Good morning, everybody, welcome to this presentation for the fourth quarter and full year results of Acerinox. Another record year for the company, the second year in a row. My name is Carlos Lora-Tamayo, I am the Chief Investor Relations and Communication Officer of the group. Today, the results will be presented by our CEO, Bernardo Velázquez , our COO, Hans Helmrich, and our CFO, Miguel Ferrandis. For those of you who are here in the room, after the presentation, there is a small gift, a plant that comes from the orchard of A LA PAR Foundation . Acerinox has had an agreement over the past two years with this foundation in order to help people with disability to have same opportunities in our society. We hope you like it.
Before getting started, let me remember you that this conference call is being broadcast on our website, acerinox.com. With any further comments, I would like to give the floor to our CEO. Please, Bernardo, go ahead.
Thank you, Carlos. Good morning, everybody. We are here very proud to present what we think are the best results in the history of Acerinox. Was the best in turnover, best in EBITDA. If it is not the best in net profit, it is because we always put our traditional prudence above the success of a new record year, and we decided to make an impairment in our investment in Malaysia. We have been taking advantage of a great situation that we had lived in the raw material business. It started in Q4 2020 and lasted until Q2 2022.
It's a good part of the cycle that this time was not neutralized by the overcapacity we used to say that it's coming especially from China and Indonesia. That is because the supply chain was totally empty at the time after all the disruptions in the supply chains, all the breakdowns in the economies because of the COVID, and also because the cost and availability of ocean freights and trade defense measures as well. In this situation, there was a feeling in the market of a lack of enough supply, what is not real. All the distributors in the business tried to build up strongly their stocks.
The situation at the end was a very good cycle that lasted until the stock levels were more or less at the normal level around the world. Second, you know, when the new situation or the new sentiment of the economy that was rumors about recession in the second half of the year or rumors about the central bank's measures to stop inflation or reduce inflation, it gave, you know, this new sentiment to the market to be prudent and reduce or control the stock levels. That would have happened around May, June last year. That was something that was predicted in our budgets and predicted in our numbers for the year. There's two very different parts.
The first half was a super record, and the second half that we tried to control the stocking period based on the experience that we have learned in the years, especially in 2007 when there was a similar cycle and we didn't want to leave this excess of optimism, and we tried to control our production and our inventories and reduce the slowdown. Of course, we have three different parts in the world, in the business, yes, and every day are more different. That is United States, Europe and rest of the world, especially Asia. Here in this slide, we are presenting the six important topics of our situation.
The first three are three messages that we think that will improve our business in the coming years. The last three are three messages remarking our strategy. We have to consider that in the next future, the supply chain is not going to be the same, you know. All the disruptions and all those things that have happened in the traditional commercial flows are changing because of trade measures, but also because, you know, everybody, all the purchasing managers prefer to diversify the sources of supply because you cannot trust only in a supplier that is too far away from your factory, especially if they are in the Far East or in China. This will bring some more material back to Europe.
Imports will be less attractive, and we think that it is not the end of the globalization process, but we are living a kind of regionalization, no. Or diversification in this, in this global economy. That will improve the consumption in our main markets because it is, it's not only that our traditional customers are, we think that they will buy more from the local suppliers, but also that if that happen in the rest of the industry, in the rest of the economy, you know, the more industries will come back to Europe and United States, and that will increase the consumption of stainless steel. Of course, circular economy, you know, is, and ESG matters that are also changing and contributing for a more regional market, no.
Especially, because we have a differentiation compared with other producers because of our products, our way of... and production process and because Scope 3, the emissions of the vessels in... the emissions in origin of the raw materials and the emissions in the way to Europe, no, will increase or will make this material less attractive for companies that want to fulfill the ESG requirements. In the last, in the point number four is important because if we are getting these results, it's not only because the good situation of the market, because prices were good, but not the best in our history, no? Production was not the best in our history.
All the cost-cutting exercises, all the efficiency and programs that we have been applying in the last years are making us more competitive. I am speaking about the Excellence 360 and this kind of programs that are making us more competitive and our margins are higher than ever. This is a success of the people of Acerinox, no? They have been working very hard and I think they'll have to thank all the Acerinox team, you know, for this special effort. Of course, we also are proud to speak about the health of the company and the strong balance sheet. Miguel will deepen on this. Another point that I think we are doing well in the last year is the capital allocation.
The balance between our debt, our shareholders remuneration and our CapEx that are trying to find the good opportunities and in this case we have found it in the United States again. Some numbers for the year. Record sales, EUR 8.7 billion. It's 30% more than last year. That was not a record in sales, but another good year. We have a new record in EBITDA, +29% compared to last year. Plus a good cash flow generation. Very good productivity, very good ROCE and added value, giving added value to our products. Succeeding in the integration of VDM that in the third year inside the Acerinox Group have been able to reach a new production record and a new EBITDA record.
It's good because when we presented VDM, we spoke about the synergies. Beyond the synergies, something that was trying to explain how VDM will help Acerinox Group to enter in new customers, to enter in new niches of the market and to enter in high added value products. This is what we are doing today, no? Only three years we have integrated 122 new customers in the group due to this integration and due to the widest portfolio of products that we are offering in the world market. I already spoke about the excellence in our operations and about the excellence in capital allocation, and we are proud to say that, you know, the new investment, the $244 million CapEx in United States, it's something very special.
It's state-of-the-art. It's also the results of a very hard work and also an effect of digitalization, no? We are increasing our capacity in the melting shop and in the hot mill, it's because we are applying, you know, digital tools to increase our productivity and that will give us an extra capacity of around 15%-20% that will give us room to put another cold rolling mill in the plant. Of course, we are increasing shareholders' returns. We will propose to the shareholder meeting to increase to EUR 0.6 per share, which is at 20% more than the traditional EUR 0.5. I'm proud to speak about our ESG targets, especially about the platinum award that we got in EcoVadis, something remarkable, and the 28% reduction in safety performance.
To speak about the circular economy and ESG, I will give the floor to our COO.
Thank you, Bernardo. Good morning, everyone. Acerinox continues to be a strong contributor to the circular economy in everything we do. As you remember, we had set six sustainability targets for 2030 connected with our 360 Positive Impact plan that you all know. In 2022, many of our KPIs have been affected by our reduced production. Regarding our impact in the circular economy and our sustainable products, we have managed to valorize more than 79% of the waste we generate in all our operations. We continue to support the fight against climate change through our reduction in greenhouse gases in all our operations. Reduction of water consumption with a more efficient energy consumption in all our processes also a focus for our factories.
This last indicator is the one that has been impacted the most when we talk about the reduction in our operations and production in 2022, as Bernardo mentioned. We remain committed to achieve, and in some cases overachieve, our 2030 targets that we have set for the company. Thanks to the effort of all our teams and suppliers, EcoVadis has recognized us with the 2022 Platinum Award , as was mentioned before. Regarding our teams, culture and diversity and safety, our teams globally have done an outstanding job in 2022 by reducing by 28% our lost time incident rate, our safety indicator.
We all know that safety remains our number one priority in all what we do in the company. In regards to diversity, we are promoting diversity in the broader sense of the word across all the world, and we consider Acerinox probably the most diverse company in the industry as per today. If we move to how was the year 2022? It was a complex year all in all. We had tailwinds in the first half of the year and supported by a very positive behavior of the market. The second half of the year continued with an acceptable consumer activity, but affected by the high inventory levels that our customers and the distribution had in all the markets. Not to forget the very difficult year from an operations perspective.
We had floodings in Germany and South Africa, strikes in Spain, supply chain disruptions and many other things happening in all the markets. By region, our main market, as you know, is North America. The end consumer market remained strong through the first half of the year. In many more of the sectors that we supply, the activity was stable and also the prices in the market. In the case of Europe, the prime demand was in line with the 2021. Inventories were high, as we know. The year end up with the lowest level of imports that we had in the year, that we'll talk in the Q4 details.
Evidently the biggest impact that we had in operations in Europe was connected to the energy cost, both electricity and gas, connected to the war in Ukraine that was affecting all Europe. The rest of the world was mainly affected by the lockdown in China and the fact that China didn't recover from that lockdown as expected and had the weaker demand through the year that affected the local market in Asia, but as well the rest of the world. On another hand, our high performance alloys division had a very strong market through the year, and the order book was very strong as well. Miguel.
Thank you, Hans. The title of the slide, as you can appreciate, is Record Results in a Challenging Year. Hans has talked about the challenges. Fortunately, my part should be the records, which is absolutely pleasant. The records in year 2022 appear to be like sports scorecards with certain records we must achieve in most of the magnitudes, historical records, especially in those related to finance. We are going to go through most of them. First of all, even though the melting production was reduced, we realize the figure of sales achieved in 2022. We are talking about almost EUR 8.7 billion. This is a sales figure that at the end creates a certain vertigo. 8,700 is a magic figure.
Probably is the same vertigo we can compare with Tenzing or Hillary when reaching the Everest, which almost is that altitude, 8,800. We are in the middle of K2 and Everest. No doubt is a magic figure. It's a magic figure for us. We keep going down. We realize an EBITDA figure of EUR 1.3 billion. Those of you who attended this presentation last year may keep on mind how proud we are, and especially managers of our generation always have the reference figure and the magic figure of the magic EBITDA achieved in 2006. At that time, the company was led by Mr. Victoriano Muñoz.
We are proud that today he is among us attending this presentation and always has been the reference figure that we thought that was unbeatable. Last year, we were able to beat it slightly, that nine record figure of 958 last year, we obtained 989. What is absolutely remarkable is that just 12 months we have overpassed and beat in a 29% the magic figure obtained last year. We now realize a new reference, which is this magic figure EBITDA of EUR 1,276 million. We go down through the P&L, and we enter in the EBIT figures. We shall talk later on. Obviously, the EBIT figure is affected by some strong impairment we have done in Bahru that we shall talk later in other slide.
Any case, what is also remarkable in this record scorecard is that we have been also recording EBIT with and without the handicap. The handicap can be considered in this case, that is the impairment of Bahru , EUR 204 million that we have made at the year-end. Even though, obviously, after the handicap we have been with this, EUR 876 million of EBITDA report, we have been in record. Obviously, if were not the case, we should have even been above the billion Euros. This is also something to clearly put on value as well as the result before taxes and minorities.
When you analyze the EBIT figure of EUR 876, and you go to the result before taxes of EUR 831, you realize that at the end, interest and finance expenses is not a headache in this company. It's very close the figure before taxes than the EBIT figure. We are not the player reporting a lower debt in this business, by far we are the one experiencing less finance charge, which also is a good demonstration of the health of our financial structure. In addition, the figure of result after taxes and minorities has not been a record, just slightly below the one of the previous year. We shall keep this as a reference.
Also, I want to remark the figure of the net financial debt, which is EUR 440 million. We need to go back until 2002 for finding such a low level of debt. The comparison of 2002, we must put on context, that was the time in which Acerinox Group convey from being a fully integrated plant to being a three fully integrated plants. In year 2002, we integrate NAS with a melting shop, and also we acquired Columbus Stainless. We have gone to levels of debt, running three plants, running three working capitals, running CapEx for keeping three plants at the state-of-the-art, and at the end, we are back to that levels and that figures of debt. I think that also this is something to keep in mind.
At the end, all these records have been achieved, even though being as prudent as we always are. You know that we are aggressive commercially, we are aggressive industrially, but we are very, very conservative financially. At the year-end, we shall explain later on, we have made inventories adjustments due to the high uncertainties and volatilities that are in our world, and we have made inventories adjustments of EUR 98 million. In addition, there is an additional record, which is the shareholder return. We have distributed to our shareholders EUR 336 million in this year. This means 14% of market cap. This means a payout on this exceptional profit that we have had this year of a 60% payout ratio. I think this is something also that we must put on value.
If we go to the Q4 results, evidently the fourth quarter, in our high-performance alloy had a very strong performance despite the typical seasonality. We know that always, the fourth quarter is affected by Christmas, Thanksgiving, and all those activities in all the regions around the world. In our stainless steel division, we were affected by a strong destocking process by the distributors in all markets, and we continue to be impacted by the inflation costs and the high inflation costs that we had around the world, mainly Europe. The North American market saw a significant drop of more than 40% in the imports, which is good news for all of us, and the stock started to rebalance through the quarter.
That means, and this continues to do so in the first quarter, as we will talk later on about the projection for the first quarter. In Europe, the apparent demand decrease was weak through the quarter. Prices were impacted by the market conditions of that low demand. On a positive note, imports dropped as well, more than 50% quarter-over-quarter, which again, is good news for all of us when we talk about the market situation and coming material from outside of Europe. Miguel.
Yeah, in these record results, at the end, we now give some details of the fourth quarter. This is a never boring sector, we are presenting a record year and at the end we are also showing how has been the correction that we have experienced in the year-end. We must precise at that time that after eight quarters of consecutive growth, the third and the fourth quarter of 2022, we have experienced a correction. After these corrections, and due to the circumstances that we have mentioned, we have obtained an EBITDA of EUR 90 million. If you go back to some years ago, you may remember in the years 19 and in the year 20, our quarterly EBITDA was very, very stable in range of EUR 90 million.
We have achieved EUR 90 million in this weak fourth quarter. Two facts. One, this is as a consequence of this inventory adjustment of EUR 98 million. In addition, in addition to this, what definitely we must keep on mind is that as we have stated in the outlook and our CEO shall explain later on, we are already stating that this is going to be the low and that consequently we expect a substantial higher profitability in the first quarter. We have obtained the low correction of the cycle. The low correction in this time is equivalent, which was the average EBITDA that we were experiencing three and four years ago. I think it's a good also demonstration of the increase in the efficiency achieved by the group in the last years. We have finally obtained these figures.
The EBITDA has been affected by these circumstances. We shall comment them later on. In addition, it's relevant also to precise how we handle this business. In the periods of the lower profitability, we have made a strong effort and a strong discipline among the whole organization, and we have obtained a cash flow of EUR 517 million in the fourth quarter. Low quarter of profit, extremely high cash flow making in the fourth quarter, driven by a working capital reduction of EUR 442 million. This is what we have putting all our efforts in the fourth quarter. This working capital reduction has been driven by a reduction in inventories in the fourth quarter of EUR 484 million.
At the end, this is something that we must put on value. We know our business, we understand our business. When the profits come down, when there are circumstances affecting the profitability, we put all our efforts then in creating cash, in generating cash of the business. If we go and now we try to explain separately both the Stainless Steel division and the High Performance Alloys. First of all, talking about the pure stainless steel, has been also record in all the magnitudes. The net sales purely of stainless of EUR 7.5 billion is a new record as the EBITDA on stainless of EUR 1,151 .
In the stainless world, those of you who follow the industry and follow all the other players, those results are the best in class. When I talk about best in class, I mean best in class in absolute figures, but also best in class in margins. In this regard, we think there are facts to keep on mind and feeling proud about as we are feeling. What we have experienced in the obviously negative part of the profitability has been affecting the fourth quarter and the full year. Because of that, you can see in the diagram that is more or less included in both because are such a big figures that have its relevance in the fourth quarter obviously, but also in the year. Let's talk about them.
There are two facts that have been registered at the year-end that have had a big impact. One is the inventory adjustment. In the case of the stainless steel, we have made an inventory adjustment of EUR 67 million. As Hans mentioned previously, our main market, you know that more than anything, we are North Americans. The North American market is keeping a strong health. We are seeing a strong weakness in the European market and consequently in the stainless, mostly in Europe, we have considered that we should make this downward in inventory of EUR 67 million. Why? Because the prices in Europe still are well depressed. We have seen in the year 2022 the maximum base prices historically achieved and also the minimum in the second half of the year. Still the prices are low.
Still the inventories are high. You normally keep in mind that the first quarter in stainless always is a healthy period. We normally are running full. This time we are seeing that still the weakness remains in Europe. Probably we shall need to wait until the second quarter for a normalization of activity. Consequently there are strong reasons that justify that we have put our inventory in net realizable value and we have made such impairment on our inventories of EUR 67 million. This has been per one side. The other side, at the end of the year we have also reviewed our projections on Bahru Stainless. We normally talk a lot about Bahru Stainless. You know it's our reroller in Malaysia. What has created for us to review our production is obviously related to several facts.
Still the situation and the demand in Asia is weak. It has still been affected by several confinations and the policies taken mostly in China. At the same time that the players in the area were keeping high levels of production and a very massive putting on the market mostly in China and Indonesia of additional productions and consequently there is a very strong aggressiveness in prices in the area. As a consequence of that, reviewing our projections for year 2021, for year 2022, we have been profitable in Bahru. We have been having positive EBITDA, but concentrating in the niche of products that made us to be profitable.
If we now understand on this basis that this may take for long, it is clear that we shall not be in possibility of running full the plants and just keeping such a low volume of production. With the squeeze on margins that we may have, needing to buy locally, semi-products for transforming in cold roll, it appeared that it was the most adequate to make a big exercise of prudency and consequently we have modified our projections for the next years. As a consequence of that, we have done an impairment of value of its assets of EUR 200 million.
This has been done at the year-end and as I say, it's mostly as a consequence of the uncertainties on the market, the squeeze in margins and the assumptions that maybe we shall not be in position of running the plant full and just keeping part of its production capabilities. This has been affecting the stainless. Another fact, when we moved to high performance alloys which was our strong bet and our diversification that we entered in moving through the high performance alloys in year 2020. We must be also extremely proud about the achievements that we have experienced in the alloys through our subsidiary VDM. It has been a record year. We have obtained record year in production, record year in sales with EUR 1.3 billion, but also record year in EBITDA.
You may remember when we explained the acquisition of VDM, we always stated the figure of 2019 has been the historical peak, was EUR 97 million. We always stated our figures, our projections are not for keeping that as a reference and we always talk that more or less the contribution we were waiting for VDM was around EUR 84 million-EUR 85 million per year. In the third year of VDM taking part of the Acerinox Group and with two years of COVID, we have been able to achieve this figure of EUR 125 million which is absolutely remarkable for the contribution of the high performance alloy division. In addition to this, in this, in this very strong year of 2022, we have obtained more synergies than expected.
We have more or less obtained 52% synergies than the one we were expected. We have achieved EUR 25 million synergies for the group through the high performance alloys. We have integrated 122 new customers, so we are in no doubt in VDM going above what we were expecting the, in the past. If we go then to the, to the fourth quarter figure, also, we have made an exercise of prudency in the fourth quarter figure in terms of the net realizable value of our inventories. In the case of VDM, the circumstances are different than in the case of the stainless. The high performance alloys is keeping a good track. Our order book is full. The market has recovered in most of this sector. You have all the explanations in the results presentation. This is clear.
In addition, there are several facts that may affect the cost structure of VDM, coming on to the supply, the orders that actually are on place with the inventories that we have actually on stock for fulfilling that inventories. Consequently, with all the facts that were in the table, keep in mind that the nickel has gone up in the fourth quarter from levels of EUR 20,000 from levels of EUR 30,000. The energy also is still an uncertainty, and VDM managed exceedingly well all the energy procurements for 2022 with some hedging contracts that they had in advance. The gas and electricity have not been an issue, or strong painful for 2022, but probably for 2023 it shall have those effects.
There are some additional extra costs that we have considered that putting on them, we should adjust the net realizable value. As a consequence of that, in this record year, we have made another exercise of prudency, and we have made at the year-end these inventory adjustments of EUR 31 million. At the end, with this, we feel absolutely comfortable for the coming quarters in the high-performance alloys division. If we go to the slide showing the cash generation, it's also several facts to be proud about. In regard of the year, we have talking about the EBITDA figure. When we took the picture of the whole year, obviously, our business is absolutely dependent on the working capital. What we need to have is the strength enough for accompanying the good market cycle.
We have invested in working capital in this year for being in position for filling the market and keeping these results. This has, on a yearly basis, meant an increase in working capital of EUR 479 million. At the end, this has been one of the main usages of our capital allocated in the year. We also must talk about taxes and this is something to talk about. You see in the picture EUR 243 million is taxes, financials, and others, but most of it, financials, as we explained before, is not relevant in our case or financial expenses. We have paid EUR 232 million of taxes in 2022. This is also being sustainable.
At the end, being sustainable is that when we are having high profits, obviously we are contributing in the communities where we are based. At the end, part of the strong allocation of the cash generation in this year has been through taxes as a consequence of the huge profits that we have been achieving. In addition, we have increased again our CapEx. We are maintaining our policy of keeping robust CapEx for keeping our plants at the state-of-the-art. With this, we have generate a free cash flow in the year of EUR 419 million. The next column is, or the next bar is also absolutely remarkable, which is the retribution to shareholders through dividend and buyback. We have invested in our shareholders EUR 336 million in 2022.
This is 2.3x what we made last year. This again, I insist is 14% of the market cap of the company and a payout of 60% in this year. This is something also to put on value. Has been also commented previously by Bernardo that we have announced to increase our dividend for the coming years. In addition to this, obviously, still we have a space for reducing our net debt. We have some conversion differences, and at the end, this obviously is a consequence of our financial strategy. You know, our financial strategy means having a strong cash position in the States.
As a consequence of this, in a yearly view, the dollar has been appreciated, and consequently, this has also contribute partially to this final figure of a net debt decrease in this record year of EUR 138 million. Just going through the fourth quarter, we have talked about the strong cash generation that we have achieved, but I want to remark again, especially in the case of working capital, EUR 442, driven by a reduction in inventories of EUR 488. This is probably the most relevant issue to comment. At the end has been a strong net debt decrease in the fourth quarter. Quarter after quarter, in the first three quarters of the year, we were increasing working capital and also the debt was obviously reflecting that.
In the fourth quarter, the exercise has meant this strong reduction. The figure which appears of conversion difference is another, this EUR 117 million, this is not cash out. This is purely the effect that in the fourth quarter, a part of all this volatility we have seen in other components, we also have experienced the volatility of the dollar. Just in the fourth quarter, even though in the year the dollar has appreciated compared with ending of 2021. In the fourth quarter, dollar moved from levels of 0.97 to 1.86. This, with the strong cash we have in the States, created that we have this accounting effect when moving this to Euro of EUR 117 million.
Even though that, the net debt figure that we are reporting has been reducing in the quarter EUR 323.
Just some tips to finish with the presentation and enter in the Q&A. We are in a cyclical business. We are doing our best to reduce the size of the cycles by including the HPA division that is also cyclical, but with a different cycle in the time. We are also trying to increase the average of the cycle, but still we are in a cyclical business. What does it mean? Is that still we haven't celebrated the good results of the year and we are back again trying to manage the lowest part in the destocking period. This is what we have seen in the second half of the year.
There is, first of all, the destocking period started in July last year and is still, is still there. Second is that we are, as Miguel mentioned, is we are conservative in our numbers and we try to predict, you know, the bad situation that is destocking period and we made the provisions and the impairment that we needed. Three, that we have a success story with VDM that is contributing to 23% of the EBITDA in Q4. As we are compensating the lowest part of the stainless steel cycle, that we are now again intensifying. We never stop our efficiency programs, but we are intensifying these programs again.
Five, that we keep a very good health in the company so that give us flexibility for the future and also, we can be safe, you know, in the worst scenarios that we don't expect, by the way. Six is that we are keeping our fixed strategy. Is capital allocation, robust CapEx, shareholders remunerations, you know, always with a healthy financial structure. That the situation, being or starting the downturn of the cycle is not that bad. I mean, as we still keep a very good order book in HPA, in the alloys divisions. I think we are very optimistic because there's a lot of projects coming in the business. We have a very strong order book.
Our major market is United States and I think is the place to be today. Now we are investing there at the right time. All the programs that they are developing now, they will contribute to the consumption of stainless steel. Stainless steel, American market in general is doing well. We are very happy to be there. It was a great decision to enter United States, and we are the market leader very clearly. The situation, let us say, you know, that our EBITDA in quarter one is going to be clearly higher than in quarter two. We never give the numbers.
Sorry?
The fourth quarter.
Sorry, than the fourth quarter. We never give numbers. We never make a forecast. We can say that the situation is improving. It's starting to improve. We understand that the stock level will come back to normal at the beginning or mid Q2. The situation is going to be good and our Q1 is going to be clearly higher than Q4 last year. That's all.
Thank you, Bernardo, Hans, and Miguel for the presentation. Let's move now to the Q&A session. We'll take first your questions here in the room and then let's and then we will move for the conference call. Here, please.
Francisco Riquel from Alantra. Thank you for the presentation. First question is, you can update on the destocking cycle. Previously we're guiding for the, for it to be completed in the first quarter, now extending it to the, to the second quarter. You can comment on the level of stocks in the main markets, imports, how they started in 2023, and supply demand of overall in general. In particular, also in the U.S. business.
Mm-hmm.
You have managed to preserve a good level of base prices during the downturn.
Mm-hmm.
I wonder if you think that these good levels will be sustainable when the restocking starts. In Europe, I understand that most of the write-downs are allocated to the European division. You would be suffering more than the European peers. If you can explain this gap, if you are suffering more with the cost inflation, energy, and with the production cuts, if you are giving up some market share, or not. I have a second question in terms of capital allocation for 2023. Working capital, you have released almost half of what you had in the previous quarter.
Do you believe that there is room to reverse more or given that you will have to restock again? Working capital CapEx, how much will you accommodate in total and for the U.S. investment that you have announced? Your views about buybacks at this point of the year. Thank you.
Thank you, Francisco. United States. The situation in United States is better than in the European market. On the market is more organized. The expectations are better. You know, the general consumption is strong. Is strong in construction, is strong in the automotive industry again. In general, consumption is good. We are managing to keep the prices under control now that the imports are very low, you know. Due to the uncertainty and to the necessity to drop stocks in the distributors, imports are not attractive for them. If they order some materials today, they will arrive in United States in five months.
We are back in the situation of this lack of visibility or uncertainty, you know, that makes less attractive imports because of this time, no? It's safer to buy in United States. It is probable, you know, that in the close future, once the stocks enter in a normal level, that our customers will start comparing prices in United States with the rest of the world. Still, you know, as we can offer very short delivery times, no, we are reducing the risk in this supply. Most of them prefer to buy locally. Even if we have to make some price cuts, will not be dramatic, we think.
In the case of Europe, yes, the situation is worse in Spain than in other areas, and this is only due to one thing. That is the energy cost. I think that is affecting us more than to our competitors. It is difficult to speak about the electricity prices or gas prices because every country has their own systems. I think that we have to insist that we need to have a European energy market. I think this is very important because for a European problem, that is the lack of gas or is the energy prices, we are adopting local solutions and this is very, very dangerous for Europe, no?
I think that we need to do something and Spain especially have to do something to reduce the energy cost because all the electro and gas-intensive industry will have no future in this country. This is very important, no? I think the government is aware of this, and they are working on this, but still, you know, the situation is worse in Spain than in other areas. In terms of market share, I think we, all the European players, we are doing more or less the same, no?
With different solutions and with different results, but we are very responsible of taking care of our markets and we are trying to reduce production at the level of the real consumption. I think this is what we are doing, no? More or less, we are doing all the same. We are losing, or we have lost market share last year compared to imports or imports have been winning this market share. I think that they reached an average of 35%, last year, above the traditional 25% or that was in the previous year. Imports took advantage of this situation, but the European players more or less are the same.
Our market share compared to our peers here is more or less the same. CapEx for next year. You have to think that we need CapEx to keep our factories updated. There's a kind of maintenance CapEx, and we have CapEx in ESG, we have CapEx in digitalization. And we have an investment in the United States that is $244 million U.S. dollars. You know that the maturity time of our investments is normally between three and four years, no? If you split the 244 in four years and you add it to a normal CapEx of the group, more or less you will have the level of CapEx in 2023. Miguel, do you want to add something or?
Regarding working capital, in principle, it should not be a big raise of working capital in the first quarter. Let's see more or less which is the evolution. As it is, we have seen obviously in January, which is the only month that we can talk, the figure of sales in America is going up and this is reflecting. Still, as we are keeping low levels of production in other plants, we are obviously not having further consequences either in inventories or more or less in suppliers. We don't expect that there shall be a big raise in working capital for the first quarter.
Not in stainless, maybe partially in alloys as much as keep its growth, but we don't think it shall be substantial.
Sorry, and regarding the buyback, this is something that still is not defined. What was agreed, it was to increase the dividend and having a flexible policy of deciding buyback when needed. We have achieved an 88% acquisition of own shares in the year 2022. With this, we have neutralized the four consecutive years of scrip that we have in during the financial crisis in Europe. Up to now, what we have not is an specific plan. It shall depend on the profitability and the cash evolution of the company as well, obviously, on the share price of Acerinox. This is. We are having a flexible policy, but not a clear commitment yet.
Any other question here in the room?
Thank you. Good morning. Iñigo Egusquiza from Kepler Cheuvreux . Sorry to come back on the CapEx, Bernardo and Miguel. The normalized CapEx should be similar to EUR 125 that we have seen in 2022, and on top of that, we include the U.S. expansion plan, the $244 million in four years. This is the first question. The second question on Bahru, after the impairment you have done of more than EUR 200 million, could you please update us on the different alternatives if there is something on the table? You mentioned during last year that you were analyzing different alternatives, potential joint ventures or full disposal. I don't know if you can update us. Thank you.
Thank you, Iñigo. No, a normal CapEx in Acerinox can be at the level of EUR 140 million per year, more or less. You know, if you add something that we will include in ESG, because, so we have some CO2 savings programs and also more or less the EUR 60 million that we can put per year in North American Stainless will be at the level of EUR 220 million. That is a reasonable level. Regarding Bahru, of course, we are looking for all the alternatives and we are still keeping this in mind. We are looking alternative. We are looking joint venture. We are looking for solutions and the way to improve our business there. There's nothing new.
Good morning. I'm Gregor from Deutsche. Congratulations on the figures 2022 and on the many highlights you've presented. My question would be, what are the lessons learned from VDM acquisition and where is your appetite in terms of inorganic growth? I know it's a tricky one, but.
Mm-hmm.
if you can say anything. Thank you.
Thank you. It's a very good one. I mean, lessons learned that is good. There's a world outside the stainless steel world, we want to explore it. I think this is what we have learned. What happened is that there's not many companies, you know, the same like VDM. VDM has been perfect for us, you know. This matches perfectly. You know, it's all that we wanted, we are now, you know, in three years, this is a success story. It's a new record. Integration is going really well. They are part of the Group, totally integrated today. We are number one in the HPA business in the world. I think this is something that something unique, something very difficult to repeat.
Of course, we are looking for alternatives. In our financial structure, as we mentioned, we can be very flexible. The debt is under control. Now we are at the level of 0.35x EBITDA. This is very good. That means that we can keep the level of CapEx, we can keep the level of debt, we can keep the level of shareholders' return, and if we have an opportunity, we can go for it. No? I think that. We are continually exploring, but it's difficult to find something that can be integrated as well as VDM in the group. We will not forget it.
Any other question here? Okay, let's move to the conference call, please.
Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, please press star followed by one. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. Our first question today comes from the line of Sandeep Peety from Morgan Stanley. Please go ahead. Your line is now open.
Hey. Hi, good morning. I have a couple of questions. Firstly, can you help us understand different moving parts of 1Q guidance of clearly better versus 4Q levels of EUR 90 million, with focus on expectations on inventory revaluations and volumes?
Okay. Well, we express clearly gives an indication that by far the worst is over. The effect of clearly also should be put in context that in this, with the several uncertainties still in the market, we are talking about geopolitical conflict in Europe, we are talking about energy. Let's see when comes the normalization, the reactivation of the market, and consequently, if it's necessary to proceed again or not with inventory adjustments in March. We must be prudent because still there is several uncertainties. We are conservative. We are more than comfortable now with the inventories adjustments. What may take place at the end of the quarter for the orders coming in the second quarter is still uncertain.
We prefer to talk about clearly better. We think it's a proper message. You appreciate the strong inventory adjustment we have done, so this provides us a strong comfort. What may be the considerations taking for the market in, for the second quarter still is unknown.
Sandeep, on the second part of your question regarding volumes, what we expect is that the Q1 will be slightly better than what we had in the Q4 in the stainless steel business. We see the markets in North America and Europe being positive versus what we had seen in the Q4.
Thank you. Our next question today comes from the line of Krishan Agarwal from Citigroup. Please go ahead. Your line is now open.
Hi, Bernardo, and hi, Miguel. Very detailed presentation. Thanks a lot for that. If I can now push a little bit more on the Q1, the guidance. Basic premise of the Q1 guidance is that the EUR 19 million EBITDA for Q4, add back EUR 98 million from the inventory, you reach to EUR 190 million, and then a little bit of a, you know, volume increase. Energy cost and the underlying weakness in, flowing from the Q4. We are looking something, you know, EUR 150 million plus. Would that be a kind of a wild assumption or you are comfortable with that for Q1?
Thank you, Krishnan. No, I think it's What we said it is clearly higher. Miguel, as Miguel explained, that we can generate an EBITDA that can be clearly better than quarter four. We have to be prudent, we have to see how is the situation at the end of the first quarters, then we will establish again our NRV provisions. That will depend on the situation. The situation is improving, we will be able to release some of the provisions that we made. If not, we will keep it. You know, we are always conservative. I don't know if I answered your question.
Medium-term question on VDM. I remember, I mean, 12 months back, you were talking about, you know, EUR 7 million per month, kind of a normalized rate for VDM EBITDA, and then on top of that, synergies. 2022 clearly has been much higher than those numbers. Should we believe that EUR 100 million-plus EBITDA for VDM is kind of a normalized number going forward in 2023 onwards?
Okay. Don't put the target too high. No. You know, we bought a company of around EUR 80 million per year and we got 120 something, you know. We are very happy with this. That will depend on the situation, of course. You know, in this market, we have a very good reputation and we can manage the cycles, we can manage the prices, and we have very loyal customers, no? Can we keep it or not? That was a new record in production. Can we keep it this year? We will try, but that will depend on the market conditions for sure, no? As...
What is clear is that, depending in normal conditions with the normal energy price, we can be optimistic, no? Maybe not, EUR 125 cannot be the normalized EBITDA for the company, but we can be optimistic.
Thank you. The next question today comes from the line of Tristan Gresser from BNP Paribas Exane. Please go ahead. Your line is now open.
Yes. Hi, and thank you for taking my questions. The first one may be also, sorry, on the Q1 guidance. I mean, the volumes you had in Q4 were probably the lowest on melting shop production since the global financial crisis. You talk about a slight improvement in volumes, potentially some inventory adjustment that still could take place in March. You know, what is driving this cautiousness in your view on what's taking place in the market in Europe and in the U.S.? Also maybe more specifically, did you expect to hit the double-digit margin at the group level in Q1?
Regarding to volumes of production and sales, I think, you know, we started the stocking period in July last year, as I said, and it was very strong at the end of the year. This is normal. All the companies wants to reach the end of the year at the lowest level of debt, no. We have to be nice in the photo. You know, we have a lot of bankers here that they know perfectly, you know, that we have to be nice at the photo, and we all try to reduce, you know, the working capital at the end of the year. This is what happened. Now, the situation is better and normally, Q1 is always a period of restocking again.
In this case, it cannot be possible because still the distributors are trying to adapt inventories.
The situation is not as bad or is not as conservative as it was in Q4. We expect a higher volume of production. Miguel, do you want to add something regarding the margins?
Well, yeah. Basically, I think we have talking the. We clearly have stated there's going to be improvements in the first quarter. We have the uncertainties. When we go to Bloomberg and we check more or less which is the consensus of the analyst, it is understood that 2023 is going to be a much, much more difficult year, purely the consensus of Bloomberg is talking about EUR 660 million for the year. This means divided in four quarters, the average should be 160. At the end, I think that with the, with the guidance that we are giving and keeping in mind more or less, which is the consensus of what be contemplated on the circumstance that we are having, I think that the. There are facts for keeping in control.
The situation in the States remains very healthy. It has been stated. The uncertainties are more in Europe, but more than 50% of our sales is in the States. So consequently, our margin in the first quarter it should be substantially higher than that one of the fourth one, no doubt.
Thank you. The next question today comes from the line of Tom Zhang from Barclays. Please go ahead. Your line is now open.
Hi. Morning, gentlemen. Thanks for taking our questions. Just two from me, please. We've talked quite a lot about the U.S. and Europe already. Maybe you could just comment a bit on Columbus, utilization rates and sort of the demand environment in South Africa. I know normally you switch between carbon and stainless depending on how the market is developing, so maybe just thoughts there. And then just a clarification on Bahru. The impairment, you mentioned it was taken predominantly because of the more difficult operating environment. Can you just confirm there were no changes in, for example, discount rates, in the sort of accounting assumptions, and it was really just all driven by a more difficult environment in Asia? Thanks.
Tom, I can take the first part of your question in regards to the situation in Columbus in South Africa. I think we managed to get Columbus to probably the most flexible plant in the world as per today. With the production of our traditional stainless steel, both for the local market and for exports into the rest of the world. Columbus has managed to get also a stable production in mild steel, in carbon steel for very specific applications in the local market, which has been driven successful at applications as per today. That helps driving flexibility, allowing us to drive production depending on how we see the stainless steel and the mild steel production.
The local business is restarting in South Africa as well for stainless steel, so we are positive about the situation with Columbus for the first quarter. We are making trials now to start producing nickel alloys in South Africa. That will be the most flexible plant in the world, no? The only plant in the world that can produce carbon steel, stainless steel and nickel alloys.
Regarding Bahru, what we have done is as we explained before, is extreme the conservatism in the projections. In projections and in the previous year, we were assuming that gradually Bahru should run almost full. Now what we have considered is an scenario that we keep Bahru running with a niche production for specific players, but not developing a whole capacity utilization of its asset. As a consequence of that, in the actual circumstances, with the low margins in the area, it has appeared that this was the proper impairment to do and this has been the exercise. As I said before, we have been profitable, positive EBITDA 2021, positive EBITDA 2022.
Assuming that, maybe it's more prudent to consider that we shall be just partially running the plant and with the margins very squeezed according to the local suppliers and the weak demand, it appeared to be absolutely reasonable to make such impairment. With this more or less, we are absolutely comfort on what may come for the next future for Bahru Stainless.
Thank you. The next question today comes from the line of Patrick Mann from Bank of America. Please go ahead. Your line is now open.
Good day. Thanks very much for the opportunity. I just wanted to ask maybe a clarification on Bahru. After the impairment, what's the carrying value of that plant? Maybe just going back to volumes, because obviously last year volumes were much lower, year-on-year and all back-end loaded. How should we think about the group volumes from Acerinox going forward? It doesn't sound like you're expecting a very sharp bounce back sort of now, but presumably the second half will be better. We also have the capacity increase in North America. Maybe if you can update us on what's your long-term total volume expectations in stainless and when do you see yourselves getting there? Thank you.
Patrick, I can take your second question, and I let Miguel talk about the first one later. In 2022 you have to remember that we had some specific maintenance stoppages around the world in some of the factories, mainly here in Spain, but it happened in some of the factories and were affected by the.
As well by the lower volumes in the second half of the year. That's what we think, and we see the first quarter, and that's the guidance we give for the first quarter, that those volumes going up. We don't expect this year, going forward into the year, those significant maintenance activities going on this year. They were one-offs happening last year. Also, evidently, the investment for North American Stainless on the long term is not gonna be available this year. It will take us, Bernardo said, several years to get that production available for the local market.
After all this impairment, as you shall appreciate in the financial statements, you can check it's in the webpage. The current value of Bahru after the impairment should be in the range of EUR 135 million.
Thank you. The next question today comes from the line of Bastian Synagowitz from Deutsche Bank. Please go ahead. Your line is now open.
Yes. Good morning all, and thanks for taking my question. My first one is actually another follow-up on guidance. Sorry to come back for it, but I'm still not 100% clear. I mean, there was a couple of moving parts, and you mentioned potential another impairment depending on how the market goes. We obviously don't really know. I guess it's probably easiest to just leave that aside, because we really don't know how metal prices will develop. If we just look at the balance of volumes, which will be better and then probably ASPs, which will still decline.
If you just take a look at that component, if you look at into your order book, would you say EUR 150 million or so or better, does actually make sense from today's point of view, given that the underlying Q4 performance was obviously close to EUR 200 million EBITDA, which is pretty strong in the context of the very weak volumes which you've had. Would you be comfortable when we X out the potential impairment impact, with EUR 150+?
It's very embarrassing, Bastian, when we are talking about clearly better, you want just to ring the exact figure. There are several facts. Your figure. I don't feel uncomfortable with your figure. I'm not making any commitment or on any further explanation, but it could be. I think it's rational. you know, the.
We never give the, the forecast. We never give our prediction.
Absolutely. Absolutely. I just wanted to basically see whether like in terms of the moving parts, the broad bandwidth, direction obviously makes sense and totally appreciate that there's not no precise guidance. If otherwise you obviously would have written it into the release. No, thanks for the clarification. My second question is another follow-up on the Malaysian business. Again, I'm trying to understand the situation. In October, you obviously said Bahru was performing well, it was profitable. I guess the impairment at least stands a little bit in contrast to that, although clearly, I think that's also a function of your conservative accounting approach, really with clearing the deck here on that business.
Could you maybe let us know what the cash flow profile for Bahru looked like last year and maybe also in 2021? I guess we can't see it in your disclosure, but has Bahru been cash flow positive in both those years?
Okay. Thank you, Bastian. Finishing with the guidance, I think that we can say that what we have already said and know that the volumes are going to be better. This is something that you have to understand. Volumes will be better because we have been cutting and electing our inventories during the last part of the year. Margins are going to be better because we have been digesting the excess of costs that we had in our inventory. That is clear. Regarding Malaysia, I think that we are very proud of the performance of our Malaysian plant. What happened is that the situation in the area is very competitive, and we are competing there with the giant of the world that is Tsingshan, that is based in Indonesia.
There's some. We don't know if there will be more projects in the area or not. We are not saying that we will have worse results. What we are saying is that the projections of Bahru Stainless will not be as positive as we thought at the beginning. We'll be positive. We have a positive projection, you know, not as good as we could think before. That was the reason that we have reviewed the value of the company and we went to this impairment that we think that is very conservative. And I think that we should be, we must be conservative.
Thank you. The next question today comes from the line of Moses Ola from JP Morgan. Please go ahead. Your line is now open.
Hi. Thank you very much for taking my question. I have two questions, which I'll take one at a time. First one is also on the Q1 EBITDA bridge. Focusing on inventory valuations and also energy costs. Obviously, in the current market, we cannot how much visibility on where commodity prices move into the rest of Q1. If prices were to hold where they are, would you say that the quarter-on-quarter impact of the inventory revaluation should be more positive in Q1 versus Q4? Also on energy costs. How much of your energy costs are hedged into 2023? Should we expect some roll-off from 2022 into 2023? I'll ask my next question after that.
On the second part of your question on the energy cost, we have right now around 30% hedging on energy costs here in Spain, which is where we are affected most by the increases. We see probably in the first quarter a level of energy that is gonna be stable through the quarter. That's what we see right now and that's what we are considering at this moment in time for our projections for Q1. Moses, energy prices is a European problem. We have different prices in the different European countries, but it's only a European problem. We have a normal price in United States, we have a normal price in South Africa and in Malaysia, it's only affecting the Spanish plant.
As has mentioned, we have been increasing the level of the volumes of PPAs that we have contracted. I think that, from this year, we will start applying around 30% of PPAs in our energy cost.
Okay. Q1 appears to be my favorite topic today. Clearly better. Clearly better means clearly better. Clearly better means that the worst is over. Clearly better means that the basis of the market are better, that we do not expect big increase in working capital. Still we have uncertainties in the second quarter, we prefer to be prudent. We have seen the volatility talking about the exchange rate, for example, in the dollar and in the euro during the year. This is one fact. We have seen the volatility in the nickel in the fourth quarter. This is another fact. We still are suffering, obviously, the consequences of the crazy war Russia-Ukraine.
There are still the supply chains are not normalized. Still we have seen a terrible increase in imports in Europe reaching market shares of 31%. Distributors are still with large inventories. This must be reduced. When shall the market reactivate and what shall be the consequences in the price? What shall be our visibility at the end of the quarter for what may take place in the realizable value for the second quarter? Still we do not know. Shall be clearly better.
Okay, thank you for that. Also on the growth CapEx into North American Stainless. Could you please provide your estimates on the incremental tons of this investment and how does this change your product and geographical mix? Specifically, how should we consider your footprint in Europe going forward? It currently stands at about 20% of shipments, though this will probably edge lower following this investment. How should we consider this part of the business going forward?
You know, the new CapEx is a beautiful project. It is beautiful because we are starting increasing the capacity of the melting shop, not with new equipment, but improving the logistics of the melting shop. How can we improve the logistics of the melting shop? Is using the new tools, using a digital twin. You know, that's the way that we found it out what are the bottlenecks of the logistics of the melting shop and that will let us increase the capacity between 15% and 20%. How can we manage that in hot rolling? As we will do it, you know, also using digital tools to increase the productivity of the mill.
We will not need investment or a big CapEx, you know, to increase our capacity. It's based on digital information analysis. Then we will spend $244 million basically in a new cold rolling mill and the upgrading of the annealing and pickling lines. That means that with a very reasonable CapEx, we will increase our capacity between 15% and 20%. This is, we never give numbers of how productive is going to be or how is it going to contribute to the margins. As you can understand, with a reasonable CapEx, we will increase production 15%-20% to follow the rhythm of growth of the American market. The payback of this investment is going to be very fast.
That will increase our capacity and our sales in United States. We are not trying to win market share there. We are just trying to accompany the American market in the growth. We are a clear market leader, and I think that we are a good market leader in United States. We don't want our customers to feel that they will have a lack of local production in the future and we promise to them that we will support the market in the future with the future growth. I think that they can be very happy to have North American Stainless as market leader there. That is going to change the geographical mix.
Of course, that will debalance a little bit the current balance of our geographical mix. Because we will increase a portion in United States, that will take three years. More or less you can make the numbers. It's not very difficult.
Thank you. Our final question today comes from the line of Krishan Agarwal from Citigroup. Please go ahead. Your line is now open.
Thanks a lot. My questions have all been asked. If I can do a follow-up on Bahru, thoughts from Bernardo . You've taken an impairment of EUR 200 million odd euros in the Q4. The carrying value is EUR 135. You've been saying that you are looking for the option for the operation. What is your thoughts on the re-potential valuation in case you were to engage into any kind of a transaction? Does that EUR 135 million value gives you a kind of a starting point or you will still be looking for a normalized, you know, valuation for the business irrespective of, you know, impairments you have taken?
You know, in terms of strategy, there's nothing new during this year. I mean, what we have done is that we are resizing Bahru Stainless to dedicate the production to high added value products and to the niches of the market with less competition. You know, that's why we reduce our production there. Doesn't mean that we are going to keep this production forever, but we will try to focus on these customers, and we'll try to increase our volumes in these customers, and we'll try to find similar customers, you know, with added value that are not in the range of products that the normal commodity makers in Indonesia or in China are doing. We'll increase our production, so we have a strategy there.
That doesn't mean, you know, that we feel that we are weak in the area and we'll have to do something. No. We have to do something or it's not a problem today, so we can keep Bahru Stainless as it is today. No, we are growing in margins. Today we are not speaking about losses in Bahru. We are positive, you know, and we'll be more positive next year and, you know, because we are increasing volumes in each products. You know, this is positive. In the way we find the other options that we are open to everything. You know, to cooperate with some of these big guys in the area to increase sales or do something together. We are open to everything in Bahru.
Any further question here in the room? This has been everything from our side. Thank you very much again for attending this presentation, and we hope to see you in the next publication of our results that will take place on April 27th. Now, we will be happy to share a Spanish wine with all of you that are here in the room. Thank you very much.
To celebrate the record results. Thank you very much.