between EUR 250 million and EUR 270 million. We expect quarterly earnings to gain momentum as the year progresses, driven by lower maintenance and higher volume. I will comment on the outlook in more detail later.

Moving on to Page 6, business highlights for the steel dust business. In Europe, total steel production remained on a declining trajectory in the first quarter. Production declined by 3% year-over-year, reflecting overall weaker demand. The EAF route was less affected by these pressures and steel dust supplies remained stable and deliveries continued at solid pace in Europe. In the U.S., steel production increased by 6% in the first quarter of 2026, supported by overall solid demand. This trend is also reflected in the load factor, which rose to 63%. We have started to process that from new EAF steel dust contracts gradually.

In Asia, Turkey started the year with a soft steel production, while Korea sees business as usual with load factors almost similar to last year. Lastly, the situation in China has not changed. The market remains weak and load factors at low levels, remaining breakeven at PLN and cash flow.

Moving on to Page 7 with the business highlights for the aluminum salt slag recycling business. Starting with salt slag, the year started softly, mainly due to lower secondary aluminum production in Europe, resulting in an average capacity utilization of 82%. We have already started to see an improvement in business environment by the end of the first quarter going into the second quarter and are confident that capacity utilization will recover in the next quarters.

Similarly our secondary Aluminum segment followed the broader European trend, resulting in a decline in volumes. However, measures implemented in recent quarters, particularly a stronger focus on operational discipline and cost efficiency enable us to preserve profitability. Looking ahead, the Bernburg expansion will support further diversification of our customer base and market exposure starting already with the ramp-up in the third quarter.

Now Rafael will explain the financials in more detail.

Thank you, Asier. Moving on to Page 9, the financial results for the Steel Dust segment. Adjusted EBITDA in the first quarter of '26 was $58 million, representing 4% year-on-year improvement. Higher volumes of WOX, all compensated for unfavorable FX movements in the quarter. EBITDA margin improved from 25% to 28% in the period. At group level, utilization in steel dust remained unchanged year-over-year at 65%, primarily impacted by maintenance shutdowns. On a regional breakdown, the U.S. and Europe increased utilization, which was offset by Asian markets.

During the quarter, zinc price in U.S. dollars increased by 14% to an average of $3,243. However, the unfavorable euro-dollar exchange rate caused that the increase in zinc price in euros was just 3%. Considering the zinc price and the hedging, the blended price in the quarter was EUR 2,615, pretty much in line with the previous year. Coke and electricity costs were slightly down year-on-year. I will provide more details on our energy costs in some minutes.

Moving on to Page 10, financial results for our Aluminum segment. Aluminum Salt Slag segment delivered EUR 9 million of EBITDA in the first quarter of the year, which represents a 10% year-on-year increase compared to the same period of 2025, even in a challenging environment. The year-on-year EUR 1 million positive EBITDA development was mainly due to higher collection fees in salt slag as well as overall lower energy and operating costs. This positive development was partially offset by lower volumes in both segments as well as slightly lower metal margin in the quarter.

We operated our plants at a solid utilization rate of about 87% in salt slag and 66% in secondary aluminum. As explained by Asier, we are seeing a recovery in the secondary aluminum business already in the second quarter and are confident about the development of the rest of the year.

Moving on to Page 11, zinc price and treatment charges. Regarding zinc LME prices, during the first quarter of 2026, zinc traded in the range of $3,000 to $3,487 per tonne, showing a particular positive trend in the first month of the year. The average zinc LME price in the first quarter of 2026 has been $3,243 or EUR 2,770 per tonne.

On the right-hand side of the slide on treatment charges. Treatment charges for zinc have been settled in April at $85 per tonne for the full year 2026 compared to $80 of last year, 6% higher compared to 2025, which was all-time low record level. This fact confirms that the supply zinc concentrate market is still very tight with spot treatment charges below the current annual benchmark.

Turning to Page 12 on hedging. As explained in the previous call, we have taken the opportunity of the recent rally in the zinc price to be very active on our hedging program. Our hedging book has been extended to and including July 2028 at an all-time high level of $3,100 per tonne. For 2027, the hedge is set at $3,000 per tonne. This provides stability and visibility over the coming quarters.

Turning to Page 13, Befesa energy prices. The page shows the evolution of the 3 main energy sources that we have in Befesa, coke, natural gas and electricity. With regards to coke prices, which today represents roughly 50% of the total energy bill, the normalization that started in 2023 continues throughout 2026. Average coke price in the first quarter was around EUR 147 per tonne, consolidating its downward trend compared to the previous quarter.

Regarding electricity, which today accounts for 40% of the total energy expense, prices are at a similar level than in the fourth quarter of last year, around EUR 111 per megawatt hour after a significant correction in the second quarter of 2025. Gas prices saw a slight increase in the first quarter of '26 to EUR 51 per megawatt hour. We remain cautious regarding the impact that the situation in the Middle East may have on the development of energy prices and general inflation for the rest of the year.

Turning to Page 14, the cash flow results. Operating cash flow in the first quarter of the year reached EUR 38 million, which represents an increase of 12% compared to the same period of the last year. On the EBITDA to cash flow bridge, starting with EUR 58 million adjusted EBITDA and going to the right. Working capital consumption amounted to EUR 17 million in the first quarter. As in previous years, the first quarter working capital is typically impacted by seasonality. This will be recovered throughout the year, especially in the last quarter, as we have already seen in the last years. Taxes paid in the first quarter came in at EUR 3 million compared to EUR 7 million in the same period of last year, resulting in operating cash flow of EUR 38 million in Q1, up 12%.

On CapEx, in the first quarter, we have invested EUR 15 million in regular maintenance CapEx across the company, EUR 11 million in growth CapEx related to the Bernburg expansion project in Germany. In summary, total CapEx of EUR 26 million in the quarter. Total CapEx for the full year is expected to be around EUR 70 million, which is expected to be front-end loaded with the second half of the year reducing the level of investment. Total interest paid amounted to EUR 9 million, reaching EUR 10 million with other minor items.

In summary, final cash flow amounted to EUR 2 million in the first quarter. Cash on hand stood at EUR 145 million, which, together with our EUR 100 million undrawn revolving credit line provides Befesa with more than EUR 245 million of liquidity. Net debt was greatly reduced by 10% to EUR 550 million, resulting in a net leverage of 2.25 at closing of the quarter, a strong improvement compared to 2.78 at March 2025.

Turning to Page 15, the structure and leverage. Befesa today has a long-term efficient capital structure with optimized financial cost. Net leverage improved significantly to 2.25 at the end of March, marking the eighth consecutive quarter of leverage reduction. For 2026, net leverage is targeted around 2x and below 2x onwards, reflecting Befesa's continuous commitment to disciplined capital management. We will prioritize the growth CapEx on these projects that will deliver immediate cash flow upon completion like the approved project of Bernburg and other market opportunities that may appear. Also, we will keep the annual regular maintenance CapEx around the level of EUR 45 million over 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. For 2026, the Board of Directors will propose the AGM to pay a dividend of EUR 40 million, equivalent to EUR 1 per share or 50% of the net income. This dividend is 37% higher than the dividend paid last year.

Moving on to Page 16. Befesa is entering into a new cycle of low CapEx and high earnings, resulting in strong free cash flow generation and shareholder value creation. During the last years, we have gone through a high CapEx cycle, which has allowed the company to expand our operations globally into the U.S. and China. Now that this cycle is completed, we are entering into a new cycle of limited total CapEx below EUR 80 million per year, along with high earnings resulting in strong free cash flow. Our total cash flow after 3 years of negative cash flow in 2025 has marked an inflection point, delivering strong financial cash flow.

Total cash flow is expected to follow a positive trajectory, reflecting the company's improvement and stronger underlying cash generation. Finally, as I already mentioned, leverage is expected to be kept below 2x over the coming years, allowing greater optionality in future capital allocation decisions. Now back to Asier on outlook and growth.

Moving on to Page 18, 2026 guidance. The start into the financial year 2026 has developed according to our expectations. We expect 2026 to be another year of earnings growth. On EBITDA level, we expect to end the year between EUR 250 million and EUR 270 million, which translates into a growth between 3% and 11%. After 4% EBITDA growth in Q1, we expect growth to gain momentum as the year progresses. We expect total CapEx in the year to be around EUR 70 million. This will enable us to further reduce leverage to around 2 from last year's level of 2.3.

Moving on to Page 19, going through the main elements. We expect the steel dust volumes in Europe to grow only modestly as we are already running at very high utilization. Volumes in the U.S. will increase, driven by new contracts with the steelmakers. In the rest of the world, steel dust volumes are expected to develop broadly in line with last year. Salt Slag operations are expected to maintain broadly stable volumes compared with 2025, enjoying higher collection fees. The metal margin for secondary aluminum is anticipated to improve gradually over the course of the year, particularly after bottoming out in the third quarter of '25.

We are already seeing an improvement in the business environment announced in April, which make us confident. For energy costs, we expect a mixed development in '26 with global coal prices slightly down to stable, but natural gas and electricity prices increasing in Europe. Here inflation continues to impact maintenance, ancillary materials and personnel costs across all regions, creating a negative pressure point in the cost structure. We should be aware that developments in the Middle East will influence energy prices and overall inflation for the rest of the year.

As stated by Rafael, due to ongoing tightness in the zinc concentrate market, the benchmark treatment charge settled at $85 in 2026, just slightly up compared to last year's $80. Hedging activity for zinc remains stable with the average 2026 hedge price set at approximately $2,990 per metric tonne, consistent with 2025 levels, suggesting a neutral hedging position. Total CapEx for the year will be around EUR 70 million with around EUR 45 million for regular maintenance and the remaining for growth in expansion of Bernburg. We will continue following our disciplined capital allocation strategy and ongoing focus on free cash flow generation, and we, therefore, anticipate further deleveraging with net leverage declining to around 2 by year-end.

Moving on to Page 20, our expansion project in Bernburg, Germany. We are on track with our planning decision for expansion project and expect Bernburg to start production in the second half of 2026. This is another important milestone in Befesa's growth journey as we continue to strengthen our aluminum business and expand our recycling capacity in Europe. This project is an example of how we diversify our customer base and end market exposure toward less volatile business. Bernburg will also contribute to our slightly higher H2 title earnings growth momentum in 2026.

Moving on to Page 21 about the European steel industry. Europe is accelerating its transition towards electric arc furnace steelmaking, largely driven by decarbonization targets and supportive policy frameworks. Between '26 and 2030, 30 new EAF projects has been announced to come online. This represents more than 32 million tonnes of new EAF capacity, which equates to 24 increase compared to the 60 million and 90 million tonnes of electric arc furnace capacity in Europe. As a result, EAF penetration is expected to rise from the current 45% over the next 5 to 10 years, supported both by the 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.

Moving on to Page 22, about the U.S. steel industry. In the United States, electric arc furnace steel capacity is projected to increase by more than 25% by 2028, equivalent to around 21 million tonnes of new steelmaking capacity. This expansion translates into over 300,000 tonnes of additional steel dust, creating a substantial opportunity for Befesa recycling operation. With a total installed capacity of 650,000 tonnes across our U.S. plants, we are now well positioned to leverage this growth. Our goal is to progressively ramp up utilization to below 70% today to around 90% by '28 as new electric arc 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 this next phase of growth in the U.S. market. Thank you very much.

Thank you, Asier. We will open the lines for your questions.

We will now begin the question and answer session. [Operator Instructions] The first question comes from the line of Lars Lasse Stueben from Berenberg.

I have a question just on the energy side of things. Could you provide the breakdown again, if possible? And I know you mentioned it briefly in the presentation, but just to get some more color. And also just generally, I know you've given some detail around how you're thinking about this in the full-year guidance. But is there anything you've kind of changed from, I guess, 2022 in terms of your energy exposure and how you're thinking about sort of hedging some of the volatility? That would be the first question.

And then the second question would be, could you confirm whether the maintenance shutdowns took place again in the first quarter or if we should expect anything else in the remainder of the year? And then finally, on European EAF, it seems like some of the projects there are progressing quite well. Could you give a feeling on general timing on when you might make a decision regarding the expansion for Etch on your end of things?

Thank you, Lasse, for the question. I will take the energy question. We didn't hear very well your second question. So you can repeat that?

Can you repeat the second question, last, we didn't get that one.

The second question was just around whether you undertook maintenance shutdowns again in Q1 like you did last year, I think, was the case.

Yes, that's clear. Okay. On energy, basically, our total energy bill today is around EUR 100 million, okay? Out of that, around 50% is coke. We are not seeing coke prices impacted by the current situation in the Middle East. 40% around that is electricity and 10% is natural gas, okay? Well, although we have seen some peaks throughout the first quarter, the average price in the first quarter of energies, as I explained, are pretty much in line with the previous year. Maybe natural gas is picking up slightly versus the previous quarter, but it's nothing super relevant.

As you know, natural gas and electricity typically impact our secondary aluminum business. And although the first quarter in the secondary aluminum business has not been very strong, we are seeing a strong business performance improvement in the second quarter already, okay? So our ability to pass through these energy price increases to the customers in aluminum is pretty high, okay? So we don't see that the situation is similar to the one that we suffer in 2022, where the main impact was obviously on natural gas, but especially on coke, given by the fact that there was a lot of production of coal coming from Russia and Ukraine. On maintenance Recytech, Asier will take.

Thank you, Lasse for the questions. Yes, maintenance basically, I think I used to tell you guys that normally it's very difficult to move very, very far the maintenance because normally the yearly basis stoppages is the how the kilns run normally. So yes, Q1 was expected to be the lowest in the year once again. Q2, Q3, higher than the Q1 of course, and probably higher. We do expect higher volumes than Q1 and for last year, and the highest obviously is the Q4. Q2, Q3 could be similar, Q4 for sure. All in all, we expect, as we say, some growth in volumes treated, especially driven by U.S.

And yes, the Q1 is the weaker and how weak are normally the queues depends as well in the days that you need to do the maintenance periods and so. But at the end of the day, the importance for us is that we have the stocks, we have the deliveries, and we can run the furnace in a higher level in the Q2, Q3. Regarding France, yes, you are right. There are some projects ongoing and coming, you have the Tata one in U.K., you have the SSAB in Sweden, you have Salzgitter, you have Voestalpine. You have as well, you know, ArcelorMittal Gijón has started already. Well, starting to ramp up and so on.

Well, our idea now is probably during 2027, 2028, start with the project, but it's not still defined because again, the projects of the steelmakers are there, but are not running, I mean, running quick, I said, probably they are slow and going very careful. So we want to keep more or less the idea of those years, but can be, you know, move, I don't think more than 6 months. So in the range of '28 and running '29 probably is our main idea now, to be confirmed, but no very different than that. Unless any issue coming with the steel dust -- or sorry, steel production projects from the steelmakers. We don't hope already.

The next question comes from the line of Shashi Shekhar from Citi.

I have a couple of questions. First, how much capacity utilization, you are targeting in the steel dust business in U.S., Europe, Turkey and Korea this year? And my second question, what zinc LME prices you have used to estimate your 2026 EBITDA estimates? That's it.

Thank you, Shashi. Asier will take the first question, and I will take the one on LME.

Yes. I think the capacity utilization, probably you can get the reference for '25 in Europe and Korea and Asia in general. And the one what we do hope to increase this year is the U.S. part. We do think that it's possible for us to increase to 73% to 75% capacity utilization this year based on the new steel dust contract. This is coming from the high 60s in the last year. The rest is more or less the same because the capacity in Europe is pretty -- almost fully utilizated.

And the situation in Turkey, Korea and China, we do hope that they are going to be more similar than '25. So all in all, we do hope to be in the levels of above or around 75 in the year. This is in the global of Befesa expectation.

And regarding the assumption on LME price on the upper and the lower ranges of the guidance, well, I think what we have said, Shashi, is that the guidance considered a number of moving parts. As you can see on Page 19, there are certain elements which are well known like the treatment charge and the hedging, but there are other elements which are not so well known. LME price is obviously uncertainty, but it is also energy prices, FX and so on, okay?

So I cannot give you a precise number. What we do is we create like a more optimistic scenario across a number of variables and a more pessimistic scenario across another -- the same number of variables, okay? And with that, we come out with the upper and with the lower part of the range. But I cannot give you a precise number because there are so many moving parts embedded in the upper and in the lower part of the guidance.

The next question comes from the line of Olivier Calvet from UBS.

Maybe just another one on energy impact, just trying there. What assumptions are you making on gas and electricity prices in your guidance? It sounds like you're calling sort of the pet coke level flattish through the rest of the year? Or sort of if you could give us a sense of the EBITDA impact of a change in, let's say, EUR 10 per megawatt hour of electricity and gas, that would be helpful.

Then the second question would be on secondary aluminum. I was just wondering if you could talk to us about the upside and downside scenario given the disruption we're seeing on the supply side, any impact on metal margins? I think you talked at the last call of something like the EUR 8 million to EUR 10 million EBITDA level as a level you're confident with, but is there any upside there? And then just on EAF volumes. So I think you talked about weak volumes in Turkey in Q1, but an expected improvement in the second quarter and second half. Can you just talk a bit about the impact of the European safegard measures on your non-European footprint, please, given also the export share of that market? And maybe I'll take the rest in the queue.

Thank you, Olivier. Well, on energy, basically, we're expecting coke prices to continue, as I said, the downward trend, not strongly, but gradual, a slightly positive result coming from slightly better prices across all regions. And you could say that, that's like the middle part of the guidance range. And on electricity and natural gas prices, I would say also that the average of last year is like the midpoint of the guidance range. As I said, first quarter, we are seeing very stable prices. Obviously, if the crisis in the Middle East continues, that may have an impact, but that is an uncertainty that we have.

So that's what I can tell you, Olivier, regarding energy impact. On secondary, Alu, I think, you can take that.

Yes. Thank you for the question, Olivier. When the secondary aluminum, we really despite the fact that the Q1 came at the beginning of the year, especially January with some still from the producers and so on because the Christmas period, December, they prolonged the starting up of the year. Later, they are coming back to normal volumes and the margins we can feel in March and especially now in April, probably helped by the high aluminum price, the margin are improving very clear.

So yes, we are optimistic with this and probably the range that you said EUR 8 million to EUR 10 million, probably we can see now with a little bit more comfortable despite, as I said, the fact that the Q1 is still a little bit far from that. But yes, we see the recovery is coming in that level.

In regards to the electric arc furnaces, a good question about the first, the measures that the European market is taking with the CBAM or even with the idea to put the quotas and less imports. Well, it's still to see. Well, in any case, for us in the European market, it's difficult to grow under the current circumstances. So the steelmakers are all expecting to increase the production and as well the prices are going better in Europe.

So this is a fact. How that affects to the rest I think that the main expectation could be probably China that were having records of export last year and probably will be affected by. They can go to other Asian parts, and we will see. In the particular case of Turkey, I think they have their own circumstances. And the Q1 is more related to the -- once again, starting up the year that normally they get for maintenance stoppages. So we do see -- no, we don't see changes. And based on our deliveries on a daily basis is what is the best for us to understand how the things are going. So we do hope the year will be similar than last year in that case. The measures, we will see what happens.

Maybe I'll just ask my last one on EPS. Just if I look at the delta between the low end of EBITDA guidance and the minimum EPS sort of guidance, that's around sort of 6-something million of below EBITDA, let's say, costs. Is that sort of the level we should be thinking about? Or any risk this is higher? Just wondering about how we should think about the range at EPS level.

Yes, that makes sense. That assumption makes sense, Olivier.

[Operator Instructions] The next question comes from the line of Fabian Piasta from Jefferies.

Some were already covered, a couple left. So first would be the target margin in secondary aluminum after the Bernburg expansion and adding beverages to that portfolio. Can you give us a flavor for that? Is that something where you are expecting to move more towards the mid-single digits margin in 2026 already and then further in 2027? Or how can we think about that?

Second is on interest expense recovery from potentially improved margin ratchet. Could you quantify that? Are we looking at finance expense of more towards EUR 30 million in 2026? Or is that too early? And the third and last, could you maybe precise -- be a bit more precise on your capital allocation strategy going forward? I guess M&A is not the biggest topic, but could we also expect buybacks for your capital allocation strategy?

Thank you for the question, Fabian. I would say the aluminum one, the margins. Well, we really hope that the margins in aluminum, the increase Bernburg will help because it's more secure, but I think that it is moving in the single digit is the case. It's going to help because it's more stable than other because it's a tooling basis contract in this case and it is helping. But the margins really are more dependent on the situation of the market.

So projecting in mid in the mid or in the top part of the single digit, I think that could be a good range to have a reference in the aluminum. Regarding the interest expense that we expect for the year, Fabian, yes, between EUR 30 million to EUR 35 million is a very reasonable assumption, okay? Let's say, as the year moves on, we will fine-tune this number. But starting the year, I think that's a good reference.

And about the capital allocation for the future.

Yes, capital allocation, yes, I think we have said that we -- I think it's a very important message for everybody to understand. We are entering into a new cycle. All the heavy investment is already behind us. That has enabled us to expand our footprint globally to the U.S., which is a very attractive market and to China. And well, the capital allocation priorities are very clear. On the one hand, we need to spend EUR 40 million to EUR 45 million on maintenance CapEx to keep our asset base running properly. Secondly, we have a commitment to pay a dividend to our shareholders of 40% to 50% of the net income. Then we want to keep the leverage below 2x for the coming years. That is something that we are fully committed.

And then obviously, we have some projects like the one of Recytech that Asier explained around the corner, which is delivering a very super high attractive return for our shareholders. After that, all the cash excess will be delivered to the shareholders either via extra dividend or a share buyback. I don't think M&A, Fabian you said, at the moment in the pipeline or in the radar. We -- as you know, we are operating in a very niche environment, very niche industry. The big M&A opportunity was in the U.S. already. We are not a part of -- our strategy is not to get into any other businesses other than our core business, still does and Salt Slag. And obviously, as we have already explained in the previous call, share buybacks is something that depending on the valuation of the company and the share price, we will definitely consider.

The next question comes from the line of Jaime Escribano from Banco Santander.

You hear me?

We can hear you.

Two questions from my side. One on zinc prices and hedging strategy update. So on zinc prices from your channel checks, if you can provide a little bit of outlook, how you see the supply-demand model, the demand of zinc prices seems to be consistent above $3,000. So just to have your view there. And in terms of hedging strategy, if you can update us until when you have the hedges and if you think you can hedge a little bit more at current prices?

And the second would be more in the interim. So the stock is down around 6% today, probably illiquidity, we know that it happened in the past. But what could you say in order to provide comfort to investors in order, so in terms of your visibility and in terms of the guidance in order to provide some assurance to the stock in the short run?

Thank you, Jaime. On hedging, I think you have all the details on the presentation on Slide 12, and I have covered that. We are fully hedged until July 2028 at a record high zinc price levels in dollars. We are continuing to monitor, obviously, the opportunities. There are 2 elements in here. One is the spot price and then the other thing is the future curve, no? Whether that is in backwardation, that means the future prices are lower than the current spot prices or the opposite. Yes, we're monitoring. It is true that even in the current volatile environment, commodity prices and especially zinc prices are holding up pretty well. And yes, we will keep you posted. On the stock, Asier has...

Yes. Well, I think that talking about the stock is difficult for us because, obviously, we think that the stock is far from the point it should be. if I were managing the market, right? Now being serious, I think that no matter what happens today because probably the reaction of one was expecting more, one was expecting less. I think we are in line with what we are telling. I mean, the next 2, 3 years until we do the next investment in Europe are going to be growing years based on the U.S. basically despite the because based on the U.S. and the volumes and the hedging we have.

So we are on our way to EUR 300 million EBITDA in 3, 4, 5 years and very, very cash-generating company, reducing the leverage ratio probably in the next 3 years, below 1.5. So yes, I think we are going to have a very good financial and balanced situation. So I do hope that the deserves more price. But obviously, market is the real owner of those things and decisions and going forward. I think that today probably is a very short time, but probably once you guys analyze the numbers and reaffirm that we are on our way to this EUR 300 million and growing EBITDA and cash generating, as Rafael explained, we can do more things with the distribution to the shareholders and why not doing other things. But at the end of the day, I think that we are on top of that and nothing strange has happened in this Q1. We are -- it's just the point moment of the Q1 because of the maintenance, the rest of the year we can good. So we are positive and optimistic that we will reach very soon this EUR 300 million. And then we will see the next 4, 5 years.

Yes. And from my side, nothing to comment on top of Asier. What I would say is that this is going to be the third consecutive year of EBITDA growth. We have been deleveraging the balance sheet over the eighth consecutive quarters. EPS is going up. We are in the middle of a shift in the steel industry, both in the U.S. and in Europe. It is true that China is not delivering, but that's an option. We are not considering China for reaching the EUR 300 million that Asier is mentioning. I think the company is in a very good shape.

The next question comes from the line of Anis Zgaya from ODDO.

I have only one. So it's on the '26 guidance, roughly EUR 18 million year-on-year improvement. And this improvement is split between higher U.S. steel dust volumes and the recovery in secondary aluminum, including any contribution from Bernburg in Half 2, '26.

Well, I think they are the aluminum and the U.S. steel volumes are the drivers to go to the high part of the year, together with the guidance, sorry. But together with many other assumptions about zinc price and about the electricity and energy cost and the inflation. So everything is together. I mean, I don't think it's worthy to say what we are considering. I think it's like basically, we do hope that 10% steel dust volumes increase in U.S. to come to 75% and the margins to aluminum to come to 8 million to 10 million. And this is more or less one of the considerations you have. But the zinc and the others, probably you guys have to do your model as well, has no sense to discuss about what to put there.

The next question comes from the line of Adahna Ekoku from Morgan Stanley.

I've got 2 left as well. So just to follow up again on the 2026 EBITDA guidance. Last quarter, you mentioned you were comfortable with consensus, which was at about 260 million for 2026. That's now the midpoint of the new guidance. But since then, we've had a much more favorable zinc TCs settlement. So I just want to understand a bit more what's changed since then? Is it just the energy cost outlook? And second, just on volumes to confirm, do you have any maintenance left over for Q2? And on the U.S. steel dust volumes ramp-up, is this more a second half weighted trajectory? Or should we expect this to be more even?

Good questions about the comfortable about EUR 260 million. Yes, it's true that this year we're coming better than we were expecting in the last report in the last call. Yes, we were expecting around 100, 110 and now it's 85 million. So it's not a very big difference at the end of the day, but obviously, it's a difference positive. We are happy with that. And yes, still probably the EUR 260 million to EUR 265 million could be that is a good figure for us to have in consideration. And more or less the midpoint always that you discussed with you is the point that you get and the point that we are more or less comfortable.

Obviously, they were not having the uncertainty 3, 4 months ago about the situation in Iran in Strait of Hormuz and so on. It's difficult for us, we have to put more things on the ideas, on the framework to do the guidance. But yes, I think that the midpoint a little bit better, although depending on those things, probably is a good reference for us. Nothing changed, despite the fact that we have some millions better than the treatment charge. In terms of the volume, yes, Q2 and Q3 are going to come better and higher than the Q1. But again, there are still splits on maintenance in the two Qs, less than in the Q1. The year where we have less maintenance definitely is the Q4.

So putting a growing from last year, I think probably last year is a good reference. On top of this, the 10%, but then 12% that we hoped that we are going have this year in total probably is a good reference. Yes, the volumes in U.S. are developing as expected at the end of the day. We do hope that second quarter will come, you know, even, you know, higher and stronger than the Q1 and Q2, Q3, probably in Q4. I think it's a growing, and the worst in terms of lower production because the maintenance has over in the year.

We have a follow-up question from the Olivier Calvet from UBS.

Yes. I just wanted to quickly follow up on secondary aluminum metal margins. I'm just wondering if you can comment on the levels you're seeing right now given the disruptions to production there? And then just a few comments maybe given higher electricity prices in the smelter, in U.S. smelter?

Yeah. Well, I think that we are now in the current situation. Again, the Q1 is not a good example because it's everything affected. To have an idea of the margin in aluminium, we need to hope this April, May, because it's affecting by higher energy prices, but higher price as well. Well, the margins are coming higher, but we need to hope, as I say before, in that range. But it is difficult to get the conclusions now. We are watching the increase in margins, but it's a matter of gradually. We do hope that we are gonna be able to transfer the energy, you know, increases to the customers at the end of the day, no?

But the mechanism for that is basically higher prices.

Yes, yes, higher prices, but you have to consider that we have higher prices in sales, but we have higher prices in purchase with the scrap as well. So that's why we talk about margins. And the high price help because you have more price to calculate even the same margin, you get better profit, right? But at the end, it depending on how you manage the purchase and sales and then the cost to be transferred to the customers.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Rafael Pérez 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 call and the Q&A session. Thank you very much to all of you, and have a good day.

Ladies and gentlemen, thank you for standing by. Welcome to the Preliminary Full Year 2025 Results Conference Call. I am Jota, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Rafael Pérez, CFO. Please go ahead.

Good morning, and welcome to the Preliminary Full Year 2025 Results Conference Call of Befesa. I am Rafael Pérez, CFO of Befesa. And this morning I'm joined by our Group CEO, Asier Zarraonandia. Asier will start with an executive summary of the period. Then we will cover the business highlights for the steel dust as well as aluminum salt slag recycling businesses. I will then review the preliminary full-year financials by business, and we'll cover the evolution of commodity prices, our hedging program, and finally, cash flow, net debt, and leverage and capital allocation. Asier will close this presentation, providing an update on the outlook for 2026 and an update on our growth plan. Finally, we will open the lines for the Q&A session. As always, this conference call is being webcasted live, and you can find the link in our website.

Now let me turn this call over to our CEO, Asier, please.

Thank you, Rafael. Good morning all. Moving to Page 5 of the business highlights. We have delivered strong full results -- year results, continuing the solid trends seen in the first 9 months of the year. Our performance demonstrates once again the resilience of our business model and the benefits of our diversified operations. Adjusted EBITDA for the full year of 2025 reached $243 million, up 14% year-on-year. The EBITDA margin improved significantly to 21% in the full year '25 compared with 17% in '24, reflecting a strong operational efficiency and disciplined cost management. Financial leverage was further reduced to 2.27 in December 2025 compared to 2.19 a year ago, well below the 2.5 target, marking the seventh consecutive quarter of deleveraging. Net income and earnings per share also increased sharply. EPS rose 58% year-on-year to 2.01, reflecting a strong profitability and improved financial performance.

In our steel dust business, we achieved resilient EAF dust volume across all markets despite adverse market conditions. Performance was further supported by lower zinc treatment charges and favorable zinc prices. Our salt slag operation delivered solid performance, while secondary aluminum has been impacted by persistent challenging environment, driven mainly by the weak automotive market in Europe, as well as the usual summer period maintenance activities in the auto industry. The Palmerton expansion project was completed as expected, with the second kiln successfully commissioned in July '25. We expect '23 to be another year of earnings growth, primarily driven by higher EAF steel dust volumes in the U.S. as well as some recovery in secondary aluminum.

Our financial leverage is expected to remain at around 2x by year-end 2026, supported by solid cash generation and disciplined capital allocation. Growth CapEx will continue to focus on the Bernburg project. I will comment on the outlook in more detail later.

Moving on to Page 6, business highlights for the steel dust business. In Europe, steel production in the full year of 2025 has remained depressed, down 3% year-on-year, mainly due to weak manufacturing activity and higher imports from China. Despite this, our steel dust deliveries from electric arc furnace steel customers continued in line with the 2024 average at very solid levels, demonstrating the resilience of the business model. Operationally, the European plants performed strongly, achieving a 94% load factor in the fourth quarter, showing a strong performance and no maintenance stoppages.

In the U.S., steel production increases by 3.1% year-on-year, driven by overall economic growth. Our U.S. plants operated at a 71% load factor in Q4, continuing a gradual improvement year-on-year. The 2 new kilns in Palmerton have been fully operational since July 2025, and new electric arc furnace steel supply contracts are ramping up progressively through the Q4, following some initial start-up delays.

At the same time, cost reduction measures in the U.S. Zinc refining plant continued to deliver the expected improvements in asset profitability. In Asia, volumes in Turkey increased by 11% year-on-year, recovering strongly after a weak second quarter affected by maintenance shutdowns. In Korea, the load factor reached 76% in 2025, up 6% year-on-year, driven by higher domestic deliveries and strong operational execution. In China, operation continued at low utilization level with earnings around breakeven, reflecting ongoing market weakness.

Moving on to the Page 7, business highlights for the aluminum salt slag recycling business. In our aluminum business, performance has remained mixed in 2025. Starting with the salt slag recycling business, operations have continued to perform strongly, running in line with previous quarters. Utilization levels remained above 90% in 2025, demonstrating the robustness and efficiency of our assets. In our secondary Aluminium segment, the market environment continues to be very challenging. As we have been commenting during the year, the European secondary aluminum industry remains under pressure with tight metal margins and limited production activity, largely as a consequence of the ongoing weakness in the automotive sector.

However, the performance in the fourth quarter of 2025 reinforces the view that the Q3 was the lowest point of the cycle and that the recovery should be underway. Despite these headwinds, we continue to focus on operational discipline, cost efficiency, and customer diversification to preserve profitability and position the business for recovery once market conditions improve.

Now Rafael will explain the financials in more detail.

Thank you, Asier. Moving on to Page 9, the financial results for the Steel dust segment. Steel dust delivered EUR 212 million of adjusted EBITDA in 2025, which represents a 25% year-on-year improvement. EBITDA margin improved from 21% to 27% in the period, mainly driven by better pricing environment on treatment charges and zinc hedging. The EUR 42 million EBITDA improvement has been driven by the following factors. The year-on-year impact from volume has practically no impact, with similar plant utilization at group level around 70%, similar to last year. As explained by Asier, we have been able to run our European assets at a high utilization despite a very challenging market environment.

On price, strong positive EBITDA year-on-year impact of around EUR 35 million. With the 2 main price components being higher zinc hedging price, 3% higher year-on-year, and lower zinc treatment charges, which was set at $80 per ton for the full year 2025 versus $165 per ton in 2024. On cost and other, the net positive EUR 6 million impact is largely driven by the lower operating cost in the zinc smelter in the U.S., as well as lower average coke price. These 2 positive effects have been partially offset by higher inflation costs in the recycling business as well as unfavorable FX.

Moving on to Page 10, financial results for our Aluminum segment. Aluminum salt slag delivered EUR 32 million of EBITDA in 2025, which represents a 27% year-on-year decrease compared to the EUR 43 million in the same period of last year. The year-on-year EUR 11 million negative EBITDA development was mainly due to the lower aluminum metal margin, as well as slightly higher operating costs and energy prices. On volumes, overall marginally negative EBITDA year-on-year, with a decrease of EUR 3 million. Our recycling volumes of salt slag remained pretty much in line with the previous year. With these volumes, we operated our plants at a strong capacity utilization rates of about 89% in salt slag and 75% in secondary aluminum.

With regards to prices, negative EBITDA year-on-year impact of around EUR 5 million, mainly driven by the pressure aluminum metal margin versus the previous year. As commented by Asier, our view is that the industry has bottomed out already in Q3 last year, and we expect positive development from now on. This was partially offset by higher aluminum F&B price with an increase of 3%, averaging EUR 2,369 per tonne. On cost and other increased pressure from higher operating and energy-related expenses.

Moving on to Page 11, zinc price and treatment charges. Regarding zinc LME prices during 2025, heat zinc has traded in the range of $2,521 to $3,351 per tonne, showing a particular positive trend in the last months of 2025. The average of zinc LME price in 2025 have been $2,867 per ton, which is 3% above the last year average. However, unfavorable evolution of the foreign exchange of the euro-dollar has resulted in a slightly lower zinc price in euros, down 1% at EUR 2,542. On the right-hand side of the slide on treatment charges, in 2025, treatment charges for zinc were set in April at $80 per tonne for the full year 2025, compared to the $165 of the previous year, marking an all-time low record level.

Turning to Page 12 on hedging. We have taken the opportunity of the recent rally of the zinc price to be very active on our hedging program. Our hedging book has been extended to the first half of 2028 at all-time high levels of $3,100 per ton. For 2027, the hedge is set at $3,000 per ton. This provides stability and visibility over the coming quarters and years. Average hedge prices amounted to $2,923 in 2025 and $2,990 per 2026.

Turning to Page 13, Befesa energy prices. The page shows the evolution of the 3 energy sources that we have in Befesa: coke, natural gas, and electricity. With regards to coke price, which today represents around 60% of the total energy bill, the normalization that started in the second quarter of 2023 continues throughout 2025. Average coke price in Q4 was around EUR 152 per ton, consolidated its downward trend compared to the previous quarters. Regarding electricity, which today accounts for 30% of the total energy expense, price are at similar levels than in Q3 2025 after significant correction in the second quarter of last year. Finally, gas prices continue its normalization throughout 2025 with a slight increase to EUR 45 per megawatt hour in the fourth quarter of last year.

Turning to Page 14, the cash flow results. Operating cash flow in 2025 has reached a record of EUR 212 million, which represents an increase of 10% compared to the same period of last year, despite higher taxes, with EUR 21 million paid taxes in 2025 versus a positive tax impact in 2024. On the EBITDA to cash flow walk, starting with EUR 243 million adjusted EBITDA and to the left, working capital consumption amounted to EUR 10 million in 2025 with a strong end of the year recovery from previous level in the first quarter, reflecting the intra-year seasonality that we explained already in the first quarter. Taxes paid in 2025 came in at EUR 21 million as a result of the final tax assessment of the previous year, in comparison with a positive tax impact in 2024, resulting in an operating cash flow of EUR 212 million in the year, making a record in the history of Befesa.

On CapEx, in 2025, we have invested EUR 50 million in regular maintenance CapEx across the company, EUR 26 million in growth CapEx related to the refurbishment of the Palmerton plant in Pennsylvania, which is now completed as well as the part of the Bernburg expansion project in Germany.

In summary, total CapEx of EUR 76 million in the year, which is lower than the range of EUR 80 million to EUR 90 million that we initially provided, reflecting a strong discipline on capital allocation. Total interest paid amounted to EUR 34 million, and total bank borrowings amounted to EUR 34 million in the full year. For 2025, the EGM approved in June to pay a dividend of EUR 26 million in July, equivalent to EUR 0.63 per share or 50% of the net income. In summary, final cash flow amounted to EUR 40 million in 2025. Cash on hand stood at EUR 143 million, which together with our EUR 100 million undrawn revolving credit line, provides Befesa with more than EUR 240 million of liquidity. Gross debt at the end of December stood at EUR 695 million. Net debt was greatly reduced by 11% to EUR 552 million compared to EUR 619 million in the same period of last year, resulting in a net leverage of 2.27 at closing of December '25, a strong improvement compared to the 2.9 at December 2024 and well below our initial target of 2.5.

Turning to Page 15, debt structure and leverage. Following the refinancing back in July 2024 and the repricing in March last year, 2025, Befesa today has a long-term capital structure with optimized financial cost. Net leverage improved significantly, as explained earlier, to 2.27 at the end of last year. This marks the seventh consecutive quarter of leverage reduction, as well as well below our company target. For 2026, net leverage is targeted around 2x and below 2x onwards, reflecting Befesa's continued commitment to disciplined capital management. We will prioritize the growth CapEx on those projects that will deliver immediate cash flow upon completion, like the approved project of Bembur and other market opportunities that may appear. Also, we will keep the annual regular maintenance CapEx around EUR 40 million to EUR 45 million over 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. For 2026, the Board will propose to the EGM to pay a dividend of EUR 40 million, equivalent to EUR 1 per share or 50% of the net income. This dividend is 37% higher than the dividend paid last year in 2025.

Moving on to Page 16. Befesa is entering a new cycle of low CapEx and high earnings, resulting in a strong free cash flow generation and shareholder value creation. During the last years, we have gone through a high CapEx cycle, which has allowed us to expand our operations globally into the U.S. and China. Now that this cycle is completed, we enter a new cycle of limited total CapEx below 80% over the coming years, along with high earnings, resulting in a strong free cash flow. Total cash flow after 3 years of negative cash flow, 2025 has been marked at an inflection point, delivering strong final cash flow. Total cash flow is expected to follow a positive trajectory, reflecting the company's improving a stronger underlying cash generation profile.

Finally, as we have already commented, leverage is expected to be kept below 2x for the coming years, allowing greater optionality in future capital allocation decisions.

Now back to Asier on outlook and growth.

Thank you, Rafael. Moving on to Page 18, 2025 guidance. Befesa closed 2025 with solid delivery within the guidance provided, achieving $243 million in EBITDA and strong operating cash flows of $212 million and maintaining a strict CapEx discipline, spending $76 million. The company continued to deleverage, reducing net leverage to 2.27, supported by improved EBITDA and consistent cash generation. Earnings per share rose to $2.01, reflecting a strong underlying performance and enhanced financial efficiency. Overall, the result demonstrates disciplined execution and continuous focus on long-term value creation forareholders.

Moving to Page 19 on '26 outlook. Looking ahead to '26, as in the past, we will provide guidance in the first quarter once the 2026 treatment charge has been announced. However, I can provide some comments about the year. We expect 2026 to be another year of earnings growth, strong cash flow generation, and continued deleverage. Steel volumes are expected to remain solid and stable in Europe, while the U.S. anticipates higher volumes driven by new contracts with the steelmakers. In China and the rest of Asia, stability is also expected to prevail. Salt slags operations are projected to maintain stable volumes compared with 2025, supported by higher collection fees. The metal margin for second aluminum is also expected to improve gradually through the year, particularly after having bottomed out in the third quarter of 2025. The smelter has benefited from a strong fixed cost reduction achieved in 2025, and further efficiencies are expected to be realized through 2026.

On the other hand, energy costs are expected to evolve more moderately. The group anticipates a slightly lower to stable overall coke prices, while European natural gas and electricity prices are projected to rise in 2026. General inflation continues to impact maintenance, ancillary materials, and personnel costs across all regions, creating a negative pressure point in the cost structure. In the treatment charge environment, the benchmark TC settled at $80 in 2025, its lowest level in 15 years. Although the concentrate market remains tight, characterized by low spot treatment charges, TCs are expected to rise in '26 toward a range of $100 to $130.

Hedging activity foreseen remains stable with the average '26 hedge price set at approximately EUR 2,990 per metric ton, consistent with 2025 levels, suggesting a neutral hedging position. Total CapEx for the year will be below EUR 70 million, with around EUR 45 million for regular maintenance and the remaining for growth in expansion of Bernburg. Net leverage will be around 2x by the end of the year.

Moving on to Page 20 on Palmerton. In the United States, our Palmerton plant has been successfully refurbished, marking a key milestone in our strategic growth road map. Both kilns are now fully operational, positioning Befesa to capture the significant growth expected in the U.S. electric furnace steel dust market over the coming years. U.S. electrical furnace steel capacity is projected to increase by more than 20% by 2028, equivalent to around 18 million tons of new steelmaking capacity. This expansion translates into over 300,000 tons of additional steel dust, creating a substantial opportunity for Befesa's recycling operations. With a total installed capacity of 650,000 tons across our U.S. plants, we are now well-positioned to leverage this growth. Our goal is to progressively ramp up utilization from below 70% today to around 90% by 2028 as new electric arc furnace capacity comes online.

The combination of our modernized departmental facility, long-term customer relationships, and strategic geographic footprint near key steel producers ensures that Befesa is ready to capture this next phase of growth in the U.S. market.

Moving on to Page 21, our expansion project in Bernburg, Germany. This is another important milestone in Befesa's growth journey as we continue to strengthen our aluminum business and expand our recycling capacity in Europe. From a timing perspective, our permits have now been obtained, and our construction officially started in August '25. We expect a 12-month construction period followed by a 6-month ramp-up phase in the second half of '26. On the commercial side, we have already secured strong customer support. Overall, the Bernburg expansion is progressing fully in line with plan.

Moving on to Page 22 about the European steel industry. Europe is accelerating its transition toward electric arc furnace steelmaking, largely driven by decarbonization targets and supportive policy frameworks. Between '26 and 2030, 12 new electric arc furnace projects have been announced to come online. This represents more than approximately 20 million tons of new EAF capacity, which means 23% increase compared to the 60 million, 90 million of electrical arc furnace capacity in Europe. As a result, EAF penetration is expected to rise from the current 45% over the next 5 to 10 years, supported both by this new project 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 strong. We are already engaged in advanced negotiations with key customers to support this expansion phase in the coming years.

Thank you very much.

Thank you, Asier. We will now open the lines for your questions.

[Operator Instructions] The first question comes from the line of Shashi Sekhar with Citi.

So I have a couple of questions. So my first question is on capital allocation. I just wanted to understand what's the priority here? Is it deleveraging, dividend payment, or further expansion into European steel dust business, given improved outlook for European steel segment? My second question is on China. I believe one of the plants is still burning cash. So I just wanted to understand at what point you will consider either closing it or moving it to some other province?

Thank you, Sashi. On capital allocation, I think we have tried to explain many times. We want to deliver a combination of keeping the leverage below 2x. I think this year, we have made -- last year, 2025, we made great progress in our deleveraging efforts, achieving a target which is below what we initially envisaged at 227. We are targeting around 2x for this year, 2026. And beyond 2026, we expect to keep the leverage below 2x, okay? Secondly, on dividend, yes, we want to keep the promise that we made at the IPO to pay 40% to 50% of the net income as a dividend to shareholders.

And then on growth, obviously, as we have explained, we are coming from a high CapEx period where we have invested heavily in China and in the U.S., and that has enabled us to expand our operations. I think the focus at the moment is for this year in Bernburg, as Asier has explained. And then we also see a clear opportunity to deploy capital in Europe, as Asier explained at the end of his speech, to capture the growth of the EAF steel market in Europe, okay? We envisage to do that through a brownfield. We will provide all the relevant details about the project at the right time. But it's a combination of capturing the growth opportunities that we see in our main market, Europe, while keeping the leverage below 2x and keeping the commitment to pay dividend.

Yes. Sashi, and regarding the second question about China, well, yes, we have one plant running probably levels in 50%, 60% and the other one is just 10%, 20% depending on the availability. But it's not burning cash because basically, what we have is that plant stopped under control, and even when we run in periods where we have stopped the plant, moving the people to run the business. And basically, the cash is -- we are not negative cash in general in China for the whole business. So we are doing EBITDA positive and converting into cash positive for the year. So we have some confidence to be in that way until the market comes back.

Possibilities for the future, well, you talk about. I mean, we are open to see if we can move in another province. And in that case, we consider even to transfer or translate the assets. We will see. The whole thing now is that China is in a situation that we don't see the need to invest in that so far more and wait for the recovery and as well because we are not, again, making cash negative, we have time to do that.

The next question comes from the line of Adahna Ekoku with Morgan Stanley.

I also have 2. So first of all, just on secondary aluminum, there was quite a strong margin improvement quarter-over-quarter, given the market backdrop. Is this a level we should expect to persist throughout 2026? Or were there any kind of specific positive effects in Q4 here? And second, just on the Q1 outlook, could you run through the kind of key moving parts to consider here, like volumes and margins? And are there any maintenance activities we should be aware of?

Adahna, thank you for the question. Well, secondary aluminum, I think that -- well, yes, I think as I reference the last quarter margins, and probably we will see this, and we are starting to see this level in the first part of the year. But still, it's a little bit early to say this is going to be there, perhaps the level even is increasing, we will see. I mean it's a good reference because we see that the last part of the part has gone. In terms of the outlook and maintenance, I think that the reference could be the last year situation for maintenance stoppages, and probably the dust and the activity volumes are going to be in line with 2025, but we think that we can improve the figures. But in terms of activity, it could be a good reference, the first quarter of 2025.

The next question comes from the line of Fabian Piasta with Jefferies.

I have 3 and one follow-up. So could you give us an indication what the EBITDA contribution from your U.S. smelting business is? Are we breakeven already this year? And what are you expecting for 2026? The second one is on the treatment charge outlook. Do you think that this is more driven by capacities or the recently increasing LME zinc price, basically making smelter compete for the zinc? And the third question would be you were referring to demand from data center verticals. Is there an end market split that you can share? How do you see that? What do you expect this growth to influence volumes in the U.S. And the last one was on maintenance. Did you say that the phasing is going to be similar like last year, so more maintenance shutdowns in the first half? Or did I get that right?

Thank you, Fabian. So many good questions. Well, regarding the U.S., refinery is where the plan is where we thought to be and is closing to the breakeven point, and the costs are under control. Now the operation depends on the volumes as well of material we can treat there, and it's basically a control of the cost already done. Even you can gain a little bit more efficiency cost for next year. Regarding the treatment charge, it's a good question about what is affecting the most is capacity demand of about concentrates market, and it's a little bit strange. But obviously, it's affected by the rest of the factors, which affects to the zinc price. Normally, the period is still in favor of the miners. The question is where it's going to be spot TC that is not -- has not to be a real election, but it's a little bit down again. So well, all the music sounds that it's going to be another year of favor of minus. The level could be in the range as we see more than $100 now, but it has to be confirmed, basically those days with a meeting for the International Zinc Association in U.S. those days. We will see.

In terms of the steel demand and so on, I think that everywhere is an expectation about the general evolution looks positive because we can see the steel share prices of everyone. I think that the expectation is that a recovery, and because the tax and custom action they are taking for -- in Europe or U.S. could have an effect in the production. If this happens, we see positive outlook for the steel in general. And regarding the last point, as I said before, yes, when we -- maintenance stoppage is sometimes not easy to move from 6 months or a longer period because yearly basis is when we do the maintenance. So more or less, what we see now for '26 is the same level than '25 with the Q1 and Q2 and then Q3 and Q4 having more volumes. This is a little bit the view that we have now, no major changes. We try to move and to do longer periods before the maintenance, but no big changes are going to come in the short term. So again, the '25 maintenance stoppage reference is a good point of your expectations.

The next question is from Olivier Calvet with UBS.

I have 3. Firstly, on volumes in the U.S., what's your expectation for additional volumes in 2026, and that if you could give us a sense of the range you're thinking about, depending on when your clients' volumes come through? The second question would be on the CapEx level. So I fully understand the message on sort of below EUR 80 million CapEx going forward. But I noticed slightly higher maintenance CapEx in '25 than I think you had indicated. So are you expecting a similar level of maintenance CapEx in '26? And just the growth CapEx part related to Berenberg, I had in mind the EUR 10 million to EUR 15 million. Is that fair? And the third one, just on the zinc hedges. So great to see you've been active on hedging. So what you've added in '27 and '28 is in USD, right? In '26, I think you had hedged in euros, right? And just if you could remind us what level of exchange rate you hedge '26?

Thank you, Olivier. I can get the first question about the U.S. volume, which is what we do expect, is partly the same that we were expecting in '25 with the new contract. So -- and then depending on the evolution of the steel production in general for the rest of the customer, but we see more or less in the range of 60,000 to 70,000 tonnes of more volume in U.S., more or less is a good reference for you to have.

Regarding CapEx, Olivier, I think we have said very clear, obviously, it's not a fixed number, but maintenance CapEx will stay between EUR 45 million to EUR 50 million over the coming years. And then growth will be based on -- in this year, for 2026, on Bernburg. We are envisaging a maximum CapEx for this year of EUR 70 million. And for the coming years, we don't see any year of CapEx higher than EUR 80 million. So what I tried to explain is that we are entering into a new cycle of limited capital, limited CapEx, and high earnings resulting in strong free cash flow.

And regarding the hedging, yes, we -- for 2026, we are hedged in euros for our European volumes, in dollars for our American volumes. And for '27 and '28, the hedging at the moment in U.S. dollars.

And just on the CapEx, so the growth part of the guidance for '26 is basically only Bernburg, or is it -- is there some headroom to do--

Yes.

The next question is from the line of Jaime Grivanomayes with Banco Santander.

A couple of questions from my side. The first one on salt slag. So the EBITDA in '24 was close to EUR 32 million, around EUR 29.5 million in '25. What could we expect in 2026? Also, if you can comment on the margin of Salted slags in Q4, which was a little bit low at 21%, more or less. What could we expect? If you can give us some color on the dynamics in salt slags, basically? And second question on secondary aluminum would be very much of a similar question. So EUR 2 million in 2025, which seems to be a trough. What should we expect for 2026, a number that you feel comfortable? And maybe a final question on the guidance 2026, which I know you don't provide, but if we look to the consensus at EUR 260 million EBITDA, EUR 260 million EBITDA more or less, how comfortable you feel with this number? And building on this, if the treatment charge ends up being around 100 million, 110 million, and zinc price averages above 3,000. How do you see this 260, do you see upside risk, or you're still comfortable with this number?

Thank you, Jaime. Starting for the salt question, yes, we have -- I think it's a business which the current normal capacity of the secondary aluminium production in general in Europe is quite stable. We do hope this reference of EUR 32 million that we have in '25 could be a reference even to increase something in '26, because we have increased fees for aluminum producers. So we see that it is a good reference, even slightly higher. The '25 number has been affected by basically the volume that you have seen that is not better, and some more weight of the cost of production because you are not increasing or compensating with the volumes. But the dynamics of the business is clear. It's very similar to the steel dust. The volumes is the key because we have the plant almost full capacity. But the current aluminum producing -- secondary aluminum producing situation is putting some stress to the plant, and we are not so efficient like in the past because the full production is the best situation to absorb the cost.

We see the '26, as I say, a stable business, but probably a little bit higher, 10% or something like that could be a good reference. With regards to secondary aluminum, what we can wait or we can expect for '26. Well, the 2 million of the Q4 is a good reference. I mean, just repeating the 2 million in every quarter, we will talk about $8 million or something like that. So well, it's not coming back to the years that we have even EUR 20 million in this business, but well, [ Sala's ] reference of EUR 8 billion to EUR 10 billion is something that will be very strange for us, right? We will see if it's going to be even better because we see very difficult to be back on the worst period like it was the Q3. So yes, the Q4 could be a good reference, perhaps conservative, but repeating this, as I say, could be a reference.

And with regards with the guidance, I know you guys that you like the numbers and basically one number and an average in the range, whatever, EUR 260 million, something that is the current consensus. Well, we are comfortable with this figure, but we need a little bit more time to see the evolution of TC and put our estimations. But I think that is, in any case, will be in the range, this amount, and we are not -- we are comfortable, yes, really.

The next question is from Bertran Palazuelo with DLTV.

Congratulations all of you and the team for the strong results. I have 2 questions. First of all, regarding capital allocation, I know you answered, but I will ask again. Clearly, seeing the dynamics you're seeing and you're stating and clearly also stating the visibility you start having with the zinc prices due to the hedges, and seeing that the spot price is higher than your hedges? Well, it looks like in the future, well, your balance sheet should get stronger and stronger. So my question is, apart from paying the dividend, what is making you not start buying a little bit of shares to show the market all your, let's say, improvements. We -- from us, we would like to see the share count decrease. In 2021, you increased it at a good price. Now we want to see it decrease because the balance sheet, it looks like it gets stronger and stronger.

And then my second question is apart from the -- what growth opportunities now apart from the state do you see medium to long term to allocate capital accretively.

Thank you, Beltran. I think we have discussed many times. I think, obviously, share buybacks is something that we have looked in the past, but the financial profile of the company was not adequate. It is true that we expect to generate a very healthy cash flow going forward. We want to keep the leverage slightly below 2x. And yes, if we don't see any growth opportunity, we will definitely consider share buybacks, considering also the share price and the valuation of the company. So always any time that we see that the valuation of the company or the share price doesn't reflect really the -- what we believe should be the fair value of the company, we will analyze share buybacks. I don't think that's something that you can expect this year.

We have another project in the pipeline, which is going to explain to you, which is in Europe, as you know very well. So it's about balancing everything. But yes, I think share buybacks are something that we are looking at, not in the short term, but more in the midterm.

Yes, indeed, I think Beltran is a good question. And I think that we are starting to enter in a cycle that we are going to generate strong cash, and the massive growth opportunities that we have in the past are not coming so high. So probably those considerations are on the table, and we have to see what is better is to keep growing with the projects as you are asking, or yes, to some program of say buybacks or whatever, what is better for the shareholders at the end of the day. In this regard, the project that we have in the pipeline for the next years clearly is to finish the Berburg plan as we are indicating basically in '26, and the next one could be -- or it could be -- the question is when, but probably starting '27 is a good reference and to run in '29 is the European second kiln in our French plant going on hand-to-hand with the projects of the steelmakers. We have in the pipeline as well the slab plant in the East Europe.

If and following the developing of the decarbonization and the evolution of the automotive sector that nowadays, I think that is not the time to do because everything is delayed and has to be confirmed. Out of those 2 projects, we have, of course, the idea to medium term for new geographies like India, or let's say, 4, 5 years, China is back at the end of the day to see opportunities, small M&As or whatever. But it's true that this is the reason, as Rafael said, that we have to evaluate the new projects against new ways of contribution to the sales holders clearly. But anyway, we are really interesting because I think there is a very good opportunity for the Befesa evolution on the growth of the European market, and then we will see what is going on with the rest of the geographies.

Okay. But also, as I said in the past, and I said it now publicly, I think you have demonstrated to the market that you're extremely good, let's say, operators. Now what you have to demonstrate to the market is that you are extremely well capital allocators. I think you demonstrated in 2021. Now you have to demonstrate it going forward because if you start a share buyback of EUR 10 million or EUR 20 million in the future when the stock is at EUR 60 million, that would make no sense. So I -- you don't have to make a big thing, but I think the balance sheet is getting stronger and the stock market is not reflecting it, and all the support.

Fully agree, Beltran, you so much for your comments.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Mr. Perez for any closing remarks.

Thank you all for your questions. Please don't hesitate to contact the Investor Relations team of Befesa for any further clarification. We will now conclude the conference call. Thank you for joining, and have a good day. Bye.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call.

Ladies and gentlemen, welcome to the Befesa Third Quarter 2025 Results Conference Call. I am Jota, the Chorus Call operator. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Rafael Perez, CFO of the company. Please go ahead.

Good morning, and welcome to the Third Quarter 2025 Results Conference Call of Befesa. I am Rafael Perez, CFO of Befesa. This morning, I'm joined by our Group CEO, Asier Zarraonandia. Asier 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 third quarter financials by business and we'll cover the evolution of commodity prices, our hedging program and finally, cash flow, net debt, leverage and capital allocation. Asier will close this presentation providing an update to the outlook of the rest of 2025 as well as an update on our growth plan. Finally, we will open the lines for the Q&A session.

Before getting started, let me remind you that this conference call is being webcast live. You can find the link to the webcast of the third quarter 2025 results presentation on our website, www.befesa.com.

Now let me turn the call over to our CEO. Asier, please.

Thank you, Rafa. Good morning. So moving to Page 5 of the business highlights. Befesa has delivered strong third quarter results, continuing the solid trend seen in the first half of the year. Our performance demonstrates once again the resilience of our business model and the benefits of our diversified operations.

Adjusted EBITDA for the first 9 months of 2025 reached EUR 174 million, up 15% year-on-year. EBITDA margin improved significantly to 21.3% in Q3 2025 compared to 16.6% in the same quarter last year, reflecting a strong operational efficiency and disciplined cost management.

Financial leverage was further reduced to 2.6x in September 2025 compared to [indiscernible] a year ago, highlighting our continued focus on deleveraging.

Net income and earnings per share also increased sharply. EPS rose 143% year-on-year to EUR 1.52, reflecting strong profitability and improved financial performance.

In our Steel Dust business, we achieved a strong recovery in Q3 volumes following the maintenance shutdowns carried out in the first half of the year. Performance was further supported by lower zinc treatment charges and favorable zinc prices.

Our secondary aluminium business continues to be impacted by a persistently challenging environment, driven mainly by weak automotive market in Europe as well as the usual summer period maintenance activities in the auto industry.

The Palmerton expansion project is developing as expected with the second kit successfully hot commissioned in July 2025.

Looking ahead, we confirm our full year '25 EBITDA guidance in the lower part of the initial range of EUR 240 million to EUR 265 million, as we already commented in July. We expect a strong Q4 driven by higher EAF dust volumes across all markets.

Our financial leverage is expected to fall below 2.5x by year-end, supported by solid cash generation and disciplined capital allocation. Growth CapEx will continue to focus on the Bernburg project following the substantial completion of the Palmerton expansion. I will comment on the outlook in more detail later.

Going to the Page 6, Steel Dust business highlights. In Europe, steel production in the third quarter of 2025 remained depressed, down 4% year-on-year, mainly due to the weak manufacturing activity and soft demand in the automotive and construction sectors. Despite this, our steel dust deliveries from EAF steel customers continued to in line with the 2024 average and solid levels.

Operationally, the European plants performed strongly, achieving a 94% load factor in the quarter. We expect strong volumes to continue into Q4, supported by healthy inventory levels and no major maintenance stoppage planned.

In the U.S., steel production increased by 4% year-on-year in the third quarter, driven by infrastructure spending and tariffs supporting domestic steel demand. Our U.S. plants operated at an 80% load factor in Q3, the highest level since the acquisition and reflecting a gradual improvement.

The 2 new kilns in Palmerton have been fully operational since July 2025 and new EAF steel supply contracts are ramping up progressively through the Q4 following some initial start-up delays. At the same time, cost reduction measures at the U.S. zinc refining plant continue to deliver the expected improvements in asset profitability.

In Asia, volumes in Turkey increased by 40% year-on-year in Q3, recovering strongly after a weak second quarter affected by maintenance shutdowns. In Korea, the load factor reached 77% in the first 9 months of the year, up 11 percentage points year-on-year, driven by higher domestic deliveries and a strong operational evolution.

In China, operation continued at low utilization levels with earnings around breakeven, reflecting ongoing market weakness.

Moving on to Page 7, business highlights for the Aluminium Salt Slags Recycling business. In our aluminium business, performance has remained mixed in the third quarter, starting with the Salt Slag Recycling business, operations has continued to perform strongly, running in line with previous quarters. Utilization levels remained around 90% for the first 9 months, demonstrating the robustness and efficiency of our assets.

As in the previous years, we carried out the scheduled maintenance stoppage during the summer months in Q3, and we expect a stronger operational performance in Q4, driven by higher volumes.

In our secondary Aluminium segment, the market environment continues to be very challenged. The European secondary aluminium industry remains under pressure with tight metal margins and limited production activity, largely as a consequence of the ongoing weakness in the automotive sector.

Q3 is typically a softer period due to seasonal maintenance shutdowns in the industry and this year was not exception. Despite these headwinds, we continue to focus on operational discipline, cost efficiency and customer diversification to preserve profitability and position the business for recovery once market conditions improve.

Now Rafael will explain the financials in more detail.

Thank you, Asier. Moving on to Page 9, the financial results for the Steel Dust segment. Steel Dust delivered EUR 154 million of adjusted EBITDA in the first 9 months of the year, which represents a 27% year-on-year improvement compared to the 9 months of the previous year.

EBITDA margin improved from 20% to 26% in the period, mainly driven by better pricing environment on treatment charges and zinc hedging.

The EUR 33 million EBITDA improvement has been driven by the following factors: the year-on-year impact from volume has practically no impact with similar plant utilization at a good level of around 69%.

As we already highlighted, there are no major maintenance stoppages in the second part of the year in large assets. We enjoy high EAF gas inventory levels across all our assets, and we expect an increase in customers deliveries in the U.S.A. for new contracts that are gradually starting in this quarter.

On price, strong positive EBITDA year-on-year impact of around EUR 28 million, with the 2 main price components being around EUR 15 million of positive impact from higher zinc hedging prices, 5% higher year-on-year; and secondly, EUR 13 million positive impact from the lower treatment charges, which was set at $80 per ton for the year 2025.

On costs and others, a net EUR 4 million positive impact is largely driven by the lower operating cost in the zinc smelter in the U.S. as well as lower average coke price in the period. These 2 positive effects have been partially offset by higher inflation costs in the recycling business, as well as unfavorable FX.

Moving on to Page 10, financial results of our Aluminum segment. Aluminum Salt Slag delivered EUR 23 million of EBITDA in the first 9 months of the year, which represents 26% year-on-year decrease compared to the EUR 30 million in the same period of the previous year. The year-on-year EUR 7 million negative EBITDA development was mainly due to the lower aluminum metal margin as well as slightly higher operating costs and energy prices.

On volumes, overall marginally negative EBITDA year-on-year impact during the 9 months with a decrease of EUR 1 million. Our recycled volumes of salt slag remained pretty much in line with the previous year. With these volumes, we operated our plants at a strong capacity utilization rates of about 89% in salt slag and 77% in secondary aluminum.

With regard to prices, negative EBITDA year-on-year impact of about EUR 4 million, as explained mainly driven by the pressure aluminum metal margins versus the previous year. This compression in the aluminum metal margin is caused by 2 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 alu scrap away from Europe.

And secondly, a very weak automotive industry in Europe, which impacts demand of secondary aluminum from automakers. However, this was partially offset by higher aluminum F&B price with an increase of 2%, averaging EUR 2,372 per tonne.

On cost and others, increased pressure from higher operating energy-related expenses, mainly through the higher energy prices of electricity as well as natural gas.

Moving to Page 11, zinc prices and treatment charges. Regarding zinc price during the 9 months of 2025, zinc has been trading in the range of $2,520 to $3,020 per tonne, showing particularly positive trend in the last months of 2025.

The average of 9 months zinc LME prices have been $2,768 per tonne, which is 3% above the same period of the last year average, [ being ] the average of the Q3 $2,825 per tonne compared to $2,640 per tonne in Q2.

On the right-hand side of the slide on treatment charges. In 2025, treatment charges for zinc was set in April at $80 per tonne for the full year 2025 compared to the $165 of the last year, marking an all-time low record level. This deduction is driving earnings significantly in 2025.

Turning to Page 12 on hedging. Our hedging book covers until the first quarter of 2027, close to 15 months of hedges in our books at increasing hedging average prices of EUR 2,640 in 2025 and EUR 2,655 per tonne in 2026. This level of hedging represents an all-time high level of hedging for Befesa, providing stability and visibility over the coming quarters.

We are taking the opportunity of the recent rally on the zinc price to close volumes for the first quarter of 2027, and we continue to monitor the market to close volumes for the remainder of 2027.

Turning to Page 13, Befesa energy prices. The page shows the evolution of the 3 energy sources that we have in Befesa, coke, natural gas and electricity. With regard to coke price, which today represents around 60% of the total energy bill, the normalization that started in the second quarter of 2023 continues throughout the first 9 months of 2025.

Average coke price in the third quarter was about EUR 153 per tonne, consolidating its downward trend compared to the previous quarters.

Regarding electricity, which today accounts for around 30% of the total energy expense, prices have rebounded to EUR 103 per megawatt hour in the third quarter of 2025. after a significant correction in the second quarter of 2025. And gas prices continued their normalization in the third quarter of 2025 to EUR 46 per megawatt hour, reversing the upward trend observed in the last year.

Now turning to Page 14, the cash flow results. Operating cash flow in the 9 months of the year has reached EUR 115 million, which represents a decrease of 3% compared to the same period of last year due to a positive tax effect that we enjoyed last year.

On the EBITDA to cash flow bridge, starting with EUR 174 million of adjusted EBITDA and walking to the left.

Working capital consumption amounted to EUR 42 million in the first 9 months of the year, mainly driven by the usual first quarter working capital consumption as well as the usual Q3 impact on secondary aluminum, driven by the slowdown in the auto industry. As in previous years, most of this working capital will [ revert ] into the fourth quarter.

Taxes paid in the 9-month period came in at EUR 17 million as a result of the final tax assessment of previous year in comparison with the EUR 4 million collected in the period of last year, resulting in an operating cash flow of EUR 115 million in the first 9 months of the year.

On CapEx, during the period, we have invested EUR 30 million in regular maintenance CapEx across the company, EUR 23 million of growth CapEx related to the refurbishment of Palmerton plant in Pennsylvania, which is now practically completed and [ Bencpur ] (sic) [ Bernburg ] expansion project in Germany. In summary, CapEx of EUR 53 million in the quarter.

For the full year, we expect total CapEx to be around EUR 80 million, which is in the lower part of the range of EUR 80 million to EUR 90 million.

Total interest paid amounted to EUR 26 million and the total borrowing amounted to EUR 22 million in the first 9 months of the year.

For 2025, the EGM has approved in June to pay a dividend of EUR 26 million in July, equivalent to EUR 0.63 per share or 50% of the net income. In summary, final cash flow amounted to minus EUR 13 million in the first 9 months of the year.

Cash on hand stood at EUR 90 million, which together with our EUR 100 million undrawn revolving credit line provides Befesa with almost EUR 200 million of liquidity.

Gross debt at the end of September stood at EUR 700 million. Net debt stood at EUR 610 million compared to EUR 662 million in the same quarter of last period -- last year, resulting in a net leverage of 2.59x at closing of the quarter, a strong improvement compared to the 3.36x at September 2024.

Turning to Page 15, debt structure and leverage. Following the refinancing back in July 2024 and the repricing in March this year, Befesa today has a long-term capital structure with optimized financial cost. We will continue reducing the leverage throughout 2025 to keep it between 2x and 2.5x by the end of the year and going forward. We expect net leverage to be below our target of 2.5x by the end of the year.

To do so, we are prioritizing growth CapEx in those projects that are delivering immediate cash flow upon completion like the approved projects of [ Bernburg ] and other market opportunities that could appear. Also, we will keep the annual regular maintenance CapEx around EUR 40 million to EUR 45 million 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.

Now back to Asier on outlook and growth.

Thank you, Rafa. Looking at the full year, we confirm our EBITDA guidance in the lower part of the range of EUR 240 million to EUR 265 million, as we previously communicated and in line with the current market consensus. This will be achieved through increased utilization driven by a strong volume in EAF across all markets, along with currently favorable market conditions, low treatment charges, supportive hedging price, declining coal prices.

Total CapEx in the year will be between EUR 80 million to EUR 90 million with around EUR 45 million on regular maintenance and the remaining on growth. Net leverage will be below 2.5x by the end of the year, and EPS is expected to be higher than 2, representing an increase of at least 57% in the year.

Moving on to Page 18 on Palmerton. In the United States, our Palmerton plant has been successfully refurbished, marking a key milestone in our strategic growth road map. Both kilns are now fully operational, positioning Befesa to capture the significant growth expected in the U.S. EAF steel dust market over the coming years.

U.S. electric arc furnace steel capacity is projected to increase by more than 20% by 2028, equivalent to around 18 million tons of new steelmaking capacity. This expansion translates into over 300,000 tons of additional steel dust, creating a substantial opportunity for Befesa's recycling operations.

With a total installed capacity of [ 643,000 ] tons across our U.S. plants, we are now well positioned to leverage this growth. Our goal is to progressively ramp up utilization from below 70% today to around 90% by 2027, as new electric arc furnace capacity comes online.

The combination of our [ modernized ] Palmerton facility, long-term customer relationships and strategic geographic footprint [ near key steel procedures ] ensures that Befesa is ready to capture this next phase of growth in the U.S. market.

Bernburg, moving to Page 19. This is another important milestone in Befesa's growth journey, as we continue to strengthen our aluminium business and expand our recycling capacity in Europe.

From a timing perspective, all permits have now been obtained and construction officially started in August 2025. We expect a 12-month construction period followed by a 6-month ramp-up phase in the second half of 2026.

On the commercial side, we have already secured strong customer support. Overall, the Bernburg expansion is progressing fully in line with plan. Thank you very much.

Thank you, Asier. We will now open the line for your questions.

[Operator Instructions] The first question comes from the line of Shashi Shekhar with Citi.

I have a couple of questions. My first question is on capital expenditure. Could you please guide us which project or projects are you planning to undertake post the Bernburg expansion project? And what is the total CapEx guidance for 2026?

My second question is on China. Can we expect any improvement in the utilization rate in 2026?

Thank you, Shashi. I will take the question on CapEx and Asier will explain you the China market environment. But on CapEx, as I said, Palmerton is almost completed or completed and the focus at the moment is on Bernburg. Bernburg is a EUR 30 million total CapEx. I would say probably 40% this year, 60% next year. On top of that, you have to consider the regular maintenance CapEx of EUR 40 million to EUR 45 million, okay? Still early to say a guidance for next year, but with these numbers, you can figure it out.

Beyond that, there are 2 projects in Europe. One is the expansion of Recytech to capture the growth of the EAF market in Europe. And the other one is a brand-new salt slag plant in Poland. Those 2 projects, we still haven't got a time line. These are market opportunities that we are envisaging the market, but they still haven't been approved by the Board, and we still haven't got a time line for those.

And Asier will comment on China.

Yes. Thank you for the question, Shashi. Yes, the question for China is always there. And well, we have to say that basically, the '25 year is coming basically the same than '24. The utilization level of the mini mills, the electric arc furnace at the areas are very, very low, and we are at a breakeven point.

Question for '26. Again, it's early, as Rafa said, with the CapEx, but I think that it's not final, that is going to change a lot. But well, the year is long and probably we need a little bit more time to see if the real estate of the construction business start to grow a little and that means more volume. So it's still early, but I cannot say that it's going to be a change -- a very significant change in '26 right today. We will update further later.

The next question comes from the line of Lasse Stueben with Berenberg.

Just a question on the secondary aluminum business, just to get a feeling for kind of the near-term outlook. It seems to have sort of rolled over in the third quarter. So I'm just wondering if -- is there going to be somewhat of an improvement in Q4 or also generally into '26 I guess, structurally, there's some problems with European automotive at the moment. So just wondering, want to get some comfort on the outlook also for '26 and beyond.

And then also on Bernburg, following on from the weakness in sector aluminum, what are thoughts -- clearly, you're pressing ahead here, but I'm just wondering, given the issues in European automotive, can you give us some comfort here that that's kind of the right move and you're not investing into something which is going to struggle for years to come?

Thank you, Lasse. Fair question. Well, obviously, this year, the secondary aluminum business is a very challenged for us and is obviously affecting to our results. The fact is that the automotive sector in Europe is foreseeing this situation in the secondary aluminum because pressing the volumes, pressing the margins down and it's a difficult situation. It's not something new, has happened in the past as well. And well, finally, the market start to absorb this level and be back on better margins.

And so starting for the 2 themes. Fourth quarter, well, we don't see a very strong quarter in terms of results, but I do think that probably it's going to be better than the Q3 because the volume even in the Q3 is lower because the maintenance stoppage and now we are going to have more volumes and the last part of the year normally for inventories and other matters is going to be better than the Q3, probably in line with the Q2 or something like that. I mean it's like we don't hope a big recovery.

'26 is a different history. I think that '26 the situation is going to be definitely better, not like a very good year, but probably some recovery in the normal activity of the automotive. But linking with the question of Bernburg, which is a logical question is like the Bernburg project, the increase of capacity is linked to not automotive demand. It's linked to the food demand, cans and other with a customer, with a tooling contract with a new customer. So this is going to deliver positive results for sure, because the volumes are there.

So all in all, Bernburg new contribution, even if it's going to be half year and some recovery. We do think that in the '26 year it's going to be clearly a better year than '25 in the secondary aluminum, not at the best of the series for sure, but it's going to help us to keep -- keeping with the good results in the global Befesa EBITDA and rest of the other matters.

Just, Lasse just one additional comment on what Asier said regarding Bernburg, which is a logical question to have. Let's not forget that the demand for secondary aluminum in the long term is very positive and everybody agrees that there's going to be more than 50% growth demand of secondary aluminum over the next 10 years. This is a structural trend. And what we want to do with Bernburg is to capture on that trend. And Asier said very well, it's about diversification from the auto industry into the beverage cans industry, which is also a good thing to have in the company.

Understood. And if I may, just a follow-up on CapEx. I mean, based on your comments, I mean, could it be that CapEx next year is well below EUR 80 million just based on your comments? Or is there something potentially that could come through, which kind of pushes you up to that kind of EUR 80 million that you mentioned?

Fully agree, Lasse. I think CapEx next year will definitely be lower than this year. We still are in the middle of the budgeting process for the next year, which we do bottom up, but clearly below this year. And I think, yes, EUR 80 million will be a cap on the CapEx for next year, definitely.

The next question comes from the line of Olivier Calvet with UBS.

Hope you can hear me well. I have a couple of follow-ups. Firstly, on the CapEx budget from 2026. Can you help us think about your pecking order of projects for growth? Are we -- are you rather looking more to EAF expansion in Europe or salt slag expansion in Europe? Or are you rather looking at potentially using your cash flow for further deleveraging or returns to shareholders? That would be the first question.

Thank you, Olivier. I think I have already tried to answer that. But yes, basically, the focus at the moment is on free cash flow generation and deleveraging and those growth projects that we have clear visibility, like Palmerton is almost completed and Bernburg, as we have been commenting before. On top of that, you have to consider the recurring maintenance CapEx.

We don't envisage any investment in the expansion of EAF in France or in the salt slag plant in Europe in 2026, okay? So that's what we can say. That will definitely help deleveraging within our target of between 2 and 2.5x, and maybe we will get closer to 2x rather than 2.5x.

Okay. And then the second question would be on the EBITDA guidance for this year. I guess mostly on the high end of the EBITDA guidance. What would you need to see basically to get to that level?

Well, definitely the high end is really not realistic for today, I want to say like that. The question here is that we are going to be in the range of EUR 240 million to the midpoint depending on the final production, which are coming very strong in October. Of course, the pricing, I mean, you have seen the zinc prices in October. So depending on how they develop could help us to get more.

And again, the recovery of aluminum that for sure, in the salt slag, which is another important business is coming for sure, better because they are not the maintenance stoppage. So well, we have to determine what is the final EBITDA level in this range. What is true is that you think in the very high part of the range, what we explained there is that at the beginning of the year when we do the guidance, well, depending on basically those things, how the aluminum business will perform, zinc prices during the year and other matters that are not happening.

So at the end of the day, I think that that's why we are confirming the guidance and the guidance is the reference, but probably among the low part, between the low -- sorry, the low part and the medium part. This is the idea.

Which is Olivier in line with the market consensus at the moment, as you know very well. There are 3 main elements that will make, as Asier explained, be on the higher part secondary aluminum is weaker than what we expected. Also, FX is unfavorable. And then obviously, in the higher part, we always consider a much higher zinc price environment, okay?

Makes sense. Okay, cool. And just the last one. Could you give us an update on the operating issues of one of your competitors in Mexico? Have you seen additional steel dust contracts as a result of their issues or --.

Well, yes, we listen about that and we cannot comment about the problems of those guys, but more than what we can treat the same than you. It's not a big effect at the beginning. They are more or less operating well and there are no changes in the market. If it is going to come more change because the problems persist or no, we will see. But in this moment, it's not a big issue and not affecting us in a positive way, obviously, not in the negative because it's not our task.

The next question comes from the line of Fabian Piasta with Jefferies.

Just got a question on the treatment charge going forward. I mean, on the chart, you were showing zinc price is increasing or very favorable this year that points towards like more stable, stable treatment charge, but spot treatment charges have increased rapidly. Do you have any visibility on where we might move? So what would be the swing factor? Are we thinking about the 10% increase, 20% increase? What are you seeing in the zinc market?

Second question would be, given the inventory levels, do you expect any spillover effects into the first quarter of 2026? That would be it for now.

Thank you for the question, Fabian. Treatment charge, well, I would like to know exactly what is going to be the figure for next year. What the rumors, salt, everything is commenting in the LME Week in London and so on is that, obviously, nobody knows what happens. But based on, as you say, in the spot and everything, perhaps levels of $120, $130, $150 max could be on the place there. We will see.

I mean, our steel very good treatment charge for us for the miners position because obviously we are one of the lowest, but probably definitely are going to be higher than this year because it's the lowest ever, right? And probably to keep $80 will be very, very difficult. So we'll see. I mean, probably, as you say, 20%, 10%, 20%, more 20% of increase over this year probably is a headwind that we are going to have next year.

And...

Can you remind Fabian, the second question, please?

Yes. The second one was basically on your steel dust inventories, whether you're expecting some spillover effects into 1Q 2026? Because I mean, when I'm looking at consensus numbers on full year sales, that would imply a revenue increase of 27% in the fourth quarter. So is there still like some dry powder for 1Q, even if you get these volumes through in the fourth quarter?

Well, once again, we will see how we finish the year. But I think that the production of the steelmakers is still under pressure but depending on the geographies starting to be a little bit more positiveness for the next year in terms of orders and so. And the inventories are now normalized because we increased the level in the second quarter because the maintenance stoppage now are normalized. So I don't think the first quarter is going to be affected, but nothing very strange.

So well, again, '26 is -- we were expecting question about '26 because we are in October that is logical. But at the end of '26, we need a little bit more time to develop, but no reasons to believe that there's going to be a big change over the normal production out of, we have to start to include some maintenance stoppages because yearly basis for those are normally affecting. So all in all, we will see what is the level, but nothing very, very crazy or very, very strong.

The next question comes from the line of Jorge González with Hauck & Aufhaeuser Investment Banking.

I have a couple of questions. And the first one, Asier, on regards of the expectation for Q4, I think you have just mentioned that the stocks that you have are now normalized after the strong Q3. This means that we should not expect a Q4 above Q3 in terms of the works sold or the steel dust process for the quarter or Q4 could still be above Q3? That would be my first question, please.

Thank you, Jorge. Now clearly, it's going to be above Q3. I mean the fact the inventory history was affected more than the Q3 because normally, over the years, we have some maintenance stoppage. And you see the series, Q4 always is the strongest of Befesa, we hope the same.

I mean now with the deliveries and the normal inventories, we are willing to run very strong in Q4. And the reason is as always because there are no maintenance stoppage. So the Q3 has been very strong. And I think that we think that the Q4 is going to be even more, not a lot because we are running at very high utilization rates. But no, no, definitely, it's going to be higher than the Q3 in steel dust.

And as well, we have to consider that the maintenance stoppage in the salt slag, which is our other strong and profitable business is going to come higher, which is a different for the Q3 because it was some maintenance stoppage that are not going to happen in Q4. So you put together, it's going to be definitely the Q4. As usual, it's going to be our strongest EBITDA, our strongest activity period, and we can confirm that. That's why we expect a strong Q4 and to be where we are going to end in the range, but definitely a strong and higher utilization rate than the Q3.

Okay. And then my last question is on regard the secondary aluminum profitability. Can you help us to understand where the profitability could be for next year? Do you have any targeted range for the profitability, taking into account some stabilization in the auto industry and the new assets starting to contribute? That will be very helpful.

For me too. Now seriously, Jorge, it's a good question. Well, I think that probably you have in front of you the last years, getting an average could be a good reference. Other is to be back for the '24 level and then again, because it's a kind of cyclicity in the business. So you can take other probably the reference of the '24 or an average or something like that. That's what we see now.

Probably we need a little bit more color as well on the market in the last months, but I think that is a good reference getting in the '24 or something like that, that is what we expect in '26 because it's difficult to see a full recovery because we know all of us read about the automotive sector with the problems and production levels that are showing European carmakers, especially. So not a full recovery, but some recovery and the levels of '24 or average of the last year probably could be a reference.

Are you expecting any adjustment of capacity in the sector that could help the margins to go up at some point or there is not any noise in this?

This is basically the point. This is basically the point. There are starting to be some players under troubles, financial troubles and probably the capacity is going to be, as always in the crisis periods adapted. It's not the case, obviously, of Befesa because we have this business, as always explained, that is for us is supporting the salt slag. Financially, we have no problems to survive there, but there are guys that probably they can get out of the market or reduce some capacity and everything is going to be more balanced.

That's why the logic of the market that has to be organized as well and that's why we understand that it's going to happen better '26 outlook for the aluminum business. The level, early to say. But again, I think that probably a recovery '24 levels or average of the last 2, 3 years, probably would be a good level.

[Operator Instructions] The next question comes from the line of Anis Zgaya with ODDO.

I have only 2. First one is on hedging. When we see the current zinc LME '27 forward prices, which are at $2,900 per tonne or slightly above. That's not bad. Why don't you accelerate hedging for the whole '27 year at this level?

And my second question is on treatment charges. The current spot prices in China increased to around $120 per tonne after a very low level in the beginning of the year. Does this seem to you to be a good indicator for the future benchmark level of treatment charge to be set next March?

Thank you, Anis. I will take the question on hedging. Obviously, we are doing that. Actually, this week, we have closed a very interesting volume of hedging for the first quarter of 2027. You cannot go at once all the way through to the entire year because the curve is in backwardation, which means that the forward prices are lower than the spot prices.

So yes, you see the spot prices, but when you want to lock in prices 12 months, 1.5 years, 2 years ahead, the prices are decreasing, okay? And we have internally certain targets that we don't want to miss, okay? So -- but yes, we are taking the opportunity, and we are moving forward with the hedging in the first quarter. So we will take one quarter at a time.

And Asier will be taking the question on treatment charges.

Yes. Thank you, Anis. Yes, I think it's a good reference, the spot normally in China because it's basically the only part of the world which runs on a spot basis in a massive way. Yes, it's a reference definitely, but always we can talk about reference. They have been periods where there is strictly the same of the spot TCs or the others is similar or not.

As I said before in the previous question, yes, this is the $120, $130 is the level that now they are considering. So well, the reference and the trend, the spot is a good light to see what is going to come. But still, again, early to say.

The next question comes from the line of Adahna Ekoku with Morgan Stanley.

I've just got one follow-up on the 2026 EBITDA, especially for steel dust. And maybe could you help us with what utilization you're targeting in the U.S.? I think you've got 90% for 2027. And in Europe, would you expect any upside from the recently announced steel safeguard measures? Or is it still too soon to say on this front?

Thank you for the question. Yes, I think the answer is yes to both. I mean we have in pipeline for the U.S. more tonnages than this year, definitely. And one of the reasons, again, that we are not moving in the low part of the range as the volume in U.S. that we have already contracted because there are some delays in the ramp-up are coming later than we expected, but definitely are starting to come and we hope that next year are going to be on our facilities during the whole year.

So yes, I think it's an intermediate year to capture the 90% utilization probably in '27, but next year it's going to be higher than this year and probably in the range of 80% or we will see exactly, but U.S. is one -- it's going to be the more volumes in U.S. is one of the boxes that we have in mind for '26, the headwind of the treatment charges probably is going to be compensated by higher volumes in U.S. and probably in other geographies like in Europe.

In the case of Europe, the answer is yes, we are starting to capture some projects that are going to come into picture in '26, not many, but there are some in, one in Spain and others that we have under the contracting period now. And we -- that's going to help to be a little bit less pressure to keep the 90%. I think here in Europe to grow from the current levels is difficult because basically you have full capacity. And the only thing which is pressing is that probably transportation cost for the dust and other are going to be benefit.

So if all those projects starting to see that are coming really, then we will start the increase of capacity in Europe probably in '27. So '26 is going to be a good year in Europe to see how the projects are delivering. But definitely, it's going to help and we are continuing with that to have more dust in 2026.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Rafael Pérez 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 call and the Q&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 and have a good day.