Earnings call: Acerinox reports solid profitability amid market challenges

Acerinox, a global leader in stainless steel manufacturing, faced a challenging environment in 2023 with a decline in consumption in the United States and Europe. Despite this, the company reported strong financial results, including an EBITDA of €703 million for the year.

Acerinox's strategy of rebalancing its product mix and focusing on high-performance alloys, along with its commitment to sustainability and operational efficiency, has positioned it for recovery after a prolonged industry low cycle.

The company's acquisition of Haynes International (NASDAQ:HAYN) is pending approval, which is expected to enhance its portfolio and geographical presence. Acerinox also plans to invest in additive manufacturing and expects a slightly better Q1 EBITDA compared to the last quarter of the previous year.

Key Takeaways

• Acerinox achieved an EBITDA of €703 million in a challenging year with decreased consumption in key markets.
• The company's strategy focuses on high added-value products and includes significant investments in its North American Stainless (NAS) and VDM divisions, and the pending acquisition of Haynes International.
• Acerinox is committed to ESG values, with reductions in CO2 emissions and water withdrawal, and the implementation of Cardinal Rules.
• The stainless steel industry is expected to recover, with Acerinox seeing opportunities in the high-performance alloy (HPA) sector.
• Acerinox reported strong operating cash flow and reduced net financial debt, with a significant impairment in its Bahru Stainless subsidiary due to Asian market challenges.

Company Outlook

• Expectations of a stainless steel industry recovery after almost two years of a low cycle.
• Opportunities identified in the high-performance alloy sector.
• Plans to invest in capacity expansion in North America and the high-performance alloys business.
• The pending acquisition of Haynes International aims to duplicate the success of the VDM acquisition.

Bearish Highlights

• A significant impairment in Bahru Stainless due to challenging market conditions in Asia.
• Caution expressed due to the cyclical nature of the business and potential impacts from a factory strike in Spain.
• Disparity in regional performances, with some regions losing money.

Bullish Highlights

• Strong cash generation with an operating cash flow of €260 million.
• Reduced net financial debt to the lowest level since 2001.
• Sales of VDM increased by 14%, contributing to record EBITDA.
• The high-performance alloys division is expected to provide 25% of the group's total results in 2023.

Misses

• A 24% decrease in year-over-year sales.
• The lowest quarterly EBITDA figure of the year in Q4, although it was an improvement from previous years.

Q&A Highlights

• The US market remains the highest contributor to Acerinox's results.
• Prices in the US market have stabilized, but there may be further pressure on alloy surcharges.
• The future direction of prices depends on raw material prices and market conditions.
• Negotiations with unions are underway to improve productivity and flexibility at the Spanish plant.
• Capital expenditures for the year are expected to be €260 million, excluding Haynes.

Acerinox (ticker ACX.MC) has demonstrated resilience in the face of global market challenges, maintaining a strong financial position and a strategic focus on high-value areas of growth. With its robust cash flow and reduced debt, along with strategic initiatives such as the Beyond Excellence plan and the pending Haynes acquisition, Acerinox is well-positioned to capitalize on the expected recovery in the stainless steel industry.

The company's commitment to sustainability and operational efficiency further strengthens its outlook. However, Acerinox remains cautious, aware of the cyclical nature of the industry and external factors such as market conditions and the ongoing factory strike in Spain.

Full transcript - Acerinox ADR (ANIOY (OTC:ANIOY)) Q4 2023:

Carlos Lora-Tamayo: Good morning, ladies and gentlemen, and welcome to the Acerinox Fourth Quarter and Full Year Results Presentation. My name is Carlos Lora-Tamayo and I am the Chief Investor Relations and Communication Officer at Acerinox. The year 2023 was a very difficult year with a strong destocking process that has resulted in a decline in apparent consumption in our main stainless steel market, the United States and Europe. Nonetheless, we have shown that the strategy that we set years ago is bearing fruit, and we have achieved solid results and strong cash generation. Acerinox has managed to reach a new level of profitability. As Miguel said in last year Capital Markets Day, the group's EBITDA in previous cycle was around €380 million. But this year, even with the difficulties we have experienced, we achieved an EBITDA of €703 million. But this does not end here. Our strategy continues. We are building our new future, rebalancing the product mix to more added-value products. In this sense, we announced organic investments in NAS and VDM. And last month, as you all know, we reached an agreement to acquire Haynes International, a US-based producer in high-performance alloys. To discuss these topics in depth and many more, we have here today our CEO, Bernardo Velazquez; our COO, Hans Helmrich; and our CFO, Miguel Ferrandis. Before getting started, let me remind you that this conference call is being broadcast on our website acerinox.com, in which you can find also the audited integrated annual report that includes the annual accounts, management report and then the statement of non-financial information. Without further ado, I give the floor to the CEO. Please, Bernardo, go ahead.

Bernardo Velazquez: Thank you very much, Carlos, and thanks all of you for attending to this result presentation. We are very happy to be here and very proud to present a very strong set of results. We call it, we say here, 2023, another milestone. Why a milestone? Because we think that it's a very interesting year that we will remember because we are validating our strategy. You know that we like to say that we want to be reliable and we want to be predictable. And now, we are validating what we are explaining before. First of all, because we have reached a new level of profitability, and this is due -- mainly due to the improvements that we have made during the last years, but also thanks to our growing strategy -- growth strategy with the acquisition of VDM and our development of the HPA materials. So, this is very important because, as Carlos mentioned, we have a new level of profitability in the lowest part of a cycle. We will speak later about this, but this is in a tremendous low cycle. We got an EBITDA of €703 million with a very solid financial situation with a very solid cash generation, with a very reasonable debt, with an adjusted ROCE of almost 18%. We have been growing in our strategy. VDM in the fourth year of incorporation to our group more than doubled the EBITDA that they had when we bought the company, €175 million. We are speaking about repeating this experience in United States, creating a platform there with our offer for Haynes. We are still with having ideas how to grow in -- with our traditional organic growth with the CapEx that we announced in NAS and in VDM, and we are releasing a new excellent plan [Technical Difficulty] we are fulfilling what we offer to the financial community. And everything, all these activities always surrounded or embed with our total commitment with ESG values. As you can see here, we got again the Platinum Award with EcoVadis. We got a fantastic 24% reduction in the accident rate in our factories, and we are reducing our Scope 1 plus Scope 2 carbon emissions in 3%. With more detail, Hans will explain you our ESG commitment.

Hans Helmrich: Thank you, Bernardo. Good morning, everyone. So, we continue to be really a great contributor to the circular economy and sustainable development. We remain committed to our 2030 goals and our 360 Positive Impact Plan. Let me take you through some of the most important improvements in 2023 towards those 2030 goals. We continue to support the fight against climate change through the reduction of greenhouse gases. We have achieved an 11% reduction of CO2 emissions in Scope 1 and 2 versus our baseline of 2015. In 2023, we reduced our water withdrawal by 18% as well versus that 2015 baseline. One of the areas I'm personally most proud of evidently is the reduction of our incidence rate with a 24% year-over-year reduction in lost time incidents in our factories across the world. We have also received several recognitions through the year that confirmed that focus that we have on safety. In women diversity, we achieved more than 13% persons in our company, well above most of our peers in the steel industry. On our 360 Positive Impact plan, I would like to mention three elements. We have increased by 50% the supply of renewable energy in our factories. We have received the CE marks for our Slag for different commercial applications that will provide a good solution for one of the most important elements that we have in our factories today as it is the Slag. And finally, we have implemented throughout all our locations, our health and safety and environmental Cardinal Rules.

Bernardo Velazquez: So, let's speak about the environment in Q4 and in 2023. And let me go back in the history to remember what was the situation, because with the pandemic, remember, that we live what is called the whip effect, the super cycle of the materials because all the supply chains were totally empty and we enjoyed the best years of our history in '21 and in '22. But the situation has started to turn and the friction point was probably May 2022. When speaking about the interest rates and speaking about the economy and trying to cool down the economy in most of the major markets, the situation started to slow down. And you know what the -- in a market like stainless steel market, where more or less 50% depends on distributors, the market normally move more with the sentiment of the economy, the sentiment of the real consumption more than with the real consumption. And the stock levels that looked low at that time and distributors were importing a lot of material, especially from Asia, the same stock levels started to be too high when the situation has started to slow down. So, since May 2022 to probably September, October 2023, we have been suffering a terrible cycle -- a terrible low cycle, never seen before. When you speak about the economy and you speak about the recession, now you can be scared, because the recession can be minus 0.5, minus 1%. In industrial production, you can -- a bad year can be minus 3%. In stainless steel, in 2023, the apparent consumption was minus 20% in United States and minus 22% in Europe. Terrible figures, never seen before. In this situation, we have been resilient. We have been making the most of the situation and trying to apply everything that we have learned in the previous crisis and trying to manage our factories, our stocks, [reducing] (ph) working capital, reducing the level of our inventories. And I think that we have demonstrated with this exercise that we manage the business, that we manage our working capital and that you can trust on us because we have reached a new level of profitability. €700 million EBITDA, I think, is very, very important and very good numbers for the current situation. As you can see in the graphs, everything in Q2 2022 has started to go down. What are the -- what had happened with this situation? Of course, everything went down. Also, imports went down in the United States and in Europe. Base prices were more or less stable in United States due to Section 232, of course, but in Europe, we have suffered the lowest prices in our history, for the first time in our history. And I've been 34 years in this industry. We saw negative base prices in Europe, negative base prices. So, we were not charging even the [indiscernible] to our customers. The cost of the raw materials was a disaster, terrible situation. And we have survived in this situation. The good thing is that after this destocking period, the stock levels are normalized now. Normally, when speaking about inventory levels, if you speak about the rotation, the number of months that you have in a stock still are in normal levels. It's a little bit high in Europe. We have 64 days, more or less, where 60 is the average. In United States, three months is average, and now we have 2.9. But if you refer or you look instead of referring to the months of consumption, just to -- just volumes to absolute values, the inventory levels that we know in -- due to the [stockist] (ph) associations in United States are now minus 10% compared with historical levels, with the average historical level and minus 19% in Europe compared to historical levels. What does it mean? That again, when the -- if the situation changes, the stock levels that today are considered normal can be low and we can live again a restocking period. And after two years - almost two years of a low cycle in the stainless steel industry, most probably when the society is speaking about a recession or the negative effect of the economy is appearing in the families, now the stainless steel that we are normally in advancing the cycle, we can start recovering. And I think this is the positive message. We have been almost two years suffering this destocking period, and now at least we have started to produce and we have started to sell at the rhythm of the real consumption, not the apparent consumption, not the apparent consumption reaction. So, generally, it's going to be better in volumes. And our order book is very reasonable now. So, the situation can be again in inflection point. The situation in HPA, in high performance alloys, is totally different because there's a lot of projects, long-term projects, big projects that do not depend too much in the interest rates because they are planning this kind of petrochemical complex or a refinery. This kind of project normally have been prepared during many years, getting the approvals, getting all the certificates, and they don't stop for this. And now, we have a lot of projects. We are supplying a lot of projects in the chemical industry and in oil and gas, not in Europe, of course, but oil and gas is booming in Brazil, in India, in the Far East, and this is keeping our factories totally -- working totally at full capacity. So, we are proud to say that under these circumstances, we have got a very resilient EBITDA, by the way, the best in the industry, and a great operating cash flow. But for speaking about numbers, I prefer Miguel to explain. Nobody like Miguel can explain these numbers.

Miguel Ferrandis: Thank you for putting the pressure on me. Well going -- first of all, let's try to go through the fourth quarter results. As Bernardo stated clearly, is a big demonstration of resilience. We have obtained an EBITDA of €96 million. The worst quarterly EBITDA this year is €96 million. Three years ago, this was the average of a standard quarterly EBITDA figure. So, it's obvious that, as we have stated, we have been improving our threshold of profitability and actually, more or less, this is the demonstration that in the low part of the year, we are achieving what was the normality in the -- in not too time far ago from now. What's more relevant probably in the quarterly figures is the cash flow. We have had a strong operating cash flow of €260 million, which is mostly driven and is fully aligned with the operating working capital reduction of €260 million also. So, I think this is something clearly to reinforce. We know our business. We control the controllables. There are quarters for taking the most of the profits, but there are quarters that when the profits decline, we take the most of working capital improvement and cash generation. This is our strategy, and we are more or less keeping it as we normally are announcing in the first semester. Some of you were concerned regarding increase on working capital. We clearly stated that this was something that should be normalized in the second semester, as has been already the case. The figures that at the end we are reporting, we are taking the lowest debt figure from reaching -- closing the quarter and the year at €341 million. This is the lower debt figure since 2001, when we just only were driving a full integrated plant, which is the one at Campo de Gibraltar. So, the group has expanded by far. But we are going back to that same levels of debt we have at that time, which at the end means net financial debt EBITDA of 0.5 times. Something that is relevant obviously to explain in the fourth quarter is the impairment of Bahru Stainless. This is thing that we are explaining regularly every year. As you remember, last year, we explained that we made a strong impairment also of €200 million in Bahru Stainless in accordance with the new strategy of running the plant at almost 50% capacity utilization, concentrating our production on the niche of produce of higher margin. The area is obviously experiencing from the last year strong difficulties. The overcapacity in China moved into Indonesia, the aggressiveness in price, the disorder in all of the market is creating that, each time the circumstances are getting worse. So, in view of this, what we finally have decided this year is making the highest impairment that can be done. So consequently, it shall not be further comments on impairments from now on because we have almost done what can be done in order for not being valued in this regard creating further troubles for the coming future. We are analyzing all the strategical possible decisions and we are contemplating every decision on that, as has been clearly stated. But on the time being keeping also that the rhythm of decision taking in Asia sometimes is longer than our standards. What we prefer is to make the maximum impairment possible in Bahru and in that regard provide you comfort for the coming future that everything that could be done has been already done. If we move to the full year figures, as every year, I want to reinforce the message. We have done a strong effort internally for presenting today these figures, but it's not only the figures or the result reports that we are presenting is a very relevant, strong pack of valuable information available in the web page. We are talking about the annual financial statements, the management report, the sustainability report, among others. All of them fully audited by PricewaterhouseCoopers. As every year we bring at this time for you the possibility of going through our financial statements and understanding the basis of our business. We always receive comments that our financial statements are among the best in the industry. So, I really stress you that reading and going through them allows to understand much more better the picture of what's going on in our business, and especially in our Group. Having said that, let's concentrate on the yearly figures. Bernardo introduced it. We come from a -- all the comparisons are related with 2022. In 2022, as we explained, last year was a year of records in almost every single magnitude. So, we had records at every part of the P&L. At that time, when we analyzed our figures, the figures -- the sales of €8.7 billion, we explained that this creates certain vertigo and we commented this is similar -- the similar figure than the altitude of Mount Everest. So, we feel certain vertigo and we make some jokes comparing with Tenzing and Hillary. When we go through the figures of 2022, let me keep the image just for explaining. Mountaineers always say that the most difficult part is to descend and the most risky part in mountaineering is by far is descending. So, what 2023 brings us is a descent in sales of 24%. Last year, we were proud of a figure of EBITDA €1.3 billion. Our pride, and our strong pride this year is that after a 24% descent in sales, we are presenting a reported EBITDA figure of €703 million. As we have been explaining, this is the new threshold for the group. We have been stating that this is the new EBITDA level through the cycle. But this year, it's even probably the low part of the cycle as we are seeing from the business and for what our competitors are reporting. So, in a low part of the cycle, we are able to present these figures. This is a strong fact of pride for ourselves. In fact, for those of you who follow, more or less us as a Spanish company, but are not so used to follow our peers or the industrial, other companies playing in this business, if we compare it with our benchmark with the two listed European groups that have recently presented their figures, our €703 million is exactly the aggregation of the results of both competitors. So I think this is a strong demonstration of, more or less, how our strategy, how all the continuous work in not only improving efficiency but reducing costs is highly appreciated especially when the market circumstances are poor. This is for us something extraordinarily relevant. We have reported a fourth quarter EBITDA of €96 million, and some of the preliminary comments that some of the analysts have been reporting this morning is lower than expected and some disappointing. Any case, I want just to reinforce, as you can see in the chart, it's true €96 million is the EBITDA for the fourth quarter after making an inventory adjustment of €68 million. We shall talk about that later. But please keep an eye on the chart that this EBITDA figure of the fourth quarter is higher than that one of the last year, the year of the records, the maximum year ever in profitability of Acerinox fourth quarter figure was €90 million EBITDA, with a margin of 5%. This year has been with a margin of 6%. It's a seasonal slowdown in the fourth quarter. It's a seasonal slowdown in our main market, which is North America. It's a quarter of two months from Thanksgiving to the year-end. This is low activity in the American market. Also in the high-performance alloys, normally December is the more quiet month on that regard. But having said that, still we are in better position, in better profitability than the one we reported for the fourth quarter last year, the year of every record. And this €96 million EBITDA is after an inventory adjustment of €65 million in the Q4 and in the year. We normally, we always try to anticipate, and when we present figures, we analyze every single item that we have on our stocks and we put it in net realizable value and we anticipate the expected loss and we make an imperative adjustment in the quarter when we are presenting result. In the third quarter, we make an adjustment of €75 million. So this has contributed to proper margins in the fourth quarter. But reaching the quarter-end and reaching the year-end, it's obvious that Steel Europe is in big pain. Still, the prices, even though improving, are extraordinarily low. And consequently, what appear more prudent is make an additional inventory adjustment of €65 million. As the one that was done in the third quarter already has been neutralized. That material has been sold. We are now presenting this inventory adjustment we see is [indiscernible] for the quarter and for the whole year, because all the others previously have been neutralized, as far as they have been already been sold -- that material. And then, basically, I think for the group figures, I think probably it's enough. Let's move to analyze it by our different segments. First of all, the stainless steel, it has been already mentioned in our main market in Europe and in the States, it has been a decline in consumption of 20% or 22%. So the stainless steel sector is experiencing a strong pain, no doubt. In the fourth quarter, we have presented a figure of €50 million EBITDA. It's a low EBITDA, no doubt, but for putting it in context, we are the only player in the stainless steel Western world that is having profits in the fourth quarter. And I can only mention of the Western world, because in the Eastern world we cannot compare, because there is no public data. But no other player in the Western world is presenting profits in the fourth quarter. In fact, no other was presenting in the third quarter. So, two consecutive quarters, our comparable peers are experiencing losses and we are bringing profits. We should appreciate that they were higher than €50 million. But it's true that we are there and we keep being profitable even in these circumstances. When we move this profitability in the stainless world, in a year of 22% correction in consumption to the year figures of €533 million with a double digit EBITDA of 10%, you can realize how proud also we are of the performance of our stainless steel division in these circumstances. In addition, we are talking of efficient working capital management. It's true that in the year we have reduced our inventories in stainless steel in a figure of more than €300 million, €304 million, which is by far a strong figure. And this drives the reduction in the whole working capital that has been €206 million, so extremely efficient work done in the working capital, all through the stainless operations in the group. And now, let's compare with the high-performance alloys. When we acquired VDM in the year 2020, one of the virtues that we were explaining you for moving to the alloys was that we are a cyclical company. We know it, we understand the cycles. The high-performance alloys also is a cyclical company but with different cycles. And this was one of our key targets at that time, trying to neutralize our cycles with introducing ourselves in a growing sector as the high-performance alloys, by acquiring the best in class in that sector, the world leader, which is VDM. But this also should contribute to moderate and neutralize our own cycles. We have been talking about the cycles of a stainless. 22% correction in apparent consumption, 25% correction of sales. When we move to the high-performance alloys, the sales of VDM in this year have going up 14%. So we are compensating the poorer performance on the stainless by a better performance in high-performance alloys. Last year, we obtained in the alloys a record EBITDA of €125 million. And this year, we have gone by far much more higher even and reaching €175 million. On the year '23, the high-performance alloys division has provided 25% of the total group results. This is something to keep in mind, not only to putting on value what has been the success on VDM acquisition, but also for understanding what's coming next, that we shall talk later on, obviously, with expanding through the expansion through the high-performance alloys. In fact, also the cycle of the alloy's world and especially of VDM has been different. They have been working with a full order book in a proper cycle during the year 2023. In the first quarter, it was appreciated that obviously, the working capital need to be accomplished the necessities of the market and the strong performance of the demand. Now the situation has been normalized, so you can see that the operating cash flow of VDM in the fourth quarter has been €81 million. So, the total figure is slightly positive, €7 million, but normalizing in the second half and especially in the fourth quarter. Also, it's being consistent in providing an operating cash flow. If we go to the capital allocation figures, more or less, just to reinforce the previous message in the upper chart, a quarter of a lower EBITDA, €96 million at the end is compensated in strong cash generation. And you see that at the end we have had a decrease in working capital of €258 million. And this is our understanding of the business. Okay, when the market goes down, we lose partial profits. But at the end, we are strong cash makers for presenting these figures of €260 million of operating cash flow and €214 million of free cash flow. If we move to the year, at the end, it's clear we -- on a yearly basis still the working capital, we have decreased it in €79 million. After last year, our year of records in which the working capital went up €479 million. So at the end, we more or less accompany the cycles. When the cycle goes up, it's clear that we need to be there, we need to run full, we need to have our material flowing for supplying to our customers. When the market goes down, we generate cash. This is our basis.

Bernardo Velazquez: So, let's move to our strategy. And we don't need to insist very much in the strategy, because we have been presenting a very detailed explanations in the Capital Markets Day at the end of last year, and also when we announced the -- our offer for Haynes International. But just to remember, that it's a success, our new strategy is a success. And it's based in four pillars. One is added-value, added-value because we are moving our business, we are transforming our business to added-value products, focusing on customers, end users, customer-centric, supplying a big variety of products from stainless steel, commodity stainless steel to the most sophisticated high-performance alloys. We are keeping our traditional excellence. We have been running our Excellence Plans since 2009 and still we have found it room to improve. And thanks to this excellence, thanks to the new level of competitiveness that we reach, we can be resilient in our numbers in the bad cycle. Of course, committed with ESG values. Sustainability is one of our main values. And everything have to be based in a prudent and in efficient and in our financial strength, none of these movements that we are announcing could be done without our financial strength. We bought VDM. We increased our debt-EBITDA ratio to close to 2% -- sorry, 2 times. Then we have digested it to 0.5 times. And we are now ready again for more acquisitions. So, I think we are in a great moment of our history with this new level of stability and building the new Acerinox for the future. Because the HPA business for us is transformational. You have seen this pyramid of material before. The pyramid of what we call the pyramid of heat-resistant and corrosion-resistant materials. Starting with the low part of the pyramid, of course, with higher volumes, but more commodity rates. Normally our sales to distributors, then it's sales to end users of our traditional stainless steel grades. That is not so simple. They need to be -- they need to approve you. You need to have a special chemical compositions or special mechanical properties designed for the customers, on-time deliveries in certain dimensions and distinct. So that's becoming more difficult to supply. Then we have the more special and super stainless steel, and then we have the HPA that in the top of the pyramid is less volume, but with very sophisticated hours. And this is what we are doing now. We are filling the gap between the two sections, the two divisions, developing super stainless steel, developing more sophisticated stainless steel to be more closer to the customers, to find -- looking for the loyalty and partnership with our customers, and being probably the only supplier in the world that can offer this range of products, from flat to long, from commodity stainless steel to sophisticated high-performance alloys and including supplying mild steel in South Africa to our local customers. The widest portfolio of products in the industry. And of course, strengthening our position in United States. That is the place to be now. United States is the economy to be. And we want to accompany our customers in the growth of the market. That's where we are investing in United States, in North American Stainless focus on specialties and trying to duplicate the platform that we are building in Europe, in United States is going to be something special. I'm very excited with this new project. Focusing on our major markets we have been very proud to say that we are the most global supplier in our industry. But the world is changing. I think that we are deglobalizing the economy or at least regional businesses are becoming more important. We are speaking now about strategic autonomy and some other concepts that we didn't hear before but this is what is coming and we are concentrating our efforts in our major markets that is Europe, is United States and South Africa. Nobody I think -- not many companies can say that have more than 50% market share in the whole continent and this is what we have in South Africa. And of course, to do this, we need technology and we need R&D. And with the combination between Acerinox, VDM and Haynes, most probably we will have the most powerful R&D team in the industry. And this is very important because we needed to fill the gap between the stainless steel and the high-performance alloys, as we mentioned before. And then, we'll be able to say that we are supplying solutions for our customers, not only materials. We are not supplying just materials to distributors and these things. So, an engineering company can come to Acerinox saying, okay, I'm going to build a refinery, I'm going to build this petrochemical complex, whatever. So, tell me what materials I have to use. And then, we will be able to supply from a normal [304] (ph) for something not very aggressive, to a cobalt-nickel alloy for something with a high temperature, very high temperature, or special characteristic. So, we will insist in this pyramid of materials, because, as you see here, moving to this part of the business, moving to the most difficult part of the business with less competition, especially with less competition from Asia, we think that we can increase or we believe that we can increase our profitability from 2.5 points to 3.5 points. And this is very, very interesting because that will be in top of the new level of competitiveness, the new level of EBITDA that we are announcing today.

Hans Helmrich: So, when talking about the strategy and growth, it's always important to keep in mind as well the organic growth. And we have been talking in the last presentations about investments that we are going to be doing to support that organic growth. And as we said, there are two that we want to take your focus on. One is the increase of capacity in North America. So after more than two years of working very hard, all the teams in NAS, and the support of those Excellence Plans that we had from the past, we have managed to increase our hot rolling capacity and finishing capacity by more than 20%. Those of you that know how factories work, it's not easy to get a 20% increase in capacity. So, and the use of regular continuous improvement activities but as well combined with digitalization tools like Digital Twins of our factories, AI allowed us to get that. So, when we finished that activity and we were sure that we could sustain that level of performance, we identified opportunities to rebalance the factory again. And that's why we decided to have that minor investment of $244 million to aggregate and generate that capacity for the market, adding our seventh cold-rolling mill, and some support from cranes to material movement in our melt shop. And the outcome of this is really having the opportunity to deliver this increased 200,000 tons to serve our customers in North America. They were asking for more capacity from North American Stainless as the number one supplier in the marketplace, and the growth of the market that is going to be taking place in North America. So, this investment will be ready by the end of 2025 and will be -- we think, a really important step forward in our presence in the most important market in the world, as was mentioned by Bernardo and Miguel before. Second, very important as well, our presence in our high-performance alloys business. As you all know, we are the number one supplier in the industry. We have announced this investment of €67 million to increase our capacity in VDM Metals in Germany in our remelting capacity mainly, reinforcing that leadership that we have, and being able to add another 15% more capacity, and evidently more sales by increasing that remelting capacity and providing as well very high-quality products to our customers because remelting is critical on the high-performance alloys business. And secondly, something also that we think is important for the future is almost tripling our capacity in our high-performance alloy's powder generation manufacturing. And this is mainly used for, we think, a growing business in this area, which is the use of that capacity for 3D printing, and really supporting our customers that are really working into additive manufacturing, and providing HPA solutions for that growing market going forward. This investment will be around 2026, ready for getting into production in Germany. So, Bernardo mentioned the focus from Acerinox over the last years, since 20 -- 2009 with all the Excellence Plans that we have been presenting to you over the years. Excellence, as Bernardo said, is one of our strategic pillars, but it's also one of our values in the company, and we have it really in our DNA, looking into excel everything we can, in everything we do. In 2024, we are launching a new program called Beyond Excellence, and I will explain why Beyond there. And we have targeted to generate €100 million of cost improvements, which will help us improving our EBITDA performance. And this new Excellence Plan called Beyond Excellence is going to be focusing six main areas. First, decarbonization and environmental projects that will help us improving our CO2 footprint and helping us in that area that is very important to many of our customers going forward. Operational efficiency projects is more of the things that I explained before with the improvement in NAS and the continuous improvement activities that have been part of the company since many years. Research and development and added-value products and commercialization of those. So, as explained by Bernardo, filling the pyramid and providing new solutions to our customers beyond just products. Productivity and automation projects and the use of those digital tools helping us improve the efficiency of our lines, as explained in the case of the NAS expansion. Having more customer-centric projects that definitely will position ourselves as being the leader with the support of R&D and good efficient factories with best-in-class quality. And supply chain cost reductions through reinforcement of collaboration with suppliers and third parties. So, all these projects will impact not only production, but will impact all the operations in the company, and every single department is fully aligned and collaborating in all these activities achieving that excellence in everything we do.

Bernardo Velazquez: Haynes, we trust, will be the new baby in the group. Now, we are still -- we made an offer. It was approved by the Board of Directors of Haynes and Acerinox, of course, and we are waiting for the approval of the shareholder meeting of Haynes and also for the authorities' approval in United States have to be submitted to anti-trust and have to be submitted to CFIUS, the Committee of Foreign Investment in United States. But we are very excited with this new project. We want to duplicate, as I mentioned, the success that we have with the acquisition of VDM and with integration of VDM, that is even more important. We want to develop this stainless steel and HPA platform in United States, spreading the portfolio of products, combining the R&D capabilities, combining the different products or the different -- using the different lines in the two companies. So, we will increase the portfolio of products and we will -- we expect to have synergies of $71 million and of course we want to develop solutions for our customers. I have to name who's the owner of the copyright, the AAA investment. But this is AAA investment. As Miguel said, that is the best place, the best business that we can do, Alloys, American and Aerospace. In VDM, we are more European focused and aerospace was less important in the portfolio of customers. And now, we are moving and we are balancing as nobody else our customer's list. It is important and we are excited. I think Haynes will match perfectly with the Acerinox organization. And I know that they are also excited and willing to be part of the Acerinox family. So, I hope very soon we will welcome Haynes people to help us to develop the new Acerinox and to help us to grow, accompanying all the businesses, all the companies in this adventure. Everything is here. I mean, it's value creation, it's synergies, it's ESG values align -- alignment. It is balancing the portfolio of customers and sectors and coming with a US$200 million CapEx that will help us to explode the synergies, modernize the company and will help us to grow. So, that's something that we have to develop further once we have the ownership of Haynes. But we are really excited with the project.

Miguel Ferrandis: For us, it's relevant just to share with you the global footprint that this possibility brings us. Talking about regions, as we have explained, VDM is the world leader in high-performance alloys. But most of revenues comes from Europe, so 65%, two-thirds of VDM revenues are generated in Europe. In the case of Haynes, the situation is just the contrary. So, Haynes is mostly an American company, focusing on the American market. 60% of the revenues comes from the States and then a minor presence in Europe of around 23%. When we combine the both companies, at the end, we reach to this global figure of 53% of revenues coming from Europe and 28% in the States. Keep this figure in mind, because those of us who follow you -- sorry, for those of you who follow us know this is exactly the opposite of the geographical distribution we have in the stainless in our group. So, more or less around 53% something before, something above 50% always is our presence in the States and around 30% is our presence in Europe. So, when we are trying just to combine and establishing a proper balance, also the alloys provides us not only the balance for fighting against the cycles but also our geographical exposure. We are 53%, 55% sales in the stainless in America and in the European market 30%. In the case of the alloys, it's just a contrary. So, the balance fits perfectly with our structure and the fit probably shall work and shall improve this resilience that we are mentioning, not only as a geographical expansion but also obviously in the case of the sectors. VDM is mostly focused especially on the chemical process industry which takes 39% and also a very strong relevance of the oil and gas sector. That actually is one of the sectors driving its good profitability in the year '23, which is the oil and gas, but has less presence in a relevant sector such as aerospace. When we move for integrating Haynes in our organization, clearly our goal, as appears in the AAA rating is aerospace. So, 50% of the sales of Haynes goes to the aerospace industry. What we reach now is a diversified portfolio in which more or less with the integration of the both companies, we shall be 33% in the chemical process, oil and gas 22%, aerospace 20%. So, 75% of the presence, even could be above 80% if we include the industrial gas turbines at the end, are going in specific strategic sectors relevant for us and clearly with good margins. This chart and this explanation also has its relevance. Haynes is a strong and very good company. It has been explained. We have taken our time for deciding this deal. And in the last year, in this results presentation, there were several questions regarding what was coming, the further inorganic growth or the expansion. And also there were very recurrent questions on why we're not putting in place a new buyback program. And the answer has been this. We were working on this and consequently we were putting our efforts on this acquisition. It's clear and obvious that Haynes is a great company. But we must understand that it's a good company trading at American multiples and unfortunately in our European industry, the multiples are low. But multiples in America are high in accordance with excellent momentum and prospects for the American market for the coming future. It's clear where the market is more expected to grow. It's now, it's appearing, the consequences of a lot of manufacturers coming back to the States because of the regionalization or geopolitical issues. In fact, we have extremely competitive energy. In addition to all of this, we have the infrastructure program in America that still is coming soon. So, there are strong facts for being in America. And at the end, we understood that. But for being in position of making the strategy movement of acquiring an American company, trading at American multiples, what we needed is to have the certainty that were synergies that more than far justify such an acquisition. And the synergies are extremely relevant. We are talking about [€71 million] (ph) of synergies. It appears in the bottom of the slide. It's realistic and reliable synergies. And this is -- this has not been done as an in helicopter view for some advisors or consultants. Okay, let's assume some savings in the procurement supplies or let's assume some sales percentage increases. No, we have had teams in VDM, in NAS and in Acerinox working on this, trying to precise item by item, the areas that we could obtain. Our track that we have been able to demonstrate in the synergies achieved in the acquisition of VDM higher than the what we announced, probably should allow you to understand that we are more than conservative normally, but we are absolutely confident on the [€71 million] (ph) synergies. And because of that, when we clearly have this absolutely precise is when we start the move to making the acquired of Haynes and we start with the diligence processes and so on. So, this is the driver for the acquisition. From these synergies, several of them shall be appearing, coming soon. But it's true that as has been previously stated by Bernardo, our aim is to grow in Haynes. Our aim is also to allow Haynes to invest in further developments. And consequently, we are making an investment program of $200 million that shall be self-funded by Haynes. But at the end, with this, we shall be able especially from years '29 and '30 to achieve the most of these $71 million.

Bernardo Velazquez: This $200 million CapEx is the key of the success of this opportunity because with the new equipment in melting and in forging and in hot rolling in North American Stainless, we'll be able to increase our production, modernize the equipment in Haynes and we'll be able to grow. We'll be able to process some of the material coming from Germany or from NAS. We'll be able to process some stainless steel plates in Haynes. It's only two hours away from NAS in Indiana, just crossing the river a little bit more. We'll be able to hot roll HPA round materials in NAS with the competitiveness of a plant of 1 million tons compared with the Haynes that is around 15,000 tons per year. We'll be able to use NAS and the Acerinox Group purchasing power to support Haynes' operation. We'll be able to develop more customers to jointly sell patents or material with patents coming from the two groups. So, it's an amazing story of synergies and amazing development. Let's go to the end, conclusions. We'll insist in the first three messages. Acerinox is reaching a new level of profitability. Just to remember, the problem that I think of being so much time in the industry is that we have a long memory, and the last time that Acerinox produced less than 2 million tons was in 2009. In 2009, we had a very negative EBITDA compared with this year. Second, that we are building a new Acerinox. All these movements in HPA is not just adding companies and adding good companies and profitable companies. This is a transformational project that will let us move to high added-value products and of course, never forgetting what we are experts that is the excellence in operations and is the organic growth. Third, that we don't forget that we must be prudent. This is a cyclical business and we're speaking about -- the debt is very difficult to manage, it is more difficult to reduce. And in our sector, EBITDA can move very much from year-on-year. So we are keeping our financial strength and keeping of course, and the focus on returns to our shareholders and increasing our dividend. And now, moving to the short term. As I mentioned at the beginning, the order book is improving because apparent consumption now is moving at the same rhythm that the real consumption as inventories are normalized. I'm not speaking about restocking, I'm not speaking about new booming in this sector. But the destocking period is over. And let's see when the economy bring us new expectations and we can change the cycle again. But we are waiting for this inflection point. The order book is strong, it's getting better in stainless steel, but it is strong in HPA, strongest than ever. And with these circumstances and why not to mention with an strike in the factory in Spain, we are still expecting an slightly better Q4 EBITDA, better than -- sorry, slightly better Q1 than Q4 EBITDA. And this is the situation for today. I would like to say that it's going to be better, just better, but the situation in Algeciras make us be a little bit more conservative. And that's all from our side.

Carlos Lora-Tamayo: Yes, thank you, Bernardo. Just comment that we will be on the road in the following weeks. So, if you are interested to meet us, please contact the [indiscernible] and will be a pleasure for us. Now, let's move to the Q&A session.

A - Carlos Lora-Tamayo: First, we will start here in the room. So, please raise your hand and state your name and company before the question. Thank you.

Francisco Riquel: Francisco Riquel from Alantra. Thank you very much for the presentation. Two questions for me. The first one is if you can share with us the Bahru contribution to the main P&L lines in 2023 so that we can better assess the underlying earnings of the group and how big attract has been Bahru in '23 and have a better view of underlying margins? And related to the strategic alternatives before triggering the decision of a shutdown, I wanted to confirm if you will be open to initiate a selling process now that you are under less pressure with the write-down? And my second question is about the US market. Base prices fell in the fourth quarter of '23. I wanted to ask if you have seen another leg down in prices, in base prices now in the start of '24, now that you are rolling over contracts of -- or if you think that this is the type of adjustment in base prices that we should expect in the US market? And if you can also comment on the demand imports underlying trends in the US market? Thank you.

Miguel Ferrandis: Yes, regarding the contribution by companies, our segments are stainless steel and high-performance alloy. So, we provide figure for all of the segments and we do not disclose company by company. It's obvious that as has been stated, more than 50% of our sales come from the States, as you know and the best performer market on comparative basis is America. So, it's obvious that the situation and even the prices is better in America, better being stable. So, in Europe, after the recovery of the COVID crisis, it was a rally in prices that allowed all the players to trespass to the customers the high energy prices or consequently at the end that obviously at that time helped but prices reach a level and then the market collapsed. The situation in the States have remained more flat. So, never went with the party in 2022. But having remained flat and consequently in that basis the market has remained almost stable. And clearly, our highest contributor is the States, as you know. But we do not segregate the figures by company. Having said that, when you are asking about Bahru, as we said last year that we were running Bahru at 50% capacity utilization, concentrating on certain niches and just thinking about 9,000 tons per month. Roughly speaking, Bahru is not a big or has never been a big profit maker for the group. But in this situation also is not a relevant loss maker. So the issue of the impairment now is at the end the clear conclusion that for a reroller in Malaysia with overcapacity existing in China with the supply of cheapest labs for transforming nickel, pig iron in Indonesia. At the end, the margins are so squeezed that doesn't make sense. So in these views, probably the strategic alternatives that are to be contemplated make sense, and what's better for us is to drive to that conclusion on the strategic alternatives with the company having done a full impairment and this is what's behind. It really has not been a painmaker for the year. The situation in Asia is terrible, but their production is low. So it's not as a consequence of huge losses. It's purely as a consequence that it's not core business. And we are not confident that the situation in Asia is going to improve. So consequently, it was the best decision to take.

Bernardo Velazquez: Just to add something. Yes, in the previous meeting, we already said that Bahru was not part of the core business. I think it's very much related with I explain of the regionalization of our business. We want to be strong in the United States, in Europe, in South Africa, and we cannot be the smallest in a very aggressive Asian market. So, the situation is clear. And after this impairment, it will not be -- any solution that we can find will not be painful for the Group. I mean, we have already suffered this experience and I think we are ready now for selling or whatever solution we can find, right? To the United States, I would like to mention that we cannot speak about market prices. It's a concept that at the end doesn't exist. We cannot speak about our prices. And at the beginning or the end of last year, we decided to adjust our customer prices just to let them compete in the international business. We don't want to -- we have a very close relation there. It's very clear that with higher prices than the rest of the world, imports went down in United States. So that means that we have a strong partnership with our customers and we wanted to make some adjustment just to let them compete in the international world. But the situation today is very stable.

Carlos Lora-Tamayo: Next question.

Robert Jackson: Good morning, gentlemen. It's Robert Jackson from Banco Santander (BME:SAN). My question is related to VDM, bearing in mind the relevance it has in the group. So, looking at the production volumes melting and cold rolling, we've seen a correction year-on-year, but the EBITDA is up 40% and net sales are up, I think 9%. Can you tell us what's -- if there's a major difference in terms of mix or any other issues in terms of the production capacity and whether it's -- whether we're going to be seeing any changes as well during this year as well during 2024? Thank you.

Bernardo Velazquez: Thanks, Robert. It's not really a change of mix. The production is -- it went down because we had some internal operational problems that nothing serious, not. But that made us reduce the production during the year, but on the other hand, we were able to increase our prices. The market is performing very well and we could control our costs. Of course, as Miguel mentioned before with a lower energy cost and our margins went up. There is no magic in this.

Carlos Lora-Tamayo: Any further questions here in the room? So, we can move now for questions for the conference call. So please, operator, go ahead.

Operator: Thank you. Ladies and gentlemen, the question-and-answer session starts now. [Operator Instructions] Our first question comes from the line of Tristan Gresser from BNP Paribas (OTC:BNPQY). Please go ahead. Your line is now open.

Tristan Gresser: Yes, hi, good morning, and thank you for taking my questions. Two, please. The first one is on the guidance. Could you please a little bit elaborate about the moving pieces there for the slightly higher EBITDA, given the large delta we can see with the buy side, sell side consensus? More specifically, do you expect a similar kind of inventory adjustment if raw materials stay where they are today? And also, do you baking any strike impact there on cost volumes?

Bernardo Velazquez: Thank you, Tristan. You know that we never disclose very much our outlooks and we only move in quarter-on-quarter basis. And what we say this is the result of all these movements in. On one hand, we have a better order book and we will -- but still we have a seasonal effect in January, Christmas, and also holidays in South Africa. So, normally we start the -- so quarter one is not the -- our strongest quarter. Second, inventory adjustment, something that we don't know. That will mainly depend on the prices of raw materials and prices of the market at the end of the quarter, not today. The effect of the strike, I think that we have previously mentioned in or at least, I read it in the newspapers that this can be around 5 million per month. But we were working normally in January and we have lost February. Let's see if we can find a solution soon.

Tristan Gresser: My second question is another question on the US market and trying to understand a little bit what's happening there. I know you're not talking about prices but what we've seen is that base prices have stabilized but alloy surcharge have been going down just as scrap prices are going up. So I can understand that the margin compression is taking place in the US. We just wanted to see if you can confirm that. And now entering March, do you expect this kind of price normalization we've seen, I mean, total prices has ended or is there still a little bit of further pressure to come or do you think the market have kind of reached a stable level now? Thank you.

Bernardo Velazquez: This is a very difficult question. We don't have the crystal ball to know what's going to happen with prices in the future. I think that today they are stable. Today raw materials are more or less stable. And in the last week, nickel prices have been moving up again. So probably the alloy surcharge in February is going to be the lowest in the year. But I don't know. I mean, now, we know that it looks like March is going to be a little bit higher, but we don't know. And today market are stable and let's see what happen. I think the American economy is a little bit more flexible or agile than the European one, and we are expecting an earlier recovery in the United States, but who knows.

Tristan Gresser: All right. That's really helpful. I'll jump back into queue. Thank you.

Operator: The next question today comes from the line of Ioannis Masvoulas from Morgan Stanley (NYSE:MS). Please go ahead. Your line is now open.

Ioannis Masvoulas: Great. Thank you very much for the presentation. Good morning. First question from my side. You've been talking about through-the-cycle EBITDA in the order of €700 million recently but that was before Haynes, before the VDM expansion and I guess before the Excellence Plan. Could you perhaps provide an update on where you see this through-the-cycle EBITDA level, assuming Haynes deal concludes? Thank you.

Miguel Ferrandis: Well, the Haynes integration still is pending, obviously, to final decision taken by Haynes shareholders. The Board of Haynes approved the offer and is submitting it to a shareholders meeting that shall take in April. Still, it's pending from some regulatory issues and therefore this may be integrated in the group in -- we expect to take place in the third quarter. So, still it's a bit premature on this basis. The work that has been done with Haynes, obviously has been a due diligence that we have been working hard on that. It has been done by KPMG. We know a lot of facts, more or less were available and public data from Haynes. But still, we have not started to work together. So on this basis, as when we announced the deal, what we are contemplating is establishing some normalized figures in relation with those that the analyst consensus are projecting for Haynes in this year. We feel comfortable with that after the due diligence process, and we are talking about EBITDA annualized figure of around $96 million. This is obviously Haynes by itself, as it is today. In addition, we obviously, as soon as we are able, we shall start to work together and then, obviously, it shall appear the rhythm of the synergies that we are talking. But the starting point from Haynes is this annualized EBITDA figure in the range of $100 million, which is something that when we acquired also VDM, you remember that we were mentioning that the figure of €90 million appeared to be high, but we were more comfortable in the range, €80 million to €90 million, more or less for Haynes shall be something similar. Obviously, we have to -- we have the possibility to expand through these synergies that we are mentioning, but this shall be gradual. It still is a lot of work to do among both teams altogether. So up to now, this is the best information we can provide you. After all the approvals are obtained and we start working together, we shall give more light. But on the time being, we should not make any further comment until the decision is approved by shareholders and by all the regulators.

Ioannis Masvoulas: Okay, thank you. Thanks for that. Second question is around the Spanish plant where you're pursuing to regain productivity and flexibility. Could you elaborate whether you're looking at outright footprint reduction at that plant or mainly pushing for greater flexibility with the workforce? And ultimately, if you can comment on during the strike, how are you looking to fulfill customer orders to ensure you keep your market share within Europe? That'd be very useful. Thank you.

Hans Helmrich: Thank you, Ioannis. So, at this moment in time, as we said, we are open for all conversations and negotiations with the unions. And for us, productivity flexibility is very important. We are not talking about the footprint reduction at this stage in the case of the Spanish facility. And the collaboration with our customers is very close. We are trying to find and work with them very closely to make sure that they have their business continuation, mainly when we talk about European customers that have been in the past already validated by any -- the other of the facilities that we have. So, this is the collaboration we had been with some of the facilities that we have, the service centers in Europe, supplying them at this moment in time. And this is what we're working. So straight collaboration, open communication, so that they know where we are. Since we don't know, how long is this going to take.

Ioannis Masvoulas: Thank you very much.

Operator: The next question today comes from the line of Tom Zhang from Barclays (LON:BARC). Please go ahead. Your line is now open.

Tom Zhang: Hi, thanks very much for the presentation and taking our questions. First one from me, just on CapEx next year, any sort of early expectations, because I guess the VDM and the NAS de-bottlenecking should start coming in? It's probably too early for Haynes, but just sort of early indications on what you think CapEx spend could be this year?

Bernardo Velazquez: You know that in our business, the maturity time of our CapEx is around three years, four years. So, if we have announced the new investment in VDM and in NAS, we are now closing the contracts with the suppliers, then we will make a down payment of around 20% to 30% of the cost of the equipment. And we will have this year and next year, or we'll start this year making the civil works. So probably we have to -- part of our CapEx will go to building and construction. And then, third year is when normally the equipment come to our facilities and we start building the new lines and having the payment for the reception of the equipment. So, it is very much diluted during four years. So we don't expect a tremendous CapEx with all the announcements that we have done. But Miguel, maybe you can give us more light in the CapEx for the year.

Miguel Ferrandis: Yeah. The combination of CapEx at this time, the combined effect of the strong investment phase we're having in NAS as the -- also expansion in VDM with other CapEx, maintenance CapEx, but also specific further CapEx for keeping the -- all the plants at the state of the art at the end provide us an aggregated figure for this year of €260 million.

Tom Zhang: And then, just another question. Sorry to push you again on the sort of strike action. But how much -- I mean, first, can you just clarify, is it a total shutdown of the European site or is it just upstream? Whether you have any issue getting sort of any inventory out and how much volume can you send in basically from the US and South Africa to help? Because I guess you haven't announced sort of force majeure or anything yet. How long do inventories last? Do you have any issues getting material over from South Africa and NAS? Thanks.

Hans Helmrich: So, this is, as you said, it's a total shutdown of the facility. What we have today, we only have the minimum services that have been agreed with the unions to keep some of the basic and mainly health and safety environmental activities running at the facility so that we can ensure that it's a safe environment. But there are no activities in the factory. That we have activities in our service centers around Europe that are taking place to supply the customers with the material that we had in those service centers at this moment in time.

Tom Zhang: Understood. Thank you. Cheers.

Operator: The next question today comes from the line of Bastian Synagowitz from Deutsche Bank (ETR:DBKGn). Please go ahead. Your line is now open.

Bastian Synagowitz: Yeah, hi, and good morning, all. I've got a couple of questions, if I may. Maybe just firstly starting on actually, Haynes. I guess when you announced that acquisition a few weeks ago, you were talking about getting down your net debt to EBITDA to 1.2 times in, I guess, less than two years. Now, you're giving a guidance which is at least materially below Street expectations at the short end for the first quarter. So, how comfortable are you to still get your balance sheet down to the levels which you are targeting with the organic cash generation and your EBITDA? Or I guess maybe, in other words, is the first quarter basically a transition quarter for you just because of the strike action and maybe some lagging metal headwinds but you're already building much more confidence for getting back to what you see as your normalized run rates in the second quarter? That's my first question.

Miguel Ferrandis: Well, in regarding to the net financial debt, it's clear that this year the status quo is going to change substantially. If we were running the group as it is today, obviously we shall be reducing our debt, no doubt this year and even though actually we finish at the level of €340 million. It's at the level of 4.4 times, but we should have a further strong reduction of debt taking place in the year 2024. It's clear that in the middle of the year or in the second half, not only we are paying for Haynes acquisitions but also integrating Haynes' debt. We still feel confident that in the maximum time of debt just after -- the day after the deal is done, we have paid for the acquisition and we have integrated debt, we shall be more or less at the equivalent figure of 1.4 times, which in addition, for our sector, having a net debt to EBITDA of 1.4 times is fully acceptable. Years ago, 10 years, 15 years ago, when we still have covenants on place linked to results. Fortunately, our treasury team made an excellent performance avoiding all of them. And actually, we have no finance subordinated to a specific covenants on results. But when we had that covenant, we were talking about 3.5 times. So even though making such a relevant deal as it is, it's going to be around 1.4 times in the year 2024. So having said that, it shall be gradually normalized and we understand that in four years or five years shall be in the actual levels. But in addition, obviously, we need to go through the process and obtaining all the improvements coming from Haynes, but this is not a headache for us. So fortunately, we are in a strong finance position that allow us to make such a relevant acquisition in this part of the cycle. And consequently, we are not seriously more or less uncomfortable with that. It's just to accept that, as we said we -- when you buy a good company, you must pay for it, and especially if it's in the American market where the multiples are high, but in the financial strength of the group, this is not going to be an issue. In regarding of the Q1 and followings, as we understand the basis for year 2024, it's going to be an upward trend. So we clearly understand when we make the budget that the lower quarter should be the first one and gradually should be improved. In fact, it's going to be obviously experiencing, as Bernardo mentioned, the issue of the strike, because of that, it has been precise. That shall be slightly better, but gradually the profitability shall be higher. And obviously, whenever the situation is normalized in Algeciras also, that shall be improving. But even though in the rest of the plants running the -- 2024 is going to be -- sorry, quarter after quarter improving the situation, the budget shows improvement quarter per quarter, starting from Q1 going to Q4.

Bernardo Velazquez: If I can add something, just a part of the strike in Algeciras today, there is no win in the market.

Bastian Synagowitz: I think I was asking because you sort of downplayed the strike impact with, I don't know, maybe €10 million to €15 million this quarter. And I guess if we look at your underlying performance in Q4, stripping out the inventory effect, you had €160 million, you say volumes are getting better. If we look at nickel prices, they're actually rising. You say apparently the market is not getting worse. So, I guess we are all a little bit puzzled where you're maybe not showing a little bit more conviction on your first quarter guidance. But, yeah, let's see what is coming out there. My second question is just coming back maybe on the bigger picture for your company and the different units. So, if we look at the disparity between your regional performances, I guess they have never been larger. You're generating pretty much all of your EBITDA in the stainless business in the US, and I guess you're losing a lot of money elsewhere. So I'm wondering, how do you plan to fix these issues, particularly in Spain and South Africa? You're saying, now negotiating with unions. But I guess the question is, don't you need an even much more drastic restructuring or even a strategic review here? And then, secondly, I understand you're pushing back on a more detailed disclosure, but could you at least give us maybe the fourth quarter and full year EBITDA numbers for NAS? Because I guess the big question is here, is it not the time for you to start reporting these numbers to show the value you have in Kentucky and then also put pressure on the other businesses because cross funding, obviously the lossmakers can't really be a sustainable strategy as we've seen for Bahru?

Bernardo Velazquez: You're asking too many questions in one. I mean, the situation is as it is. So, we have flat prices in the market. Activity is getting better because of the end of destocking period. But we normally or we never give numbers for more than one quarter. The rest is part of your job, I think. I mean, this situation is stable. It's not -- sorry, it is enough that we have announced the end of the destocking process. And let's see what happened with the general economy can be better or worse. Also, we never disclose numbers between the different areas with different factories. Restructuring is a continuous exercise that we are doing in all the plants. I can tell you, believe me that we are always monitoring the right level of labor for the activity of all the plants. So, this is the normal exercise. We are not speaking about the restructuring in Algeciras. We are speaking about adapting the labor contract to something more related with the new business model that we want. We are speaking about flexibility. Basically about flexibility and as mobility. And because something that I think you will understand very easily. We want people not to work in different lines of the same section, when the situation let us drive us to stop one of the lines and keep the other one at full production. So, we want -- we need this kind of flexibility in order to adapt the business model to our strategy. And to adapt the [indiscernible] business model and to something that we are doing in the rest of the plants. And something that is very normal in the rest of the industry in Spain as well. Because exaggerating a little bit. But in the past we were used to have one cycle every five years. And now we are having five cycles every year. So, we need this kind of flexibility to adapt our production to our order book and to adapt our performance to our order book and adapt also our payments, something that is going to be more positive for our employees. To adapt the production bonus to the new alloys that are more exigent from the quality side, more exigent from the customer side, but also they have less productivity. So, we will adapt our formulas for this new situation. And trying to modernize Acerinox. We have been using the same formula for I don't know how much, 40 years. I think it's time to change it. And I think it's time to adapt to the new situation. Something that everybody can understand today. Restructuring, we are not speaking about restructuring in any of the plants. We think that we are making the most of all the equipment, facilities, people and markets that we have. A good situation, very stable in United States in general. I think United States is the place to be not only in stainless steel. Europe is a little bit more doubtful. Europe have to find a way to move in this new economy and to resist to the imports and pressure from other areas. And this is what we are trying to do. South Africa in this new future that will -- going to be a less global market, a more regional market. We are moving South Africa to be a fully regional player. In the past, we were depending more or less 70% in exports. Now we are targeting to go to only 30% of exports. The rest will be for the South African market. And that's why we have developed mild steel in South Africa. We're increasing our customer base there, promoting the use of stainless steel and also being the platform to supply stainless steel to the whole African Continent. So, I think we are in the right places. And sometimes markets are going better or worse, depending on the times and locations. And we are very well positioned in our three major markets. And that's going to be part of our strategy, and this is part of our risk diversification that we wanted.

Bastian Synagowitz: Okay. Thanks, Bernardo, thanks for clarifying that. Just briefly on Algeciras. I think the plant is in a good location. Have you, for example, looked at a possible repurposing of the mill slightly away from stainless over to green carbon steel? Because I guess there are a couple of projects in Spain and at least in Columbus, you've obviously done a slightly similar strategy.

Bernardo Velazquez: No, we are trying to transform Algeciras in -- it's already a good plant and in a good location. And we are transforming Algeciras to be the best green stainless steel producer and to be the green -- the greenest and better specialty stainless steel producer. This is what we are targeting.

Bastian Synagowitz: Okay, understood, thank you.

Operator: The next question today comes from the line of Patrick Mann from Bank of America (NYSE:BAC). Please go ahead. Your line is now open.

Patrick Mann: Good day. Thank you very much for the presentation and for taking our questions. A bit of a high-level question. So, the nickel market looks like it will be an oversupply for the foreseeable future with additional supply coming out of Indonesia. And the price of nickel goes into the calculation of your alloy surcharge, but it can also affect the transaction price and the base price. What do you think the impact is going to be on the stainless steel market? And do you think CBAM, Carbon Border Adjustment Mechanism, means it's not going to be too big of an issue and will effectively have two different markets? That's the first question. And then, the second question, in Europe, do you think we need to see a reduction in capacity for the market to recover? As you pointed out, we've seen negative base prices, imports have not been that high to explain that, do you think there's structurally too much European capacity or is this just a very low demand period and you expect us to come out of it? Thank you.

Bernardo Velazquez: The answer to that -- it's a good question. It's a good question because normally in the good times we are able to restructure all the tariffs and apply the alloy surcharge. In the difficult times, normally we lose all the references and we are working with effective prices. The situation is changing. It's changing in the ferrochrome industry. Now China is the biggest producer of ferrochrome, of course, with South Africa and [indiscernible]. But they are -- normally the business, daily business in China is affecting to the ferrochrome prices and business in the rest of the world. Nickel pig iron, of course, is something that is disturbing the market. You know that we are very focused on scrap. We are probably more than 90% of our raw materials is scrap. But this -- at the end is the same. We have -- in Europe, we have four players. Four players with four -- the four own alloy surcharge formula. So at the end, we are speaking about effective prices. You cannot have a higher alloy surcharge and a higher base price as well because the market is paying what is acceptable. So, we don't mind at the end if it's going to change or not. It is good and it's comfortable for us and give stability for the market and this is happening in the American market. It's easy for us because you negotiate a price -- a base price for the quarter and then the alloy surcharge is what it is. And nobody discussed these numbers. But we don't care if we lose the reference of the alloy surcharge. Speaking about -- what is the second question? Capacity in Europe. I can tell you in Europe, we are now the steel producers. I was feeling very close to the tractors coming to Madrid from the agricultural problems because I wake up in the morning looking at the sky to see if it is a sunny day and we have solar power or if it's a windy day and we have a wind power and that's going to affect the energy prices. And also, complaining that we are going to be the greenest in the world but not because the green production is because we are going to close the plants if we cannot be competitive. So, what we are asking to the European Commission is the answer that probably also the agriculture industry is asking for. The answer is CBAM. CBAM is a good answer if it works. We have to monitor it before we apply it and we'll have several years to get adapted to the CBAM process. Until now we are only monitoring the CO2 emissions of the importers, some of them do not want to provide numbers. And then I think it's a little bit weak, the European Commission here, because they are applying what is called a reference, but the reference is a European reference and normally these players that do not want to disclose the numbers is because they are dirtier than we are in Europe. So we'll need some adjustment there. I think what is really interesting for this process is Scope 3. No, as I -- probably you have -- it's not the first time that you hear our explanation. Note that, you see, Acerinox is normally producing 30% CO2 emissions less than the world average. The world average that we have today is without China because they are not participating in the associations, so that I assume that normally, say our emissions are 30% less than the average. Don't speculate with this. And a vessel coming full of stainless steel from Asia to Europe, half emissions for more or less, around 30% of what Acerinox is producing in our normal production. That means that if you are using or you are importing material from Asia, your CO2 emissions are at least 60% higher than the Acerinox one. So, if our customers, our society start taking this responsibility, we are asking for sustainability, have to be at all levels, not only for factories, not only for plants, also for customers, families and everybody. And finally, we will buy a washing machine not only with the energy efficiency, but also with a certificate of how friendly is it with the environment. They are using recycled material, they are using low CO2 emission, the power, these kind of things. And Scope 3 is going to be very interesting for this. So, we just start reporting Scope 3. I think that will help -- will support this previous idea that the world is becoming more regional, so -- because the cost of emissions in transport are one of the highest.

Patrick Mann: Thank you.

Operator: The next question today comes from the line of Maxime Kogge from ODDO BHF. Please go ahead. Your line is now open.

Maxime Kogge: Hi, everyone. So I have the first question on the long products. This is a segment that has been declining very significantly over the past quarters. It's fallen to a historical low. So, can you help us explain what the situation there and what's it doing even worse than long -- than flat products or is it a question of end markets, of competition? I mean, this is a segment where you're the only European player, at least of the three big ones. So any clarification help would be helpful.

Hans Helmrich: Yes, the long products market has been affected globally by it. As you well said, it's mainly pretty much affected in Europe. We have started to see some recovery step by step, but it's still very far from what it was. And imports have been a key player to that in the marketplace in Europe and in North America. But we really think that with new products for the future, we'll be able to provide better solutions to our customers. And that market should be recovering step by step.

Maxime Kogge: Okay. And second one is on Haynes. Have you started to have discussions with local politicians, local unions and convince them that a European group is -- can be the best owner for the company?

Bernardo Velazquez: No, not yet. We cannot do it. We are waiting for the result of our offer and we cannot take actions in Haynes. Of course, we have discussed potential synergies. We have discussed potential these CapEx or necessary CapEx, but we cannot go further on this. I think what we have been speaking is with our friends in the Kentuckian government, the same that Haynes is speaking with their friends in the Indiana government, because I think we are too close, very close. And we have been both companies very supportive of the community, of the local community. I can tell you that NAS is a good example and they are always taking NAS as a good example of a good factory, a good business that is good with the community and integrated with the community, with employees and developing the economy of Kentucky. Haynes has a similar position in Indiana. And I think that a deal between two American neighbor plants is very -- is probably very welcome between the American politicians and unions.

Maxime Kogge: Okay, thank you. And perhaps the last one is, it's on your carbon footprint. So you point out and you're right to do that, that your performance is way above that of your two main competitors in Europe. But if I look at your carbon footprint, it's higher, actually, than the two other reference players. So what are you doing actually to reduce that gap? And how are you confident that you can close the gap in the coming years?

Bernardo Velazquez: We are intensifying the use of renewable energies, but we cannot go to 100% of these renewable energies because we are also working during the night time. I mean, and in the case of -- this is in the case of Spain. In the case of South Africa, in the case of United States, we are affected by the mix -- the country mix of both Kentucky and South Africa are areas where coal is important for their economy. And most power stations are coal power stations. So that's the only reason, because in Scope 1, that is the real one, where we can take our decisions and we can manage. We are the lowest in the industry.

Maxime Kogge: Okay, very clear. Thank you.

Operator: The next question is a follow-up question from Ioannis Masvoulas from Morgan Stanley. Please go ahead. Your line is open.

Ioannis Masvoulas: Yes. Thanks very much. Just a couple of follow-ups from my side. First, I appreciate you don't disclose divisional breakdown of earnings. But can you give us a sense of the utilization rates in NAS during Q4 and what you expect for Q1?

Hans Helmrich: Ioannis, I would say, NAS is around 80% and is slightly growing now in the Q1.

Ioannis Masvoulas: Perfect. Thank you very much for that. Second point, just on working capital. You made good progress in 2023, especially in the last quarter. Is there potential for more progress with further unwind in 2024 or shall we expect something more stable, especially now that nickel prices have also started to lift?

Miguel Ferrandis: As of today, working capital is not going to be a big driver in 2024. So, we understand we are finished with record, as I mentioned previously, mostly in all the stainless steel division. So, we are working historical minimum of inventories. So in that regard, the situation shall be depending of the ups and downs that may occur in the market. But from our side, we don't consider that this year is going to be a year with big relevance of working capital movements. So it shall be quarter-on-quarter, but not such relevant as has been in the last two years.

Ioannis Masvoulas: Very clear. Thank you. And just the last one on CapEx. You talked about €260 million this year. Does that include the contribution from Haynes once it closes in Q3, or is that excluding Haynes?

Miguel Ferrandis: No. It's fully excluding Haynes. This is the CapEx that has been approved and decided for the group in this year. Still is not including Haynes. We do not know when shall be Haynes finally integrating and consequently, at that time we may adjust the figure, but this is excluding Haynes. It's €260 million, more or less. Our standard has been align CapEx in -- historically with depreciation, it's going to be around €100 million more because the expansion programs were taking place. But this does not include Haynes.

Ioannis Masvoulas: Perfect. Thanks again. Thank you.

Operator: The next question comes from the line of Krishan Agarwal from Citi. Please go ahead. Your line is now open.

Krishan Agarwal: Hi, thanks a lot for taking my question. Most of them have been answered. A quick follow up from Bastian's question on the conservative guidance for the Q1. It's more of a clarification. Is there any kind of an impact you have considered from negative inventory valuation for the Q1 guidance?

Miguel Ferrandis: All the adjustment that could be done has been done. So, we feel very comfortable that all the stocks, all the material we have on the stock that could have experienced a loss in NRB sale already shall be done. So, it shall be depending on the market evolution, we are seeing improvement in terms of apparent consumption. Let's see if prices start to go up. So, it still is a bit premature, but we feel comfortable with the inventory adjustment already done and we have no yet -- no feeling of what shall be necessary to do at the end of March. Still is a bit premature but we did what was reasonable to take place at that time. If there is no further deterioration in the prices should not be necessary, it's such a big one, as you have seen, it has been decreasing quarter to quarter but still it's a bit soon. The market has a start a bit late this year. So, let's see how is the evolution and how is the prices to be allocated to the order book at the end of March. So, still it's very early for us for having such a view.

Krishan Agarwal: Very clear. Thanks a lot.

Operator: Thank you. There are no additional questions, so I'd like to hand the call back over to the management team.

Carlos Lora-Tamayo: Okay. Thank you very much for all of your questions and for joining us today. That concludes our presentation for the full year results. Thank you very much.

Bernardo Velazquez: Thank you very much.

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