Good morning. My name is Lydia and I will be your conference operator today. At this time, I would like to welcome everyone to the Befesa Preliminary Full Year twenty nineteen Earnings Presentation. After the speakers' presentation, there will be a question and answer session. I would now like to turn the call over to Rafael Perez, Director of Investor Relations and Strategy.
Please sir, go ahead.
Good morning and welcome to the full year twenty nineteen preliminary results conference call of Befesa. I am Rafael Perez, Head of Strategy and Investor Relations of Befesa. And today as usual, we have with us Javier Molina, CEO of Befesa and Wolfgang Lehmann, CFO Ophases. Javier will start with an overview of the current market environment and will present full year key highlights as well as main consolidated financials. Then Wolf will review the financials of our steel dust and aluminum solid slag business services in more detail as well as cash flow, net debt and capital structure.
Javier will close this presentation providing a preliminary view for 2020 as well as an overview of our mid term growth roadmap. Finally, we will open the lines for the Q and A session. Before getting started, let me remind you that this conference call is being webcasted live. You can find the link to the webcast of the full year 2019 results presentation in our website, www.defeso.com. Now, let me turn this call over to our CEO, Javier, please.
Good morning and thank you for attending this conference call. 2019 has been a good year for Befesa. Despite the unfavorable price environment that has affected the earnings of the company, Befesa has delivered a strong operating performance and has continued to deliver solid exercise results, setting the foundation for organic growth in the coming years across all the markets we currently operate. In 2019, we have deployed capital around €60,000,000 dedicated to growth initiatives, representing a record level in the history of Befesa. We have executed growth investment in every single geography where we have operations, Europe, Turkey, South Korea, as well as China.
During this year, we continued to run our recycling plants at the high capacity utilization and the level of deliveries from our customer across all the markets where we operate have been high and similar to the previous year. Befesa's business based on the circular economy has a bright future and the company is in a strong situation from the breaking, strategic and financial point of view. From a macroeconomic point of view, despite the global economy being affected by several uncertainties like the tariff war between China and U. S, Brexit, weakness in the car industry, etcetera, the market where we operate have remained stable during 2019. EA's steel production shows robust fundamentals and stability.
Additionally, the FESAS business models enjoys high barriers to entry driving mainly by the location of our plants in close proximity to our steel producing customers. From the metal prices point of view, 2019 has been a challenging year for BEPEZZA. The unfavorable price environment with treatment charge increase of 65% and zinc and aluminum price decrease has affected the level of earnings that BCESA has generated in the year. This impact has been partially offset by better zinc price hedge compared to 2018. We have recycled 666,000 tons of steel gas, which represents a lower volume than in 2018, driving by the temporary shutdown of our plant in Turkey to expand its recycling capacity.
In the Aluminum segment, we recycled 493,000 tons of aluminum solid slag and SPLs and produced 177,000 tons of secondary aluminum alloys at similar levels that the previous year. During the period, we achieved six forty eight million dollars of revenue, 160,000,000 of EBITDA and $83,000,000 of net profit. Our EBITDA margins has remained very strong at 24.6%, which is slightly better than the previous year and the second highest level in the history of our company. Our earnings per share was at EUR 2.43. The operating cash flow has been strong and we have been able to fund the PECAS total CapEx, pay an attractive dividend and maintain the leverage ratio of 2.6.
We want to maintain our strong commitment to pay an attractive annual dividend to shareholders, even in this high investment period. Based on this, PEPESA aims to distribute a dividend equal to €1.32 per share, representing a flat amount year on year and a 3.5 dividend yield based on the closing share price of 2019. Although, earnings have been lower in 2019, we have continued to deliver our growth plan as expected and have set the path for volume and earning growth in the coming years. At BESESA, we are going through a heavy investment period and during 2019, we have executed five growth projects in Europe, Turkey, South Korea and China. With the majority of our organic growth projects completed, the peso is currently focused now on the expansion into new geographies.
China is the largest steel market in the world. A transition towards more EF steel production and a growing concerns about environmental protections is creating the business opportunity for our company. Befesa is building a strong local team that we are training across our European recycling plants. We are dedicating time and resources to the development of this business opportunity and confirm the potential that China represents for the recycling business of Befesa. According to our expectation, China will become the single biggest market for Befesa in the coming years.
The management of the volatility of zinc price through hedging continues being a cornerstone of Befesa strategy. Currently, we have hedged in place until October 2021 and we continue to monitor the market to lock in further volume beyond that date. Additionally, in 2019, we have seen how Befesa's former main shareholder Triton has fully exited the shareholding of the company. In June 2019, Triton sold its remaining stake in Befesa. Since then, we are a public company with a free float of 100% and a strong shareholding structure formed by institutional investors who mainly have a long term view.
2019 has been a year in which the world has seen an increased concern around sustainability and climate change. Waste management is one of the most critical problems we face. A global growing population together with increased life standard, especially in emerging markets will drive an increase in the volume of waste generated across the globe. According to the World Bank, by 02/1950, the population of the planet will increase by 25% and the volume of waste generated will increase by 70%. This enormous challenge has to be managed properly and it is essential to invest in companies with a green proven technology and the right business model.
The face of business model based on the circular economy is a good example of how a company can have a positive impact by running a sustainable business model and at the same time create economic value to its shareholders. The FESAR's recycling services provides sustainable hazardous waste management solutions that solve important environmental problems in the steel and the aluminum industry. Equally important, BEPEZZA's business reduced destruction of natural resources from the ground. Today, BEPEZZA manage and recycles more than 1,500,000 tons of hazardous waste a year, avoiding landfill. Furthermore, we extract and produce more than 1,200,000 tons of new materials that we've introduced in the economy, reducing the consumption of natural resources.
In summary, in 2019, the Befesa delivered a strong operating result and solid strategic progress, while earnings were affected by lower metal prices. Our healthy cash flow generation allow us to finance all the investment with our own resources, pay an effective dividend and yet maintain the leverage at a moderate level while we continue to execute on our strategy in order to secure future volume and earnings growth. Now let me pass the presentation to Wolfgang Lehmann.
Thank you and good morning. Going now to Page six, the results of our Steel Dust Recycling Services segment are as anticipated in our last third quarter call and our latest guidance. Full year 2019 revenue decreased by 5% to €360,000,000 primarily driven by lower electrodark furnace steel dust throughput of 7% year on year, mainly due the seven months downtime in Turkey. Secondly, the unfavorable treatment charges of $245 per ton in 2019 versus $147 per ton in 2018. Thirdly, the 8% lower LME zinc average price year on year, but partially these headwinds were offset.
A, thanks to the hedges in place, the blended zinc prices were up 5% year on year, that is $2,280 per ton in 2019 versus $2,168 per ton in 2018 and B, the continued improvement and recovery in the stainless operations. Full year EBITDA year on year decreased by 8.8% or $12,100,000 to 125,300,000.0 The main drivers of the approximately $12,000,000 year on year EBITDA decrease are approximately as follows: decrease of 21,000,000 from the impact of the year on year unfavorable treatment charges of $245 per ton in 2019 versus $147 per ton in 2018. Secondly, a decrease of $10,000,000 from volume, electric arc furnace steel dust throughput decreased primarily driven by Turkey. Dollars 9,000,000 decrease from the lower LME zinc prices down 8% year on year to $2,247 per ton in 2019. This was partially offset by a positive $24,000,000 impact year on year from the better zinc hedges and secondly, a positive $5,000,000 year on year from our recovered stainless operations.
In summary, net net, the EBITDA decrease in the Steel dust recycling services segment was primarily driven by Turkey as the better zinc hedges and improved stainless operations offset most of the remaining headwind year on year from treatment charges and lower LME zinc market prices. EBITDA margin as a percent of sales was a solid 35% in the year. On the right hand side of Slide six, we show details on plant utilizations and prices. On capacity utilization, normalizing for the explained Turkey downtime, we continue to run at high utilization levels of 90% in 2019. With regards to zinc prices, LME zinc market prices have decreased during the year 2019 to an average of $2,274 per ton, down 8% year on year.
Nevertheless, reviewing our zinc blended prices, which take our approximately 70% hedged and 30% LME spot volume into consideration as well as actual volume weighted per month, on average, the full year prices were up 5% year on year to $2,280 per tonne. Our hedging approach works. As mentioned by Javier, most importantly in the steel dust recycling service segment, both the Turkey plant upgrade as well as the new Welsh Oxide washing plant in South Korea were successfully completed on budget and time and are expected to drive volume at excellent utilization levels and earnings growth in 2020. The focus in 2020 will be on China growth as explained later by Javier. Turning now to Slide seven, the results of our Aluminum Salt Slags Recycling Services segment.
Full year revenues were down roughly $50,500,000 or 14.7% to $292,400,000 This was mainly driven by 19% decrease year on year from lower aluminum alloy average market prices. This was partially offset by a volume increase in the secondary aluminum alloys of plus 7,400 tons to 177,000 tons in 2019. Full year EBITDA was down $4,200,000 year on year to $32,900,000 Main dynamics behind the variance were secondary aluminum represented as gray bars in the charts being approximately flat year on year at $12,000,000 The high efficiency furnaces installed in Bilbao during the 2018 delivered results and offset the negative impact from the scheduled downtime at the Barcelona plant during part of the 2019 to implement the same high efficiency furnace. Solstlex represented as orange bars in the chart being down year on year by $3,800,000 to $21,000,000 mainly explained by approximately 6,000,000 due to the 19% lower alumina alloy average prices, then slightly reduced sulphide volumes being partially offset by improved efficiencies. Overall resulting consolidated EBITDA of the Aluminum Salt Flex Recycling Services segment decreased by €4,200,000 year on year to €33,000,000 On the right hand side of Page seven, we show details on plant and prices.
Solflex and spent for lining volume and utilization levels continued at high close to 90 fiveninety 3% utilization levels in 2019. Also in the secondary aluminum, we are very pleased with the operational performance and achieved production levels. Normalized for the downtime to implement the high efficiency furnace plant utilization levels are at above 90%. Market prices on the other hand have still not recovered, actually decreased further in the 2019 and were on average during the year at very low levels. Full year averaged at $13.97 euros per ton of aluminum alloy free metal bulletins, down 19% year on year compared to $17.15 euros per ton in 2018.
Taking the market and price environment into consideration, overall in 2019 for the aluminum sulfate recycling service segment, the efficiency improvements helped to partially offset the pressure from the very low aluminum alloy prices and the negative impact from the scheduled downtime in the second half to upgrade Barcelona. Turning to Page eight with an overview of our results referring to net debt, cash, leverage, cash flow and capital structure. On the left hand side, net debt. We closed 2019 as expected with $542,000,000 of gross debt, 126,000,000 of cash on hand, resulting in a net debt of €417,000,000 and a moderate leverage of 2.6 times, in line with the latest guidance provided in our third quarter earnings call. Leverage increased on the one side due to the reduced full year EBITDA run rate of €160,000,000 On the other side, net debt increased by €40,000,000 compared to year end 2018 to €417,000,000 at year end twenty nineteen.
This increase was mainly driven by the cash position development as well as the €14,500,000 impact from the implementation of IFRS 16 amendment, which affects accounting for renting and leasing from the 01/01/2019 onwards. For 2020, we are targeting an approximately stable leverage at current levels. With regards to our capital structure, on the 02/17/2020, Effesa successfully repriced its Term Loan B. The new interest rate decreased by 50 basis points to Eurobor plus 200 basis points with a floor of 0%. This reduction will result in financial cost savings of around €2,600,000 per annum.
After a fixed period of nine months, the interest rate could be reduced further alongside certain leverage ratchets down to a rate of Euroboard plus 125 basis points in case the face of leverage is lower than 1.75 times. The remaining six point five years tenure remains unchanged maturing in July 2026 and including loan baskets to accommodate the China growth expansion. The repricing is yet another measure to continue to improve Buffetza's long term capital structure and financial efficiency. Furthermore, we continued during 2019 with our €75,000,000 revolving credit line entirely undrawn and fully available as well as our €35,000,000 guarantee line. Again, this efficient capital structure sets us up very well for the long term and provides the required flexibility to execute our growth roadmap, especially in China.
With regards to credit ratings, both rating agencies maintained their credit ratings unchanged, Ba2 for Moody's and BB from Standard and Poor's, both with stable outlook. On the right hand side of Page eight, the total cash flow after funding working capital, taxes, interest, dividend and record CapEx investment was a negative $25,000,000 from year end 2018, resulting in cash in the bank of $126,000,000 in line with the latest guidance provided in our third quarter earnings call. As expected, working capital was temporarily impacted by higher inventories required to manage the ramp up of the Korea washing and the aluminum furnace project. These are not expected to occur in 2020 as these initiatives are completed. Secondly, accounting for hedges impacted working capital as year on year the balance moved from a liability at year end 2018 to an asset position at year end 2019 as hedges on the books are in the money.
The operating cash flow in 2019 remained solid at $103,000,000 approximately flat year over year, allowing the VESA to fund $80,000,000 of record CapEx for our growth initiatives and distributing $45,000,000 dividend. Normalizing for one time temporary impacts, the run rate operating cash flow remains at approximately €120,000,000 For 2020, we are planning for pretty much balanced cash flow at approximately current levels of leverage. Turning to Page nine, our hedging approach and hedging book are the same as during our last update. We are hedged up to and including October 2021, thus for the next one point five years. What we have added is in the left lower table, the full year 2019 view on effective zinc average price to Buffet.
In example, the monthly blended rate between hedged volume and non hedged volume, which amounted to EUR 2,280 per ton in 2019 is approximately in line with the October view estimate we provided to you in our third quarter earnings call. The zinc blended price represents an increase of EUR112 per ton compared to 2018. Zinc volumes hedged in 2019 remained flat year on year as usual at the usual 92,400 tons per annum rate. Therefore, the improvement in the zinc in the effective zinc average price was thanks to the higher hedging prices in place during 2019, which more than offset the 8% lower spot LME average prices that impact the unhedged volume portion. Our hedging strategy is unchanged based on four pillars.
We like to be approximately one, two, three to four years out hedged. We hedge around 60% to 75% of the zinc equivalent payable volumes. We continue to hedge the majority denominated in euro and the hedge prices we show are net prices after credit line forward and currency forward discount. At BFFA, we do not provide any collateral for these hedges. This is priced in by our hedging partners.
As always, we continuously review the market for further hedging opportunities at attractive prices and are pleased with our hedging book up to October 2021. Overall, our hedging book continues to provide a much reduced variability of earnings and cash flow and greatly improves the predictability of our earnings and cash flow. Back to Javier now on our growth roadmap and 2020 preliminary view. Thanks, Wolff.
Although a more detailed guidance for 2020 earnings will be provided once the treatment charge for Fin has been settled, I would like to finish providing a few comments on the outlook for 2020. 2020 is expected to be a year of a strong operating performance benefiting from the executive projects of 2019 as well as further study expansion contributing beyond 2020. This would be reflected in significant volume increase in steel dust as well as the completion of the first steel dust recycling plant in China. The strong operating performance will drive earning growth. On the other hand, the earnings for 2020 will depend on the level of zinc treatment charge as well as the average LME zinc price for the year that affects approximately 30% of the volume of zinc that is not covered by hedge as Wolf has explained.
As I said, we expect to provide more detailed guidance with the release of the first Q earnings at the April. In our steel gas business, we expect to run our plants at high capacity utilization across all the markets we operate. And similarly, in our renewable solar gas business, we expect to continue our high plant utilization levels. In 2019, we invested strongly and successfully executed the majority of organic growth projects that form one of the big building blocks of our mid term growth roadmap. For 2020, we expect this project to deliver positive earnings contribution.
In the steel gas segment, the upgraded plant in Turkey has an annual recycling capacity of 110,000 tons of steel gas. For 2020, we expect to increase the total volume of the steel gas recycle by approximately 10% year on year, mainly driving by higher volume in Turkey as well as some additional incremental volume in other geographies. Based on this, we expect to achieve record levels of the steel dust throughput and plant utilization well above 90% in 2020. In South Korea, the new watching plan for works will increase the level of earnings and margin of the South Korean operations by providing to our single smelter customers a high rate of works. Although the full level of earning contribution will not be achieved until 2021 for commercial reasons.
In the Aluminum Solar Flag segment, the farm based upgrades at the Spanish plant of Andio and Barcelona will continue to improve the efficiencies of the secondary aluminum operations contributing to earning growth in 2020. The other key building block of our midterm growth roadmap is the expansion in China driving volume and earning growth for 2021 and beyond. The construction of the first steel dash recycling plant in Jiangsu with our recycling capacity of 110,000 tons is expected to be completed by the 2020. The second plant under development is in the province of Hainan, is scheduled for completion by the 2021 in the 2021. Regarding our development in China, as we all know, the coronavirus is causing disruptions in China.
At this stage, there is still uncertainty about the impact of Befesa. In the short term, we expect for towards some delay in the construction of our plant that cannot be totally fortified at this stage. But in any case, in the midterm, our expectation of the business opportunity we're facing in China remains unchanged. Environmental protection as well as electric arc furnace steel market share are increasing in China, creating the need for the recycling services solutions that the CESA provides. So for 2020, we expect to generate a strong cash flow that will allow us to continue to fund another high investment year focusing mostly on developing the two steel gas recycling plants in China, maintain an attractive annual dividend distribution to our shareholders and manage the leverage ratio around approximately current levels.
Finally, in 2020, Befesar will continue to improve its communication regarding sustainability and ESG with its investors and other stakeholders to ensure that the contribution of Befesa to the secular economy and to a more sustainable world are clearly understood. Thank you very much. Thank you, Javier. We will now open the line for your questions.
The first question comes from Charlie Mortimer from Citigroup.
Good morning. Happy morning, Rafa. Good morning, Wolf. The just two questions for me. And to confirm what you're just saying regarding the WOX washing plant, which, as you say, came online in December, are you sticking with the guidance that it could be, I think you said before, 5,000,000 in terms of EBITDA?
And did you just to confirm that you said that benefit, the EUR 5,000,000 or whatever it is, will be FY 'twenty one rather than necessarily FY 'twenty? And second question regarding utilization for this year. You expecting 90% utilization of the current total or the new total capacity in FY 2020? Thanks.
Thanks, Charlie. Regarding the first work in the watching plan of South Korea, yes, the total contribution of the plan at full operations will be depending on the SIM prices between EUR 4,000,000 to EUR 5,000,000. But as you know, that will happen in 2021. For 2020, we expect half of that figure or even 40% of that figure for commercial reasons. We have some contracts in place signed that we need to honor.
And so we will have we will be in a position to fit totally the plan in 2021. And the second question was?
Regarding the utilization for this year, I think you were just saying that you can get back to Yes. '90
The utilization rates on average in the steel gas business will be above 90%. And the same will happen in solid slack and secondary aluminum. So we don't expect any problems in feeding the plant, so we expect to have a high utilization rate.
Excellent. Thanks, Javier.
Thank you. The next question comes from Ignacio Shachelle from Commerzbank. Please go ahead.
Yes, thanks. I would have two questions. The first one on your China expansion. I think you've explained quite well that the construction time line is more or less confirmed. Regarding the commercial negotiations with your customers, I would think that it's now time is approaching where you should actually strike first contracts with your customers.
I mean, is there any additional insights or feedback that you're getting from potential clients there? Are you seeing any signs that there's a willingness to pay a collection fee? And are you also seeing commercial interest from, let's say, the same client base that you anticipated a year ago? Or is it that you're probably sourcing material from slightly bigger distances away from your plant? Or any other surprises in first commercial discussions with clients?
Hi, Hincko. Well, initially we have in the two plants in the two projects in China as I told you in presentation regarding the project in Yanzhou. Before the coronavirus, we expected to finish the construction at the 2020. Now, the coronavirus crisis could create some delay in the project. Up to date, it's really difficult for us to say exactly how big is going to be the delay.
Today, our people is still out of the sites of the work. So, and we don't know exactly when they will come back to the plan. So except for the coronavirus issue, the timeline, we maintain the same timeline, probably the coronavirus is going to produce some delay that could be, I don't know, one month to month or let's see, it depends how evolve the coronavirus situation. And regarding the negotiations, well, we have a detailed plan to start talking with all our potential customers in the especially in Yanceu this year starting right now after the new Chinese New Year. Well, we have had again some delay because of the coronavirus, but we don't expect any surprise and anything different from the first conversation we have with all our potential customers.
We have maintained with all of them permanent contacts, permanent conversations. So we know that they are waiting for us to finish our work on our plan as soon as possible. The next step is to start real negotiations once we can show them that our plan is progressing on time. Okay?
Okay. And the second question would be on your available capacity in aluminum salt slags recycling services. I think during the last two years, you always had a slightly lower available capacity in secondary aluminum because of the upgrades in the Baja Barcelona. How should we think about that going forward? Is that similar that you always, let's say, have 5% of capacity that is not available because of upgrades?
Or is it less this year? And also on Salt Lake, should we expect any big impact on available capacity from the Hannover upgrade?
Okay. Let me start with the solid slag business. In solid slag, we expect a strong year. We suffered some small decrease last year, but it was not caused by any raw material supply problems. There was technical issues in different plants and we expect the same strong situation for this year.
The load factor should be or will be above 90% clearly, except if we face some technical issues that is not something that we cannot forecast. The capacity expansion of Hannover, well, we are today in the first step in getting the final permits to do the capacity increase over the plan. And but on the other hand, we will be K2s analyzing the European automotive industry before to establish construction works. Today, have we are in a position to fit 100% our plans. The market is in a very stable situation.
And the last thing we would like to do is to create overcapacity in the market. So let's we it's decision that probably we are going to take more next year than this year.
Okay?
Okay. That sounds good. Maybe just a quick housekeeping questions on the revenues because I think in both segments the revenue decrease was a bit stronger than the, let's say, stable volumes and slightly higher blended zinc price would have suggested. Is there anything we should know with regards to revenue recognition that would help us to understand why revenues were a bit lower? I guess there's always been some volatility in recognition of some of the other revenues?
Or is it just quarterly volatility?
It's only volatility. The main reason to explain the revenue decrease is price and treatment charge. And then the rest are the small difference could be explained by volume, but nothing special. Don't know if you to highlight something important.
No, nothing special and no other impact.
Great. Thanks very much.
Thank you. The next question comes from Oscar Valmes from JPMorgan. Please go ahead.
Yes, good morning everyone. It's Oscar from JPMorgan. Yes. So my question is on throughput. So it seems like Q4 throughput was down 2% year on year.
My understanding was that Turkey was fully ramped up in Q4. So the question is, was there any impact from Turkey in that Q4? And why have you adjusted the Q4 utilization from kind of 90 from '85 to '95? And then the second question is just more housekeeping. Do we expect another benefit in stainless steel next year?
Or do we expect flat year on year in stainless steel? Thank you very much.
Thank you, Oscar. Regarding Turkey, well, the initial idea was to or we started the ramp up in Turkey on time at the August. But at the end, we faced some troubles in the ramp up basically because the layout of the Turkish plan is very difficult in the new geographies like Turkey or like South Korea or China. We have a very well defined plan, rectangle, etcetera. The layout of our old plan in Turkish is really very complicated.
And based on that, we have some ramp up problems that and based on that at the end, the utilization rate of the plant in the last quarter of last year was not full capacity. That's why we have these less production in Turkey, okay?
Okay. So that 95% is ex Turkey, so kind of Bethesda ex Turkey? Okay, perfect. Thank you.
And then regarding stainless steel, well, last year we saw a good recovery in our stainless steel operation. And I think we have in front of us in some more small recovery. We cannot see in big figures, but perhaps this year we can try to achieve another 1,000,000 or $2,000,000 additional in the stainless steel business.
Okay, perfect. Thank you very much.
Thank you. The next question comes from Benjamin Sanzaro from Berenberg. Please go ahead.
Hi, good morning. Just following up on that same question on in terms of the volumes. So I mean, there was a shortfall in Q4. Is that only because of Turkey? Or was there also some issues that you faced in South Korea and Europe?
Because I think on the Q3 earnings call, you mentioned that both were running at high utilization. Was that still the case in Q4? And do you also expect the same heading into Q1 of this year?
Yes. I think, Benjamin, good morning. As Javier mentioned, the plant construction in Turkey was completed on budget on time at the August, and then we took the rest of the year for the ramp up. Now since January, we're very pleased with the performance of the Turkish plant. And as such, that will contribute to earnings growth, and we're pleased with that.
In terms of the fourth quarter, the remaining regions were as expected and at very high plant utilization levels.
Okay. So you're saying no issues from weakness in the board?
Not really, Benjamin. Let me say in I have explained several times that it's something interesting to understand. One, we cannot forecast exactly how long will be the maintenance shutdown of the plan. The maintenance shutdown could be between two to four weeks depending on how we are going to find in the repays etcetera, etcetera. One week of additional shutdown means 2% of utilization rate.
So it's something which is for us extremely difficult to forecast. That's why we like to say that we will be above 90% and that will be 90%, 94%, 92% and that will depend more in our case in the extent of the maintenance shutdown than any other thing. What we can confirm is that during last year, we didn't have any problem of supply in neither in our European plants nor in our South Korean plants, okay? And this is the same the situation we expect for this year.
Okay. And so for 2020, do you think volumes will gradually ramp up over the year or do you expect Turkey to come on full as of Q1?
What we expect for the full year is to have an increase in the total steel recycling business of around 10% compared to 2019.
Will that be a gradual ramp over the year? Or do we already see Q1 being a stronger platform utilization In in Turkey
Q1 twenty nineteen, in January Turkey was in operation. So the increase will start in February. But from February we will see gradually this increase.
Okay. Thank you.
Okay.
Thank you. The next question comes from Jaime Scribano from Banco Santander.
Hello. Good morning. I have one question regarding net debt 2020. Where do you see the net debt EBITDA? And I linked this question to the what you put on the refinancing, which basically says that if you that you have a ratchet and you can reduce the UDIVOR plus 20 200 basis points down to 125 basis points if your net debt to EBITDA is below 1.7 times after nine months.
When do you think you can be below that level and how this reconcile with maintaining a dividend of €1.32 per share? Would it not be maybe better to pay less dividend and be below 1.7 times in order to save interest, for example? Thank you.
Jaime, thank you very much. So in terms of net debt to EBITDA in 2020, as I mentioned when we discussed the page, for 2020, we expect to be roughly at the same leverage that we are right now, which is some around 2.6 times. And again, then in the April call, we will provide more concise guidance on that. Then in terms of the new capital or the repricing, yes, it is correct that for leverage at or above 2.25 times leverage, currently the rate is year over year plus 200 basis points. And we have a hold on that for nine months.
And then for the remaining 6.5 life of the loan, we have ratchets from two to 2.5 times, it's going to be Euribor plus 175 basis points. From 1.75 to two times leverage, it is Euribor plus 150 basis points and for leverage below 1.75 times, it is Euribor plus 125 basis points. At this stage, it's all about the timing of our China growth expansion.
And about the evolution of zinc price and aluminum price and treatment charge, depending what's happening with the metal prices and the treatment charge, will achieve these the new ratchets sooner or later. And regarding the question about the dividend, well, we have been thinking about that 55 basis points of less interest rate means EUR 2,500,000.0 approximately. With the reduction we have achieved, we are going to get this figure. But we have considered that to send to the market, to our investor the message that we want we are in the position to pay a stable dividend is a very good message and that's why we have considered and we are going to present to our shareholders and our shareholders meeting the approval of this measure because we want to send the message to our investors that BCESA, the company is a very solid financial position that will permit us to do our CapEx investment and at the same time to pay a solid and stable dividend.
Okay. Thank you very much.
Thank you, Jaime.
Thank you. The next question comes from Oscar Valnez from JPMorgan. Go ahead.
Hi, guys. Another question from me quickly. It's a difficult question. I don't know if you can answer it. But just if we think about treatment charges, just qualitatively, how what's the worst case scenario?
We've seen spot Chinese treatment charges go above 300. And treatment charges are at the highest level maybe in the past five years. Could we see kind of it going above 300,000,000 Or should we think about 300,000,000 as the max downside scenario? I don't know if you can comment. Thank you.
As you said, Oscar, it's really a very difficult question. For example, this week, Assier Sarandia has been in Arizona, in USA in meeting with all the seeing and smelter producers in the world. And there are a lot of rumors, but nobody knows what is going to happen really. If you read the report of the different analysts, some people is talking about $300 or people is talking about the sale level that in 2019. And on top of that, we have the coronavirus with the Chinese markets quite close.
So frankly speaking, it's very, very to talk about treatment channel and prices is always to talk about the low that in this situation is even more difficult than normally.
Okay. That's fine. It's too early.
Our preference, Oscar, for exactly that reason is to wait just like last year until March, April until those treatment charges are negotiated and then we can provide more concise guidance.
Okay, perfect. Thank you.
Thank you. The next question comes from Michael Hoffman from Stifel. Please go ahead.
Thank you, both Javier and Rafael. I had a question. If you had the current market price for metals and your current treatment charge, what direction is profitability moving EBITDA?
Hello? Yes, yes. You are Michael. We have in terms of volume for 2020, we have three volume or additional pitchings. We have three new things.
First is the additional capacity in the plant of Turkey. That's why we are we expect an increase in the steel gas recycling business of around 10. So we have another 60,000 or 70,000 tons of recycling capacity. We produce additional EBITDA. Then we will have the working plan in South Korea that as I commented, we'll be in full operation for commercial reasons in 2021, but we'll produce some additional EBITDA in 2020 as well.
And then we have the new furnace in Barcelona that will increase will produce some additional EBITDA as well. And on top of that, we expect some additional efficiencies in the stainless steel business. So, if we would maintain the metal prices and cement charter sale level that will be more or less situation that will be the increase that you can expect in terms of volume. And in the negative side, have a worse hedge in 2020 compared with 2019 that will affect our P and L in between €5,000,000 to €6,000,000 is the same.
Can you
say that last part again? I didn't understand the last part.
Yes. Last year, our hedge price was at €2,310 per ton. And this year, the hedge price is €2,250 per ton. So this €60 of difference will produce a negative difference of compared with the previous year of around 6,000,000
Yes, it's pure math, Michael. So you take the EUR 60 per ton difference times 92,400 hedged tons, you come to somewhere EUR 5,500,000.0 headwind, yes, from the hedges.
Right. And if I take all of the other things that Javier shared plus current prices and treatment charge, the math comes out if I'm back to math, it's you should be up slightly in profitability given the puts and takes, lower metals prices but better volume offset by lower blended hedge.
Yes, yes, yes, yes.
And if treatment charges stay where they are, yes. Okay. All right.
And then capital spending ought to be down in 2020, right? I mean something like EUR25 million, EUR30 million?
The capital yes, overall CapEx we expect should be similar to what we've done in 2019. If you follow the overall trend in 2018, we spent EUR41 million. And in 2019, we doubled that, we spent 82,000,000, right? And we expect for 2020 a similar level. And also a similar split in terms between maintenance and growth spending, yeah?
So in 2019, we spent roughly after EUR82 million, we spent roughly EUR25 million on maintenance as usual, maintenance including IT productivity, compliance, etcetera. And then growth, we spend roughly €57,000,000 And for 2020, we expect a similar overall level, somewhere around 80,000,000 ish. And then we expect about 25,000,000 as usual on maintenance and then the rest on growth. But again, we'll come back to you in April with very concise numbers, but this is approximately what we see. Okay.
Then the growth portion will be dedicated nearly entirely to China and China.
Right. That's what
I thought.
Okay. And then lastly, in other revenue lines that are in the steel business, should we assume they're flat year over year? JOHNSON:]
the close
movement Basically,
around the top line?
Okay. That
helps. Yes. Cool. Thank you very much for taking the questions.
Thank you, Michael.
Thank you. Ladies and gentlemen, there are no further questions in the conference call. I will now give back the floor to the company. Thank you.
Thank you all for your questions. You can also contact the Investor Relations team of FFSA for any further clarification. We will now conclude the conference call and the Q and A. Let me remind you that you can find the webcast and the dial in details to access the recording of this conference call in our website, ww.feso.com. Thank you very much.