Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Befesa SA (XTER:BFSA, Financial) reported a strong third quarter with adjusted EBITDA of EUR 49 million, up 16% year-on-year.
- Operating cash flows increased by nearly 40% year-to-date, driven by strong cash conversion.
- The steel dust recycling business delivered strong results in Europe and the US, maintaining high capacity utilization around 90%.
- The company expects full-year 2024 adjusted EBITDA to be between EUR 210 million and EUR 215 million, representing a growth of 15% to 18% year-on-year.
- Befesa SA (XTER:BFSA) has extended its hedging book to cover close to 24 months, providing earnings visibility and predictability.
Negative Points
- The secondary aluminum business was negatively impacted by weak demand in the European automotive industry.
- The zinc refining operations in the US are experiencing a double-digit negative contribution for the full year 2024.
- The company's expansion plan in China is on hold due to current market conditions.
- Aluminum metal margins are under pressure due to weak demand and difficult access to aluminum scrap.
- Net debt at the end of Q3 stood at EUR 662 million, with a net leverage of 3.36 times.
Q & A Highlights
Q: Can you provide some breakdown on the reduction in the EBITDA guidance midpoint for 2024?
A: The midpoint is a reference within the range we provide. The reduction is due to various factors, including persistent challenges in the China market and pressures in the aluminum business. We believe the adjusted range of EUR210 to EUR215 million is more accurate given these conditions. - Asier Zarraonandia, CEO
Q: Has the range on cash flow guidance changed as well?
A: Yes, the total cash flow range has been adjusted to between minus EUR20 million to minus EUR10 million, considering expected working capital reversals and limited remaining CapEx for Q4. - Rafael Pérez, CFO
Q: What are the main drivers for the expected double-digit EBITDA growth in 2025?
A: Besides improved hedging, growth will be driven by increased tonnages and utilization rates in the US, new contracts, and cost reduction plans in the smelting operations. Energy prices are also expected to contribute positively. - Asier Zarraonandia, CEO
Q: What is needed to restart the expansion projects in China?
A: We need to see a recovery in steel production and overall economic conditions. Currently, projects are on hold due to the real estate crisis and other economic challenges in China. - Asier Zarraonandia, CEO
Q: Can you elaborate on the initiatives to recover from the negative impacts in the secondary aluminum and smelting segments?
A: We are focusing on cost reduction in the US smelting operations and expect some recovery in aluminum margins as the automotive industry stabilizes. The cost reduction plan is a key focus for us. - Asier Zarraonandia, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
