Ladies and gentlemen, welcome to the first quarter 2026 results conference call. I'm Lorenzo, the Chorus Call operator. I would like to remind you that all participants will be listen only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for question at any time by pressing star one on your telephone. For operator assistance, please press star zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Rafael Pérez, CFO. Please go ahead.
Good morning, welcome to the Q1 2026 results conference calls of Befesa. I am Rafael Pérez, CFO of Befesa, and this morning I'm joined by our group CEO, Asier Zarraonandia. Asier will start with an executive summary of the period. I will cover the business highlights for the steel dust as well as aluminium salt slag recycling businesses. I will then review the Q1 financials by business and will cover the evolution of commodity prices, our hedging program and finally cash flow, net debt leverage and capital allocation. Asier will close the presentation providing an update on the outlook for 2026 and an update on our growth plan. Finally, we will open the line for a Q&A session. As always, this conference call is being webcast live and you can find the link in our website.
Let me turn the call over to our CEO. Asier, please.
Good morning and welcome also from my side. Please move to page 5 with the financial and business highlights for the first quarter of 2026. We had a good start into the year despite a challenging macroeconomic environment. Adjusted EBITDA increased by 4% to EUR 58 million and the margin improved accordingly from 18% to 20%. This development was driven by both segments, steel dust and aluminum. Net income and earnings per share increased by a double-digit rate, being up by 11% year-over-year. Both KPIs were driven by operational improvements as well as better financial results. As last year, Q1 was impacted by maintenance activities, resulting in overall steady steel dust volume against a volatile market backdrop. In aluminum, we are seeing signs of recovery, especially at the end of the first quarter, despite challenging business environment.
Regarding 2026, we expect another year of earnings growth with adjusted EBITDA ending the year between EUR 250 million and EUR 270 million. We expect quarterly earnings to gain momentum as the year progresses, driven by lower maintenance and higher volume. I will comment on the outlook in more detail later. Moving on to page six, business highlights for the steel dust business. In Europe, total steel production remained on a declining trajectory in Q1. Production declined by 3% year-over-year, reflecting overall weaker demand. The EAF route was less affected by these pressures and steel dust supplies remained stable and deliveries continued at solid pace in Europe. In the U.S., steel production increased by 6% in Q1 2026.
Supported by overall solid demand, this trend is also reflected in the load factor, which rose to 63%. We are starting to process dust from new EAF steel dust contracts gradually. In Asia, Turkey started the year with a soft steel production, while Korea sees business as usual with load factors almost similar to last year. Lastly, the situation in China has not changed. The market remains weak and load factors at low levels, remaining break even at P&L and cash flow. Moving on to page seven with the business highlights for the aluminium salt slag recycling business. Starting with salt slag, the year started softly, mainly due to lower secondary aluminium production in Europe, resulting in an average capacity utilization of 82%.
We have already started to see an improvement in business environment by the end of the first quarter going into the second quarter and are confident the capacity utilization will recover in the next quarters. Similarly, our secondary aluminum segment followed the broader European trend, resulting in a decline in volumes. However, measures implemented in recent quarters, particularly a stronger focus on operational discipline and cost efficiency, enable us to preserve profitability. Looking ahead, the Bernburg expansion will support further diversification of our customer base and end market exposure, starting already with the ramp up in the third quarter. Rafael will explain the financials in more detail.
Thank you, Asier. Moving on to page nine, the financial results for the steel dust segment. Adjusted EBITDA in the first quarter of 2026 was EUR 58 million, representing 4% year-on-year improvement. Higher volumes of Waelz salt compensated for unfavorable FX movements in the quarter. EBITDA margin improved from 25% to 28% in the period. At group level, utilization in steel dust remained unchanged year-over-year at 65%, partly impacted by maintenance shutdown. On a regional breakdown, the U.S. and Europe increased utilization, which was offset by Asian markets. During the quarter, zinc price in U.S. dollars increased by 14% to an average of $3,243. The unfavorable Euro dollar exchange rate caused that the increase in zinc price in euros was just 3%.
Considering the zinc price and the hedging, the blended price in the quarter was EUR 2,615, pretty much in line with the previous year. Coke and electricity costs were slightly down year-on-year. I will provide more details on our energy costs in some minutes. Moving on to page 10, financial results for our Aluminum segment. Aluminum, Salt Slag segment delivered EUR 9 million of EBITDA in the first quarter of the year, which represents a 10% year-on-year increase compared to the same period of 2025, even in a challenging environment. The year-on-year EUR 1 million positive EBITDA development was mainly due to higher collection fees in Salt Slag, as well as overall lower energy and operating costs. This positive development was partially offset by lower volumes in both segments, as well as slightly lower metal margin in the quarter.
We operated our plants at a solid utilization rates of about 87% in salt slag and 66% in secondary aluminum. As explained by Asier, we are seeing a recovery in the secondary aluminum business already in Q2 and are confident about the development of the rest of the year. Moving on to page 11, zinc price and treatment charges. Regarding zinc LME prices during Q1 2026, zinc traded in the range of $3,000-$3,487 per tonne, showing a particular positive trend in the first month of the year. The average zinc LME price in Q1 2026 has been $3,243 or EUR 2,770 per tonne. On the right-hand side of the slide on treatment charges.
Treatment charges for zinc have been settled in April at $85 per ton for the full year 2026, compared to $80 of last year, 6% higher compared to 2025, which was all-time low record level. This factor confirms that the supply zinc concentrate market is still very tight, with the spot treatment charges below the current annual benchmark. Turning to page 12 on hedging. As explained in the previous call, we have taken the opportunity of the recent rally in the zinc price to be very active on our hedging program. Our hedging book has been extended to and including July 2028 at an all-time high level of $3,100 per ton. For 2027, the hedge is set at $3,000 level, $3,000 per ton. This provides stability and visibility over the coming quarters.
Turning to page 13, Befesa energy prices. The page shows the evolution of the three main energy sources that we have in Befesa: coke, natural gas, and electricity. With regards to coke prices, which today represents roughly 50% of the total energy bill, the normalization that started in 2023 continues throughout 2026. Average coke price in the first quarter was around EUR 147 per ton, consolidating its downward trend compared to the previous quarter. Regarding electricity, which today accounts for 40% of the total energy expense, prices are at a similar level than in the fourth quarter of last year, around EUR 111 per megawatt hour, after a significant correction in the second quarter of 2025. Gas prices saw a slight increase in the first quarter of 2026 to EUR 51 per megawatt hour.
We remain cautious regarding the impact that the situation in the Middle East may have on the development of energy prices and general inflation for the rest of the year. Turning to page 14, the cash flow results. Operating cash flow in the first quarter of the year reached EUR 38 million, which represents an increase of 12% compared to the same period of the last year. On the EBITDA to cash flow bridge, starting with EUR 58 million, adjusted EBITDA, and going to the right. Working capital consumption amounted to EUR 17 million in the first quarter. As in previous years, the first quarter working capital is typically impacted by seasonality. This will be recovered throughout the year, especially in the last quarter, as we have already seen in the last years.
Taxes paid in the first quarter came in at EUR 3 million compared to EUR 7 million in the same period of last year, resulting in operating cash flow of EUR 38 million in Q1, up 12%. On CapEx, in the first quarter, we have invested EUR 15 million in regular maintenance CapEx across the company, EUR 11 million in growth CapEx related to the Bernburg expansion project in Germany. In summary, total CapEx of EUR 26 million in the quarter. Total CapEx for the full year is expected to be around EUR 70 million, which is expected to be front-loaded, with the second half of the year reducing the level of investment. Total interest paid amounted to EUR 9 million, reaching EUR 10 million with other minor items. In summary, final cash flow amounted to EUR 2 million in the first quarter.
Cash on hand stood at EUR 145 million, which together with our EUR 100 million undrawn revolving credit line, provides Befesa with more than EUR 245 million of liquidity. Net debt was greatly reduced by 10% to EUR 550 million, resulting in a net leverage of 2.25 at closing of the quarter. A strong improvement compared to 2.78 at March 2025. Turning to page 15, the debt structure and leverage. Befesa today has a long-term efficient capital structure with optimized financial cost. Net leverage improved significantly to 2.25 at the end of March, marking the 8th consecutive quarter of leverage reduction. For 2026, net leverage is targeted around 2 x and below 2 x onwards, reflecting Befesa's continuous commitment to discipline capital management.
We will prioritize the growth CapEx on this project that will deliver immediate cash flow upon completion, like the approved project of Bernburg and other market opportunities that may appear. We will keep the annual regular maintenance CapEx around the level of EUR 45 million over the coming years. On dividend, we are committed to maintain our dividend policy to pay between 40%-50% of the net income to shareholders. For 2026, the board of directors will propose the AGM to pay a dividend of EUR 40 million, equivalent to EUR 1 per share or 50% of the net income. This dividend is 37% higher than the dividend paid last year. Moving on to page 16. Befesa is entering into a new cycle of low CapEx and high earnings, resulting in strong free cash flow generation and shareholder value creation.
During the last years, we have gone through a high CapEx cycle, which has allowed the company to expand our operations globally into the U.S. and China. Now that this cycle is completed, we are entering into a new cycle of limited total CapEx below EUR 80 million per year, along with high earnings resulting in strong free cash flow. Our total cash flow after three years of negative cash flow in 2025 has marked an inflection point, delivering strong financial cash flow. Total cash flow is expected to follow a positive trajectory, reflecting the company's improvement and stronger underlying cash generation. Finally, as I already mentioned, leverage is expected to be kept below two times over the coming years, allowing greater optionality in future capital allocation decisions. Now, back to Asier on outlook and growth.
Moving on to page 18, 2026 guidance. The start into the financial year of 2026 has developed according to our expectations. We expect 2026 to be another year of earnings growth. On EBITDA level, we expect to end the year between EUR 250 million and EUR 270 million, which translates into a growth between 3% and 11%. After 4% EBITDA growth in Q1, we expect growth to gain momentum as the year progresses. We expect total CapEx in the year to be around EUR 70 million. This will enable us to further reduce leverage to around two from last year's level of 2.3. Moving on to page 19. Going through the main elements. We expect the steel dust volume in Europe to grow only modestly as we are already running at very high optimization.
Volumes in the U.S. will increase, driven by new contracts with the steel makers. In the rest of the world, steel dust volumes are expected to develop broadly in line with last year. Salt slag operation are expected to maintain broadly stable volumes compared with 2025, enjoying higher collection fees. The metal margin for secondary aluminum is anticipated to improve gradually over the course of the year, particularly after bottoming out in the third quarter of 2025. We are already seeing an improvement in the business environment in April, which make us confident. For energy cost, we expect a mix of development in 2026, with global coal prices likely down to stable, but natural gas and electricity prices increasing in Europe. General inflation continues to impact maintenance, auxiliary materials, and personal costs across all regions, creating a negative pressure point in the cost structure.
We should be aware that developments in the Middle East will influence energy prices and overall inflation for the rest of the year. As explained by Rafael, due to ongoing tightness in the zinc concentrate market, the benchmark treatment charge settled at $85 in 2026, was slightly up compared to last year's $80. Hedging activity for zinc remains stable, with the average 2026 hedge price set at approximately $2,990 per metric ton, consistent with 2025 levels, suggesting a neutral hedging position. Total CapEx for the year will be around EUR 70 million, with around EUR 45 million for regular maintenance and the remaining for growth in the expansion of Bernburg. We will continue following our disciplined capital allocation strategy and ongoing focus on free cash flow generation, we therefore anticipate further deleveraging, with net leverage declining to around 2 by year-end.
Moving on to page 20, our expansion project in Bernburg, Germany. We are on track with our planned decision for expansion project and expect Bernburg to start production the second half of 2026. This is another important milestone in Befesa's growth journey as we continue to strengthen our aluminum business and expand our recycling capacity in Europe. This project is an example of how we diversify our customer base and end market exposure toward less volatile business. Verbund will also contribute to our slightly H2 earnings growth momentum in 2026. Moving on to page 21 about the European steel industry. Europe is accelerating its transition toward electric arc furnace steel making, largely driven by decarbonization targets and supportive policy frameworks. Between 2026 and 2030, 30 new EAF projects has been announced to come online.
This represents more than 22 million tons of new EAF capacity, which equates to a 24% increase compared to the 16.9 million tons of electric arc furnace capacity in Europe. As a result, EAF penetration is expected to rise from the current 45% over the next 5-10 years, supported both by this new project and the progressive replacement of blast furnaces. Given our strong market position, established customer relationships and ongoing business development efforts, Befesa is strategically well-positioned to capture the significant volume growth expected from this structural shift. We are already engaged in advanced negotiation with key customers to support this expansion phase in the coming years. Moving on to page 22 about the U.S. steel industry.
In the U.S., electric arc furnace steel capacity is projected to increase by more than 25% by 2028, equivalent to around 21 million tons of new steel making capacity. This expansion translate into over 300,000 tons of additional steel dust, creating a substantial opportunity for Befesa recycling operation. With a total installed capacity of 650,000 tons across our U.S. plants, we are now well-positioned to leverage this growth. Our goal is to progressively ramp up utilization to below 70% today to around 90% by 2028 as new electric arc furnace capacity comes online. The combination of our modernized Palmerton facility, long-term customer relations and strategic geographical footprint near key steel producers ensures that Befesa is ready to capture this next phase of growth in the U.S. market. Thank you very much.
Thank you, Asier. We will open the lines for your questions.
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you are entering the queue. If you wish to remove yourself from the question queue, you may press star and two. Participant are request to only answer while asking a question. Anyone who has a question may press star and one at this time. The first question comes from the line of Lasse Stüben from Berenberg. Please go ahead.
Hi, good morning. I have a question just on the energy side of things. Could you provide the breakdown again if possible? I know you mentioned it briefly in the presentation, but just to get some more color. Also just generally, I know you've given some detail around how you're thinking about this in the full year guidance, but is there anything you've kind of changed from, I guess, 2022 in terms of your energy exposure and how you're thinking about hedging some of the volatility? That would be the first question. The second question would be, could you confirm whether maintenance shutdowns took place again in the first quarter, or if we should expect anything else in the remainder of the year?
Finally, on European EAF, it seems like, you know, some of the projects there are progressing quite well. Could you give a feeling on general timing on when you might make a decision regarding the expansion for Recytech on your end of things? Thank you very much.
Thank you, Lasse for the question. I will take the energy question. We didn't hear very well your second question, so if you can repeat that.
Yeah. The French, the French project.
Oh, that is the third.
Oh, the third. Sorry.
Can you repeat the second question, Lasse? We didn't get that one.
Yeah. Of course. The second question was just around whether you undertook maintenance shutdowns again in Q1 like you did last year, I think was the case.
Yeah, that's clear. On energy, basically our total energy bill today is around EUR 100 million. Out of that, around 50% is coke. We are not seeing coke prices impacted by the current situation in the Middle East. 40% around that is electricity and 10% is natural gas. Although we have seen some peaks throughout the first quarter, the average price in the first quarter of energies are, as I explained, pretty much in line with the previous year. Maybe natural gas is picking up slightly versus the previous quarter, but it's nothing super relevant. As you know, natural gas and electricity typically impact our secondary aluminum business.
Although the first quarter in the secondary aluminum business has not been very strong, we are seeing a strong business performance improvement in the second quarter already. Our ability to pass through these energy price increases to the customers in aluminum is pretty high. We don't see that the situation is similar to the one that we saw for in 2022, where the main impact was obviously on natural gas, but especially on coke, given by the fact that there was a lot of production of coke coming from Russia and Ukraine. On maintenance and r ecytech, Asier will take.
Thank you, Lasse, for all the questions. Yes, maintenance and basically, I think I used to tell you guys that normally it's very difficult to move very, very far the maintenance because normally the yearly basis stoppages is the how the kilns run normally. Yes, Q1 was expected to be the lowest in the year once again. Q2, Q3, higher than the Q1 of course, and probably higher. I, we do expect higher, you know, volumes than Q1 and for last year, and the highest obviously is the Q4. Q2, Q3 could be similar, Q4 for sure. All in all, we expect, as we say, some growth in volumes treated, especially driven by U.S.
Yes, the Q1 is the weaker and, you know, how weak are normally the queues depends as well in the days that you need to do the maintenance periods and so. At the end of the day, the importance for us is that we have the stocks, we have the deliveries, and we can run the furnace in a higher level in the Q2, Q3. Regarding France, yes, you are right. There are some projects ongoing and coming. You know, you have the Tata one in U.K., you have the SSAB in Sweden, you have Salzgitter, you have voestalpine. You have as well, you know, ArcelorMittal Gijón has started already. Well, starting to ramp up and so on.
Well, our idea now is probably during 2027, 2028, start with the project, but it's not still defined because again, the projects of the steelmakers are there, but are not running. I mean, running quick, I said. Probably they are slow and going very careful. We want to keep more or less the idea of those years, but can be, you know, move, I don't think more than 6 months. In the range of 2028 and running 2029 probably is our main idea now, to be confirmed, but no very different than that. Unless any issue coming with the steel dust or, sorry, steel production projects from the steelmakers. We don't hope already.
Understood. Thank you.
Thank you, Lasse.
The next question comes from the line of Shashi Shekhar from Citi. Please go ahead.
Hi. Good morning, everyone. Thank you very much for this opportunity. I have a couple of questions. First, how much capacity utilization you are targeting the steel dust business in the U.S., Europe, Turkey, and Korea this year? My second question, what zinc LME prices you have used to estimate your 2026 EBITDA estimates? That's it.
Thank you, Shashi. Asier will take the first question and I will take the one LME.
Yes. I think if the capacity utilization, probably you can get the reference for 25 in Europe and Korea and Asia in general. The one what we do hope to increase this year is the U.S. part, no. We do think that it's possible for us to increase to 73-75 capacity utilization this year, based on the new steel dust contract. This is coming from the, you know, high 60s in the last year. The rest is more or less the same because the capacity in Europe is very, you know, is almost fully utilized. The situation in Turkey, Korea, and China, we do hope that they are gonna be more similar to 25. All in all, we do hope to be in the levels of above or around 75% in the year. This is in the global Befesa expectation.
Regarding the assumption on LME price on the upper and the lower ranges of the guidance, I think what we have said, Shashi, is that the guidance considers a number of moving parts. As you can see on page 19, there are certain elements which are well-known, like the treatment charge and the hedging. But there are other elements which are not so well-known. LME price is obviously uncertainty, but it is also energy prices, FX, and so on. I cannot give you a precise number.
What we do is, we create like a more optimistic scenario across a number of variables and a more pessimistic scenario across another, the same number of variables, okay. With that, we come out with the upper and with the lower part of the range. I cannot give you a precise number because there are so many moving parts embedded in the upper and in the lower part of the guidance.
Yeah. Got it. Thank you very much.
Thank you, Shashi.
The next question comes from the line of Olivier Calvet from UBS. Please go ahead.
Yes. Hi. Good morning. Thanks for taking my questions. Maybe just another one on energy impact. You know, what assumptions are you making on gas and electricity prices in your guidance? It sounds like you're calling sort of the pet coke level flat-ish through the rest of the year. Or sort of if you could give us a sense of the EBITDA impact of a change in, let's say, EUR 10 per Megawatt-hour of electricity and gas, that would be helpful. A second question would be on secondary aluminium. I was just wondering if you could talk to us about the upside and downside scenario, given the disruption we're seeing on the supply side. Any impacts on metal margins?
I think you talked at the last call of something like the EUR 8 million-EUR 10 million EBITDA level as the level you're confident with, but is there any upside there? Just on EAF volumes. I think you talked about weak volumes in Turkey in Q1, but an expected improvement in the second quarter and second half. Can you just talk a bit about the impact of the European safeguard measures on your non-European footprint, please? You know, given also, the export share of that market. Maybe I'll take the rest, in the queue.
Thank you, Olivier. On energy, basically, we expecting coke prices to continue, as I said, the downward trend, not strongly, but gradual, a slightly positive result coming from slightly better prices across all regions. You could say that that's like the middle part of the guidance range. On electricity and natural gas prices, I would say also that the average of last year is like the midpoint of the guidance range. As I said, first quarter, we are seeing very stable prices. Obviously, if the crisis in the Middle East continues, that may have an impact, but that is an uncertainty that we have, you know. That's what I can tell you, Olivier, regarding energy impact.
On secondary alu, I think Asier you can take that.
Yes. Thank you for the question, Olivier. Well, in the secondary aluminium, we really, despite the fact that the Q1 came at the beginning of the year, especially January, with some instances from the producers and so on because the Christmas period, December, they prolonging the starting up of the year. Later, they are coming back to normal volumes and the margins we can feel in March and especially now in April, probably helped by the high aluminium price, the margin are improving very clear. Yes, we are optimistic with this and probably the range that you say, the EUR 8 million-EUR 10 million, probably we can see now with a little bit more comfortable despite, as I said, the fact that the Q1 is still a little bit far from that.
Yes, we see the recovery is coming in that level. Regards to the electric arc furnace, it's a good question about first, the measures that the European market is taking with the CBAM, or even with the idea to put the quotas and less imports. Well, this is still to see. Well, in any case, for us in the European market, it's difficult to grow from the current circumstances. The steel makers are all expecting to increase the production and as well the prices are going better in Europe. This is a fact. How that affects to the rest, I think that the main affectation could be probably China, that were, you know, having records of export last year and probably will be affected by.
They can go to other Asian parts, and we will see. In the particular case of Turkey, I think they have their own circumstances and the Q1 is more related to the, once again, starting up the year than normally they get for maintenance stoppages. No, we don't see changes. Based on our deliveries on a daily basis is what is the best for us to understand how the things are going. We do hope the year will be similar than last year in that case. The measures, we will see what happens.
Thanks. Maybe I'll just ask my last one on EPS. Just if I look at the delta between the low end of EBITDA guidance and the minimum EPS sort of guidance, that's around sort of EUR 160 something million of below EBITDA let's say costs. Is that sort of the level we should be thinking about or any risk this is higher? Just wondering about sort of the how we should think about the range at EPS level.
That makes sense. That assumption makes sense, Olivier.
Okay, thanks.
Thank you, Olivier.
As a reminder, if you wish to register for a question, please press star and one on your telephone. The next question comes from the line of Fabian Piasta from Jefferies. Please go ahead.
Hey, good morning, gentlemen. Thanks for taking my question. Some were already covered, a couple left. First, would be the target margin in secondary aluminum, after the Bernburg expansion and adding Befesa to that portfolio. Can you give us a flavor for that? Is that something where you were expecting to move more towards the mid-single digits margin in 2026 already and then further in 2027, or how can we think about that? Second is on interest expense recovery from potentially improved margin ratchet. Could you quantify that? Are we looking at finance expense of more towards EUR 30 million in 2026, or is that too early? The third and last, could you maybe be more, bit more precise on your capital allocation strategy going forward?
I guess M&A is not the biggest topic, but could we also expect buybacks for your capital allocation strategy? Thanks. Going back to the queue.
Thank you for the question, Fabian. I will take the aluminium one, the margins. Well, we really hope that the margins in aluminium, the increase in Bernburg will help because it's more secure, but I think that is moving in the one single digit is the case. It's gonna help because it's more stable than others because it's a tooling basis contract in this case and it's helping. The margins really are more dependent on the situation of the market. So projecting in a mid or in the top part of the single digit, I think that could be a good range to have a reference in the aluminium. Regarding the interest spent that we spent for the year, Fabian, yeah, between EUR 30 million-EUR 35 million, I say is a very reasonable assumption, okay?
Let's say as the year moves on, we will fine-tune this number, but at start of the year, I think that's a good reference.
About the capital allocation for the future.
Yeah, capital allocation. Yeah. I think we have said, no, that we. I think it's a very important message for everyone to understand. We are entering into a new cycle, no? All the heavy investment is already behind us. That has enabled us to expand our footprint globally to the U.S., which is a very attractive market, and to China. Well, now the capital allocation priorities are very clear. On the one hand, we need to spend EUR 40 million- EUR 45 million on maintenance CapEx to keep our asset base running properly.
Secondly, we have a commitment to pay a dividend to our shareholders of 40% to 50% of the net income. We want to keep it the leverage below two times for the coming years. That is something that we are fully committed. Obviously we have some projects like the one of Recytech that Asier explained around the corner, which is delivering a very super high attractive return for our shareholders. After that, all the cash excess will be delivered to the shareholders, either via extra dividend or as a share buyback. I don't think M&A, Fabian, is at the moment in the pipeline or in the radar. As you know, we are operating in a very niche environment, in very niche industry.
The big M&A opportunity was in the U.S. already. Part of our strategy is not to get into any other businesses other than our core business, steel dust and salt slag. Obviously, as we have already explained in the previous call, no share buyback is something that, depending on the valuation of the company and the share price, we will definitely consider.
Great. Thanks, guys.
Thank you, Fabian.
The next question comes from the line of Jaime Escribano from Banco Santander. Please go ahead.
Hi. good morning. Can you hear me?
We can hear you, Jaime.
Two questions from my side. One on zinc prices and hedging strategy updates. On zinc prices, from your channel checks, if you can provide a little bit of outlook, how you see the supply-demand model, the demand of zinc prices seems to be consistent above $3,000. Just to have your view there. In terms of hedging strategy, if you can update us until when you have the hedges and if you think you can hedge a little bit more at current prices. The second would be more in the interim. The stock is down around 6% today, probably illiquidity. We know that it happened in the past.
What could you say in order to provide comfort to investors in order, in terms of your visibility and in terms of the guidance, in order to provide some assurance to the stock in the short run. Thank you.
Thank you, Jaime. On hedging, I think you have all the details on the presentation on slide 12, and I have covered that. Now, we are fully hedged until July 2028 at a record high zinc price levels in USD. We are continuing to monitor the obviously the opportunities. There are two elements in here. One is the spot price, and then the other thing is the future curve, no? Whether that is in backwardation, that means the future prices are lower than the current spot prices or the opposite, no? Yeah, we're monitoring. It is true that even in the current volatile environment, commodity prices, especially zinc prices, are holding up pretty well. Yeah, we will keep you posted. On the stock, Asier.
Well, I think that talking about the stock is difficult for us because obviously we think that the stock is far from the point it should be if I were the managing the markets, right? Being serious, I think that no matter what happens today, because probably the reaction at the one was expecting more, one was expecting less. I think we are in line with what we are telling. I mean, it's the next two, three years until we do the next investment in Europe are going to be growing years based on the U.S. basically, despite the, because based on the U.S. and the volumes and the hedging we have. We are on our way to EUR 300 million EBITDA in three, four, five years.
Very, very, you know, cash generating company, reducing the leverage ratio probably in the next three years below 1.5. Yes, I think we are gonna have a very, very, you know, good financial and balance situation. I do hope that the share deserves more price. Obviously, market is the real owner of those things and decisions and going forward. I think that today probably is a very short time. Probably once you guys analyze the numbers and reaffirm that we are on our way to this 300 and growing EBITDA and cash generating, as Rafa explained, we can do more things with the retribution to the shareholders and, well, why not doing other things.
At the end of the day, I think that we are on path of that, and nothing strange has happened in this Q1. It's just the point moment of the Q1 because the maintenance, the rest of the year we can good. We are positive and optimistic that we will reach very soon this EUR 300 million, and then we will see the next four or five years, no.
Yeah. From my side, nothing else to comment on top of Asier. What I would say is that this is going to be the third consecutive years of EBITDA growth. We have been deleveraging the balance sheet over the eighth consecutive quarters. EPS is going up. We are in the middle of a shift in the steel industry, both in the U.S. and in Europe. It is true that China is not delivering, but that's an option. We are not considering China for reaching the EUR 300 million that Asier is mentioning. I think the company is in a very good shape.
Thank you, Jaime.
Thank you.
The next question comes from the line of Anis Zgaya from Oddo. Please go ahead.
Yes. Thank you very much. Good morning, and thank you for taking my questions. I have only one, so it's on the 2026 guidance. It's roughly EUR 18 million year-on-year improvement 5. Could you how this improvement is split between higher U.S. steel dust volumes and the recovery in secondary aluminum, including any contribution from Bernburg in H2 2026? Thank you.
Well, I think if they are, they are the aluminium and the U.S. steel volumes are the drivers to go to the high part of the year, together with the guidance, sorry. Together with many other assumptions about zinc price and about the electricity and energy cost and the inflation, everything is together. I mean, I don't think it's worthy to say what we are considering. I think it's like, basically we do hope that 10% steel dust volumes, you know, increase in U.S. to come into 75% and the margins to aluminium to come to EUR 8 million-EUR 10 million, this is more or less one of the considerations you have. The zinc and the others, probably you guys have to do your model as well. Have no sense to discuss about what to put there.
The next question comes from the line of Adahna Ekoku from Morgan Stanley. Please go ahead.
Morning. Thank you for taking my questions. I've got two left as well. Just to follow up again on the 2026 EBITDA guidance. Last quarter, you mentioned you were comfortable with consensus, which was at about EUR 260 million for 2026. That's now the midpoint of the new guidance. Since then, we've had a much more favorable zinc TC settlement. I just want to understand a bit more what's changed since then. Is it just the energy cost outlook? Second, just on volumes to confirm, do you have any maintenance left over for Q2? On the U.S. steel dust volumes ramp up, is this more a second half-weighted trajectory, or should we expect this to be more even?
Good questions about the comfortable about EUR 260. Yes, it's true that the TC were coming better than that we were expecting in the last report, in the last call. Yes, we were expecting around EUR 100, EUR 110, and now it's EUR 85. It's not a very big difference at the end of the day, but obviously it's a difference, positive. We are happy with that. Yes, still probably the EUR 260-265 could be that is a good figure for us to have in consideration. More or less, the midpoint always that you discuss with you is the point that you get and the point that we are more or less comfortable.
Obviously, they were not having the certainty three, four months ago about the situation in Iran, in the Strait of Hormuz and so on. It's difficult for us, we have to put more things on the ideas, on the framework to do the guidance. Yes, I think that the midpoint a little bit better, although depending on those things, probably is a good reference for us. Nothing changed, despite the fact that we have some millions better than the treatment charge. In terms of the volume, yes, Q2 and Q3 are gonna come better and higher than the Q1. Again, there are still splits on maintenance in the two Qs, less than in the Q1. The year where we have less maintenance definitely is the Q4.
Putting a growing from last year, I think probably last year is a good reference. On top of this, the 10%, but 10%-12% that we hoped that we are gonna have this year in total probably is a good reference. Yes, the volumes in U.S. are developing as expected at the end of the day. We do hope that second quarter will come, you know, even, you know, higher and stronger than the Q1 and Q2, Q3, probably in Q4. I think it's a growing, and the worst in terms of lower production because the maintenance has over in the year.
Perfect. Thank you.
Thank you, Adahna.
We have a follow-up question from the line of Olivier Calvet from UBS. Please go ahead.
I just wanted to quickly follow up on secondary aluminium metal margins. I'm just wondering if you can comment on the levels you're seeing right now, given the disruptions to production there. And then just a few comments maybe given higher electricity prices in the smelter, in U.S. smelter.
Yeah. Well, I think that we are now in the current situation. Again, the Q1 is not a good example because it's everything affected. To have an idea of the margin in aluminium, we need to hope this April, May, because it's affecting by higher energy prices, but higher price as well. Well, the margins are coming higher, but we need to hope, as I say before, in that range. Difficult to get the conclusions now. We are watching the increase in margins, but it's a matter of gradually. We do hope that we are gonna be able to transfer the energy, you know, increases to the customers at the end of the day, no?
The mechanism for that is basically higher prices.
Yeah, yeah, higher prices.
Yeah.
You have to consider that we have higher prices in sales, but we have higher prices in purchase with the scrap as well. That's why we talk of margins. The high price helps because you have more price to calculate even the same margin, you get better profits, right? At the end it's depending on how you manage the purchase and sales, and then the cost to be transferred to the customers.
Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Rafael Pérez for any closing remarks.
Thank you all for your questions. You can also contact the investor relations team of Befesa for any further clarification. We will now conclude the conference call and the Q&A session. Thank you very much to all of you, and have a good day.
Ladies and gentlemen, the conference is now over.