Good morning. My name is Lydia, I will be your conference operator today. At this time, I would like to welcome everyone to the Befesa preliminary full year 2019 earnings presentation. After the speaker's presentation, there will be a question-and-answer session. To enter the queue, you can press zero one on your telephone keypad at any point during the call. I would now like to turn the call over to Rafael Pérez, Director of Investor Relations and Strategy. Please, sir, go ahead.
Good morning, and welcome to the full year 2019 preliminary results conference call of Befesa. I am Rafael Pérez, Head of Strategy and Investor Relations of Befesa. Today, as usual, we have with us Javier Molina, CEO of Befesa, and Wolf Lehmann, CFO of Befesa. Javier will start with an overview of the current market environment and will present full year key highlights, as well as main consolidated financials. Wolf will review the financials of our Steel Dust and aluminium salt slags 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&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 on our website, www.befesa.com. 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 extraordinary 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 EUR 60 million 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 a high capacity utilization, and the level of deliveries from our customers across all the markets where we operate has 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 operating, 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, et cetera, the markets where we operate have remained stable during 2019. EAF steel production shows robust fundamentals and stability. Additionally, Befesa's 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 Befesa. The unfavorable price environment with treatment charge increase of 65%, and zinc and aluminium price decrease has affected the level of earnings that Befesa has generated in the year.
This impact has been partially offset by better zinc price hedge compared to 2018. We have recycled 666,000 tonnes of steel dust, which represents a lower volume than in 2018, driven by the temporary shutdown of our plant in Turkey to expand its recycling capacity. In the Aluminum segment, we recycled 493,000 tonnes of aluminum salt slag and SPLs, and produced 177,000 tonnes of secondary aluminium alloys at similar levels than the previous year. During the period, we achieved EUR 648 million of revenue, EUR 160 million of EBITDA, and EUR 83 million of net profit. Our EBITDA margin 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 Befesa's total CapEx, pay an attractive dividend, and maintain the leverage ratio at 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, Befesa aims to distribute a dividend equal to EUR 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 Befesa, 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, Befesa is starting focus now on expansion into new geographies. China is the largest steel market in the world. The transition towards more EAF steel production and a growing concern 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 hedge in place until October 2021. We continue to monitor the market to lock in further volume beyond that date.
Additionally, in 2019, we have seen how Befesa's former major holder, 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 flow 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 standards, especially in emerging markets, will drive an increase in the volume of waste generated across the globe. According to the World Bank, by 2050, the population of the planet will increase by 25%, while 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. Befesa 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 for its shareholders. Befesa Recycling Services provides sustainable hazardous waste management solutions that solve important environmental problems in the steel and the aluminum industry. Equally important, Befesa's business reduce the extraction of natural resources from the ground. Today, Befesa manage and recycles more than 1.5 million tonnes of hazardous waste each year, avoiding landfill. Furthermore, we extract and produce more than 1.2 million tonnes of new materials that we introduce in the economy, reducing the consumptions of natural resources.
In summary, in 2019, 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 attractive 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 earning growth. Now let me hand over the presentation to Wolf 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 EUR 360 million. Primarily driven by lower electric arc 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 tonne in 2019 versus $147 per tonne in 2018. Thirdly, the 8% lower LME zinc average price year-on-year. Partially these headwinds were offset. A, thanks to the hedges in place, the blended zinc prices were up 5% year-on-year. That is EUR 2,280 per tonne in 2019, versus EUR 2,168 per tonne in 2018. B, the continued improvement and recovery in the Stainless operations.
Full year EBITDA year-on-year decreased by 8.8% or EUR 12.1 million to EUR 125.3 million. The main drivers of the approximately EUR 12 million year-on-year EBITDA decrease are approximately as follows. A decrease of EUR 21 million from the impact of the year-on-year unfavorable treatment charges of $245 per tonne in 2019, versus $147 per tonne in 2018. Secondly, a decrease of EUR 10 million from volume, electric arc furnace steel dust throughput decreased, primarily driven by Turkey. EUR 9 million decrease from the lower LME zinc prices, down 8% year-on-year to EUR 2,274 per tonne in 2019. This was partially offset by a EUR +24 million impact year-on-year from the better zinc hedges. Secondly, a EUR +5 million 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 EUR 2,274 per tonne, down 8% year-on-year.
Nevertheless, reviewing our zinc blended prices, which take our approximately 70% hedged and 30% at 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 EUR 2,280 per tonne. Our hedging approach works. As mentioned by Javier, most importantly in the Steel Dust Recycling Services segment, both the Turkey plant upgrade as well as the new waste oxide washing plant in South Korea were successfully completed on budget and time, 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 Aluminium Salt Slags Recycling Services segment. Full-year revenues were down roughly EUR 50.5 million or 14.7% to EUR 292.4 million.
This was mainly driven by 19% decrease year-on-year from lower aluminium alloy average market prices. This was partially offset by a volume increase in the secondary aluminium alloys of +7,400 tonnes to 177,000 tonnes in 2019. Full-year EBITDA was down EUR 4.2 million year-on-year to EUR 32.9 million. Main dynamics behind the variance were secondary aluminium, represented as gray bars in the charts, being approximately flat year-on-year at EUR 12 million. The high-efficiency furnaces installed in Bilbao during the second half of 2018 delivered results and offset the negative impact from the scheduled downtime at the Barcelona plant during part of the second half of 2019 to implement the same high-efficiency furnace.
Salt slags, represented as orange bars in the charts, being down year-on-year by EUR 3.8 million to EUR 21 million, mainly explained by approximately EUR 6 million due to the 19% lower aluminium alloy average prices, then slightly reduced salt slags volumes being partially offset by improved efficiencies. Overall, resulting consolidated EBITDA of the Aluminium Salt Slags Recycling Services segment decreased by EUR 4.2 million year-on-year to EUR 33 million. On the right-hand side of page seven, we show details on plant utilization and prices. Salt slags and spent pot lining volume and utilization levels continued at high, close to 95%, less 93% utilization levels in 2019. Also, in the secondary aluminium, 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 fourth quarter of 2019 and were on average during the year at very low levels. Full year averaged at EUR 1,397 per tonne of aluminium alloy free Metal Bulletin, down 19% year-on-year compared to EUR 1,715 per tonne in 2018. Taking the market and price environment into consideration, overall in 2019 for the Aluminium Salt Slags Recycling Service segment, the efficiency improvements helped to partially offset the pressure from the very low aluminium 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 EUR 542 million of gross debt, EUR 126 million of cash on hand, resulting in a net debt of EUR 417 million and a moderate leverage of 2.6 x, 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 EUR 160 million. On the other side, net debt increased by EUR 40 million compared to year-end 2018 to EUR 417 million at year-end 2019. This increase was mainly driven by the cash position development, as well as the EUR 14.5 million impact from the implementation of IFRS 16 amendment, which affects accounting for renting and leasing from the January 1st, 2019 onwards. For 2020, we are targeting an approximately stable leverage at current levels. With regards to our capital structure, on the February 17th, 2020, Befesa successfully repriced its term loan B.
The new interest rate decreased by 50 basis points to Euribor plus 200 basis points with a floor of 0%. This reduction will result in financial cost savings of around EUR 2.6 million per annum. After a fixed period of nine months, the interest rate could be reduced further alongside certain leverage registers down to rate of Euribor plus 125 basis points in case Befesa's leverage is lower than 1.75 x. The remaining 6.5 years tenor remains unchanged, maturing in July 2026 and including loan baskets to accommodate the China growth expansion. The repricing is yet another measure to continue improve Befesa's long-term capital structure and financial efficiency. We continued during 2019 with our EUR 75 million revolving credit line entirely undrawn and fully available, as well as our EUR 35 million 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 EUR -25 million from year-end 2018, resulting in cash in the bank of EUR 126 million, 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 EUR 103 million, approximately flat year-over-year, allowing Befesa to fund EUR 80 million of record CapEx for our growth initiatives and distributing EUR 45 million dividend. Normalizing for one-time temporary impacts, the run rate operating cash flow remains at approximately EUR 120 million. 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 and a half years.
What we have added is in the left lower table, the full year 2019 view on effective zinc average price to Befesa. In example, the monthly blended rate between hedged volume and non-hedged volume, which amounted to EUR 2,280 per tonne in 2019, is approximately in line with the October view estimate we provided to you in our third quarter earnings call. This zinc blended price represents an increase of EUR 112 per tonne compared to 2018. Zinc volumes hedged in 2019 remain flat year-on-year as usual, at the usual 92,400 tonnes per annum rate. Therefore, the improvement 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 to three to four years out hedged. We hedge around 60%-75% of the zinc equivalent payable volumes. We continue to hedge the majority denominated in euro. The hedge prices we show are net prices after credit line forward and currency forwards discount. At Befesa, 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 review.
Thanks, Wolf. Although a more detailed guidance for 2020 earnings will be provided once the treatment charge for zinc has been settled, I would like to finish providing a few comments on the outlook for 2020. 2020 is suspected to be a year of a strong operating performance, benefiting from the executed projects of 2019, as well as further strategic 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 end of April of this year. In our Steel Dust business, we expect to run our plants at high capacity utilization across all the markets we operate. Similarly, in our Aluminium Salt Slags Recycling Services, we expect to continue our high plant utilization levels. In 2019, we invested strongly and successfully execute the majority of the organic growth projects that form one of the big building blocks of our midterm growth roadmap. For 2020, we expect this project to deliver positive earnings contribution. In the Steel Dust segment, up graded plant in Turkey has an annual recycling capacity of 110,000 tonnes of steel dust. For 2020, we expect to increase the total volume of the steel dust recycled 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 steel dust throughput and plant utilization well above 90% in 2020. In South Korea, the new washing plant for WOx will increase the level of earning contribution and margin of the South Korean operations by providing to our zinc smelter customers a high rate of WOx. Although the full level of earning contribution will not be achieved until 2021 for commercial reasons. In the Aluminum Salt segment, the furnace upgrades at the Spanish plant of Aranjuez 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 dust recycling plant in Jiangsu with a recycling capacity of 110,000 tonnes is expected to be completed by the end of 2020. The second plant under development is in the province of Henan. It's scheduled for completion by the middle of 2021, in the third quarter of 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 on Befesa. In the short term, we expect for two or some delay in the construction of our plant that cannot be totally quantified at this stage. In any case, in the midterm, our expectation about the business opportunity for Befesa 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 Befesa provides. 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 dust 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, Befesa 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 circular 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.
Ladies and gentlemen, the Q&A session starts now. If you wish to ask a question, please press zero one on your telephone keypad. Thank you. The first question comes from Charlie Mortimer from Citigroup.
Morning, Javier. Morning, Rafael. Morning, Wolf. Just two questions from me. To confirm what you just said 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, EUR 5 million, in terms of EBITDA? Did you, just to confirm, you said that benefit of the EUR 5 million or whatever it is, will be FY 2021 rather than necessarily FY 2020? Second question, regarding utilization for this year. Are 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 washing plant of South Korea, yes, the total contribution of the plant at full operation will be, depending on the same prices, between EUR 4 million-EUR 5 million. 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, we will be in a position to feed totally the plant in 2021. The second question was?
Regarding the utilization for this year, I think you were just saying that you can get back to 90%.
Yes. The utilization rates on average in the Steel Dust business will be above 90%. The same will happen in salt slag and secondary aluminium. We don't expect any problems in feeding the plant. We expect to have a high utilization rate.
Excellent. Thanks, Javier.
Thank you. The next question comes from Ingo Schachel from Commerzbank. Please go ahead.
Yeah. Thanks. I would have two questions. The first one on your China expansion. I think you've explained quite well that the construction timeline is more or less confirmed. Regarding the commercial negotiations with your customers, I would think that now the time is approaching where you should actually strike first contracts with your customers. 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? Is it that you're probably sourcing material from slightly bigger distances away from your plant or any other surprises in the first commercial discussions with clients?
Hi, Ingo. Well, initially, we have in the two plants in China, as I told you in the presentation. Regarding the point in Jiangsu, before the coronavirus, we expected to finish the construction at the end of 2020. With 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. We don't know exactly when they will come back to the plant. 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, two months, let's see. It depends how evolves the coronavirus situation.
Regarding the negotiations, well, we have a detailed plan to start talking with all of our potential customers, especially in Jiangsu this year, starting right now after the Chinese New Year. Well, we have, again, some delay because the coronavirus, but we don't expect any surprise, anything different from the first conversation we have with all our potential customers. We have maintained with all of them permanent contact, permanent conversations. We know that they are waiting for us to finish our work on our plant 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. The second question would be on your available capacity in Aluminium Salt Slags Recycling Services. I think during the last two years, you always had a slightly lower available capacity in secondary aluminium because of the upgrades in Bilbao, 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 solid slags? Should we expect any big impact on available capacity from the Hannover upgrade?
Okay. Let me start with the salt slag business. In salt 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. 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 issue. That is not something that we cannot forecast. Regarding the capacity expansion of Hannover, well, we are today in the first step in getting the final permits to do the capacity increase of the plant. On the other hand, we will be cautious analyzing the European automotive industry before to start this construction work. Today, we are in a position to feed 100% our plants. The market is in a very stable situation.
The last thing we would like to do is to create our capacity in the market. It's a decision that probably we are going to take more next year than this year. Okay.
Okay. Maybe just a quick housekeeping question on the revenues. 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, or that would help us to understand why revenues were a bit low? I guess there's also 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. The rest, the small difference could be explained by volume, but nothing special. I don't know if, Wolf, you want to highlight something more.
No. Nothing special, and no other impact.
Okay, great. Thanks very much.
Thank you. The next question comes from Oscar Val Mas from JP Morgan. Please go ahead.
Good morning, everyone. It's Oscar from JP Morgan. My question is on throughput. It seems like Q4 throughput was down 2% year-on-year. My understanding was that Turkey was fully ramped up in Q4. The question is, was there any impact from Turkey in that Q4? Why have you adjusted the Q4 utilization from 85% to 95%? 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, we started the ramp up in Turkey on time at the end of August of last year. At the end, we faced some troubles in the ramp up, basically because the layout of the Turkish plant is very difficult. In the new geographies like Turkey or like South Korea or China, we have a very well-defined plant, perfect rectangle, et cetera. The layout of our old plant in Turkey is really very complicated. Based on that, we have some ramp-up problems. 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 this less production in Turkey. Okay?
Okay. That 95% is ex Turkey, so kind of Befesa ex Turkey.
Absolutely.
Okay, perfect. Thank you.
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 some more small recovery. We cannot think in big figures, perhaps this year we can try to achieve another EUR 1 million or EUR 2 million additional in the stainless steel business.
Okay, perfect. Thank you very much.
Thank you. The next question comes from Benjamin Pfannes-Varrow from Berenberg. Please go ahead.
Hi. Good morning. Just following up on that same question in terms of the volumes. 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? Do you also expect the same heading into Q1 of this year?
Yes. Benjamin, good morning. As Javier mentioned, the plant construction in Turkey was completed on budget, on time at the end of 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, you're seeing no issues from weakness in the fourth quarter?
Not really, Benjamin. 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 each plant. The maintenance shutdown could be between two to four weeks, depending on how we are going to find in the repairs, et cetera. One week of additional shutdown means 2% of utilization rate. 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%. That will depend more in our case, in the extent of the maintenance shutdown than any other thing. What we can confirm is that last year, we didn't have any problem of supply neither in our European plants nor in our South Korean plants. Okay? It is the same situation we expect for this year.
Okay. 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 Dust Recycling business of around 10% compared to 2019.
Yeah. Will that be a gradual ramp over the year, or do we already see Q1 being a stronger full year than in Turkey, basically?
In Q1, 2019, in January, Turkey was in operation. The increase will start in February. From February, we will see gradually this increase.
Okay. Thank you.
Great.
Thank you. Ladies and gentlemen, just a reminder. In order to ask a question, please press zero one on your telephone keypad. The next question comes from Jaime Escribano from Banco Santander.
Hello, good morning. I have one question regarding net debt 2020. Where do you see the net debt, EBITDA? I link this question to what you put on the refinancing, which basically says that you have a ratchet and you can reduce the Euribor plus 200 basis points down to 125 basis points if your net debt to EBITDA is below 1.7x after nine months. When do you think you can be below that level, and how does this reconcile with maintaining a dividend of EUR 1.32 per share? Would it not be maybe better to pay less dividend and be below 1.7 x in order to save interest, for example? Thank you.
Jaime, thank you very much. 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 somewhere around 2.6 x. Again, then in the April call, we will provide more concise guidance on that. In terms of the new capital or the repricing, yes, it is correct that for leverage at or above 2.25 x leverage, currently the rate is Euribor plus 200 basis points. We have a hold on that for nine months. For the remaining six and a half life of the loan, we have ratchets from 2x -2.5 x, it's going to be Euribor plus 175 basis points. From 1.75 x-2x leverage, it is Euribor plus 150 basis points.
For leverage below 1.75 x, it is Euribor plus 125 basis points. At this stage, it is all about the timing of our China growth expansion.
About the evolution of zinc price and aluminium price and treatment charge. Depending what's happening with the metal prices and the treatment charge, we will achieve the new ratchets sooner or later. Regarding the question about the dividend, we have been thinking about that, 50 basis points of less interest rate means EUR 2.5 million approximately. With the reduction we have achieved, we are going to get this figure. We have considered that to send to the market, to our investors, the message that we are in the position to pay a stable dividend is a very good message. That's why we have considered, and we are going to present to our shareholders in our shareholders' meeting the approval of this measure.
Because we want to send a message to our investors that Befesa, 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 a stable dividend.
Okay. Thank you very much.
Thank you, Jaime.
Thank you. The next question comes from Oscar Val Mas from JP Morgan. Go ahead.
Hi, guys. Another question from me quickly. It's a difficult question. I don't know if you can answer it. Just if we think about treatment charges, just qualitatively, 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 it going above $300, or should we think about $300 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. This week, Asier Zarraonandia has been in Arizona in USA., in meeting with all the zinc and smelter producers in the world. There are a lot of rumors, but nobody knows what is going to happen really. If you read the reports of the different analysts, some people are talking about $300, other people are talking about the same level than in 2019. On top of that, we have the coronavirus, with the Chinese markets quite close. Frankly speaking, to talk about treatment charge and prices is always to talk about the crystal ball, but in this situation, it's even more difficult than normal.
Okay, that's fine.
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. Ladies and gentlemen, just a reminder, in order to ask a question, please press zero one on your telephone keypad. The next question comes from Michael Hoffman from Stifel. Please go ahead.
Thank you. Well, 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, sure, Michael. In terms of volume for 2020, we have three volume or additional efficiencies. We have three new things. First is the additional capacity in the plant of Turkey. We expect an increase in the Steel Dust Recycling business of around 10%. We have another 60,000 or 70,000 tonnes of recycling capacity. We produce additional EBITDA. We will have the washing plant in South Korea, that, as I commented, will be in full operation for commercial reasons in 2021, but will produce some additional EBITDA in 2020 as well. We have the new furnace in Barcelona that will produce some additional EBITDA as well. On top of that, we expect some additional efficiencies in the stainless steel business. If we would maintain the metal prices and treatment charges at the same level, that will be more or less the situation.
That will be the increase that you can expect in terms of volumes. In the negative side, we have a worse hedge in 2020 compared with 2019 that will affect our P&L between EUR 5 million-EUR 6 million. This is the summary.
Can you say that last part again? I didn't understand the last part.
Yes. Last year, our hedge price was at EUR 2,310 per tonne, and this year, the hedge price is EUR 2,250 per tonne. This EUR 60 of difference will produce a negative difference compared with the previous year of around EUR 6 million.
Yeah, it's pure math, Michael. You take the EUR 60 per tonne difference times 92,400 hedged tonnes, you come to somewhere EUR 5.5 million headwind. Yeah. From the hedges.
Right. 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, you should be up slightly in profitability given the puts and takes. The lower metals prices, but better volume offset by lower blended hedge.
Yes.
If treatment charges stay where they are, yeah.
Okay.
Yep, all right. Capital spending ought to be down in 2020, right? Something like EUR 25 million, EUR 30 million?
The overall CapEx, we expect should be similar to what we've done in 2019. If you follow the overall trend, in 2018, we spent EUR 41 million, in 2019, we doubled that. We spent EUR 82 million. We expect for 2020 a similar level and also a similar split in terms between maintenance and growth spending. In 2019, we spent roughly, after EUR 82 million, we spent roughly EUR 25 million on maintenance, as usual. Maintenance including IT, productivity, compliance, et cetera. Growth, we spent roughly EUR 57 million. For 2020, we expect a similar overall level, somewhere around EUR 80 million-ish. We expect about EUR 25 million as usual on maintenance, and then the rest on growth.
Okay.
Again, we'll come back to you in April with very concise numbers, but this is approximately what we see.
Okay.
The growth portion will be dedicated nearly entirely to China. Yeah.
Right. That's what I thought. Okay. Lastly, in other revenue lines that are in the steel business, should we assume they're flat year-over-year? The close movement around the top line.
Basically, yes.
Yeah. Okay.
Basically, yes.
That helps. Yep. 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 Befesa for any product clarification. We will now conclude the conference call and the Q&A. Let me remind you that you can find the webcast and the dial-in details to access a recording of this conference call in our website, www.befesa.com. Thank you very much.