Acerinox, S.A. (ACX) Earnings Call Transcript & Summary

Morning, everybody. And welcome to Acerinox Earnings Conference Call for the First Quarter 2020. My name is Carlos Lora-Tamayo and I am the Head of Investor Relations. First of all, we hope that all of you are well. These difficult times remind us that health and our loved ones are the most important. Today, our CEO, Bernardo Velázquez; and our CFO, Miguel Ferrandis, will host the call, combined by María Uclés and myself from the Investor Relations team. For getting started, let me remember you that this conference call is being broadcast on our website, acerinox.com. Please, Bernardo, go ahead.

Good morning, everybody. Thank you for attending this presentation. I wanted to join you in this presentation because it is a quite unusual one. It's probably one of the more difficult one than we have faced in all the period in my last 10 years, I have been CEO of the company. So I would be very happy after this presentation I can -- I have given to you some more light about what has happened in Acerinox, what can you expect from Acerinox and what you can expect from the industry and the economy, in general. And of course, we'll try to make it short to give you enough time for the Q&A session, that I think, that can be very, very important. So let's start with the first slide, and let's explain the Q1 results. Just today, Q1 look like a part of our history. Nobody remember what was happening in the beginning of Q1 or the end of Q4. We are so concentrated in the current situation, very difficult to go back, speak about what was happening in Q1. What was happening was more or less, especially at the beginning, what we expected and we predicted in our last presentation. Note the activity after an improvement in quarter 4 last year, activity started recovering, in our case more than the market because we reduced our production in the last quarter in order to generate cash and reduce our stocks. We have been affected, in general, by the reduction of raw material prices, especially nickel price. That affected to the alloy surcharge and, of course, started in some areas in Asia and China in late January, February and in Europe, since the beginning of February. We have started to see the effect of the coronavirus in our results, in our activity that have -- I must say, that already affected our profit and loss account. Going by regions. In Europe, we reported higher stocks in Europe, still are a little bit high. So the activity was not -- was almost flat. In January, February -- at the beginning, January, February, apparent consumption in Europe went down 1.1%, but then it dropped dramatically in March, a minus 12.7%. We have at the end an average of the quarter of minus 5.4%. So under these situations with stock levels a little bit high, prices remained stable, but low. And the most important thing for the quarter is the results of this antidumping investigation, that we started in EUROFER, against hot-rolled material coming from China, from Indonesia and from Taiwan. And the preliminary measures were a duty of around 19% for China, around 17% for Indonesia and around 8 -- 6% to 7% to Taiwan. That will be important for the market in the future. In United States, the effect of the coronavirus has started much later, mid-March or even at the end of March, and the situation was -- again, was we predicted. The stock level was under control. We reported lower stocks in the United States. So the apparent consumption went up in January, February, plus 7%. So this is important. So with low inventories and a robust economy, we started increasing our prices in the States. I have to say that under the corona scenario, with so difficult to predict what can happen in the economy with such low visibility, most of the importers in Europe and the United States have decided to stop importing. They live in the day-to-day business, and they are looking for a short-term delivery time. So imports in the United States were low at the level of 15%, and drop 1 point to 14%, and import were very high in Europe at the level of 30%. We have estimated that are now at the level of 25%. And finally, in Asia, what we've seen is an irrational behavior of the Chinese producers because with all the coronavirus crisis in China, all the customers, the stainless steel users decided or were forced to stop their plants, but the stainless steel producer were working at a lower level, but working. So they have built a very high level or very high -- very important piles of stock. So prices in the region are collapsing. So we are only protected because of the duties and antidumpings in Europe and in United States and because what I said about the -- that people are reducing imports due to this uncertainty in the market. What is Acerinox doing and how are we facing this situation? First of all, we started Q1, increasing our production, 22% quarter-to-quarter, and we increased our EBITDA plus 15%. So we are putting Acerinox in the mode -- in the driving mode to increase our production and increase our profits. We also -- we are focused on the VDM acquisition, that took place, the 17th of March. And finally, I think that this is the most important thing. What we have been doing in Q1 was preparing the Acerinox Group to overcome this difficult scenario. What have we done? First of all, we have started with our sanitary protocol. In our last year presentation, the 28th of February, we already announced that all the sanitary protocols in the Group were in place. We have been working hard in liquidity and in cost control, as we will explain later. So economy have been impacted by coronavirus, especially in March, and now we are ready to work under this difficult scenario. If we go to next page, next slide, is -- well, the only thing that I can add is that we have -- I have said, Europe was weak. Alloy surcharge went down. We have a strong competition and still high stocks in Europe and in Asia and the effect of coronavirus. So I can say that the results that we have got been -- and that the range that we gave in the last forecast can be very positive. I think, you have to value the difficult scenario where we have moved, and we are more or less in the level that we predicted. Miguel, could you please explain the numbers?

Sure. We are going to pass quickly through the slides. I think that there is a big document with well-explained information for you to understand. But yes, if -- we want to express main issues from this slide in Page #4. As Bernardo has been mentioned, there has been a good starting of the year. Activity improved substantially compared with Q4. We have taken about more than 20% of increase in activity, and this is a good sign. EBITDA figure compared with last year show some decline. So we are releasing EBITDA figure of EUR 85 million. This apparently shows a 6% correction compared with first quarter last year. We must remark that we have done an inventory adjustment at the close of the quarter of EUR 16 million. I remember you, that last year in the first quarter, the market was constantly improving for second, third quarter. So the market was in an upward trend. At the close of March, in view of the circumstances, some inventory adjustment was done. So after doing such inventory adjustment of EUR 16 million, we are reporting EUR 85 million. Any case, it shows a big growth compared with the figures we are coming from in the previous quarter. There is another indication for understanding this slide, and this is that the only inclusion of figures related to VDM that has not been integrated in our consolidated figures yet. That you can appreciate a big increase in the net financial debt. As a consequence of the acquisition of VDM on the 17th of March, our debt has increased. The payment down to the VDM service has been EUR 313 million. So because of that, you can appreciate the net financial debt, going up to a level of EUR 854 million. So the figure, if you not been by VDM acquisition in March, the fee ratio have been in a level of 5.42%, which is in line with the increase in working capital we have achieved. So these are figures that have explained. We shall talk later about VDM and the reason why still we have not incorporated. We shall do it in the second quarter. But what is clearly is that, one effect of the deal is coming in the increase in the net financial debt we are reporting at the end of the final -- of the first quarter. If we move to the Page #5, you see the trends that we are talking about, increase in activity in the first quarter after a big correction coming in the fourth quarter of last year. That was explained when we released the annual figures. So high levels of activity. And then we reached the figure of the evolution of EBITDA. We are providing consistent figures of EBITDA. You can appreciate them, this EUR 85 million, I insist, if you see the trend, you can see how the upward trend of the market was running in the first half, last year. So consequently, this -- when we compare, let us keep in mind that there was no inventory adjustment in that figure of first quarter, EUR 90 million, last year compared with this year of EUR 16 million. We should have put up our figure of EBITDA to levels of EUR 101 million. So it's a strong performance then. In addition, we have not included VDM figures, as I mentioned. But yes, as an indication, if we should have include the figures of March of VDM in which VDM from March should be included in our consolidated figures, the EBITDA should have been even higher in levels of EUR 10 million. So I think, this is a positive issue to understand, which is more or less the real figures for the quarter and also the contribution, that VDM is putting on our results starting day 1. As a consequence of all of this that we have been mentioning, the evolution of net financial debt with some short increase due to the increase in working capital, as appears in the slide, of EUR 65 million. But in addition, at the end of the quarter, we indicate the figure that has been impacting our debt for the acquisition of VDM of EUR 313 million.

So let's speak about how we are managing the challenges of 2020 with this special situation of coronavirus. We are fighting. We are working hard to keep our plants open because we think this is our obligation. We must keep Acerinox working. We must keep the economy working, but we are not doing this, not taking care of our people because this is the most important thing, the sanitary protocol. We started learning about the sanitary crisis in Asia, in our Asian offices, then we have to stop Italy. And then the virus came to Spain, where we started applying all the measures. And with all the measures that we have learnt, we have extended our protocol to the rest of the world. So now that the situation is getting tough in United States, we are in a privileged situation because we know of what we learnt in the rest of the world. We are applying since day one, all the measures. And I'm speaking about social distance, disinfection, temperature control, PPEs and all these things that are making our people -- that can go safe to work in our plants. Today, the [ Acerinox ] Group of around 8,800 people, we have only 8 cases of coronavirus. So this is below 0.01% of the employees. If we go to next slide, I think, that the overview of the current market and the current situation is something that you know better than me. Most of the industries are collapsing. The PMEs of most of the countries are collapsing. Many industries have shut down. And on the other side, there are some industries that have been performing better, such as food production, food equipment, medical and sanitary hospital production and some -- even some others like kitchen pots and pans or barbecues because of this home cooking. But in general, the situation is tough. And what is even worse is a big uncertainty and a total lack of visibility. So we don't know what's going to be our future. And of course, we don't know the length of this low cycle. Now we can -- we are working in what we can work -- what we can give a solution. But we don't have the crystal ball to see what's going to happen in the future. I don't know, if the reaction is going to be you, we or whatever, but what I know is what can I do to improve Acerinox. The situation now in Acerinox is that after the government decision to lock down most of the activities, we worked hard to reopen Acerinox Europe and Roldan and Inoxfil, our Spanish plants because we were not considered an essential industry, but we were considered necessary for the essentials. So we are working, and as I said before, taking care of our people and having a very strict control of the sanitary measures. In North America, we have been considered an essential industry. So we are working. We are working and we have been working all the time, but that doesn't mean that the American market is not deteriorating because we have seen deteriorations through the quarter. In the case of Columbus and Bahru, we are closed down. We are locked by the authorities. And now, we are in the process to reopen the plants, again. Today morning, we have opened the melting shop in South Africa, and we are also shipping -- dispatching and shipping same material. And we hope next week we will be able to open in Malaysia. And in the case of VDM, luckily, they have reported a very good quarter with a strong order backlog, and they are working almost normal. In general, what I can say is, more or less, the Group average capacity utilization will be in Q2, around 65%. And go to Page #8 is how Acerinox is facing this crisis. You never know everything about the situation. And this is totally unpredictable. But what we can say is that we have some experience because the team that now we are managing at Acerinox is almost the same team, that was in the period 2008-2010. So we learned some -- we learned something from the previous experience. First of all, liquidity is key. Companies never collapse due to bad results. They always collapse due to liquidity. And liquidity is key, and this is what we are -- this is our priority #1. Second point, traditionally, we have been following a very prudent strategy, and we are always proud to say that we have a very strong balance sheet. And our balance sheet is already in good shape, and even after the acquisition of VDM is in a very good shape. The third point is, so we are applying since day one, what we learned in the previous crisis. And this is very important, as Miguel, explain later because we didn't need to invent anything, not a -- receipts were in place. Of course, we are improving and trying to improve and trying to do our best. You never know everything, as I said. But at least, we have had the idea of what to do. And fourth, and I think, it's almost as important than the previous one, we are keeping our long-term strategy because the situation at the end will overcome, and we need to be ready for the future. And this crisis -- we will overcome this crisis. We need to focus on our long-term strategy because we have to be stronger after the crisis. We have to take care of Acerinox to make it stronger in every circumstance. So let's start with the first point on liquidity.

Okay. Yes, the first radical demonstration of strength is the liquidity we have actually in hands. We are talking -- telling about massive liquidity. We are talking about EUR 1.4 billion. Already, we have cash on hands of more than EUR 1.1 billion, and we have also committed lines available of more than EUR 300 million. So at the end, this drives us to this figure of almost EUR 1.5 billion actually, as fully liquidity on place. In this regard, let's put this in context of what's coming in the coming years. All of us are following on a daily basis macro figures and projections of when we may come back to normal levels, prior to the COVID crisis. Who knows in which quarter of 2021, or when this is coming. What's clear is that, in our case, we have such a comfortable figure in terms of our debt terms, that with the actual liquidity in hands, we can cover all maturity debt until 2025. So I think, this is absolutely demonstration that we can keep very, very well comforted liquidity. We are not struggle. We are not considered that we are going to be struggling with our liquidity, even though the circumstances of the stoppage of activity should extend most of this year, 2020 and all of our business should be forced to be closed by authorities by far. We could seal that properly. And this is not going to be an issue. What's relevant, in our case, and this is something also that we always explain. We have a high quality debt. What means high quality? High quality does not mean only a competitive debt in terms of cost, but also is a debt, free of covenants related to results. And this is something that also is remarkable. We do not know how much shall it take for the market to recover, previous levels of activity. But even though, our profitability reduces, this should not have any impact on our debt actually in place. In addition to this, in the early March, we have closed 5 term loans with different institutions that we have been working, since February. And with this additional term debt with maturity of around 5 years, at the end we took EUR 350 million. The average cost of this term debt fixed cost rate is below 1%. You see in the slide, this is in the range of 0.9%. So this is also another good demonstration of the strength we have. And definitely, the -- absolutely understanding of our business and of our strength by the financing community that are keeping us to maintain this very, very competitive cost and consequently allow us to survive even though the scenario should remain depressed for a long-term range. If we go to the balance sheet in the coming slide, you see our structure. You know that, historically, we feel safe, and we prefer to work on this cyclical business, where we are having a good amount of cash in hand. So actually, this is the EUR 1.1 billion we have been talking about. So we have our gross debt extremely competitive. We talked previously that the one we have done in March, or closed in March is below growth of 1%. The total amount of our debt -- this -- almost EUR 2 billion in debt. The weighted average cost is 1.4%. So it's extremely competitive. I repeat, free of covenants on results. And then with the cash we have actually in hands of EUR 1.1 billion, what we -- which is the figures we are reporting of net financial debt of EUR 854 million. This coming just 2 weeks after our acquisition of VDM, which has good additional EUR 300 million to our debt. So I think that it's absolutely remarkable scenario of comfort, which is the one in which we are selling for these travel days that are experiencing actually. When we analyze the debt, obviously, in terms of debt to equity, starting March, it's clear that it appears to be a high ratio. It shall be diluted. We are incorporating debt for the acquisition of VDM, but still we are not incorporating the profitability and the results from VDM. Any case, in this high level of recently increased debt for the acquisition, the debt-to-EBITDA ratio is in absolutely acceptable ranges of 1.76. So in this regard, also we feel very, very comfortable and extremely competitive rate, as we have been mentioning.

Then what are we doing? What can we do for the Acerinox Group, under this situation? Because we don't know everything, but we know some receipts. As I mentioned, we are the same team, that were running Acerinox in 2008. And we always are very proud to say that we are very -- that we are a team that is very loyal to the company, and we have been in the company for many years, but now is the time to demonstrate that we really know our business and that we can control our business. And what did we learn in 2008? First of all is that fixed cost is very heavy in our profit and loss account, in our business. So since then, we tried to [ finalize ], as much as possible of the fixed cost and mainly focused in maintenance and subcontractors. So we included clauses in our contracts to [ finalize ] all these activities. And now we can say that we are very flexible. We can move it almost as flexible as our production. And we can match this fixed cost to our production level. Second, of course, looking after our people because we always say that we need very skilled people to run our plants. And it is very difficult to train people for this business because they are running a complex equipment. But looking after our people, we are trying to apply all the measures that we have learned. In some cases, in the case of Spain is we are negotiating a temporary layoff. In some other areas in the world, we are doing the same with the legislation, making it possible. In some others, with a very flexible labor legislation, like in the United States, we are adapting the working time to the necessities, and we are working -- we're doing what contractors were doing for us before, with our own personnel. So we are trying to adapt the working force to the necessities and trying to reduce these costs as much as possible. But what is more important that we have got a level of flexibility that have made our fixed cost almost as variable like the variable cost. And also, we have many times say that we can control our working capital, but we can't control our cash allocation. And this is a focus because cash is king, today is king more than ever. So we are reducing our CapEx. This is -- we already took some measures, are in place, postponing important CapEx, not canceling, but postponing important CapEx. We have reduced -- we are reducing the net working capital needs, adapting them to the activity. And of course, we have performed the shareholder meetings in an exercise of prudency, trying to postpone it according to the Spanish legislation, until we have more visibility to take the right decision. So this is the important message. We are doing whatever we can to adapt Acerinox to the current scenario. Cash is king, and we are very concentrated in this slogan. This is a tradition for us. So we are cutting cost. We are adapting our structure to the current level of activities. We are reducing everything to keep our cash generation. What I can say is that in Q2 we will have a positive cash generation and we will reduce our debt, again. Of course, the visibility is very short. But if nothing worse than what is today happens in June, we can say that we have a positive cash generation. We expect to reduce our debt. And finally, so we are keeping our long-term strategy of business. We will overcome this situation, and we need to focus on this. As we explained before, this is the new strategy, where we have included VDM. The VDM, we are embedding all the traditional excellence in production and in the way of running the business with the high added-value products, especially coming from VDM, always based on our strong balance sheet and focusing on sustainability because we need that this -- we cannot forget this. Some people are saying that after this crisis, the economy, our life will be different, but I'm sure, that will not change in what is related with sustainability. And it's going to be one of our levers, and we will keep it intact, the same that we are focusing on integrating VDM. And I'm very focused more than ever in reducing our variable cost going to the Excellence 360º Plan because if we want to be competitive, we will have to demonstrate it now. So as we announced on the 17th of March, we closed the deal with VDM and now have integrated this. We are starting working in the integration of the company. Miguel can explain.

Yes. We are -- just giving you some comments on VDM. First of all, I want just to remark. You know what, one of our mantras that we'll always explain in regarding of Acerinox is diversification. So in these times of where the implications of this pandemia are affecting almost every continent in different areas, in production, in demand, the consequences of it should be different in the different world areas. What's clear is that the world diversification we have actually in America, in Europe, in South Africa, in Malaysia, is a clear demonstration of our strength. So we are not exposed to any specific single areas, which could have other implications than the others. With the acquisition of VDM, it's not only that our geographical diversification also improves, moving more to the Northern Europe, not only in our production in the Southern Europe as has been up to now, but the diversification also that VDM provides to Acerinox group, in addition, is even more relevant for moving the group more to the high nickel-alloy sector, which is definitely high-qualified and value-added sector. And in this regard, VDM, what's clear is that it's not only the market leader but it's the best-in-class. So at the end, what we are incorporating to the Group is the #1, the best-in-class nickel alloys producer with a high reputation in the sector and especially, with a very, very well-respected management team that has driven the company successfully in the last year. So in this regard, it's a deal that we have put a lot of efforts, as you know. It's improving the Acerinox Group and the diversification inside Acerinox Group. And as we always have been mentioned through -- with VDM, with a restructure in certain areas also, we shall be in position for increased business of the nickel alloy. So it's going to be a win-win for both sides. What's more relevant is that, as we always have been saying, is that plug and play. This means that the integration process is been keeping on all of its agenda in the actual terms. So it's clear that we closed the deal, as has been mentioned, on the 17th of March. That both teams actually are working hard for making a smooth transition process. And with the commitment of the both teams, VDM and Acerinox, actually a single team, we are working hard. And as a consequence of that, in every area of the business, we are running with the previously scheduled integration process. So this has not been affected by the pandemic, and we have been able to keep it, and keep its agenda in all its terms, as has been mentioned. What is clearly for us the big commitment and also the commitment for providing you reliable data is that we are now in the process of the full integration in our figures -- in our accounting figures of VDM, and we are trying to do it as quick as possible. The international accounting standards, the IFRS, normally provides one year for this purchase price allocation to be on place and the full integration in the consolidated statements. Our commitment is that we shall be in position probably for making it smoothly and trying to reach the semester figures with a whole integration in the accounting of VDM and, definitely, providing you further information. Just for having some guidance, we have preferred in terms of our always prudent basis not to incorporate any figures because we must, obviously, attack every single area of the balance sheet and of the P&L. But as a pro forma, just the figure of VDM coming from March are related and expressed in the Page 16. So pro forma of what should have been the first quarter figures, if we should have incorporated the results of VDM for the month of March, you can see that we should increase our net turnover in EUR 71 million, and the EBITDA should be moving from EUR 85 million to EUR 94 million. So in comparing with the previous year, if, in addition, we expressed the EUR 16 million of the inventory adjustment, at the end we should be probably in the range of EUR 110 million EBITDA for the first quarter. So I think, this is a good demonstration also of all the value that VDM can provide. And definitely, we feel very, very comfortable to express the coming figures in the coming quarter, with the integration of VDM in our -- in all of our figures.

Okay. Let me summarize and get some conclusions of this presentation, and then we can start with the Q&A session. So first of all, as you all know, 2020 will be an incredible challenging year. Second is the duration of any downturn, that is currently impossible to predict. And understand that we are not fortune tellers and we can speak about what we know, but it's impossible to predict what's going to happen. And now I think that we are in the eye of the storm. Acerinox is in a very strong shape now, and we can weather any storm. This is a strong message. We have a strong liquidity position, and our balance sheet remains robust. And as we have explained, we have numerous levers to pull to protect the business. We know how to do it, and we have been always focused on controlling the controllable aspects of our business. We are doing what we know. We have to demonstrate now that we can control our business and that we know our business because we think that we know how to do it because we have done it before. Some of the good things of the stability of the company -- and I'm not saying that this is perfect. We have some pros and some cons. But now we have a very strong team, very well coordinated and it was the same team that was -- took Acerinox through 2008, 2009 and 2010. And the second level of people also participated in these decisions in these times. So we have a very strong team, ready to afford and ready to face whatever crisis come. Also VDM is very important because VDM will add diversification and stability in the short term and in the long term. And remember that the cycles are different to the stainless steel cycles. So that will contribute to give stability to our business. Of course, we will continue to focus on our long-term strategy, as we mentioned. And what I confirm is that Acerinox will come out stronger than it went in. We'll say that this is time to show how strong is a company, and what I can tell you is that the Acerinox, for sure, will come out of this crisis, stronger than we went in. And after these messages...

Yes. Okay. Thank you, Bernardo, and thank you, Miguel, for the presentation. Let's move now to the Q&A session, please.

[Operator Instructions] The first question comes from Francisco Riquel from Alantra.

I'm glad to hear that you are all safe and well. So I admit, that the visibility is very low. So I would like to focus on those things where -- which are more under your control. So first of all, costs, if you can update on your cost structure. How much are fixed costs versus variable costs. So that we can have a better idea of the flexibility to adapt to a falling utilization rate that you have mentioned? And also a bit more color on the initiatives. You mentioned some still -- of the measures under negotiation or under administrative decisions. So a bit more color there on the potential savings. CapEx, you have been reviewing strictly the CapEx. So how long can you go? What are you thinking in terms of CapEx? Working capital, you have a good track record today, but now you are facing shutdowns and sudden collapse in demand. What new measures and what shall we expect? So that's it. So it's cost, CapEx, working capital and if you believe that you can -- how much cash you can burn, use during this second quarter, if any?

Paco, this is Bernardo. I'm very happy to check that you're also safe and in a very good shape. Let me start with the first question, costs. You know more or less in our business, we can say in general number, and I'm not going to go to the detail. But we are have around 25% is fixed cost and 75% -- 25% is fixed cost, 75% is variable cost, including the variable costs, raw material cost. What is the capacity that we have to save in these 2 categories? In our fixed cost, that is including personnel, it's less flexible. So we can expect savings between 15% and 20%. And in variable cost, we can go a little bit even further of our production levels, and we can save between 25% and 50%. Second question is about capacity utilization. We give numbers related to our nominal capacity, today, with the current product mix. And the average of the quarter is going to be for the Group, 65% of capacity utilization. Then you make another question, that is related to the measures that we are taking, and it's a big catalog of measures. In the case of Spain, we are negotiating a layoff. Layoff will give us the flexibility that we miss in the Spanish labor legislation, and we are trying to negotiate a temporary layoff of around 50% of the time for -- and, of course, we'll have to make it as longer as possible, but that will depend on the final negotiation. Of course, we want to limit the complement to the workers, but this is something that is today under negotiation. And you know that the rule in Spanish economy is now under this process. Now everybody is trying to come at this. I think, this is very important, the temporary layoff because, finally, we are warranting the employment. We want to warranty the employment for our employees, very important for us. And -- but this is under the negotiation, not only between Acerinox and Union, but also between the rule, the Spanish economic world. We have reduced our contractors, of course, and are adapting the contracts to the level of activity. And of course, we have reduced the maintenance materials, not only maintenance contractors, but also maintenance materials. Sometimes you have the -- you follow us, since many years ago, and I'm sure that you remember that I have said that we can have maintenance normally. When we're working at 100% capacity, we do it based on time of service, but we also can do like cars, by kilometer. So we can adapt our maintenance materials also to this way of working. In the case of United States, the measures are different. No, we are not going to fire any employee there because we have adapted our working time to the necessities, and they are very happy. We don't have unions there, but the communication with the employees is very clear. It's totally transparent, and they are totally committed with the business. So we have eliminated extra hours as in the rest of the Group. We have reduced the working time. We have reduced, of course, the production bonus in all the plants. And in the United States, we are doing something that we cannot do in Spain. That is that we have substituted the contractors for our own people. So we are not paying to contractors, and we are doing that works with our own people. This is very important. This is very -- gives us a big flexibility. And in some of the regions, we are doing what we can do, depending on the legislation. In Columbus, for example, it is important, a big number of employees that we call the trainees because it's a system that we are training, but using a big number of people from universities and technical colleges. And we have a lot of temporary workers, and we have reduced this kind of people, in order to give employment. And of course, we are reducing the maintenance expenses and the contractors. In Bahru, it is very different because in Bahru we almost do not have contractors. We are doing everything with our own people. And in that case, of course, the salaries in Malaysia are very low. But it's also difficult to move. We will need longer time to negotiate all these things. So what we are doing until now is reducing bonus, reducing extra hours, reducing time. And of course, there's something that we know is how to run a plant in the Acerinox Group, and we are moving to run all the plants in the economy way. We are trying to stop the most expensive lines. We are trying to reduce all our costs. We are working in the way like not in the expert way. We are moving -- we are working in the economy way. We are trying to do everything in the -- considering the lowest cost as possible. This is -- you need a good knowledge of the plant, good control of your production process, and this is what we are applying today. So we are doing everything we know and everything we can. And for CapEx, of course, we have already started with some CapEx. I do not remember the level of CapEx that we have published in -- the CapEx for this year -- the authorized CapEx for the year is EUR 110 million. And I think, we have already -- we have invested around EUR 24 million, the EUR 24 million. So we have -- the balance can be reduced almost to 50% or even a little bit further. If we need it, we will cut our CapEx from EUR 110 million to 50% of that. Of course, we have to follow the -- what is happening, and we'll try to adapt CapEx and to adapt everything to the business circumstances. And it's too soon to say that this is going to be a final decision for the rest of the year, let's see. But we have already adapted our CapEx to the current scenario. Miguel, do you want to add something on working capital and in cash generation?

Yes. In regarding of the cash generation for the second quarter, the most relevant area, definitely, we are implementing the savings and the cost savings, as Bernardo is mentioning. It still is not clear -- we shall be -- the strength of the savings depending, definitely, of what we are facing in terms of reduction in production or depending from authorities. Any case, what's under our control, more related to the working capital, the dynamics that we are working now is that in the foreseen reduction of levels of activity. As Bernardo has been saying, we shall be in position of reducing our working capital, and this shall be the natural effect for considering that we shall have some reduction of debt for the second quarter, mostly driven as a reduction in the working capital.

The next question comes from Alain William from ODDO BHF.

I was just wondering, if you could get a bit more color on your assumption, regarding operating at 65% of normal...

Sorry, Alain. Alain, sorry. We cannot hear you properly. Could you repeat again?

Sorry. Can you hear me?

Yes.

Okay. So I was just wondering if you could get a bit more color on your assumption, regarding operating at 65% of normal capacity. What do you expect at NAS, for instance, as it could have a material implication for your cash flow capability? And then second question, can you tell us a bit more about the order development, as we speak. Where are we versus this time last year? And then last thing. You touched on price developments in Europe. Can you tell us, where we stand in the U.S., in terms of the price development, please?

The question is on our price development.

Capacity or the development -- capacity utilization and order developments.

Yes, okay. Thank you for your questions. Capacity utilization, we mentioned is this, we will run -- the average of the quarter is going to be around 65%. That 65% is a mix of many things. We are starting in April. We have Columbus and Bahru are locked down. But they will restart in May, and we will increase production in this area because we still have pending orders, and our customers haven't canceled those orders. So we will increase our production there. In the case of Acerinox, April was still not bad, but we are going down in this -- in production for May and June. And in the case of United States, last quarter was good. We are starting to deteriorate the -- or the market was starting to deteriorate in end of March. April, it will go down a little bit and will be deteriorating through the quarter. I'm not going to say a plant by plant, but the average will be 65%. But as I mentioned, it's a mix of many things. You also mentioned level of something around?

Orders.

About orders. About Orders, yes, the visibility is very sure today. So most of our customers are trying to -- the inspiration is that they're working with from hand to mouth. They are trying to stock as less as possible because they also have to take care about their working capital. So delivery times are reducing the way it has. Today, you can speak as a normal cycle. It's a normal production cycle. So we are delivering in around 4 weeks. Of course, we don't -- we are not fully booked for the next 4 weeks. We are receiving orders every week, and we are producing fast. Today, we can deliver in 2 weeks. But this is not bad because this is the best way to fight against imports and even to compete in better conditions against our competitors because we have integrated plans. So this is good for us. But remember that today, so we are in the eye of the storm. So nobody wants to buy anything today. Now let's wait a couple of weeks to have more visibility. But today -- we cannot take conclusions for today's situation. Regarding to prices, I think, it will have to go through areas because now the distance is longer. Many people are saying that we are now starting to see the end of the globalization process. I don't know if that will happen. But what I can tell you is that the regional difference are higher than ever. In China and Southeast Asia is a disaster because of this excess of production in the Chinese mills. So prices are ridiculous and are at very low levels. And -- but now they are not affecting so much to the European prices. The European prices are very low because we still have high stocks and because we finished the year, very low level of prices, but compared to Asia are much better. In the case of United States, we managed even to increase prices, a little bit in -- at the end of February. And steel prices are at that level because today it's not a question of price. Today it's a question of visibility. You will not sell more, if you decrease your price. So the prices are stable. What I can say, today's prices in United States are stable and in a level that, of course, we cannot increase them. But we don't need to decrease them because customers do not want to import material from offices. I hope, I have answered your question.

The next question comes from Seth Rosenfeld from Exane BNP.

I have a couple of questions with regards to VDM, please, trying to understand the expectations for demand and also earnings contribution. Of course, 2020 is a very unique year, but perhaps on a more sustainable basis. First, to clarify, the EUR 10 million EBITDA contribution you commented for, is that just for the last 14 days of March, in which you controlled the asset, or for the entirety of the month? Second, last quarter, you provided a target of at least EUR 80 million EBITDA, down from EUR 97 million the prior year. Of course, 2020 is a unique year. But just structurally, given the oil and gas exposure of VDM, how should we think about a more normalized earnings contribution for this business going forward? And then, lastly, in your prepared remarks, you did flag a particularly strong order backlog at VDM. Does that imply that we should expect less weakness in Q2 at VDM than other businesses, or should we expect a similar trend which is around 65% utilization rates?

Thank you, Seth. First of all, in regarding of the indication we have done of the March figures, when we talk about the EBITDA figure of VDM of EUR 10 million, we are talking of incorporating the whole March. So keeping in mind, even the transaction was closed on the 17th of March as much of the competence approvals coming from the European Union from the States, came late February. According to accounting standards, we are considered to have full control of the company, since starting of March. So definitely, what we shall incorporate, because still is not included in the figures, is that starting from March the whole results of March of VDM, which means the sales of EUR 71 million and this EBITDA of EUR 10 million. So this is -- definitely, it's clear that still we have had now time to making all the account and issues, the opening and closing of the previous VDM, the opening of the new ones and so on. We are working through that, but this shall be coming and probably we shall report it in the second quarter. But we shall incorporate the whole result for the whole month of March.

You also made a question, related to the exposure to oil and gas sector. Oil and gas is important for VDM. It's around 30% of VDM business. And so it's important. But the cycle of VDM is different to ours. They are normally working with a minimum 6 months' delivery time. And they are pushing or they're working with projects for 3-year delivery time. So the 6 months is a mix of many different origins of the others. And what I can tell you is that we haven't seen any cancellations yet or we haven't seen any cancellation. And people decided to postpone the deliveries a little bit, but was the case of the Italian or the French customers, but because of the lockdown of the countries, not because they have canceled the project. These materials, it's a very small portion of huge investments and very complex investment that you cannot stop in one day. You cannot stop in one day. So of course, that will mean that some of the projects that are now under -- in the decision process will be postponed, but can be postponed for how long, nobody knows. It can be a couple of months, it can be a year or can be 2 years. But at the end, normally, when you postpone the project that was already decided, you always try to accelerate it. So it doesn't mean that we are going to lose these offers. Also, some -- we also use these materials for maintenance in the oil and gas sector, not only for new projects, but also for maintenance, and they have a regular sale because you cannot stop the projects. And on the other hand, you also have to see that in this business that it is more long-term oriented. Some industries, such as oil and gas is now depressed or we can also say that the aerospace business is also depressed. But on the other hand, chemical industry is in good shape. Pharma industry is in good shape. And we are also very important in these activities in these industries. So we will compensate the product with oil and gas with some other sectors. For us, chemical sector is more important than oil and gas.

Yes. Also, as an indication, you said that you asked even though we shall only incorporate profits from VDM since March, as we mentioned. But the January to March period of VDM for your models, and if you were more or less to consider that, gives us a figure of turnover of EUR 205 million, EBITDA figures of around EUR 20 million. So more or less this is in line which -- what we indicated, when we made the results presentation in February, this annualized figure in the range of the EUR 80 million of EBITDA in a normal scenario should have been at January, February and March. This more or less keeps the trend that we were mentioning to you. So we still feel comfortable of that. Whatever should be the consequences of this coronavirus and what may impact in some areas, as has Bernardo mentioned, it's a big diversification of areas, but this may come. But any case, still have to now, the figures are absolutely in lines with the one we were contemplating and assuming and sharing with you.

With regards to the end-market exposure, are you able to confirm the exposure to each of the areas you touched on? Your initial presentation from last autumn only showed for the specialty alloys industry, as a whole, specifically, for VDM. Can you please confirm?

Alright. This is the information that we presented is the only one that we are handling. Still -- as you mentioned, automotive is done, but electronics will go up. Yes, Seth, I couldn't understand...

Seth, you were asking about our exposure in the different markets, isn't it?

Exactly, please.

The oil and gas definitely is a sector, as Bernardo expressed, also it's not only regarding to expansion but also to maintenance. Chemical process industries is a sector relevant for VDM, and this definitely is working. As we expressed previously, still up to now, the average per the industry is an area which probably VDM is up to now more focused on the flat and less to the loan product. So this is a sector more covered by the European -- sorry by the American company. This is an area that VDM has a potential growth, but it's not socially response up to now. So in general, maybe whatever could be some correction on the oil and gas could be probably compensated by others, such as the chemical process, for example.

But yes, but our mix is not exactly the same here. Our aerospace here is 30% in the case of VDM, it is below 10%. The same that oil and gas here is 20%, for us is around 30%, but chemical is 23% and for us is more than 30%. So it's not exactly the same bit of a mix.

The next question comes from Luke Nelson from JPMorgan.

Hello, can you hear me?

Yes.

Yes.

Just on the 65% utilization for Q2, just to dig a bit into that. I know, you're not going to break out on an asset level, but is it possible to give an indication of how you expect that to progress over the quarter, just so we can get an idea of what you're expecting the exit run rate utilization to be, at the back end of Q2? That's my first question.

Okay. We have been -- so of course, we don't know what can happen. So we know what is the situation for April. We have some certainty of what can happen in May. And still, it's difficult to say what's going to happen in June. So we are making our forecast, and we are working with a very stressed scenario, that in which we will be at the level of 75%. 75%, 60%, 50% that will be the evolution. And we don't think that we will go below 50% of capacity utilization. This is the scenario that we are handling. But this internally, and this is in our own investigation and how we are getting ready for this because nobody knows what will happen. So today, as I mentioned, we are in the eye of the storm, but who knows what is going to be the situation in June. I think, the visibility is very short. We are working within a scenario of 50% capacity utilization in June, but that can be better or not. This is what I can say.

And then just, again, on VDM and to Seth's question just around end markets. And clearly, aerospace is under representation in VDM, relative to North American peers. But at the time of the acquisition, you did talk about it being sort of the midterm opportunity to grow into and expand margins. Just given what is happening in aerospace and potential sort of repercussions to continue for an extended period of time, is it still an area or a strategy that you think is likely an appropriate, given this outlook?

No, we said that we had an opportunity in the aerospace sector. And we will focus on aerospace. And what we can say is that we are lucky because we are developing the sector and projects are waiting for us. So we will be able to target this sector in the future. We are preparing with all the certifications, the technical approvals with the customers, and this process hasn't stopped. So we'll continue with our strategy.

No, in general, see that we are passing through momentum that are affecting almost every sector and a specific sector. So now we can, in view of the actual circumstances and people being forced to remain at homes, it's clear that the airline sector is passing bad times. But in any case, we'll work on the long-term run. We are long-term oriented. So this is -- the pandemia effect should take some quarters more. But at the end, we are not going to a Mad Max world, in which all the technology disappears and all the communications and so on. So sooner or later, there shall be activity. There shall be obviously renewal of all the sectors that up to now, or in the actual basis are suffering. But it isn't going to take for long. And consequently, our long-term strategy remains in place.

Exactly. And let's see the shape of our competitors after this crisis.

Sure. That's very clear. And sorry, just one final follow-up, just from a modeling point of view. On CapEx, you talked about prior guidance of EUR 110 million, which can be essentially halved. Can you remind me, does that include or exclude VDM? And if not, just to clarify what your expectations are around sort of CapEx spend with that, this year?

No, this is not included. So when we mentioned EUR 110 million, we talked about hours, and we mentioned that VDM and normalized CapEx should be in the level of 25. So now we consider, we're probably reducing these at levels of 50% in the case of hours. Maybe in the case of VDM, should be a bit below that level. So on hour basis now, we can talk about depending, obviously, in the circumstances, but what Bernardo mentioned is in the 50 to 60 not that he knows maybe 15 to 20 VDM. So we are moving down from what should be an aggregated figures of around 140 to an aggregated figure of around 75 or 80, something like that, depending, obviously, on how this affects, the production in the main plants and then the normalization of the production after the start-up of the activities.

We -- so we haven't published any -- we haven't taken any decision about important big projects in our factories these days. So what we are doing is maintenance CapEx, that you know, that is more or less at the level of 30%. And as the same maintenance material can be adapted to the circumstances. So we can cut this maintenance CapEx and adapt it to the level of activity. We have some other projects like revamping of the older lines. The factory in United States that is 30 years old now also need some revamping, and we have postponed the revamping of our annealing and pickling line #1 because we need to start in this process, and we have also postponed the motor change of the Sendzimir Mill, the Roldan Mill #2. And this is postponed. This was the most important project that we had for the -- we planned for this year. And also, we have some -- a huge number of small projects for digitalization and sensoring and all these things. And we'll try not to stop them. But we will adapt because it's new project. We will adapt them to the necessities. Because -- we don't want to stall them because that will give us cost advantages, but we can.

The next question comes from Alan Spence from Jefferies.

The first one is around cash. I mean, obviously, you've been focusing on this cash is king mantra within this report. And you've talked about reducing CapEx, lowering working capital and cost reductions. How do you think the dividend fits in, with all of that?

We have stated that we have postponed the decision -- so that we postponed the celebration of our shareholder meeting that is -- shareholder meeting will be -- we will have to take the decision about dividends. We, the management proposed the Board to give the same level of dividend as last year. And the Board proposed to the shareholder meeting to keep the same level of dividend. So we have postponed the decision. But still, our idea is to keep the same level of dividends everytime, but let's see what happens. I think, that this is something that we don't need to decide today. Unfortunately, according to the new legislation, we can postpone the shareholder meeting. That's going to be good for us because we'll have more information at the time of taking this decision. But today, the management -- it is the management idea to keep same level of dividend, but we'll see.

Okay. So the management team is still comfortable with that proposal. On VDM, can you possibly tell us what the volumes were, either for the March month or all of Q1?

Well, I think that this is more or less the figures we are talking about. In terms for March month, we were talking about a turnover of EUR 71 million and EBITDA of EUR 10 million. And then results before taxes of EUR 4 million. If we move more for the quarter figure, we are talking about sales of EUR 205 million and then EBITDA of around EUR 20 million. So this is the -- the figures in terms of results. In terms of -- or let me check -- in terms of earlier more or less -- sorry, I have not the figures here with me.

I don't have it now.

Okay. I'll follow-up for that one afterwards. Just one last...

With VDM, it's totally a different product. In Acerinox, we are always speaking about volumes because volumes give us the capacity utilization, efficiency and low cost, this is for in commodity industry is key. In this industry, margin is more important than volumes. And so we are not using production volumes as one of the KPIs of this company, unless important.

But it's in the range. In terms of shipments, I think, it's in the range. So roughly speaking, we are talking about 3,300 January, 3,000 February and 3,200 March. So it's more or less keeping a very stable range as is the standards for VDM.

Okay. That's very helpful. And just last one, pushing on one of the questions you received earlier about working capital. Can you give us any sort of a range that you might be targeting in Q2 for working capital release?

Yes. Well, we are -- as we have said before, we are considering certain reduction of working capital and certain reduction of debt. Our working capital is absolutely related to the activity and mostly the activity on June, which is the most difficult issue to provide from now. But we are understanding figures of the stainless -- pure stainless business, maybe reductions of working capital in the ratio of the EUR 60 million or something like that. Consequently, the effect in that should be in that way. This is as a consequence of the assumptions in reduction of activity, as Bernardo has been mentioning. Keep in mind, working capital in our case, we clear very, very committed targets. At the end, in the case of our stainless division, after Acerinox moves with working capital of around 50 days to finance. This is the effect that we are experiencing. This is purely stainless what most previously was our Acerinox business. Keep in mind that integration of VDM, working capital is substantially different because they mostly related to the inventories because the production process of VDM is substantially higher than us. So when we are establishing as an average, that our own capital in this, we are in the range of the 50s. In the case of VDM, it's in the range of 120. So this is an area, that when we consider the figures in the case of Acerinox, with this basis of production, we think that shall be a reduction in working capital in that range of the EUR 60 million. But when we incorporate VDM, maybe because of this different effect, the figure for a -- global consolidated integrated figures could be reduced and maybe moving more in the range of the 40s after integrating VDM. But this is keeping in our mind that still June, as we have mentioned, is very, very undetermined. So this is more or less the feeling we have up to now on these basis of the business.

The next question comes from Carsten Riek from Crédit Suisse.

A lot of questions have been already raised. One, I would like to actually dive a little bit deeper because you mentioned, you received governmental help or you negotiated at least short-term work with the government in some jurisdictions. Does that actually have any read across to your ability to pay dividends, going forward, especially for the current fiscal year? That's the first one.

Sorry, maybe I didn't explain the situation. Well, we are not negotiating with the government. We are negotiating with our workers, under the umbrella of the Spanish or whatever country legislation. And in any case, we have to compromise dividends or anything with this. There's no -- there's sort of big news in Spain, but nothing related to dividend or dividend related to employment or these things. What is clear is under the current legislation, you have a temporary layoff, you have to warranty the employment for all those people for 6 months. And this is something that currently is being negotiated with the government, all the Spanish enterprise organizations and sectors organizations, but there's nothing related with the dividend. This is totally independent. And in any case, we are not negotiating with the government and this Spanish legislation. If you go to a temporary layoff, you can save 25% of the contribution to the social security system, and this is something that is under the envelope. So we will apply for this. And of course, the workers will receive the standard unemployment salary, will also be a government contribution, and that will help us to reduce our cost and to pass this period.

Okay, perfect. The other one is also only a clarification. If you report VDM from next quarter on, will that be a separate segment or will it be clamped together, somewhere in the existing structure?

We need to determine this process of the purchase price allocation in all the single areas, how much we shall be able to then consequently to this [indiscernible] as a separate entity. So this is -- we shall try to give as much as info as possible. But still we have not a clear view of how we shall proceed with that.

Yes. I think, it is important and we want to be as transparent as possible. So we cannot integrate totally VDM under the Acerinox Group umbrella. Because then -- because of the different sizes, you will lose all the information related to VDM. So we will consider VDM, as a separate unit, and you will receive regulatory information about this specialty steel -- specialty alloys business and not as we are doing with the rest of the group, but we have to decide what is the level of information that we can provide.

Your next question comes from Jose Maria Canovas from JB Capital.

Most of them have actually been answered. So only two on the U.S. market. First of all, you were talking about the shutdown of active plant in Midland. Well, stop of operation. I just wanted to clarify, were they actually operating there, or were they on hold until they knew what was going to happen with the imports coming from Indonesia? And my second question is regarding inventory levels. You were stating that in the U.S. they stood at very low levels, the lowest since 2015. Just wanted to know how reliable those figures are? I mean, do you really trust them, or could we see something like we saw in Europe where some distributors are not actually posting their inventories and then this figure could be misleading?

Thank you, Jose Maria. First of all, in regard to Allegheny and the situation in United States. You know that the joint venture between Allegheny and Tsingshan applied for exemptions under Section 232 to import slabs from Indonesia out of tariffs. They have been applying and pushing and lobbying to get the exemptions, but until now, nothing happened. And if nothing happened before this crisis, I think that now the American market -- American government is going to be more protective than ever. So I don't expect that they will get the permit. So under these circumstances, but not only under these circumstances, as far as we know, Allegheny decided to close the Midland plant. I don't know if this is because of the lack of orders, or if this is because of their cost, or if this is because of this -- of course, they are complaining that they need to import the slab from Indonesia to be competitive. We are saying that they can do that with their domestic suppliers. And that if they are not competitive, it is not because of the [indiscernible], because they are not competitive and they haven't done the right things. So this is very clear for us, and we are trying to -- also to explain the American administration that we should keep this Section 232 in any case. There's some other factories in United States that are closing because of the market situation and some others that are very exposed to the automotive industry, and they are locking for several weeks. We don't know exactly how much. But of course, this is very positive for us because we are remaining as the biggest player in the United States. And America is becoming more and more local. They have to reduced the number of imports, and now we are again, melting close to 50% of all the extended steel that is melted in North America. So this is very positive for us. Second question is related to inventory, the level of stocks in United States. So level of stocks is, as you know, this is some magazines or some consultant companies that are keeping or collecting information from several entities and that's the way we know the level of stocks. I think, in the case of United States, it's more reliable than Europe, but the companies that are reporting to -- for these stock levels are around 50% of the American distributors. So we missed information of 50% of these distributors. Normally, in normal situations, in normal circumstances, the trend is the same, but we don't know what is the level of stocks in the plants or in the final end users. But it is not as different as [indiscernible] as it is in Europe because this 50% of importers that are not reporting, some of them are some sort of important distributors that are not reporting, some of them are in the West Coast and are importers, but it is not such a big effect that we have in Europe, where the entry door of all the imports that are the Brazil's, the Belgium and the Italian distributors and traders are not reporting another ones, that are normally building up their stocks. So I think, it is more reliable.

The next question comes from Bastian Synagowitz from Deutsche Bank.

I just have a few quick ones left, actually. And I'll just start off with one on -- a follow-up on VDM. Could you please give us any sense on how much of VDM's business is related to projects part of the business which is more the flow or consumables type of business? So that is the first one. I'll stop here.

Yes, the first one is very easy, 90% of business is projects. They only keep a very -- more like 10% of the business that is what they call the fat lane that is material for -- maintenance materials from the traditional customers that they want to supply very fast, but it's only -- it's less than 10%.

Okay, understood. Then my second one is just on the behavior of your customers. You mentioned earlier that there is obviously this trend of lower import activity, which is absolutely logical. But is this something which has been hitting you in your business as well, which we are doing out of Columbus into Europe?

Sorry, Bastian, can you repeat this question, again?

Sure. So you mentioned earlier that, obviously, you do see a strong trend of lower import activity, which I guess is fairly logical, customers want low lead times. But I was wondering, if this, basically, something which has been hitting you as well in the export business out of Colombia into Europe, i.e. -- sorry, has Columbus actually suffered from essentially lower -- disproportionately lower import -- or exporting activity into Europe?

Okay. Columbus until now is closed. So they have no activity. And we will reopen Columbus with the other book that we had before March. So before the lockdown and still we haven't considered this order. But Columbus for many years have been considering like a European mill or at least we in a panel, we managed to work with Columbus, as a European mill. And I think, our customers many times do not see the difference. They do not consider Columbus as an importer. So the level of activity in Columbus and Europe is going to be more or less the same as the level of activity of Acerinox. They have their own customers. In most of the cases, we are not overlapping these 2 mills. They will keep some level of activity, but still the market is going to be what is the level of activity in South Africa because the market -- the economy is totally locked down. Even in the case, the number of cases affected by coronavirus is not very big, but they prepared to lockdown the country and to control the situation since the very beginning because the sanitary situation of the country is not the best. But let's see what happens.

Okay. Okay, fair enough. Then my very last one, and I appreciate, it's obviously a difficult one to answer, but it's actually on the outlook. So could you just give us maybe any early indication on whether you do feel to slip into a negative EBITDA territory, on a Group level in either April, March or June, just from the data you have so far from what your order book is telling you so far? Now obviously, if we ignore any volatility from the metals market, obviously, which we may get. So any inventory impairment or so. If you ex that out, do you think that any of the month in the second quarter could be negative on a Group level?

I think, Bastian, of course, it's difficult for us to speak about this because we don't -- we want to give you some guidance, but we cannot tell everything because we never announced our results, our forecast. What I mentioned is that we are -- cash flow generation is going to be positive, but we will reduce our debt, and even net profit is going to be positive. Not much, but it's going to be positive. Miguel, do you want to add?

No. At EBITDA level, by far, in the second quarter, at the end, keep in mind that we shall face different phases. April is a month affected by closure of activity, for example, in South Africa and in Malaysia and partially what has been starting of the month in Spain, even though that is going to be by far positive EBITDA in the coming months with more products and all the strategies in place, where we may face is, obviously, the effect in the demand and the reactivity of demand, what shall be the rhythm and by far, we also, in our forecast consider that EBITDA is going to be by far positive. So we have no doubt on that. But in any single month of the quarter, we are not going to face any negative EBITDA.

But please take in mind -- keep in mind that we don't have the crystal ball. We don't know what's going to happen in June. And what -- as I mentioned before, we are managing a scenario in which, in June, we will work at 50% of capacity utilization.

Yes, absolutely. No. I think that's actually a pretty bold statement at this stage, and I totally appreciate visibility is very low, but thanks for those comments, and all the best.

The next question comes from Luis de Toledo from BBVA.

I had only one question remaining. I don't know what's addressed previously by asking. Maybe -- I mean, if taking into account the comparison we made with 2008, 2009 period, obviously, the company is completely different, now the ramp-up at NAS, Bahru asset, but if we assume that the capacity rates were more or less similar at the 60%, 65%, that base prices were extremely low in Europe as well. Maybe the only difference is that, maybe, the transaction prices in Asia are now much lower. When you consider that you have a management that can address the current situation, what was the most difficult thing that you had to face in 2008? It was the starting drop in nickel prices that had an influence in activity? Or -- I mean, the question was that if you were to assume that the activity does not improve at a Group level compared to the second quarter guidance if the U.S. enters now in a lockdown phase and you have to work with capacity rates in the range of 60%, 65% and with current prices, not probably at your rating, if you were to avoid this operating loss. I assume, that the previous question, obviously, addressed that. But I would like here to know, if you compare it to 2008, 2009, what makes you comfortable to say that you can cope with the current situation. What's more difficult to deal with low prices or with low activity levels by then, considering that, obviously, the financial situation is much better now.

Thank you very much, Luis. I think that there's two important facts that we are totally different at that time. First of all, that we have started in 2008, suffering the incredible raw material crisis. Remember, nickel price at USD 40,000 or more than USD 40,000 per tonne and going down to around USD 8,000, and the amount of provisions and inventory attainment that we had to do at that time. So this is totally different. Now the business is running more or less smoothly, with low activity, but it's running smooth. Level of prices is more or less stable, of course, much more stable than they were at that time, but are low and are low because of the overcapacity in China, but also because we all have learned to reduce our cost. Now this is not only at the level of competitiveness of all the stainless steel makers as a Group and also the new technologies and digitalization and everything will help us to reduce our cost and probably in the future the price again. So -- but if the prices are so competitive, this is not bad because we are developing the stainless steel industry. Now we have more new end users, new applications for stainless steel. So this is positive. The difference in the Acerinox Group comparing 2008 and today because we are the same team, we have -- many people still are the same that they were working at that time. And still, we are keeping the culture, most of the aspects of our culture. It is -- if you can recognize Acerinox you are following us since that time and you still can recognize Acerinox, but we learned from that process. At that time, the strategy of Acerinox was very clear, was produce as much as possible, try to debottleneck all the plants to increase production every year because if you increase production you will reduce your fixed cost per unit base cost and you will be more competitive. That was the most important strategy at that time. It will end after that crisis, that this is not possible these days because if we work at 100% capacity we will not sell more today because with lower prices we will not increase our sales today. And also, we don't have the financial power to increase our stocks at the level of 3,000 or 4,000 tonnes per day. That's going to be a disaster, so -- but it will end. In that crisis we can manage the plant with more flexibility, but not increasing our cost. This is important. In the past, cost mainly depending of -- on the level of activity and volumes. Today, our cost depends more on the way we do things, depend more on excellence. And you know that we have learned a lot how are we progressing with the excellent plans. We learnt a lot, how to manage variable -- to variabilize the fixed cost. We learnt a lot of how to control our business, not being at 100%. So today, I think, it's totally different for the Acerinox Group because today we know how to do it.

Ladies and gentlemen, there are no further questions on the conference call. I will now give back the floor to our speakers. Thank you.

Okay. There are some questions from the webcast. Most of them are already answered, related to dividend, for example. Let's go now to one question from Bank of America, Olivia Du. Have you taken the state funding aid for labor cost? If so, how much can that cover your cost base?

We don't have this number yet because we haven't finished the negotiations with the representatives of the workers in Spain. But assuming more or less the scenario that we are working with, we can save in labor cost at the level of EUR 1.5 million per month.

Okay. And the last question is coming from Nordea. You mentioned that the 65% capacity utilization for the second quarter. This is mainly due to the lower demand or the regulation in the countries you operate mills?

This is a mix of everything. In the case of Malaysia, South Africa, it's lockdown of the country, but that's also affecting to France that they didn't lock the economy, but it's, in fact, is totally stopped. In some other countries, we have some activity. There's a big difference today between countries. And in the case of Europe, there's a big differences between the North and the South of Europe. There's no activity, Portugal, low activity in Spain and Italy and France, but Germany is maybe working at 80% of the normal level, and the Scandinavian countries and Poland are also working around 80% of normal levels. There's big difference between countries, but this doesn't affect us very much because you know that we have presence in all these countries.

Okay. Thank you very much. There is no further question. So thank you for joining us on this call. Let me remember that next report will be on July 29, the second quarter and half year reports on July 29. Have a nice day and keep safe.

Yes. Thank you very much. We would like to be more and more transparent and to give you more visibility in our business and in the global economy, but you have to understand that this is impossible today. So thank you very much for your attendance to this conference. And please take care and keep safe. Bye-bye.