Hello everyone, welcome to the Acerinox First Quarter 2023 Results Presentation. My name is Nadia, I'll be coordinating the call today. If you would like to ask a question at the end of the presentation, please press star followed by one on your telephone keypad. I will now hand over to your host, Mr. Carlos Lora-Tamayo, Chief Investor Relations and Communications Officer to begin. Carlos, please go ahead. Good morning, everybody, and welcome to the Acerinox Earnings Conference Call for the first quarter, 2023. First of all, we hope that you and your related ones are well. The presentation will be hosted today by our CFO, Miguel Ferrandis, accompanied by the rest of the IR team, María Uclés, Borja Destra, and myself. Before getting started, let me remember you that this conference call is being broadcast in our website, acerinox.com. I would like to hand over to our CFO. Please, Miguel, go ahead. Thank you, Carlos, and thank you to all our investor relations team, which is present here today among us for giving you certain comments regarding the Q2 figures. All of the attendees in this session, it is just eight weeks ago when we were presenting exceptional figures for 2022. As we explained, we beat all the historical records of our company. At that time also, we explained the basis that we are passing through the actual environment in our business. Just 8 weeks later, what we confirm is that the basis still are there. There have not been significant changes. At the end, what we feel comfortable and proud about is that the figures that we are presenting for the Q1 2023 capture most of the issues arising the market that we were explaining at that time. First of all, as we can see in the page three in the Q1 2023 at a glance, the quarterly EBITDA, EUR 226 million is clearly better than that one of the Q4, as we were explaining that time. Even though the market conditions remain challenging in Europe, we have been able to present these satisfactory figures, and we are proud of this profitability we are achieving. We are keeping our strategy in most of the areas. We are keeping our absolute control on the controllables and obviously focusing on our sustainable commitments. Our strategy is long-term design, we are loyal to the strategy. At the end, just giving some initial comment of what shall be coming through this presentation, what we can be comfortable today, more or less, explaining to you is that the trend is positive. The Q2 EBITDA should be higher than Q1. Should be slightly higher. The figures of the Q1 are remarkable. On the actual basis of the market conditions, we feel comfortable for the Q2, we shall be slightly above the figures we are presenting today. We shall talk later about this. Going through the presentation, moving to the slide number four, when I previously stated that we are proud, our proudness is regarding our figures and regarding our profits. Our proudness is also regarding the great success we are experiencing in most of the areas related to ESG. Our well-deserved Platinum Award, recognized by EcoVadis last year. We think justifies more or less all what we are doing. We are having great success in terms of waste reduction. I think it's very self-explanatory, the slide. We are having great success also in the recycling of consumables. Already recycling almost 100%, as also appears in the slide. Also we are having great success on water reduction. We keep on track, and we are focused on certain areas such as emissions, safety, diversity, and clearly these are our main focus to keep on improving. There are some areas regarding ESG where still we obviously are not so under our control now, mostly related to energy efficiency, keeping in mind the disruptions that have been characterizing the energy market, mostly from 2022, that still are there. These disruptions obviously affect and impact the measures for energy efficiency as well as also are having its effect on the rhythm of production that we are taking. Because of that is the main area in which still appear in the slide list, achievements, but it's an area that as much as we are going to be normalized, we think that shall appear, and we shall be covering all our targets, shall be gradually coming, and we hope that that's starting soon. When we move then to try to analyze the market in page number five. We have made a title for the slide, for this slide and the coming one, which we think it's a definition of most of the issues we want to express today. The trough is behind us. What is the meaning of the trough is behind us? We are willing to talk about two issues, two cents for this statement. One is obviously on short-term basis, the quarterly figures, the quarterly results, we saw and it's strong adjustment and correction in the Q4 last year. We are stating the trough is behind us. We have come back to that new probably level that we are seeing of a quarterly profitability. Also the trough is behind us, we want to remark what has been stating from our side since time ago. The last decade was extremely tough for our sector. Most of the external facts that characterize this difficult decade are in way of normalizing, consequently, our cohort for the coming years is substantially higher. As a consequence of that, we think that the level on the basis of the contribution and profitability of our business are going to be substantially ahead of that one that has been characterizing last decade. All the homework we have done in terms of excellence, in terms of cost savings, in terms of e-efficiency, are each day more well appreciated. As a consequence of that, we clearly state that we think that the trough is behind us, and we have more to celebrate in the coming years than the tough circumstances that we have experiencing from a decade. When we enter in the issues and being more concrete on the figures relating the first quarter, the figures appear in the left side. Sorry, in the right side. What we see is that there are very satisfactory figures in the difficult environment that we have been trying to define in the left side. In general, what we can see is for a stainless steel market, our main sector, the stocking process still is in the market. Consequently, we have been facing in most of the quarter a strong destocking process affecting mostly Europe, but affecting also America. The energy prices, even though are less crazy than the levels that we're achieving the last year, but they still are abnormally high and uncompetitive, and this is something that still remains there. This is a tough environment. When we compare the situation in America, in the States, and in Europe, just looking at the color of the bullet points, you can appreciate that the basis is more healthy in America. The imports have been corrected year-on-year basis. The inventories gradually have been normalized, given most of the quarter still having high at the service centers and distribution, but fortunately, we think that ending March, the situation has almost reached normal. In view of these circumstances, we are also appreciating the comfort that the base prices in the American market have remained stable, which for us obviously is a strong fact of satisfaction. It's our main market. On comparative basis, the best prices actually in the stainless market are those of the North American one. The situation in Europe is substantial different. As you can see, the four bullet points we wanted to remark, three of them are negative. The apparent demand is down 33%. Inventories still remain high, so probably it shall take most of the quarter for the inventories to getting reduced in Europe, and this definitely affects the market. In addition, as a consequence of this, also prices remain at very low levels. We have one fact that we consider positive, that is that the imports on comparative basis have dropped. It's true that it's a positive fact, but it's a positive fact as a consequence of the three difficulties arising the market. Because of the apparent demand is down, because of the inventories still are high, and because of the prices are so low that there is not such a big gap compared with Asian prices, we are seeing that there is less attraction for imports, and consequently, this is not as damage in the market as secure. As a consequence of the poor performance of the European market. In view of these circumstances is what we consider that the profitability is high. In contradiction, what we are seeing with the stainless in our high-performance alloys, the market remains very strong. We shall see later on, and we shall appreciate that the high margins, the good profitability, and the good contribution from our High Performance Alloys division, but this is a sector that actually is keeping a very, very healthy track, and this is one of the issues that contribute to our comfort for the coming quarters. When we put this on the figures, you can see then that all the numbers related to the Q1 2023 are extremely satisfactory compared with the fourth quarter last year compared with the previous one. Any case, the comparison with the first quarter last year, in the best momentum in the story of the stainless steel, where all our plants were running full, where the prices were showing last year a rally as a consequence of the normalization through all the supply chain, all the restocking occurring in most of the sectors, were driving a extraordinary performance in the first half of last year. When we compare with the Q1 last year, as may occur also regarding the also exceptional Q2, the comparison is obviously not as favorable. As a consequence of this, and considering that that was so exceptional, is that we feel much more comfortable showing all the improvements that are appearing as a consequence of the Q4 and how we finished last year. The EBITDA of EUR 226 million for us is strong and solid, and as a satisfactory EBITDA in these circumstances. We are giving an EBITDA margin of 13%, which shows also the robustness of our figures. These figures have been obtaining even though making an inventory adjustments adjustment at the end of the quarter. The profits are there, the profitability is high, the figures are very solid. The circumstances, and mostly in Europe, as we are saying, is that the one that we still are more than prudent. We see that still the situation and the prices in Europe is strongly affected. We appreciate now, as we have been saying that this is going to take most of the second quarter until being normalized. Consequently, we feel more comfortable making inventory adjustment at the end of March for adjusting the net realizable value of our inventories to the circumstances that actually are taking place in Europe. We have done at the end of the quarter an inventory adjustment of EUR 82 million. Even though after that, we must put on value what is the EBITDA achieved of EUR 226 million. The net debt is not a headache for us. It is true that it has been increased in the quarter. There have been, which are depleted in the cash flow. There have been facts affecting the net debt. Obviously, we have, we have paid dividend, the starting of the year. The dividend increase that was established for this year also included that half of the dividend was to be paid in the first quarter, consequently, this has been one fact. In addition to other facts, mostly related to the working capital, which in the sector that is absolutely now in a good momentum as is the High Performance Alloys. We have seen an increase in working capital, and this is one of the reasons, as we shall explain later, why the net debt has increased in the quarter. It's nothing that seriously concerns us at this part of the year and at this part of the cycle, and especially at this part of our solid position in all the financial figures. The slide shows also more or less the evolution that we wanted and we have been mentioning previously. The trough is behind us. It's more easily to appreciate it in this slide. The scale is unfair because the rocketing figures of the Q1 and Q2 of 2022 cannot be appreciated in a visible scale, and consequently, we have broken the bars for showing that profits that we achieved for 2022 and 2023. Any case, as we have been mentioned, there were exceptional circumstances in the first semester. This is not what we consider should be the normality. What we wanted to express in this slide is that it's obvious that the structure of our business is cyclical. This is our field. We must play in this field. What we are doing our best is improving and changing the contribution, the efficiency, and the profitability of our business. What was normal three, four years ago, this average of the EUR 90 million EBITDA per quarter, now is the one that we are seeing that is the strong correction that is coming in a time, but it appears to be our baseline for a correction time. Then quickly, we have been recovering and reaching a new level of EBITDA in the range of the EUR 200 million, EUR 226 million, in line with more or less what we also were achieving two quarters ago or in the Q2 2021, and so on. This is something that we are stating from time ago. The basis for understanding our group and the basis for putting on value all the excellence plans and all the cost savings that we have been doing allows us to consider that probably our speed cruise now for our quarterly contribution is more in line with the level of EUR 200 million at the level of EUR 90 million that we were achieving not so far away from now, just three, four years ago. We move just to give a bit more data on the stainless steel or on the HPA going division per division, most of the issues affecting the stainless steel we have been talking about, the figures are really satisfactory. An EBITDA contribution of EUR 197 million, which is an EBITDA margin of 13%. In the actual circumstances, having a two-digit EBITDA margin is remarkable, in our case, it's 13%. It's something that we must put on value, and we are proud about because the momentum is tough, especially the momentum in Europe is tough. It's compensated by the better momentum that we are having in the States, but also keeping in mind, especially when we compare with the last year in the Q1, that at that time, as we said previously, we were running full. Now, probably in average, we are running close to 80%, but in America, in Europe, and also in South Africa. Most of our plants now are running at lower levels of capacity utilization at that time. Even though that, and even though the prices, circumstances in Europe, we are keeping that EBITDA. It's a very robust figure. The cash flow, the operating cash flow in the stainless steel business shows EUR 113 million. This is another fact to be proud about. We have kept, in this basis, a strong discipline in all our working capital issues, so consequently, the working capital has not changed. To compare with that of December, it's almost a variance of around EUR 10 million. It's more or less a strong stability. We are keeping good discipline in the working capital in the stainless, which is probably the market more affected. As a consequence of that, we have been able to achieve this positive operating cash flow of EUR 113. When we compare with that of the last year, it was EBITDAable, but keeping in mind that the contribution coming from the EBITDA was EUR 200 million above. What we have been doing is making a strong commitment and a strong discipline in the working capital section of the stainless, and this has contributed to this operating cash flow in these figures, showing improvements in all the units. We are proud of how we are handling this situation in the stainless, even though we hope that the environment in Europe should improve. When we move to the High Performance Alloys, the situation is, in terms of the market, much more better than the one that we are facing in the stainless. The momentum in the High Performance Alloys is very good. The order book is complete. The basis, the margin of the contribution of this business is very healthy. At the end, we are having figures of EUR 29 million EBITDA. We had EUR 21 million in the Q4, but we are even above the EBITDA obtained in the first quarter of last year. The momentum in the High Performance Alloys is good. The momentum is different of that of the stainless. As a consequence of that, the driver of our cash generation, as you know, is working capital. The working capital has increased in the High Performance Alloys division. This is as a consequence of the good market times as we are seeing. We are showing certain improvement in inventories in the first quarter. Probably, this is going to be more neutralized in the Q2. Also, some of the basis of the working capital in the High Performance Alloys division have changed. As we know, during last year, we have been changing and diversifying the sources of raw materials. Some of the basis of our suppliers' policy have changed, this is more or less affecting also, or at least in these earlier stages, our working capital figures, especially related to suppliers. Because of that, the combination of both facts have meant this increase in working capital, and as a consequence of that, the momentum shows cash destruction or operating cash flow negative of EUR 132 million, that we think that gradually should be also neutralized for the coming quarters. That is not an issue that actually concerns us, and we think it is just showing more or less the basis of the High Performance Alloys market and also more or less the changes in some of the issues or some of the challenges that we have been passing through. We are not so concerned, and we think that gradually this shall be also neutralized during the rest of the year. If we move to page number nine and we see the more or less what is our capital allocation, we want to remark the well-balanced capital allocation with a clear target that we have, more or less, in the three main areas. Starting by the end, it's clear that we have been paying dividend in the first quarter. As I said before, our board decide an increase in dividend payment of 20% per share for year 2023. The first dividend has been paid in the first quarter, as well as the second dividend shall be paid in the month of July. The first quarter reflects capital allocation in our three areas of our three key targets for our capital allocation, the dividend, as we are seeing, as well as the CapEx. We are increasing our CapEx. We are investing in efficiency in the group. We also announced recently a part of we are increasing our CapExes in most of the plants for increasing efficiency and committed also to the ESG targets that we have marked for our group. In addition, we are in expansion phase, and we are starting the expansion phase as you know, in our most profitable mill, which is North American Stainless. This was previously explained. Still it's not so appearing in the figures. It shall be gradual, when we announce that the CapEx for this year shall be in the range of EUR 210 million, well, at the end we have seen also part of this is reflected in the CapEx of the first quarter of EUR 43 million. The third main target for our capital allocation is keeping the flexibility in the working capital. That flexibility is the one that more or less is also appreciated with this increase in working capital of EUR 173 million. At the end, this is something that, as I said before, it shall be corrected gradually during the year, but it's showing more or less the basis of our business in the first quarter. Going as a conclusion, we wanted this presentation to be self-explanatory in terms of the slides and also with the information you also have in the report that we have prepared today. We think that you have a lot of data for understanding the business. Going through the main conclusion, we'll repeat again, the trough is behind us. The start of the year has been strong, even though the actual conditions, we are consequently proud about these figures. The cash flow up to March is negative on EUR 90 million. This is something that should be gradually improved during the year. Nothing to be concerned about. There are uncertainties mostly in Europe, still there are facts that keeps us alert and then we focus on that. We have talked a lot about Europe, still we are seeing that the situation in Asia is not healthy, and the recovery coming from the Chinese New Year has not been a good March as expected. Consequently, still there are high level of inventories in the area. This is something that should be solved or may have also its influence in the coming quarters. We need to be alert. In our main market, fortunately, the stocking process at the end of March has proven to be effective and we hope that this should allow to increase productivity for the coming quarters. The situation, obviously, and the prices remain high in the States. Let's see what occurs with the gap compared with other areas. The American market continues being in a very, very healthy position. This is another factor of comfort. We have two areas that now are facing very, very satisfactory, which is North American Stainless and also it's our High Performance Alloys. Consequently, those two areas keep most of our comfort, and we think that they are going to be the drivers of the profitability of the group, at least mostly in the second quarter. In this basis, what can we expect for the Q2? Basically, as we were saying before, we are comfortable with the figures for the Q2. We think that shall be above the figures of Q1. The actual circumstance of the market probably should create that we shall be slightly above. In this basis, being so profitable the first quarter, we consider that we can keep the trend with certain improvement, but slightly better than these figures that we are presenting today. I think this is most of the messages we wanted to express today. I want to remark again, we are proud of these figures because the circumstances really are difficult. We think that we have a extremely well-committed team all over the world, and the efforts of all our teams all over the world have enabled to demonstrate that we are now in these levels of profitability and efficiency, and we hope that also the market should put this on value. Thank you. Thank you very much for your attendance. Now all of us feel absolutely delighted to try to solve most of your questions if there is any. Thank you, Miguel, for the presentation. Let's move now to the Q&A session, please. Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you choose to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure your phone is unmuted locally. We ask you please speak slowly and clearly as possible. Our first question today goes to Tristan Gresser of BNP Paribas Exane. Tristan, please go ahead. Your line is open. Yes. Hi, good morning. Thank you for taking my questions. I have two. The first one is on the U.S. market. Can you discuss a little bit the market conditions there? I mean, you flagged that the stocking has ended, demand has improved quarter-on-quarter. There's been a shift toward domestic buyers. How sustainable are those trends? Would you still expect some pricing adjustment to take place in the near term in the U.S., notably given the elevated regional pricing differential? That's my first question. Yeah. Thank you, Tristan. The situation in the States, as we said, the market remains healthy. There has been obviously a destocking taking place. We think that probably end of March, the situation is almost normalized. Well, on one side affecting not only the distributors that were keeping high level of stocks, but also in addition, some of our final customers at the end even were having some production disruptions due to the supply of some components that have been affecting the demand. This is something that gradually should be normalized. We previously stated in America, more or less our standard is running full. We seeing on the actual basis, and we have been adjusting our production in the States, and we have been running at levels of 80% capacity utilization. With that, we are covering the market needs as it is. The prices in America are much more stable than in other areas, consequently the prices remains and have been remaining robust. It's true that there is a price difference among America and every part of the rest of the world. The imports have not been rising in the States, consequently up to now the situation is healthy. We must keep an eye that any time the price gap, and especially, as we were mentioning before, we are seeing high level of inventories in Asia. The demand in... The demand and the increase in consumption in Asia after the Chinese New Year has been not as high as expected. The production levels in March have remained very strong. There are inventories in the area that gradually probably need to be adjusted. These adjustments shall take place in the second quarter. We think that maybe there shall be some production adjustments, and we are seeing some news and some of the players that are adjusting their production. We must keep an eye on the fact that maybe also imports should have its effect on imports. The American market or the basis of the American market, and especially in certain of the end users, is really driven by the Buy American. As well as, probably, Europe is much more, no, an easy highway to introduce material. In the case of America, the basis of the American customer is more focused on the local products. Having said that, if the price differential is so high, this may have its effect. We still are not concerned, but we are keeping an eye that this price differential should not attract too many imports. We have not seen that. We must be focusing properly to see if this may be impacting the prices in the coming quarters. Not yet, but as we are seeing before. Let's see what comes in this, in the second quarter and how we are passing through the summer. At the end, from now up to June, we are not concerned. Let's see what may be taking place for the second semester, but still is a bit premature. All right, thank you. My second question, and that's helpful. My second question is more on the guidance for Q2. I mean, if I look at the negative inventory adjustment for the past, let's say three quarters, it took out maybe EUR 17 million-EUR 19 million of performance. If I look at the guidance, it probably, and you can tell me, it still implies some elevated negative inventory impact. My first question, is that fair to make that assumption? How should we think about that? Can you explain how you make those adjustments? I believe they are mainly in Europe. At some point, do you expect some cost alleviation there and not being forced to do so, especially if destocking ends? Thank you. Thank you. Well, the fact is effectively obviously concentrated in Europe. The way the level of margins that we are achieving in the States, as we said before, is healthy enough. Our inventory adjustments is calculated item per item. We are more or less adjusting the value of the inventories to the net realizable value of each of the items. It's not an average, so we are more or less correcting every item that should experience a loss. The actual basis of the European market, the situation of the prices in the European market still is very tough. Consequently, we are seeing a level of prices in Europe that we almost have not seen ever. This is something that we must keep an eye on. We are very prudent. The uncertainties that are affecting also the European market remainder. We reach levels of 39% market share of the Asian imports at the end of last year, in the last quarter last year. This needed to be diluted. Maybe two or three months ago, we were contemplating that this should be neutralized at the end of the first quarter. Nowadays, what we are seeing is that still it's going to take more time. Maybe this time drives us to the end of the second quarter. Still the stocks are high. If this drives us to the end of the second quarter, we must keep an eye on that the seasonal slowdown in Europe also takes place in the third quarter. It's difficult to predict at this time that after that normalization of the stocks, it shall be a strong correction in the demand, and consequently, the figures for the third quarter should be high. On that basis, we prefer to be prudent. We are very, very conservative when we make these inventory adjustments, and we found absolutely rational and adequate to correct our inventories in this, in this range. We are experiencing very low prices and still having certain costs that are absolutely uncompetitive. Energy prices are not as crazy as were last year, but any case they still are very high. It is one circumstance also that affect the cost of our production and the cost of our inventories. This is the reason. What can we expect for the second quarter? It shall depend obviously on how we see the picture for the end of June and what is going to be the seasonal effect this year. If the situation of the inventories are corrected and there have not been increases in imports, maybe shall not be needed such an adjustment. Keeping in mind that we enter in the, in the summer slowdown, we prefer to be prudent. On this basis, we think it's adequate, these inventory adjustments. Let's see what takes place. All right. That's, that's really helpful. Thank you. Thank you, Tristan. Thank you. Our next question goes to Patrick Mann of Bank of America. Patrick, please go ahead. Your line is open. Thanks. Hi, Miguel. Maybe to follow on Tristan's question about the guidance, just so that I absolutely understand. You have, you know, let's say EUR 226 in EBIT this quarter after an EUR 82 inventory write down. Excluding the inventory write down was EUR 300. Your guidance for slightly better in the second quarter, is that assuming a similar level of inventory write down? Or. Yeah. Would it be, you know, if we don't have an inventory write down and it's slightly better, is over EUR 300 possible? If the basis of the European market appear to be okay for the third quarter, that could be the case. The issue is. Okay ... what may take place in the summer in Europe. The summer in Europe is, you know, the seasonal slowdown. On this basis, what should be needed to do at that time? We still have not obviously all the, all the facts, but let's be prudent on that. Okay ... even Yeah ... even though we should have to make an inventory adjustment at that time, we think that we are going to be slightly better. The better and... Appreciate it. Yeah. ... and what is defining the better obviously is not a fact that we can now precise, because it shall be depending on the level of the inventory adjustments to be done. We are comfortable that the figures should be above the one that we are presenting today. Got it. I appreciate you have to be conservative. I understand that. I just wanted to check I was completely understanding the guidance, that it wasn't slightly better without the inventory write down. Just one more question, if you don't mind. You said apparent demand you thought was down 33% year-on-year in the first quarter in Europe. Can you give us an estimate of what that split is between, you know, what do you think real demand is done? How much of that... Is it all inventory, or what's your read on the underlying real demand or steel use? Thank you. Well, at the end it's a combination of you're stating, first of all, of obviously the stocking and the inventories. At the end, the real underlying demand still is not healthy in most of the sectors. At the end, this is as a consequence of as we are saying, of all these uncertainties that still remain in Europe. We still are obviously having the conflict in place. There has been obviously the additional concern that took place with all the financials issues taking place also for on the financing institutions. At the end, this creates more concern. At the end, there is less confidence of a robust reaction. At the end, this is affecting every sector. This is something that still is there. Some of the issues that we have been explaining for the States also may be affecting Europe. It's not only the final demand, but also several of our customers are having also failures in part of the supplies of other components. Consequently, they are adjusting our production, and they are adjusting their orders until they get normalized. The combined effect of all these issues are the ones that are spoiling the European market in this time. Thank you. Thank you. Our next question goes to Krishan Agarwal of Citi. Krishan, please your headline is open. Hi, thanks Miguel. My question is partly answered earlier, but if I can push you a little bit in terms of the shipment improvement which we have seen in Q1. I mean, how much of that improvement you would attribute to coming from the U.S. and how much of that is coming from Europe? As a kind of, you know, supplement to that, the profitability split, if you were to, you know, make a guess. I don't know. I'm sure you don't give the split on a regular basis. From a directional point of view, how should we read that the majority of the increase has come from the US or it is coming from the Europe as well on the underlying basis? Sorry, Krishan. You, regarding more or less, I do not know if I understood properly. If not, please correct. In terms of volumes, we have been improving in Europe because we were parting from very, very low levels in the second half of last year. We know we, as we announced, we made or we extended certain of the program maintenance shutdowns. We were adjusting production. We have also the terrible level of energy prices achieved in Europe. Consequently, we adjust our production there. In the first quarter, what we are seeing is that the increase is coming in volumes from a more normalization of Europe and South Africa. In the case of North America, the volumes have been reduced because we normally run there at high levels of capitalization. What we are doing now is being very selective in America in the product mix that provides the proper margins. Consequently, the margins of America remain high, but we have been reducing our volumes there. If we just precise on volumes, it's lower figures in America and higher in the others. The margin contribution is substantially higher in America than in the rest. Understand. In terms of profitability split, if you were to make a directional estimate, did Europe see the increase in the Q1 versus the Q4? In profitability? Yeah. Yes, because the Q4 was dramatic. Okay. Okay. Thank you. Thank you. Thank you. Our next question goes to Ioannis Masvoulas of Morgan Stanley. Ioannis, please, your line is open. Hi. Good morning. Thanks for taking my questions. First one is on Europe. You just mentioned that you've seen improved profitability quarter-over-quarter. Could you provide a bit of color whether Europe was a bit of positive in Q1 after the inventory evaluation? A slightly positive. Let me say it that way. We are not so precise on the figures per division, but let's say that's slightly positive. That's after the inventory adjustment, right? Yeah. Okay. That's very clear. Thank you very much. Second question is on what you alluded to around the Chinese oversupply and potential for an export threat later in the year. Where would you expect to see the highest impact if that export pressure comes through Europe or the U.S.? The reason I'm asking is that right now we have a very high U.S. base and all-in price related to other regions. Interested in hearing your thoughts on which region will be the most impacted in that scenario. Thank you. Up to now, still we have not seen any big increase in the flow coming from Asia. We as we said before, we are not appreciating imports. The import penetration has been lower in this first quarter because there has not been attraction, but mostly because of the difficult environment we are seeing in Europe. Maybe in Europe is not going to be the case. Even the European players at this time with such uncertainties are not willing to enter in bringing material, extending supply terms for material coming from overseas and so on. In the case of America normally is a more difficult market for imports. We have not seen a big flow of material moving from Asia to the States. You know, obviously in the States, in addition, we have the Section 232 taking place. There are some, we are reading more or less that there are some announcements of production adjustments coming mostly in China. There was probably better expectance of the demand reactivation in March. As we were saying, the mill production has been high, but the demand remains lower. In most of the end users, still the comfort is there. What we expect is that the local demand in Asia should more or less gradually be recovering and then diluting this high level of inventory. Not necessarilyAll this material is to be shipped overseas. We understand that this normalization, because the confidence still is there. I think there are sectors after the with the relaxation of the COVID measures, it's being appreciated higher activity and higher demand in the Asian market. What was expected is a strong reaction in March. This has not been taking place. Maybe we need to wait a bit more. There are no basis for say there's going to be a big tsunami of material leaving Asia moving to other areas. Still is a bit premature, but we understand that the demand shall be reactivating there. Supported also by the fact that maybe there are production reductions and some expected shutdowns taking place in this quarter in order also to neutralize that as far as we are reading. That's very clear. Thanks so much. Thank you. Thank you. Our next question goes to Bastian Sienkiewicz of Deutsche Bank. Bastian, please go ahead. Your line is open. Yeah, thanks and good morning, all. Miguel, I've got two questions. Firstly, on costs. In your presentation, you say that energy prices still remain high, and I guess you probably still must have been shipping out a lot of inventory, which has been produced with very high energy costs. So energy costs are maybe still elevated, but clearly we start to see a significant easing on the energy markets. Do you expect to see some relief in realized energy costs in the second quarter? Is there any way you could even quantify that for us? Maybe not relief yet. Probably it, as we have been saying before, it's talking about big figure, EUR 100 per megawatt is uncompetitive. Obviously we compare with what we have been experiencing, one year ago. It's substantially less dramatic. We think that this, and it appears to be a certain comfort that the curve should be keeping going down. We are seeing when we attend, and we see all the PPAs market, it appeared and the trend of the curve is to be going down. Probably not yet coming for the second quarter. We think that gradually should be coming more. We are, and we know that we are involved in, that there are several projects coming on renewables energy, but starting summer 2023 or later on, or even more for 2024. More or less there is a common understanding that these figures should be normalized. For the Q2, I still consider that this range where we are moving now is what's considered to be normality, so it's not going to be a short-term issue. Okay. Thank you. My second question is just again, coming back to the U.S. market and the demand situation there. You said you were running around 80% utilization rate, I guess in the first quarter, which is reflecting the destocking environment. Could you give us maybe just a broad guidance as to the utilization rate level you expect in the second quarter? Are you gonna be back closer to full utilization? Are we gonna move maybe into the 90s or so? I'm also wondering, what are the demand dynamics which you see, particularly in your direct end customer business? I know that most of your business there is obviously more related to service centers here. You've been seeing destocking, so it's probably more difficult to gauge the underlying picture. What is the picture you're seeing with your direct end customers, and have you seen any changes in the dynamics there? With our direct end customers, as we said, as we said previously, we are seeing in some of our customers that they are also affected by some of the problems in obtain more or less part of the components from other industries, and consequently their orders are going down. We see in our case, our sales, for example, to the domestic appliances, the sales have been experienced a reduction, but the customers feel comfortable that their demand is not in line with that. More or less some reactivation there could take place. The, for us, the heavy transport in which we are present, as you know, we are less present in America in the light vehicles. For us, it's not a strategic niche to be present on, but we are very present on the high transport tractor, trailers, and vans. This is a sector that is doing healthy. In this regard, we keep comfortable with that. Their order books now appear to be more or less healthy, at least until the Q3. In that basis, the heavy transport remains doing fine. Those related to the food industry appear to be solid order books as their new business line come online and there are investments in new equipment for industrial kitchens and associated equipment and so on. The food service and handling equipment is doing okay. We are waiting to see what may take place regarding all the infrastructure regulation passed last year. Most of the large projects for which funding has been requested and assigned so far have not reached the point in which orders for pipe and tubes are being processed. This still is to come. We always have been stating that this is what's coming in the States, when other sectors should probably start more to stabilize, we also have the comfort that this is still to come. Still this has not been precise. We hope that this shall be gradually coming. Still the pipe and tube has not been seen the reaction that we are waiting since the Biden plans was announced. This is more or less most of the sectors that we are supplying. In general, the situation is as we say, it's relatively robust. The final sector, our final customers remain fine. The stock is having the one that needed to dilute their inventories, but from the final customers, we keep the comfort. As I said before, the final customers, the Buy American in the States is an issue. I think that we have been obviously prioritizing these customers, and I think we are focused on the constant and proper supply. On these basis, we think that the imports that are more aggressively affecting other markets, probably in the States still have less strength as a consequence of that. Obviously, the distributors are open, but we keep the comfort on that part of the market. When are we going above actual levels of capacity decision? We are not in a rush because still we are seeing that the margins are satisfactory for us. What we do not want is to more or less break the actual balance. We think that the situation for April, May more or less should remain in these levels. Let's see if gradually we are able to recover previous levels and targeting maybe those of 90% that you were mentioning. Maybe not above that, at least on the coming months. Okay, great. Thanks for that, Miguel. Very helpful color. Thank you. Thank you. Our next question goes to Moses Ola of JP Morgan. Moses, please go ahead. Your line is open. Hi, Miguel. Thank you very much for taking my question. Most of my questions have been asked already, but I just wanted to see if you could provide a comment on local media reports of labor disruptions at your operations in Spain. I appreciate if you cannot, at this moment comment on this, but could you perhaps provide a timeline on when some of your wage negotiations are due, and essentially just also like the capacity at some of your operations in Spain, just give us a framework of the production there. Yes. Thank you, Moses. It's true that it appears some announcement of a summoning of a strike in Europe, unfortunately, it was canceled. At the end, there was a final decision for keep on running and keep the production in the plant. It's true that we are in the process of a wage agreement. Probably, there is the starting process has been more tense than normal, we think maybe a bit more aggressive than normal. At the end, also there are now different new unions entering the business, some of them are more aggressive in their approach and so on. This has been creating noise. In the assemblies, you know, it always appear that the most radical is the one that is more follow and so on. We have seen with great comfort that even though the initial approach was aggressive, or finally it has been decided not to go to the strike and keep the ball running and keep it with the discussions and so on. This year is a year of political elections in Spain, taking place some local and regional ones in May and probably the national ones in November, December. The years of elections always create further tension, and especially when it takes at the same time that the wage discussions always more or less appear to be also some political issues that justify that some of the approaches are more aggressive or not and so on. We are keeping the discussions. We have been opening and keeping open the negotiations. All the explanations have been properly given. We are committed more or less to the dialogue. We see with great comfort that finally it was canceled the decision to go on strike and the plant is running. We shall be keeping the negotiations, and we hope that during the year we shall reach a proper agreement for all the parties. Yeah. Thank you for that. Is there actually a deadline for any agreement to take place? So far in your negotiations, are you seeing in like wage increases in line with, let's say, inflation over the past year or maybe above or below? Well, we are feeling following the calendar. We understand that it shall take place prior to the end of the year, but probably it shall take time. Any case being solved during 2023, but probably for the second half of the year. Thank you very much. Thank you, Marcus. Thank you. Our next question goes to Robert Jackson of Banco Santander. Robert, please go ahead. Your line is open. Hi, good morning, Miguel and team. First question is related to Columbus. Has Columbus been suffering from numerous disruptions in South Africa, and thus would have affected the results? Well, in general, in the first quarter of Columbus normally is the seasonal summer slowdown there. Most of January until February are starting still is the summer holidays and the summer period. This is an issue that has been taking place. There has been some energy issues in the energy supply, especially in the last time. This is something affecting the whole country. Our team there is making good effort for obviously, as we said before, we are not running full, so consequently what we are trying is to run the plants in the times where we have electricity available and so on and keeping our production and keeping our targets. In general, we are doing business. It's true that the starting of the year, especially the first quarter normally is the weakest in Columbus. We are doing okay. The part of the exports from Columbus is the one that obviously being Europe, the natural market, the exports there are low, so the contribution of that business is going down. In a part of this model, we are running March has been a satisfactory, very satisfactory month in terms of deliveries and also in terms of production. As a consequence of these issues that we are seeing in the stainless, we are producing more in mild steel. We have been producing more mild steel and stainless, and the margin is a bit lower. It's a much more flatter type. It's satisfactorily running and in principle it's okay. The main concern now is these issues of the failure in the electricities that is experiencing the whole country. We are trying to do our best in managing the plan for being as less exposed as possible. It's a national problem. It's not under our control. Okay. Despite all that, second quarter looks better, bearing in mind that it's seasonality and probably less disruptions. Yes, I think so. Second question, related to VDM Metals. If I look at the EBITDA margin, fourth quarter 6% and first quarter is 9%, production-wise, very similar levels. Is there any impact from mix effect? The mix of the sales is significantly different or what's behind the significant improvement in margins? The margins have been high. There has been some. When we moved to VDM, for us, obviously, we internally in the group, we must keep on mind the differences. We normally used to say that VDM is our boutique, so we are talking about million tons in stainless, and sometimes we are talking about the levels of production in VDM, and then the effect that may have disruptions of 2,000-3,000 tons in a quarter appear to be obviously showing percentage disruptions. This is something that at the end in January, there were some issues, fortunately solved affecting production in VDM. Consequently, the strain has been normalized during March. We have been able to keep good margins, but then maybe the sales have been lower, as a consequence of that, affecting sales and affecting the finished goods areas. This is something that gradually shall be solved. As a consequence of this, is probably one of the reasons why we have seen this increase in inventory that is more work in process, and this shall be neutralized during the year. We are not concerned about that, but it's true that the sales figure has been a bit lower than what should've been, as well as the finished goods. Having some challenges in that area, and as I say, fortunately absorbed. During the year they shall have no impact, but maybe some issues occurring in January has been affecting those areas. It shall be normalized during the rest of the year, and the margins remaining high. The EBITDA margin is high as you are saying. As much as we keep good margins and we are in position for normalizing the sales, the deliveries and the finished goods areas that shall not be affecting this or experiencing these effects, we understand that also the contribution and the profitability should be higher in the second quarter. Okay. Just finally, NAS in North America, I guess, is also benefiting significantly from the strong energy sector or exposure to the energy sector, which could be in the range of 10%-15% of sales. Is that reasonable? I think it's much more lower than that. The sector is relevant, but it's lower than that. Okay. Thank you very much.