Befesa Q1 Earnings Call Highlights

Key Points

• Q1 adjusted EBITDA rose 4% to EUR 58 million with the group margin improving to 20% and net income/EPS up about 11% year‑over‑year; management reiterated 2026 adjusted EBITDA guidance of EUR 250–270 million and expects earnings to gain momentum as maintenance eases.
• The steel dust segment drove results with Q1 EBITDA of EUR 58 million and a margin uplift to 28%, aided by stable European supplies and rising U.S. utilization, while the aluminum salt slag business delivered EUR 9 million of EBITDA (up 10%) as higher collection fees and lower energy costs offset weaker volumes.
• Cash flow and balance‑sheet metrics improved: operating cash flow was EUR 38 million, net debt fell 10% to EUR 550 million (leverage 2.25x), the board plans a EUR 40 million dividend (EUR 1/share, ~50% payout), and full‑year CapEx is expected around EUR 70–80 million with potential excess cash returned to shareholders.

Befesa ETR: BFSA reported a “good start into the year” in the first quarter of 2026, with both of its main segments—steel dust recycling and aluminum salt slag recycling—contributing to earnings growth despite what management described as a challenging macroeconomic backdrop.

First-quarter results: EBITDA up 4% and margin improves

Group CEO Asier Zarraonandia said adjusted EBITDA rose 4% year-over-year to EUR 58 million, while the adjusted EBITDA margin improved to 20% from 18%. Zarraonandia also said net income and earnings per share increased at a “double-digit rate,” up 11% year-over-year, citing operational improvements and better financial results.

As in the prior year, management said the quarter included maintenance activities. “Q1 was expected to be the lowest in the year once again,” Zarraonandia told analysts, adding that the company expects higher volumes in subsequent quarters, with the fourth quarter typically the strongest.

Steel dust business: stable supplies in Europe, utilization rising in the U.S.

In the steel dust segment, Zarraonandia pointed to a mixed regional picture. In Europe, he said total steel production declined 3% year-over-year in Q1, reflecting weaker demand, though electric arc furnace (EAF) production was “less affected,” helping steel dust supplies remain stable. In the U.S., he said steel production increased 6% and noted improving operating metrics.

CFO Rafael Pérez said steel dust utilization at group level was 65%, unchanged year-over-year and “partly impacted by maintenance shutdown.” He added that utilization increased in the U.S. and Europe but was offset by weaker Asian markets.

Pérez said Q1 steel dust adjusted EBITDA was EUR 58 million and described a 4% year-over-year improvement, citing higher volumes of Waelz salt that offset unfavorable foreign exchange movements. He also said the segment’s EBITDA margin improved to 28% from 25%.

On commodity dynamics, Pérez said zinc prices in U.S. dollars averaged $3,243 per tonne in Q1, up 14% year-over-year, but currency effects meant the increase in euros was about 3%. He said the company’s “blended” zinc price (including hedging) was EUR 2,615, “pretty much in line with the previous year.”

Aluminum segment: higher fees and lower costs offset volume pressure

In aluminum, Zarraonandia said Q1 started “softly,” attributing that to lower secondary aluminum production in Europe. He said average capacity utilization in salt slag was 82% and that the company began to see improvement by the end of Q1 heading into Q2.

Pérez reported EUR 9 million of EBITDA for the aluminum salt slag segment in Q1, a 10% year-over-year increase. He attributed the improvement mainly to higher collection fees in salt slag and “overall lower energy and operating costs,” partly offset by lower volumes in both salt slag and secondary aluminum and a “slightly lower metal margin.”

He said utilization was about 87% in salt slag and 66% in secondary aluminum. Zarraonandia told analysts he was seeing clearer margin improvement in March and April, “probably helped by the high aluminium price,” and reiterated confidence in recovering toward an EUR 8 million to EUR 10 million EBITDA level in secondary aluminum, while noting Q1 was still below that range.

Hedging, treatment charges, and energy costs

Pérez said zinc traded between $3,000 and $3,487 per tonne during the quarter. He also noted that benchmark zinc treatment charges were settled in April at $85 per ton for 2026, up from $80 in 2025, which he said had been an “all-time low record level.” He described the zinc concentrate market as “still very tight,” with spot treatment charges below the annual benchmark.

On hedging, Pérez said the company was “very active” and extended its hedging book through July 2028, describing it as an “all-time high level of $3,100 per ton.” He added that for 2027 the hedge is set at $3,000 per ton, which he said improves stability and visibility. Later, Zarraonandia said the average 2026 hedge price is approximately $2,990 per metric ton, “consistent with 2025 levels,” which he characterized as a neutral hedging position.

On energy, Pérez said Befesa’s energy bill is around EUR 100 million, with coke representing roughly 50%, electricity 40%, and natural gas 10%. In Q1, he cited an average coke price around EUR 147 per ton, electricity around EUR 111 per megawatt hour, and gas around EUR 51 per megawatt hour. Management repeatedly flagged uncertainty tied to geopolitical developments, with both Pérez and Zarraonandia pointing to potential Middle East-related impacts on energy prices and inflation.

Cash flow, balance sheet, dividends, and capital allocation

Pérez said operating cash flow was EUR 38 million in Q1, up 12% year-over-year, with working capital consumption of EUR 17 million that he attributed to typical first-quarter seasonality. Total Q1 CapEx was EUR 26 million, including EUR 15 million of maintenance CapEx and EUR 11 million related to the Bernburg expansion. He reiterated full-year CapEx expectations of around EUR 70 million, describing investment as front-loaded.

Net debt fell 10% to EUR 550 million, and Pérez said net leverage improved to 2.25x at quarter-end from 2.78x in March 2025, marking the “8th consecutive quarter of leverage reduction.” Liquidity, he added, included EUR 145 million of cash and a EUR 100 million undrawn revolving credit line.

On dividends, Pérez said the board intends to propose a EUR 40 million dividend for 2026, equivalent to EUR 1 per share or 50% of net income, and said it would be 37% higher than last year’s dividend. He reiterated Befesa’s dividend policy to distribute 40% to 50% of net income.

Looking ahead, Pérez said the company is entering a “new cycle of low CapEx and high earnings,” with total CapEx expected to remain below EUR 80 million per year and maintenance CapEx around EUR 45 million. He said excess cash after core commitments could be returned to shareholders via “extra dividend or as a share buyback,” depending on valuation, while adding that M&A is not currently a focus.

2026 outlook and growth projects

Zarraonandia reiterated 2026 adjusted EBITDA guidance of EUR 250 million to EUR 270 million, implying growth of 3% to 11%, and said earnings should “gain momentum as the year progresses” as maintenance eases and volumes rise. He said Europe steel dust volumes are expected to grow only modestly given high optimization, while U.S. volumes are expected to increase on new contracts. In Q&A, he said U.S. steel dust utilization could rise to 73% to 75% in 2026 and that overall group utilization could be “above or around 75%” for the year.

On growth, Zarraonandia said the Bernburg expansion in Germany remains on track and is expected to start production in the second half of 2026, with ramp-up beginning in the third quarter. He also discussed longer-term structural tailwinds from the shift toward EAF steelmaking in Europe and the U.S., and said Befesa is in “advanced negotiation with key customers” to support expansion over the coming years.

About Befesa ETR: BFSA

Befesa SA offers environmental recycling services to the steel and aluminum industries in European, Asian, and North American markets. It operates through two segments, Steel Dust Recycling Services and Aluminium Salt Slags Recycling Services. The Steel Dust Recycling Services segment collects and recycles crude steel dust and other steel residues generated in the production of crude, stainless, and galvanized steel; sells waelz oxide to zinc smelters; and treats crude steel dust. The Aluminium Salt Slags Recycling Services segment recycles salt slags; spent pot linings, a hazardous residue generated by primary aluminium producers; and recovers and sells salt, aluminium concentrate, and aluminium oxides.

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