Ladies and gentlemen, welcome to the Aperam Q3 2025 results conference call. I am George, the Chorus Call operator. I would like to remind you that all participants will be listen-only while 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 zero. The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Timoteo Di Maulo, CEO. Please go ahead.
Hello everybody, and thank you very much for joining our conference call today. All our comments were contained in the podcast that we published this morning, which, you know, 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. As you know, this is my last quarterly conference call as CEO of Aperam. I'm proud of the work we have done to build a strong and resilient Aperam during the last 11 years. Just like in the podcast, my two colleagues, Sudhir Sivaji and Nicolas Changeur, are here, and together we are working forward to answering your questions. Let's start straight away with the Q&A, please.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Anyone who has a question may press star and one at this time. Our first question comes from Tristan Gresser with BNP Paribas. Please go ahead.
Yes, hi. Thank you for taking my questions. I have two. The first one, in your Outlook presentation, you mentioned some price pressure from imports in Brazil. Can you discuss a little bit the situation there? I thought that you had received recently a renewal on the anti-dumping duties from China and Taiwan on CRC. Is that enough? Do you need more? Usually, we talk a bit more about Europe import pressure and not so much Brazil. Has anything changed recently?
Hi, Tristan. Sud here, because it's Brazil, let me answer, and I think it's important and your understanding is correct. This price pressure is not on our stainless product portfolio. It's actually the non-stainless part, specifically the commodity electrical steel grades, which is the NGO part, and some carbon steel part, so to speak. We just mentioned that just to be clear, what are the different moving factors for your models, so to speak? It has nothing to do with stainless, and there your understanding is correct. There is a proposed anti-dumping revision, and we are waiting for the results on that one on stainless. This is just the non-stainless part. The effect is not very significant, but still the effect is there.
The reason we wanted to mention that is because, as you know, Brazil goes into a summer quarter in Q4, and it has been our most profitable contributor compared to Europe, which is positive but slightly positive. When volumes disappear, smaller changes become visible, and that is the reason we gave that guidance. No concern on the stainless market. Demand remains stable. Margins have not unchanged. The import pressure has not changed to positive or minus in stainless in Brazil.
Okay. No, that's very clear and helpful. My second question is on CBAM. In the presentation, you mentioned that CBAM is on track. Can you mention a little bit the details of what you expect from the policy? What would be a good outcome, a more neutral outcome, and a more negative outcome? Do you firmly believe that Scope 3 on NPI will stay? Can Scope 2 be included? Does that even matter? Do you think the commission will be able to assign a carbon intensity by company or by country? Finally, if you have a view on the benchmarks, as I believe there are differences depending on the grades of stainless steel you look at. Any color there would be greatly appreciated.
Okay. It's a complex question, knowing that not everything is clear today and because the commission has not decided things like the benchmark, the default value, which have an impact in terms of numbers. Now, what is clear as of today is, first, the application from the 1st of January. The second thing that is clear is that for stainless steel, there will be the inclusion of the precursor. Precursor meaning the raw material, the most important ferroalloys that are in the scope of stainless steel, like ferronickel, pure nickel, or nickel pig iron, or ferrochrome. The third point that is clear and that you have mentioned is that Scope 2 is not considered. Okay? It will not be considered, the application of the CBAM for the time being. The other point which is clear is that CBAM will have a progressive ramp-up.
This has been already disclosed many times, and it will start in January 2026 and will have the full effect in the next seven years. This is what is clear today. The other part that is clear is that considering the very high level of CO2 of the producer, which are the most competitive because they have a nickel pig iron, this will have a big impact on all producers which are based on nickel pig iron. The other part which is also clear is that the commission is putting in place the melting pool just to avoid the non-traceability or improve the traceability. All this is positive. The numbers are not yet communicated. In particular, as you mentioned, all the benchmark and the default values are not, for the moment, known.
Okay. All right. No, that's very comprehensive and helpful. I'll leave it there. All the best for what comes next. Thank you.
Thank you very much.
The next question comes from Maxim Kogge with ODDO . Please go ahead.
Yeah, good afternoon. Two questions on my side. The first is on volumes, actually, and the bridge from Q3 to Q4. Reading between the lines, I understand that you expect volumes to increase in Europe in line with usual seasonality, which I find quite positive in contrast to what has been guided by your two main competitors. In Brazil, this will be lower, but in line with seasonality. Can you confirm that and shed perhaps a bit more color on the trends you're seeing?
No, no, I fully confirm that. The seasonal effect in Europe and in Brazil are classic ones. Europe will increase their volumes because in Europe, typically, the month of August is very low because of the closure of all the south of Europe, France, etc. For Brazil, you start the summer, and there will be a summer in Q4. All in all, I confirm that Europe will be some increase of volumes, and in Brazil, will be some decrease in volumes, totally in line with the seasonality.
Okay, very clear. Second question is on the aerospace end market, which has been actually quite soft, unlike your initial expectations. Perhaps can you shed more light there on your customer portfolio, your exposure between aftermarket and new equipment, all kinds of information that can be useful to appreciate the potential of upside in 2026?
Okay. Fundamentally, we are exposed to aerospace in Universal and a little bit in some activity of recycling for Eutica, but these are minor compared to Universal. Universal is our exposure to aerospace. What has been clear in aerospace, and we have discussed in previous call, is that there has been a long phase of dystopia in which we are still now. What is clear also in aerospace is that as a market, the market is very solid, and the order book of all the producers that we are addressed, producers which are the typical Boeing, etc., but all the supply chain of this producer with motors, with landing gears, etc., they have a very solid order book.
Now, once the dystopia is finished and we see that this is going to the end in the next few months, the market will go back to the performance that they have shown in 2024 and to the beginning of 2025. It is clear that this market is a bit different from the commodity markets that we address with the standard stainless steel, where the stock and inventory are between two to three months, four months. Here we are discussing inventories which are along the supply chain of many, many more months. They are 12, 18 months. Whenever there is a disturbance in the demand, this has a very long, let's say, consequence, and this is what we are experiencing. On top, we have had some maintenance during Q3, but as I repeat, we are very confident on 2026.
Okay, thank you. Congratulations, Tim, on the great transformation work achieved over the past few years.
Thank you very much. I appreciate it a lot.
The next question comes from Tom Zhang with Barclays. Please go ahead.
Yes. Hi, thanks for taking the question. Just one from me, actually. It's on CBAM. I think we've discussed before, there's clearly a lot of potential loopholes and specific issues for stainless, whether that's different grades, whether that's sort of default values. And it's a global market. I think these importers are quite smart guys. They're going to try and find ways around it. In my mind, with CBAM, it's not just about getting the policy right. It's about being very quick to react to examples of circumvention and changing the policy, which is why I think the delays that we've been having, even for something like benchmark and default values, is maybe a bit of a concern.
From your discussions in Brussels, is there anything that gives you confidence the commission is going to be more flexible and, in particular, quicker to react to adjust the CBAM policy in the future to try and shut out circumvention? Yeah, yeah, sort of any thoughts you have around that would be interesting.
For sure, they have. I see you are very well informed. For sure, they have fully understood about the benchmarks, and they know personally the story of the grades, and they have granted us that this will be fully considered because not all the grades have the same content of CO2. Typically, the highest content of CO2 is in the austenitics, which represent 75% of the market. They are fully aware and they are supportive on this point. The loopholes that you are referring are very well known. They are on the capacity shifting and the circumvention. All this has an answer, which is the melting pool.
The implementation of both melting pool, the benchmark, and the default values is part of what the commission is working on, knowing that the commission has a very clear view on what are the loopholes and the possible measure. At least we have given them all the possibility to put in place measures which are totally satisfactory.
Okay. Maybe if I could just push you slightly. I mean, we've had some stories of Asian producers basically melting slab and then immediately scrapping that slab and remelting it and basically just calling it scrap as one way of circumventing CBAM. Maybe this is very small scale, but just giving us an example. I guess my question is more, once CBAM is in place, do you think the commission is going to be faster going forward in being able to adjust CBAM, or do you think it's still going to be quite a slow European process? When we see a circumvention, maybe it's going to take one, two, three years for them to go out and fix it.
I don't think you can change dramatically the speed of Europe. Now, what is clear is that all what is described here is very well known, and it is not discovered tomorrow morning. They will not start to work on all these problems from tomorrow morning. Okay? On top, the question is also the fact that you have, let's say, referred to things which are relatively theoretical. So scrapping a slab and then remelting the slab is something which has a cost. And at the end, you have a very low interest to do that. I am confident that progressively, the CBAM will be a strong support for a living playing field. Then we will see.
Okay. Fair enough. Thank you very much. And congrats, Tim. It's been good to work with you.
Thank you very much.
Cheers.
Thanks.
As a reminder, if you wish to register for a question, you may press star and one. Our next question comes from Bastian Synagowitz with Deutsche Bank. Please go ahead.
Yeah. Hi, good afternoon all, and thanks for taking my questions. My first one is also coming back on the planned policy changes. I guess as a starting point, no one at the moment is really making any money in Europe because we're easily EUR 200 away from what used to be previous mid-cycle margins. Tim, would you be confident enough to say that with what is coming here and with what is planned, we should be going back to mid-cycle margin levels even before a demand rebound, which we've been waiting for for some time, but I guess which we can't really bank on? That would be my first question.
Yes. The answer is a clear yes. Now, the answer is not if we are confident or not that this will restore a level playing field. The question can be in which months we will see the effect because it's a question of months. We don't know exactly when the commission will put in place. We have asked the 1st of January. A lot of member states are supporting the 1st of January, but at the end, when the level of imports will be reduced at a sustainable level, which was the level of 2012, 2013, when the utilization rates of the plants in Europe will be, let's say, much better and close to the 80%-85%, yes, the market will be different.
This will be different even in a moment where the final demand is still lagging behind because, as you have seen also in our podcast, for the moment, the markets are not yet recovering. We can expect a double effect, which is, on one side, the full, let's say, ramp-up of the safeguard, and on the other side, the fact that some policy like the German plan will enter in effect, and the demand will be stimulated and go back to a more normal level. Now, as I repeat, and that has to be clear to everybody, it is a question of months, not a question of years, not a question of quarters. I think it is a question of months. Can be one, four, I do not know, but it will come.
Okay. Thank you. That's been very clear. My next question is on Alloys. Can you maybe help us to understand how, I guess, the former business pre-Universal is doing, and are you still confident to be hitting the EUR 100 million EBITDA target this year, or has this become out of reach? I guess you obviously have the maintenance situation here, which is constraining you a little bit. Maybe also, can you give us a bit more color on how much Universal is contributing relative to the, I guess, previous EUR 60 million pre-synergy earnings aspiration level this used to have? Those are my questions on Alloys.
Okay, Bastian. Hi. On the question, yeah, we've given you two points, which is that we have this temporary weakness in the oil and gas market, which I'm sure the entire industry is going through, right? Based on that, on an annual run rate level, the previous Alloys business would be about a 10% less level, so to speak. That's an upside, and we still stick to the EUR 100 million goal for the previous Alloys business. The universal business, if you remember, we are actually only taking this year, and that's something to be kept in mind, only 11 months, right? The first month was before, just to keep run rate in mind.
We had guided close to EUR 60 million for the year in a steady-state run rate, and the weaknesses, which Tim has explained in the market and the maintenance issues between Alloys before Universal will traditionally bring Universal probably to around 50%-60% of that number this year, so to speak. This is the broad level we expect this year. Starting next year, it should be full run rate for Universal because we will have it 12 months in our portfolio and Alloys as well. Synergies have to start kicking in. Remember, we guided to EUR 27 million synergies also. This is a year of ramp-up of synergies, so there should be the full run rate of the first year of the ramp-up, which we promised is split across the next four years, should also start flowing in just to give you Alloys.
Okay. Perfect. That's great color. Just briefly, on Alloys, are you seeing just any signs that this is now starting to come back for the next year, I guess, in terms of earlier call-off rates and indications, or is it just too early to say?
It's too early to say because also there's a lot of year-end-related stall-on, a lot of equipment which get called off end of the year, as you know. It is not just simply a Brent price compared to where the investments are calculated. So it's too early to say.
Okay. Great. My last question is on your financing line, which was slightly higher this year. Could you maybe just briefly update us on how much of the financing costs were related to things like advisory and also hedging, and what would be an assumption which we could use here for, I guess, the recurring run rate? I think you mentioned EUR 15 million cash costs in the report, but what can we use as a P&L item for the next quarter?
Hello, Bastian. Nicolas speaking. For the interest rate, you can use for your model EUR 15 million basically per quarter. The rest of the cost is indeed the derivatives. We are looking here at a timing effect, and this effect should be neutral over a period of time.
Okay. So EUR 60 million annualized is basically the financing line in the current situation with the balance sheet and financing costs as it is.
Yes, that would be for this year, Bastian, if I can jump in. I think the broader guidance is look at our debt, and we have the 4%-5% rate, plus you add a few utilization fees and everything. You have to understand we have announced this time a refinancing of EUR 790 million. That refinancing, obviously, the older lines were probably at 3%-4% because they came in from five years ago, right? That will probably have a smaller hit, a very, very, let's say, high single digit or a low double digit, and I'm talking now EUR 10 million or EUR 11 million to that number starting next year if you want to look at long-term models.
Okay. Okay. Understood. Great. Perfect. Those were all of my questions. Tim, also from my side, it's been a pleasure working together. All the best for you in your role.
Thank you very much, Bastian.
Ladies and gentlemen, this was our last question. I would now like to turn the conference back over to Timoteo Di Maulo for any closing remarks.
Okay. Thank you very much for attending and participating to our Q3 call today. As I open, this is my last quarter conference call as CEO of Aperam. However, you know that I will remain closely connected to Aperam not only as a shareholder, but also as a future member of the board of directors. I also intend to continue supporting Aperam and will continue as a strategic advisor on public affairs for Europe, for example, so that we can build a fair and clean steel industry in Europe. I am confident that our open, transparent dialogue with the capital market will continue thanks to my successors and that you will continue to have confidence on the fact that the headwinds that we have faced in the last quarters are going to be partially solved or totally solved in the next future.
Thank you all for the cooperation, and see you and have a fantastic start to the Christmas and holiday season. Bye-bye to all of you.
Thank you. Bye-bye.
Ladies and gentlemen, the conference is now over. Thank you for joining the call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.