Ladies and gentlemen, thank you for standing by. I'm Paulina, your current call operator. Welcome and thank you for joining the Erdemir conference call and live webcast to present and discuss the first quarter 2026 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, Ereğli Demir ve Çelik Fabrikaları T.A.Ş., 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 its 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 contained in 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 taken into account the fact that they're not based on historical facts, but are driven from expectations, beliefs, plans, targets, and other factors which are beyond the control of our company.
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's understood that forward-looking statements are no longer achievable, such matter will be announced to the public, and the statements will be revised. The decision to make a revision is a result of 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 revision at a 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 Ms. İdil Önay Ergin, Investor Relations Director. Ms. Ergin, you may now proceed.
Thank you very much, Paulina. Good afternoon, everyone. Welcome to our conference call and webcast of Erdemir for the first quarter of 2026. First, I will go through our investor 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.
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 HRC. Let's take a look at coking coal, iron ore, scrap, and HRC prices. In the first quarter of 2026, the coking coal market displays a volatile outlook, caused between weak steel demand and seasonal supply side developments. Throughout the quarter, the slowdown in steel production in China, weakness in the construction sector, and lower than expected end user demand limited demand for coking coal. Accordingly, coking coal fluctuated in the range of between $218 and $253 per ton and closed the quarter at around $240 per ton.
Iron ore prices followed a similar trend to the previous quarter in Q1 2026, but fundamental dynamics remained weak. While prices remained resilient around $105 per ton, they fluctuated between $96 and $110 per ton throughout the quarter due to the impact of geopolitical uncertainty. High port inventories in China, weaker steel production compared to the previous years, and new supply expectations, put downwards pressure on prices.
Turkish scrap import prices, gradually increased throughout the quarter, ranging from $370 per ton and $398 per ton and rose about $400 per ton by the end of the quarter due to the impact of tensions in the Middle East. On the bottom right, we show HRC prices in Black Sea, China, and South Europe. The global outlook for the first quarter of 2026 was shaped by geopolitical risks, uncertainties in trade policies, and monetary policy expectations. Regional divergences became more pronounced in the global HRC market during the first quarter.
In Europe, prices were determined more by regulations and supply expectations than by demand. CBAM and trade measures made imports more difficult, raising the price expectations of domestic producers. On the Chinese side, the market is caught between policy expectations and weak domestic demand. On the other hand, in Türkiye, the cost-demand balance determines the pricing, while the upward trend in the Turkish market is expected to continue as uncertainty persists in global markets. It also seems likely that changes in the, in trade flows due to the war, will support the Turkish steel market. Türkiye's trade advantage and access to nearby markets, supports its competitiveness.
On page four, you will see the production, consumption, exports and import figures of Turkish steel markets. In the first two months of 2026, Türkiye maintained its position as Europe's largest and world's seventh largest crude steel producer. In the January- February period, crude steel production increased by 5% to 6.4 million tons, and this growth reflects resilience in domestic output despite the challenging global steel market conditions.
Going back to the slide, while production remains at the same level as last year, domestic steel consumption continues its upward trend, rising by 3% to 6.7 million tons in the first two months of the year. Imports and exports decreased by 13% over the same period. As a result, the export-import coverage ratio remained at 74% in the first two months of 2026, the same as the previous year. The European Union remains Turkey's largest export market in the first two months, followed by MENA and CIS.
Despite the annual decrease, China stayed the largest supplier of flat steel products in the first two months. China was followed by South Korea, Russia and Malaysia. The increasing impact of the EU's Carbon Border Adjustment Mechanism, CBAM, in 2026 has made carbon intensity a more prominent pricing factor in steel imports. The new safeguard measures expected to come into effect on July 1st are anticipated to be detailed on a country-by-country basis in the coming days, which is expected to eliminate uncertainty.
Let's take a look at the financial results and operational metrics. On page six, you will see the summary of our first quarter results. We achieved $1.4 billion revenue, also we generated $137 million EBITDA and $9 million net profits. On page seven, you will see the operational indicators of our company. Following the commissioning of the last two investments in our investment package, in the second quarter of 2025, our crude steel capacity utilization ratio has gradually increased since then and reached 96%. Accordingly, sales and production levels returned to their normal levels. Supported by strong demand, we achieved sales of 2.1 million tons in the first quarter, and we aim sales volumes of over 8.2 million tons in 2026.
Let's take a look at the segment of breakdown of domestic sales and export volumes on page eight. As you can see, from the pie chart, there has been a slight change between sectors, when we compare it to last year's breakdown. There has been a transition from distribution chain, general manufacturing and auto to pipe and profile on a percentage basis. We see similar changes between sectors in the long product, although its share in total sales is relatively small. Our export volume was 312,000 tons in Q1, representing around 15% export share in total sales. Although our main focus is the domestic market, we also consider export as an alternative market. This year, we aim to keep the share of exports in total sales in the 10%-15% range.
On page nine, you can find a breakdown of revenue for domestic and export sales. 84% of the revenue comes from domestic sales, which is in line with the domestic volume. Despite import pressure in the domestic market, we achieved to generate $137 million EBITDA. We generated $73 EBITDA per ton in three months. Our EBITDA per ton guidance for 2026 stands in the range of $75-$85 per ton. In the coming quarters of 2026, we expect EBITDA per ton to increase through cost reductions and increased efficiency resulting from newly commissioned facilities, also increasing HRC prices and our company's increasing sales volumes. The company returned to net profit once the impact stemming from cancellation of inflation accounting disappeared. We generated $9 million net profit in the first quarter of 2026.
On page 10, you can see how we reached a net profit from EBITDA. One of the largest items was depreciation, which was $82 million in the first quarter. The other major item in this chart was financial expenses of $54 million. The tax expense amounted to $11 million. After other expenses, net profit was $9 million. In the graph below, you can see EBITDA to change in cash bridge. Our net working capital increased compared to the fourth quarter due to the decreasing inventories and increasing trade payables. We spent around $70 million to investment activities in three months. This amount also includes CapEx and advances paid for the CapEx as well. The reason for the change in credit payments is that we paid off our maturing financial debt to reduce our credit interest costs.
On page 11, you will see the historical trends of financial borrowings and net debts. As you can see in the financial borrowings chart, our financial borrowings have decreased by the amount of our credit payments. When we look at the first quarter, our net working capital decreased compared to the fourth quarter due to the decreasing inventories and increasing trade payables. We managed to achieve a net debt EBITDA of 1.25x at the end of the quarter due to the decrease in working capital and the increase in LTM EBITDA. We expect to keep the net debt EBITDA around 1.8x in 2026.
Slide 12 represents our cost of sales breakdown. There has been no significant change in our cost breakdown since Q4. In the second quarter, our cost of sales will increase due to the energy and freight costs and insurance costs. Sales price increases will offset these increased costs. Page 12 represents the historical CapEx . Total CapEx was $775 million in 2025 and $147 million in the first quarter. We expect that CapEx will be approximately $600 million in 2026, with maintenance and other ongoing investments. Investments such as solar power plants, port and crane investments, and energy efficiency investments are included in the CapEx figure of 2026. As you already know, the figure is accrual-based, and the cash outflow will be lower due to the advanced payments.
Lastly, for the gold mine, as you already know, we announced the inferred resource in November 2025. We expect that the reserve announcement for the gold mine to be made in the second quarter. Investment decision for the gold mine will be made after this announcement is shared. Page 14, just as a reminder, we announced our net zero roadmap in 2024. There are no changes to this roadmap, the details of which we previously shared. The first investment in this package, solar power plant, is planned to be partially commissioned by the end of 2026.
Now 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, you may press star and two. Please use a headset 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 is from the line of Alain Gabriel with Morgan Stanley. Please go ahead.
Yes. Good afternoon, and hi, İdil. A couple of questions from my side. Firstly, on the guidance which you've just referenced of $75-$85, we have seen a very steep increase in Turkish steel prices across both flat and long products. Given your relatively shorter lead times, one would have expected a quicker pass-through to your margins, yet the guidance has remained unchanged. Can you share with us a bit more color on the building blocks of the, let's say, the average selling price going forward versus the cost movements that you have referred to in your presentation? That's my first question. Thanks.
Hello, Alain . Thanks for the question. Yes, I just shared the EBITDA per ton guidance as $75-$85 per ton, which is exactly the same what I shared at the end of the year. We decided to keep that EBITDA per ton guidance just because we can only see the second quarter results right now. Yes, it looks that EBITDA will be higher in the second quarter. As you already know, our sales order book is full for two and a half months, so it means that we already closed the second quarter. That's why we have the enough information about the sales prices in the second quarter and the cost for the second quarter.
I can easily say that in the second quarter, our EBITDA per ton will be higher. Of course, from the spot market, we follow the spot prices for the third quarter. Yes, we didn't start to sell for the third quarter. That's why we didn't revise the guidance. We just would like to see the third quarter results or at least when we start to selling the third quarter, we will be more relaxed, we will be more comfortable when we decide to revise our EBITDA per ton guidance. Just to be cautious or just to be conservative, let's say, we decided to keep our EBITDA per ton guidance same as we shared on the last quarter's conference call.
The second part of your question, yes, we are expecting higher sales prices, and actually we expect gradually increasing in each quarter during the year. Also we expect that higher cost due to the war. We will see increasing energy prices. We will see increasing freight and insurance costs. Because the sales price is increasing more than the costs increase, we believe that we will offset the increases in the cost. We believe that EBITDA will also, EBITDA per ton will also increase gradually. Again, we have only the visibility for the second quarter, but we didn't start sell the third quarter yet. We just try to stay on the cautious side.
Thank you. That's very clear. To follow up on that question, I guess, on the conflict in the Middle East, with energy costs, consumer retrenchment and the broader impact on your business, can you give us a bit more color on how you're seeing this impacting Erdemir? On the flip side, are you seeing any opportunities to gain market share now that some of your competitors in the region, like Iran, for example, they have been cut off from the seaborne markets? How are you seeing this conflict shaping your business? Thanks.
Normally, at the beginning of the war, I was saying there will be no negative or positive impact due to the war for the Turkish steel producers. I'm not only speaking on behalf of our company, but also for the Turkish steel producers. When you look at our results, especially the export ratio and the amount of export, actually there is a decrease when you compare with the Q4 results. The increase comes from the semi-finished goods, actually slab, requests from the MENA region. We believe that this demand comes from the war because, I mean, there is a demand for slab from the MENA region.
Because Iran lost its steel factories, we just increased our export share due to this slab demand from the MENA region. That's the only thing I can say that maybe positively affected our results. Other than that, most of the analysts was asking if Chinese imports decreased due to the, you know, closing of Strait of Hormuz. Actually, no, there is no change because most of China's importers are not using Strait of Hormuz, same as our raw material suppliers.
We also didn't have any negative impact because of the Iran war. None of our raw material suppliers use Strait of Hormuz. There wasn't any problem getting, you know, our raw materials. Yeah, just, I mean, overall, as a summary, we didn't see any material impact, positive or negative, from the war.
That's very clear. I'll go back in the queue. Thank you.
You're welcome.
The next question is from the line of Krishan Agarwal with Citigroup. Please go ahead.
Hi. Can you hear me?
Yes, Krishan. We can hear you.
Yeah. Thanks a lot. Can you update me with the CapEx guidance for the full year? I'm assuming that, okay, CapEx has continued to come down versus the last year. Also on a related note, how much of the EBITDA improvement we should expect because you are in the phase of now commissioning the previous the capacity expansion which you have done?
I'm sorry. I just missed the second question.
How much of the EBITDA improvement we should expect from the commissioning of the new capacities in 2026?
All right. Last year after we commissioned our new facilities, we were saying that we're gonna have positive impact on our EBITDA per ton, additional $20, $30, and $40 in each quarter starting from the third quarter of last year. Actually we are seeing the full impact of our newly commissioned investments, the plant, blast furnace and coke batteries. Actually right now, we are at the, you know, full impact of the EBITDA per ton, you know, additional EBITDA per ton from the new investments. The first question. Oh, the CapEx guidance.
Yes.
We are expecting to have around $600 million in 2026. In the first quarter it was $147 million, which is in line with our yearly expectations of $600 million for the whole year.
Understand. Also, the steel shipments into the Q1, they were up 12%. How should we think about the full- year expectation for the steel production and the shipments for 2026?
Production and sales, they are highly correlated, so they are almost the same. We produce and sell. I mean, our order book is full for two and a half months. Everything we produce we directly sell. We said that we are expecting to have above 8.2 million tons for the whole year. In the first quarter it was 2.1 million tons and we can just expect very similar figure for the second quarter as well, 2.1 million tons.
Understand. Thanks a lot.
You're welcome.
The next question is from the line of Paul Kirjanovs with Bank of America. Please go ahead.
Hi, İdil. Thanks for the presentation. This is Paul Kirjanovs from Bank of America. I just want to follow up on free cash flow. Free cash flow in the quarter was driven in part by working capital. Could you give us some color on how you expect working capital developing in the rest of the year? Asked another way, do you think there's more room to improve working capital from here? Thank you.
Thank you for the question, Paul. We expect working capital to remain stable in the coming quarters. In addition, we anticipate a slight increase in net debt due to the dividend payments and capital expenditures. For the working capital, we expect to see this figure to remain stable in the coming quarters.
Okay. That's clear. Maybe another one if I can squeeze it in quickly.
Yes.
We noticed utilization has stepped up quite a bit from last year into quarter one. What would you say is a normal level of utilization ratio going forward?
The capacity utilization ratio you mean?
Yeah. Correct. Yeah. Yeah. Yeah. Correct.
Actually our normal is above 95%, so we work with full capacity. Last year, there were some holes in the second quarter because of the commissioning our new investments and un-commissioning the old facilities, so we lost couple of days in the production. Other than that, our normal level is above 95%, so we can just assume that we will keep this level during the year.
Okay. That's very clear. Thank you.
You're welcome.
The next question is from the line of Evgeniya Bystrova with Barclays. Please go ahead.
Yes. Hello. Good afternoon. Thank you for the presentation. I have just a few questions. My first one, could you please say again, repeat what was your net leverage target for this year or where you see the ratio this year? Given that the company has been generating cash for several quarters, for several consecutive quarters now to working capital, do you expect maybe more debt repayments or reduction in total debt in the coming quarters of this year?
My second question is actually related to the energy costs. What would you say is the company's sensitivity right now in terms of the energy costs and EBITDA, for example, if there is like a 10% change in energy costs, what would be the impact on your EBITDA? Thank you.
The, the impact in our costs from the increase in energy cost is around $7 per ton, roughly. It's a manageable amount of increase actually. The first question, the leverage ratio, the target, actually, we expect to keep the net debt to EBITDA around 1.8x in 2026. Right now it's 1.25x at the end of first quarter. We did it due to the decrease in working capital and of course the increase in LTM EBITDA.
Thank you. The next question is from the line of Cemal Demirtaş with Ata Invest. Please go ahead.
Thank you for the presentation. My first question is about the sales volume trends. As you mentioned in first quarter, you have 2.1 million tons, and in second quarter it could be 2.1 million tons. Going forward in the third and fourth quarter, should we expect some deceleration or could we have a upside to that sales volume up to, you know, 8.5 million tons or 8.6 million tons? Any possibility on that front? I wanna know related to this, did you import any slab at this moment in first quarter?
Again, related to this, the pricing trends, we see that in your working capital, your inventory level is coming down, and it's helping your net debt reduction because of the, you know, lower net working capital. I wanna ask inventory sites. In this environment, the prices are not declining. Are the amounts declining? What's the justification for this decline, especially on the inventory side? I'm trying to see for the second quarter.
Again, in this, related to this, do you think any pull forward demands on the steel side happened so far as your orders books out sales for, well, for two and a half months, I understand. Could you give just some indication about the trends? The prices are increasing by 12%, but is it premature to assume some significant improvement in second quarter or should we just assume that, you know, we are gonna benefit in the, you know, in the third quarter? You know, it's a combination of questions.
The last one is about the management change. We recently you announced yesterday that two members of the Board were replaced. As far as I know, the CFO and the Acting CEO, I guess, like Serdar also resigned. Who's gonna be the replacement? Could you give us the, you know, what's gonna be the direction? I know that you're not, I'm not talking about strategic direction, but who's gonna be leading the company from now on? Thank you very much.
Hi, Cemal. Thank you for the question. I'll just start with the first question of sales volume. Yes, we sold 2.1 million tons in the first quarter, and we expect to sell very similar amounts, 2.1 million tons in the second quarter. When I gave the guidance for the whole year, I said we are expecting to have above 8.2 million tons. It means that we might keep the level same as 2.1 million tons or it might, we might have even higher tonnages. Normally, in the last quarter of the year, every year, we have the highest level of sales quantity in the whole year. Most probably the fourth quarter again will be the highest amount of sales in 2026.
Again, we just keep our guidance at the same level. We are expecting to have higher than 8.2 million tons for the whole year for 2026. We didn't import any slabs. That was your second question. In the first quarter, there is no slab import. The inventories, yes. I mean, our finished goods inventories are at historically low levels. We are also selling from inventory because the demand is strong. Therefore, our inventory levels have decreased. For the second quarter, you can just assume stable figures, very similar figures to the first quarter. The sales prices, yes, we are seeing increasing sales prices in the Turkish market, same as you.
As I shared earlier, we already closed the order book for the second quarter, but we haven't closed it for the third quarter. We are just trying to be conservative. That's why we're not giving any lights from third quarter expectations. Again, I can simply say that we are expecting gradually increasing sales prices and EBITDA per ton during the quarters for 2026. The management change, yes, these kind of things happen in the corporate. It's a professional decision of our management. There won't be any change in the doing the business in the working style.
The company—a ctually, we already announced who came for the changes, who is the new executive manager. It's gonna be exactly the same business doing business for Erdemir.
Thank you, İdil.
The next question is from the line of Zenande Meyiwa with UBS. Please go ahead.
Excuse me. Hi, can you hear me okay?
Yes, Zenande, we can.
Thank you for taking my question. I just wanted to clarify your comment about the working capital remaining stable. Do you mean it will remain stable as in we'll get a similar level of relief in the coming quarter? Just looking at your inventories, which are near record lows as well as your payables increasing, should we expect a little bit of a release in the coming quarters, especially given the fact that you're planning on increasing your production and also given the fact that your inventories are currently at low levels?
We're not going to increase the production. We are at the maximum levels. Our crude steel capacity utilization ratio is 96%, we are already working with full capacity. Yes, our finished goods inventories are at historically low levels. Because you will see very similar figures in inventory for the second quarter, we expect working capital to remain stable in the coming quarters as well.
I just wanted to clarify, maybe I missed it at the beginning. From the 1.3x net debt that you have at the moment, to your guidance for the full year to 1.8x, what drives that?
Actually, we anticipate a slight increase in net debts due to the dividend payments and CapEx .
Okay. Okay, that's clear. Thank you.
You're welcome.
Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Ms. Ergin for any closing comments. Thank you.
Thank you very much for joining us. We hope to meet you again at our second quarter 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.