Ladies and gentlemen, thank you for standing by. I am Mina, your call operator. Welcome, and thank you for joining the Erdemir conference call and live webcast to present and discuss the third quarter 2025 financial results. All participants will be in a listen-only mode, and the conference is being recorded. The presentation will be followed by a question and answer session. Should anyone need assistance during the conference call, you may signal an operator by pressing star and zero on your telephone. Please note, Eregli Demir ve Çelik Fabrikalari T.A.S. (Erdemir) may, when necessary, make written or verbal announcements about forward-looking information, expectations, estimates, targets, assessments, and opinions. Erdemir has made the necessary arrangements about the amounts and results of such information through the disclosure policy and has shared such policy with the public through the Erdemir website in accordance with the Capital Markets Board regulations.
As stated in related policy, information containing forward-looking statements, whether verbal or written, should not include unrealistic assumptions or forecasts. It should be noted that actual results could materially differ from estimates, taking into account the fact that they are not based on historical facts but are driven from expectations, beliefs, plans, targets, and other factors which are beyond the control of our company. As a result, forward-looking statements should not be fully trusted or taken as granted. Forward-looking statements should be considered valid only considering the conditions prevailing at the time of the announcement. In cases where it is understood that forward-looking statements are no longer achievable, such matter will be announced to the public, and the statements will be revised. However, the decision to make a revision is a result of a subjective evaluation.
Therefore, it should be noted that when a party is coming to a judgment based on estimates and forward-looking statements, our company may not have made a revision at that particular time. Our company makes no commitment to make regular revisions, which would fully cover changes in every parameter. New factors may arise in the future, which may not be possible to foresee at this moment in time. At this time, I would like to turn the conference over to Mrs. İdil Önay Ergin, Investor Relations Director. Mrs. Ergin, you may now proceed.
Thank you very much, Mina. Good afternoon, everyone. Welcome to our conference call and webcast of Erdemir for the third quarter of 2025. First, I will go through our presentation, a master presentation, which you can find on our website, and you can also follow it through the webcast. At the end of this presentation, there will be a Q&A session, as usual. I'll start with slide three. Our presentation consists of two sections, as you already know. The first one is the market overview, and then the financial results. Let's start with the commodity prices. On page three, you will see the prices of steel-related commodities and hot rolled coil. Let's take a look at coking coal, iron ore, scrap, and hot rolled coil prices. In the third quarter of 2025, the coking coal market showed a volatile yet narrow range trend under supply constraints and regulatory pressures.
Production restrictions in steelmaking regions of northern China and weak demand in India exerted downward pressure on prices. Overall, coking coal prices fluctuated between $170- $190 per ton during the quarter, averaging around $184. The iron ore market has been supported by a moderate demand recovery and lower-than-expected production cuts, while current prices remain elevated compared to fundamental indicators. Although downward pressure on steel prices persists in China, iron ore prices hold steady in the $100-$105 per ton range. Towards the end of the year, weak domestic demand and rising trade protectionism stand out as key issues that could exert downward pressure on iron ore prices. In Q3, Turkey's imported scrap market remained generally under pressure due to cautious buying from producers and strong supply conditions. Nevertheless, prices averaged around $345 per ton, in line with the previous quarters.
On the bottom right, we show hot rolled coil prices in the Black Sea, China, and South Europe. In the third quarter of 2025, the global hot rolled coil market continued to search for direction and its weak demand, high inventories, and uncertainties in trade policies. As the final quarter begins, regional price differences are expected to become more pronounced with the increase in protectionist measures. On page four, you will see the production, consumption, exports, and import figures of the Turkish steel market for the first eight months of 2025. While consumption rose slightly by 3% and production increased by 4%, exports of steel products grew by 12% in volume during the first eight months of the year and reached 10 million tons. Imports also increased by 18% to 12.6 million tons over the same period, mainly driven by higher semi-finished product imports.
As a result, the export-import coverage ratio increased to 79% in the first eight months of 2025. It was observed that the total imports were largely realized under the inward processing regime. With the circular published by the Trade Ministry on September 16, it was made mandatory for 25% of the imports of products processed to exports to be supplied domestically. This change was welcomed in terms of domestic steel production. At the export side, the tariffs imposed by the U.S. and the safeguard system quota revision by the European Union have continued to offer Turkish producers a more competitive environment. Under the Trump tariff clause, the U.S. reached agreements with many countries. However, steel was generally excluded and remains subject to a 50% tariff.
On the other hand, uncertainty due to the Carbon Border Adjustment Mechanism, which will come fully into effect from January 1st, 2026, and looming safeguard system revisions negatively affected EU buyers' import demand. Asian countries, which have been the most negatively affected by this policy, increased their exports to unprotected markets. Let's take a look at the financial results and operational metrics. On page six, you will see the summary of our nine-month results. We achieved $3.8 billion revenue. Also, we generated $341 million EBITDA and $62 million net profit. On page seven, you will see the operational indicators of our company. Following the commissioning of the last two investments in our current investment package in the second quarter, our crude steel capacity utilization ratio, which was 75% in the second quarter, increased to 90% in the third quarter.
Accordingly, sales and production levels returned to their normal levels. We aim to close the year 2025 with around 7.8 million tons of sales. Let's take a look at the segmental breakdown of domestic sales and export volumes on page eight. As you can see from the pie charts, there has been a slight change between sectors when we compare it to last year's breakdown. There has been a transition from general manufacturing and auto to pipeline profile and distribution chains on a percentage basis. We see similar changes between sectors in the long product, although its share in total sales is relatively small. We achieved an export volume of 371,000 tons in Q3, representing 19.2% export share in our total sales. We are above our historical average with 23% export share in the first nine months.
Although our main focus is the domestic markets, we also consider export as an alternative market. On page nine, you can find a breakdown of revenue for domestic and export sales. 76% of the revenue comes from domestic sales, in line with the domestic volume. Despite import pressure in the domestic markets, we achieved to generate $341 million EBITDA and $62 million net profit in the first nine months of the year. We generated $68 EBITDA per ton in nine months. As we approach the end of the year, we would like to share that our EBITDA per ton expectation stands in the range of $60-$65 per ton. On page ten, you can see how we reached a net profit from EBITDA. One of the largest items was depreciation, which was $200 million in nine months. The other major item in this chart was financial expenses of $177 million.
After other expenses, net profit was $62 million. In the graph below, you can see EBITDA to change in cash flow. Our net working capital increased compared to the second quarter due to the expansion of the trade payables maturity. Additionally, a dividend payment of $43 million was distributed in the third quarter. Also, we spent around $336 million to investment activities in nine months. This amount also includes CapEx advances paid for the capital expenditures and sale of commercial offices for investment properties as well. On page 11, you will see a historical trend of financial borrowings and net debt. As you can see in the financial borrowings chart, the share of short-term debt in total debt decreased to 24% in Q3 with the support of $950 million eurobond issuance. When we look at 2025, our net working capital decreased due to the expansion of the trade payables maturity.
Despite high capital expenditures, we succeeded in keeping net debt EBITDA below 3x s in the first nine months, and we expect to keep the net debt EBITDA ratio below 3.2x for 2025. Slide 12 represents our cost of sales breakdown. Due to the decrease in coal prices, the percentage of coking coal costs decreased in the raw material baskets, which is in line with the trends in raw material markets. Since we can see the costs in the fourth quarter, we can say that there will not be a significant cost increase in raw materials. Page 13 represents the historical capital expenditures. Total CapEx was $1.1 billion in 2024 and $631 million in the first nine months of 2025. The new first-class premise in İskenderun and number four coke factory in Ereğli was commissioned in the second quarter of this year.
Other than these investments, such as pelletizing plants, solar power plants, and energy efficiency investments are included in the CapEx figure of 2025. For the gold mine, we expect the resource announcement for the gold mine to be made in November and the reserve announcement in the first quarter of 2026. As we have shared since the beginning of the year, we expect that CapEx will be around $850 million in 2025 with maintenance and other ongoing investments, and maintenance will be around $58 million per year, as usual. As you already know, this figure is accrual-based and the cash outflow will be lower due to advance payments. On page 14, just as a reminder, we announced our net zero roadmap last year in January. There are no changes to this roadmap, the details of which we previously shared.
The first investment in this package, solar power plants, is planned to be commissioned by the end of 2026. We may continue with the Q&A session. We will be delighted to answer your questions. Thank you for listening.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their telephone. If you wish to remove yourself from the question queue, then you may press star and two. Please use your handset when asking your question for better quality. Anyone who has a question may press star and one at this time. One moment for the first question, please. The first question comes from the line of Gabriel Alain with Morgan Stanley. Please go ahead.
Yes, thank you for taking my question. Hi, İdil. My first question is on the CapEx plans for 2026 and 2027. Do you mind reminding us of how much you're budgeting for the next couple of years, and how will the split work by project, roughly? I'm just trying to get a better understanding of what is essential and what can be rephased for a later date if your earnings run rate and if the broader environment for steel in Turkey does not improve materially. That's my first question.
I'm so sorry, but I couldn't get the question because of the sound problem. Could you please repeat your question?
Yes, absolutely. My question is on the CapEx plans for 2026 and 2027. Do you mind reminding us how much you're budgeting for the next couple of years and what is the split roughly by project? I'm just trying to get a sense of what is essential and what can be rephased for a later date if the broader environment does not improve for steel in Turkey.
There is no calculation on net zero roadmap, so it means that we announced we will spend $3.2 billion in seven years until the end of 2030. It means that $450 million additional per year will come only from the net zero investments. Plus, we have regular modernization, which is also included in CapEx, and a small amount of maintenance. Altogether, it's going to be around $600 million, $650 million. We can say that the sustainable amounts in 2026 and 2027 will be around $600 million, $650 million.
Thank you. That's very clear. The second question is on the regulatory environment that is getting more challenging with the EU Steel Action Plan and the Section 232 in the U.S. that's in place. What are you doing to counter these risks? Are you finding new markets that would be an offset? Are there any policy changes that you are discussing with the Turkish government to try to mitigate these risks?
That's a very good question and a very popular question because the regulations have recently changed. I mean, inward processing regime. Let me start from the European Union changes in quotas. Although the proposal has not yet been accepted, we do not expect a planned change in quotas to have a material impact in our sales volumes because the share of exports in our total sales averages around 20%, and the majority of our sales are directed to the domestic market. Approximately half of our exports are made to European Union countries, but we have the flexibility to redirect any potential volume loss resulting from the quota changes to the domestic markets or other export destinations. In September this year, the Ministry of Trade revised the inward processing regime and made it mandatory to use 25% domestic steel and shortened the certificate validity period from six months to four months.
We see this development as positive for domestic steel producers and believe it will support domestic prices by reducing imports. We haven't seen any impact from this regime because since the certificates are obtained in advance, the positive impact of the inward processing regime will begin to be seen in the first quarter of 2026. For European quota change, actually, the main target is not Turkey. We know that this change is basically against the Far Asian countries, especially China. Turkey still holds the largest quota for HRC, for hot rolled coil, and we believe that Turkey will continue to be the primary import source for Europe as it is now. Of course, there is another part in the U.S. The tariff imposed by the U.S., you know, it continues to offer Turkish producers a more competitive environment. Under the Trump tariff clause, the U.S. reached agreements with many countries.
However, steel was generally excluded and remains subject to a 50% tariff. Again, since the U.S. is not our main export market, we do not see any risk to our exports. The problem is if some countries cannot go and sell their product, for example, in the European Union, if they come to Turkey. This is the main question. If our imports will increase. We believe that Turkey will be able to protect itself against imports from other countries with the revision of the inward processing regime and both completed and ongoing anti-dumping investigations and additional taxes. As you remember, last year, the Trade Ministry finalized the anti-dumping investigation against HRC products from China and some other countries, and the average of additional taxes was around 30% for China, for example. We believe that these two regulations change.
The first one is the inward processing regime, and the second one, additional taxes from anti-dumping investigations. We believe that Turkey will be able to protect itself against the risk of increasing imports.
Thank you very much. Thank you. Very clear.
The next question is on the line of Zenande Meyiwa with UBS . Please go ahead.
Thank you. Can you hear me?
Yes, we can hear you, Zenande.
Thanks. I did just a follow-up question on the CapEx figure. Are you saying that you've now revised down your CapEx assumptions to $600 million- $650 million, or is it still the $800 million per annum that we should expect?
For 2025, we have been saying since the beginning of the year, we are expecting $800 million, $850 million levels for 2025 CapEx. For the next year and a year later, for 2026 and 2027, it will be less because the biggest part of this year's CapEx was the two main investments. One is the blast furnace in Iskenderun, and the other one is the coke factory in Ereğli. These two investments were already completed and commissioned. The biggest part of $800 million, $850 million from this year was these two investments. They are already completed. That's why next year and a year later, we will see a smaller amount of CapEx.
Okay. Will it increase from 2028 to 2029 on the back of the EAF installation?
It might change in 2028 because at these years, we will start two electric arc furnaces. The first one will be completed in İ skenderun, and then at the end of 2030, the second electric arc furnace in Ereğli will be completed. It might increase again, but we can say that it might be stable because most of the additional investments will be completed. For example, solar power plants. We will commission these solar power plants at the end of 2026. It will be more or less, but will be around like $600 million during the years until the end of 2030.
Okay, that's clear. Just another question on the nearer-term stuff. I mean, you've had quite a massive working capital release in Q3. Just wanted to ask, what should we expect for Q4? Should we expect maybe a little bit of a build since we're going into a sizably strong quarter, or should we expect more or less the same release?
Considering that Q4 becomes clearer in terms of both price and cost, we expect to see similar figures in Q4 to Q3 in net working capital.
Okay, cool. I'll turn it over. Thanks.
The next question is from the line of B ystrova Evgeniya with Barclays . Please go ahead.
Yes. Hello. Thank you very much for the presentation and for the answers. I have several questions. First of all, on your margins, I mean, quarter on quarter, it seems that EBITDA margin was down, even though EBITDA per ton was up. I am just trying to understand what we can expect in the fourth quarter. You said that your EBITDA per ton guidance for the year is now down. What could be the main driver of that, or basically what went or what was unexpected that made you change or revise your guidance down for the full year in EBITDA per ton terms? What are you expecting in terms of EBITDA per ton maybe for 2026, and how much improvement do you expect to come from this commissioned investment and energy efficiency, etc.? My second question is just a follow-up on CapEx.
Could you please repeat the number for maintenance CapEx and also for the potential gold CapEx? Is it right to assume that this year it will not happen, but maybe starting from Q1 2026, we might see additional CapEx related to gold operations? Thank you.
Hello, Evgeniya. Unfortunately, I am not able to give any figure for the gold mine, but the good news is that we will announce soon the resource report, hopefully in November. After we share the resource and then the reserve report in the first quarter of 2026, most probably we will be able to share a CapEx figure after these reports. The other question you mentioned, yes, by the way, it's lower. We said around $70 EBITDA per ton expectation in our last quarter's call. Obviously, the market conditions drive us to lower our EBITDA per ton expectation to $60- $65 per ton. Despite the decline in sales prices in Q3, we maintained the balance in EBITDA per ton and even increased it by reducing costs through increased efficiency in our newly commissioned facilities. The new investments had an impact of approximately $20 on EBITDA per ton.
For 2026, unfortunately, again, I am not able to give any number for the next year. We will start our budgeting process in November. Most probably when we announce our year-end results, we will share some guidance for 2026.
Thank you. Just as a follow-up on CapEx, because previously you mentioned that if the gold investment goes ahead, you might increase your CapEx this year from $800 million, $850 million to $1 billion. Could we expect maybe a similar increase of CapEx next year depending on the parameters of the gold project?
Yes, you are right. It depends on the size of the gold mine. Yes, at the beginning of the year, we said that we expect to have $800 million, $850 million. That's the regular amount. If the gold mine has a significant reserve, it might go up to $1 billion. Right now, we will just wait and see the amount. Yes, this number is not that far from our expectations. Again, we would like to wait and see the amount of reserve in gold mines.
Right. Thank you.
The next question is from the line of Jones Andy with UBS . Please go ahead.
Hi, İdil. Thanks for taking the follow-up. I just wanted to ask about this CapEx again because I think you said originally $3.2 billion of CapEx by 2030 on the EAF, the solar and the biomass stuff, which implies over five years, $640 million a year just on that without any maintenance CapEx. I'm curious to understand how you're now saying it should be $600 million sustainably to the back end of the decade. Can you just again clarify the moving parts? How much maintenance? How much from the EAF-related spending? How much for the projects next year? How do you see that step-up playing out in the coming years? Clearly, at some point, spending will have to go back up, as far as I can see. I'm not sure why it would stay down at $600 million given that previous guidance and basically what's changed.
Hi, Andy. Actually, it's not five years. It's seven years. We announced this in 2024, at the beginning of 2024, and we started our solar power plant, the first phase of the solar power plant in 2024. Until the end of 2030, it's seven years. We just divide it equally per year. $3.2 billion, when you divide it to seven years, is $450 million. Plus, we have around $150 million, sometimes $200 million regular modernization, small size of modernization. Plus, we have maintenance, $50 million- $80 million per year. These are the total package. It's around $600 million, $650 million per year.
That adds up to more than the $650 million, I think. If you say $450 million plus $150 million to $200 million, you're already basically there, then you've got your maintenance on top of that. It sounds still to me like it should be close to the $700 million, but maybe it's lower next year and then it steps up later. Is that the way to think about it?
Of course, it's not going to be $450 million, you know, precisely for every year. It will change during the years. We are just roughly trying to give a projection to our analysts and investors that it's going to be around $450 million. Sometimes it could be $500 million for a year, and next year it's going to be like $400 million. It will change from time to time, but the average will be around $450 million.
Okay. Cool. Just a clarification on 4Q. Can you talk us through the moving parts there, like the expectations around volumes, pricing, costs? What are the moving parts influencing that margin and the organic stuff?
Sure. As I mentioned during the call, we expect 7.8 million tons sales. It's going to be around 2.2 million tons sales for Q4, and we expect to have very similar sales prices and costs in Q4. The thing is, the contribution from our new investments will increase. In this quarter, it was around $20, and it's going to be around $40 next quarter. Finally, in the first quarter of 2026, we will see the full impact of $40 from our new investments. That's the general expectation for the next quarter.
Is that $40 per ton on the whole production base, or are we just talking about a fraction of it?
Sorry, I couldn't get the question.
Sorry. The $40 per ton is what? Is that on the total production? Is that on the total margin of the group, or is that on a proportion impacted by this?
No, it's $40 contribution to EBITDA per ton. Yes, group's consolidated EBITDA per ton will be around $40 contribution to that figure.
Okay, that's clear. Thank you.
The next question is a follow-up question from the line of Evgeniya Bystrova with Barclays Bank PLC. Please go ahead. Ms. Bystrova, you have the floor.
Sorry. Can you hear me now?
Yes, we can hear you.
Yes, just a quick follow-up. On the $20 per ton contribution from the investments, without this $20, the EBITDA per ton this quarter would have been $48 per ton. Is that the right way to think about it?
Yes, yes, that's correct. It would have been less if our new investment wasn't completed.
Thank you.
You're welcome.
Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mrs. Ergin for any closing comments. Thank you.
Thank you very much for joining us. We hope to meet you again at our year-end conference call. Have a nice day. Thank you.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for calling and have a good afternoon.