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Operator: Ladies and gentlemen, welcome to the Aperam Fourth Quarter 2025 Results Conference Call. I'm Lorenzo, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Sud Sivaji, CEO. Please go ahead, sir.
Sudhakar Sivaji: Thank you very much for joining our conference call today. All our comments were contained in the podcast that we published this morning, which supports our quarterly financial reporting and where applicable, our disclosure of regulated information. We also save more time for your pertinent questions during this call. Good afternoon to everyone joining this call. Together with my colleague, Nicolas Changeur, we're looking forward to answering your questions. So let's start straight away with Q&A. Thank you. Operator, if you could open the lines.
Operator: [Operator Instructions] The first question comes from the line of Gresser Tristan from BNP Paribas.
Tristan Gresser: I have 2. The first, could you help us understand a bit the current situation in Europe if your order books are improving at the moment or not? Are more buyers of stainless steel turning domestic? Are buyers of stainless steel still importing like nothing has changed? You also flagged that inventory has decreased, but imports have surged in Q4. So I'm also trying to square that one out and see how much of an overhang there is on the market in Q1, Q2? That's my first question.
Sudhakar Sivaji: Tristan, thanks. So the discussion about the market in Europe currently is that our order books are recovering from Q4, but it's purely a seasonal recovery. Q1 is typically Europe comes back from its Christmas holidays and there's a seasonal recovery. So we don't see anything special additional like we said in the podcast. So it's seasonality purely. The second question you had was are importers turning to domestic? No, we don't see that specific activity. Typical buying patterns, both apparent consumption and real consumption, which drives our production is at seasonal normal levels. In terms of the inventories being low, the distributor supply chain, the statistics were at the end of Q3. And as you mark correctly from our podcast, imports surge was there at the end of Q4, probably as some distributors were trying to cover for CBAM discussions. So this will have, like we said in our podcast as well, some overhang in H1, but it's, I believe, a temporary overhang because, as you know, of the three bodies of the European Commission, two, the INTA, which is the association and the European Council have both come out and said 1st of July is the start of the new quota period for the trade safeguard duties. So we do believe that, that window is closing. So it's an overhang because of these imports end of Q4, but this overhang probably is going to affect the first half of the year a bit. And that's the reason we gave the guidance we gave.
Tristan Gresser: Okay. No, that's very clear. And just following up on that. I think in your prepared remarks, you talked about the impact of CBAM depending on the behaviors of importers, basically, if they decide to take the risk or not to use actual default value. To what you're seeing so far, given that CBAM has been implemented now for more than a month, are they taking the risk? Or how do you -- how would you see that behavior being at the moment from importers?
Sudhakar Sivaji: At this point in time, we don't see anything abnormal, Tristan, but I'll also be very clear, like you just remarked, it's just 1 month in, right? So you cannot make a pattern out of what's happening in the first month, so to speak, right? So that's why we said we'll have to probably wait for 2, 3 months and see that if they are. But what is absolutely clear is that if they take the risk, sometimes it will look like in 2026, they don't have anything to pay, but that is just because of the plan that has been put in that all payments would be retroactive in 2027. So -- we know that there is a lot of noise out there, and that's the reason, Tim and I recorded a video separately as well, just to be very clear showing that the default values are the standard values. And if somebody has to go for a real value, they have to actually show and accredit themselves to nationally accredited authorities in Europe.
Tristan Gresser: Okay. No, that's very clear. And my second question is on the nickel situation. What's your view on the situation in Indonesia? Do you think the rally in nickel prices can be sustained? And I think we've seen higher stainless steel prices in the region already in Indonesia, China. I mean if imports are still coming in, that should definitely help to have those Asian prices at a higher level. Yes. Any help there to understand the situation would be great.
Sudhakar Sivaji: So yes, the prices in Asia have gone up by the raw material price go up. So it's primarily a shift up compared to raw material prices, right? So I think that development is completely independent of what we have said trade defense led because in that case, there is a reduction of imports in H2. So it should be an add-on, so to speak, rather than one replacing the other.
Operator: The next question comes from the line of Dominic O'Kane from JPMorgan.
Dominic O'Kane: So I have 2 questions. The first question just moves on from the nickel question. Could you maybe just give us a sense of how the moves that we're seeing in the nickel price could impact your bridge over the next 1 to 2 quarters? I assume you are fully hedged for the next quarter, but can you just maybe give us some context around your exposure to the nickel price moves?
Nicolas Changeur: Yes. So in fact, the -- so Nicolas Changeur speaking, good afternoon. So nickel have a moderate impact on our pricing. As you know, we are using scrap, and so the relative move of the nickel are very limited. We are mainly using nickel only in our prime nickel and so LME-related nickel with our fuel alloys business where we are fully hedged.
Dominic O'Kane: And my second question is just around capacity utilization. So in a market where we may start to see demand in Europe coming back, can you just maybe give us a sense of what your capacity utilization currently is and if you have spare capacity that you could bring back into the market relatively quickly?
Sudhakar Sivaji: Yes. So Dominic, absolutely. So first thing, our current utilization, depending on the player was between 65% and 75%. And typically, we've said the safeguard measures, which is different from what you asked in terms of underlying demand picking up. The safeguard measure, we had guided to from 7% to 10%, there should be a utilization lift just by the replacement of imports, which will now be reduced, right? So in our case, at Aperam, we have capacities available. As you know, we run electric arc furnaces, which can be switched on and off 3 times a day, and we have sufficient downstream capacity as well to match this utilization increase of 7% to 10%.
Operator: The next question comes from the line of Maxime Kogge from ODDO.
Maxime Kogge: So first question is again on nickel. Sorry for that. But I mean, you're explaining to us that nickel does not really have any impact on the stainless business given that you procure most of your nickel needs from scrap. But if I look at the alloy surcharges that you published and, you and your peers, we see a big increase actually in February. So I guess that's still related to nickel. Is there anything I'm missing there?
Nicolas Changeur: Yes. But the business that is related to the this alloy is very limited, in fact, in Europe. So the impact is small.
Sudhakar Sivaji: Maxime, we published the prices because there's still 1 or 2 customers who buy based on the alloy surcharge discussion, right? But as you know, in Europe, we moved to a fixed price discussion in 2019, and we have not looked back at all because the dumping of imports into Europe has contributed that we have all moved to a fixed price policy to compete with them.
Maxime Kogge: So those alloy surcharges are not really that relevant. Fair enough. So regarding Brazil, there has been some announcements last week about higher duties for certain product categories. It affects stainless and electrical, so where duties are supposed to rise from 12.6%, I think, to 25%. So what's your take on that? And can you expect a positive impact in the coming quarters?
Nicolas Changeur: Yes. We expect a positive impact. And we evaluate this impact at mid-single-digit EBITDA per quarter. As you know, we are already booked for Q1 and beginning of Q2. So basically, we see this picking up end of Q2 and beginning of Q3.
Maxime Kogge: And you expect those duties to remain in place permanently because at this stage, you're only valid for 1 year, if I'm right.
Sudhakar Sivaji: They said that they're going to review this for a year, but we remain confident if the dumping from Asian countries continues, the Brazilian government has been very keen on ensuring that there is a fair trade policy in Brazil. So we look at it for the next year, as you have said, but this is something which we will work together all the time, just we do.
Maxime Kogge: Okay. And last one is on your guidance for recycling and renewables on the one hand, and alloys and specialties on the other hand. So there was traditionally an EUR 80 million to EUR 85 million guidance for R&R. Is this figure still achievable despite the miss that we saw last year? Should we expect the first contribution there from the diversification activities like bio-oil, biochar? And regarding A&S, so there was a EUR 100 million EBITDA guidance. You add to that the EUR 60 million contribution from Universal. And then there are the first synergies flowing in of around EUR 9 million. So does this figure add up to lead to something above EUR 160 million?
Nicolas Changeur: Yes. So basically, we expect this to be pretty much in line. There is a ramp-up over the year of 2026 with the alloys business. So -- but overall, we expect by the end of the year to be basically at this level. In particular, as you know, oil and gas has been a little bit under pressure. There is also Boeing that is ramping back during 2026. So your numbers are fully right by the end of the year.
Maxime Kogge: And for R&R also?
Sudhakar Sivaji: R&R is at stable levels, Maxime. So alloy should reach that run rate, which you said, like Nicolas, for the last quarter, and that's our view currently, looking at oil and gas and Boeing. And R&R is at the stable numbers you have mentioned.
Operator: The next question comes from the line of Inigo Castellanos from Kepler Cheuvreux.
Íñigo Egusquiza: So I have three on my side. The first one is a clarification on the CapEx. You mentioned CapEx for 2026 is going to be around EUR 200 million. And then in the presentation and during your podcast, you are talking about some additional site upgrade CapEx of EUR 160 million over 3 years, if I am right. So can you explain a bit, I guess, that this EUR 160 million in 3 years is included in the EUR 200 million figure for 2026? And can we assume that this is going to be, I mean, EUR 200 million in the following years as well? This is the first question.
Nicolas Changeur: Yes. So the EUR 160 million are absolutely integrated in the EUR 200 million. As you know, our continuity CapEx is around, let's say, EUR 150 million. So after you have those EUR 160 million over the next 3 years. So plus/minus in 2027, 2028, you can count around a similar level of CapEx if there are no new growth opportunities.
Íñigo Egusquiza: My second question is on the outlook, you are giving for Q1 2026. You have mentioned in the press release that EBITDA in Q1 would be higher than in Q4, but also during the podcast, you gave some more indications regarding EUR 100 million quarterly run rate EBITDA in the first semester, but I understood slowing in Q1 and accelerating in Q2. Can you please elaborate a bit on that sequential number? And also in addition to this, how do you see the consensus EBITDA number for 2026, which according to Bloomberg is around EUR 520 million EBITDA?
Sudhakar Sivaji: So Inigo, on the question, Q1, I think we have given a consensus it will be higher. But we also said that it's -- we are confident enough based on our Leadership Journey contributions to give that for the first half of the year, it will be $100 million run rate. And we said it will happen in 2 steps. So I think it gives you clearly kind of an indication how these 2 steps happen because we said we'll start slowly and we actually ramp up in the second quarter. So I think that gives enough guidance on how you plot these numbers from one quarter to another. On your question for the annual year, see, unfortunately, we have just discussed that. There are so many variables also on H2 and our order books, as you know, are typically 2.5 months long. Compared to other players in the industry, you have to consider that Aperam's stainless business in Europe's order book is considerably shorter because we run our own distribution division. As a result, we would like to give outlook only for Q1, right? The fact that we are doing for Q2 this time is primarily because we know that seasonally, Brazil will come back, and we know the contribution of our Leadership Journey, and that's the reason we are giving some color on Q2. Sorry about not being able to guide for the year.
Íñigo Egusquiza: No problem. Thank you. Very clear answer to the question. And just a final question on my side. On the European Union trade defense protection measures, you are mentioning again that you expect the application to start July 2026. I don't know if you can elaborate a bit where do we stand? Why is taking, I would say, longer than expected, although you were pointing to that July as the application date. But where do we stand? Are we expecting for any European Union Parliament meeting to take a final decision? Any color would be much appreciated.
Sudhakar Sivaji: First of all, thank you Inigo, for acknowledging that from the beginning, we've always said it's going to be most probably 1st of July. And our message hasn't changed. This application has to pass through 3 bodies. One is the European Council, the other one is the INTA and the third one is the European Parliament. And this is a process. Each of them make their own proposal, and they have to start a process to discuss among themselves to come to a common proposal. The good news is that everything is proceeding on plan for a 1st of July introduction, meaning the European Council and the INTA have made their proposal and have started discussions. And we expect around the third week of February for the European Parliament also to start this discussion and see what their version of the proposal could be. And after that, it is going to take them time to talk among themselves. It is important to remember this whole process has been triggered because the previous safeguards expire on the 30th of June. So legally, the European Commission always pointed out that the earliest it could start -- sorry, the latest it could start is 1st of July, and now I think they are going to respect that deadline.
Operator: [Operator Instructions] the next question comes from the line of Adahna Ekoku from Morgan Stanley.
Adahna Ekoku: I've got one left. On the normalized EBITDA guidance, so this is EUR 700 million to EUR 800 million. I believe previously, this was EUR 800 million before Universal. So could you just run through what's changed here? And if you could go through the kind of key building blocks of this bridge, that would be really helpful.
Sudhakar Sivaji: Adahna, sure. I think let's start with EUR 350 million for 2025. And then when we add the EUR 150 million new Leadership Journey guidance we have given, without any trade defense and CBAM support, this EUR 150 million includes the EUR 500 million just on Aperam's own first. Secondly, the synergies of Universal were included -- are included in the EUR 150 million as well. So this is something to keep in mind, right? From EUR 500 million, you see that we have announced new investments, and we do expect another EUR 50 million additional EBITDA improvement from the investments we have announced. But this should happen ramping up in 2028, but the full effect in 2029 visible, so to speak. So it's post Leadership Journey 5. And the delta then from the EUR 550 million to the EUR 750 million is basically utilization improvement in Europe plus support from trade defense measures. What you are seeing now as a range from $700 million to $800 million to the previous $800 million is the difference is basically if CBAM is going to be immediately effective or is there going to be a ramp-up. That is the delta of the $50 million to $75 million that you look. Is that bridge clear? Or should I?
Adahna Ekoku: No, that was very clear. Thank you.
Operator: The next question comes from the line of Tommaso Castello from Jefferies.
Tommaso Castello: I have 2 left. The first one is on Brazil, which obviously performed better than last year at EUR 75 million EBITDA. Should we consider that as a normalized run rate also for 2026 onwards?
Nicolas Changeur: Yes, it will be a normalized low cycle for Brazil for next year, yes.
Tommaso Castello: Okay, and then the last one...
Sudhakar Sivaji: I'm sorry, just keep in mind that in 2024, it was exceptionally low because we had a hot strip mill investment. And as a result, there were for the first half of the year, losses in EBITDA. So the EUR 75 million is at the low end of the cycle, like Nicolas said.
Tommaso Castello: Yes, yes, definitely. Thanks for that. And then the last one. I know it's probably hard to estimate. But, for example, carbon steel, we have some estimates on the potential impact of the new trade measures, basically cutting around 10 million tons of steel being imported -- from being imported into Europe. Now the stainless steel market is obvious smaller, but I was wondering if you had any estimates on how much the new trade measure could impact in terms of percentage of, yes, the volumes basically being shipped to Europe.
Sudhakar Sivaji: So this is what we said earlier also, which was that we expect a 7% to 10% jump in utilization. So depending on what you take the stainless market and demand at, that gives you an estimate of the number. So it's a 7% to 10% jump in utilization.
Operator: The next question comes from the line of [indiscernible] Capital.
Unknown Analyst: Hi, can you hear me?
Sudhakar Sivaji: Yes, Lucian, loud and clear.
Unknown Analyst: Sud, and congrats on the results. Just going back to the Adahna's question. So if the normalized EBITDA was previously the target was EUR 800 million. You've got Universal on top, which should kind of add, say, EUR 90 million to EUR 100 million, so you get to EUR 900 million. So why is that now actually stepping back to EUR 700 million to EUR 800 million, especially considering safeguard measures that are going to be coming in, which should obviously be a further boost on top of that previous range?
Sudhakar Sivaji: Absolutely. So Adrian, I think we have to understand in the past, when we have discussed, we said that the margin in Europe in 2025, for example, thanks to imports -- or rather no thanks to imports and the dumping is EUR 300 per tonne below the previous average, right? And our assumption, and that's the reason I split out what we can do on our own. And if you say the entire EUR 300 per tonne on the margin comes back, then we are back to that EUR 800 discussion. That is the reason I say EUR 500 million on our own, EUR 50 million due to the investments announced, it's EUR 550 million, and then it's up to trade defense measures in CBAM. So the delta to the previous EUR 800 million you're looking for is our 2025 margin being EUR 300 per tonne below compared to previous averages. And I think this is the official discussion we've had before as well, that the low cycle has been EUR 300. How much of this recovered? So it's not a change in the results. It's basically when we say EUR 500 million on our own because of the different business model, EUR 50 million due to the additional investments, and then based on CBAM and trade defense, are we going to recover the entire EUR 300 million or part of it is the delta to the number.
Unknown Analyst: Got it. So yes, you're just setting the floor lower, which is good. And hopefully, there's upside to that.
Sudhakar Sivaji: Exactly. So if you say that, that entire EUR 300 million is coming and additional trade defense, but those are theoretical discussions, and we wanted to just be clear what our performance and what is expected from the market.
Operator: The next question comes from the line of Bastian Synagowitz from Deutsche Bank.
Bastian Synagowitz: A few quick ones maybe. Just getting back to the European market. So I guess just coming back to the point you said, so you're saying that you're not seeing any abnormal demand or nothing extraordinary in your order book. But then I guess when we look at the quarter drawdown, it has come down significantly in the first couple of weeks of '26 as it should do as a result of CBAM. So just curious, do you read this as well as customers are currently really heavily absorbing their inventory? Is this what's currently happening? That's my first question.
Sudhakar Sivaji: Look, customers are drawing down on the inventory not because of the regular inventory being drawn down because in Q4, as you know, there's been a significant surge. So there's a lot of inventory in the system.
Bastian Synagowitz: Okay. But these are your reads as well that if you -- I guess, if quota drawdown is lower, demand doesn't really show up in your order book extraordinary, then it must be a much more significant drawdown of that extra inventory, right? Of the market share from quotas, yes.
Sudhakar Sivaji: Sorry, you are correct. But fundamentally, there's 2 comments to that. One is the fact that realistically speaking, based on 2 weeks, you cannot estimate the entire quarter drawdown discussion. I hope you understand. And the second thing is that, yes, with the deliberate intention of consuming those inventories in this quarter is why importers have brought in all these inventories in Q4. So we do see that demand drawdown happening from inventories.
Bastian Synagowitz: And just also getting back on CBAM. So I'm wondering where do you see the average CO2 footprint in the current import mix, the way you judge it versus particularly also the most efficient -- CO2-efficient sources of supply, which you now have on the import side. I'm pretty sure you've done the math. So maybe you could give us your views on how you see the battlefield there at the moment and how it has been impacted by CBAM.
Sudhakar Sivaji: The battlefield is exactly as it's been defined by the commission's default values. If you look at it, the commission's default values on carbon dioxide emissions from different countries are basically at the levels which we expected them to be. The one thing is, of course, is there some circumvention because some of these countries probably using metal from Indonesia, that is something I'm sure that the commission will continue to monitor. But the default values basically set the exact map of how we see the different carbon footprints of the different countries are.
Bastian Synagowitz: And then maybe a very last question on the next chapter of your Leadership Journey and I guess, the new investments, which from my understanding, are mostly tech to Europe. And Europe for the last couple of years obviously has not been a great ROI place as maybe -- as it comes to the different options. So are these investments still under the condition that, I guess, everything is really panning out the way we hope it to pan out? Or are there basically no regret moves and you will go ahead with those independently from whatever is happening?
Sudhakar Sivaji: I would say that fundamentally, you have to look at it in 2 different directions. One is that 2/3 of these investments are diversification into specialties in alloys and stainless specialties. And another 1/3 is into automation and putting in new lines with higher productivity and higher efficiency. So if you look at it in -- if the demand picks up and the cycle comes back, these lines will be used or the one with higher productivity will be used to serve the upside structurally. If the demand goes in low cycle, we are a cyclical business, primarily in stainless, then we have the most efficient lines running, and you do know that we have a track record of variabilizing our costs depending on the demand. So that's the reason. So in a sense, yes, these are measures which are required because we want to move primarily into specialties in stainless and alloys. But at the same time, we take the opportunity to put in modern lines. See one primary principle of this, and we've mentioned this in the podcast is that we want to push the technology to make sure we are best-in-class and do not fall pray to the same thing which some other industries in Europe have fallen pray to. We want to be out there competing with the most modern lines being built in Asia and to take productivity gains in low cycles and upsides in high cycles.
Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Sud Sivaji for any closing remarks.
Sudhakar Sivaji: So thank you for joining the call, everyone, and it was a pleasure answering your questions. As you know, Nicola and I, with the Investor Relations team will be on the road over the next couple of weeks, meeting a lot of you. You know, for us, a very eventful and exciting year has just begun, and we look forward to talking to all of you in 2026. As we say in Dusseldorf, have a fantastic carnival season, and we hope to talk to you soon. Thank you.
Operator: 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.