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

Good morning, everyone, and welcome to this presentation for the fourth quarter and full year results of Acerinox. My name is Carlos Lora-Tamayo, I am the Head of Investor Relations. Today, we have here also Rafael Miranda, our Chairman; Bernardo Velázquez, our CEO; and Miguel Ferrandis, CFO of the group. Before getting started, let me remember you that this presentation is being broadcast on our webcast -- on our website, acerinox.com. And now with any further ado, I leave the floor to Rafael. Please, Rafael, go ahead.

Good morning, everybody, and thank you for attending our 2020 results presentation. As everybody knows, 2020 has been a very difficult year worldwide for many sectors and industries. And in these challenging circumstances, we have been able to achieve very robust results. The net sales, as you can see in the screen, has been EUR 4.668 billion, only 2% lower than the precedent year. The adjusted EBITDA reached the figure of EUR 398 million in line practically with the precedent year. Reported EBITDA was EUR 384 million, 5% higher than year 2019. And the results before taxes and minorities reached the figure of EUR 132 million, 5.7x more than the year 2019. Results after taxes and minorities after the impairments we made and that will be explained to all of you, has been EUR 49 million. The cash generation was outstanding, reaching the figure of EUR 421 million, the highest level since the last 8 years. And the net financial debt, the group financial debt was EUR 772 million, only EUR 277 million higher than 2019 after the acquisition of VDM, and also the ratio between the net financial debt and EBITDA is 2x, which is a very good figure for our industry. All this has been possible to reach for our rapid response to the consequences of the COVID-19 through an incredible job made in cost control. The performance of our U.S. subsidiary in NAS and the integration of VDM, what has been made in very difficult circumstances, as all of you know. Let me now pass to our sustainability and ES&G focus of our policy. The Board of Directors of Acerinox is committed with the sustainability developments in our company and with the ESG policies. In this regard, during 2020, we have formalized all our actions in a new sustainability plan called Acerinox Positive Impact 360 degrees, in which we establish concrete objectives and commitments. This plan and our ES&G policy accounts for its contribution to the 17 sustainable development goals of the United Nations, and in particular, through the positive impact of the creation of quality employment, investment in industrialization and innovation policies and the leadership in the circular economy. In the screen, you have the 4 pillars of our plan and ES&G policy and explaining all the concrete actions. But I would like to highlight that we have prioritized set concrete goals for 2030, with having 2015 as the base year. And those concrete goals are the 20% reduction of greenhouse gas emissions, renewing the commitment to achieve climate neutrality by 2050. A 7.5% reduction of energy intensity, 98% waste recycling, 20% reduction in water withdrawal, annual reduction of 10% in the incident rate of sick leave accidents and the annual increase of 10% in the percentage of minority in new recruitments. The final idea of all our sustainability policy is fostering sustainable development in the countries in which we operate for 50 years, and become leading our industry in this matter, part of the solution of the climate change programs. Well, with this summary, I would like to now pass the floor to our CEO and CFO, who will develop all these ideas.

Thank you, Rafael, and good morning, everybody, and thank you for attending this presentation of the -- of our results in 2020, this unusual year for our 50th anniversary. After 3 consecutive years with a negative growth in apparent consumption of stainless steel was -- I will refresh that United States, our consumption went down 2% in '18, 9% in '19 and 10% last year. In Europe was 0.2% in -- minus 0.2% in 2018, minus 4% in '19 and minus 40% and -- 14% in 2020. So we could expect some recovery. Actually, we were expecting this recovery for the beginning of last year, but never came due to COVID-19. And of course, we also could expect some that stocks should be low. Also, I will refresh that since 2008, we have been working in flexibility of our company and control the business -- the control of the controllable parts of the business, as we repeated very often in our presentations, and 2020 has been the best year to prove it. This extremely strange year and with a high volatility, with a high level of uncertainty, I think it has been the best year to prove what we have got in terms of flexibility and control. I -- when we presented the Q1 results in 2020, we said -- starting speaking about coronavirus, we said, we know how to do it. And we know how to do it because we did it before, we did it in the previous crisis. So what has happened during the second part of the year. As you know, the consumption started improving in Q3, mainly in auto industry and appliances. But what happened in Q4? This is what some more different. And the fact is by -- that was unexpected by mid-November, we started to see some more trust on the economy and the general consumption, maybe or probably due to the more trust on the vaccines. Of course, inventories were very low in all the markets around the world. And we saw some improvement in consumption, especially in consumer goods. This is related to the stainless steel business. So that means that we have started to pick up more orders, and that happened by mid-November. And with the catalytic effect of nickel price as it is traditional, and a very low level of imports that was translated in a business improvement. Low imports. Why low imports? Mainly in some areas because -- the United States because of the trade barriers, maybe some of that is also happening in Europe. But especially in Europe, was the very low-cost of -- for a very low price of stainless steel, very affected by Asian prices. And also with this fast recovery, the freight industry was not ready, the cargo industry was not ready to respond to the necessities and the lack of containers from Asia to Europe and United States led the price to high increase. So that at the end, this activity -- more activity in the market with a nickel price increasing and people trying to anticipate purchases founded that they couldn't import because of these factors, and that represented an increase in the order book of all the western producers. That was especially strong in the United States, where we saw an unexpected strong Q4. Even with the elections, normally November when they have elections, it's a weak month. There's low activity. And also -- we also mentioned that after Thanksgiving, there's almost no activity in the United States, and this year was not like that. We had a strong November, and we also -- the days of December that we worked, were very strong, too. How we reacted to this situation, as we mentioned before, there's flexibility, the same flexibility that we shown when we had to stop to slow down our factories because of the coronavirus, was the same flexibility that we have shown when we accelerated in Q4. But accelerating, running the business with higher level of productions, with more purchasing the raw materials but always keeping control of the controllable -- controlling our inventories, controlling our working capital, controlling our cash generation that was very strong within the quarter. And of course, focusing on cash, as we already mentioned, and trying to reduce our debt as we promise, when we presented the acquisition of VDM. We are in 2% -- sorry, 2x EBITDA, that was the target that we announced. And how is the situation, the high-performance alloys? The same that we have a better input from VDM in quarter 2 when stainless steel was slowing down. Still the activity hasn't come in the case of the high-performance alloys, but it's coming. We are now finding green shoots in the market, electronics and the electric industry is booming now, the same that in stainless steel, auto industry is also performing very well. And now we are starting to see some good signs in the chemical industry. Still we are missing oil and gas, but chemical industry is back. So we finished like this. We will start seeing finally more of this at the end of this quarter. Miguel will explain all the details of the profit and loss account later but just let me give you some tips. We had a very complicated -- in a very complicated year, we have delivered a very constant and robust EBITDA. And in the case of Q4, we also received some additional input in our EBITDA line due to the process of integration of VDM that we had 1-year to finish with this process, and we have to reclassify some hedging accounts in VDM that were produced through the year, but came to the EBITDA line in quarter 4, that's EUR 14 million, that Miguel will explain later. So strong recovery in Q4, flexibility, control, and that led us to present this strong EBITDA and very strong and expected cash flow situation. So Miguel?

Let's go to the details on the financials of this difficult 2020. First of all, we know it's a difficult year to analyze and understand probably also, it's a difficult year to explain. At the end, running the business on this year has been like running 3-track circles. On one side, we have our business. On the other side, we have to face the COVID, which, as all of you know, has had dramatic consequences on the world economy. And probably the third track has been -- that has been the time in which we have gone through the integration of VDM. I think what must be remarked is that in the 3 areas and in the 3 fires, I think we have had an extraordinary performance. We shall talk in detail about the effects on the business, on the margins and on the cash but also in terms of the integration of VDM with a huge work and devotion from both sides, obviously, from VDM and from Acerinox. I think also the integration has been very, very successful, and we finished the year with the all the -- most of the homework regarding such integration already done, and this is important. But as we say, it's probably because of this more difficult to understand and to compare and to normalize or even making projections. So consequently, as we normally do, I reinforce that a part of the summaries that you have on these slides, but I reinforce that you go through the financial statements that are available in our web page, fully audited. And most of the clues of the -- for understanding the year probably can be better understood going through our financial statements. In this basis, if we just start to compare and to analyze what has occurred in the stainless, I think there are some facts that -- in this slide, you can appreciate. First of all, the huge effect of the COVID in the stainless took place in the second quarter, and you can realize in the production and sales, how big was the correction taking place in the second quarter. But what is relevant is, and I reinforced to focus on the evolution on the EBITDA margin. You can see in this slide that the adjusted EBITDA margin was 7% in the first quarter, 8% in the second, 9% in the third and 11% in the fourth quarter. So gradually, quarter-after-quarter, we have been improving our EBITDA margin, even though the effects of the COVID were there and the correction in the market by the COVID was there, but we have done an extraordinary performance on cost reduction for keeping margins, and especially on variabilizing the fixed cost. As a consequence, as you can read in the right page in green, in the right part of the slide, the personnel expenses were down 16% as well as the operating expenses were down 16%. So this means if you go to the year figures that with a reduction in the net sales of 15%, the reduction in cost in the group has been 16%. As a consequence of that, we have neutralized in our margins, the effect of the COVID. And at the end, what we are reporting is figures in the stainless division in which the EBITDA margin has been just correcting coming from the previous year at 5%. I think this is something that probably needs to be remarked. If we also go through the evolution of the quarters, concentrating in the second quarter, there is something also that you must take in place. Obviously, you can see that the EBITDA was negative in that quarter. This was also as a consequence of some analysis that was done in the second quarter. So at the closing of the quarter, we make the impairment test as we normally make on certain assets of the group. And what was found in the month of June is that the consequences of the COVID, mostly in Asia, with the prices collapsing the consumption going down and especially the fact that there still was a lot of capacity in place as the market was correcting, but still China players were keeping their production figures. This has a huge effect on the prices and on the margins in the area. So we make our very, very recurrent, conservative projections for the coming years. And on June, it appeared that was logical then to make some impairment of assets in Bahru, and we made an impairment of EUR 42 million. And because of that, we have such negative EBIT in the figures of the second quarter. But also what needs to be reinforced is that, since that time, in the second semester, Bahru has been keeping a good track, contributing with positive EBITDA, contributing with noncash restruction and as a consequence of this, when we have made the same prudent and conservative analysis at the year-end we found that it was not necessary to make any additional impairment on the assets, not only in Bahru, but also on the group. We think that this is something that is very, very relevant and also I wanted to reinforce. Also in the -- you can see in the -- especially in the second semester and especially in the fourth quarter, the strong cash commitment of the group. We developed operating cash flow before investments of EUR 242 million in the fourth quarter. This is also something to be reinforced. And at the end, on a year basis for 2020, what we have is a total figure of operating cash flow before investments of EUR 337 million as appears in the slide. And a part of the excellent contribution in all the margins by the cost reduction plan that we've put in place, we must also reinforce the message of the commitment on working capital. Working capital has gone down in this year, EUR 175 million. Being the main driver for this working capital reduction, the reduction in inventories of EUR 165 million, which also, as you know, is some of our standard commitments all around the group. I said previously that it was not necessary to make any impairment of assets at the end of the year, but also at 31st of December, we have made very, very conservative projection for the coming years and what we have done is, just at the bottom of the P&L, in terms of the taxes, some tax credit impairment, which on a yearly basis, it means, roughly speaking, around EUR 24 million. So we have considered that with very, very prudent assumptions for the coming years, as we normally are, we are very, very conservative. Keeping in mind what could be more or less the recoverability in the next 10 coming years, we have preferred to make some impairment on tax credits of EUR 24 million, just at the bottom of the P&L, not affecting, obviously, non-EBITDA, non-EBIT. And yes the tax line. This is most of what I wanted just to reinforce regarding stainless. If we move to the high-performance alloys division with incorporation of VDM figures on the group. Also, keep in mind that we are incorporating 10 months of figures coming from VDM. The acquisition took place mid-March but more or less, we have been incorporating all the figures from March to December. So this is a 10-month contribution in this year. It's true that the announcement of the deal took place in November 2019, but the effective transaction date was on mid-March, almost during the COVID. As a consequence, as I said before, most of this integration has been with a huge commitment of all the organization but working in remote. But even for that, we reached June. And as we mentioned, the first semester figure with most of all the accounting integration, with the purchase price allocation already done. And we have also been improving all our works during the second semester. When you go through the figures, it's clear. First indication, as we announced when we make the deal, that part of the advantages of the integration and the diversification through the high-performance alloys was to compensate our cyclicality with a different business that at the end has certain level of differences in its cycles. So we were saying before that the tough of the COVID correction in the stainless took place in the second quarter, in the case of the high-performance alloys for VDM has been the correction stronger on the third quarter. So you can realize in these figures that VDM took a positive EBITDA of EUR 23 million in the second quarter. And the main effect took place in the third quarter with an EBITDA of just EUR 2 million. It is clear that in comparison with stainless, which is more or less a commodity product, we are massive producing 2.2 million tonnes. The high-performance alloys, and especially VDM is a niche. So when you are running with figures of production in terms of 50,000 tonnes, a strong correction of 20% in the production or in consumption keeps big effect because, obviously, the resultant produced tonnes are the ones that must absorb the costs. So it's clear that VDM must suffer more and the high-performance alloys suffer more than the commodity stainless in terms of correction. We have seen it in all the high-performance alloy industry when they have been presenting the results, most of the Americans are with negative figures. In that case, what's remarkable also is that VDM has always been keeping its positive EBITDA. But in addition to this, what's also remarkable is the strong concentration on cash flow. And you can see that in the worst part of the year, in the second quarter for the high-performance -- sorry, in the third quarter, for the high-performance alloys, the operating cash flow done by the division has been EUR 64 million. So at the end, it's true that has been certain effect by the correction. We are long-term runners. So we understand that this crisis occurs time to time. We are very, very confident, as previously was mentioned, on the -- under more or less gradual recovery of the high-performance alloys. But in the meantime, we are concentrating our efforts in generating cash and in reducing working capital, as is appearing in the figure. At the year-end, you can see in the bottom, the EUR 84 million of operating cash flow is in line with net debt that VDM had at the time of the incorporation. We always mentioned that it was a deal of EUR 313 million for the purchase price of VDM, but also we were incorporating in our figures, EUR 85 million of net debt. The cash flow generated since March to December is more or less covering all of this figure of EUR 85 million, as has been mentioned. So it's a year of -- for talking about cash generation, it's a year for talking about cash flow. We compare in these slides what has been the fourth quarter and what has been the full year. Just looking at the first -- of the fourth quarter, you can realize that with the EBITDA of just a single quarter, EUR 131 million, we can more or less cover the full dividend that has been paid in the fourth quarter of EUR 135 million, which is a 7% dividend yield. So at the end, we have consolidated our dividends. And as you remember, we increased the dividend payment last year. So just with EBITDA generated in 1 quarter, we are able to cover debt. And in addition, we have, obviously, the huge concentration in working capital reduction for providing these figures for positive free cash flow generation even after investments, even after taxes, financials and all the other adjustments. If we move to the full year as appears also in the slide, it's clear that providing these figures with operating cash flow of EUR 421 million is something to reinforce. And at the end, this allows us to more or less keep the message that also appears in the slide. So 60% of the purchase price of VDM has been almost covered in the cash flow generated during this year. I think this is also some good demonstration of the efficiency of the group. And all the excellent performance that has been taking place during the year in the stainless and in the high-performance alloys area. If we go to the next slide, just for understanding and analyzing our position. Our strategy in the last year has been taking advantage of the extreme competitive debt that we were able to obtain, mostly in Europe while also keeping in terms of prudency in part of our strategy, also was keeping a good position of cash on hands at the end with the cash on hands, we can cover most of the maturities that we have in the coming years. So if we take on place, not only the liquidity actually on place, but also the available lines, we can cover all our maturities for the next 10 years. So this has been also part of our strategy. In this year, in terms of finance, I think we have also been very, very flexible in terms of prioritizing in any part of the year, what for that time was the critical area. In the first part of the year, in the first quarter, all our priority was to achieve a competitive debt for the acquisition of VDM. And consequently, we raised EUR 350 million of new debt at a very, very competitive price. It was announced at around 1%, so this is something to remark. In addition, most of these new finance is green finance. It's according to the actual standards for green finance, and then we obtained that. So consequently, this has not been a huge increase in the income -- in the financial expenses of the year. In the second quarter, when the COVID was there, most of our plants were even forced to close temporarily. We prioritized the liquidity. It appear not very, very clear how long was it going to take for improving the situation in the COVID, there was a lot of uncertainty. So the priorities there were taking as much as possible of availability for if the recession took more than or longer than expected, and we developed this extreme liquidity that appears in the figure. And then as we have been saying, the priorities in the second semester has been focusing on reduction working capital and in generation of cash. So we feel absolutely comfortable with this structure in our balance sheet. As you know, we finished the difficult year 2020 with a debt-to-EBITDA ratio of 2x in a year in which we have had not only the COVID, but also we have made the strategic acquisition of VDM, which has been a huge acquisition for the group. And just in 10 months after the acquisition, at the end, we closed the year with a debt-to-EBITDA ratio of 2%. So this is, we think, a good demonstration of the efficiency we have achieved and a very, very good indicator of how we can be reducing this ratio for the coming years.

So this is an area when in this frame, what can we expect for 2021. We have recently reviewed our strategic plan with our Board of Directors, more or less reinforcing and readapting what we deliver -- when we presented the acquisition of VDM, more or less, the focus are what you perfectly know because we have a better situation in general terms. But I think about it, it's high volatility and high uncertainty than before. It's more positive. But also what can we expect for next year? It is difficult to find out. What can we find? It is just a restocking period. It just -- it's a general improvement of the economy. Can we see a strong recovery with all the plans that the governments are are presenting? So in our case, we have to focus in our business. We have to focus and, as we already mentioned, in controlling the controllable. And it means control the business as close as possible, focus on cash flow this important cash scheme, this is always our message, and we fully trust on this. And being smart in capital allocation, which I think that we have already demonstrated, but never losing the focus on the long term. And we have a strategy, we have a very clear strategy, not many companies today, in this volatile can say that they have such a clear strategy for the long term. And this is what we are focusing to readapt our business for the next 50 years. And our vision that is to accelerate the transformation of Acerinox from a high-quality stainless steel company to an innovative and sustainable provider of stainless steel and high-performance alloys for global markets. So this is the target with VDM, with incorporation of VDM, and this is the target with the integration of VDM. We want to be the preferred supplier for competitive solutions, not only in stainless steel, traditionally, we did Bahru's including, high-performance alloys as -- and also as a demonstration of how flexible can we be or how flexible we are, also supplying carbon steel when we need it or developing a new business line that is carbon steel, as we have done in South Africa, and we announced in this presentation. We also focused on sustainability, as our Chairman mentioned, we have to focus on sustainability, and our Board is very committed with sustainability. Now Europe and most of the western countries has decided to be sustainable. And after 50 years of our life, of history, we're trained to be efficient and eco-efficient. We have already demonstrated that we are a sustainable company, but we wanted to formalize more our sustainable plan, our sustainability plan. And this is what we have released in our first annual integrated report. Where we are integrated not only the financial numbers, but also the nonfinancial information. I will have to say something that is the eco efficiency means sustainability is exactly the same. And Acerinox has forever, tried to be very competitive, and that means a lower consumption of electricity, lower construction of natural gas, higher metallic yield. And all of that means that we need less resources than other companies and other businesses to produce 1 tonne of stainless steel, that is our target. So this is eco efficiency. You mix it with a reduction of waste, that is also very important for our business. The more that we can reuse our waste, the more profitable than we can be, the more sustainable and the less raw materials that we have to buy. And of course, always keeping an eye, very close eye, on inclusion because we have lend with the different -- with our geographic diversification. That the more divest that the companies, the more fresh ideas that you are getting into your business and having plans for continents and increasing the number of women participating in our business in all the areas of the business, we are realizing that we have a fresh air. And we have more inputs for our business, and it is very positive. I will not read all the numbers because, as already been mentioned, and you can find all our strategic plan in our first integrated annual report. On outlook. Again, a difficult outlook. You know that we only give some guidance for the next quarter, we never go farther than a quarter. And the situation is difficult to read. I mean we have, in one hand, we have a better consumption-driven by end user business. I think that with less expenditure in all the families, there's some extra money to spend in a small investment and that can be renovation of house, that can be appliances, you can buy a freezer or TV or you can buy a car. This is what we are seeing in the current economy. Of course, after 3 years with negative apparent consumption in U.S.A. and in Europe, the stocks are very low, but we also know that they are lower than normal in China. So we are leaving a restocking period. How this restocking period and this improvement in consumption in a consumer goods business, how can that dismatch? So this overlap with the more trust on the economy -- that will be, in our case, that will be -- will arise in our business as more project business and more project mean hot-rolled and special materials in stainless steel and, of course, high-performance alloys that normally focus on projects. We are starting to see some green shoots. We think that this business is coming. We are starting to see a recovery in auto, a recovery in electronics, a recovery in chemical industry. Of course, we miss oil and gas, but there are also some important projects in third countries. Speaking about the -- speaking about Qatar, Dubai, Arabia or Brazil or some African countries, we are starting to see some projects in the oil and gas business. So we expect that by the end of the quarter, we will reach normal levels of production in VDM as well. We have a strong demand today. I can tell you that we are fully booked in all our plants. We will work at 100% capacity in all our plants, except Bahru Stainless, we have decided to work or to run the company in a different business models, just focusing on high added value products/in order not to compete with the very commodity grade that can produce our competitors in China or Indonesia. And this is a small way of doing business in Malaysia. Now Bahru Stainless is not a problem for us. We are positive in EBITDA and in cash generation. And also, we are seeing that we succeed with our price increase in the United States. So the situation is improving for Q1. Also, in Europe, at the beginning, in Q4, we are following the raw material price increase with our prices. But now we are gaining some extra margin in our business in Europe. So we are also improving, we expect a better situation at the end of the quarter. And with this mix of things, we are expecting a Q1 in 2021, that should be slightly higher than in Q4 2020. Remember that we will not have the extra contribution of VDM now that this EUR 14 million for the reclassification of accounts. So I think it's very challenging. It's very challenging to have a slightly higher than Q4 EBITDA in first quarter of Q1. The rest is uncertainty. It's -- let's see what happened with the real economy. Let's see what happened with the project business. Let's see what happened with all the plans that most of the governments are presenting. Let's have a close eye on what happens in the Chinese economy after the Chinese New Year. They will also release some plan for -- to reactivate the economy. We know that India is presenting very strong infrastructure programs. For sure that the United States sooner or later, will present these infrastructure programs. We have been expecting them since 1 year ago. And I think we are very close to get it. And in Europe, maybe with more uncertainty, it is more difficult or we have presented a more complicated recovery plan, still most of us are trying to analyze, which is going to represent in the future. But I'm sure that with all the governments and with all the central banks focusing on reactivating the economy, so we will have a better economy at the end. So it's difficult to find out what's going to happen, but for sure that, in Q1, we will have a strong EBITDA at the same level of Q4. Conclusions. We have repeated many times during the presentation that we'll aim to be flexible, and we reacted very fast to the extraordinary challenges presented by COVID. We focus on control and this situation, safety, sure, safety is the most important, liquidity, supply chains. We try to guarantee the supply chains, all the receivables in our company and varibalizing the fixed cost is something that we were doing since 10 years ago, trying to be almost 100% variable in our cost structure to maintain profitability in this and the low levels of sales and production. We have to be flexible, agile and ready to rapidly benefit from a recovery because we not only work on -- in a defensive way, we also have founded how to put the company in the sport mode, accelerating production and sales when the situation allows us to do it. Consistently focusing on profitability, and generate the best free cash flow to enable optimal capital allocation for the business and shareholders. And always focusing in the long-term strategy, having a very clear strategy. We know perfectly where we are going to, and VDM is a big part of this new strategy. And we will continue fundamentally to receive Acerinox in the years ahead, to adapt it to the business consumption, processes and our own business, trying to find out what our weak and strong points of the time, trying to review all the assets and everything in our group and trying to build the best Acerinox for the 50 years ahead. And as I mentioned before, with a very clear vision to be a professional player of advanced and sustainable materials, sustainable solution in stainless steel, in high-performance alloys and in carbon steel or everything that we can do to improve our business. So I'm sure that as it always happened when we overperform or underperform, you have many questions for us. So we are ready to listen to your questions and try -- and we will do our best to explain your doubts. Thank you very much.

Thank you very much, Rafael, Bernardo, Miguel for this very interesting presentation. We move now to the Q&A session. Following your recommendations, we will limit the question to 2, in order to give time to others to ask their question. So please go ahead.

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

Two questions for me. First on the NAS, on the United States, if you can please elaborate a bit more on the improvements in the quarter. If you believe that the increase in demand is due to the reopening of the economy, restocking, or if you are already starting to see any impact from the Allegheny decision to shut down their commodity business, if you are seeing any volumes from new or existing clients? And if not, what shall we expect for this year 2021, in volumes? And second question, Columbus, I read in the quarterly report that you are shifting some production into carbon stainless. I wonder if this is some material or not, if you can give us any number in terms of melting tonnes or impact on P&L sales or margins for this new activity? And whether this is a temporary opportunistic decision or if it is more structural? And if so, what you think are your competitive advantages in this business?

Thank you very much for the question, Paco. In the case of NAS, I think we explained what was the situation in the United States when we presented our third quarter results in October. And we were cautious in our outlook because the November elections were coming and also the holidays -- the traditional holidays in December. And then as I mentioned, it was suddenly maybe in mid-November, we have started to see recovery with -- once the year was closing and once all the company, we are reaching the end of the year with a good level of working capital and debt. They saw the recovery, and they wanted to react to be ready for the new orders in -- the new others from their side in December than in January. So that means that they started buying in December, they are activating more than expected the economy. Of course, the announcement made by Allegheny to close down the commodity stainless steel section was also accelerating this process and making customers, the customers that are trusting on Allegheny for the deliveries that started to find a new supplier and other suppliers. And this is also helping the market. But it's everything that is catalyzing this reaction. So there's better consumption, better expectations. Better expectation due to the trust of the vaccine, altogether with a higher nickel price with this announcement made by Allegheny and the weak possibility to import materials because of the 25% duty and because of the cost of the freight and altogether meant that over reaction from the American market, but this is strong. I think it is based on a real economy. So the -- all our customers and all the distributors have to readapt the stock levels to the current level of sales. So they need to increase. And as far as the sales are also increasing, they will need to keep on buying to keep the appropriate level of stock because remember that we normally -- the normal measure for the stock levels in our businesses in days of sales. So we trust on the American economy, especially, finally, the government released these infrastructure programs. In the case of Columbus, we have been developing during the year this possibility with -- South Africa has seen some closures of some carbon steel plants in the past years. And we find it a niche where we can compete. So we are not the carbon steel producers. We cannot compete with the blast furnaces and with the big producers, but we can be in a niche of carbon steel that is more special, and this is for a very special application that I cannot mention. But this is a very special application, and we develop a competitive family of grades of carbon steel, in which we are profitable, and we can compete with carbon steel supplier, especially with imports. And we have this -- we have room to do it. And as we normally try to do and we speak about flexibility, we try to be flexible. So we try to be flexible. And try to use carbon steel to fill our plants -- in our plants. I can tell you that we are considering more or less 20 -- from 20% to 30% of our production will be carbon steel. But always keeping an eye on standards that this is our major business, and then we will fill the plant, the rest with carbon steel. And we will try to be flexible. This is our idea. I don't know if I have answered your question, Paco.

Our next question comes from Alan Spence from Jefferies.

I've got 2 questions. I'll take them one at a time. First one is regarding capital allocation that you highlight as a 2021 objective. And for the balance sheet, is this just going to be a gradual deleveraging, or are there some specific targets for the balance sheet that you can share with us?

Well, basically, I think what we must keep in mind obviously, when we talk about our balance sheet, is mostly related to working capital. In working capital, we must assume that we shall have certain valuation. We shall be considering probably recovery -- gradual recovery during the year 2021. So this may have a temporary effect in working capital going up and maybe this should create some distortions quarter-on-quarter, but this is something that shall normalize during the coming months. But when we realized a strong recovery, mostly in Europe, which is the one that still is to come. America is keeping a stable, highly profitable track. In Europe, as we have been saying, it shall be mostly improvements for the end of first quarter or even for the second quarter. And also, in the case of the high-performance alloys, the improvement shall come probably a bit later, and we expect to see more normalization probably for the second semester. So we must keep in mind that this should have some effects on the working capital. In terms of other areas of capital allocation, it's clear that in the investments in this year, we have made the -- we have prioritized investment on specific CapEx for the running business. This is a sector in which if you are not reinvesting, you are out of the market, as you know, but we have prioritized, and we are keeping a proper level of CapEx than in the range of the EUR 100 million. In addition of financial investment has been the case of VDM, and then the main other area for capital allocation, obviously, is retribution to shareholders. I think it's a good achievement that in a year such as 2020, we have keep our -- we have consolidated the increasing dividend we made in 2019. We have probably a very satisfactory dividend yield in terms of 7%. As you know, the Board has some buyback program that Phase I was achieved in this year in which obviously, liquidity has been a priority. What we have put on post is any other further program on buying back our shares, but this is there. Maybe whenever the circumstances arrived, obviously, this could be reviewed, but still, there are no plans. I think still we have faced properly the crisis of the COVID. And then we need to see gradually the recoveries in almost every sector and probably in almost every of our divisions and plans.

Okay. And my second question is on VDM. Obviously, a very solid quarter relative to expectations and positive commentary in the order book. Your -- in your previous answer that you mentioned kind of reaching normalization in the second semester. So should we be thinking that this could potentially achieve a $20 million per quarter contribution by Q3? Did I understand that correct?

I think there is a distortion in the figures of the fourth quarter of VDM and Bernardo mentioned it previously. We have seen an EBITDA margin in VDM of 10%. This is what should be a normalized EBITDA for VDM, but still probably, we are not there just as a consequence of the market improvements. So what has been taking place in the fourth quarter for reaching these EBITDA figures of EUR 15 million in the case of VDM has been certain reclassification. We have done through the integration of VDM during most of this year has been mentioned. And then in the case of the derivatives of commodities in which VDM has a big expertise. Our rules in the stainless commodities is that derivatives are always more or less treated in the financial part of the P&L. But at the year-end, it has been reclassified, the derivatives linked to raw materials according to the accounting standards, and has been moving up at the gross margin level and consequently, improving the EBITDA figure. So part of the recovery that is coming in the fourth quarter of VDM is the aggregated effect that the nickel rally occurred in the second semester has been more or less being realized and reclassified from financials to EBITDA. So maybe half of it comes from this quarter and half of it comes from the previous quarter. So this does not mean that VDM will need certain quarters more. The correction in the high-performance alloys...

Let me add something to Miguel's explanation that is that when the stainless steel was suffering -- the stainless steel cycle and the high-performance alloy cycle. That doesn't mean that high-performance alloy is not cyclical, but the cycle is different. Normally, there's a delay of [indiscernible], then we are starting to see some recovery that will come finally in VDM at the end of the quarter. But already, we are starting to see a better situation, our order book is improving. And if we can see some recovery in oil and gas industry, we will be more or less at the level of production precrises at the beginning of quarter 2.

Okay. Can you just quantify the size of the derivative benefit in Q4? And that's it from me.

Could you please repeat the question?

Yes. Could you please just quantify the scale of the derivative benefit in Q4 to that business?

It has been EUR 12 million. And more or less, as I said before, according to the rally, most of it is coming from the effect of the nickel price increase in the second semester. It should be a normalized level, could be half of it taking place in the fourth quarter and half of it in the third quarter.

Our next question comes from Ioannis Masvoulas of Morgan Stanley.

Two questions from my side. The first on the Q1 EBITDA guidance where you suggest a slight increase, which would seem a bit conservative in today's market conditions and some of the seasonal trends. Can you help us understand what you're assuming for volume development quarter-over-quarter? And what's your view on your ability to fully pass-through higher raw material costs, which could possibly suggest further margin expansion relative to the Q4 levels? And I'll stop here for the first question.

We are always conservative. We never want to overwhelm the market, but I think this is realistic. If we have benefited in Q4 for EUR 14 million to be a slightly higher Q4 numbers, we have to do more than this, we have to improve more than this EUR 14 million so this is challenging for us. In volumes, in terms of volumes, I think that we're going to improve our numbers. But the rapid increase of the nickel price and raw material prices in Q4, in some extent, revaluated the cost of our products, the cost of our working process, the cost of our raw materials and the cost of our finished goods. So we have benefited from this increase of price, nickel prices especially, because we have been able to increase the final price before we have the effect of the cost increase. But I think it is not conservative, it is challenging. If we can reach this number, I think it's going to be very positive. So I don't fall in the dentation of multiplying times 4, what happened in the last quarter because it is -- still the world is very uncertain. And still, the volatility is very high, and we cannot promise and then under-deliver later. I think that we prefer to try to be realistic.

Okay. Understood. So within that, just on the inventory adjustment of the negative EUR 14 million. Do you expect some of this to repeat in Q1? Or do you feel that you're in a better position to pass-through raw material costs? I'm just trying to understand how that is going to progress during the year and especially in Q1, based on the order book you have today.

Yes. When it was analyzed, Slide #5, in these lights, traffic lights that we just tried to remark, which are the positive facts and which are the negative facts. The strong nickel price came with red and with a green and this is, obviously, as a consequence, that there are some markets. Our main market, which is the stainless in the states, is the market in which the extra alloy is working properly and the pass-through is going okay. And this also means some acceleration, even a reactivation of the orders. So this is positive for certain markets. But in the markets will still -- the prices are historically low and still a bit crazy, which mostly is Europe. We must understand that still this increase in the nickel price for being able in fully trespassing to the customers, still, we shall need time. So consequence, the inventory adjustment that has been taking place in the year-end is as a consequence of this. So we can -- we do not make a global mass of inventories. It's clear that most of our business is highly profitable in the states, but still mostly in Europe, our margins are in stainless. The margins are very, very low. And we need to recover from this historically low levels of base price that we have been achieving, and this affects mostly Acerinox Europa as well as Columbus. And also, as we said before, the prices in Asia have been affected by the massive output, mostly coming from China and Indonesia, not in line with the correction in demand. So still, the margins are very low in certain areas. And as a consequence, we have made such inventory adjustment, correction of EUR 14 million at the year-end. Having said that, as has been previously stated, in the order books. Now we see that the situation mostly in Europe is improving gradually and probably for the end of the first quarter shall not be needed any further adjustment. We are well covered for the first quarter with that. And at this time, we don't think it's going to be necessary for the end of the first quarter any further adjustment more. I think we are there. And consequently, we do not expect it to take place.

That's very clear. And just a second question on cost reduction. It's a very good performance during 2020 across personnel and operating costs. How should we think about some potential reversal in cost trends during 2021 as demand and volumes recover?

As we have said before, the big success on the year 2020 has been variablized at the most the fixed cost and then making it variable, makes that we are very, very flexible to be protected when the market goes down. But obviously, a increase in the output, a increase in the volumes should have also its effect. So certain on the improvements and part, obviously, of our cost reduction plan and the excellent EUR 360 million is coming there, but we must be flexible to understand that operating costs related to output as much as we are now seeing much more better improvement. We shall be optimizing production, as has been stated in South Africa with a new carbon steel, which allows us obviously, to be flexible switching, but taking advantage for a high plant running covering both sectors. We are with high capacity utilization as has been stated in the states and the recovery also in Europe. We must assume that part of this being variable costs shall be in line with the improvements in the market, but definitely contributing to improved margins.

Our next question comes from Carsten Riek of Crédit Suisse.

Also 2 questions from my side. One is, again, on South Africa and the currency production range. Just trying to understand why you established it now. Is the reason for it that you switched prematerial delivery from Bahru away from Columbus and towards Asia? And how does it actually again, fit to the South African market, which seems to be oversupplied, as we can see by the closure of some of the capacity by carbon steel peers. That's the first one.

Thank you, Carsten. You're right. You're right. Now Bahru stainless is mainly buying in the area. Trying to get advantage of the competitive prices in -- especially in Indonesia, but also in China. And we have been developing more activities, some more profitable activities for Columbus, and we saw the opportunity and we started substituting the deliveries to Bahru Stainless from developing this carbon steel grades. The carbon steel market in South Africa today is not oversupplied. I think there's a level of equilibrium in the market after the closure of some of the carbon steel plants. So the situation is good and understand that the level of production of a stainless steel mill compared with the level of production of blast furnace, a big blast furnace in carbonate steel is negligible. I mean, so we are not going to be a strong competitor of the carbon steel guys. No, we are just trying to find our room in a small niche of the market, small for carbon steel, but sufficient and very interesting for us.

Perfect. Thanks, Bernardo. The second question I have is on stainless steel imports. How do you see the imports developing into Europe, in particular, at the moment, given that the stainless steel price difference between Asia and your main markets, U.S. but especially Europe are at the highest level over the past 7, 8 years, at least the data I get from data providers.

There's many things to consider -- sorry, many things to consider in imports, in EU. I want to understand you know we reached a low level of prices in -- by the month of September, October, that was now interesting for the Asian mills to come to Europe. But also, of course, we have the cost of the freight, the -- the cost of containers coming to Europe and the lack of containers coming to Europe. So of course, this has helped to reduce imports. In 2019, imports in Europe were at the level of 29%. We have finished the year with an estimate from a -- fair enough estimate of around a 22% to 24% of imports. But in last quarter, in quarter 4, imports were at the level of 19%. This is a more reasonable figure. How imports can develop in the future? This is difficult to analyze. First of all, we have the safeguard measure. And I know that we have always complained that the safeguard measures didn't go because were designed for a growing market and not for a decreasing market. But now the market is growing again. So we will see if safeguard measures are going to work now or not. There's also another new effect that is the apparently -- or previously, it was decided that the safeguard measures will finish at the end of June this year. But now the European Union has accepted to review the extension of safeguard measures. As far as the Section 232 is still existing in the United States. So we will not know how the situation is going to be. Another interesting factor has been the antidumping that has been already confirmed in Europe in hot-rolled material against Indonesia, against China and against Taiwan. And this is very important, not only because of the imports of hot-rolled material for finished goods for vessels for the heavy industry, but also because some of the European rerollers used to buy from these sources, and we are putting these lower prices of raw materials into the market in cold-rolled way. So they have been pushing down prices in cold-rolled as well. And with the new situation, with this antidumping, this European rollers are now buying locally, and that is helping us also to moderate the level of prices in Europe. And also, you know that the European Union has accepted another antidumping case against India and Indonesia in this case for cold-rolled material. And I think that with all these elements, if you put everything together and you mix it, I expect to have better conditions in the European market or at least, not such a tough condition as we have been facing in the last years. I think that also with Asian markets going up, Asian markets improving. And as you have -- as you can see with the Chinese export that has been -- has gone down last year. So -- and this is because the Chinese economy was performing better than the others. We see that India is also recovering. We see some recovery in the Far East. I'm -- I think, and as I already mentioned, maybe it's not -- it's a hope, and it's not a real thinking, not -- but I think that in 2021, we will see better business conditions in Europe.

Our next question comes from Luke Nelson of JPMorgan.

First one was just on underlying cash flow, which in Q4, actually looks a little bit weak, and it looks like in the other line, which I think relates to potentially derivative losses or hedging on derivative losses. Can you maybe just explain the nature of these hedges, sort of how long they remain active at the underlying sort of level, I'm guessing it relates to nickel or the breakeven? Is there just a bit more information on that is useful. That's my first question.

Well, the -- as you know, the derivatives on the nickel is not a business line in our business. It's just a protection, obviously, of the margins for entering in contracts, especially in the case of VDM for entering in the long-term contracts according to the nature of the product. What this creates is that in a time in which that has been fixed and the nickel goes up, the mark-to-market of such derivatives that already are there definitely have its effect. And consequently, they appear as has been the case, mostly in the second semester. But as I said before, what we tried there is just to be covered and to be covering our margins for taking orders for the long term. The mark-to-market effect has been there in a time of a nickel going up. We think probably, this shall be less appreciated in the coming years, as probably most of the derivatives regarding of nickel shall be treated as accounting coverages and the fluctuations in the mark-to-market shall be probably going through equities and results and not so appreciated in the P&L, but this shall be starting working from the first of January. As I said, before this is not a business line, this is just a protection for covering the margins in our division. And consequently, this is something that is not taking place, as you can imagine, when we made a forecast of budgets. What we want is to be protected, especially in the case that our main raw material goes up, and we have get entered in long-term contracts with certain customers. But it's there, it has had a positive contribution in the year-end on 2020. But it's not something that recurrently, we must consider that shall be taking place.

Okay. So just to confirm, from a cash flow point of view, going forward, say for -- if there are any inventory revaluation effects similar to what was in VDM, we should expect that they will -- there will be a wash in the operating cash flow line, just given the hedges that are in place, the contracts that are in place.

No, it's not a cash effect. Let me say it this way. It appears -- when it appears in our cash flow, what will reflect is that it's certain adjustments of the figures that we are bringing on the profit side, but it's a noncash effect.

Okay. And then second question is just on Columbus and Bahru. Is it possible to give an indication of where their profitability was at an EBITDA level in Q4?

As has been stated before by Bernardo, we are running actually a high level of output, most of the plants where we are accommodating the output of the plant to the actual market circumstances is in the case of Bahru. And consequently, our target for Bahru, assuming that it's not massively using it's capacity is creating positive EBITDA and nondestroying cash. So on this basis, we are keeping a prudent rate utilization of Bahru when we establish that our target is create positive EBITDA. You can understand that we are not talking about the massive contribution. But it's just getting certain that it's always in positive EBITDA. So it's not a huge contribution. What's relevant is that we are able, even though in that circumstances of the market in the Southeast Asian area for keeping positive EBITDA and for nondestroying cash. And as much as the market allows us to be running at other ratios, we should be there as much as it's clear that it shall have a positive contribution. So in these ways, I think the Acerinox Group has a strong balance sheet and strong enough for being Bahru -- running Bahru with a certainty that Bahru provides and adds in both EBITDA and in cash flow. So as has been stated by our Chairman and by our CEO, recurrently, we'll review all the assets of the group. And at the end, more or less, what we have a clear picture is that there is no asset that can be more or less deducting profits from the rest of the group. As much as the assets provide positive EBITDA, it's fine, and we understand the circumstances, and we can be patient for waiting of a proper recovery. The plant of Bahru is fully efficient, the equipments are absolutely remarkable in the state of the art but it's true that the margins in the area still are depressed.

Sorry. And on Columbus, what was the sort of contribution in Q4, sort of low single-digit and sort of a bit more on what their contribution was, if you can.

I'm sorry, Luke, but you know that we never provide the split of our companies -- of the group companies in our numbers.

Our next question comes from Krishan Agarwal of Citi.

Can you hear me?

Yes.

Most of the questions are being answered. Just a quick follow-up on cash allocation. So I mean, debt reduction was very strong in 2020. And if I were to look at the consensus numbers, you probably -- it's moving towards a onetime net debt-to-EBITDA in the next 12 to 18 months. Last time you were there in 2018, you did a small buyback of around EUR 50 million. Is that a line of thinking as well this time once you reach to that net debt-to-EBITDA level or is there any kind of a different metric you would consider as far as the cash returns are concerned?

Krishan, thank you for your question. I think this is part of the -- as we mentioned, the clever capital allocation as we'll try to increase our cash flow through a higher EBITDA. And then we will play, we will adapt the working capital to our necessities. And of course, we will need CapEx. And we have to, of course, to invest in the modernization of our technologies. And also we are investing in the digital transformation. And the idea is that the excess of cash that we generate under this situation. And once we are in the comfortable side of debt. That is -- you know that we are, as promised, below 2x the excess of cash that we generate in the better business condition. It is clear that we'll go to dividends and also buybacks of shares as we promised when we approve our program that is still in place. That -- and we did it for the first time in 2018. And we promised that the excess of cash will be to reduce the number of shares in the market trying to -- with the target to go back to the situation previous, so we have started to do the split dividend. This is the idea. This is what we approved in the annual shareholder meeting, and this is still our target. This is still in place.

And a quick follow-up. Can you also update on the guidance for the CapEx for 2021?

The idea is that we are going to keep it at the same level than in 2020, around the EUR 100 million.

Our next question comes from Francisco Rodríguez of Banco de Sabadell.

I have 2 questions, please. The first one will be related to the situation of prices. I don't know if you could talk about base prices in Europe. What's the current situation and what -- I mean, what's the performance you're seeing during the quarter? And the second one would be linked to Bahru and any -- you could give us any comment on any strategic opportunities you can see -- you can foresee for that asset in the near future.

Thank you for the question. You know that this day is very -- it's difficult to speak about prices. So I will just give you some indications, not a -- of course, in United States, we made it public. So I can tell you that we have increased prices since January. And we are continuously monitoring it. We have more opportunities, but the difference in price between United States and the Asian countries is, I think, it's in the level that we will not go further if prices in Asia doesn't move. But we expect some price increase in Asia as well. In the case of the EU during quarter 4, we have been just following the raw material prices. And I can tell you that in first quarter, we are starting to gain some more margins. So, no. So the price increase is going faster than the raw material increase. So we are increasing -- we are improving our margins. In the case of Bahru Stainless, I think that Miguel explained perfectly the situation. Of course, we are continuously reviewing all the assets of the group. And in the case of Bahru Stainless, we have been asked many times. This is also true. We are changing or readapting our strategy in Bahru Stainless, and this is mainly because we have the skills and the experience now to do it. In our business, still, we can say that Bahru Stainless is a new plant. And now we know how to increase the added value to our business. So as it is difficult to compete against the Indonesian mills or -- you can say, since Jan, we are doing something clever, that is that we are buying commodity stainless steel in Indonesia. But a cold-rolling in Malaysia to get products that the Indonesian and most of the Chinese mills cannot do because -- can't make because they don't have the skills. They don't have the experience and they never focus on high added value products. And this is what we have done in Malaysia. We have reduced the level of production, but we are mainly focusing on high added value products. Sometimes it's high added value because of the thin gauges. It's a very thin material that cannot be produced in Indonesia or some other times, it's a very thick, cold-rolled material, they also do not make in Indonesia. Sometimes it's because of the bright finish, or it is because the good finish or it is because the good quality, or it is because of the high mechanical properties. But we are now focusing on each of the market with less competition, with higher added value. And the idea is that now that we are comfortable in this niche, we will increase the deliveries to the customers that -- today's customers and, of course, increase the number of customers with more or less the same situation or the same necessities. So today, Bahru Stainless is not a problem. So it's in sale, everything is in sale. As you can sell everything, depending on the price, but we are not going to give Bahru Stainless for free. Our target is to make Bahru Stainless profitable, and we are on the way to do it.

Our next question comes from Robert Jackson of Banco Santander.

Bernardo and Miguel, question is on NAS. Considering the new opportunities in the U.S. market because of the closure of one of your peers, do you need to invest in NAS to increase the mill capacity? And will you be considering also increasing your distribution networks to be able to take further advantage of those opportunities? You have a mill capacity of [ 1.4 ] book face value, would you be increasing that through investments, or is that not required? The other question also in NAS. Could you give us regarding the bright Allegheny production? Are you at full capacity there? Is that -- was that -- and were you full capacity in the fourth quarter?

Robert, let's start with Allegheny. This plant is producing at the level of 200,000 tonnes per year. And of course, that will improve market conditions in the United States, but it's a quantity that can be easily produced by the 3 remaining players. So I think there's enough production locally for the American market, most of the plant has been working at 100% capacity. So with the closure of Allegheny -- of this section of Allegheny, that will benefit, of course, the 3 of us. But it would not be a real big change in the American market. What is interesting is that if we don't expect that the American administration will remove the Section 232, but maybe we have to be ready to some negotiations, some this between the traditional partners -- some traditional business partners. And I'm speaking about Japan or Europe or some other areas. So if that happens, the release of the -- partially release of the Section 232 will be compensated with the lack of this production in Allegheny. So the situation will be in good shape, but a reasonable good shape, not with enough material to source the American market. And this situation, how we're considering to increase capacity. You know perfectly that we are always trying to find bottlenecks in our business and trying to debate net. This is the traditional way of running the plants in Acerinox. And we are always doing that. The BA line was a new investment, but mainly to supply a new product to the market, new product for NAS in the market, but also to fill the capacity of the melting shop. And this is what we are still doing. So we don't need more investments, but we are continuously looking for improvements. And we are continuously looking for improvements in many ways, a small investment to debottleneck certain areas, but also increase our efficiency. The more efficient than we are, the more material that we have to deliver to the market. So we are busy with this. Regarding to the commercial network, I think that we have a very good commercial network. We have our plant that is located in less than 1 day, we can supply to 80% of the American market. We have the perfect location. So we have our service centers to support the plant and support our customers. And we have the best base of loyal customers in the American market. And I mean, loyal because NAS is clearly the leader in the American market in terms of volume, but NAS is clearly the leader of the American market in terms of quality, in terms of reliability. And it is clear that the preferred supplier of stainless steel in America. So we have the best loyal network -- commercial network in America, and we don't need to invest in more. Regarding BA production, as we mentioned in previous presentations, we have been very lucky. You have to work hard, but it's also good to be lucky. And in the case of NAS, we decided to put the BA line in the best moment when the Section 232 has started. So most of the American users of BA materials, of raw material, started to make trials with NAS today. We are almost fully booked in the BA line. I mean, almost fully booked because we have a certain percentage of the line that is -- this producing other materials, that is Polish materials, some special Polish materials. But all the appliances makers in America are now working with NAS, of course, all the American. And we are now making shares with the rest of the market. So we are very happy with the development of the BA business in America.

Next question comes from Bastian Synagowitz of Deutsche Bank.

Just a quick one from my side, actually. And just one last question. So on the VDM transaction, I remember, I think one of your aim was to also cross-sell some standard stainless steel grades into the project business into which VDM is more involved. And I guess, last year, one of the problems was that particularly the large projects were impacted by the COVID situation. Could you maybe just share with us how far you've been able to integrate the sales teams and whether you've had any, say, success cases of cross-selling standard material into these projects already at this early stage of integration?

Bastian, believe it or not, but the integration process of VDM is going on time and on target. Even under these difficult circumstances, and with a lot of video conferences, a lot of remote working, but we are happy with the integration of VDM. Probably this is because everybody, all the people in VDM and also in Acerinox are willing to be integrated. So we have the support of all the teams that are excited with this new situation because I think that VDM is the best -- the investment for Acerinox to diversify products and to go to this high added value on projects business. And I think that clearly Acerinox the preferred owner for VDM. They wanted to belong to the Acerinox Group to -- and a strong industrial group. So the integration process is running extremely well. We are on target and on time. And the challenges are coming mainly for this year, but we have already started to see some good sign. So we have a very a very intense commercial network in more than 50 countries in the stainless steel side. And completed -- and with the complementary commercial net growth of VDM, we are supplying. Now we have presence in more than 60 countries, and we are supplying more than 90 countries. That means that we together are better, are complementary. And we have started to see -- we have started to sell stainless steel to the traditional VDM customers. And we have started to sell high-performance alloys to the traditional stainless steel customers. So we have already started to experience the advantages of this operation.

Our next question comes from José Nasa Canovas of JB Capital.

Basically one regarding the revision by the European Commission of antidumping of cold-rolled imports, coming from China and Taiwan. If you could please give us an update on this. What should we expect in terms of timing and potential outcome? And why is it taking so long?

José, there's nothing new on this. Just the 5 years antidumping against China and Taiwan, this is in the process to be reviewed. Good news that the commission accepted to review this antidumping and they are following the normal process. You know that one of the characteristic of the EU is not their fast taking decision. I think that we all have to be patient with the commission. They have to follow their rules, and they have to discuss everything between all the member states. But they are following the normal procedures. So this is -- nothing has changed on this. So we are happy to see that they are reviewing the antidumping process, and we expect a good decision.

Our next question comes from Inigo Egusquiza of Kepler.

Rafael, Bernardo, Miguel and Carlos. Most of them have been already answered, but I just have a quick one on the shareholder structure of the company on Nippon Steel, which controls a 16% stake in the company. They decided to leave the Board. Back in, I think it was summer 2020. I don't know if you can share with us any thoughts on potential outcome on this stake controlled by Nippon Steel? And in addition to this, the other question that I have is whether there would be a possibility that in case this stake comes to the market if Acerinox could use part of the buyback program this 8% to participate in the potential sales if it comes to the market.

Well, what we can tell you is what is known by the market. As you know, the traditional shareholder of Acerinox during the last 50 years has been in Nisshin. Nisshin still has been acquired 2 years ago, I think, by Nippon Steel. Nippon Steel has a completely different policy for its minority interest in companies. And well, they let know -- they give us the information that according with this policy, they are not prepared to remain in the Boards where they do not have a majority of the companies. All that was disclosure, clearly to the market. And also, what we must tell you clearly, is that they have stated that they will remain as shareholders of the company by -- in the future as a financial position for them. According with our conversations with them, we maintain very good relationships with them. Fortunately, for us, anything has been decided about their stake. And in any case, if they decide sometimes something about this stake, they will know us in advance. And this is what we can't tell you in relation with this question. The second question. Well, this is to anticipate very much what could be this situation. We must just study this possibility in the moment where they decide if they decide because this is not the case in this moment. But as Miguel said, fortunately, once we achieve the ratio of EBITDA to -- net debt-to-EBITDA of 1.2, we are prepared to relaunch our buyback program. And we will see in this moment.

Our next question comes from Tristan Gresser of Exane BNP.

Just one question on working capital, a strong performance in Q4. And I think it seems when you discuss debt and leverage before, you mentioned that you were expecting some distortion on working capital due to raw material. Can you give us some color on what you expect for Q1 and maybe general expectations for the full year?

Well, the fact of, as you know, in terms of working capital, we are very, very sensible to the changes in the market. So this means that we must see in our recovery in the market, but as previously stated, is taking place probably gradually during the quarter but more constituted at the end of the quarter. We must be prepared for assume that this should mean certain increase in the working capital. So as much as we are running actively most of our plants, we have instated a good situation in the states and the improvements in Europe and Columbus. This should mean, obviously, running more material on process. And also see how more or less our invoice material goes gradually up. So the working capital is very, very sensitive to the times in which the market changes. And consequently, this is something that should take place for the stainless, probably in the first quarter. So it should not be strange that the working capital should go up and then stabilizing. But we must be prepared, as we have said, that in a good market time, as a consequence of the market improvements, the working capital goes up. But this, for us, is not a problem. On the contrary, we are willing to enter in these times in which we are full order book. We are increasing our sales and the prices are going up and consequently, this is part of the working capital that we need to finance. The normal issue should be some gradual effect and distortions in the quarter. And we hope that for the year-end, the figure should not be huge, but we must be assuming that this is coming this year.

All right. That's really helpful. And just in Q1, when we look at size, and look at the release in Q4. Is it something of that magnitude? Or should we look maybe higher?

No, no, it should be lower than the change during in the fourth quarter.

All right.

Sorry, different sign, but lower. So not in the same proportion.

Yes. And just last question for me. You closed the books of 2020. Can you let us know maybe what is your current position regarding carbon cost in Europe? I know the policy is much upping gear at the moment. But if you can discuss a bit for the next trading phase in terms of shortfall inventory OpEx inflation? Anything you can share that would be helpful.

It's not clear. It was going to happen with the carbon -- the carbon business, but still, we have 3 allocations for our production. So this is something that is not going to us yet. And because we have the free allocations, and we have more allocations for -- free allocations for the next minimum 5 years. But of course, we are following with a lot of interest in this process because we are also trying to convince the EU that it is okay. So we have to be carbon neutral in 2050 as we promised and as we agreed. But this is an extra cost for the European steel industry. So they must realize that competition from other countries not following the environmental rules and policies of the EU, it's going to be a disadvantage for the European producers. So it's interesting. It's something that we are following very, very closely. We will be always ready to explain you what is happening in this case.

We have no further questions on the phone line. So I'll hand back.

There is one final question from the website. This is coming from [indiscernible] of Wood Mackenzie. Given your intention to move towards carbon neutrality and your emphasis on the uses of stainless steel scrap, is there a general intent to increase your reduce of scrap in a stainless melting in the years ahead as part of that ESG plan.

Thank you for your questions. So we are always trying to increase the percentage of scrap in our productions. Basically, as we used to say, we are a recycling company because we are recycling more than 90% of the products in our melting shop. And this is interesting because there's like 2 business models in stainless steel in the world. One is in the traditional countries that we have a model based on stainless steel scrap. And there's another one now in the Asian countries, especially in China and in Indonesia, they are merging nickel pig iron and starting in blast furnaces. So I wanted to mention this because in the stainless steel will not happen with the threaten that the carbon steel makers have. That is the lack of scrap. We have enough stainless steel scrap in Europe and United States. And of course, we will try to increase the scrap in our melting shop as much as we can because it's the cheaper source of nickel and chromium that we can find in the market. So this is our target. But will not happen what can happen in the carbon steel business. That is as some of the blast furnace producers are trying to move to electric furnaces in order to reduce the CO2 emissions, there will be more people trying to use stainless scrap, carbon steel scrap or mild steel scrap. And that will lead to maybe some tensions in the mild stainless steel scrap business. This is not our case. There's enough stainless steel scrap for all the producers in Europe and in United States, we will try to increase as much as possible the percentage of scrap as the cheapest source of nickel. We have been always proud to say that we are very intense in the use of stainless steel scrap, probably the #1 in the world. And we will keep on doing this because this gives us more competitiveness than other sources of raw materials.

Well, this has been everything from our side. Thank you very much again for participating in this call. Thank you very much to all of the speakers as well. Just to remind you that the first quarter 2021 results will be released on May 11. Thank you very much again.