Ladies and gentlemen, welcome to the Aperam second quarter 2026 results conference call. I'm Iruna, the Chorus Call operator. I would like to remind you that all participants will be in listen only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Sud Sivaji, CEO. Please go ahead, sir. Hi. Welcome, everyone, and thank you for joining our Q2 2026 conference call. Our presentation covering the Q2 performance was published earlier today in our morning podcast, alongside our financial results and relevant regulatory disclosures. We have always set up things this way so we can jump straight into Q&A and spend more time addressing what's top of mind for you. I know it was a busy day for a lot of you, and hopefully our podcast format helps make that day a little bit more easier for you. Together with my colleague, Nicolas Changeur, we're looking forward to the dialogue with you now. Let's start straight away with the Q&A. Operator? Ladies and gentlemen, we'll now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one at this time. The first question from the phone comes from Tristan Gresser with BNP Paribas. Please go ahead. Yes. Hi. Thank you for taking my questions, and thank you for the slide in the presentation that shows the net margin improvement. I have some questions around that number. If you could clarify if it's related to Europe only, if it's the spread, the EBITDA per ton improvement or the raw material spread improvement for H1 year to date. If it's also on a spot basis or is that already realized on the Q2 results? So a few clarification on that number, that would be great. Sure. Tristan, let me start right away by saying that because it is for the Europe safeguard the impact primarily, it is just the scope of Europe, right? To be clarified for Aperam, because you may be looking at other stainless companies which do not have a distribution division, it covers the consolidated scope of margin improvement over both our businesses, meaning our stainless mills, which is part of the Stainless & Electrical Steel segment, and the European part of the distribution segment. This is a market view, really, end-to-end. Okay? Second one, it is not a raw material improvement. It is a net margin improvement. You can consider it the equivalent of EBITDA margin improvement per ton. This is the reason we have spoken about demand being a factor. This is the reason we have spoken about volumes overhang from last year from some of the domestic suppliers being a factor. This is the reason we have spoken about energy cost being a factor. This is the reason we have spoken about the raw material prices in Asia being a factor. It is a net EBITDA margin improvement. As we promised last year, Q3 2025, we always talk about net figures, clear figures, which translate into adjusted EBITDA. This is the EBITDA impact. The impact we have shown, your third point was it wasn't H1 or YTD, it is a spot assessment of as we stand after the TRQ measures came into effect. That answers the fact that not a lot of this margin improvement was present in H1. The last point, you asked me if this is spot and some Q2 results, have they gone in? I can tell you that much of the Q2 results, as you remember, was in the period where the importers could not bring in volumes, but at the same time, we did have volume overhang from last year. These results are present to a very small extent in the Q2 results. If you do a quarter-on-quarter bridge, you should see a very limited part from Q2. Okay. No, that's very clear and helpful. If that's spot, I don't want to be too precise, but we've seen scrap prices kind of decline heavily recently. Does that include also those lower scrap prices? Yeah. In the sense we are looking at net margin, it does include the scrap price effect. Yes, we cannot double count it at the point. You have to understand that there's two parts to the discussion. One is that scrap price is declining, yes, but there is also a valuation effect coming out of it. This is just a market effect. Mm-hmm. Okay. That's clear. The structural EUR 200 per ton improvement you discussed previously, and that probably we need to compare to that EUR 75 per ton. Do you see in the current market conditions, and I know it's the summer low, so it might be a bit difficult to have visibility, but with what you're seeing on the market getting to this EUR 200 per ton, do you currently have the conditions to get there? Or it might require something else and then if it requires something else, is it likely that this margin recovery also, well, jumps a little bit into 2027? Look, first of all, you rightfully pointed out summer is not quite ideal quarter for these measures to come into being, right? That's clear. We cannot make that measure. We do not see it over the Q3 period. The other part is that, if you look at it, this margin improvement, as we've shown in the curve, comes with a certain increased demand, which is what will lead to. Okay? The other factor which could lead to is reduced supply or inventory overhang in Europe from domestic suppliers. Those are the two factors. From the demand side, at this point in time till end of Q3, our outlook, we don't see a strong order book coming in from underlying demand. There might be some restocking because people have also imported in Q2. From demand side, there is not a trigger built in into our Q3 forecast. Q4, we always see Q4 as a strong quarter because Europe comes back from summer. Let's wait and see how that develops. At this point in time, because our order book is also significantly shorter compared to other stainless players, because 70% of our volumes go through our own distribution business, where the length of the order book is within a month. We profit from it, as you see that from our distribution segment. From our view, for Q4, it's a little too early to give you any kind of outlook on how I see that demand. Okay. That's clear. Maybe one last question also on, sorry, it's the European stainless steel. For carbon steel, there is this view that come September, October, there won't be a lot of imports, the inventory buildup would have declined, and you can see a bit of a supply squeeze. I was wondering if you could see the same thing for stainless. My understanding is that the import decline has already kind of been absorbed in a way that that demand might be a bit weaker. Would love to have your views on what could potentially happen in that September-October timeframe. First of all, let me start with the last statement of yours, Tristan. Please do ask questions because I understand this is a complex issue and there are a lot of factors at play. First one is that demand has not weakened. It has just continued being weak. That's the first thing. Now, the point is that, if we compare to carbon, and I cannot speak for carbon, in stainless, we had Q1 and Q2 already reduced imports. Right? That's the reason we do believe that that momentum will continue, so to speak. The primary difference for us as a positive trigger, if you look forward, is that with the 120,000 tons of cold rolled import quarter per quarter, we are right at, like our curve shows, the margin of what would be considered as a demand improvement. Is that clear? In the sense, I don't say that for us it is the same situation as carbon steel, for us it takes less to trigger this discussion because of the quarters per quarter. Okay. All right. Perfect. Thanks for the call. I really appreciate it. For any further questions, please press star and one on your telephone. The next question from the phone comes from Bastian Synagowitz with Deutsche Bank. Please go ahead. Yeah. Hi, thanks for taking my questions as well. Some of them have already been answered, but maybe starting with one quick technical question. Can you just help us to reconcile why there was a higher valuation effect in Stainless last year compared to 2026 now? I guess in the context of what nickel did, one would have thought that the tailwind was stronger this versus last year rather than the other way around. That's my first question. Bastian, I think I'll give the numbers to Nicolas in a minute, but you do have to remember that Stainless went up and then came down again, number one. Sorry, raw material prices went up and came down, number one. Number two is that we also have a scrap division, we have a quicker rotation. Any price increase, and that's what Tristan was talking about, that reflects much more quicker in our P&L because we are just faster in turning things around. Got you. Okay. Quicker translation rather than, I would say. Exactly stronger gradual realization. Yeah. Yeah. You would see that, you can call it valuation or timing effects at Aperam, both at S&S, and Nicolas, you can speak to that, and at recycling, because we have the longer value chain. On a paper, you would expect us to have higher valuation effects. In reality, because of the quicker turnaround, and you see that in the excellent net working capital release, these translation effects reflect immediately in our P&L. Q2's had a lot of it, and that's the reason the higher price effect on one side is balanced by the lower effect. What was the valuation effect, Nicolas? Yeah. On the valuation, in Q2, you can consider that we had a low double-digit impact in our Q2 results. We don't expect this effect to come in Q3. We are as a neutral, let's say, on Q3 quarter. Understood. Great. Thank you. My next question is just on alloys, and I can see the performance fell back a little bit from last year when comparing. You highlight the energy sector, which I guess is a reasonably obvious situation, but would you still be confident enough to say that you'll be able to grow the EBITDA for the business compared to last year, I guess given the tailwinds you're currently seeing in aerospace in particular? Maybe also, is there a very early color which you could give us just across the business, maybe with regards to the fourth quarter, even though I know that's very early? No, but that's a fair question. The point is that oil and gas has been the biggest delta as you've seen across the sector. Right? In this case, for us, oil and gas has been the delta to last year. The improvement compared to last year, there is a technical effect, Bastian, which is that we had about a month and a half of additional Universal this year compared to last year, if you remember, annually speaking, in our P&L, because we closed late January, right? One month we did not have it in our P&L. That's one effect, which is a technical effect, which brings an additional EBITDA when you compare year-on-year. The other part is that if you look at it, in terms of aerospace, order books are looking good. Outlook is more positive. You've seen our message on Boeing restarting the fourth line. This should translate into order books end of Q4, and the positive effects should come probably in Q1. There might be some early gains in Q4, this is for us a smaller impact. The main factor, if you so wanted compensating for the lack of oil and gas at Aperam compared to the rest of the industry, which is dependent on oil and gas, is our innovation products. The ramp-up in our innovation products, we've spoken about electrical and electronics engineering, we've spoken about OLED screens, we've spoken about our magnetic acquisition, that's something which we will talk about in our Capital Markets Day as well, the potential going forward. That's something which is already giving us some help this year. Thank you. If you would just look across also some of the other units, I guess you talked about Europe already. Brazil obviously has the usual seasonality, but particularly recycling usually has a relatively good fourth quarter seasonality as well. I guess their alloys as well, their service and solutions as well. Is there any early color on those? Does the seasonal pattern in those units still hold? Nothing which you can think of. Typically, these are all short-term businesses because recycling, renewables, these are all typically people order scrap a month, a month and a half ahead, so to speak, except for aerospace recycling, where the order books are longer. S&S, the same way on the other side. Right? We don't see anything besides the normal seasonality there. Great. Thank you. The next question from the phone, counselor Maxime Kogge with ODDO. Please go ahead. Good afternoon. Sorry, I missed the start of the call, so please excuse me if the first question has already been answered, but this was about volume development in Q1 versus Q2. They were actually slightly down while you are guiding them to be higher. What's been at stake there? Is it that imports ticked up a little bit in Q2 versus Q1? That demand was weaker than expected, or that competitors were also perhaps more aggressive? We've heard Acerinox say actually that they were able to expand their capacity from Q1 to Q2. Any view there? Look, let me walk through that. When we guided to higher volumes, we did expect a higher demand. I think the demand did not get weaker. It's just been weak, stable underlying. Okay, that's first point. The second point is that as Aperam, we always choose value. We would not just sell volumes for the sake of selling volumes. We price margins above everything, as you see in our results. As a result, we did look at it and we did margin arbitrage where we ended up selling some of these volumes through third-party players so that our own distribution business, which would have typically imported to compensate these volumes. Right? Our S&S business is an independent entity with its own value creation and with a significantly higher ROCE. Fundamentally, this business, we decided, and we have given that in the podcast, not to import also because of the safeguards and at the underlying demand level, we did not see that arbitrage paying us off. The volumes did go, which would have gone typically through our S&S, through independent distributors. That's why it looks compared to what we expected in Q1. It is something which we did not want to play the volume game, so to speak, when demand is weak, and we wanted to concentrate on margins. Against that backdrop, since volumes have been perhaps a bit weaker than expected and a bit beyond what they should be, we might have expected perhaps the Q3 guidance to be a bit more supportive there. No, absolutely not. Because you're already from a low base. Okay. No, absolutely not. Volumes demanded from the market have not been weaker. We did not have volume overhang from 2025, whereas some domestic suppliers did have that volume overhang from 2025. We chose there to focus on margins and supplying our customers who are the independent distributors, and that's the reason for that. The market volumes have not been weaker or stronger compared to previous quarters. Okay. No, that's clear. Second question is a general one on regulations. Are you happy with the latest details of the new TRQ system? I mean, the country ceilings. There's still the possibility to carry over unused quotas, probably that's something that remains quite negative. There are some discussions around the melt and pour concept. I don't know if it's still as crucial as it was a few months ago when we didn't know much more about the country ceilings. In relation to that, yeah, what's your take on the reform of the ETS scheme? Should not have a major impact on you directly, there's, of course, the risk that CBAM gets watered down, which could be a bit negative for your competitiveness, yes. Any color there would be helpful. Let me start with the ETS discussion and then give you a broader answer, so to speak, right? Fundamentally, for stainless, the ETS discussion does not make a huge impact, yeah. Your assessment is perfectly correct there. There might be slight discussions on the CBAM side, it's not going to fundamentally change the competitive advantage of European players, and especially Aperam. I'd be very clear. The second topic is you're talking about TRQ and the carryover mechanism and everything, right? Let me answer here, not just for Aperam, but also for stainless industry, how we look at it, right? Which is important. In Europe, we are introducing a significant trade reform together with the colleagues from the other European steel companies. We are happy that this started. That is the reason we've also gone ahead and put our money where our mouth is and announced investments already in Q1 into Europe. We tend to compare this to the previous years where things have been difficult, the European Commission has recognized this and introduced this TRQ. Obviously, we would like to, and we are working together with the Commission, to extend this also to downstream. We look at all our customers as well, and we understand the carryover mechanism or the different quota treatments between the FTA countries or the non-FTA countries. It's a way to fairly balance a fair trade flow and at the same time keeping our downstream competitive. We continue to work if there are any loopholes, Aperam was profitable even before the trade measures were introduced. EUR 75 per ton was the profitability of our European business even before that. I welcome this to strengthen our European steel community, also we have to look at downstream. In this context, I'm happy where we are. Melt and pour is a key clause because it's an unfair trade flow, we'll continue to work with the Commission. You've seen that the Commission has already reacted on the aluminum side and looked at it as an anti-circumvention measure. This gives us also promise that when we continue to work with this Commission, this will also be solved. That is how I look at it. In the broad scheme of things, as we have shown, the supply side unfair trade flow through TRQs has been addressed properly, we now have to ensure that we use this to develop European industry. In the broader scheme of things, for Aperam, EUR 75 per ton profitability before, and a targeted over the cycle EUR 200 per ton improvement, I think it is something which we will strive towards. We will continue to work our own performance as your Leadership Journey says. There are things to improve, it is not something I'm going to sit and complain about. Just the last one. This is about molybdenum, where prices have kept being very high actually and increasing further in recent months. Since this dual pricing system in Europe doesn't really work anymore, I would have thought that this would be negative for you. At the same time, you have this 316L range that allows to save molybdenum, probably you're gaining market share there. Any view on how this very high molybdenum prices affect you? First on molybdenum, we focus scrap mainly, not pure raw material. Second, it is a very high price, it's something which is much less imported than any other grade. It is a grade in which we pass on all the cost, we have also a profit. On top of it, we have also a strong offer, such as, for example, the 316A for the customers that would like to have the benefits of the 316 with a more competitive raw material. We are happy and there is no problem there with the molybdenum, we have, of course, a strong innovation pipeline in order to improve the TCO there. No, that's clear. Thank you. We have a follow-up question from Mr. Tristan Gresser with BNP. Please go ahead, sir. Yes, hi. Thank you for taking the follow-up questions. Just wanted to ask you if you could elaborate on the restructuring charges and legal provisions you had in Europe, Brazil, I think it was EUR 35 million in Q2. What was that? If we should think of any cash impact as well in, I don't know, Q3 or Q4 moving forward. That's my first follow-up. Yes. On the restructuring charge, as you know, we have announced a positive EBITDA impact, linked with a PIS/COFINS case that we have gained in Brazil of EUR 59 million. I need to mention on top of it that we have positive interest of EUR 24 million. You are looking at EUR 83 million positive on one side, which will be transformed in cash in the next three to four years. Versus this, in the EBITDA, we have EUR 30 million provision. You can consider that 50% is on Europe restructuring with the exception of France. The other, it is litigations in the different countries around the world where we close some subsidies such as in the U.S. This impact will also be over the next, let's say, two to three years for the second 50% and four years for Europe. Basically, you see overall it is positive cash when you take the positive and the negatives. Just a follow-up then on the tax rate, the effective tax rate for next year. Would you expect something, I know it's a bit early, but would you expect an effective tax rate also to be a bit reduced? Most probably, I expect the ETR to be slightly reduced. We are working on it and, in particular in Brazil, I think it will be lower than in the past. Okay. That's clear. Maybe a question on Brazil, if you can discuss a bit the market situation, I know you flagged that you built some inventory levels, because you had some project in Q4. If you could just remind us what's going to be the impact from that project and where you see the market at the moment. Tristan, this is a project which we announced last quarter. It wasn't for Q4, it is for the first half of 2027. Since Brazil is a small market, we actually have to build these inventories over a year just to make sure that the market is not affected. That's why we've started building these inventories right away so that there is not a sudden impact on the market. This is something which we published last time. It is a small, very low double-digit investment, and it increases the mix in our stainless, and also the capacity of how much stainless we can supply. Because you know our philosophy. In Brazil, we are the only player in South America, and we are capable of producing from 800,000 to 900,000 tons right from upstream phase. It has helped us every time we see an improvement in demand to marginally increase that demand. We produce about 350,000 - 400,000 tons of stainless in Brazil, and we see that the country continues to grow and the growth comes in increments, and that's the reason we are now investing this marginal amount to make sure our downstream keeps increasing with the country's demand. That is the investment for next year, and we are starting to build inventories already this year. We expect, we set a high single-digit EBITDA impact more or less. Okay. Lastly, the Capital Market Day, I know it's in November, but can you give us maybe some hints or flavor on what you want to focus on then? Yeah. Tristan, I would suggest please come to the Capital Markets Day. I can give you a sneak preview. Fundamentally, it's going to be on three topics, right? One is the fact that we have built a company which has delivered, let's take Q2, for example, EUR 130 million EBITDA. This EUR 130 million EBITDA in the face of so many headwinds, there is some support from trade defense in Europe. It's fundamentally different from the EUR 130 million EBITDA, which would have been in 2019, 2020. In 2019, 2020, Stainless Europe would have been EUR 80 million-EUR 90 million of this, or EUR 80 million of this EUR 130 million EBITDA. Today, it is exactly the other way around, where all the other businesses we have built, grown, and acquired have gone on to perform this. We would like to present this transformation story and help all our investors understand that Aperam is not a one-trick pony. We are actually building a company which is across the entire value chain. In one session where every division head comes and presents their plans and how they're executing this, and how they compare to peers in their respective businesses. Number two is the fact that we are looking at our EBITDA target over the next three years to EUR 700 million-EUR 800 million. There is a lot of moving parts in this. We would like to translate this EBITDA target, which we have announced, into executable actions and present that to ensure that our investors and you all understand what we plan to do and how we plan to do it. The last one is Aperam, as it expands beyond Stainless Europe, is looking at different markets and different end-user applications. We are talking about aerospace. We are talking about electrical and electronics engineering. We are talking about spacecraft. We are talking about defense. We are talking about growing in infrastructure in countries like Brazil. To look at this part of it and see where innovation is, where the different end markets present to ourselves opportunities beyond even the 2028 timeframe. This is the case for our Capital Markets Day. All right. That's very clear. Thank you. The next question from the phone comes from Adahna Ekoku. Please go ahead. Hi, good afternoon. I have got one question remaining. Just on cash flow in the second half, on CapEx, you have only spent EUR 66 million of the EUR 200 million guidance. Is there anything particular we should keep in mind about phasing of spending in Q3 and Q4? What working capital movement is currently assumed in the flat net debt guidance to Q3? No, we will spend our EUR 200 million overall over the year. You can basically count that we will achieve it. Okay. Is that evenly split between the two quarters or properly back-end loaded in Q4? Most probably there will be more in Q4. Okay, perfect. Any comments on working capital? On working capital, we will achieve our deleveraging. We are on track with what we have promised. You can expect improvement in the working capital by the end of the year. If you look at where we stand today, we are already at the level of the net debts that we have reached almost end of last year. Everything is going well there. Yeah. Perfect. Thank you. Gentlemen, that was the last question from the phone. Thank you so much for attending and participating in our Q2 call today, and thanks for all the questions. I would also thank all of you specifically on today, because it's been a busy day, as we have heard from a lot of you. We try improving how we present information to you ahead of time, so please reach out to us in case you would like that changed or adapted. Now on our Q3 outlook and our Q2 results. We've had an excellent Q2 in the face of headwinds. On Q3, if you look at it, we are guiding on an outlook based on seasonality. 2026 is already proving to be a defining year in Aperam's transformation. We thank you for your continued support as we build this momentum, and I'm excited about the Journey ahead. As always, our investor relations team is available to connect with you and address any future inquiries. Please do not hesitate to reach out to us. For those of you in the Northern Hemisphere, have a fantastic summer, and we hope to talk to you soon. Thank you. Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your line. Goodbye