• Adjusted EBITDA (Q4 2024): EUR62 million, up 27% from the previous quarter.
• Adjusted EBITDA (Full Year 2024): EUR213 million, a 17% increase year-on-year.
• Operating Cash Flow (2024): EUR192 million, a 30% increase year-on-year.
• Leverage (Year-End 2024): 2.9 times, below the initial target of 3 times.
• Steel Dust Segment EBITDA (2024): EUR170 million, a 25% increase year-on-year.
• Steel Dust Segment EBITDA Margin (2024): Improved from 17% to 21%.
• Aluminum Salt Slags Segment EBITDA (2024): EUR43 million, a 10% decrease year-on-year.
• Salt Slags Recycled Volume (2024): Increased by 18% to 426,000 tons.
• Secondary Aluminum Alloys Production Volume (2024): Increased by 2% to 171,000 tons.
• Zinc LME Average Price (2024): $2,780 per ton, up 5% from the previous year.
• Operating Cash Flow (2024): EUR192 million, up 30% year-on-year.
• Total CapEx (2024): EUR119 million.
• Net Debt (Year-End 2024): EUR619 million.
• Dividend (2024): EUR29 million, equivalent to EUR0.73 per share.

• Warning! GuruFocus has detected 6 Warning Signs with WBO:BFSA.

Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Befesa SA (WBO:BFSA) delivered a strong fourth quarter and full-year results, with adjusted EBITDA reaching EUR213 million, a 17% increase compared to the previous year.
• Operating cash flows increased by 30% year-on-year, driven by strong cash conversion.
• The company achieved a leverage ratio of 2.9 times, below the initial target of 3 times.
• Befesa's Steel Dust Recycling business delivered strong results in Europe and the US, with high capacity utilization rates.
• The company has extended its zinc hedging book to cover close to 24 months, providing earnings visibility and predictability.

Negative Points

• The secondary Aluminum business was impacted by a challenging automotive industry in Europe, affecting demand and compressing metal margins.
• The US zinc refining operations faced a EUR15 million negative contribution due to unfavorable market conditions.
• Chinese operations continue to run at low utilization levels, impacted by weak electrical furnace steel production.
• The Aluminum Salt Slags Recycling business saw a 10% year-on-year decrease in EBITDA due to lower aluminum metal margins.
• Befesa expects higher natural gas and electricity prices in Europe in 2025, which could impact operating costs.

Q & A Highlights

Q: Where do you see the current environment relative to the steel production cycle, and what kind of incremental upside would a recovery bring to Befesa? A: Rafael Perez, CFO: The steel production cycle varies by region. In Europe, we're at full capacity, so changes won't significantly impact throughput. In the US, increased production could fill our existing capacity, currently at 70% utilization. In Asia, particularly China, capacity utilization is low, offering room for growth if conditions improve.

Q: How should we think about working capital needs in 2025? A: Rafael Perez, CFO: Working capital outflow is typically driven by increased activity and revenues. For 2025, you can expect a working capital requirement of around EUR10 million to EUR15 million.

Q: What is the current capacity utilization at the Henan plant in China, and are there plans to reduce costs there? A: Asier Zarraonandia Ayo, CEO: The Henan plant is running at about 20% capacity. We are maintaining minimal staffing to control costs, and the plant is not cash negative. We expect overall capacity utilization in China to be around 50% to 60% in 2025.

Q: Can you give us an idea of the EBITDA uplift anticipated from the Palmerton investment in 2025 versus 2024? A: Asier Zarraonandia Ayo, CEO: The Palmerton project will contribute to an overall increase in US volumes. We expect an additional 5 million to 6 million tons in 2025, with further growth in 2026. This should result in an EBITDA improvement of at least EUR20 million.

Q: Are there any early signs of improvement in China, particularly in the residential construction sector? A: Asier Zarraonandia Ayo, CEO: We see a slightly better situation in China, with new contracts contributing positively. We expect a modest contribution of EUR4 million to EUR5 million from our Chinese operations in 2025, indicating a positive trend.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.