CHAIRMAN S REPORT GENERAL SHAREHOLDERS MEETING ACERINOX, S.A.

Transcription

1 CHAIRMAN S REPORT GENERAL SHAREHOLDERS MEETING ACERINOX, S.A. 1st June 26 1

2 Ladies and Gentlemen, As in previous years, before discussing what year 25 has been for our Society and its Group, please allow me to explain you, as an introduction, the framework which has surrounded our activities and which has influenced so much the economic results, that are going to be presented in this General Shareholders Meeting. Gross Domestic Product (G.D.P) The world economy grew at a 4.8% rate, lower that the 5.1% growth reached in 24, which was the highest in the last decades. EVOLUTION OF GROSS DOMESTIC PRODUCT (21 25) GDP (%) 12 The G.D.P growth was lower in general in all fields during 25. As usual, China with 9.9% stands out, followed by United States with a 3.5%. The biggest decrease took place in the Euro zone, which only reached a disappointing 1.3% and where Spain was the exception with a 3.4% growth, which is more than double than the euro zone China USA Spain Euro Zone Source: IMF Industrial Production Index The stainless steel consumption is very related to the Wholesale Price Index growth; that is why it is worthy of special attention. EVOLUTION OF INFLATION (21 25) INFLATION (%) 5, 4, 3, 2, 1, ,7 2,2 Spain Euro Zone Source: EUROSTAT The satisfactory G.D.P. growth of our country contrasts with the Industrial Production Index of only.1% against 1.8% in the year before. It reflects the alarming loss of competitiveness of our industry. This loss in 25 was the biggest of all the developed countries of the O.E.C.D. To a great extent it is due to the increasing differential of inflation, which has been accumulating year after year since our country was included in the Euro Zone. Since it is not longer possible to correct with monetary depreciations and being the Euro so much appreciated, specially against the Far East currencies, we are getting to a situation of increasing deficit of the balance of trade and the beginning of a relocation about which we all must be worried. 2

3 In 25 the Industrial Production Index also dropped in all the areas, although to a lesser extent than in Spain. China had also a important growth of 15.9%, United Sates of 3.1% and the Euro Zone of just a 1.2%, much lower than in other areas. EVOLUTION OF INDUSTRIAL PRODUCTION INDEX (21 25) IPI (%) China USA Euro Zone Spain Fuente: IMF, ODCE and EUROSTAT ENERGY Other factor of great concern, which every year I must necessarily refer to, is the energy. Last year in my speech I pointed out that the Department of Industry, showing a great sense of responsibility, had decided to extend the electric rates until year 21. Regrettably, our company could not take this gas rate system and at the beginning of the year the price of our supply has doubled since we have had to go to the spot market. Many years ago I highlighted that the halt in nuclear investements would necessarily lead to an important deficit of the electric supply and to a rise of natural gas prices, as fuel, due to the fact that demand should be covered with combined cycle stations. Regrettably, it has happened this way. The Industry Department has become aware of the problem and has opened a discussion about nuclear energy, which is really welcomed by many of us, who had been demanding it for a long time. The Minister has just stated in Sitges: Spain cannot allow itself the luxury of doing without nuclear energy. As a first measure, it seems that it has been decided to extend the life of the eight remaining stations, which would be the right direction. We still have to tackle with our European partners the problem of wastes, incorporating the latest reprocessing and reduction techniques and constructing, in the meantime, suitable dumps. Regrettably, we are late, because 9 countries, some of them so sensitive regarding nuclear energy, as Finland and Japan, are constructing 26 reactors, and our China, which apart from hydroelectric stations and many coal power stations, has a schedule for 3 new nuclear stations to be developed in the next 15 years. To construct new reactors to maintain at least the current level of nuclear generation is the only option for the moment so that the Spanish electricity sector can have convenient costs in the future and consequently, our industry is able to have prices and supply quality which are similar to our European competitors. In addition, our country will be able to comply with Kyoto Protocol. 3

4 RAW MATERIALS Next I will discuss on the evolution of raw materials, which each year are more important in our activities and which prices were more volatile than ever during the year under review: Nickel During the first five months of the year, LME Nickel quotations follow the upward trend of the last three years, reaching on the 12 th May an all-time high of 17,75 USD/Mt, more than double than 8, USD/Mt, which has been the long term average price until year 23. OFFICIAL NICKEL PRICE AND INVENTORY LEVEL IN THE L.M.E. (199 May 26, Friday 26) Monthly average values. (USD/Mt. Ni.) Thousand Mt , 24 Maximum historical closing level reach on : 23,1 USD/Mt. Ni 22. 2, , , , , 12. 1, 1. 8, 8. 6, 6. 4, , Average 24 25: 14,22 USD/Mt. Ni Average : 8,62 USD/Mt. Ni Nickel price Inventories in the L.M.E June onwards, the price weakened an important drop took place, falling down to 11,5 USD/Mt on the 1 st November. The collapse of nickel prices in view of the output reduction by stainless producers, which consume 7% of world nickel production, did not take place as expected; Instead, it suddenly went up to 14,12 USD/Mt on the 12 th December. This trend has intensified during the year 26 and the day before yesterday nickel price reached another all-time high, closing at the LME at a price of 23,3 USD/Mt. 4

5 CONCENTRATION OF THE NICKEL MARKET Top five producers represents 57.6% of the market supply Others 42.4% BHPB 6.2% Jinchuan 7.% Norilsk Nickel 18.7% Falconbridge 8.8% Inco 16.9% SOURCE: Norilsk Nickel and Deutsche Bank turn into four if FALCONBRIDGE takeover bid by INCO succeeds. There has not ever been a shortage of nickel. There is no reason, at least so far, justifying this volatility, which damages so much the stainless steel consumption. There is no explanation, only the great concentration, which has developed in this sector. The five main producers supply the 57.6% of the world market, and they will The excess of liquidity of the hedge funds in the LME seems to be even more important. The LME seems to be losing its role of independent reference to the creation of prices in the supply contracts of Nickel, Copper, Zinc and other industrial metals quoted on said market. Suffice to say that it is estimated that the Nickel world production during 25 totalled 1.33 million Mt and consumption amounted to 1.29 million Mt, while LME deals were more than 2 million Mt. NICKEL: L.M.E. TRANSACTIONS COMPARED WITH PRODUCTION AND CONSUMPTION WORLDWIDE Million Mt Million Mt Transactions Production Consumption 1.29 Million Mt 1.26 Million Mt Ferrochrome CONCENTRATION OF THE FERROCHROME MARKET Top five producers represent 65.8% of the market supply Others 34.2% Xstrata 22.% Kermas 14.9% Kazchrome 14.6% The ferrochrome sector has had a consolidation process, even bigger than in the Nickel case. The first five producers represent 65.8% of the world production. Outokumpu 4.9% China (various( various) 9.4% SOURCE: CRU and Deutsche Bank 5

6 The main difference among Nickel contracts and Ferrochrome, Ferromolybdenum, Ferromanganese, Ferrosilicon, etc is that Nickel prices, as above mentioned, are reference to the LME prices, while ferroalloy prices are set quarterly by direct negotiation, between producers and consumers only according supply and demand balance. During the first quarter, ferrochrome prices kept at the same levels of 74 cts USD/Lb of chrome at the end of 24. In the second quarter they reached 79 cts YSD/Lb, the highest in the last 15 years. They fell again to 74 cts USD/Lb during the third quarter and down to 69 cts USD/Lb in the fourth quarter, following the stainless steel production fall. FERROCHROME QUARTERLY AVERAGE PRICES (Metal Bulletin) USD / Lb. Cr. 1, , 1.,8.8,6.6,4.4,2.2, Beginning 5.69 Ending 5 Molybdenum MOLYBDENUM PRICE (Metals Week) Weekly average values (USD / Lb. Mo.) Beginning Ending 5 I would like to remind you that molybdenum production is located in three countries: Chile, United States and China and that ferromolybdenum prices had quadrupled in the previous year. In 25 they went on increasing until they reached an all-time high of 39,25 USD/Lb on the 6 th June. At that time approximately 11% of the stainless steel market, which usually uses this molybdenum grades because of their highly anticorrosive properties could not accept such high prices. Consequently, molybdenum prices went down to 25 USD/lb at the end of the year. This level is being kept during the first months of 26. 6

7 THE STAINLESS STEEL MARKET The world stainless steel market evolution has been completely different in both semesters of the year 25. In the first half of the year, it was maintained the upward trend of the raw material prices, which started in 22 and intensified in 24, resulting in a speculative increase of the stainless steel inventories all over the world, especially in warehouses and tubists. In the second half of the year, a certain tiredness was felt and a slow down in the order bookings. This was due to the vertigo created by the high quotations of all raw materials, mainly the Nickel and Molybdenum quotations, never been kept so high for so long. During the summer, a stock reduction process took place and there was a price fall in all markets, which was even stronger than that of year 21, and lasted during the whole second half of the year. Its effects were still felt in the first quarter of 26. In the whole of the year, the stainless steel world consumption increased, although it has been uneven in the different markets: with 8.3% decrease of flat products apparent consumption in the EU and even 6.5% in Spain; such decreases had not taken place since year 21. China was an exception with a 16.7% growth according to data supplied by the Association of Special Steel producers of China. This figure is an estimation due to the difficulty in verifying in a country with so many small producers and thousands of consumers, joining the western practises very quickly but with enormous difficulties. The stainless steel consumption shifts year after year from one geographical area to another, with an spectacular growth in China, more than 25% of the stainless steel world consumption, India and the remaining Asian countries. In year 1997, the Asian market represented 44% of the global consumption and in 25 it was 58%. APPARENT WORLD CONSUMPTION OF COLD ROLLED FLAT PRODUCTS Thousand ASIA REPRESENTA Metric tonnes LA MITAD DEL CONSUMO MUNDIAL, CHINA UN CUARTO Source: 13, , 12. 1, , 9. 7, , 6. 4, , 3. 1,5 1.5 Compound annual growth WORLD : 6.1% China : 19.1% Rest of the world : 3.2% 9% 17% 3% 44% Others USA Western Europe Rest Asia China Japan Obviously, the bigger growth in this period has taken place in China, which has had an annual growth rate of 19.1% against the 3.1% annual growth rate of the rest of the world, with a very satisfactory total global rate of 6.1%, as far as I know, has not been achieved any other product alternative to stainless steels. The relocation of some transformer industries of Europe and Asia is unavoidable, but what really matters is the global growth of consumption. It will be offset by other applications typical of mature consumption in developed countries where stainless steel is indispensable, as it has already happened in the United States. I do not refer only to nuclear stations, environmental protection facilities, etc but also to new opportunities such as the construction of 25 ethanol plants in the United States. Ethanol is obtained from maize in order to, as a first stage, replace the 3% of the oil used for fuel. Each ethanol plant uses approximately 2,5 Mt of stainless steel. 1% 1% 22% 58% 7

8 PRICE OF NICKEL IN THE L.M.E. AND AUSTENITIC STAINLESS STEEL PRODUCTION RATIO % USD/lb L.M.E. Nickel Price Cash US$/lb Austenitic ratio (%) The result of the high nickel quotations is that the ferritic grades are taking the place of the austenitic grades for interior designs, where the corrosion resistance requirements are not so important. Since 22, when the upward trend of nickel prices began, the austenitic grades share has been reduced in 1 points. Lately there is a certain adjustment due to the loss of prestige of 2 grade types, which use manganese instead of nickel, which in China have being very unsuccessful regarding corrosion in that country. It has been proven that they are not a proper replacement for 3 grade types or chrome nickel austenitic grades Source: Heinz H. Pariser PRICES In addition to the high stock level accumulated in year 24 and the first quarter of 25 due to speculation created by raw material prices, important new production capacities have taken place all over the world, especially in China, and lower growth of world economy, particularly in Europe. It stands to reason the strong drop of the stainless steel prices in all the markets, without exception; the strongest we remember in only a semester. STAINLESS STEEL COLD ROLLED SHEET PRICES AISI mm (1995 April 26) STAINLESS STEEL COLD ROLLED SHEET PRICES AISI mm (1995 April 26) /Mt GERMAN MARKET USD/Mt NORTHAMERICAN MARKET 2, , , 2. 3, 3. 2, , , 2. 1, 1. 1, , Base price Alloy surcharge SOURCE: MBR Base price Alloy surcharge SOURCE: MBR 8

9 The second semester 24 the margins of the stainless steel producers had already got narrower, having absorbed part of the alloy surcharge increases derived from the raw material price trend. Consequently, base price reductions of more that 3% were reached at the end of 25. The same, but to a lesser extent, occurred in the United States market. In the Far East countries, where the alloy surcharge system is not used yet, the collapse was even worse. STAINLESS STEEL COLD ROLLED SHEET PRICES AISI mm (1995 April 26) USD/Mt, final price, alloy surcharge included 3, , , , 3. 2, , , , 2. 1, USA GERMANY HONG KONG 1, , , SOURCE: Metal Bulletin Research Stainless Steel Monthly WORLD PRODUCTION Two weeks ago we had the satisfaction of hosting in Kentucky the 1 th ISSF (International Stainless Steel Forum) Annual Conference, with more than 8% of the world production represented there. The ISSF showed us some statistics, showing that the world stainless steel production in 25 was 24.3 million Mt, with a 5.96% annual growth rate over the last 55 years. Likewise, another estimation of a remarkable 5.56%, for the next five years was also submitted. 9

10 EVOLUTION OF THE STAINLESS STEEL WORLD PRODUCTION Million Metric tonnes YEAR YEAR YEAR 24 YEAR % +7.6% -1.% +8.6% 2.7 YEAR 26e It was also pointed out that in year 25 the world production decreased by 1%. On the contrary, for year 26 a global increase of 8.6% is forecasted, partly due to the stocks build-up, a 1% growth in Asia, more than 7% in Europe and a 6% growth in America. Europe y Africa Asia America Statistical source: International Stainless Steel Forum (ISSF) CONSOLIDATION The concentration process of the stainless steel producers has been really intense in Europe and in America, but not yet in Asia. Since 199 there has been a substantial change. The top five world producers which then represented 31% of the world production, increased up to 58% in year 24. This concentration has been smaller than the ferrochrome one, very similar to the nickel concentration, but far bigger to the carbon steel one. Suffice to point out that should the takeover bid over ACERLOR by MITTAL take place, it would reach a 1% of the WORLD CONCENTRATION OF STAINLESS STEEL FLAT PRODUCTS PRODUCERS ACERINOX, Posco, ALZ, Armco, Kawasaki, Nippon Yakin, Nippon Metal, Atlas, MS&A, Washington, Pamco, Tang Eng, Cyclops, Nisshin, Daido, Acesita, Sanvick, VEW Outokumpu, Sammi, Fabrique Sumitomo, British Steel, J&L, Avesta, Allegheny Thyssen Nippon Steel AST Krupp Ugine world production and ACERINOX Group, which since last year are the second stainless steel group in the world, has that production share in stainless steel. 52% 31% Top 1 Top 5 84% 58% A.K. Steel, Jindal, NTK Nippon Yakin, Taiyuan, Baosteel Yusco, Nippon Sumikin, Nisshin, JFE, Allegheny Krupp Thyssen Stainless Arcelor Year 25: ACERINOX 2 nd producer Outokumpu worldwide Posco Source: JP Morgan 1

11 ACERINOX GROUP After this general review, I will now go on to inform you on our Group evolution during the year: Productions 1.- Flat Products ACERINOX Group productions have been very uneven in the two semesters of 25. In the first half of the year, the upward trend of the previous years went on in all the Group factories, with a 17.2% increase in melting production with regard to the same period of 24. On the contrary, melting productions in the second half of the year were affected by the inventories reduction in all markets and by the scheduled biennial maintenance and improvement stoppage in the melting shop and hot rolling mill of our Campo de Gibraltar factory. COLUMBUS factory, in South Africa was enormously affected by the lack of orders for hot coil for cold re-rollers in the Far East. The join production of the three melting shop of the Group, 2,241,62 Mt, is 3.8% lower with regard to the previous year, but notwithstanding, they turn us into the second world stainless steel producer, with a 9.2% share. FLAT PRODUCT PRODUCTION OF ACERINOX GROUP (Thousand Mt.) MELTING SHOP 2.5, HOT ROLLING SHOP 2.5, COLD ROLLING SHOP 2.5, 2.25, 2.25, 2.25, 2., 2., 2., 1.75, 1.5, 2.2 mill. tons. -3.8% 1.75, 1.5, 2. mill. tons. -2.9% 1.75, 1.5, 1.5 mill. tons. +7.6% 1.25, 1.25, 1.25, 1., 1., 1., Total Acerinox, S.A. NAS Columbus Flat products hot rolled production goes down by 2.9%. Cold Rolled production increases by 7.6%, with NAS increase really outstanding. 11

12 2.- Long products: Long products hot rolling increases by 4.6%. The apparent consumption fall in the European market has also affected ROLDAN, S.A, which has reduced it production by 4.3%, while NAS long products has continued with its upward trend, reaching a 27.5% increase. LONG PRODUCT PRODUCTION OF ACERINOX GROUP Thousand Mt ,786 tons. +4.6% TOTAL ROLDAN NAS NET SALES EVOLUTION OF NET SALES OF ACERINOX GROUP Million Millones de Euros 4.5 4,5 4. 4, 3.5 3,5 3. 3, 2.5 2,5 2. 2, 1.5 1,5 1. 1, ,214 1,779 1,63 1, Consolidated Group Trading companies ACERINOX S.A. N.A.S. COLUMBUS ROLDAN + INOXFIL The Group Net Sales, 4,214 million euros, was 4.4% higher than the invoiced figure of the year before, being outstanding NAS increase and COLUMBUS decrease, for the reason I have just mentioned. GEOGRAPHICAL DISTRIBUTION OF ACERINOX GROUP NET SALES One of the advantages of ACERINOX Group, well-know all over the world, is the production and sales diversification in the five continents, with a share in America which is increasing year by year and which means the 38.5% of the Group Net Sales. YEAR 25 Oceania 1.2% Africa 4% Asia 14.3% Europe 42% Americas 38.5% YEAR 24 Oceania.4% Africa 4.9% Asia 16.1% Europe 43.2% Americas 35.4% 12

13 COMMERCIAL NETWORK Our commercial network goes on expanding worldwide, together with our production development. Nowadays, we own 17 service centres and one more under construction in Atlanta, 31 warehouses and a new one under construction in Warsaw and 27 commercial offices. Next, I will speak about our societies. Firstly, about our parent company: 13

14 ACERINOX, S.A. The productions of our Campo de Gibraltar Factory evolved very favourably during the first semester of the year, showing a decrease in the second half of the year due to the following reasons: 1.- Unfavourable conditions in the international markets. 2.- Schedule biennial halts, 16 days in the melting shop and 17 days in the hot rolling mill, for purposes of maintenance, improvement and enlargement of the facilities. 3.- From the month of April, billet exports to the United States ceased, due to the fact that NAS started producing its own billets in the Kentucky factory. ACERINOX, S.A. : Factory of Campo de Gibraltar Nevertheless, the melting shop totalled a production of 99, Mt, which is 1.2% lower than the previous year production. The hot rolling shop production amounted to 78, Mt, showing a 9% increase and the cold rolling shop obtained 61, Mt, which is 6.8% higher. In 25 our parent company has carried out investments amounting to 132 million euros, from which 38 million go for equipments for Campo de Gibraltar factory, 87 million euros for financial investments, to acquire a 12% additional share of COLUMBUS and capital increases in the commercial companies and the rest goes to investments explained in detail in the annual report. INVESTMENTS IN ACERINOX, S.A. Valores Million medios mensuales (USD/Tm. Ni.) INVESTMENTS IN THE FACTORY OF CAMPO DE GIBRALTAR FINANCIAL INVESTMENTS OTHER INVESTMENTS TOTAL Tm.. en miles 14

15 The Board of Directors has approved the 15 th Investments Phase for this factory for an amount of 35 million euros, which will be carried out mainly during next year. Its aim is the technological renewal and updating of the facilities so as to increase production and solve the bottlenecks in very balanced factory, running at full capacity and almost depreciated by 91.4%. Likewise, the target is to improve safety and the environmental conditions. These improvements are necessary to go on being on the lead of competitiveness in Europe, but they are not enough, if at the same time there are no appropriate conditions in our country. 31 st DECEMBER 25 RESULTS Million ACERINOX, S.A % over 24 NET SALES 1,63.3 1, RESULTS BEFORE TAXES DEPRECIATION The parent company Net Sales, 1,63 million euros, decreases by 7% if compared with 24. Results after taxes, 71.5 million euros, showed a 3.7% decrease and Net Cash Flow, amounting to 1.7 million euros, is 32.4% lower. RESULT AFTER TAXES NET CASH FLOW ROLDAN, S.A. After, the record year of 24, the long products world market was very affected by the reduction of inventories and the general fall of apparent consumption for all the stainless steels from the second quarter 25. Besides, this market was very distorted by the imports from third countries, particularly those coming from India. ROLDAN : Factory of Ponferrada 15

16 31 st DECEMBER 25 RESULTS Million In this context, ROLDAN, S.A. factory in Ponferrada obtained 128, Mt of finished products, which is 4% ROLDAN, S.A. lower than the record % over production of the year before. NET SALES During the year RESULT BEFORE TAXES DEPRECIATION RESULT AFTER TAXES NET CASH FLOW investments amounting to 5.6 million euros were carried out in the factory. Net Sales, 322 million euros, were 6.5% higher due to the allow surcharge increase, partly offset by reductions of base prices. The Profit after Taxes, 7 million euros, were 48% lower to the figure obtained in 24 and Net Cash-Flow, 13.3 million euros, was 39% lower, but still higher than the share capital which amounts to 11.9 million euros. On 31 st December 25, 8% of the tangible fixed assets is already depreciated and the gearing ratio was of 9.2%. An investment plan amounting to 2 million euros has been approved. It will be carried out during 26 and 27, coinciding with the 5 th Anniversary of the society incorporation. These investments are mainly aimed to a new updating of the hot rolling mills. They will allow strong increases in productivity and metallic yields and also energy savings. COLUMBUS STAINLESS During the first six months of the year, production, sales and result of our South African subsidiary company were positive. On the other hand, the fall of raw material and stainless steel prices affected the second semester figures of this company to a great extent due to the following reasons: 1.- This society was created by its shareholder founders mainly aiming to the export of hot coils to the Far East. Although since 22, the year of its acquisition, investments have been carried out mainly to rationalize and double the production capacity of the cold rolling mill. There is still unbalance between cold rolling mill and melting shop-hot rolling mill. The market fall and the coming into operation of new melting shops in China and Korea, which occurred much earlier than expected, have triggered a sudden halt of hot coil exports. 16

17 2.- The Rand appreciation against USD by 12.1% in the year, or by 46.5% since the beginning of year 22 is affecting COLUMBUS tremendously, for being a company which exports more than 8% of its production. Rand appreciation also affects consumption development, which until year 21 grew at 1% annual rate, which has been practically non-existent during the last years. EVOLUTION OF THE SOUTH AFRICAN RAND VS USD AND EURO (Years 22 25) Percentage data 6% 5% 4% 3% 2% 1% % -1% % % % % 28-Dec Dec Dec Dec-24 3-Dec-25 Exchange rate ZAR / USD : Exchange rate ZAR / EUR : ZAR/EURO % % ZAR/USD % % Source: Central Bank 3.- South Africa does not have stainless steel scrap, which makes COLUMBUS more dependant on pure nickel, and consequently more sensitive to the nickel price fall. The nickel price collapse in the second half of the year, damaged COLUMBUS due to the previously acquired contracts for Nickel purchases, which were referred to the LME. The melting shop production amounted to 565, Mt (21.3% lower than in 24) and hot rolling shop production totalled 523, Mt, (21.8% lower than in year 24). On the other hand, cold rolled production was 323, Mt, which was 1% higher. Net Sales totalled 911 million euros, 14% lower to the invoiced figure in 24. Results after taxes was 11.7 million euros and cash flow amounted to 17 million euros. 31 st DECEMBER 25 RESULTS Million COLUMBUS % over 24 NET SALES , RESULT BEFORE TAXES DEPRECIATION RESULT AFTER TAXES NET CASH FLOW

18 EVOLUTION OF COLUMBUS RESULT AFTER TAXES Million It is interesting to point out the evolution of the results during the four years since its acquisition by ACERINOX. The years with favourable conditions for the international stainless steel market, the trend has been positive and increasing and during unfavourable years the trend was less and less negative. As we informed in last year General Shareholders Meeting, we have increased our share in COLUMBUS by 12%, consequently now it amounts to 76%. COLUMBUS. STAINLESS: Factory of Middelburg (South Africa) After the improvements carried out, the Middelburg factory is perfectly ready to produce in the melting shop and hot rolling mill one million Mt yearly, and almost 4, Mt in the cold rolling mill, which with an additional cold rolling mill would reach 5, Mt. This would require an additional investment of 4 million USD, which we will carry out as soon as domestic and overseas stainless steel market and Rand valuation will make it justifiable. The number of consumers and countries buying cold rolled products is much higher than those buying hot coil, which very few rerollers use, and they are mainly sited in the Far East. South Africa enjoys competitive costs for manpower, ferrochrome, electric power and gas supply from coal, which give this company a great strategic value for the future, if Spain is harmed by electricity conditions and the Kyoto Protocol. 18

19 NORTH AMERICAN STAINLESS In the mentioned and unfavourable framework, with a 1.5% decrease of stainless steel flat products apparent consumption and a 1.3% decrease also for wire rod in the United States, NAS has gone on growing and strengthening its position as one of the leading companies in the North American market during 25. Melting shop production, 768, Mt, was 11.1% higher that the production of the year before. During the first quarter of the year, the billet continuous caster came into stream, and this way the long products process in Kentucky factory becomes also integrated and it turns to be the most complete one in the stainless steel sector and it is also expected to become the most competitive. Hot rolling mill processed 79, Mt, which means a 3.3% increase over the year before. Continuous casting for billets EVOLUTION OF PRODUCTIONS IN NAS Thousand Mt Melting Shop Hot Rolling Shop (flat products) Hot Rolling Shop (long prodducts) Cold rolling production amounted to 537, Mt, which is 13% higher than the production of the previous year. Long Products hot rolled production totalled 67, Mt, which is 27.5% higher than the year before Cold Rolling Shop 19

20 Net Sales, 1,981 million USD, was 16% higher than the invoiced figure of 24. Results after taxes, million USD, was 2.7% lower than that of the previous record year. Net Cash Flow, million USD, was 11.1% lower. 31 st DECEMBER 25 RESULTS Million USD NAS % over 24 NET SALES 1, , RESULT BEFORETAXES DEPRECIATION RESULT AFTER TAXES NET CASH FLOW NAS has been the only company of the Group and probably the only stainless steel company in the world, which has obtained positive results in such a hard quarter as it was 25 fourth quarter. NAS has progressed enormously in the policy of approaching and giving just in time service to the market. Said policy based on service centres has always given very good commercial results to ACERINOX Group. NAS COMMERCIAL NETWORK EXPANSION MINOOKA (ILLINOIS) AGUA MANSA (CALIFORNIA) ATLANTA (GEORGIA) TORONTO (CANADA) Since 22 the first service centre in North America, located in Minooka (Illinois) is in operation; this is the area of greatest stainless steel consumption in the United States. In August 25 the second service centre in Agua Mansa (California) was opened and by the middle of the year 26 the service centres of Atlanta and Georgia will come into operation. 2

21 Due to the fact that there is not a local stainless steel producer in Canada and our knowledge of said market, we consider it to be a natural market for NAS. That is why in 25 we incorporated NAS CANADA INC., which will also allow us to export some products from Spain. A service centre in Guelph (Ontario) has been built and was opened fifteen days ago. The Kentucky factory enlargements are taking place according to the foreseen schedule: 1.- Nº 4 ZM cold rolling mill was put into stream in March 26. No.4 Sendzimir Mill under construction 2.- Nº2 electric furnace will be put into service in the last quarter of the current year, which will increase the melting capacity up to one million metric tons. No.2 Electric Furnace structure 21

22 Nevertheless, we cannot stand just with all the achievements for the last fifteen years, from NAS foundation. NAS : Factory of Kentucky (USA) At the end of the year the Ghent Factory in Kentucky will increase its melting capacity to one million tons and it is already the most complete factory in the stainless steel world due to the fact that it has carried out the integration of flat and long products in the same location. Since the layout was designed with far-reaching sights and ACERINOX deep expertise, it allows further enlargements. The Board of Directors held this morning has resolved to carry out a new and important investments phase. The aim is to increase the annual melting capacity to 1,415, Mt, with a 2 nd AOD converter. The cold rolling mill will be enlarged with a fourth annealing and pickling line and a fifth ZM cold rolling mill so as to reach an annual capacity of 77, Mt of cold rolled products, 25, Mt of hot rolled sheets and coils and 6, Mt of plates. The finishing shop for long products will also be enlarged so as to produce 17, Mt yearly. Foreseen investment will amount to 27 million USD, which will be covered by NAS itself. 8 new jobs will be created. The new facilities will come into operation at the end of year 28. The return of such capex is quick. Just with a 2% fixed assets increase, we shall achieve a 4% increase in the melting production capacity at the end of 26, or a 78% increase in finishing products in 25. It will allow all the shops to work at full capacity. The Kentucky factory will be very well balanced in the end, as it is our Campo de Gibraltar Factory, after 35 years of continuous investments and improvements. 22

23 ECONOMIC RESULTS OF THE CONSOLIDATED GROUP The Consolidated Group results show the unprecedented market deterioration during the second half of year 25, but they prove the Group strength so as to obtain profits in a year with such hard conditions, as we have just discussed. EVOLUTION OF THE CONSOLIDATED GROUP (E.B.I.T.D.A.) Million (% over sales) (IAS) The Gross Operating Result Margin (EBITDA) totalled million euros, which in absolute terms is the third highest with the lowest margins of the Group history. The Result Before Taxes and Minorities, million euros, is 54% lower than that of 24. Following ACERINOX traditional policy of presenting very sound balance-sheets, an extraordinary provision has been included to adjust the inventories value to the net realisable value for an additional amount of 41.6 million euros. 31 st DECEMBER 25 RESULTS CONSOLIDATED GROUP Variation Thousand IAS IAS Net Sales 4,213,559 4,35, % Gross Operating Result (EBITDA) 415, , % Net Operating Result (EBIT) 257,928 53, % Result Before Taxes and Minorities 228, ,51-54.% Depreciation 111, , % Gross Cash Flow 339, , % Result After Taxes and Minorities 154, ,36-5.7% Net Cash Flow 266, , % EVOLUTION OF THE RESULT AFTER TAXES AND MINORITIES CONSOLIDATED GROUP Million euro Spanish GAAP IAS The Result after Taxes, million euros, is 5.7% lower to the result obtained in 24, under I.A.S., is lower than years 24 and 22 but higher than years 23 and 21, which clearly shows the capacity of the Group to offset the margin reduction with a bigger volume and operative improvements. Net Cash- Flow, million euros, is 39.8% lower. 23

24 For second consecutive year, NAS leads the profit contribution to the consolidated net results with a 69%, followed by ACERINOX with a 36% and ROLDAN, S.A with a 7%. COLUMBUS had a negative contribution of 4.9% and most of the subsidiary companies had also a negative contribution, were very affected by the price fall and subsequent inventories CONTRIBUTION TO THE RESULT AFTER TAXES AND MINORITIES (%) YEAR 25 Roldan e Inoxfil Domestic Trading Companies Overseas Trading Companies devaluations. The whole of the domestic companies contribution was.4% and foreign companies contribution was of 6.4%. INVESTMENTS OF THE CONSOLIDATED GROUP Valores Million medios mensuales (USD/Tm. Ni.) NAS Acerinox Columbus FINANCIAL INVESTMENTS The net debt of the Group, 829 million euros, has increased in 155 million euros as a consequence of the 27 million euros corresponding to yearly investments, 42 million euros buyback of own shares approved in the last General Meeting and the greater need of working capital financing, which is derived from the prices increases of raw materials. Notwithstanding, a 4% gearing is thought to be reasonable taking into account the Group growth and it will undoubtedly decrease when prices of raw materials go down FIXED ASSETS INVESTMENTS ACERINOX, S.A NAS COLUMBUS ROLDAN + INOXFIL DOMESTIC TRADING COMPANIES OVERSEAS TRADING COMPANIES TOTAL Tm.. en miles 24

25 STOCK EXCHANGE MARKET REPORT In spite of the continuous appreciation of oil prices and the changes of the monetary policy in Europe and mainly in North America, the Spanish stock exchange in 25 performed, for third consecutive year, very positively, with a 18.2% IBEX-35 appreciation. Until the month of April, ACERINOX share price evolution was better than the IBEX-35. The sharp fall of the stainless steel market in EVOLUTION OF THE STOCK EXCHANGE MARKET. YEAR 25 Daily percentage data 25% 2% 15% 1% 5% % -5% -1% Jan Feb Mar Apr ACERINOX May Jun the second half of the year affected the evolution of our stock. From November there was a recovery, and the year closed with a 4.1% appreciation. Jul Aug Sep Oct Nov IBEX 35 Dec +18.2% +4.1% FIVE YEARS EVOLUTION OF THE ACERINOX SHARE AND THE INDEX IBEX-35 Percentage % Data % % Nevertheless, the share price appreciation, 51%, during the last five year, is much higher than 17.8% IBEX- 35 appreciation. In the last decade, it has grown at a 1.3% annual rate ACERINOX IBEX : ACX= 8.12 IBEX 35= 9, : ACX= IBEX 35= 1,733.9 ACERINOX, S.A. share profitability during a period of ten years, including appreciation and collections, amounts to 298%, consequently, it has quadrupled its value, 25

26 RESULT APPLICATION PROPOSAL The Board of Directors, following its policy of consolidating the dividends in the years of lower results, as 25, will submit for approval the distribution of the parent company profit after taxes, 71.5million euros, in the following way: PROPOSAL OF APPLICATION OF RESULTS. ACERINOX, S.A. Euro PROFIT AFTER TAXES OF THE YEAR 71,523,96.2 APPLICATION : * DIVIDENDS 67,46,. * VOLUNTARY RESERVE 4,53,96.2 Two interim dividends of.7 euros per share, on account of year 25 were paid on the 4 th January and 4 th April 26. We now propose to pay out a complementary dividend of.12 euros on the 4 th July, which would be added to the issue premium refund of.8 euros per share. RETURN TO SHAREHOLDERS / share,4.4.35,35.3,3.25,25.2,2.15,15.1,1.5, To sum up, we propose a., total retribution of euros per share for year 25, consolidating the 19.3% increase of the year before The Pay-out for 25, including issue premium refund and dividend, is 57% for the Consolidated Group. The share profitability for the year, which must always include the issue premium refund, varies depending on how it is considered the annual quotation of 24 or 25, between 2.88% and 2.77% Reduction of Share Capital Issue Premium Refund Dividend 26

27 BOARD OF DIRECTORS The Board of Directors held on the 9 th June 25, with previous report from the Appoitments and Remunerations Committee, resolved to appoint Mr. Saburo Tanaka Boardmember representing METAL ONE. In this General Shareholders Meeting we propose his ratification and appointment for 4 years. Mr. Leslie Boyd s term of office as board member representing the South African Group, comes to its end; he was one of COLUMBUS founders. I would like to express my sincere thanks for the valuable contribution to the Board of Directors due to his great international experience in the iron and steel industry and his deep expertise of South Africa. Board in South Africa (3-November-25) We would like to keep him with us and for that reason we have proposed him to be an independent board member of COLUMBUS, and fortunately he has accepted. To replace Mr. Boyd, Our South African partner in ACERINOX and COLUMBUS, the INDUSTRIAL DEVELOPMENT CORPORATION (IDC), proposed D. Mvuleni Geoffrey Qhena, who is CEO of the IDC in South Africa. After the report from the Appointments and Remunerations Committee, the Board of Directors will propose his appointment as Board member for a period of four years. Likewise, the re-election of Mr. Santos Martínez-Conde Gutierrez-Barquín as a Board member representing CORPORACIÓN FINANCIERA ALBA, for another period of four years. It will also be propose to re-elect the Directors Mr. Rafael Naranjo Olmedo and Mr. David Herrero García as Board members for the referred period of time. In this event, Mr. Jose Luis Lejeune Castrillo finishes its term of office, who cannot be re-elected for a matter of age, according to the rules issued by this Board of Directors in year 23. Once more, I would like to give him recognition for his devotion and brilliant contribution to this society since its constitution in year 197, in the construction and management of Campo de Gibraltar Factory for more than 2 years and afterwards, from 199 to 21 at NORTH AMERICAN STAINLESS as president and as member of ACERINOX Board of Directors since year 199. Personally, I have always had in Jose Luis a close friend and a wholehearted collaborator. 27

28 ORGANIC GROWTH ACERINOX has always committed itself to its organic growth and the only exception was COLUMBUS acquisition, because it was carried out under favourable conditions and because it is an integrated factory, with the main part of the facilities being modern and for its privileged position as far as energy and raw materials are concerned, and also because it is in the African country with more chances of economic development. Besides, its layout allowed us to carry out important enlargement, some of which were already carried out in year 22. Thanks to our organic growth, in 25 we have reached the second position in the stainless steel producers world ranking. We are not interested in being in the first position but we really intend to become the most competitive Group. With the investments, which have just been approved, amounting to 3 million euros: 35 millions go to the Campo to commercial warehouses in Spain and in the European Union, and especially, 27 million of USD to NAS factory in Kentucky. All of them are going to be carried out in the following two years and they will give a powerful push, with the aim to get INVESTMENT PLAN APPROVE (Period of execution 26 28) Million XV PHASE FACTORY OF CAMPO DE GIBRALTAR FACTORY OF PONFERRADA (ROLDAN) TRADING COMPANIES NAS TOTAL a production of 3.5 million Mt with only 3 melting shops in 21. If ISSF forecast of a world annual growth rate of 5.56% are right, we would have a world share of 11%, starting off at 9.2% in year

29 FORECAST OF THE MELTING PRODUCTION CAPACITY EVOLUTION. ACERINOX GROUP Million metric tonnes YEAR 25 Real production YEAR 27e YEAR 29e Acerinox NAS Columbus We can reach this aim, with the highly qualified and motivated staff, and with the second-to-none expertise of our factories, commercial centres and headquarters in the stainless steel sector. It is the best way to go on creating value for our shareholders and our employees, contributing to the progress of the countries were we are. Thanks a lot for your attention and continuous trust. 29