Good morning, and a warm welcome to Aperam's Q3 podcast. My name is Sud Sivaji, and I'm Aperam's CEO, and I hope you're having a good start to the day. Today, together with our Chief Financial Officer, Nicolas Changeur, we're pleased to walk you through our third quarter performance, give our view on current markets, provide an update on Aperam's transformation, and share our outlook for the fourth quarter. To echo how I concluded our last call, we're building Aperam into a diversified high-value materials player, and Q3 is a great proof point of exactly that. The third quarter is our seasonally softest quarter, with the summer slowdown in Europe and generally weaker demand across the continent. Despite that backdrop, we delivered our best third quarter in four years, which reinforces our hard work as we invest in developing Aperam beyond Europe and beyond stainless production.
As is our standard practice, we will host a conference call with Q&A later today. It will take place, as always, at 2:00 P.M. Central European Time. We look forward to addressing your questions then. The registration link for the call is available on our website and can also be found on the penultimate slide of the 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 two. Moving to slide three, I'm proud to report Q3 results for 2026, the best Q3 performance in four years. Let me walk you through the numbers behind those results. Shipments came in at 540 kilotons, impacted by the typical seasonal slowdown we see across key markets every third quarter.
Sales reached EUR 1,510 million, broadly in line with the lower shipment volumes. Adjusted EBITDA was EUR 105 million, down 19% versus quarter two's EUR 130 million. This quarter-on-quarter decline was driven mainly by the European seasonality across stainless recycling and Services & Solutions, alongside our scheduled maintenance in Alloys & Specialties. Working capital stood at EUR 1.5 billion, down 2% versus Q2, an excellent outcome in a quarter where volumes typically contract and payables drop significantly. CapEx came in at EUR 38 million as we continue to invest selectively in the growth projects with the best value. This brings me to free cash flow, which is at the heart of the comment I just shared with you. We generated EUR 68 million of free cash flow in the quarter.
That is lower than Q2's EUR 106 million, as you would expect given the softer EBITDA, but it still represents a strong 65% cash conversion ratio despite market headwinds and seasonal payable effects. This is exactly the kind of structural high cash conversion we want to showcase as we are developing our integrated value chain. As a direct result, our net financial debt continued to decrease, down to EUR 980 million, even in a seasonally softer quarter. We remain firmly on track with our deleveraging targets for 2027. We also continue to see robust contributions from our Leadership Journey 6 self-help program, which delivered EUR 18 million of gains in the quarter, and our progressive dividend policy was maintained, with EUR 36 million paid out to shareholders. Later in this broadcast, we will take you through the Leadership Journey gains in more detail.
Moving to the next slide to talk about our markets and the development across our regions and businesses. Looking first at Europe, we saw the typical slowdown during the summer, which led to lower delivery volumes across both industry and distribution. Brazil, on the other hand, had a good quarter with its usual seasonal strength shining through. Within our businesses, recycling was impacted by seasonality but remains fully on track, and Alloys & Specialties saw its progress temporarily affected by scheduled maintenance. Energy price increases continue to weigh on our EBITDA, with the quarterly impact ramping up to EUR 20 million, primarily affecting our European operations. On trade defense, the picture continues to move in the right direction.
2026 import penetration into the EU is notably below 2025 levels throughout the year, 13.3% in Q1, 18.3% in Q2, and 14.8% in Q3, giving our European stainless business a fairer playing field to compete in. As we had guided earlier, we will still see the structural improvement stable at the level of EUR 75 per ton into Q3, giving us a solid base in the context of the energy cost volatility from the Iran conflict. On the Waste Shipment Regulation part, you've seen that the formal process has started, and we look forward to working with the European Commission to enforce this in mid-2027. If you look at the EBITDA per segment chart on the right, you can see how this plays out across our four segments.
Stainless & Electrical Steel came in at EUR 52 million, down from EUR 59 million in Q2, in line with the seasonal pattern I just described. Alloys & Specialties delivered EUR 25 million, down from EUR 29 million, reflecting the scheduled maintenance. Recycling & Renewables came in at EUR 21 million versus EUR 32 million in Q2, and Services & Solutions delivered EUR 8 million versus EUR 21 million, both impacted by the typical summer lull in activity. Despite this across-the-board seasonal softness, every single segment remains a meaningful contributor to our bottom line, and that diversification is exactly what allowed us to deliver our best third quarter in four years, even with European demand still weak and the energy volatility working against us. Let's dive deeper into the four segments. Nicolas, the floor is yours.
Bonjour to everyone. Let's start with Recycling & Renewables. Adjusted EBITDA came in at EUR 21 million, a 34% decrease quarter-on-quarter. This was driven by seasonally lower volumes and the absence of valuation gains we benefited from in Q2. On a year-on-year basis, the picture is very different. Adjusted EBITDA more than doubled compared to Q3 2025 based on higher volumes and gains delivered after our successful restructuring of the business. Looking at the market within scrap recycling, global demand for stainless steel scrap is increasing and continues to drive market strengths. Just as importantly, destocking in the aerospace alloys recycling sector is almost done, and we are now seeing the order book recovery starting to take hold as important customers in the U.S. ramp up their production.
In bioenergy, charcoal demand was higher, in line with seasonality, and we saw the typical ramp-up in seedling and biochar sales. Looking ahead to the fourth quarter, we expect EBITDA in this segment to be higher, supported by seasonal volume recovery and favorable valuation effects. Moving to the next slide, Stainless & Electrical Steel. Adjusted EBITDA for the third quarter reached EUR 52 million, 12% lower quarter-on-quarter. This was driven by seasonality, with a decrease in Europe only partly compensated by Brazil. on a year-on-year basis, we delivered a notably higher performance, reflecting the positive impact of the Leadership Journey and trade defense. To start with, on trade defense, we promised to guide every quarter on how the margin was improved since the European trade defense measure, and as Sud said, we confirm that we see the EUR 75 per ton net increase as stable for Q3.
Those trade defense gains, together with Aperam's self-help and cost leadership, are mitigating for the current increased energy cost coming from war escalation. Aperam has the most flexible assets for increasing volumes to meet demand in Europe, and as discussed in Q2, will always run every one of its businesses only on profitable volumes. In Brazil, the election results are out, and it is still early days, but the good news is that the trade defense measure will continue. Now, looking at our end markets. Construction. In Europe, still no signs of recovery. In Brazil, we continue to see the effect of high interest rates, though demand remains solid. Consumer goods. Europe saw a mild easing of demand, while Brazil was stable despite some price pressure. Automotive and transport.
Europe continues to see declining car production and a decreasing share of non-EVs, while Brazil delivered higher production of light vehicles and trucks, with continued support from government measure. Food, health, and catering. Demand in Europe remained unchanged at a good level. Industry, energy, and chemical. Europe saw less dynamic demand from the global energy sector, while Brazil performance was lower, driven by some project postponement in capital goods into 2027. Looking ahead to the fourth quarter, we do not expect any additional demand recovery in Europe beyond the typical seasonal uplift, and the Brazil business is moderating with the start of the regional summer holiday period. With energy headwinds and no further support from valuation effects, we expect EBITDA for this segment to be lower in Q4. Turning to the next slides, Alloys & Specialties.
Adjusted EBITDA came in at EUR 25 million, a 14% decrease quarter-on-quarter due to seasonal effects, including our planned maintenance. On a year-on-year basis, performance was stable despite the weakness in oil and gas. Looking at our key end markets. In aerospace, demand remains high. Boeing is ramping up its production. Also, this is taking up more time than expected, but the order book for aircraft manufacturers stretch into years. Supply chain normalization continues, however, at a slower pace for structural parts compared to engine components. In energy and chemical, LNG vessel demand remains high. Though a negative effect is possible should the Iran conflict continue. The oil and gas sector face continued soft demand, but market momentum is projected to build post-conflict. And demand in the chemical sector remains mixed and below past average levels.
In automotive and electrical and electronics, we continue to see growing demand in displays and magnetics applications, and the rising share of EVs continues to support demand. Looking ahead to the fourth quarter, we expect performance to be higher following this summer maintenance quarter. Order book have expanded, particularly across the aerospace sector. Turning to the next slide with our fourth segment, Services & Solutions. Adjusted EBITDA for the quarter was EUR 8 million, a decrease quarter-on-quarter due to lower activity in the summer period and no valuation support. On a year-on-year basis, this represents significant growth compared to a weak Q3 2025, which was impacted by windfall losses. Looking at the market for distribution, spot price were stable in the holiday quarter, while underlying market conditions remain subdued with recovery yet to materialize.
Imports were significantly down compared to 2025, and we are starting to see some destocking of the speculative inventory that importers built up in the first half of the year. Regardless, distributors' inventory continue to be elevated relative to weak demand into Q4 due to the speculation in H1 2026. Looking ahead to the fourth quarter, we expect EBITDA to be higher, underpinned by stronger seasonal volume. Moving to the next slide, I want to step back from the quarter and put our cash generation into a longer-term perspective, because this is really at the core of the CEO comment Sud shared with you at the beginning of this podcast. In Q3 2026, we have delivered a remarkable 65% cash conversion, as we mentioned earlier, but this is not a sporadic event.
Over the last 10 years, Aperam has consistently generated meaningful free cash flow through the cycle, with a cash conversion ratio averaging 44% since our creation. In the first nine months of 2026, we generated EUR 130 million of free cash flow, despite the significant increase in our raw material prices, the seasonally weaker third quarter, and the broader market headwinds we have discussed today. This is exactly the kind of benchmark cash performance we are building for. New businesses in an integrated value chain that is structurally capable of converting earnings into cash at a higher rate year after year, regardless of where we are in the cycle. Why is cash conversion so consistently high for Aperam? There are three main reasons. First, the quality of our earnings.
Adjusted EBITDA represent more cash from operations versus accounting treatments, and that is why it turns so consistently into free cash flow. Second, our ability to release cash at every stage of the cycle. Our integrated value chain and our flexible, efficient business model let us move quickly. We can release working capital when the market changes and limit windfall losses when prices move against us. Third, our low capital intensity. Aperam needs relatively low sustaining CapEx to keep its assets running well. That means each year, we can direct more of our capital to transformation and growth project that will drive our future returns. Indeed, that reliable cash generation is what has allowed us to be a consistent and growing source of returns to our shareholders.
Looking at dividend, we paid EUR 109 million in dividend in the first nine months of 2026, continuing an unbroken track record of shareholder distribution every single year since 2016. Our progressive dividend policy remains firmly intact, and our continued deleveraging give us confidence that we can keep rewarding shareholders while also investing in the next phase of Aperam transformation. Now, I will hand it over to Sud, who will take you through our Leadership Journey progress and our outlook for the fourth quarter.
Thank you, Nicolas. Moving to the next slide, let me give you an update of phase 6 of our Leadership Journey, our self-help program covering the years 2026 to 2028, designed to keep Aperam cash-accretive and a leader in value creation, even at the lowest points of the cycle. As you know, this phase rests on three pillars. First, One Aperam synergies. This is a key differentiator for us. We are building and expanding into new businesses beyond Stainless Europe, but very importantly, as part of an integrated supply chain. Each business is competitive and cash-accretive on its own, but also brings significant synergies to other businesses inside Aperam. Second, circularity. We remain the only leading player treating circularity as an opportunity rather than a cost, scaling sustainable businesses with tangible financial returns. And third, innovation.
From bio-oil to OLED screens, we continue to develop products that create value across our entire portfolio. I am pleased to report that we have achieved EUR 18 million of gains in the third quarter, bringing our total for the first nine months of the year to EUR 56 million, against our total goal of EUR 150 million for 2026 to 2028. This is a strong start into the Leadership Journey 6 program. To keep it short, we have already achieved our first-year target. These gains are well spread across our four segments. In Recycling & Renewables, we captured raw material efficiency gains and synergies with Stainless Europe. In Stainless & Electrical Steel, we delivered purchasing gains in Brazil, together with cost control and stronger productivity performance in Europe. In Alloys & Specialties, we advanced Universal integration and upstream synergies with Stainless Europe.
And in Services & Solutions, we continue to improve digitalization and there are further cost savings. This is precisely the structural self-help engine that underpins the value creation and also the cash conversion story Nicolas just walked you through, and is a key reason why we remain confident in our ability to keep deleveraging and rewarding shareholders, whatever the macro backdrop. Turning to our guidance for the fourth quarter. We expect shipments to be higher quarter-on-quarter, driven by the usual seasonality in Europe, but balanced by Brazil, which enters its summer period. We expected adjusted EBITDA in Q4 to be slightly higher than in Q3, supported by the seasonal increase in Europe and the contribution from a return to normal activity levels in Recycling & Renewables and Alloys & Specialties, following the scheduled maintenance quarter we just reported on.
This is partly offset by the fact that we do not expect any economic recovery in Europe in 2026 and by lower seasonal demand in Brazil. Let me also give you a few other important forward-looking items. We are reducing our full year 2026 group CapEx guidance to around EUR 175 million as a consequence of the lower demand and activity in Europe. Our full year 2026 base dividend remains stable at EUR 2 per share. As I said at the very start of this broadcast, further deleveraging is on track and with net financial debt expected to be lower at year-end 2026 versus 2025. To close, Q3 2026 was our best third quarter in four years, delivered against a backdrop of seasonality, energy price volatility, and subdued European demand.
That is the clearest possible proof that our strategy of expanding Aperam beyond European stainless and beyond traditional stainless production is working. Crucially, our higher cash generation not only secures our deleveraging target by the end of 2027, but expands our capital allocation flexibility. This enables us to expand the business to growth investments and continue our focus on progressive shareholder returns. Following our Q3 results, Nicolas, the IR team, and I look forward to connecting with you during our upcoming roadshows and conferences across Europe from November through January. Please reach out to us anytime at ir@aperam.com to schedule a meeting or ask any questions. We look forward to connecting with you soon. Finally, a quick update regarding our Capital Markets Day on Wednesday, 18 November in Paris. We have received an overwhelming response, and the event is now fully booked. Thank you to everyone who registered.
All of us are truly looking forward to connecting with you all and discussing our way forward as we transform Aperam into a high-value materials company. We will be happy to share our presentations with you after the event on our website. Thank you very much for listening to Aperam's Q3 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.