Good afternoon to all of you. Welcome to Aperam fourth quarter 2022 podcast. I am Timoteo Di Maulo, CEO of Aperam. Sud Sivaji, Aperam's CFO, I will present to you a Q4 that might have been the cyclical trough already. We will answer your question at the webcasted conference call today at 2:00 P.M. Central European Time. The dial-in details are on our website and on the last slide of this presentation. Please take note of our disclaimer regarding forward-looking statements on page two. Then we move to the highlights on slide three. In the fourth quarter, we realized EUR 129 million EBITDA, pretty much in the middle of guidance range. A further decline quarter-on-quarter, but a good result considering the many headwinds in what could be the cyclical trough quarter.
Q4 reflects the stocking, cost inflation and another substantial inventory valuation charge, mainly in all our European businesses. It also highlights the resilience of our differentiated value chain, running above historical normal for quarter, with more than half of the EBITDA being contributed by upstream and downstream operations. Brazil continued to perform solidly. Good news came from the regulatory environment. First imports in Europe have been normalized and this should last. The European Commission has recognized circumvention of existing duties against Indonesia through Turkey. The Commission further detailed the Carbon Border Adjustment Mechanism. The full details should come at a later stage, it is very positive that there is a movement towards a full Scope 3 assessment of imports to create a truly level playing field. Overseas, the WTO ruled against the Indonesian nickel ore export ban.
While the decision has been appealed, it is a very positive sign and allows the European Commission to counter the subsidy of Indonesia without further delay. The great news of this quarter is that Brazil introduced a countervailing duty against Indonesian cold-rolled material at almost 90%. This will directly benefit our operation. Self-help and improvement remain the core of Aperam. We realized another EUR 25 million Leadership Journey gains and Phase four programs runs ahead of plan. You know that we act in line with our financial policy, we canceled the 2 million shares bought back in 2021. We also intend to cancel the share that we bought back in 2022 at a later stage. Finally, I want to talk about ESG, in a differentiated way than you are used to.
I am delighted to announce that Aperam has joined force with Econick. Econick is the global knowhow leader in hyperaccumulating plants. Together, we are in the process of developing agriculture-based nickel production at a scale with the newly formed Botanickel joint venture. Pilots have already started in several countries. Botanickel targets the first quartile on the nickel cash cost curve. After the full ramp up, nickel production should cover a major share of Aperam primary nickel requirements. Recyco, our nickel recycling unit, will also play an important role in this value chain. This initiative is more than just business. It helps Aperam realizing its net zero commitment, and it will operate responsibly and fully aligned with the UN SDGs. A successful Botanickel will empower local communities by providing employment and also by supplying renewable energy as a by-product to disadvantaged communities.
This is the second major investment of Aperam's really recently formed venture capital arm. We fund innovative ideas that will help us operationally, technically, or within the ESG scope. MOWEA, a German technology company, was our first investment. Their product, a superfast polygon laser scanner, will give us a high differentiated product offering in the future. We have built relevant investment pipeline. Stay tuned for more. Let's look at the next slide on the current market environment. Overall, the fourth quarter developed in line with expectation. The import window has closed for good. Imports have fallen back to the historical normal level. The market share of Chinese cold-rolled materials has more than halved to 4.5% in Q4. We expect that to further normalize to below 1% seen between 2015 and 2021.
Anti-dumping duties are effective measures, and in the absence of major price disruption, we expect it to stay that way. Additional measure by the European Commission could even tighten imports further. Importers are one process step below the imports. The situation has improved compared to the end of September, as inventories have been reduced by 80%. Compared to the historical average year, inventories are still slightly elevated in absolute tonnage. The soft demand environment, however, turned this into high inventories days. Sentiment is clearly improving and first stockists are cautiously replenishing material. We expect Q1 to be slightly impacted by further destocking. Real demand has cooled slightly in Q4, mainly in sector like construction and consumers that are sensitive to higher interest rates and cost inflation. We noticed a slight inventory overhang there.
Demand in food, health, and catering has stabilized at a level that reflects a tighter consumer budget. The automotive industry, on the other hand, continued to record good demand, supported by a stronger order backlog in Europe and is improving in Brazil. In the industrial space, energy projects are strong and oil and gas is recovering. Demand is good in Brazil for ethanol and oil and gas. Generally, the sentiment in the market has improved over the past few weeks, and we expect this to be reflected in Q1 shipments. I hand over to Sud, for the review of the financial performance.
Thank you, Tim, a very warm welcome to all of you. The press shipments due to destocking, energy costs below from the previous quarter and a highly negative inventory valuation. In that perspective, we delivered a very solid fourth quarter. Before 2021, anyone would have considered EUR 129 million EBITDA as a better than normal Q4. Within a challenging environment, Aperam has clearly strengthened its resilience via the Leadership Journey and our differentiated value chain. The flexibility of our business to create value in all scenarios remains unmatched. There weren't any one-offs in Q4, but the financial result is unusual this quarter, with EUR 114 million FX and derivative valuation losses. Nickel increased 42% during Q4. The negative result was mainly driven by unrealized results on nickel derivatives, and the realized FX derivatives were compensated by revenue side gains.
The nickel volatility will wash out over the cycle. On the cash flow side, two numbers stand out in Q4. We were able to release EUR 197 million working capital, which funded a higher than normal CapEx of EUR 143 million. We are putting the 2025 improvement plan into action and fully spent the budgeted EUR 300 million CapEx in 2022. Aperam has a high and consistent cash generation ability, as evidenced by a 12% free cash flow yield for Q4 and a 13% yield for 2022. This is the basis that allowed us in a year with an unusual high working capital requirement and significant investments in our footprint to hand back a record EUR 345 million cash to our shareholders, all of it was earned.
Once again, and seven years running, Aperam remains the stainless player with the highest cash rewards for shareholders. Moving to the next slide, let me talk about our financial policy. Our financial policy is clear when it comes to rewarding shareholders. We have a progressive dividend policy, and after strategic CapEx and M&A opportunities, if we have excess cash, we hand it back via share buybacks or special dividends. Our track record proves that we live by this financial policy, and it's quite simple and efficient. The excess free cash flow left over from one year is returned to the shareholders the next year. The graph on the left shows the free cash flow since 2017 and the cash returns of the following years to shareholders should match each other.
Remember, there was a EUR 500 million acquisition of ELG in between, yet our debt to EBITDA is unchanged at 0.4x. We combine strong returns with an efficient balance sheet, we are happy to maintain the way it is. Based on the record 2022 and improving outlook in 2023, we expect to continue our shareholder return policy. Now let's move to the right-hand chart. The piece feels like a distant past, let me remind you that 2022 marked a year with record Adjusted EBITDA for Aperam. Looking at how we used that EBITDA, we think we did a good job as custodians for our shareholders. 24% went into building net working capital. That is an unusual item, but is a pure reflection of higher commodity prices.
During the year, nickel went up by 43% and electricity about 148%. Once these mean revert, the net working capital locked in will turn into cash flow again as the intensity is unchanged. We spend only 16% on tax and debt reduction, and both positions should remain low also in the future. While we strike a fine balance between improving and strengthening our business within the 2025 strategy and returning cash to shareholders as laid out in our financial policy. The 32% of adjusted EBITDA that we return to shareholders and the 28% that we invested in strengthening our operations to create shareholder value reflect that thinking. Moving to the next slide, we show that we make good use of that growth CapEx. It is a major driver for the progress of Phase four of the Leadership Journey, our Self-Help program.
We realized another EUR 25 million gains in the fourth quarter, and after two years, we've already realized a total of EUR 122 million. We targeted EUR 150 million till the end of 2023. The gains realized so far will be sustained in a year of major investments and transformation, and we are very confident to reach the goal. About half of Q4 gains came already from our improved footprint. The Alloys pro-growth project, sourcing gains, and the synergy from ELG acquisition made up the balance. After spending EUR 300 million CapEx in 2022, we plan the same number for this year. Let me remind you that we do not invest in capacity additions, but in upgrading our footprint to deliver better mix and profitability.
Our organic growth CapEx comes with a minimum IRR of 15%, so we are confident it will create value for shareholders. We completed the upgrade of our electrical steel business in Brazil, and we are in the midpoint on a number of initiatives. The new AOD that we built in Genk is a major project that was planned for the end of 2023. In order to make use of the market situation, we split it into two phases and have advanced the first phase into March, April. Other major projects are the upgrading of the hot rolling mills in Châtelet, in Belgium, Brazil and also for alloys in Imphy, France. While the upgrade in Châtelet is complete and the ramp-up is starting in Q1, we target to complete the other two projects going into 2024.
In 2025, our upgraded asset base will allow us to produce a better mix, which is a major driver behind that EUR 300 million EBITDA improvement that we target to realize by then. Moving to the next slide, let's take a look at the segment performance. Recycling & Renewables delivered a very strong quarter with EUR 55 million adjusted EBITDA. On one hand, this proves that recycling business is capable of performing solidly in any given market environment. It also demonstrates the shortened reaction time to market changes, which is part of the realized synergies. In the fourth quarter, the segment also benefited from some positive valuation effects and we expect a normal Q1 result in line with the recurrent earning power. Stainless & Electrical has two very different stories to tell at the moment. On one hand, there is Europe where destocking has noticeably impacted shipments.
That leads to some missing contribution margin. Another consequence is that high raw material and energy costs were carried over into the fourth quarter as shipments were missing. This had a noticeable negative impact on European EBITDA. South America, on the other hand, continued to perform stable at a high level with the usual seasonal quarter-over-quarter decrease. Costs are supported by low and stable energy costs, the product mix is solid but flexible. For Q1, we expect Stainless & Electrical to improve substantially despite the usual seasonal trough quarter for Brazil. S&S is closest to the spot market, shipments reflect the soft demand. EBITDA improved quarter-over-quarter, mainly because it has a shorter order book compared to the upstream business, the inventory valuation and the cost impact eases earlier.
The EUR -4 million EBITDA is still a reflection of a negative inventory valuation and depressed pricing in the fourth quarter . For Q1, we expect an improvement towards a historically normal Q1. Alloys & Specialties. At EUR 12 million, we delivered the guided normalization post the extreme weather impact in Q3. We continue to guide for a better 2023 compared to 2022 and expected Q1 at a historically normal Q1. Others and eliminations was again positive at EUR 28 million as guided last quarter. This is a reflection of the intercompany elimination in times where sales prices have normalized, but substantial raw material costs remain in inventory and the reversal of the significant negative eliminations from the previous quarter. Assuming stable raw material prices, this should return to normalcy, a low double-digit negative figure in Q1. I now hand back to Tim for the outlook.
Thank you, Sud. Q4 was tough, but the sentiment has improved, and it seems as if we have passed the cyclical trough. Q1 is seasonally stronger in Europe, but the seasonal trough in Brazil. The stocking should continue. In addition, we have a longer standstill in Genk for the AOD upgrade this quarter. Consider all this, we expect slightly higher shipment quarter-on-quarter in Q1. We expect this to translate into a higher adjusted EBITDA versus the fourth quarter. The increase should be in line with the average historical seasonal improvement. Pricing have been stable for some time, Realized pricing should be a headwind for the last time together with some cost inflation. Assuming stable commodity prices, a swing in inventory valuation should work against this.
We expect net debt to remain stable as we will have lower CapEx on one side, but likely need some working capital for the Genk standstill and the higher nickel price. The other items from the financial policy are unchanged. In line with our progressive dividend policy, we recommended an unchanged dividend of EUR 2 per share. Sud already explained that our CapEx budget is unchanged at EUR 300 million for 2023, split into EUR 150 million for maintenance, energy efficiency and decarbonization, and EUR 150 million for realizing the 2025 improvements. The environment keeps changing at a fast pace, but with an upward trends. We are solid back on the road and looking forward to meeting our shareholders and prospect. It will be great to see you in person at one of these events.
Thank you for listening to Aperam Q4 management podcast. We will host a conference call today at 2:00 P.M. Central European Time to answer your question. We wish you a pleasant day and hope to see you again at the Q&A.