A warm welcome to Aperam Q4 podcast. I'm Sud Sivaji, Aperam CEO, and I hope you're having a good start of the day. Today, together with Nicolas Changeur, our Chief Financial Officer, we will discuss our fourth quarter performance, current trading, and outlook for the first quarter. But first of all, I want to share how honored and energized I am to officially step into the role of Aperam CEO at the beginning of 2026. Thank you for sending me your kind wishes. Now is a crucial moment for Aperam. We've grown in the diversity of geographies, the mix of our businesses, and improved the value chain of Aperam by two acquisitions and one joint venture in the last four years. This happened in the middle of a world in turmoil as companies continue to shrink and disappear.
Today, I'm motivated and absolutely confident that the strength of our global team will continue to drive Aperam into a successful future. But now, you're interested in our Q4 2025 results as well as our guidance. I will also take the opportunity to introduce you to the next phase of our strategy. As always, we will host a conference call later. The start time is 2:00 P.M., Central European Time, and we welcome your questions then. The link to register for the conference call is available on our website and on the last slide of this podcast presentation. Aperam is providing the following information as part of its earnings release documentation. This material supports our quarterly financial reporting and, where applicable, our disclosure of regulated information. Please take note of the disclaimer on page 2. Starting with the highlights and the development in the fourth quarter of 2025.
As expected and announced, this quarter was very challenging, but our guidance was supported by the strong focus on self-help. Despite a challenging macro environment across all businesses, I'm delighted that we delivered a solid trough EBITDA, thanks to structural improvement from the Leadership Journey Phase 5 . The trough quarter showcases Aperam's inherent competitiveness gained by our leadership journey. We delivered EUR 30 million in gains in the fourth quarter. More importantly, we've reached EUR 195 million of our EUR 200 million target. This means the original three-year plan was completed already in just two years. On the businesses, let's begin with Europe. We saw the seasonal volume upticks in Europe, though conditions remain tough in terms of pricing and margin. In Brazil, performance was impacted by seasonality as expected, and the scheduled annual maintenance, but also from some price pressure by non-stainless imports.
Alloys was impacted as well by repair and maintenance of a key asset as guided, but the asset is back in operation now. However, oil and gas, as guided, remains weak. The good news is that Universal is fully on track to deliver the synergies of EUR 27 million over five years. Imports reached, as in the last quarter already, the 25% mark. 25% imports at the low cycle is a high number and makes it clear that action from the European Commission is welcome and necessary to ensure fair competition. We also delivered benchmark cash performance with an operating cash flow of EUR 422 million and made a big step towards deleveraging. Thanks to the efficient working capital management, we achieved a net debt reduction beyond our initial forecast. Moving to the next slide to talk about the different end markets.
For Aperam, the construction sector is important, but the outlook remains unchanged and only the heating market is showing some recovery. The German spending program will materialize, but this will take some time to be visible, especially as it is late cycle demand for stainless. The construction sector in Brazil marked a stable development. Consumer goods are stable. The focus is today on necessary replacements, but not additional demand. The automotive sector is characterized by discussions on system transformation towards electric vehicles. As a result, customers are unsure about these decisions and also driven by a weak economy, the momentum in the car production is not yet picking up. In Brazil, the development is definitely healthier, especially the truck sector is developing positively. Demand in food, health, and catering is flat, however, below a normal level. The industrial demand shows an increasing momentum in Europe.
A return to standard level is possible. In Brazil, demand is solid, but the oil and gas segment continued its weakness. Aerospace is growing, and manufacturers have full order books apart from the short-term economic outlook. The issues at Boeing are homegrown problems, but the production is recovering now. As a result, destocking along the supply chain will happen in 2026, and we believe helping our specific demand as we go into H2. As mentioned already, imports into Europe kept a high mark of 25%, and this is happening in a time of low demand. Inventories even decreased further in Q4 on the distribution supply chain. Moving to the next slide, I'd like to directly address three topics currently defining our conversations with the capital markets.
Nickel price volatility and evolving EU regulations regarding trade defense and CBAM are not just topics of interest. Especially, EU regulations are potential structural shifts that define Aperam's competitive landscape heading into 2026. Let's look at nickel price development. After a period of stagnation and oversupply, we saw a significant surge in the final weeks of 2025 into 2026, and the rally also for other metals continued in January, and the nickel reached even more than $19,000. Now, the nickel price has come back from the speculative spike into the area of $17,000, but it remains highly volatile. For Aperam, our message to the market is one of stability on nickel. While these price swings often cause ripples elsewhere, the impact on our valuation is limited. We use LME-grade nickel, primarily only in our alloys and specialty segment, where they are suitably hedged.
Furthermore, because scrap prices, our primary input, do not correlate directly with LME, but rather follow their own supply and demand fundamentals, pure nickel volatility has a negligible effect on us in the short term. Now, if nickel prices stay up permanently, it will influence Asian raw material and stainless prices, thus having an indirect effect on our business. Coming now to the regulatory environment. Of course, we are closely monitoring the safeguard and trade defense measures proposed by the European Commission and had many meetings and discussions in Brussels last year. While several details are still being finalized, the trajectory is clear. These measures are designed to prevent unfair global trade practices in the European market. We anticipate these measures will officially kick in by July first, 2026.
Consequently, we expect to see a positive ramp-up in our earnings throughout the second half of 2026, as many of you seem to have already factored in. Finally, the most transformative shift, the Carbon Border Adjustment Mechanism, known as CBAM. As of January 1, 2026, full enforcement is happening. CBAM is a very important milestone for Aperam. By looking at the carbon intensity of imports, the EU is finally leveling the playing field. As a leader in low-carbon stainless steel production, our competitive advantage is now backed by legislation. While the first half of 2026 may see some noise due to an import surge at the end of 2025, the long-term outlook is resoundingly positive.
We expect the cost of carbon to be reflected in the price of imports, but the effect is ramping up slowly, and the impact on our earnings in 2026 will depend on importer behavior. If they choose to ignore the risk, we clearly expect that they will pay the default values as duties in 2027 retroactively. I suggest you watch the video we have prepared for you about our position on CBAM and clearing some myths around it at the end of this call. Now, I will hand it over to Nicolas.
[Foreign language] to everyone. Let's start with adjusted EBITDA. In the first quarter, we delivered EUR 67 million, where we guided in a decrease compared to EUR 74 million in Q3. The first quarter faced challenging conditions, in particular, price pressure in Europe, weak oil and gas, and the repair of key assets for alloys, as well as seasonality and maintenance in Brazil. However, thanks to our Leadership Journey Five, as mentioned by Sud, we have been able to improve our competitiveness, staying ahead of competition. You will notice also that we had, in the first quarter, exceptional items amounting to EUR 28 million. This includes EUR 10 million of restructuring for the next chapter of our leadership journey and also year-end inventory adjustment. As already commented by Sud, Aperam has shown its strengths in cash flow generation.
Operating cash flow is solid in Q4 2025, as it was in Q4 2024. This covers CapEx, dividend, and also the strong deleveraging. Net debt was reduced again, and we achieved more than forecasted originally after the closing of the acquisition of Universal, thanks to our very high level of operating cash flow of EUR 422 million over the year. Moving to the next slide. Our four segments perform without any surprises and based on the guidance that was given. Recycling & Renewables adjusted EBITDA increased to EUR 32 million. This was driven by more favorable pricing despite lower volume and positive valuation effects. For Q1, we expect lower adjusted EBITDA, also due to lower valuation effects. Stainless & Electrical generated adjusted EBITDA of EUR 11 million. The decrease was due to price pressure in Europe, combined with seasonality and annual maintenance costs in Brazil.
In Q1, the seasonality in Europe and modest price recovery will drive higher results despite the weakest quarter of the year in Brazil. Services & Solutions achieved adjusted EBITDA of EUR 7 million. This increase happened despite price pressure due to lower valuation charges. The market is still challenging, but usually Q1 is a seasonal stronger quarter, and we expect a positive EBITDA development. Alloys & Specialties reported quarterly adjusted EBITDA of EUR 22 million. The decrease resulted from the weak oil and gas segment, as well as the repair and maintenance of a key asset. The repaired asset is back in operation and in total, despite some market weakness, EBITDA should increase in the first quarter. Other and eliminations amounted to EUR -5 million, and this is not an unusual figure for a quarter.
Intercompany elimination, resulting from the strong integration across Aperam business, such as recycling, forest, stainless steel mills, and distribution are located here, as well as the corporate cost. Moving to the next slide, let's talk about the leadership journey. The leadership journey is our self-help program since the creation of Aperam in 2011, where we focus on improving competitiveness and driving Aperam transformation. It has five phases, with a phase five plan in 2024 to 2026, focus on efficiency to mitigate the effects of substantial global inflation, cost increases in Europe, while ramping up key assets in Brazil and in alloys. Thanks to the gains generated in Leadership Journey Phase 5 , we were able to remain profitable and competitive, particularly in Europe, despite intense market headwinds.
Also, as mentioned by Sud, in Leadership Journey 5, we reached the entire 3 years goal in the first 2 years. Thanks to this early achievement, we are officially launching the next chapter, Phase 6, with focus on value growth by leveraging our integrated value chain and innovation. Let me introduce further our new Leadership Journey, Phase 6. Leadership Journey is not only a simple cost management and efficiency program. Our self-help program leverage every link in our value chain and entails structural transformation. We are not just weathering the cycle, we are reengineering our business to lead it. Phase 6 is based on three critical foundations. First, synergies. We are generating even more value from our differentiator in the market, our integrated supply chain.
In Europe, we intensify the cooperation between the different segments from scrap as a raw material over the mills to the distribution in service and solutions. In addition, 40% of our alloys product are running through our European stainless mills. Also in Brazil and at Universal, we will unlock further synergies with our Recycling & Renewables segment. By optimizing this one Aperam approach, we ensure that our operations stay competitive and cash positive even when the market hits the low cycle. An important proof point for this is also in terms of the synergies, net working capital employed. As demonstrated in 2025, we continue to optimize net working capital between our units. In addition, we will streamline our SG&A across the businesses to remain cost efficient and ensure resilient margins in a volatile macro environment. Second, we are redefining circularity.
For many, sustainability is a regulatory burden, but for Aperam it is a competitive edge. Through Recycling 2.0 and our forest, we are scaling sustainable business that offer tangible financial returns. Recycling 2.0 is where we are investing in our footprint in recycling with three objectives: consolidating into a more efficient hub and spoke model to serve our key clients, to use digitization in Europe and the U.S. to improve synergies with our mills. And lastly, investing in automation and productivity to become the state-of-the-art recycler for aerospace alloys in the U.S. market. In renewables, we are increasing the productivity of our forest and scaling up our bio-oils and carbon credits, turning our green credentials into profitability. Finally, innovation is our path to differentiation.
We are moving up the value chain from bio- oil to high-tech OLED screens by expanding our alloys footprint into our space in Europe, developing our electrical and electronics engineering offerings, and growing further in the energy sector. We are focusing on innovation to ensure our product mix derive value in new markets. By the use of robotics and automation in our production and AI agents in our commercial and distribution, we see clear benefits across all our businesses. You can see on our website two recent patented examples of innovation. Our patented 316A grade for high value-added marine application. It is a low-cost, low carbon footprint stainless steel grade, replacing 316L in all applications. It is fully plug and play for our customers. Another recent patented innovation is our Slinky Solution for electrical motors, increasing performance, reducing size of motors, and reducing waste for customers.
To bring it together, Leadership Journey Phase Six is about finding value in our supply chain through synergies between the businesses which work well together, through scaling our Recycling & Renewables platform, and vitally, growth with innovation across all our businesses. We are building a business model at Aperam that is more circular, more innovative, and thus more profitable across the entire economic cycle. Coming now to the update on net financial debt. Our promise after the successful and really fast closing of the Universal acquisition was deleveraging. Starting with the peak at the end of Q1 2025, just after acquisition, we have been able to generate cash for CapEx, for attractive dividends, and EUR 257 million to reduce net debt to less than EUR 1 billion. Originally, the target was to deleverage by EUR 200 million.
Despite the challenging market conditions, cash generation was successfully achieved also in the low of the cycle. This development is driven by our cost leadership and the ability to generate cash also in difficult times, helped by effective working capital management. With the financing we did, the balance sheet is stable, and the mid- and long-term financing of Aperam secured. We were in the fortunate position of having excess demand when raising debt. This underlines our strong position and credibility in the capital market. Our focus will remain on cash also in 2026, and we will continue to earn the dividend for our shareholders during the lowest of cycles without raising debt, fund our transformation, and be ready for the recovery whenever it happens. I hand it over to Sud for the outlook.
Thank you, Nicolas. As Nicolas has explained, we want to focus on growing the value of our integrated supply chain inside Aperam. Now, I'm thrilled to go a step further. At Aperam, we want to look beyond the next cycle. This is why we invested in a modern cold rolling mill in the middle of COVID, or in 2023, invested in the hot rolling mill in alloys. In this tradition, I would like to announce transformational investments in our European footprint across our businesses. Firstly, on stainless, we have three investments planned. First, we plan to invest in a new automated cold rolling mill in Genk, Belgium. Genk today offers our entire stainless product portfolio, capturing the upside in high cycles or when the trade measures become effective, and providing us an efficient integrated site with cost advantages in low cycles.
We are investing in a revolutionary annealing technology in Châtelet, Belgium, which will save us energy costs, reduce our carbon footprint, and provide us with flexibility in our annealing capacities. We are investing in our cold rolling mill in Gueugnon, France, to develop the site into a center for specialties. Processing alloys already, now moving to specialty stainless, specifically moving into energy and heat efficiency applications. In alloys, we will invest in a new vacuum induction melting, VIM, furnace complex, debottlenecking our upstream for specialties. As is today, the mills of Stainless Europe will continue to provide the downstream capability for 40% of alloys material flow. This synergistic development will help us capture the growth in aerospace in Europe, energy, and electrical and electronics engineering applications. But why now? It is a clear strategy.
Europe is a key market for us, and we believe that we should prepare for the future with modern technology that can compete with the best in Asia and create value by being the fittest. With the coming trade defense measures and European investments in energy and aerospace and defense, the upside is tangible. But we want to build an Aperam that capitalizes on its efficiency and the ability to serve the customer demands across the cycles. We are investing in these modern automated tools that can, in low cycles, ensure our operations remain the most efficient and cost-effective in the market. In high cycles, allow us to capture maximum upside and better reach the market, and deliver growth in the specialties market in both stainless and alloys. The investments kick off in 2026 and ramp up into 2028, except the alloys investment would need until 2029.
We expect a cash outflow of EUR 160 million across these projects over the next 3-4 years. I would like to remind you that we expect at least a 15% IRR on our investments. As always, we will keep you posted with these updates as these investments start and develop. As you can see now, Aperam is not just reacting to the market. With these investments, we are forging our future in Europe and for Europe. Moving to the next slide, I'd like to conclude with the outlook. Having one month of 2026 behind us, the development of Q4 2025 has continued. Underlying demand, apart from the seasonal development, remains stable, albeit at a low level, and that visible spark of momentum everyone is looking for is still missing.
But the good news is that in Europe, in alignment with historical seasonal patterns, we anticipate an overall increase in shipment volumes throughout Q1. While Brazil is currently navigating its seasonal low, seasonal higher demand in Europe will be the driver for the quarter. Alloys continue to deliver EBITDA at a stable high level, despite the oil and gas weakness and the wait for Boeing recovery. Also, in 2026, net debt should decrease, but not in the first quarter, due to capital needs for more working capital based on our seasonal higher activities. In total, we expect EBITDA in Q1 2026 on a higher level compared to Q4 2025. With Brazil seasonally returning in Q2, we expect to see a further recovery.
This, combined with our leadership journey contribution, gives me the confidence to guide to a quarterly EUR 100 million run rate in H1 2026 for Aperam, but in two steps. Please be aware that we start slowly into the new year and speed up later. As discussed at different points in this podcast, we expect to see additionally some positive effects in H2 from the trade defense measures starting in July. Now, let's look into our transition into 2026 and beyond. Now, this slide is more than only a financial roadmap. It is a testament to the value we have built and the growth we are now positioned to capture. We've navigated the low cycle with discipline, and we built a more cash-generated business model with our differentiated value chain. Firstly, our strategic diversification beyond stainless.
While stainless remains our heritage, our future growth is significantly more spread out. Through Leadership Journey Phase 5, we have successfully developed our alloys and our recycling and renewable segments. Between 2020 and 2025, the addition and growth of these two segments has contributed to an additional EUR 130 million to our annual EBITDA. When you look at the growth in shareholder value between 2020 and 2025, we've seen a EUR 280 million increase in market cap. But more impressively, the additional EBITDA in alloys and recycling renewables equals to EUR 810 million EV when applying our historic multiples. Now, on top of 2025, with the future upside of the development of Universal, we see further EUR 400 million in value on the horizon.
As I've explained, our investment to debottleneck the upstream in the alloy segment with the new vacuum induction melting furnace will be a cornerstone of this continued value through innovation as we look to power the sector growth in aerospace, energy, electrical, and electronics engineering. As we continue to build Aperam further, our focus has not diverted from fortifying the foundation. In 2026, we generated EUR 422 million in cash flow from operations. This disciplined cash focus allowed us to bring net debt below the EUR 1 billion mark. By deleveraging now, before the next upcycle, we've ensured we have the balance sheet strength to be opportunistic and capture the gains when the market turns.
In terms of shareholder value, just between Q1 2025 and Q4 2025, we have moved about EUR 250 million from debt to equity in our shareholder enterprise value. Last but not the least, let's talk about our stainless business in Europe. Even in the worst market conditions, our European stainless operations have remained profitable. This is not by accident. Through continuous improvements in cost competitiveness and productivity, we've ensured that our low cycle floor is higher than before and has resulted in the European cost leadership. In fact, our Stainless & Electrical segment is delivering a run rate of EUR 150 million, even at the bottom of the cycle.
This gives us confidence in to invest in productive new tools to capture the upside resulting from a stronger trade defense, to diversify into high-value specialties, and to have modern tools with low cost, defending our competitiveness in low cycles. I wanted to conclude with a simple analogy: We can thrive even when the wind is against us, and we are building a company that powers on its own engines, from Recycling & Renewables, to stainless, to alloys, to distribution. When the trade winds shift, we are ready to capture that upside as well. As we transition beyond 2026, we are on a clear path to a normalized EBITDA of EUR 700 million-EUR 800 million annually. Aperam is no longer just a cyclical steel company.
We are a diversified, high-value material player with a focus on cash, a solid balance sheet, and a clear plan for value growth. Let's look into the future together. Starting next week, we'll meet investors. Nicola, the investor relations team, and I will be on the road attending conferences and carrying out roadshows. As you can see on the slide, we have a full schedule to be available at many locations in Europe, as well as in the U.S. All of us are looking forward to meeting as many of you as possible. Please contact our investor relations team with any feedback or if you need corporate access. We're happy to help you and to look into the future. Thank you very much for listening to Aperam's Q4 management podcast.
We wish you a pleasant day and look forward to your questions in our conference call this afternoon at 2:00 P.M. Central European Time. But I have just one more thing now. CBAM was mentioned already, and there are many interpretations and misunderstandings about it. This is why my predecessor, and now board member, Tim Di Maulo, and I recorded a video to share background information and explanations. This video is available on the Aperam website, but it's also now part of this podcast. We hope this video is helpful for you, and you will enjoy this special kind of education on a topic which will impact us for many years to come.
Hello, everyone. I'm Sud Sivaji, CEO of Aperam. Today, I'm joined by Tim Di Maulo, our board member and our strategic advisor for public affairs. Welcome, Tim.
Thank you, actually, for joining us today and, taking the time to discuss an important topic. We wanted to address a topic which is very important in the discussion in the steel industry, the Carbon Border Adjustment Mechanism, or CBAM, which is being introduced by the European Commission and causing a lot of questions among our different stakeholders. So, Tim, to start off, may I ask you, what can you briefly tell us what CBAM is?
Thank you, Sud. So CBAM is the European carbon border mechanism under the European Green Deal. It makes sure that imported goods reflect the carbon cost of their production, just like European producers have done under the EU ETS, so the Emission Trading System, which is in place since 2005, and supports the European targets to cut emissions by at least 55% by 2030 and reach climate neutrality by 2050. So specifically, CBAM applies to direct emissions, so the Scope 1 of steel production, as well as for certain emissions of key precursor materials which are part of the Scope 3, such as the ferronickel and ferrochromium. This applies only for stainless steel. In practice, the CBAM encourages producers outside the European borders to adopt more sustainable practices, so conditioning market access on lower emissions.
It's not just compliant, it's about promoting global decarbonization.
That's great. So, Tim, when exactly does CBAM come into effect, and why is it so important for the European industry?
So CBAM is full in force from the first of January 2026, but it will be progressive, and the ramp up, it will last until 2034. Its primary goal, it is to maintain a level playing field. So producer in countries with lower environmental standards should face carbon costs that reflect their higher emission. This will protect European industry, which have invested in heavily in decarbonization from unfair competition. By ensuring carbon price equity between domestic and imported goods, the CBAM also discourage the relocation of European industry to region with weaker environmental regulation. And what is the result? The result is jobs for the Europe, sustainable practice, and a stronger European industry.
Implementation is clearly key. Tim, can you explain why CBAM is ramped up progressively, and what is the role of default values in this process?
CBAM is introduced gradually to avoid a shock to trade and to the industries. At the start, importers receive a partial exemption from carbon cost, similar to the transition support that European steel producers receive today. This support is reduced step by step, and will be fully phased out by 2034, when all imports will pay the full carbon cost. Importers must report how much CO2 is linked to the products they bring into Europe. For this, they can use two ways: by using the real emission data or by using the standard values set by the European Commission. If they use real data, it must be audited and confirmed by an independent verifier to make sure it follows European rules. If they cannot provide verified data, the European Commission automatically applies standard default value.
This prevents companies from under-reporting emissions, and ensures imports still face a realistic carbon cost. The European Commission updated these default values and published them in December last year.
Tim, that means default values are indeed default. That sounds obvious, but can you give us an example?
Okay, as an example, we can take the carbon default footprint of Indonesia, which is 8.7 tons of CO2 per ton of cold-rolled stainless steel. After considering the equivalent free allocation to Europeans and adjustment to ensure a realistic carbon cost, this value remains about 8.3 tons of CO2 per ton of stainless steel. This applies not only to Indonesia, but also, for instance, to Taiwan, whose default value is set at the same level, because its production largely relies on Indonesian semi products. At the end, the CBAM cost of importing stainless is the multiplication of the emission and the CO2 ton price at that moment. In order to ensure that the applicable default value is that of the country where the steel is actually made, we also support a Melt and Pour Rule.
This will keep CBAM fair and credible and avoid circumvention.
One clarification, Tim, because you talk about tons, but it is also about a price for CO2, right?
So every time that you consider ton of CO2, you have to consider that for each ton of CO2, you have to pay the cost of the CO2 at that moment. The CO2 cost is in a market, in the ETS trading system, and at the moment you will import, you will pay that cost.
If you now go into some details, does CBAM apply to an entire site, or just product-specific, or to part of the tons? How does it handle across different production sites?
In simpler terms, all steel from a given installation has the same emissions, whether it's made from primary materials or scrap, or whether they come from different stainless steel family, austenitics, ferritics, duplex. This approach prevents resource shuffling and ensure fairness.
Thank you very much, Tim. Thanks for taking the time to explain to us and why CBAM is very important to the industry, and why the specifics of the CBAM matter. I hope we managed to clarify what CBAM is, and why it matters for the European steel industry. I would like to add that as a leading European stainless producer, Aperam has long prioritized sustainability and reducing greenhouse gas emissions. CBAM is sometimes mistakenly seen as a protectionist measure, but this is entirely incorrect. Its purpose is to promote efficient energy use and reduce the global carbon rules. In line with CBAM rules, if a country produces stainless steel at the same European standards, they should not and will not be subject to CBAM costs. An effective CBAM is crucial to restoring a level playing field, ensuring all producers contributing to the European market meet equivalent environmental standards.
It supports the EU's climate objectives while promoting global sustainable practices, reinforcing both environmental responsibility and industrial competitiveness. At Aperam, we remain committed to sustainability, transparency, and responsible growth.