Innovative Technology Solutions for Sustainability BEFESA ZINC First Quarter 0 Earnings Presentation 6 th May 0
Forward-looking Statement This presentation contains forward-looking statements and information relating to Befesa Zinc that are based on the beliefs of its management as well as assumptions made and information currently available to Befesa Zinc. Such statements reflect the current views of Befesa Zinc with respect to future events and are subject to risks, uncertainties and assumptions. Many factors could cause the actual results, performance or achievements of Befesa Zinc to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others: changes in general economic, political, governmental and business conditions globally and in the countries in which Befesa Zinc does business; changes in interest rates; changes in inflation rates; changes in prices; decreases in government expenditure budgets and reductions in government subsidies; changes to national and international laws and policies that support renewable energy sources; inability to improve competitiveness of our renewable energy services and products; decline in public acceptance of renewable energy sources; legal challenges to regulations, subsidies and incentives that support renewable energy sources and industrial waste recycling; extensive governmental regulation in a number of different jurisdictions, including stringent environmental regulation; our substantial capital expenditure and research and development requirements; management of exposure to credit, interest rate, exchange rate and commodity price risks; the termination or revocation of our operations conducted pursuant to concessions; reliance on third-party contractors and suppliers; acquisitions or investments in joint ventures with third parties; unexpected adjustments and cancellations of our backlog of unfilled orders; inability to obtain new sites and expand existing ones; failure to maintain safe work environments; effects of catastrophes, natural disasters, adverse weather conditions, unexpected geological or other physical conditions, or criminal or terrorist acts at one or more of our plants; insufficient insurance coverage and increases in insurance cost; loss of senior management and key personnel; unauthorized use of our intellectual property and claims of infringement by us of others intellectual property; our substantial indebtedness; our ability to generate cash to service our indebtednesschanges in business strategy and various other factors. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or targeted. Befesa Zinc does not intend, and does not assume any obligations, to update these forward-looking statements.
Agenda Q Business Highlights Q Financial Highlights 3 Outlook 4 Appendix 3
Q 0 Highlights Continues strong performance in current uncertain market environment 6.3 M Revenues, an increase of 6% Y-o-Y.4 M Ebitda, an increase of 3% Y-o-Y 36.0% Ebitda Margin, versus 33.8% in Q 0 96.% Load Factor, versus 00% in Q 0 47,589 tons WOX sold, an increase of 8% Y-o-Y,544 Average LME Price, versus,753 in Q 0 4
Q 0 Highlights (cont d) Another quarter of solid results with some growth coming from Turkey Steel Dust 3 4 Positive effect in revenues of increase in hedge from,560 to,703, partially offset by decrease in LME spot price Increase in WOX volumes production (+6.% Y-o-Y) Improved performance of Turkish plant operations Y-o-Y by % Increase in throughput (+7.6%) and slightly lower average load factor (96% vs. 00%) due to planned maintenance shutdowns Stainless Steel Strong increase in throughput (+65%) and load factor (73% vs. 45%) Reduction of alloys sold in Q 0 vs same period of 0 Capex plan 3 Zinc Sur: Full flexibility (not committed). On hold Bilbao: Full flexibility (not committed). On hold Gravelines: Start operations in Q 0 Stable EU-7 Steel Production (million tons) 45.7 47.4 4. 4.5 43.9 Q-o-Q Change: +5.8% Y-o-Y Change: -3.9% Source: World Steel Association; CRU analysis Q ' Q ' Q3 ' Q4 ' Q ' 5
Agenda Q Business Highlights Q Financial Highlights 3 Outlook 4 Appendix 6
Consolidated Figures Another strong quarter benefiting from Turkey consolidation, and some recovery in stainless steel Q 0 EBITDA reached.4 m, representing an average EBITDA Margin of 36% Net Debt is 3.8m, representing a Net Debt EBITDA ratio of.9x * Revenues for Q Revenues by quarter ( M) 48.7 53.7 6.3 ( M) 53.7 5.5 63.9 5.3 6.3 Q '0 Q ' Q ' EBITDA for Q Q ' Q ' Q3 ' Q4 ' Q ' EBITDA by quarter 30 5 0 5 0 5 ( M) 7.5 8. 36% 34%.4 36% 50% 30 5 45% 0 ( M) 40% 5 0 35% 5.4 8. 9.4 6.6 7.7 34% 3% 30% 34% 36% 70% 60% 50% 40% 30% 0 Q '0 Q ' Q ' *Assumes LTM Ebitda of 76.m 30% 0 Q ' Q ' Q3 ' Q4 ' Q ' 0% 7
Steel Dust Segment Solid results in steel dust in Europe despite current turmoil and Turkey providing growth Excluding Turkey, throughput in Q 0 decreased 4% Y-o-Y due to planned maintenance stops Revenues increased by +4. 4% for Q 0 vs Q 0 due to higher volumes of WOX sold (+8.%), and lower LME Zinc price (-.9%) partly offset by hedge Revenues for Q Revenues by quarter ( M) 38.7 4.4 47.4 ( M) 4.4 4.7 48.3 4.4 47.4 Q '0 Q ' Q ' EBITDA for Q Q ' Q ' Q3 ' Q4 ' Q ' EBITDA by quarter 30 5 0 5 0 5 0 ( M) 7.4 7.7 0.6 45% 43% 43% Q '0 Q ' Q ' 80% 30 70% 5 0 60% 5 50% 0 ( M) 40% 5 30% 0 0.6 7.7 7. 8.5 5. 43% 40% 38% 37% 43% Q ' Q ' Q3 ' Q4 ' Q ' 00% 90% 80% 70% 60% 50% 40% 30% 0% 8
Stainless Steel Segment Quite positive Q results show momentum in segment Q 0 revenues increased 0.7% Y-o-Y, mainly due to the increase of the throughput by 64.6%, compensated by the reduction in alloys sold during this quarter Improvement in load factor Y-o-Y from 44.5% to current 7.4% Revenues for Q Revenues by quarter ( M) 0.3 4.9 ( M).3 9.7 5.6 0.9 4.9 Q '0 Q ' Q ' EBITDA for Q Q ' Q ' Q3 ' Q4 ' Q ',8,6,4, 0,8 0,6 0,4 0, 0 ( M) 0. % 0.5 4%.8 % Q '0 Q ' Q ' 30% 4,3 5% 3,3 0%,3 5%,3 0% 0,3 5% -0,7 0% 0.5-0.6 4% -6%.6.8 0.9 4% % 6% Q ' Q ' Q3 ' Q4 ' Q ' 50% 40% 30% 0% 0% 0% -0% 9
Cash Flow & Liquidity Stable cash flow generation and strong liquidity position Operating activities: 4.9m increase in Q 0 vs 0 in cash generated from operating activities, also increased by lower taxes and financial expenses Investing activities: 8m increase in outflow vs Q 0 due to the acquisition of tangible assets worth 7m Q Figures in 000 0 0 Variation Cash generated from operations,96 8,04 4,857 Taxes paid (5,54) (9,00) 3,946 Interest paid (8) (,3),9 Interest received 85 99 753 Net cash flows from Op. Activities (I) 8,377 (,308) 0,685 Net cash flows from Inv. Activities (II) (8,07) (85) (7,) Net cash flows from Fin. Activities (III) (84) 0 (84) Effect in change of the perimeter (IV) 0 5 (5) Net increase (I+II+III+IV) 66 (3,07) 3,338 Balance at beginning of period 75,96 40,96 34,990 Balance at end of the period 76,8 37,854 38,854 0
Agenda Q Business Highlights Q Financial Highlights 3 Outlook 4 Appendix
Outlook We maintain a positive outlook for the rest of 0 Steel Dust 3 0 load factor will not be affected at current levels of EAF production Similar levels of EAF production expected for 0 than for 0 Strong demand for WOX from Zinc smelters Stainless Steel Good momentum of Q 0 expected to continue throughout the rest of 0 Higher load factor than 0 expected as volumes recover Hedging Update 3 Continue hedging strategy to mitigate zinc price fluctuations Lower and more volatile LME Zinc prices than in 0 Actively looking for pricing to hedge Q 04
Outlook Growth strategy focused on Turkey, benefiting from flexible and uncommitted capex plan Turkey 3 4 Attractiveness of the market and expansion constrains in existing facility drives new growth strategy in Turkey New 0kt plant in Adana (near Iskenderun). Land already acquired, and permits and authorizations process currently on going. Another land for a third plant acquired. Detailed engineering and preliminary works will be carried out through 0 Start of operations expected for 04 Zinc Sur / Bilbao 3 Construction postponed due to market uncertainty in steel dust volumes in southern Spain Detailed engineering and preliminary works will carry on through 0 Start of construction date still to be determined Gravelines Fully commissioned and started operating during Q 0 3
Zinc Prices Hedging policy compensating for pressures in Zinc Prices and providing visibility to the cash flows for the next 0 months 4.000 3.000 January 0,703/tn January 03,700/tn.000.000,560/tn January 04,550/tn 0 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-0 Dec-0 Jun- Dec- May- Nov- May-3 Nov-3 May-4 Nov-4 Daily Zinc Spot ( /ton) Hedging Price ( /ton) Average LME Zinc Price in Q 0 was,544 Average LME Zinc Price in Q 0 was,753 Source: Company data; Factset; AME 4
Agenda Q Business Highlights Q Financial Highlights 3 Outlook 4 Appendix 5
Detailed Balance Sheet Figures in 000 Assets 3.03.0 3..0 Equity and Liabilities 3.03.0 3..0 Non-current assets: Equity: Intangible assets: Of the Parent: Goodwill 79,6 79,6 Share capital 5,00 5,00 Unrealized Asset and Liability Revaluation Other intangible assets 5,5 5,08 Reserve,55 7,50 84,34 84,370 Other reserves 00,604 7,79 Translation differences 5 74 Property, plant and equipment: 390,38 387,33 Net profit for the year 8,335 7,83 Property, plant and equipment in use 84,8 86,75 56,456 53,98 Property, plant and equipment in the course of construction,706 6,0 Of minority interests 6,947 6,68 05,84 0,763 Total equity 63,403 59,86 Investments accounted for using the equity method Non-current liabilities: Non-current financial assets: Provisions for contingences and expenses 8,785 8,807 Investments securities,670,670 Non Recourse Finance 94,07 93,99 Other financial assets 89 79 Capital Grants 3,0 3,39,759,849 Other non-current liabilities,36,59 Derivative financial instruments,33 3,940 Derivative financial instruments 0 0 Deferred tax assets 8,4 8,83 Deferred tax liabilities 9,33 3,636 Total non-current assets 43,7 43,05 Total non-current liabilities 346,534 348,9 Current Assets: Current liabilities: Inventories,0,639 Non Recourse Finance 9,985 3,38 Trade and other receivables 8,934,548 Current obligations under finance leases 0 0 Trade receivables, related companies 3,449 7,465 Trade payables, related companies 5,964 3,833 Tax receivables 6,394 7,55 Trade and other payables 7,453 30,04 Other receivables 3,3 3,8 Derivative financial instruments 0 0 Derivative financial instruments 0,863 5,653 Other payables: Other current financial assets 37,073 4,636 Tax payables 7,409 7,86 Cash and cash equivalents 39,09 5,80 Other current liabilities,599,887 Total current assets 5,076 54,583 9,008 9,748 Total current liabilities 7,40 76,950 Total Assets 58,347 585,688 Total Equity and Liabilities 58,347 585,688 6
Detailed Consolidated P&L Figures in 000 Consolidated Income Statement Data Q 0 0 Variation Revenue 6,47 53,747 8,500 Cost of Sales (35,436) (3,474) (3,96) Other operating income,66 865 40 Depreciation and amortization charges (3,43) (3,79) (53) General & Administrative expenses (5,66) (4,970) (69) Profit from operations 8,984 4,989 3,995 Finance income 85 99 753 Finance expense (7,008) (,30) (5,707) Exchange differences (gains and losses) (78) 4 (8) Net financial expense (6,54) (,98) Profit before tax,470 3,79 (,3) Income tax expense (3,863) (4,86) 43 Profit from continuing operations 8,607 9,505 (898) Attributable to: Shareholders of the Parent 8,335 9,505 (,70) Minority Interests 7 0 7 EBITDA,46 8,68 4,48 7
Detailed Cash Flow Q Figures in 000 0 0 Variation Cash Flows from Operating Activities Profit for the period before tax,470 3,79 (,3) Adjustments due to: Amortization/ Depreciation 3,43 3,79 53 (Profit)/Loss on disposal of non-current assets 0 () Change in provisions (3) 8 (04) Financial income (85) (99) (753) Financial expense 7,088,30 5,787 Income from government grants (8) (87) 6 Change in working capital: Change in trade receivables and other receivables (6,386) (4,537) (,849) Change in inventories (633) (3,646) 3,03 Change other current assets,37 (50),874 Change in other current liabilities (3,36) (,388) (,938) Cash generated from operations,96 8,04 4,857 Taxes paid (5,54) (9,00) 3,946 Interest paid (8) (,3),9 Interest received 85 99 753 Net Cash Flows From Operating Activities (I) 8,377 (,308) 0,685 Cash flows from investing activities Purchase of intangible assets (,55) (9) (,6) Purchase of property, plant and equipment (6,969) (489) (6,480) Proceeds from disposal of assets 7 48 (4) Acquisition/(disposal) of new subsidiaries 0 0 0 Other non-current financial assets 90 (345) 435 Net Cash Flows From Investing Activities (II) (8,07) (85) (7,) Cash flows from financing activities Repayment of borrowings and other long-term debt (97) 0 (97) Long Term borrowings 3 0 3 Distribution of dividends/capital reduction 0 0 0 Net Cash Flows From Financing Activities (III) (84) 0 (84) Effect of change in the perimeter on cash and cash equivalents (IV) 0 5 (5) Net Increase In Cash and Cash Equivalents (I+II+III+IV) 66 (3,07) 3,338 Cash and cash equivalents at beginning of the period 75,96 40,96 34,990 Cash and cash equivalents at end of the period 76,8 37,854 38,38 8
Detailed Segment Reporting Figures in 000 Revenue Q 0 Q4 00 EBITDA EBITDA Margin Revenue EBITDA EBITDA Margin Steel dust 4,44 7,656 4.6% 4,368 6,754 40.5% Stainless steel,306 5 4.%,,680 5.% Total 53,747 8,68 33.8% 5,490 8,434 35.% Revenue Q 0 Q4 0 EBITDA EBITDA Margin Revenue EBITDA EBITDA Margin Steel dust 47,393 0,59 43.4% 4,37 5,69 36.7% Stainless steel 4,854,84.3% 0,949,570 3.5% Total 6,47,46 36.0% 5,30 7,738 33.9% % Variation % Variation Revenue EBITDA Revenue EBITDA Steel dust 4.4% 6.6% 0.0% -9.5% Stainless steel 0.7% 56.3% -.6% 53.0% Total 5.8% 3.4% -0.3% -3.8% 9
Detailed Operational Data Crude Steel Dust Q 0 0 % Var. (in Dry Metric Tons) Throughput crude steel dust 34,33 4,773 +7.6% Average Load factor 96.% 00.0% Waelz Oxide Production 46,077 43,4 +6.% Zinc contained in production 30,0 8,49 +6.0% Waelz Oxide Sold 47,590 37,49 +8.% Zinc contained in sales 30,949 4,6 +8.% LME Average Zinc Price ( Euro),544,753 -.9% Stainless Steel Q 0 0 % Var. (in Dry Metric Tons) Throughput Stainless steel dust 3,397 9,074 +64.6% Average Load factor 7.4% 44.5% Metal Alloys sold,085,988-45.4% 0
Glossary For a full understanding of this presentation and the Company s activities, please see below a glossary of certain terms used Electric arc furnace Leaching Mini-mills Scrap steel Stainless steel dust Steel dust Tolling fee Waelz kiln process Waelz oxide Zinc smelter A type of furnace used by mini-mills to melt recycled steel scrap to produce new steel A hydrometallurgical process that increases the purity of the WOX Steel production facilities that use EAF technology, as opposed to integrated furnaces that use iron ore Raw material for mini-mill steel production A hazardous residue in form of powder resulting from the stainless steel production A hazardous residue in form of a powder, rich in zinc that results from mini-mills steel production A fee we charge stainless steel manufacturers to collect and treat stainless steel and then return to them the metals recovered in the process A technology used for processing steel dust that produces waelz oxide (WOX), used at all our steel dust plants A product with a high concentration of zinc that is generated in the steel dust recycling process and that is used in the production of zinc as a secondary raw material An industrial plant that produces high purity zinc from primary and secondary raw material sources. Primary sourcing are zinc concentrates from the mine and the main secondary sourcing is WOX
Q&A