Befesa Sa · XETR:BFSA
Befesa Sa — H1 2022 Earnings Presentation
59 slides from Befesa Sa's earnings presentation, September 2022
Slide 1: Business Update Post H1 2022 Results
Business Update 2022 Post H1 2022 Results September 2022
Slide 2: Disclaimer
Disclaimer This presentation contains forward-looking statements and information relating to Befesa and its affiliates that are based on the beliefs of its management, including assumptions, opinions and views of Befesa and its affiliates as well as information cited from third party sources. Such s
Slide 3: Business update
Electric arc furnace steel dust (EAFD) recycling plant at Asúa-Erandio, Spain 01 Business update
Slide 4: Executive summary
Executive summary • Continuing 25% yoy EBITDA growth … Q2’22 at €57m EBITDA, +26% yoy like Q1; H1 at €118m +25% or +€24m yoy • Metal prices decreased recently with recessionary & lower China market sentiment – although – energy inflation continues at high levels • ESG: - CO2 holistic approach highli
Slide 5: Business highlights
Business highlights Steel Dust Alu Salt Slags • EAFD throughput: • Salt slags volumes: 630kt H1, +85% yoy; 173kt H1, -12% yoy; 292kt Q2, +83% yoy 85kt Q2, -6% yoy • Around 80% plant utilisation • 2nd aluminium alloys: 85kt H1, -15% yoy; • WOX sold: 42kt Q2, -12% yoy 217kt H1, +82% yoy; 114kt Q2, +11
Slide 6: Mid-term growth roadmap
Mid-term growth roadmap Executing well defined growth roadmap even during COVID-19 pandemic; - China: In commercial operations at 1st plant (Jiangsu) and ramping up 2nd plant (Henan); Expanding further - US: Driving progress on the integration of AZR and related synergies - Europe: Expanding with EA
Slide 7: Zinc prices & hedging strategy
Zinc prices & hedging strategy Hedge book fully extended up to Jan’25, c.2.5 years; Improving earnings & cash flows visibility Zinc LME price vs. Befesa’s hedging prices (€/t) Zinc LME1) Befesa’s hedges2) c.€2,450 c.€2,500 €2,317 €2,239 c.€2,350 €2,275 €2,280 €2,136 €2,151 Befesa’s avg. blended3) 20
Slide 8: EAF steel production & Befesa's steel portfolio growth & diversification
EAF steel production -&- Befesa’s steel portfolio growth & diversification China is the largest and growing EAF steel producer worldwide; Befesa growing and diversifying its portfolio to capture China and US addressable markets EAF steel production: EU-27 / US / China, million tonnes Befesa’s EAFD r
Slide 9: China I, China II and further expansion
China I 1 Changzhou plant, Jiangsu province Key facts of the plant: • 1st EAFD recycling plant in China, 110kt EAFD p.a. • Total investment: c.€42m Status update: Construction completed on budget In commercial production & selling WOX Contracted for >80% EAFD volumes from customers, but COVID constr
Slide 10: FY 2022 guidance: confirmed but trending towards lower end of the range
FY 2022 guidance: confirmed but trending towards lower end of the range Global diversified footprint and expansion initiatives delivering between +11% to 37% yoy growth; Wider guidance range driven by energy & base metal price volatility and market (volume) Lower-end: €220m Upper-end: €270m +€22m /
Slide 11: ESG at Befesa
ESG at Befesa Key player within the circular economy, with c.2 million tonnes recycled and c.1.5 million tonnes of valuable materials recovered annually, that contributes significantly to increase efficiency of raw material use in the metals industry and promotes the transition towards a more sustai
Slide 12: Environmental highlights
Environmental highlights Baseline 2030 commitment • Holistic CO2 impact analysis: -20% Befesa prevents emissions of >2.4 mtpa CO₂eq, plus, 0.56 additional environmental benefits of reduced landfill 0.06 0.45 0.50 0.45 • Committing to CO2 Reduction Plan: 2021 PF 2030E 20% CO2 emission intensity reduc
Slide 13: Befesa acquired creating a global leader in EAFD recycling
BEFESA acquired creating a global leader in EAFD recycling 02 Acquisition of AZR closed on 17 August 2021
Slide 14: Transaction highlights
Transaction highlights • On 16 June 2021, Befesa signed the acquisition of 100% of American Zinc Recycling (AZR)’s recycling assets for a purchase price of $450m / €372m – implying an attractive c. 6x post near-term synergies EBITDA acquisition multiple, about half of Befesa’s current 2021E trading
Slide 15: Acquired 100% of recycling assets upfront; option for zinc refining plant
Acquired 100% of recycling assets upfront; incremental add-on option for new zinc refining plant (ramping up) AZR is one of the largest EAFD recycler in North America1) with 4 plants with c. 620kt total capacity EAFD recycling assets Zinc refining 1 Barnwell, SC 2 Rockwood, TN 5 Rutherford County, N
Slide 16: Decarbonisation driving further growth of EAF steel production in the US
Decarbonisation driving further growth of EAF steel production in the US EAF method expected to grow further to >70% share by 2025 Crude steel production by process in the US, % share 37% 29% 28% BOF • US has one of the largest and growing markets of EAF steelmakers globally EAF 63% 71% 72% • EAF is
Slide 17: Befesa closed AZR acquisition; operations delivering as expected
Befesa closed AZR acquisition on 17 August; Operations delivering as expected; Driving progress on integration & related synergies BEFESA #1 Europe (Steel Dust & Salt Slags) a US / North American leader (Steel Dust) #1 Asia1) (Steel Dust) Global leader1) in EAFD recycling EAFD recycling EAFD recycli
Slide 18: Attractive acquisition multiple with additional upside potential
Attractive acquisition multiple with additional upside potential – 2021E pro forma view1) BEFESA (Steel Dust – current perimeter) (Recycling operations) 2) Further EBITDA8), €m 138 mid-term potential 62 45 3) 17 4) 2021E 2021E PF Near-term 2021E PF mid-point pre near-term synergies post near-term sy
Slide 19: Strong near- & mid-term synergy potential identified
Strong near– & mid– term synergy potential identified Total pre-tax near-term synergies of c. $20/€17m expected within first three years of combination (Recycling operations) EBITDA / ton throughput Up to Near-term synergies c. €185/t of c. $20m / €17m c. 35% mid-term efficiency potential €138/t €10
Slide 20: Leverage-neutral transaction with expected strong double-digit EPS accretion
Leverage–neutral transaction with expected strong double–digit EPS accretion1) Funding of transaction (at closing) Financial profile – 2021E Combined Pro Forma3) Total price, $m EBITDA, €m 2) Mid-point of 450 10 460 €165 to €190m 2021E guidance 240 62 178 Price for Price for Zinc Total BEFESA Befesa
Slide 21: Diversifying the highest margin business unit and improving profitability
Diversifying the highest margin business unit and further improving Befesa’s overall profitability EAFD recycling capacity1) EBITDA by segment c. 1,665kt c. €240m4) 2nd Alu 6% Salt Slags 10% US 620 €178m3) 1,045kt2) 8% 14% 550 Asia 550 Steel Dust 84% 78% 495 Europe 495 BEFESA Befesa BEFESA Befesa+AZ
Slide 22: AZR's zinc refining asset: strategic integration opportunity
AZR’s zinc refining asset: strategic integration opportunity to support EAFD recycling operations in the US Plant footprint • Close proximity to AZR recycling plants, at Rutherford County, NC • Applies new solvent extraction technology for zinc refining • Restarted operations in 2020; Ramping up; Ca
Slide 23: Secured option to acquire AZR's zinc refining asset
Secured option to acquire AZR’s zinc refining asset only upon fulfilling operational & financial performance milestones Payment schedule to acquire AZR’s zinc refining asset1), $m $135m for remaining 93.1% stake in AZR’s zinc refining asset: • Only upon fulfillment of 2-phased operational and financ
Slide 24: AZR acquisition a key step on Befesa's accelerated growth path
The acquisition of AZR’s recycling business represented a key step on Befesa’s accelerated growth path 2007 2017 2022 European leader1) European & European & Asian in EAFD recycling Asian leader1) & North American = a global leader1) 37% Befesa’s 37% 33% EAFD recycling 495kt 780kt c.1,665kt capacity
Slide 25: H1 2022 results
Nanjing City, Location of Befesa China’s HQ 03 H1 2022 results
Slide 26: Consolidated key financials
Consolidated key financials H1 adjusted EBITDA at €118.0m, +25% yoy, driven mainly by US zinc operations delivering as planned; yoy higher base metal prices offsetting energy inflation & unfavourable Zinc TC Adjusted EBITDA bridge H1 2021 to H1 2022 (€m) +€23.8 / +25.3% 36 1) -36 118.0 94.1 24 +26 Z
Slide 27: Steel Dust Recycling Services
Steel Dust Recycling Services H1 EBITDA at €95.0m, +37% yoy, driven mainly by US operations delivering as planned; yoy higher zinc market prices offsetting energy inflation & unfavourable TC EBITDA bridge H1 2021 to H1 2022 (€m) +€25.8 / +37.2% 21 -21 95.0 25 +26 Zinc LME Inflation incl. energy, 69.
Slide 28: Aluminium Salt Slags Recycling Services
Aluminium Salt Slags Recycling Services H1 EBITDA at €23.6m, -5% yoy; Energy inflation and some volume pressure mostly mitigated with higher aluminium metal prices; Overall plant utilisation at around 80% EBITDA bridge H1 2021 to H1 2022 (€m) -€1.2 / -4.8% 24.8 14 -14 23.6 -1 Lower aluminium alloys
Slide 29: Cash flow, net debt & leverage
Cash flow, net debt & leverage Continued strong liquidity of >€300m including record €239m cash on hand; Net leverage of x2.09 at Q2’22, improved vs. x2.16 at YE’21 H1 adjusted EBITDA to total cash flow (€m) 118.0 -26.2 -11.9 Total capex = €57.5m Seasonality / timing -15.9 64.0 -36.8 Mainly China Ma
Slide 30: Befesa overview
Secondary aluminium production plant at Bernburg, Germany 04 Befesa overview
Slide 31: Befesa at a glance
Befesa at a glance Global leader in Europe, Asia and US in providing regulated critical hazardous waste recycling services to the steel and aluminium industries LTM Q2 20221) Steel Dust Recycling1) Aluminium Salt Slags Recycling €1,010m Revenue2) #1 Position Global #1 Position in Europe in salt slag
Slide 32: Key milestones
Key milestones Befesa has grown successfully through organic initiatives and acquisitions EAFD expansion China First to market with state-of-the-art EAFD recycling plants in China: Changzhou, Jiangsu: EAFD expansion Korea & Türkiye ✓ Completed on budget ✓ In commercial operations since Dec’21 Second
Slide 33: Investment highlights
Investment highlights Environmental Favourable Global Strong solutions mega trends leader regulation in high demand supporting secondary steel in Europe, Asia & US, getting stricter and for the steel and and aluminium markets in niche recycling markets, expanding into aluminium industry e.g. CO2 red
Slide 34: ESG at Befesa
ESG at Befesa Key player within the circular economy, with c.2 million tonnes recycled and c.1.5 million tonnes of valuable materials recovered annually, that contributes significantly to increase efficiency of raw material use in the metals industry and promotes the transition towards a more sustai
Slide 35: Decarbonisation & EV trends supporting secondary steel & aluminium markets
Decarbonisation & EV trends supporting favourable secondary steel (EAF) & aluminium markets Global crude steel demand1) Global primary aluminium demand2) Global EV sales penetration4) (million tonnes) (million tonnes) (%) 82 87% 1,946 68 1,760 1,773 1,798 64 64 43% 2% 3% 7% 2019 2020 2021 2030E 2019
Slide 36: Global leader in Europe, Asia & North America
Global leader in Europe, Asia & North America EAFD recycling plants Befesa is the global leader in steel dust and salt slags recycling services with a competitive advantage due to its close-proximity to key clients Salt slags & SPL recycling plants Lünen Clients Duisburg Hannover Fouquières-lès-Lens
Slide 37: Highly regulated & critical service model
Highly regulated & critical service model Befesa is the leading environmental services partner in the circular economy of the 2 nd steel and aluminium industry by recycling and avoiding the landfilling of c. 2 MT hazardous residues and recovering c. 1.5 MT of new valuable materials HAZARDOUS WASTE B
Slide 38: Befesa's resilience during latest crises
Befesa’s Resilience During Latest Crises Befesa has demonstrated resilient volumes and capacity utilisation levels during the latest crises 2008 / 2009 / 2010 2019 / 2020 / 20213) 600 1000 2019 2020 2021 240 >1.1Mt Incl.240US acquisition 550 900 Befesa EAFD 220 500 474 482 800 220 throughput, kt 687
Slide 39: Experienced & stable management team
Experienced & stable management team Senior management team delivering results through long-standing industry expertise, entrepreneurial spirit and focus on operational excellence as well as governance and compliance processes Javier Molina Asier Zarraonandia Key achievements / track record Executiv
Slide 40: Investor agenda & appendix
Waelz kiln at EAFD recycling plant in Gyeongju, South Korea 05 Investor agenda & appendix
Slide 41: Investor's agenda
Investor’s agenda Financial calendar Next investor conferences 2022 Q3 2022 Q4 2022 Q3 2022 Statement & Conf. Call Frankfurt – Commerzbank & ODDO BHF BBVA Iberian Forum (virtual) Thursday, 27 Oct Corporate Conference 2022 6 & 7 Oct – BBVA 6 Sep – Commerzbank & ODDO BHF Capital Markets Day London – C
Slide 42: Q2 2022/21 – Key financials
Q2 2022/21 – Key financials (€m, unless otherwise stated) Steel Salt Secondary Corporate & Total Dust Slags Aluminium eliminations Befesa Revenue1) €197.9 €22.1 €119.8 -€28.7 €311.1 yoy change +€103.5 / +109.6% +€4.6 / +26.5% +€29.9 / +33.3% -€18.5 / - +€119.5 / +62.4% Reported EBITDA €40.2 €8.2 €7.
Slide 43: H1 2022/21 – Key financials
H1 2022/21 – Key financials (€m, unless otherwise stated) Steel Salt Secondary Corporate & Total Dust Slags Aluminium eliminations Befesa Revenue1) €353.8 €41.3 €217.7 -€40.3 €572.5 yoy change +€158.5 / +81.2% +€4.0 / +10.7% +€45.4 / +26.4% -€19.6 / - +€188.3 / +49.0% Reported EBITDA €95.0 €14.6 €9.
Slide 44: Multi-year trend – Key financials
Multi-year trend – Key financials1) (€m, unless otherwise stated) 2017 2018 2019 2020 2021 Revenue €667.42) €720.1 €647.9 €604.3 €821.6 Reported EBITDA €153.0 €176.0 €159.6 €123.5 €189.6 Reported EBITDA margin % 22.9%2) 24.4% 24.6% 20.4% 23.1% Adjusted EBITDA €172.43) €176.0 €159.6 €127.03) €197.63)
Slide 45: Q2 2022/21 – Operational data – Steel Dust Recycling Services
Q2 2022/21 – Operational data – Steel Dust Recycling Services Q2 2021 Q2 20221) yoy change EAFD 159.6 292.3 +132.7 / +83.2% throughput (kt) EAFD average 77.6% 75.4% -217 bps capacity utilisation (%) Waelz oxide 52.6 110.1 +57.5 / +109.2% (WOX) sold (kt) Zinc LME price €2,418 €3,683 +€1,265 / (€/t) +
Slide 46: H1 2022/21 – Operational data – Steel Dust Recycling Services
H1 2022/21 – Operational data – Steel Dust Recycling Services H1 2021 H1 20221) yoy change EAFD 340.7 629.7 +289.0 / +84.8% throughput (kt) EAFD average 83.2% 81.6% -160 bps capacity utilisation (%) Waelz oxide 119.3 213.8 +94.5 / +79.2% (WOX) sold (kt) Zinc LME price €2,349 €3,510 +€1,161 / (€/t) +
Slide 47: Q2 2022/21 – Operational data – Aluminium Salt Slags Recycling Services
Q2 2022/21 – Operational data – Aluminium Salt Slags Recycling Services Q2 2021 Q2 2022 yoy change Salt slags & SPL 91.3 85.5 -5.8 / -6.4% treated (kt) Salt slags & SPL 81.4% 76.2% -520 bps avg. capacity utilisation (%) Aluminium 48.2 42.4 -5.8 / -12.0% alloys produced (kt) Secondary alu 94.2% 83.0%
Slide 48: H1 2022/21 – Operational data – Aluminium Salt Slags Recycling Services
H1 2022/21 – Operational data – Aluminium Salt Slags Recycling Services H1 2021 H1 2022 yoy change Salt slags & SPL 195.8 172.9 -22.8 / -11.7% treated (kt) Salt slags & SPL 87.7% 77.5% -1,022 bps avg. capacity utilisation (%) Aluminium 99.5 84.6 -14.8 / -14.9% alloys produced (kt) Secondary alu 97.8
Slide 49: Multi-year trend – Operational data
Multi-year trend – Operational data 2017 2018 2019 2020 2021 EAFD throughput (kt) 661.0 717.1 665.8 687.0 885.7 EAFD average capacity 84.7% 92.0% 80.7% / 90.1%1) 83.2% 83.3%2) utilisation (%) Waelz oxide (WOX) sold (kt) 217.8 240.9 217.6 239.2 291.0 Zinc LME price (€/t) €2,572 €2,468 €2,276 €1,979 €
Slide 50: Consolidated key financials
Consolidated key financials Q2 adjusted EBITDA at €56.9m, +26% yoy, mainly driven by US zinc operations delivering as planned; yoy higher base metal prices offsetting energy inflation & unfavourable Zinc TC Adjusted EBITDA bridge Q2 2021 to Q2 2022 (€m) +€11.6 / +25.6% 20 -19 56.9 1) 45.3 10 +14 Zin
Slide 51: Steel Dust Recycling Services
Steel Dust Recycling Services Q2 EBITDA at €40.2m, +23% yoy, mainly driven by US operations delivering as planned; yoy higher zinc market prices mostly offsetting energy inflation & unfavourable TC EBITDA bridge Q2 2021 to Q2 2022 (€m) +€7.5 / +22.9% 10 -13 40.2 32.7 10 +14 Zinc LME Inflation incl.
Slide 52: Aluminium Salt Slags Recycling Services
Aluminium Salt Slags Recycling Services Q2 EBITDA at €16.1m, +28% yoy; Energy inflation and some volume pressure more than offset with higher aluminium metal prices; Overall plant utilisation at around 80% EBITDA bridge Q2 2021 to Q2 2022 (€m) +€3.5 / +28.1% -6 16.1 10 12.5 -0.5 Inflation incl. ener
Slide 53: Cash flow, net debt & leverage
Cash flow, net debt & leverage Continued strong liquidity of >€300m including record €239m cash on hand; Net leverage of x2.09 at Q2’22, improved vs. x2.16 at YE’21 Q2 adjusted EBITDA to total cash flow (€m) 56.9 -2.7 -4.6 Total capex = €31.7m Seasonality / timing -11.3 38.3 -27.4 Mainly China expan
Slide 54: Steel production: Global ranking
Steel production: Global ranking Befesa is present ✓ Expanded in Türkiye & South Korea; ✓ AZR acquisition addresses US → China: ✓ Jiangsu started operations Dec’21; → Henan ramping up Q2’22 … + Further expansion Top–10 Crude Steel Producing Countries Top–10 EAF Steel Producing Countries (2021, milli
Slide 55: EAF steel production: Regional overview
EAF steel production, MT % EAF share EAF steel production: Regional overview Outlook Befesa is present Decarbonization driving accelerated growth of EAF 109 59 64 67 49 47 2015 2021 2015 2021 2015 2021 63% 69% 41% 44% 6% 11% 20 29 21 22 World 2015 2021 2015 2021 564 65% 72% 30% 32% 405 Served market
Slide 56: Sustainability at the core of Befesa
Sustainability at the core of Befesa Befesa’s operations have direct positive environmental impacts as well as multiple positive indirect effects on a more sustainable world by enabling the transition to a low-carbon economy BEFESA Direct environmental benefits Indirect sustainability benefits • By
Slide 57: Holistic CO2 impact of Befesa
Holistic CO2 impact of Befesa Befesa’s operations help avoid around 2.4 million tonnes of CO₂ equivalent each year Befesa’s global CO2 emissions Befesa’s CO2 emissions by business 10% 12% From reducing agents (scope 1) Steel Dust 10% From heating process (scope 1) Alu Salt Slags Befesa’s From electr
Slide 58: Befesa's climate action plan: CO2 emission intensity reduction targets
Befesa’s climate action plan: CO2 emission intensity reduction targets by 2030 & 2050 Befesa is committing to a 20% GHG emissions intensity reduction by 2030 and aiming at net zero emission by 2050 Baseline 2030 commitment 2050 vision -20% Net zero emission 0.56 Scope 2 0.06 0.45 Scope 1 0.50 0.45 -
Slide 59: Befesa and the EU Taxonomy
Befesa and the EU Taxonomy Befesa expects 100% eligibility with EU Taxonomy, based on expert talks, advisors and own estimates, → 100% of Befesa’s revenue, capex & opex eligible & aligned List of eligible activities EU-Taxonomy eligibility of by EU Taxonomy Befesa’s operations in 2021: Two approache