Hello, and welcome to today's Acerinox 3Q 2022 Results Presentation. My name is Jordan, and I'll be coordinating your call today. If you'd like to register an audio question, you may do so by pressing star, followed by one on your telephone keypad. I'm now gonna hand over to Carlos Lora-Tamayo, Chief of Investor Relations, to begin. Carlos, please go ahead. Good morning, everyone, and welcome to the Acerinox third quarter 2022 earnings conference call. Today, the presentation will be led by Bernardo Velázquez, CEO, Hans Helmrich, COO, and Miguel Ferrandis Torres, CFO of the group. After our prepared remarks, we will open the line for questions. Please note that all the forward-looking statements are subject to various assumptions as noted in the earnings release and shown on this slide. Before getting started, let me remind you that this conference call is being broadcast on our website, acerinox.com. Now, I would like to give the word to Bernardo. Please, Bernardo, go ahead. Thank you, Carlos. Good morning, everyone, and thank you for attending our presentation. Today, we are presenting a strong set of results, the highest in our history. Most probably, we will beat our historical record that we obtained in 2021, and 2022 results will be most probably the highest ever. We have demonstrated that we can take advantage of the good cycles, and now, after an exceptional Q2, we will demonstrate that we can control the controllables. The controllable part of the cycle in the downturn of the whip effect that we are living. Excess of optimism in the market led to high imports and high stocks, and now we have to correct the excess of the party, of this party. Probably, the real economy is not so volatile and is not suffering so much. If we control our controllables, the hangover will not be so severe. You can see, starting with sustainability, that we are making progress. In the current scenario in quarter three, with the production adjustments based on maintenance plan, maintenance breakdowns, and also adjusting our production to our deliveries, it is difficult to keep the same level of efficiency in the lines. That's why some of our KPIs are not making progress. In general, we are very committed with sustainability. We are making progress in the long term. We are fixing more aggressive targets, and we are very, very active in the cultural change. Having a look at this impressive set of results, we must say that we reached the highest EBITDA ever with EUR 1.2 billion after a provision of EUR 65 million after an inventory adjustments of EUR 65 million that will put the company in better conditions for the coming months. I think it's also so important that due to our strong financial position, we have been able to control our working capital and even increasing and managing our stocks in order to make the most of this opportunity. When a broken market, especially in Europe, we prefer not to enter in this bargain. We prefer to keep our stocks, our inventories, and manage it carefully so that we will release in better conditions most of this working capital in Q4. This exceptional situation and this our trust in our situation and the cash generation that we expect has led our board of directors to propose to the shareholders for the next shareholder meeting to increase the dividend to 0.6, which means a 20% increase in our dividend and a GL of around 7% based on our current prices. We are very proud of these results. If we have to increase our working capital, that's something that we can manage, that we can control. This control the controllables is our key message, and you will see that in Q4. Good morning, everyone. This is Hans speaking. Let me take you through what happened in this quarter. We had a good quarter in the weaker market conditions. In the different markets, we had a very strong performance in our High-Performance Alloys market. Stainless business has been going through the end of what we consider restocking process in all the markets. The current demand has been weakening through the quarter. It is true, and you all know that situation in all the markets remain difficult in regards to the cost inflation, which is high in all the markets around the world. If we go through the main markets, United States is our main market. Flat products apparent demand has decreased quarter-over-quarter. Imports started to decrease. Inventories have peaked into what we consider was the highest level and started to reduce through the quarter. Stable base prices remain in the North American market, and the Section 232 remains in place as the trade activities continue to be the same in the United States. In Europe, flat products apparent demand decreased as well in Europe as in the United States in quarter-over-quarter. Prices impacted by market conditions, as we all know. Evidently, the most difficult situation is in regards to energy costs, both electricity and gas, which have been very high through the whole quarter. If we go through the rest of the world, lockdowns in China affecting the domestic demands. Excess production has been putting pressure as well on prices in Asia and in the rest of the world. We go briefly into a Acerinox highlight as explain by Bernardo previously. We have been focusing on controlling what we can control, so we have been putting first adjusting our production to the demand and the seasonality of the third quarter, which is traditionally affected by seasonality, mainly in Europe. Adjustment of the production to demand, including flexing costs in all the facilities so that we can really flex, and that's what we've been doing. We have some planned maintenance activities in the quarter that we have foreseen to be done, and we did those very correctly. With that, I will pass over to Miguel on the financials. Thank you, Hans. Okay, let's concentrate on page number three to have a quick look at the financials of the third quarter. First of all, what appears evident is that in the stainless steel division mostly, it has been a weakness in the apparent demand. It's clear that the restocking process took place in the second quarter, and actually in the third quarter, we are seeing a change in the trend, and also at the end, combined with other factors, as the seasonal slowdown and so on. This has been the first effect. In any case, we are presenting today an EBITDA figure for the quarter of EUR 241 million. As you know, we do our utmost to be predictable. In this line, when we released the second quarter figures, we anticipated that the EBITDA third quarter should be in line with the average of the previous year, which was the historical record. This figure is absolutely in line with that message. At that time, several of you commented that this appeared to be a pessimistic figure, and what we have been explaining to you in the last months is that at the end, we prefer to be prudent because we understand that with all the uncertainties in most of the areas in these days, we understood that probably at the quarter end, some inventory adjustment should be made. The reality has been exactly that. We reached in September, especially with the strong correction we are seeing in most of the market, and mostly in Europe, it was necessary to make some inventory adjustments to put our inventories on net realizable value. This has been a strong effect in the quarter of EUR 65 million, and consequently, we have been able to keep our guidance. What's remarkable is that EUR 241 million, which is average of our best year in history, has been done after a strong inventory correction of EUR 65 million. This drives to an operating cash flow of EUR -50 million in the quarter. This is going to be strongly corrected in the fourth quarter. At the end, we give a figure with a net financial debt of EUR 763 million, that it's higher than that one of the Q2. We have had relevant issues that at the end have been concentrating in the quarter that had not expected to take place in the fourth quarter. One strongly relevant is that the tax payments for income tax of the previous strong quarters has been concentrated in this Q3, mostly in July and September. Only by this issue, EUR 140 million have been cashed out for paying taxes, which is higher than the whole amount of tax paid in the previous years. This is a relevant figure for re-concentrating in work in one quarter. In addition, it's the quarter in which we have paid the dividend, EUR 150 million to our shareholders, and in addition, we are involved in the buyback program, as you know. Only for distribution to shareholders, EUR 190 million plus cash out of taxes of EUR 140 million has driven to this increase in net financial debt. In addition, in the relevant issues of the increase in net working capital, and this has been previously explained by Bernardo as well as Hans. We are increasing working capital in the High-Performance Alloys that we shall take later as a consequence of the very good momentum we are experiencing. The increasing working capital also in the stainless division has come as a voluntary decision in order, as Bernardo explained, for not getting nervous. We can keep our controls in place and not accept desperate orders that were coming to the market. The correction normally in the downward trend creates a strong cash generation, but in this time, as much as the market was broken in August and most of September, we prefer just to keep the stocks and not enter in desperate bargains, as has been mentioned. As a consequence of that, the strong cash generation as a consequence of working capital reduction is concentrating mostly in the fourth quarter. It has been a delay probably of around one month, and we shall appreciate it in the fourth quarter. This is the most relevant for explaining in the group. When we move to the stainless steel picture, what's relevant is, obviously, consider the, and you shall appreciate the reduction in volumes in the production. The planned maintenance outage has been taking place in the three main plants. In Acerinox, we have, we had a program maintenance shutdown for July and August in Martinswerk and in the hot rolling, and this has been also extended to September due to the situation as well as the energy prices crisis. In Columbus Stainless has been also a program maintenance in the melting shop, and in North American Stainless also in the hot rolling. This is because of this, we are seeing this effect in our production figures. In addition, we are experiencing in the stainless the net working capital increase by the situation that I mentioned previously. If we would move to page eight, we enter in the High-Performance Alloys division, this is absolutely a nice topic now to explain. We are experiencing a very good momentum in the High-Performance Alloys division. Our order book is full. We are having records, and we are obtaining records in the HPA division. VDM is having its historical record performance. If you see the accumulated EBITDA up to September is EUR 104 million, substantially above the figures that we were forecasting when we made the acquisition of VDM. What is remarkable also is that we have obtained in this third quarter an EBITDA figure of EUR 39 million. You can see that the one of Q2 was forty-one, so we have had a very strong consecutive quarters in the High-Performance Alloys division. Probably the one of the Q2, which was remarkable, but also had a tailwind of the nickel appreciation. In the case of the Q3, it's purely the good momentum and the good margins and the selection of products of the best margins we are facing in this time, in which the order book, as we are saying, is full. We have seen a recovery in most of the sectors for the High-Performance Alloys, and this is more or less providing this good figure. As a consequence of the good momentum, it's true that also the working capital is moving up, but this is absolutely in line with our plants running full, and especially a lot of material to be actually in process in our production level. In the cash flow has been and there has been a positive also free cash flow in the quarter in the High-Performance Alloys. As a consequence again, even though the working capital of the very good momentum achieved in the alloys division. If we go to the cash flow, which is obviously a relevant topic in this quarter, affected by the circumstances we are talking about, we want to clarify the EBITDA has been relevant in the quarter and in a change of the trend quarter. This EUR 241 that we are proud is the average of our best year in our history. It's a relevant figure. At the end, in all the cash out, we are appreciating the circumstances that we have been mentioning. A strong concentration of cash outs in taxes. You are seeing also in the dividend and buyback, and especially the increase in working capital that we have been talking about. This is something that shall be reverted by far in the fourth quarter, but in the third quarter we have had this concentration of all these facts. When we move to the nine months, the EBITDA generated as you can appreciate, we are in this record of figure of EUR 1,196 million EBITDA. It's true that up to now, the increase in working capital take most of this, but as much as we must see, appreciate it in a longer period, the stronger reduction that is coming in place in the fourth quarter should definitely not only move us to have a strong and relevant operating cash flow figure, not only for covering our CapEx, but also for covering the strong distribution to shareholder that is coming in this year. In addition, we shall provide final figures for the year with a strong reduction in debt compared with that one coming from the previous year. We are coming to the end, and I would like to try to explain what is the frame of our operations. Now, first of all, we all know that we are in a very special geopolitical situation. Now, I think it is difficult for us, but it's also very difficult for you to predict what can happen in the coming months. Because, you know, probably in the last decades, we haven't lived a moment like this with so many uncertainties. The visibility is very limited, especially in Europe. Anyway, I think that, due to the characteristics of our market and due to our previous performance, and you must understand that we are better prepared than other sectors to work with no visibility. We have developed, as we have mentioned many times, a very high level of flexibility to be adapted to these cycles. If somebody can do or can manage and can sail in these turbulent cycles, this is stainless steel and this is Acerinox. Second is that we have our specialist market conditions, as I mentioned at the beginning. This is part of the, what we call the normal cycle, that this time has been increased due to the excess of optimism in the first part of the year. I mean, that excess of optimism led the market to import more than needed, and then the stocks are high, and now we have to correct. This is the normal part of our cycle that we can manage. Now, in this case, amplified by the whip effect. Under this situation, with less visibility and we have to reduce our stocks and control our productions to. We are focusing on what we always do, is controlling the controllables. This is what we all mentioned. You cannot change the general economy. We cannot change our market, but we can adapt our company to the market condition, and this is what we are doing, especially focused on efficiency, flexibility and capital allocation. Number four that we mentioned is that, even as Miguel mentioned, I think we have called this set of results for Q3 resilient. Because even in a worse scenario, in a downturn, we are reaching a level of results that is more or less the average of the highest record of our history. We cannot say that this is bad. I think this is very promising. Now that in a downturn, we can maintain a high level of EBITDA generation. Of course, diversification is helping us. Now, this is very, very important. We are transforming our group. We are moving our stainless steel production to higher added value products and more high added value customers, and also, you know, the difference in the cycles, the rhythm of the cycles in HPA and standard steel make us more stable. Because today, HPA is in a very good situation. We have a very strong order book and also a very important EBITDA generation that is contributing to this stability. We are focused, as Miguel mentioned. I want to insist in this, capital allocation because, with a strong balance sheet and a very reduced debt, we can play with this figures, and we can adapt our company to the trend to get the most of the situation, and this is what we are doing. We will generate a strong cash in Q4. We haven't give our products for free, not in a momentum that was complicated in the downturn, at the beginning of the downturn, especially in the European business. We will adapt our company in order to get the best results for our shareholders. I think this is important, and this is part of our trust in our future. We will control the working capital. Even having a Q4 EBITDA that's going to be lower, not bad, than Q3, we will remain resilient. We'll hope, and we are fully convinced that we will get the highest results ever. We believe so strongly in the future and in our situation that we have proposed to increase our dividend from 0.5 EUR per share to 0.6 EUR per share, which means a 20% increase. You know, this, we understand that the market consider the volatility of our business as a higher risk. I mean, if you want to invest in a higher risk company or a higher risk sector, you are expecting to receive a higher yield. Now with this, at the current share prices, we will see, we will put our company in a level of 7% yield, what I think it is very, very interesting for the shareholders. Finally, to remark that we think and we are fully convinced that Acerinox is in the best shape in its history. Now, first of all is the general trends, the macro trends. I think that we all agree that the world is becoming more regional. It's becoming more regional because we have seen with all the supply chain disruptions, with the COVID, with channel problems and with everything, that you cannot trust only in a supplier that is 1,000 kilometers away from your site. Now, also trade defense as well are contributing to this, no? Are making imports less attractive. It's not only that we will have less import pressure, but we will have more sales in our local markets and at a better price, but also that with this situation happening not only in stainless steel, but in the whole industry, in our customers and in the customers of our customers, at the end, that would contribute to a higher industrialization in Europe and in United States. We trust that these movements will make industry to play again a key role in United States and Europe. Now, for many years, we have been suffering the globalization effect. Now all the production moving to Asia, not only new production of stainless steel that was built in Asia, but also most of our customers moving to Asia. Most of the consumption growth was concentrated in that region. Now the situation is reversing, you know, and more industry will come back to Europe and United States. We will have higher consumption in a more regional world. We will act as we are, you know, a global company, a local company in a global business, you know. I think we are locals in United States, we are local in Europe, we are locals in South Africa, we are locals in Asia. This is. We are not based on export. We will not suffer trade defense. We will not suffer this effect of regionalization because we are regional in all the markets that we are present. That is almost the whole world. Important also to mention the transformation again of the Acerinox group with HPA. I think that we are demonstrating that was a good movement and already VDM is contributing to the stability. Balance sheet and a strong cash generation is something that we have insisted very much because we have a company in a very good financial health. Operational excellence, focus on capital allocation, control the controllables. We know how to do it. We have done it before. I think the current management team it is the third crisis that we have suffered or we have lived. You can call this situation today a crisis. This is not, it's not so clear. Let's see what's happened. Trust in the management team that we have. We know how to do it. We believe that the current situation of our company is not reflected in the share price. I think the share price is not reflecting the health of our company. Probably, we are not the only company suffering this situation. We'll do the best of what we can do, what we can control, and also we would like to express our trust in the future of our company, and to thank our shareholders, our loyal shareholders to invest in Acerinox and increase their remuneration 20%. That will, we expect will contribute to recognize the efforts to be a shareholder of Acerinox in a very, very volatile business. We'll have new opportunities. Our market is very healthy. Consumption is good. Stainless steel, high performance alloy will be part of energy transition and circular economy and all these things. Our future will be better than our present. This is what we can say. Thank you very much. Bernardo, Hans, Miguel, for the presentation. Now, we can open the line for the Q&A session. As a reminder, if you'd like to register a question, please press star followed by one on your telephone keypad. If you change your mind, please press star followed by two, and please ensure you're unmuted when speaking. Our first question comes from Tom Zhang of Barclays. Tom, please go ahead. Hi, good morning. Thank you very much for taking our questions. I have two. I'll take them one at a time, please. First, just on the Q3 apparent demand in Europe, you know, you're saying it's down 22%. Clearly, there are a lot of issues there in terms of, you know, seasonality, destocking, maintenance, import pressure. Could you maybe run us through how you see each of those developing? Subsequently, do you see, you know, demand declining further in Q4? Or is it more a stable outlook in Europe? Thanks. Thank you, Tom. Thank you for the question. It is difficult to predict what's gonna happen. In general, what we see is that imports are going down in Europe and in United States. Especially Europe, it's very difficult to predict because you know that we are now in the safeguard measure system. The imports have a quota per quarter. Normally, imports are very important in the first month of the quarter, and then is going down until in the third month, it's almost negligible. Still we are finishing October, but we don't have the numbers of October. We see less pressure in the market, but we don't have the numbers to warrant this. In United States, we can clearly say that the imports are now going down. That means imports going down doesn't mean that the apparent consumption will increase. I mean, with imports going down, apparent consumption will also go down. What is important, there are also stocks will go down. This is what we need. As I understand your agreement in Spain on the Melt Shop, you're able to run two-week-long period layoffs. It sounds like your net working capital release strategy is to sort of run down inventories, which implies you need to reduce your melt production. How comfortable are you with the sort of labor agreements that you have in place? Or do you think you might need even longer shutdowns into winter beyond that sort of two-week period? You know that, I think, we took the right decision in March this year when electricity prices started to go up. When I accepted a temporary layoff with our workers in the Spanish plant. This is temporary. I would like to insist on this. This temporary layoff let us be flexible in our costs, in our labor cost. We are adapting our labor force to the current situation. We decided not to put more pressure on the market. I think this is important. It's part of the decisions that we have taken for the last part of the year. We didn't want to put more pressure on prices in the European market. We didn't want to burden our stocks. We are keeping a reasonable level of production adapted to the level of demand that we have. Now, I think this is a responsible attitude, and we are applying the temporary layoff in order to be responsible with the market. For the coming quarters, who knows? It will depend on the stock situation. We think that the real demand is not so bad. No, of course, it is not as good as it was in the previous part of the year, but it's not so bad. That once the distribution sector will adapt the stocks to the current situation, to the current expectation that is more on situation, then we will comeback to production again. I think this is important to distinguish now that in the stainless steel business, more or less 50% is end users, 50% for the producers, for the mills, 50% the distribution, 50% more or less is end users. Distribution sector it is full now, so they are re-adapting the purchases in order to regularize their stocks. In the end user business, we are delivering our orders that we have already contracted with our customers, and the situation is more stable. Once we will stabilize the distributor business, then we will be back in the higher production level again. Okay. As a sort of base case, even though you had these maintenance outages in Q3, you would expect your mill production to, you know, roughly stay flat in Q4? Do you think risk that it declines even further? Tom, this is Hans. We expect it to remain at similar levels on a global basis, talking about the whole situation in all the factories around the world. As Bernardo Velázquez said, we have the opportunity definitely in Spain, all the facilities that we have for flat and long products to flex according to the market demand. We can use as many days or weeks as we need, depending on the demand. Okay. That's clear. Thank you. I'll turn it back. Our next question comes from Bastian Synagowitz of Deutsche Bank. Bastian, please go ahead. Yes. Good morning, all. My first question is just on your outlook. I appreciate it's obviously difficult to frame in this environment, but in the past you've been always giving us a little bit of a firmer steer as to where you see the actual EBITDA guidance. Is there maybe a floor for fourth quarter EBITDA you could point us towards? Like a level you would be feeling comfortable with. Could you let us know how far, if any, you're still expecting any further inventory payment at current metal prices? Could you maybe also just quantify the degree of working capital release you're expecting in the fourth quarter? Miguel, I guess you already have been saying that you expect a healthy reduction versus last year's net debt, but maybe if you could just give a bit more color on this, that'll be great. Those are my first two questions. Thank you, Bastian. It's difficult, as you said, there are several uncertainty issues for making predictions. In any case, let's try to be a bit rational. With the inventory adjustments, our inventory actually is properly valued on the actual market circumstances. As appears in July, there are still several question marks of what's going to be the situation for the first quarter. On a regional basis, we understand as appears in the results report that it should be improvement in the market for the first quarter as much as those inventories that are actually more than covered by the huge wave of imports that came in July are neutralized. This should be the logic. We understand that the imports are going to be rationalized, so consequently the level of stocks shall also normalize. This should be more or less a regional scenario, but we must keep in mind that there are several uncertainty factors, especially in Europe. We must combine the war, the consequences of the war, and also the energy crisis and the skyrocketing prices of energy, mostly in Spain in this case. As it matters in other countries, but obviously we are affected by the energy prices in Spain. This is what makes it difficult to make predictions. Consequently, we say that the EBITDA shall be lower than the third quarter. The EBITDA shall be lower than these EUR 240 million. Regarding on that, this appears to be clear. Having said that, what I can say is that we have obtained almost EUR 1.2 billion EBITDA, 1,186. The consensus at Bloomberg gives us an indication of the year of the average of all of you in the range of EUR 1,350 or something like that. We feel comfortable with that. We cannot be more accurate on further predictions or be more aggressive because we do not know what's coming. If we should just repeat, which is not going to occur, we should be in EUR 1,400 and something. We are going to be below that. Maybe with the Bloomberg consensus, we are comfortable. Who knows? Three months in advance, we feel comfortable with the average of all the analysts that are appearing in the Bloomberg. This is the most that I can say at this time. Bastian, this is Bernardo. Yeah. I'd like to add something that is interesting. You know, the same that most of the economists are surprised that we are moving to a recession or a slowdown of the economy with zero unemployment in many areas, but it's unusual, it is also unusual that we are living a downturn situation in the stainless steel business with a stable nickel price. This make the situation unique in our normal cycles because first of all, because the adjustments in inventory will depend on nickel price and also because the level of correction in most of the distributors will also be linked to the nickel price. If nickel is stable, you don't have all the necessity to cut your stock so much. This is also interesting that this can make this cycle less severe than others. Let's see. Thanks, thanks for the color on the EBITDA side as well. Just on a quick follow-up on that one. If we look through your regional units, is it fair to assume that basically in the fourth quarter, Europe and Spain will basically be EBITDA loss-making. Africa, Peru, maybe closer to break even or also negative. And then particularly, obviously now standing out with a very, very significant decent, positive result. Is that like a fair reflection of how your regional EBITDA contributions will likely look like? Bastian, you know us very well, but I cannot say yes or no. I think that we never give the numbers per company, you know, and we cannot answer this question. Okay, fair enough. On the working capital point, is there more color you could give us on the working capital release you expect? Yes. The working capital is going to be strong. As I explained previously, we are more or less experiencing this strong reduction in the working capital in the first quarter. It should have started earlier, but as was mentioned, you know, with this very big wave of imports that arise in Europe, for example, in the month of July, the first month of the second quarter. Keep in mind that these imports were material that was contracted in the second quarter when the price gap between Europe and Asia was around EUR 1,800 according to CRU. Even though the duties, even though the freight or whatever, obviously it was very, very favorable for Asian exporters to place material in Europe. All of these entries in July have been creating this overstocking in the distribution. At the end, the distribution sector was absolutely quiet and as has been explained before, was not willing to take any material unless at crazy tenders that we didn't want to enter and we didn't have the necessity to enter. Maybe some players could be more cash involved. Was not our case. Most of September we have been very, very quiet with the distribution. This has now been reappearing, so this is going to concentrate more in the fourth quarter. This reduction in working capital that normally takes place in the change of the trend, this time is going to be appreciated in the fourth quarter because in the third one, this effect in the seasonal slowdown of the summer period has created, at the end we have strongly began to reduce it late September. Then consequently October to December we shall have a huge effect. As I said before, and you know how prudent we are in terms of capital allocation, the operating cash flow that we are generating in the year shall cover obviously all the CapEx, but also the very strong increase in shareholder remuneration that we are contemplating this year, that is going to be roughly EUR 330 million. At the end we are providing year's strong figures in terms of cash, but most of the cash generation is going to come in the fourth quarter. Let's keep in mind that in the first quarter the momentum was excellent. In the second quarter we have the crisis of the nickel at LME, so nickel prices were rocketing. In addition, we had our successful strategy at that time of assuring the supply of raw material, but paying in cash. Obviously this increased strongly the second quarter working capital figures. In the third quarter we have more or less delayed the stock reduction by the reasons I mentioned. Consequently, all these effects are the ones that should revert in the fourth quarter. The fourth quarter is going to be a very strong quarter in terms of working capital reduction and consequently cash generation. There are not going to be strong cash outs in taxes or in repatriation because this has been concentrated up to now. As a consequence, most of the working capital reduction shall go straightforward to the cash generated and to the reduction in debt. Okay. Okay, thanks for the color. My last question is, coming back actually on strategy around Peru, which obviously we didn't see you selling during the very strong upcycle over the past two years. Do you still believe that you will be able to find a strategic solution for Peru? If that's not the case, what are your plans to basically generate an appropriate return through the cycle with these assets? Bastian, thank you for the question. You know that we are always open to every possibility, you know, but Peru is now performing well. I mean, this is not a problem for the group. You know, I mean, given this position as a global company, you know, we can supply, you know, the international customers from all the parts of the world. Peru is not a problem as you can think that it was before. No. We are making profits in Peru, and the situation is healthy. I mean, when you say you're making profits, obviously we know the last obviously six quarters have been very strong. Before obviously the business was probably not as stable. I guess for the last six quarters, obviously pretty much all assets were generating decent returns. When you say you're profitable, does it mean you basically really expect a more reliable sustainable return in Peru also in the quarters ahead? I think we started to be positive in Peru before the tailwind of this situation. We adapted the strategy there, and we selected the group of customers that were giving us a better margin. Better margin because of the exigencies of the sector, or because last time more special materials that is not. Big competition that, you know, the Chinese or Indonesian are out of this range because of the special thicknesses or because of the special chemical composition, whatever. We have been able to manage this and to find our niche of the market with less production, but keeping our level of competitiveness. I mean, in the good situation with the tailwind, we have been increasing our production again and trying to pick, you know, because the situation was good for everything, you know. Now we are back. We have started back to the previous strategy and we are comfortable there. Okay. Thanks, Bernardo. Anyway, Bastian, if we have an opportunity, we will study it. Our next question comes from Tristan Gresser of BNP Paribas Exane. Tristan, please go ahead. Yes. Hi. Thank you for taking my questions. First, please, can you discuss a little bit market condition in the U.S., and also why you remain so confident there into year-end and maybe into next year? We've seen some weakness in base prices, I presume not from your side, but also some appliance maker cutting guidance, warning of weaker demand. What makes the business so resilient, and what makes you so confident about the near-term outlook there? Thank you. Okay. Thank you, Tristan. Thank you for the question. I think the situation in United States is totally different. I've been in United States, visiting our plant and visiting some customers with Hans a couple of weeks ago. You know, I think that the situation is totally different. Nobody's speaking about the war there, and nobody's speaking about the energy crisis there. I mean, the frame is much more stable and much more flat than can be in Europe, you know. The situation for our customers is good. Our confidence is not based on general economic numbers. We are not economists. We are only considering what the information that we have received from our customers and mainly in every sector, because the stockists are speaking about this digestion of the excess of stock in a few months. You know, it can be from three to five, depending on the level of consumption, depending on the seasonality, because now you know that United States will start in November with Thanksgiving and Christmas in December. But they are pretty confident that they will digest the excess of stock very soon. I think that the distributors, they are service centers, are adapting also a very responsible strategy. They are keeping the level of prices and that makes the American market much more stable than the European. Second, in all our conversations with end users, including appliances, you know that the General Electric plant is our neighbor plant in Louisville, just a few kilometers away from us, and we were there. They also think that they have been living an exceptional period during the COVID, you know, because people, they were investing in their own homes and now the situation is becoming normal, but normal is good. The prediction for next year are good even. People do not want to have a long-term view, you know. Normally at this part of the year, we would be speaking now about deliveries for six months or even for one year. Now in most of the markets, customers, and also we are comfortable with this, we are speaking about three months visibility. They are reasonably optimistic for this next three months. That's it. That make us be so comfortable with this. Hans, if you want to add anything. Yeah. We have had the opportunity to talk to many customers, both on the distribution and on the end customer consumer. It's exactly right what Bernardo said. It's true that our customers still have some backlogs of production from previous months. They are having labor needs in the marketplace in North America, which is very important, and that's making them being still optimistic about the volume remaining at historically good levels, so that they can continue with the current market situation. All right. That's helpful. My second question is about the commentary you made about Q1, and obviously you expect some improvement. When you talk about improvement, are you talking about demand, prices, and also EBITDA maybe to increase quarter on quarter into Q1? That's my second question. Thank you. Of course, the Q1 is too far. We never give a forecast for more than one quarter. What we expect is that during Q4, during Q3 and Q4, most probably, the market will absorb and will digest the excess of stocks, and then the situation will improve in some somewhere in Q1 next year. We cannot tell you exactly what will happen. I think this, if the situation is better, if the stocks are lower, are normal in Q1, then. So we're both done with our count. Okay, fair enough. Thanks a lot. Our next question comes from Patrick Mann of Bank of America. Patrick, the line is yours. Thank you very much. Two questions, please. Just on, you know, the tough environment, it can throw up opportunities. Is there anything you are thinking about for any potential M&A that you might embark on in that, you know, given that I think a lot of the smaller producers or distributors are under quite a lot of pressure here. The second question, you kind of spoke about adjustments to production being mainly demand driven or adjusting to demand. Maybe you could just talk a little bit about how energy prices play into, you know, your production decisions, and whether that's gonna be a new sort of operating parameter for Acerinox in Europe going forward. You know, kind of. Yeah, I'll leave it there. Thank you. Hello, Patrick. Thank you for your question. You know, we are continuously looking for opportunities. You know, this is something that we are monitoring all the time, and it's part of our activity. As you said, you know, the challenging conditions probably will arise opportunities. We are considering this. Of course, we don't have a decision. Of course, we haven't chosen the right or the next movement, but we are always focusing on this. Based on our success in VDM integration, we are happy to be a participant in this sector. Maybe, Hans, you can answer. Yeah. The second part. Hi, Patrick, this is Hans. What you said is correct. We have the ability to flex our production, based on both conditions. One is the market demand and the situation in the market, and secondly, as well, the energy costs, depending on the energy costs. The agreements we have with the unions, and they have been very collaborative in this sense, allow us to make those decisions as we need in a very short term, and we have done it both ways. Initially, the first step we did in the second quarter was already connected to this situation, energy cost situation in Spain, and we have been using it in both cases. Thanks. Maybe kind of related to that, you spoke about you know, deliberately holding back on working capital inventory not to sort of sell at fire sale prices. How do you assess that? Do you kind of compare what prices are relative to replacement cost, either produced in Europe or imported, and then kind of set that as a floor for what you'll sell at? Yeah, just trying to understand what, you know, what's the kind of minimum you would go to, or how you determine whether a price offered is for inventory that you've already produced, whether that's, you know, a fair price or whether you should sit out the market and wait. Let me explain a little bit about the price situation in Europe, and then you can just follow with the answer. I'm sure that you have been in a flea market, no? When you are looking something that you are not interested because you don't want to buy it, normally the seller offers you a very low price, and you can bargain a lot. This is what is happening in the European market. Now, with summer times, with the seasonality, with the lower perspectives and everything and higher stocks, you know, mills want to increase sales to customers, to distributors that do not need these materials. So what are they doing? They, "Okay, I will buy it if you offer me a very discounted price." This is not the market price. This is just an opportunity price. If somebody is desperate to make cash or if somebody need desperately to make cash, they can go to this level of prices. This is not our case. No. We have a comfortable financial situation. We don't need to enter in this situation, so we are keeping, you know, control of our business, and we are like saving, you know, this material, saving these future profits because we think that in the future we'll have better opportunities. We don't need to be. We are not desperate to sell today. This is the idea. What is market price? For the last months, there was no market price in Europe. It was just opportunity price. Now that the situation is becoming more stable, we will see the level of stability because probably as imports are going down, you know, the situation, the stocks will go down, and the situation will be more normal, and we will go back to normal levels. These normal levels will include an extra. Not an extra, I mean, it's not in the formula. No. I mean, we'll include the cost of energy in Europe. That is the same for the Germans, for the French, for Belgium, for Spain, you know. We are all living in this energy crisis, and we will have to reflect the situation in prices. That will be in a stable situation, and that's why we are not participating in this bargain. Okay. That makes sense. Thank you. In addition, just for your understanding, your question regarding the inventory adjustment. As you know, we are extremely conservative, so what we make at the end of the period is that We take all the items we have in our stock that compare with our order book and our order book entry and accepted, which is a realistic order book. Obviously, we are not taking that bargain that Bernardo has been explaining, but the order book that we are already having, we should be the reference of the prices. Then all the items in our stock that should reflect a loss according to that accepted order are the ones that are adjusted. This is the most conservative way to proceed. We do not make an average from those profitable with those that create loss. We just register and adjust the value of those who create loss. What is clear in this situation, and this is one of the reasons why we cannot be providing more guidance because still part of it we are not having is what may occur with the energy cost. Energy cost now, obviously, is taking a relevant, very relevant role of the prices in Europe and obviously affecting our cost. At the end, for the future, who knows either what is going to be the energy prices or if in the coming months as Bernardo is expressing, shall appear some surcharges in order to compensate energy costs in Europe. That could be a factor of neutralizing, but we cannot introduce it from now. Because of that, what should be the inventory adjustment to do in December is still open depending on what is energy position. What we know is that up to now, we are absolutely properly valued in our inventories, and consequently, after that inventory adjustment of EUR 65 million, which is remarkable, but we feel very, very comfortable for the coming quarter. Thank you. Our next question comes from Ioannis Masvoulas of Morgan Stanley. Ionis, please go ahead. Good morning, and thanks very much for taking the questions. A few less from my side. The first one, we talk a lot about stocking among distributors, but can you talk about the real demand among your end-using industries? Have you seen any weakness incrementally relative to your July update across Europe or the U.S., or do you see the market remaining stable? Thank you. Thank you for your question, Ioannis. I think the market is more or less stable. The real demand of our end users is very stable. They are also trying to adapt the stocks. They have reduced the rhythm of production a little bit. Not as much as distributors, for sure. They are adapting the inventory situation to the end of the year, but their demand is still stable. This is what we can say. Yeah. Yeah. As I said before in all the regions, mainly in our strongest region in North America, we see that underlying demand being stable. Really there is some sustainability, as Bernardo said, coming in the fourth quarter and everyone is looking for the year-end inventory levels and managing those stock levels in that sense. Specific sectors, I think the automotive industry is coming back now with the availability of electronics again. That's also happening with appliances, with the lower prices of stainless steel and of many items, many raw materials. Some projects that were postponed are coming back. In general, the situation is good. Catering industry is very good. Food processing industry is good. In general, construction is a little bit more adapting, you know. This is in general the situation is good for us in stainless steel. In High-Performance Alloys is different. The demand is very strong. Many projects that were frozen previously are now back, especially in oil and gas and in chemical industry. The world is today investing a lot of money in projects in oil and gas and chemical industry, and this is giving us a very strong order book in High-Performance Alloys. Great. Thanks for that. Second question, going back to working capital. Can you talk about the reasons for the reduction in payables in Q3? And also when we look at the debtor, let's say the past several quarters starting in Q1 2021, you've actually built EUR 1.5 billion. How long do you think it's going to take you before you can release the vast majority of it? Or is there a structural element around higher energy and other costs that mean we need to assume there's gonna be a structural working capital relative to history? Thank you. Well, thank you. Regarding payables, the situation in the third quarter at the end is obvious, as a consequence of we have been paying in the third quarter all that raw material at 90 days payment term that enter in the late second quarter. We have been paying the raw materials for the full running production that took place in the second quarter. This has been cashed out and keeping in mind that we have strongly adjusting our production figures in the quarter as a consequence not only of the maintenance program, but also consequence of we are adjusting actually our production to demand. What we are is actually buying much less material in comparison with the previous quarter. This create the strong reduction in payables. This is more or less as a consequence of change in the trend. In a normal scenario, this should be accompanied by a stronger reduction in inventories. By the reason we have mentioned, this has not been taking place in September and shall occur mostly from October onward. Consequently, this shall be the big change for the fourth quarter. Regarding your other comment, it's true that obviously in this relevant figure of the net working capital, we must keep in mind several facts. You are talking obviously about certain inputs in the cost that obviously have its relevance in these days. But another one that has a strong relevance, obviously, is the currency effect. More than anything, we are Americans. 50% of our sales are in America, so consequently it's clear that for our business it's good, for our profitability it's good. When we separate and isolate purely the working capital, the weight of the working capital in this time is higher as a consequence of the appreciation of the dollar because we are more dollarized in terms of our production and our figures. This is also another fact to keep in consideration. It's a combination of raw material that has been going up and actually obviously has increased during the year and now we are in the range of $23,000 per ton at LME. This has its relevance compared with the previous year, plus the other cost inputs, especially the energy, plus the currency, plus the volumes as a consequence of the cycle in which we are coming from. This is a combination of all these effects. Great. That's very clear. Thank you. A very last question from me. We spent a lot of time talking about energy costs and energy challenges, and you have outlined an energy efficiency target by 2030. Looking at your slide three, you haven't made much progress in the past few years. How should we think about that target? Is it still achievable? Can you perhaps talk about some of the initiatives you're undertaking? Thank you. Yes. You know that the energy efficiency is part of our excellence plan. We have been very focused on this and what I can say is that we are the best player in Scope I emissions in the industry, what means that our energy efficiency is the highest in the industry. This is interesting, and that's why our goals are very challenging for us, you know. In the last situation with this volatility, you know that our equipment is normally made for a continuous working, no? Once you have to accelerate too much or once you have to cut production or adapt production, then that is, the energy efficiency is suffering. That's why our numbers are not progressing as we expected. Now that we are again in the controlling situation, I think that we'll come back to this and, of course, with the current prices, this is a key issue for us. We are very focused on this. We are taking several initiatives. We are defining our CapEx strategy for sustainability matters and efficiency at the end. You know that I always say that efficiency and sustainability is the same. At the end, we are speaking about saving energy, saving money and reducing CO2 emissions, what is the same. We have a lot of initiatives based on the use of our heat gases, exhaust gases, to produce steam or to produce electricity. This is several projects that we have. Of course, we are increasing our participation in renewable energies. Probably next year, after next year, we'll start having more or less our 20% of our consumption will come in Europe will come from renewable energies. We are also improving the efficiency of our burners, of our furnaces and of our electrical furnaces in the melting shop. We are also having a very interesting projects in digital transformation, you know, like for example using big data to analyze what is the best way and the best time to melt our steel in the electrical furnaces, reducing electric consumption and analyzing the peaks and weaknesses of the process. We have a lot of initiatives, and that will be reflected in the excellent plan and of course in the targets in sustainability. Great. Thank you. We have a question from Maxime Kogge of Oddo BHF. Maxime, please go ahead. Yeah, good morning. I'm just reporting on the energy situation. Is it possible to quantify the, I mean, the headwind it represented in Q3? I mean, basically you had much higher gas prices, but conversely, prices for electricity went down in Spain from very elevated prices in H1 and they stayed very low in the regions of the world. Following on that, I mean Could we expect a tailwind actually for energy in Q4 given the recent evolution of gas prices? Electricity prices have also come down. Could that be a tailwind in Q4, or is that too early to say? Well, in regard to the first part, electricity prices are still by far. We cannot say that electricity prices have reduced in Spain. When we look at the figures of July to September, we are more or less paying six times the equivalent electricity cost that we are paying, for example, in the States. The gas is obviously an issue that is damaging all the industry all around Europe and all around the world in these days. The gas obviously has been one of the most inflationary energy inputs on a worldwide basis. Electricity, in our case in Spain, is absolutely out of control. It appeared that the Spanish government had some tools in order to try to establish a cap, and this has not been working. At the end, we have seen energy prices in Spain absolutely grow crazy in terms of reaching levels in August of around 280 EUR/MW, which is absolutely unsustainable for the industry in all of Spain, and we are seeing a lot of electro-intensive industries in Spain are forced to close because of that. The energy issue still is absolutely out of control and probably is our main headache in these days. The other facts are we have more tools to play with, but still the electricity appears to be for us a really non-sustainable issue to keep running full or melting in Spain at this cost of electricity. We understand that it's going to go down, but still in the quarter has been terrible. You know, just a couple of years ago, we were complaining about gas prices in Europe because, you know, 20 EUR per MWh was considered a high price. Now, we are thinking that EUR 80 is cheap. Now, it's at least four times more. I think this make the European industry unsustainable. I mean, we have to compete. This really still is. We are speaking about a regionalization of our markets, but we are still in the global market, and we have to suffer the pressure of imports from other regions with more stable electricity and gas price. This is a European problem, and we expect that we are working with the European and Spanish authorities to find a solution at the European level because we think that we need to do something at the European level because most of the European countries or all the European countries are suffering this excess of electricity and gas prices. We hope they will understand and also the situation will calm down. Then we'll find a better solution because at the end, it is the European industry which has to compete against other areas, and that will affect not only stainless steel and not only the electro-intensive industries. That will be at the end. That will That will affect the general industry, and this is a European problem. Okay. Assuming energy prices remain this high, I mean, sustainably, I mean, what are your options? What are the ways available to you to improve your competitiveness in your European, your Spanish footprint to offset that? We've mentioned before. We are first of all trying to buy renewable energies, PPAs, if they are available at a reasonable price. Secondly, we are very focused on efficiency. This is our main focus, you know, and investment that will make us more efficient and investment that will make us to reduce our CO2 footprint, reducing the energy consumption. Okay. Thank you. You know, we have our alternatives. We are a global company. For example, South Africa has a very stable electricity and gas price today. No? If the situation becomes very critical, we can always bring slabs from South Africa to be rerouted in Spain. Okay, interesting. Thank you. We have no further questions on the phone lines, so I'll hand back to Carlos. Yes, thank you. We have several questions from the website. The first one is coming from Iñigo Vega, Kepler Cheuvreux, and it's as follows. What could be the net debt by year-end? Consensus has something below EUR 300 million, which seems a bit aggressive. Any color on that, please? Yeah. EUR 300 million at this time, I consider it to be aggressive. Maybe that could have been the case at the start of the year, keeping in mind also that we have invested in the buyback program, roughly speaking, in the second buyback program, around EUR 100 million. After this, we consider that EUR 300 million shall be low. Last year year-end figure was EUR 570 million. We are going to be below that. I think we shall be below EUR 500 million, but any place from EUR 400 million-EUR 500 million appears to be logical at this time. But obviously, depending on the market circumstances, we shall move it within that range. I hope more close to the EUR 400 million than to the EUR 500 million, but still is a bit premature to define. Having said that, this mean EBITDA ratio for the year of 0.3, which in our sector is absolutely a fabulous figure. With this, definitely we are very comfortable. Thank you, Miguel. The next question comes from César Sánchez from Renta 4. Hi, good morning. Congrats for the results taking into account the current market situation. This would be unthinkable a few years ago. I have only one question, if I may. Could you give some color about prices for the long-term contracts for 2023 and how they compare with those of the previous year? Thank you. Very sorry, César, but we cannot speak about prices. No, compliance reasons. Okay. The last question is coming from Leon Susquesa from Vestinberg, that is in line with César question. Can you share with us how the negotiation of the annual contracts for 2023 are going? How may they contribute to 2023 compared to 2022? Oh, no answer. Okay. There is no further questions. Thank you for joining us in this call and have a good day. Thank you very much. Thank you. This concludes today's call. You may now disconnect your lines.