Welcome to Aperam Q1 Podcast. I am Tim Di Maulo, Aperam CEO, and I wish you a good start of the day. Together with Sudh Sivaji, Aperam CFO, I will be discussing our first quarter performance, current trading, and the outlook for the second quarter. We will host a conference call today at 2:00 P.M. Central European Summer Time, where we will answer your questions. The link to register for the conference call is available on our website and on the last slide of this presentation. In order to facilitate the dial-in to the call, we would ask you to pre-register for getting your personal code. The transcript of this podcast is available on our website. As always, please take note of the disclaimer on page two. What to say about the first quarter 2025? Overall, it was a quarter without surprises, despite a very volatile environment.
Our standing guidance and the effect we anticipated for the first quarter were fully realized. The new year has begun as the old one ended, and the situation remains challenging. The hope for a necessary and welcomed EU economy recovery has improved, but real business has not changed much so far. We continue improving Aperam. The closing of Universal took place in January. Now our value chain is even more differentiated by successfully entering the United States, as well as the aerospace industry. Europe was again a very tough market, and pricing pressure intensified in the course of the quarter. Seasonally higher volumes did not lend support. What is still valid and important, we are the cost leader in Europe, which allows us to stay breakeven in difficult times. Brazil is different, with Q1 being the summer-holiday quarter.
However, demand was robust, and we are supporting the market with the good performance of the hot rolling mill upgrade. The negative earning impact last year turned into a benefit with a mixed upgrade and lower cost. There is not much to say about imports into Europe. They decline slightly and are at 23.5%. The Leadership Journey enters the second year of its fifth edition, and we already realized EUR 21 million in the first quarter after we over-delivered our target last year. In total, Leadership Journey 5 achieved EUR 116 million cumulated so far. On the ESG side, we are proudly highlighting our recent expansion in forests in Brazil. We are proud to have secured a EUR 250 million financing package from the International Finance Corporation, which is a member of the World Bank Group.
This includes EUR 150 million from IFC own account and up to EUR 100 million in mobilized funds from other lenders, for example, ING. Such financing is exceptional in the steel space. The IFC environmental audit is very detailed and strict, so we view this as an external confirmation of our approach. This new funding will bolster our sustainable forest management program of BioEnergia. As you know, this is our renewable energy subsidiary in Brazil and also a key building block for our decarbonization roadmap. Aperam BioEnergia manages 150,000 hectares of forest, including over 40,000 hectares of natural vegetation preserves and wildlife corridors. We have already expanded the forest with a CapEx of EUR 50 million, and in addition, we established the bio-oil production facility. This is a key innovation and will help us to pioneer our commercial-scale production of bio-oil captured from the waste of the charcoal production process.
The bio-oil can replace synthetic fuel products, helping to avoid greenhouse gas emissions and improve the circularity of Aperam's operation. The IFC loan will be further used for further expansion, upgrading the charcoal production to minimize greenhouse emissions during the process and grow the seedlings business with third parties. Besides BioEnergia, Aperam Group's decarbonization efforts until 2030 are CapEx-like at around EUR 15 million-EUR 20 million annually. Let us turn to the market. Seasonality had a significant impact. In Brazil, Q1 is their summer-holiday quarter, with lower demand, and in Europe, seasonality drives volume to a higher level compared to Q4. However, European demand remains sluggish, and seasonal variation should not be mistaken for a step change in demand. New inventory declines slightly in absolute tonnage, but seasonally adjusted is now on a normal level compared to the average of the last five years.
These inventories are normal, but given the high uncertainty, we do not expect that the distributors are eager to hold more inventory. Regarding real demand, the sector trends have continued, and only one sector has changed. The construction sector, including elevators, HVAC, and facades, remains one of our most important segments. It remains burdened by price and cost inflation, but a first positive sign has emerged. While overall demand is still soft, we recognize a pickup in heating, ventilation, and air conditioning. We hope that the lower interest rates will further stimulate demand. Additionally, we see the German plan as a potential catalyst for the construction sector. Keep in mind that the money needs to be budgeted and allocated first, so although it comes with a lead time, it could prove to be a game changer for demand.
For consumer goods, there was no increase in demand beyond some stock replenishment in Q1. The demand in food, health, and catering was solid, but still below normal activity. Industrial demand is showing some dynamics, but only from the energy sector. Some recovery signals are visible. The automotive sector continued to deliver negative news, and it seems that the big run on electrical vehicles has been postponed, and it is not happening at the moment. Once again, the market in Brazil is performing well, in concern to Europe, even if in the seasonal trough demand was robust, as distributors were quite active during the quarter. Demand in automotive and transport is good, while truck demand is soft, but trains for public transportation are improving. Consumer goods showed ongoing good demand for white goods, and other consumer items are performing stable.
Brazil is a growing country and needs additional projects in infrastructure and housing. Capital goods are faced again with higher demand. As mentioned, inputs into Europe were unchanged. I will now hand over to Sudh for the financial review.
Thank you, Tim, and a warm welcome to everyone. Let's start with adjusted EBITDA. For the first quarter in 2025, we guided for lower EBITDA compared to Q4 2024. We gave this guidance at the beginning of February, mentioning the price pressure in Europe, negative valuation effects, and the seasonality in Brazil as responsible for this development. We confirmed this on 3rd April in our Q1 update, and today we reported an adjusted EBITDA of EUR 86 million. Despite the price pressure and stimulus, we were able to achieve an EBITDA per ton of EUR 200, and this proves the success of the Leadership Journey. Even in difficult times, we are able to earn money. Due to the first-time consolidation of Universal for two months, there were some specific effects. Exceptional items amounted to a negative EUR 36 million. Purchase price allocations for inventory fair value were reversed directly during the quarter.
Here, a reminder that the reversal is non-cash. For this reason, earnings per share for the first quarter came in at minus $0.24. To give a comparable figure, when excluding the Universal effects, earnings per share was $0.09. Our cash flow showed the typical seasonal swing happening in the first quarter. Net working capital increased significantly. I will explain this later. As you can see, the net financial debt increased with the acquisition of Universal as the main driver. Now let's dig deeper into this topic. Moving to the next slide. Following the acquisition of Universal, we have one clear mission: deleveraging. This is our key financial objective. On the graphic, you can see the development of net debt since the end of last year. There are two main components, the first being the acquisition of Universal.
In total, EUR 517 million in payment for equity and assumed debt, including all M&A costs. Another topic was mentioned already. Like always in the first quarter, the working capital is increasing. Q1 volumes are higher, and we have to prepare the business for even higher volumes in the second quarter in stainless steel in Europe and Brazil. Alloys built up inventories for the successful LNG business. In addition, destocking and lower raw material prices had an impact on payables first. You will see deleveraging starting in the second quarter. Working capital will reverse, and free cash flow will reduce the net financial debt. As promised, we will pay our quarterly dividend in line with our financial policy, but there is enough left to pay down debt. When we announced the acquisition of Universal last October, we promised to deleverage within three years.
This means net financial debt fully normalized at the end of 2027. How can we be sure about that? Is a recovery of the economy necessary? In fact, we simulated different scenarios, especially for this year, and even without a recovery in 2025, we will reach our target. At the end of this year, net financial debt should already be lower than last year adjusted for Universal. Just a reminder that EUR 1 billion of the net financial debt of Aperam is the Net working capital of the recycling business and the value of the Universal business. Both value-accretive business acquisitions that give a sum total of EUR 70 million synergies on their EUR 120 million baseline EBITDA and drive the transformation of Aperam. Moving to the next slide, our four segments performed in line with guidance. The pricing pressure in Europe for stainless steel and the seasonality have already been mentioned.
Recycling & Renewables adjusted EBITDA is down to EUR 16 million, coming from the typically strong fourth quarter. Selling prices were lower, and the valuation effect was negative, as expected. In general, there was lower scrap demand. For Q2, we do not expect any major change. Adjusted EBITDA should be rather stable compared to Q1, as the scrap market remains challenging. Stainless & Electrical reported adjusted EBITDA of EUR 28 million. Seasonally higher demand could be more than offset by the seasonal Brazilian trough, but volumes are not the key issue here. EU pricing pressure intensified and resulted in a decrease against Q4. Under these circumstances, only the cost leadership in Europe prevented a very poor result. The Brazilian business now benefits from the positive effects of the hot rolling mill. The outlook for Q2 is positive. This is mainly due to the seasonality.
Europe and especially Brazil are prepared for a seasonally higher volume. In addition, we expect a less negative valuation effect. Strong demand continues in Brazil, and H1 EBITDA should already surpass the full-year result of 2024. Service & Solutions achieved an adjusted EBITDA of EUR 13 million. This increase resulted from higher spot market prices as well as higher volumes. A negative valuation effect was more than offset. Our segment is close to the spot market, and this can quickly drive results in any direction. For Q2, assuming an unchanged market environment, we do not expect any major change in EBITDA, and the necessary balance for pricing could come from lower valuation effects. Alloys & Specialties reported a new quarterly record EBITDA of EUR 29 million. The Universal consolidation for two months was the main driver here.
The success of the segment continues, and it is much less cyclical and less susceptible to economic cycles than our other segments. Demand was high, and shipments have increased significantly. The ongoing temporary aerospace supply chain destocking is a factor to consider, and Universal's full potential will be reflected in subsequent quarters. In Q2, the full consolidation of Universal for the first time will support EBITDA noticeably. Please do not forget that we have guided already for 2025 that Aperam's historic alloys and specialty segment should deliver EUR 100 million EBITDA based on the LNG order book, the additional capacity available through Gueugnon, and the ramp-up of our Indian business. The result from Universal will be added to this guidance, and this means that 2025 will mark a record on a standalone basis and even much more with Universal. Others and Elimination recorded in total a balanced result.
It's normal here to expect a high single-digit EUR figure per quarter, but the high level of integration between different Aperam businesses, such as recycling, charcoal, stainless mills, and distribution, compared to the competition, allows us to make strategic decisions on managing just-in-time inventory between segments, and this is then reflected in the elimination. This can change the outlook for the next quarter depending on spot markets. Moving to the next slide, the Leadership Journey is transforming Aperam and aids in building a differentiated value chain. We are now in the second year of phase five on this successful journey. After having targets clearly exceeding last year, we started already strong into the new and realized EUR 21 million in Q1. This equals to almost 30% of our target for 2025. What happens now and what is still to come?
Let me remind you of the booster component, the classic cost-cutting program contained in 2024 and 2025. We are now realizing the gains. This is the next crucial step in strengthening our competitive position in Europe. Furthermore, the new hot rolling mill in Brazil is finally fully up and running, and we are getting the benefit from this investment. With this development, we are cementing our cost leadership in Europe and Brazil. You know the goal of the Leadership Journey is to achieve an EBITDA improvement of EUR 300 million in a normalized economic environment. Looking at the Q1 results, it is clear that we are still far away from a normalized situation, but the relevant improvements are put in place, and the progress becomes also visible on a relative basis within Europe. We realized an EBITDA per ton of EUR 200 in Q1, which is much higher than the previous cyclical lows.
In addition, we announced the synergies we expect from Universal. They will ramp up to a sustainable additional EUR 30 million per year. As the transformation materializes and resilience increases, Aperam should generate an average of EUR 100-120 million adjusted EBITDA per quarter, even in difficult times like now. On this basis, Aperam will be fully self-financing, able to deleverage our balance sheet, and pay an attractive progressive dividend to our shareholders on a recurring basis. I hand over back to Tim now for the outlook.
Thank you, Sudh. At the beginning of February, when we published our Q4 figures, I said that the situation in Europe remained unclear, but today the situation is even more difficult. Not only the development in the most important economy in Europe is unclear, furthermore, the biggest uncertainty comes from the tariff wars. While we are not directly impacted by tariffs, indirect effects apply, although they are hard to estimate. In this situation, the guidance carries an additional risk element, and our outlook depends on the continuation of a reasonable macro environment. We have not planned for a recovery in 2025 and instead rely on what we can control, the Leadership Journey improvements, and the continued return from our differentiated value chain that now includes a US element via Universal. In Q2, we expect higher shipments. This is based on the seasonally stronger quarter in Europe and in Brazil.
However, price pressure will continue in Europe. On the other hand, Universal will be fully consolidated for three months for the first time, and the valuation effect should be less negative. Sudh spoke already about cash flow and net financial debt. Higher earnings and improved free cash flow will reduce our financial debt, and we will start deleveraging. As a reminder, this means that we earn a dividend of EUR 2 per share this year and a bit more. In terms of CapEx, we are very consciously investing only in maintenance, in productivity, and in our alloys business. Our budget for 2025 remains unchanged at EUR 200 million. As you know, volatile commodity prices could still change the above EBITDA and Net working capital indication. We'll only be able to provide guidance once the raw material prices are known.
It is now a well-established routine to provide an update shortly after the end of the quarter. This means that our next update will be published in early July. The current trade in Europe and in Brazil, as well as in the EU regulation and the uncertainty environment, leave much to be discussed, even though we can't have an answer to everything here. We are back on the road in May, participating at conferences and carrying out roadshows. I hope to meet you in person and look forward to that. Please contact our Investor Relations department with any feedback or if you need corporate access. I would like to close with our new vision. It makes clear what we are doing and how our journey looks like. Our vision is we are committed to establish Aperam as the leading value creator in the circular economy of infinite world-changing materials.
Our vision expresses everything that we are doing. We are bit by bit transforming the company as we tap new earning streams which create value independent from the stainless steel cycle. Thank you very much for listening to Aperam Q1 Management Podcast. We wish you a pleasant day and look forward to your questions in our conference call at 2:00 P.M. Central European Summer Time.