Hello and welcome to the Aperam Q1 2024 Results Conference Call. My name is Caroline, and I'll be your coordinator for today's event. Please note this call is being recorded, and for the duration of the call, your lines will be on listen-only mode. However, you'll have an opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to register your questions. If you require assistance at any point, please press star zero, and you'll be connected to an operator. I will now hand over the call to your host, Timoteo Di Maulo, the CEO, to begin today's conference. Thank you. Hello everybody. Good afternoon, and welcome to this call. So I'm here with Sud Sivaji, our CFO, and we will open directly to your questions, as I suppose that everybody has had the possibility to go through our podcast. Thank you. Hello? We will take the first question from line Yannis from Morgan Stanley. The line is open now. Please go ahead. Hello. Good afternoon, and thank you very much for the presentation. Two questions from my side. The first one, on the Q3 outlook, you suggested a slightly positive delta on European pricing, but going into August and September, we're seeing prices rolling over somewhat based on steel trade press. Given lag effects, would you expect European pricing to be a headwind on the Q3 to Q4 bridge? What are you seeing in your order books? I'll stop here for the first question. Thank you. You know that always there is a lag effect in pricing, and I would like to start from the fact that the prices for the moment are well below the normal. Okay? And so prices and volume in Europe are well below the normal. We have seen some recovery at the end of Q2, which will translate into Q3, but remember also that Q3 for Europe is seasonally a very low quarter. So this will be, combined with the seasonal effect, will be, let's say, relatively neutral to Europe. And then you have also other effects like the raw material for which we don't know for the moment what will be the trend. Okay. Very clear. Thank you for that. Maybe just a second question on the inventory valuation, because we've seen nickel coming down so far this quarter versus Q2, and spot prices are below the June end levels as well. How does that reconcile with the Q3 guidance for a still positive impact in absolute terms? Hey, Yannis, Sud here. Let me take that one. See, inventory valuation, when we speak about inventory valuation, you're probably just looking at nickel, right? First things first, on nickel, we are ahead, so there is going to be an adjustment. But you do realize that there are other raw materials, right? For example, we use a lot of chromium, but in our alloys business, we do use a lot of molybdenum, cobalt, right? So when you talk about inventory valuation, unfortunately, you guys probably look at the pure stainless players like some of our competitors. And in our case, we are looking at even we are the biggest titanium alloy supplier in the whole world when it comes to recycling. So there's a whole bunch of raw material mix in our portfolio, and that's the reason for this, right? So to look at it, we are looking at very, very slight movements. Even if you take nickel, right, if you're reading into a risk, how does Q4 develop? I would say it still depends on the price of these raw materials, right? But we are not looking at large significant effects unless nickel goes to $50,000 like last year and then drops to $15,000. Does that give you color? I've given you the list of raw materials which drives our inventory valuation. And if you're just purely looking at nickel, I've given you also the magnitude of the change is not going to be that much, both up and down. Okay? Great. That's very useful. Thanks so much. I'll join with you. Thank you. We will take the next question. Thank you. We will take the next question from line Tom from Barclays. The line is open now. Please go ahead. Good afternoon. Thanks for taking our questions. Just two from me first on the mixed benefits. So obviously, in Europe, you talked about mix helping to offset price cost. Could I just ask how structural that is, or is it at all related to the sort of industrial pickup that you also talked about? You were saying small changes in industrial demand ex-energy. That's the first one. When you refer to mix of product, do you understand? Exactly. Yeah. The product mix, especially in Europe that you sort of mentioned. Yeah. Exactly. So what we have invested during the Leadership Journey was not only in cost competitiveness, as you remember, but also to enlarge our product mix. This is progressively coming on stream. So it takes some time, but this is coming and will support Europe. Okay? So then in the past, we had a disadvantage on energy, which is over now. This means that also Europe is back to be the most cost competitive footprint in Europe. So these are the two effects that are supporting Europe. Understood. So is it we should continue to expect mix to be a tailwind rather than this being a sort of quarterly one-off? Is that fair to say? Yes. Yes. I think I assume that the product mix will continue to grow and go in the direction we have wanted and we have invested for. This is perfectly in line with the EUR 300 million improvement that we have promised. Got it. Thank you. And then the second question, just on the sort of European market, I mean, could you just talk a little bit about how you see supply demand? I know Yannis was sort of mentioning about prices most recently, but really just in the context of domestic supply coming back online with some of your competitors, how you see that playing out versus real demand, probably more into Q4 and sort of after summer? Just curious on thoughts. Thank you. So remember that the last period has been still periods of decreasing volumes and a decreasing of inventories. And then part of this decreasing inventory was in the melt shop, in the industry, which we are not producing. So strikes were compensated also via some imports from other regions. So all in all, in Europe, the supply has always been fitting the demand. Okay? So the new, let's say, that the news that one of our competitors will be back in operation will take some time, first of all, and will impact will be compensated by some probably lower imports or in any case by the fact that stock are so low that there is not a risk that this will have a significant effect on the market. Okay. Fair enough. Thank you. Thank you. We will take the next question from line Tristan from BNP Paribas. The line is open now. Please go ahead. Yes. Hi. Thank you for taking my questions. I have two. So the first one is on the net debt guidance. I think you said that it will increase in Q3 and then decline in Q4. But last quarter, I believe you were a little bit more specific, and you said that net debt would be only slightly higher on the year-on-year basis by Q4. Is that still the case? Tristan, hi. Sud here. Tristan, I think we got very specific guidance last year, and we have not changed that, right? We said from Q2 till end of this year, we will have a EUR 120 million reduction. You take the Q2 net debt and take the EUR 120 million. This was the exact guidance last quarter, and we have repeated the same number and the guidance in the outlook of this quarter as well. Nothing has changed. If you want the exact numbers, it was EUR 670 million last quarter. Subtract EUR 120 million, you come to EUR 550 million. Okay. That's fair. And then on Europe, you mentioned that European stainless margins have improved in Q2. Do you still see margins improve on a spot basis at the moment, or do you see a more stable development given the recent downward pricing movements? And also wanted to check if you expect the price cost squeeze in Europe into your Q3 S&S guidance. So it's a bit early to be said, but because it depends on also the development of raw material, development of price, etc. But fundamentally today, I see more stability or a slight increase which was in Q2, which transfers to Q3. Now, the real point for us is not the market. We are not expecting so much from the market. It's the fact that Stainless Europe has finalized all the ramp-up of the plants that we have shut a lot. You remember in the last quarter, we were a lot impacted by the fact that Europe was ramping up all the melt shop in Genk, all the upgrade on the hot rolling mill in Châtelet. And now all this is full running, and the cost competitiveness of our plant has been restored. We are confident, but it is more, let's say, something which depends on our competitiveness than on a real big change of the market. Okay. That's very clear. Maybe a quick follow-up to that on Europe. Inventory, you've shown that in your presentation of very low. The restocking you mentioned, could that already take place in September after the summer, or is that too early in your view? Look, everything will depend on demand. Today, what is clear is that the supply is on very short delivery. So if there is not a change in the final demand, we can stay at a very low level of inventory and continue like this. If there is a change in the real demand, then stock will become tight, really tight. Okay. That's very clear. Thank you very much. You're welcome. Thank you. We will take the next question from line Bastian from Deutsche Bank. The line is open now. Please go ahead. Yeah. Thanks. Good afternoon all. I've got two questions. Just maybe first of all, one on the market, and I think it's absolutely amazing that the low value-added and low capital employed, asset-light services business literally is on par with the everyday EBITDA margins in the stainless business. And that's even before the technicalities around elimination. But now, given that one of your European operators and competitors is back in the market, I guess maybe in the first place, we were all surprised that prices did not rise further. But do you think there is a risk that prices may be falling back as they are trying to conquer back market share? From your earlier comments, I fear that you don't really see them acting as aggressively. But yeah, I just wanted to see how you basically consider the risk of prices potentially falling back. Maybe also, could you briefly talk about how your lead times are looking like just now? That would be great. So I can't, let's say, give any comment on what will be the future behavior of our competitors. But today, let's say, what is the sense to come back to the market with destroying prices? There is no sense after having, let's say, fought so long for the, let's say, sustainability. So I don't see this happening because, of course, the strike has been, let's say, already taken into account by the commercial world and by the market. I don't see this happening. I think that we might have some few smaller volumes, maybe, but with the variabilization that we are able to do, this will not impact significantly our results. I don't see a huge drop in the short term, even if I cannot be happy or promise any kind of increase in the market. Okay. Your lead times at the moment too? Our lead times are relatively short. Relatively short on when we say lead time, which are relatively short for this kind of industry, is in the range between 2 and 3 months. Okay. Understood. And then my next question is on your Leadership Journey. And I guess there's obviously a lot of stuff happening there, but some of that is also market-dependent. But then there is obviously the EUR 50 million booster and other items where you may be a little bit more in control. I guess the ramp-up of Brazil and the AOD should also help as well, even if things in the market are not really improving much. So could you possibly single out a little bit how much improvement into 2025 we should expect from all of the, say, slightly more tangible initiatives, even if things are not getting better from here? So hey, Bastian, Sud here. So we had guided to EUR 75 million in 2024, run rate till end of the year, and another EUR 75 million for 2025. So I don't see a reason to change that. Yes, there might be some effects coming from the market, especially gains on variable costs depending on prices and things like that. But at the same time, you do know that we always come back and put in additional measures or work on that. So for me, that top-line number of EUR 75 million for 2024 expected gains, I don't see significant deltas on that, first thing, right? And in terms of the EUR 50 million booster, which you're talking about, basically, a EUR 50 million booster is the cost reduction program, the fixed cost reduction program, which we have put in Europe, right, including FTE reduction. And in the podcast, I tried to speak about it. That's going on as planned also. So we do expect to achieve that. So that EUR 50 million is, of course, contained between this year and next year, the EUR 150 million. Is that clear? Yep. Okay. No, that's clear. Thanks for that, Sud. The last point, I guess if we take a snapshot of your current status quo, right? So I guess you're delivering really well in the, say, non-stainless divisions, like S&S, recycling, and obviously the Alloys business. They seem to be pretty firmly on track towards targets, as you say, as well. And at target, obviously, that gives us something around EUR 300 million, more or less, EBITDA. And then looking at, I guess, the stainless business, even if we net out maybe some of the elimination effect, which we saw this quarter, you're basically at a run rate of annualized something around 150-160 already before any market recovery. And then you obviously have all of these items from the Leadership Journey, which you're still working on. So I mean, the bridge here stacks up pretty well also in terms of what that means for your free cash flow, obviously, for the years ahead. I guess you talked quite a bit about the fact that you're very comfortable with your balance sheet, yet the net debt clearly has gone up. What would be the next step when you start to generate excess cash above basically your dividend? Would you, first of all, go and maybe try to bring down the balance sheet net debt position a little bit, even though you said you're basically feeling comfortable, or would you be inclined to use it even for other purposes? So, Bastian, thanks for that question. I tried to present a chart on this last Capital Markets Day as well. So to just reiterate the position which we have declared in our financial policy, today, the net debt position is exactly the same as the net working capital of our recycling business, okay? Which basically means that in a business like ours, where we work across different commodities and different business models, we as management do not believe in reducing trading because the recycling business is a business in which 80% of the products are sold in the next two months, already sold. So it is like a trading business. If you take other peers in the U.S., for example, look at their trading inventory. So for us, the way we view this is that we should not be using hard-earned cash to actually reduce this debt. This is what we have discussed last time in detail, and I presented that chart because it is purely a price-based movement. If value of scrap goes up, value of titanium goes up or down. And so the way our peers in the trading business do is they don't even use long-term debt. They actually use RCF, a rolling credit facility, or extended credit lines to manage this working capital debt. I just wanted to make that clear. So if you take out the working capital of recycling, Aperam, and I mentioned it in the podcast, is already zero debt. Okay? So I want that as an opening statement to make it clear that once we start generating even more cash, I mean, I still tell you that the core of our tenet is that we will always generate free cash flow, at least the dividend. We will not raise debt to pay our dividends, right? If you keep that as the core, any excess free cash flow generated, financial policy hasn't changed. We look at opportunities, internal and external. And if we do not have opportunities, share buyback because we are valued so. Okay. Understood. Okay. Thanks. Thanks, Sud. Thank you. As a reminder, if you would like to ask a question, please signal by pressing star one on your telephone keypad. We will take the next question from line Maxime from ODDO. The line is open now. Please go ahead. Yeah. Good afternoon. So I was quite surprised by your positive comments about automotive because this is a segment that has been deteriorating a lot in the past months, and you're still saying that it's trading above normal. So is it because you're still overexposed to the conventional/hybrid market? Is it because you are ramping up Cybertruck production? Can you provide more color on this aspect? And do you expect this to remain? Thanks for the question. Oh, sorry. This segment to remain resilient over the next quarter? Okay. Thank you for the question. You know that we can talk on specific projects, but remember that for us, automotive is three things. First is we have automotive in Europe and in Brazil. And in Brazil, the situation is much better than it appears to be in Europe. Then in Europe, there is the question of the automotive, which is linked to the new electric vehicle and the traditional one. The traditional one, indeed, we see some slowdown, but remember that for us, these are products which have, let's say, below the average EBITDA. And so we are not so much concerned about some slowdown of the volume. And the third part is the fact that despite that Europe is not China, there are a lot of new vehicles and applications in the electric vehicle. And this is for us an opportunity. So we are also exporting, exporting solutions which are unique and, let's say, evidently with good margins. So we think the automotive for us is supportive. Okay. Okay. That's clear. And second and last question, it's about the social movements you've had recently in France. I think you flagged last time that this could have an impact in Q2. Finally, this did not happen, if I understand it well. And can you confirm that it will also not affect Q3? Because I think you mentioned the lagged effect there, too. So some impact. Every time you have a discussion and you have some strikes, you have some impact. But what we are happy for is that this impact has been, let's say, reduced at the minimum and with a good social dialogue. And it's clear that when we present a strong improvement and cost reduction, etc., a new footprint, this is always a tense discussion. And this discussion is ongoing, is continuing. We have been able, with the social dialogue, to maintain this to a limit which is well acceptable and without big consequence. We believe that we can continue to work to limit this at a low level in Q3 and Q4. Okay. Thank you. Thank you. We will take the next question from the line of Moses from J.P. Morgan. The line is open now. Please go ahead. A few questions from my end, please. Just firstly, on the other line, so obviously, it's a large negative number this quarter due to greater eliminations, as you discussed in the podcast. But is there any steer you could give us, I guess, based on obviously your guidance for pricing here in Europe? Any steer you could give us on how we should expect that number to evolve in the next couple of quarters? Hey, Moses. Yeah. The Elim number, as I explained in the podcast, if you take a look at it, is negative because as prices increase and profitability returns to Europe, our European operation, which is interconnected starting from our recycling business through our stainless mills into our Services & S olutions business, does have a lot of flow-through inventory. And these inventories carry profits. And just to make sure that we don't double count it, we remove them, right? And in the past, these numbers were very low because end of the day, the margins were low. And that's the reason for the last two years you've seen structurally low eliminations. Now, this is the quarter where the margins have turned. And as Tim has explained, it's not just slight improvement in prices. It's more. Our cost competitiveness increasing coming from the Leadership Journey and also last year's one-time effects, which we had, the investments and the problems related to that, those costs going away. Now, when that happens, profitability increases suddenly over a quarter. When it happens over a quarter, the entire inventory sitting between these divisions carries a profit which needs to be eliminated. That's the reason for this first-time turn and a large negative valuation. To answer the other question, based on current estimates of prices, I've guided in the podcast for single-digit elimination as in the past per quarter. I don't see any necessity to change that in the current discussion of prices, which Tim has had earlier with Tristan and Yannis. Okay. Thank you. Very clear. And then secondly, just on Brazil, I think you previously guided last quarter that you expect a normalized result there given pricing of, let's say, around EUR 75 million- EUR 80 million EBITDA for the year. Just with your comments here on greater headwinds to pricing in Brazil, would you still say you're still seeing a normalized environment or more downside risk? So the point is the following. In Brazil, we have had a very strong headwind due to the ramp-up of the hot rolling mill. You remember that we have announced an important revamping of the hot rolling mill, transforming the hot rolling mill from 1250 to 1500. So these are massive investments, and the ramp-up has been slow. So this has decreased a lot the competitiveness and the volumes of Brazil during the second quarter. Now, pricing-wise, Brazil is impacted by the fact that in the global market, the prices are low. So you remember how the prices are settled in Brazil? They are correlated to the imports and with the percentage, which is the import duties plus the premium that we always have. So the lowest price, the lowest, these are also in Brazil. But in any case, Brazil remains an upside for the future. We will see on the finalization of the ramp-up, the recovery of the delay during Q3, and we will give more guidance during Q4. Okay. Thank you. And just finally, as we have seen in the U.S., sorry, as we approach the elections, we've seen greater rhetoric from steel companies over there to limit imports, particularly from Mexico, which would significantly impact one of your peers. Obviously, I know you don't have great exposure into the U.S., but have you thought perhaps of some of the indirect impacts into Europe in a scenario where the U.S. becomes even more protectionist? Do you see risks where that could redirect even more imports into Europe at this stage? I don't think that Europe is today linked to this. We have our European trade defense, and we are exposed to the global world, which is much bigger than the United States. If there is any subject to be treated in terms of impact on the trade, it is mostly the relationship between our trade defense in Europe and the global pricing, which are in the rest of the world. Okay. Understood. Thank you. Thank you. We will take the next question from line Yannis from Morgan Stanley. The line is open now. Please go ahead. Hello. Yeah. Thank you for taking the follow-ups. Just two from my side. First, on Leadership Journey 5, you flagged that you're behind schedule with EUR 15 million realized so far this year, versus a target of EUR 75 million. Could you quantify the impact that the Brazilian hot rolling mill has had on the targeted savings so far this year? And then the second question on the EUR 300 million EBITDA improvement on a like-for-like basis, could you flesh out on which initiatives you're running potentially ahead of target and which ones are more in line or maybe if there are any areas that you need to catch up on? Thank you. Hey, Yannis. So thanks for the questions. First things first, we did not say we were behind target. We actually said that it may look to someone looking from outside who takes a EUR 75 million target for the year and sees for the first two quarters, we have made just EUR 15 million, that it's a slow start. But this is something if you look at Leadership Journey one, two, three, and four, for the last 14 years, you will see that whenever we start Leadership Journey in a year, obviously, there is going to be a ramp-up, and the first two quarters are a slower start. Why do I say that? Because we have in the podcast again confirmed the Leadership Journey target of EUR 75 million for the end of the year. So yes, there are slight effects from the Brazilian hot strip mill ramp-up, but these will be compensated by other measures which we see as possible. So I do not see a risk in that discussion for end of the year. Yeah. And as far as your question on the EUR 300 million, the tracking to our end of 2025 targets go, it's evident that alloys, recycling, and S&S are well on their way to their targets, which we have announced at the capital markets day. And the two stainless businesses are also ramping up fast compared to the market. And for me, if you look at it, that EUR 300 million target so far on operational improvement, what we can control, everything is as per plan. As exchanged earlier with Bastian, presence of extra volumes in the market for the stainless businesses, which is missing today, would accelerate all the variable cost gains in the stainless businesses. That's the status on each of those divisions contributing to the EUR 300 million. Excellent. Thank you very much. Thank you. Either of you has no further question at this time. I will hand it back over to your host for closing remarks. Okay. Thank you very much for your participation in this conference call. I would like to share with you a final remark on the two points. The second quarter has been an example of what is happening to us as a company. The transformation we have launched with investing in a differentiated value chain, which is much more stable and gives a basis, a sustainable basis on top, investing in forest, recycling, circular economy, in Services & S olutions, and in alloys. The second part is that on top, we have worked a lot to improve our footprint. So when you improve your footprint, unfortunately, in this big industry, you have a strong headwind due to the fact that during the period you improve your footprint, you have to close down. You remember four times our melt shop in Belgium, the hot rolling mill in Brazil, etc. But whenever this is finished, it's finished and immediately becomes a strong advantage for the company and improves the competitiveness of the company. And this is what is happening. On top, with these variable costs linked to energy, etc., that are over now, Europe has come back to a strong competitiveness. Brazil, we are sure, will come back to stronger competitiveness, product mix, and volumes. So whatever happens in the market, we are prepared for it, and we are confident. So I wish you relaxing holidays, and I hope to see all of you or some of you on the road in September. Thank you very much for the participation. Thank you for joining today's call. You may now disconnect.