• Total Adjusted EBITDA: EUR56 million, up 15% year-on-year.
• Operating Cash Flow: Increased by 134% year-on-year.
• Net Income and EPS: Increased by 97% year-on-year.
• Leverage: Decreased to 2.78x from 3.4x in March 2024.
• Steel Dust Adjusted EBITDA: EUR49 million, a 37% increase year-on-year.
• Steel Dust EBITDA Margin: Improved from 19% to 25%.
• Aluminum Salt Slag EBITDA: EUR9 million, a 32% decrease year-on-year.
• Average Zinc LME Price: $2,838 per tonne, up 16% year-on-year.
• Operating Cash Flow: EUR34 million in Q1 2025.
• CapEx: EUR11 million in maintenance, EUR7 million in growth, totaling EUR18 million.
• Dividend Proposal: EUR25 million, equivalent to EUR0.63 per share.
• Cash on Hand: EUR105 million.
• Gross Debt: EUR718 million.
• Net Debt: EUR613 million.
• Senior Secured TLB Interest Rate: Reduced by 50 basis points to Euribor plus 225 basis points.
• 2025 EBITDA Guidance: EUR240 million to EUR265 million, representing 13% to 24% growth.
• 2025 Total CapEx Guidance: Below EUR100 million.
• 2025 EPS Growth Guidance: At least 40% growth.

• Warning! GuruFocus has detected 6 Warning Signs with BFSAF.

Release Date: April 30, 2025

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

Positive Points

• Befesa SA (BFSAF) reported a strong first quarter with a 15% increase in adjusted EBITDA to EUR56 million, demonstrating resilience in a challenging macroeconomic environment.
• Operating cash flow increased by 134% year-on-year, showcasing strong cash conversion capabilities.
• Net income and EPS saw a significant rise of 97% year-on-year, indicating improved profitability.
• The company successfully reduced its leverage to 2.78x, continuing its quarter-on-quarter improvement.
• Befesa SA (BFSAF) has extended its zinc hedging program to 2027, providing stability and an expected EUR20 million incremental EBITDA for 2025.

Negative Points

• The Secondary Aluminum business continues to face challenges due to a weak European automotive market, impacting demand and compressing aluminum metal margins.
• Planned maintenance shutdowns led to lower volumes in the Steel Dust segment, affecting overall production levels.
• The Aluminum Salt Slag segment experienced a 32% year-on-year decrease in EBITDA due to lower aluminum metal margins and higher energy prices.
• The company anticipates continued pressure from higher energy costs, particularly in natural gas and electricity prices in Europe.
• Befesa SA (BFSAF) remains cautious about the unpredictable political and economic environment, which could impact future business operations.

Q & A Highlights

Q: Can you explain the zinc Treatment Charges (TC) impact on Q1 results and the expected growth CapEx for 2026? Also, why does the EPS guidance seem conservative compared to EBITDA? A: The TC for Q1 was $80, as contracts allow us to apply the new TC from January 1st. For 2026, remaining growth CapEx will include EUR10-15 million for Bernburg and potential projects in Poland and France, capped at EUR100 million annually. The EPS guidance is conservative due to uncertainties in financial costs and taxes, with EUR1.8 as a bottom estimate.

Q: What zinc prices are assumed in the 2025 EBITDA guidance, and what is the expected capacity utilization for the US Steel Dust business? How might tariffs impact your business? A: The guidance range considers zinc price volatility, with last year's average at $2,780. The US Steel Dust business is expected to reach 75-80% utilization, improving to 85-90% in subsequent years. Tariffs could positively impact US operations by increasing local steel production and prices.

Q: What factors contribute to the guidance range of EUR240-265 million in EBITDA? A: Key factors include EUR5 million from US Steel Dust volume growth, EUR5 million headwind from Secondary Aluminum margin compression, EUR15 million from zinc refining cost reductions, EUR3-5 million headwind from energy prices, EUR18 million positive impact from lower treatment charges, and EUR20 million from zinc hedging.

Q: How did the Steel Dust and Salt Slags segments perform in Q1, and what is the outlook for Secondary Aluminum? A: Steel Dust margins improved due to better treatment charges and hedging, despite lower volumes. Salt Slags margins were lower due to seasonal volume impacts and energy costs but are expected to recover. Secondary Aluminum faces uncertainty due to high scrap prices and weak auto demand, with a potential EUR5-7 million negative impact.

Q: What is the expected EBITDA per tonne for the US operations, and why might tariffs be beneficial? A: The target EBITDA per tonne in the US is EUR120-150 over the next few years. Tariffs could boost US steel production and prices, benefiting local operations.

Q: Can you provide more details on the FX exposure and its impact on the business? A: Befesa does not hedge FX directly. Sales and costs are matched in local currencies, with zinc price hedging done in respective currencies. The unhedged portion is in dollars, and while a strong dollar is preferred, FX fluctuations have limited impact.

Q: How is the smelting business performing, and what is the expected breakeven point? A: The smelting business is expected to reach breakeven by year-end, with progressive improvements throughout the year. Q1 showed a EUR3 million improvement compared to last year.

Q: What are the expectations for treatment charges in 2026, and how is the Chinese market performing? A: It's too early to predict 2026 treatment charges, but current low levels are beneficial. In China, steel production remains stable, with expected capacity utilization of 60-70% by year-end.

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