Aperam S.A. (APAM) Earnings Call Transcript & Summary

Yes. Good afternoon. welcome to the Appen Capital Markets Day 2022 live here in Dusseldorf and on the webcast. Thanks very much for joining. Please take note of the disclaimer and the forward-looking statements . And the agenda is quite effective this afternoon. We'll have Tim, our CEO, kicking it off with a brief introduction, and then Manish will follow up with the 2025 strategy that we presented to you so we'll get an update. And then we continue the series of in-depth looking at our segments after doing SME Europe last year and also the alloys business. This year, we'll take a look at the recycling and renewables business and also our distribution segment, SNS. Sud our CFO, will then wrap it up with the finance and outlook, and then we'll all turn to a joint Q&A with all presenters. So you have a lot of time to ask all the questions that are on your mind. So I'll now hand to Tim Di Maulo, our CEO.

Thank you. Welcome. So I'm very happy to see a lot of you. I hope that the fact that we are in a very strange moment for the world will not distract us too much from what is the sense of the Capital Market Day. The sense of the Capital Market Day, as you know, is to give you the view of where this industry, where this company is going, what is our strategy, how we are continuing to perform. Remember that we have shown you already last year our performance over the last 10 years, which were according to the trust, you give us extremely interesting. We have a strategy, which have been based during the last 10 years on the leadership journey and will continue to be based on leadership journey. Now we are at the moment we have, from one side, to continue riding the cycle, which is something which is -- we have used in this kind of segment of commodities. I have only 35 years in the stainless steel business, and I counted 11 cycles. So I know that this time has a completely different aspect. You don't expect the cycle at that moment, not in the downside, but even in upside, nobody was expecting after 2020, 2021 or who was expecting was really good. So we have to managed this, yes. And evidently, some part of the discussion will be around this. But let's look also at the sense of the Capital Markets Day is to give you the real understanding of the company, which is transforming. It is in a phase of transformation, which is much more in the new economy, which is the circular economy and not a simple stainless steel producer. So you will have the opportunity to see this with your eyes tomorrow. I'm very happy that this is have been possible. Maybe in the future, we will be even be able to see something more like what we do in Brazil, like top for that. And I will start immediately with the -- with 1 slide, which introduced a little bit the key topics of the short term and the long term. You clearly have in mind what is happening in energy in availability of energy in Europe, okay? This is a clear challenge on the short term and also the level of imports has been high in the first 6 months of the year. But then the company has on the opposite, progressed a lot on leadership joinery, progressed a lot in the strengthening and in the performance of the Brazil and alloys and in the clear outstanding units of let's say, even today in the short term, are supporting a lot the company. And we have a completely, but completely different framework of trade defense in Europe compared to the last low cycle, which has been, as many of you remember, has been 2019. When all of a sudden the 232 in 2018. And then Indonesia was there without any market and with only 1 market which was Europe with the capacity representing roughly 60% of the European capacity. This is the short term. In long term, we will continue to have the strength our competitiveness. Leadership Journey is our trademark and will continue to be the base of we look at, and we will be very transparent and very clear with you, the company's focus in continuously improving this performance. We have a very big challenge for all the industry, which is the Zero Carbon. It is all the part of the carbonization is all the part of sustainability of this industry. And here comes the reason where you are here. We want to show you how we are focusing into the the circular economy, Aperam will is today a actor the circular economy. I've said already, on the opportunity of growth of the market because the -- what will happen, and I will explain in a few minutes is a big opportunity to grow for stainless steel and then the trade defense, which will remain. Now if you look at what is happening. What has happened also this summer, which have had a lot of, let's say, dry season, hot season flows in some country, et cetra. It is clear that we cannot say where we are in terms of the use of the resources of the planet. And the circular economy is becoming a central subject for all the industry, but not only for the industry, also for consumer, for government. What is a circular economy? It's based on 3 principles. Principle 1 is to eliminate waste and pollution, 2 is circulate products and material and third, regenerate the nature. You can see a few sentence here, which have the base of the problem. The base of the problem is that we are in an area, we are leading in area where the pollution is growing or it is above the normal level in which we should leave. 99% of people are living there. We are in the consumption of products which lead to 400 million tonnes of plastic, which are wasted every year. And also, this plastic are not recycled. Figures can range. Some people will say 2%, some people 5% et cetera, but it is a minimum part of the recyclability. And 99% -- this is something that I find extremely interesting, 99% of what we are is mine and process and transport will be wasted in the 6 months. This is the wolrd in which we have. And as a consequence, we have a big burden that is the biodiversity, which is reducing due to this part of extraction and the consumption of natural resources. At the point that, and this is something that for me is a pity, coffee could disappear in 2080, for an Italian is a real drama, even if I will not be there, probably, but fish by 2048. We have put this only to attract your attention on something which is extremely important, and we'll focus this industry in the future. Now why stainless steel has an opportunity and is a material which is there for that reason. You know perfectly that stainless steel has long life. And it's never wasted. 100% of stainless steel there and can you continue to recycle it anytime you want. You have a product which has a handles property, all that kind of good that are in in whatever, lose their properties during the usage. Stainless steel do not. As my thoughts since my marriage in '96, and is still the Stainless steel still perfectly working and there is no problem. You have the same experience, I suppose. Stainless steel is forever. And on top, at Aperam, what I will show you is that the circular economy is not only products, it's also the way you do these products. And the way we do with these products is by using the nature to extract from the atmosphere carbon. And this year will be the speech of my colleague on Nabi Energia and recycling everything you can in a context of the [indiscernible]. So ESG in Global part of the principle of Aperam. And to be concrete, it is not only carbon is a sustainability in every aspect of the life, including safety people, including general diversity, water. All these are in KPIs in which we have a clear engagement. You know these are public figures for which we have engaged. We can tell you about all the certification. Now we can do this transparently, et cetera. But the real point is of this Capital Markets Day is to be sure that you understand that it is not pretending, it's doing. It's doing in the fact that our objectives are there. And what we will show you is there to show that we are going on. Now this circular economy this attention to environment is it only a burden for stainless steel or not. And this is the question that I want to answer this slide on the following one. Stainless steel is a product which has property to solve the energy transition. The energy transition is that you go from 1 slide like this and you see on the left. The source of energy, most of this is [indiscernible] energy, so carbonated energy to the different industry to the new of having energy, which are high new labels. You will see in the following presentation, how this transition open opportunities in real, let's say, target for us, just I wanted to give you an example, which is in the transition period and the use of the energy, you will have liquid gas, which became a transitory period for the hydrogen. On this, we have forecasted all the growth of our alloys segment. Remember, we have already presented you last year that the alloy segment will double compared to the actual because from the point of view of the new energy and also for the use of the new energy or the electrical applications that are linked to the alloys. This will open a tremendous opportunity, which will capture. Now what will be Aperam and what is our engagement? What we want you to understand is how we go for a more profitable, more cash generative and stable company. The 3 concepts are important and especially in this moment where you see so much, let's say, disturbance coming from the external environment. This slide is not new. It was there last year, but it is logic to go back because this is our clear engagement for 2025. Leadership Journey is a program in which we'll be able to deliver in excess of EUR 300 million EBITDA compared to the standard level, which we say is 2016, 2018. So in 2025, you take the standard level, which we have had in the average '16, '18, you will not have EUR 300 million. And this is not a -- it is something concrete in the sense that it is based on our footprint on the growth of alloy in the ELG in the mix, in the distribution growth, everything that you will see. Finally, a more stable company, a growing company, is also a company which is derisking and taking care of the fact that the activity in which expands the activity, which are, let's say, focused in the full strategy. I told you, we want to be an actor of a circular economy. And you will see what will be the change in the mix of revenue of EBITDA from 2016, '18 to 2025, with a decrease share of Europe, which is the Europe producing stainless steel to the profit of a new segment, which we have here, it is the green one, it is renewable and and renewables to alloys, which become much bigger to Brazil, which is 1 of the fundamentals of the pillar of the company, but it has a strong potential to grow and especially from [ '22 for on. ] In Services & Solutions, they are a big, let's say, you will be [indiscernible] to telling you when you will see what we have been able to do in our hand side tomorrow. Now I give the word to Vanisha, which will go to the strategy. And thank you for your audience.

Thank you, Tim. Good afternoon, and a warm welcome. I'm Vanisha Mittal Bhatia, Aperam's Chief Strategy Officer. Today, I will share Aperam's strategic vision, focusing on Aperam's differentiated yet integrated value plan, our leadership journey, earnings growth plan and energy focused. Aperam has a much broader value chain compared to the traditional European stainless steel business models. Aperam has 4 verticals and together, they create value and bring resilience to our business as they have a different role to play during a cycle. From owning our own recycling to producing 3 distinct product groups: stainless steel electrical steel, nickel alloys to then also distributing a major part of our products. Aperam is truly an integrated value and supply chain business. Let me mention each one briefly. Recycling & Renewable is a new vertical we have created and is a cornerstone of the circular economy. ELG is a top stainless scrap recycler globally with locations in Europe, U.S. and Asia. ELG is strategically positioned to growing recycling streams in our industry and bringing synergies, efficiency to Aperam. You'll hear more about this from Tim. Bioenergia is the global leader in Charcoal. It is benchmark in this industry, as Fred will explain later. This is helping us become CO2-neutral and cost competitive as Charcoal has a much better cost position than Metcoke. Aperam has the state of art production facilities with different geographical exposures. In the heart of Europe, our European stainless mill in Genk has the most modern rolling mill. Our operations in Brazil, not only is cost competitive and low in its CO2 footprint, but also makes multiproducts that deliver strong results in every phase of the cycle. Alloys and specialties is unique because it has the capability to produce some of the most complex and sought-after materials and is providing solutions for many of the energy position industries. Last year, at the Capital Market, we showed how the footprint change in Europe benefits the growth of our alloys business. And you just heard Tim talk about that. Also, Nicolas will explain how the interaction between our European stainless division and our distribution activities creates growth potential that less integrated players cannot realize. An example competitive advantage is our service center in Henk that Tim just mentioned, which you will see tomorrow. It uses the latest technology to become the most cost competitive service center in Europe and has the ability to reach new end user segments Aperam could not have access to before. You may remember the leadership journey started 11 -- you may remember the leadership journey started 11 years ago. It was and still is 1 of the pillars of our comprehensive improvement plan for success going forward. Key aspects cost reduction, equipment and mix improvement, Aperam is constantly upgrading assets to enhance productivity and cost efficiency as well as produce higher product mix and quality. Since its inception, Aperam has realized gains of more than EUR 800 million, having completed Phase 1, 2 and 3. The ongoing Phase IV is making very good progress towards reaching the additional target of $150 million. Many of our ongoing projects will provide tangible results by and 2024. With the newest acquisition of ELG, Aperam reinforces our raw material and circular economy strategy, not only for an improved CO2 footprint, but also for leapfrogging on many areas of our recycling model. Now as we go through our lead plan for 2025. We will be focused on decarbonization as earnings growth through investments in assets and capabilities as well as in the development of innovative products. Of course, we will focus on energy efficiency. Some highlights of our Phase IV. In Europe, the gain rolling mills have been completed, but we continue to invest in several other additional upgrades and also some reduction of less competitive tools. The Chatelet hot rolling mill and AOD will both be completed next year, and we will allow us to produce new grades on non-commodity material at lower costs. In Brazil, we have completed the upgrade of our electrical steel offering, and we are now able to produce higher quality material that carries a premium. The hot rolling mill upgrade that will be completed in 2024 will then allow us to supply wider coils to the market, improving the mix and being able to cater for new applications. The future is bringing incredible opportunities to all our product lines. New applications in much more specialized sectors will open up a new range of product mix for us. We are investing in our megatrend strategy, strengthening our capabilities to produce new products needed by the transition industries, thus putting innovation in the heart of our vision. Electrical steel is an essential material for multiple applications, especially for the evolving sustainable solutions in the electrified world. It is required in large quantities for electrical motors up to 100 kilos per unit. Even for wind and power, other renewable solutions largely quantities are needed. This is a material that is linked to the of the technology in many industries. And it has -- it is a high-end margin business with a strong growth environment. Stainless steel has many characteristics which make it very interesting. One is it's noncorrosive property, it has a long life under extreme conditions. Another characteristic is it's more fire and acid resistant than other metals, making it a safer choice for battery stacks. Solar, fuel cells and heat exchangers. There are many more applications within the new transition industries and further to be developed in the coming years. Not to forget, Alloys & Solutions is highly specialized on added value products to specific applications on we have invested in flat rolling capacity, putting Aperam in a position to have growth streams as we could not previously have. So 50% of our energy consumption is coming from carbon-neutral energy sources, but the rest are shown on this slide. More recently, due to the energy crisis in Europe, Aperam is working on mitigation actions. Firstly, by trying to reach our CO2 targets while also completely supporting our sustainability footprint for the future, our long- and short-term goals are aligned. For example, in the new rolling mill in Genk, we see a noticeably positive impact of our energy saving with an improvement of 30% to 40%. Similar results are expected in Chatelet, Brazil and alloys. As we upgrade our tools, we will see further improvement. We are certain that the more energy optimization opportunities. So we are targeting a 10% further reduction on total energy consumption in Europe. Furthermore, having electric arc furnace as a production base means use it during nonpeak hours. We have both spot and longterm contracts in France and Belgium, and are actively looking to increase our renewable mix. And we are also comfortable to reach our CO2 targets before time. And of course, we are part of exploring to participate and new opportunities in renewable energy projects going forward. On natural gas, a short-term solution may not be possible, but we are looking to substitute gases. Currently, there is a cost limiting factor to convert all our processes into electrification. But in time, we will also hope to do so. With the ELG acquisition, we are aiming to improve our scrap mix for better yield and lower energy consumption, which will allow us to provide new products with 100% recycled scrap. One source of CO2 in our process, which is not replaceable is electrodes. But the good news is Aperam has secured sequestration via our growing Bioenergia. And this can help us reach 0 target. Sorry. Okay. We have encountered many cycles in the last years, and Aperam has been resilient throughout those cycles. And in the future, we expect cycles to continue. Today, we face high energy prices in Europe and also high import levels compared to previous years. There is high inflation and recessionary risks. Since the last low cycle, however, Aperam is more resilient due to stronger trade defense and our own improvement actions. We have a stronger asset base and better value margin products. We also now have ELG as part of the business. We are very confident in our strategic vision, having the dynamic ability to adapt to any situation and become the most sustainable safe low CO2 footprint and profitable stainless steel company. And now I will hand it back to Tim.

Thank you, Vanisha. So what you have heard until now, it is something which were a little bit already in your mind, I mean, that has been explained. There is our strategy leadership journey, what we have done. But also this part, which is new, the part of being an act of the circular economy. And now my job is to try to give you inside the part of recycling, what is exactly in what consists of this part and how this fits with the industry, which is the stainless steel production. So first of all, something concrete. When you say you want to be an actor of this circular economy, you should not say, okay, we have a couple of people which let's say, right slides and intentions or -- and then you pretend to be. We have invested in the last years and to the 30% of our people are working actively in something which has nothing to do -- nothing else to do than circular economy are renewable. These people are in these 3 areas, which are the scrap recycling, TLG company, which are [indiscernible]. They are in the forest. There are people which are farmers. They are in the dust and recycling of the recycle, which is an industrial operation, it's still interesting for the collect of precious raw material from, let's say, the byproducts and what in the past was put in Westland. Aperam Recycling, our acquisition, you know that was a nice steal. But what was, I remember you in few KPIs is 1 of the 2 biggest scrub recycle in the world with 1.2 million tonnes, around 1,150 people working mainly in Europe, United States and some activity also, which is expanding in Europe. If you say they are contributing to the fact that the scrap based industry compared to a primary raw material base industry is by 4.2 million tonnes per year less CO2 emission. So what is scrap? Scrap is not 1 single product. Scrap is raw material and very precious raw material. You have not only some iron and carbon -- you have a lot of material which you see here, like iron with iron, which are nickel, cobalt, chrome, Tungsten. These are typically in the second segment of stainless. But we have also another part which is in the super alloys. So remember that ELG is 2 pillars. One is talent and the other 1 is an activity of collection of super alloys for the aerospace industry, in particular, and we will see later what is this industry and you will see also what is the reality of this industry. Now we are part of a system of the circular economy, which go from the supplier scrap. The supplier scrap happens in 2 ways. One is the scrap which collect is collected from industrial user costal steel. So it is the typical yield when you have a stamping company. When they stamp, there is a part of the -- what they have received as the primary raw material as sales fell as a raw material, which we can scrap and you collect this. But there is another part, which is the end of life. End of life is whatever you can collect in the West in everywhere. So if you, let's say, with, I don't know, a pot, this will be used. I think washing machine, et cetera, everything will be extracted, softened and will become new primary raw material. The -- in the middle between the scrap supply and those who use the scrap, which have the melter in -- on the right, which are all the company, which typically our customer. You have a landscape of people which collect process and distribute. So when you are in a men's shop, in a big men's shop, 1 million tonne. You cannot select knife by night for 1 thing here, et cetera. This is not possible, okay? They receive scrap by train, and they must be granted that the quality of what they receive is perfectly in line with what they buy. And in between, there is also a long supply chain will treat and process this scrap to be able to give to the melt shop, the right quality for the right value. Now quality for the right value is also a question of what is the scrapper coming from. You see I indicated previously, the industrial scrap is easy relative easy. You have to be sure that it is the right quality, et cetera. It's not mixed between low quality, quality, et cetera. So this is something that you have to take okay. But when there is the demolition, you can find every kind of things it is mixed with copper, with normal steel, with aluminum, with at every kind of products, and you have to process also because you have some ships which are different. And when you have, I don't know, a big rotor of a turbine. You cannot put this in directly in the meltshop, okay, because it'll explode immediately. And this is part of the job that we do in in the scrap yard. So the service of LG of what is our new segment Aperam recycling is not only collect, but is also to put this scrap in a way that the customers can use it, assuming also the economic path because you collect in the 1 at a certain price, what you are collecting, you are collecting nice you are collecting iron, you are collecting metals, which can fluctuate a lot during the life. And you have to manage everything, which is the risk of the fluctuation of price. And at the end, you must be profitable all the supply chain. So this is after what they do. They have to certify that what they give to the meltshop correspond perfectly. There is no water. I don't know if you are aware, but if you put water in a meltshop is a big problem like I don't know if you or fine in a plant. I really suggest you not to put water there because explode, as you know perfectly. And the same with the liquid steel, exactly the same. So all this is part of the work they are doing. For super alloys is even more complex. So I'm sorry to show this because typically, it's a slide that you should never show it is too complex, not easy to read, et cetera. I wanted to only to to give you the message that is really complicated. When you go to the aerospace industry, you have to take in mind that there is a material which are the price whether you count not euro per tonne, but euro per kilo, sometimes even $1,000 per kilo. So very, very expensive products. These products have been sometimes remained 2, 3, 4 times to get to the right purity and they use only part of what they will see on these very expensive projects. Maybe sometimes in some process, they use only 30% and 70% is scrap. So what is that what happens to that is that all the recycling part part of the use of this material, super alloys, has to be extremely efficient and be sure that you can be, let's say, you can brand the granted the purity of what they see. You have a strict certification in this business, which are the typical aerospace certification. It is not something that can be done by anybody who tomorrow, I will become a supplier of aerospace and I take the scrap here and to there. Absolutely not. We have people which are specialized to recognize materials by visually recognized on the base of a very long train, you will see them and they took a look at any small piece by piece because there is a tremendous value in small piece, but it is a very specialized kind of work for which we are paying, of course. And in a market which is growing, which is growing. It is interesting have been in the stainless steel because stainless steel has collected for the reason that we have said is continuously growing as collected scrap. Aerospace. The good news is that when we bought the company, we were in the trough of the aerospace and it as was there. So it was nice to capture all the growth, which is coming back. So aerospace is now back to the growth of the past, and growth is something which is good for this kind of activity. And good for the results. We company, which has been bought for, I remember you are for an average of EUR 55 million, has always been positive with ups and downs during -- due to the cycle due to the fact that manage stock. So there are 2 effects on the stock. There is the net working capital, which increased when the prices are increasing, especially in super alloys, when you have in a low of 80% nickel and nickel goes up immediately you have the effect on the working capital. But a company which has a sustainable, let's say, results and with tremendous synergy with our upstream. The synergy we have declared are in the range of 24%. We are more than comfortable with these figures. Why? Because the of the business is to find the right products among all the sources that you have. We have thousands of suppliers, thousands of different products and find the right products for the mills at the right moment, mixing them in the right way in a way that the mill can produce a product with a lower TCO, okay? A lower cost due to raw material. And remember that the cost of raw material for stainless steel is the majority on the cost, okay? So it is in deepest part. On total, you will see that it is a business of of logistics. You transfer from very dispersed side to a single where it is melted. And all the logistics, all the efficiency that we can do going directly to the mill or avoiding double, triple intermediation will constitute the bulk of the synergy for which we strongly believe. Now is this a business also which has a future. I think that you are convinced that the circular economy as a future and what we believe is that the use of scrap and the economy around scrap will be growing exponentially. Why? Because it is clear in all countries, which have developed the use of stainless. These stainless will arrive at a certain point at end of cycle, end of life. On top of the natural, let's say, yield for the processing. And this graph represents what is happening with the growth of the stainless steel of the last 10, 20 years. With the last 10, 20 years, you will see in the next future, the growth of stainless, the scrap stainless increasing a lot in all continents. In all continents, and our willingness is to be there as one of the major actors even tomorrow. So this is about scrap. I repeat, tomorrow, you will touch it. No, you will not touch it. It is forbidden, but you will see it very close, okay? It is forbidden because I remember that would scrap and stainless steel is very -- is cutting a lot, and so the accident is immediate. Never touch anything, which is in steal [indiscernible] during the process, please take also this in tomorrow, you will have old instruction. It will be a safe tour, but to take in mind this. [ Reseco ] [ Reseco ] is an unknown. Sometimes it is a little bit hidden in his burgers in France, it's another site famous mostly for our line [indiscernible]. In [indiscernible], we have a smaller meltshop, which has been specialized in the last 10 years in the recuperation of slag powder and dust. All these byproducts, which were at a 0 value in the past, are treated here in a process, which is an industrial process with people which are very, let's say, expert in metallurgy and can extract from byproducts, new noble elements. In particular, nickel, in particular, molydenum and [ chrome ], which are typically used for our mills. So with a process which is completely different and has a footprint CO2 footprint, which has nothing to do with the extraction from mine, the transport to the smelter, this melting with the older CO2, et cetera. Remember that in a process where you create nickel from mine, typically in nickel pig iron. When you produce 1 ton of nickel, you have, at the same time, produce something between 60 to 100 tons of CO2. This you have to take in mind. This is what happens in a process from mine to nickel pig iron, this nickel has this kind of footprint. We are in a completely different area, and we can use this plant to extract nickel, chrome and other elements like Malibu with, let's say, a level of CO2, which is a little bit more of scrap, but nothing more. Also for this, we are investing is an interesting segment growing for which we are serving not only our mills, of course, in which we take 100% of our waste but also other industry closed industry that can use this facility, both in our work or we buy and recuperate the raw material. Okay. So we have a break. We are a little bit in advance, so the break will be a little bit longer. We will come back at 2:15, correct? At 2:15 we will come back. So please, I think there is a coffee outside and some refreshment. [Break]

Hello, everyone. So my name is Frederic Ayres Lima. I'm in charge of Aperam Stainless [indiscernible] South America. So I think Tim and Vanisha spoke a bit about the unit when spoke about the competitiveness, about the cash generation capacity. Tim also said a few words about the CO2 situation we have in Brazil. And myself, I will focus today on BioenErgia. BioenErgia is a unit we could summarize with 3 words: sustainability, innovation and efficiency. And my idea is to show you why we summarize with those 3 words. To go through this unit, it's a large sustainable forest operation. We have 126,000 hectares in BioEnergia, 76,000 hectares of planted Eucalyptus and another 50,000 between native forests than other areas like roads, infrastructure furnaces that are accounting for 10,000 hectares. We are, as I already said, today, world leader in charcoal production. We have a capacity of 450,000 tons of charcoal with our own wood. We employ only in this unit 1,000 employees, 1,000 people. So similar to what Tim said for the whole run about 30% of the operations of upfront stainless and electrical South America are in this renewable energy business. It's a very innovative company. Only in patents, we have around 45 patents that go from the genetic maturity plant downstream to the production of charcoal itself. If we go back in time, the history of this company starts when [indiscernible] was founded in 1944. So then we started the genetic research on Eucalyptus in the '6os. On the '70s, we started the plantation itself. On the '90s, this company where the [ Azazita ] was privatized -- so -- and then through the change we had of the merger of [ ArcelorMittal ] we arrived to 2011 when the spin-off took place, and we became upfront. Within this period, we had all the main certifications a forest operation can have the FSC certification that recognize the sustainable way of managing for us on top of ISO and even OAS certifications. If you ask me the viestone, I would put for '21 and '22, I would put 2. The first one is the capacity we have today of 450,000 tonnes of charcoal. And the second one would be the neutrality that we will explain a bit further. I like to show this map because -- so that you know where we operate in Brazil. So when you look at the net on the top -- on the left there, you have the Amazon forest. And be BioEnergia is somehow in the southeast of the country. It's important to remember that the distance from BioEnergia to the Amazon Forest is more than -- we are now from Moscow. So it's really totally out of the Amazon forest. So there is no correlation with it. It's 350 kilometers from the operations of the steel production. So at the same time, distant from the forest and close to our operations itself. We operate in -- sorry, we operate in 6 cities. So these are 126 hectares in 6 different cities in the north of [ Mineras ] state. About the operations itself, it starts with the R&D on the genetic material. So out the clones we played of Eucalyptus are the result of a lot of research and development through which we find the ideal con to be planted. Based on the climate of the area we are planting based on the soil and based also on the targets we have of density and of quality of the charcoal. Then after this R&D after the selection of the cone should be planted, we have the production of the seeds. So we produce 100% of our seeds, and we even sell seeds to the market. So the seeds we produce, as I said, are a result of a longer research and development. The best one is I would say, the most recently developed ones are the ones we plan and those that are obsolete, I would say, for our own use, we sell in the market, a big part of it. So we are not only supplying charcoal, but we are always -- we are also supplying technology through our seeds we delivered with we sell to the market. Then comes the planting. The third step of our production is the plant in itself, so as the name says, it's simply putting the seed on the earth so that it will grow. It starts with the preparation of the soil with how we need to the planting and then at the planting it ends. And we come to the CV culture, that is the longest part of the process. It's 7 years of [ CV ] culture. During which, we manage the forest itself. We fight against disease. We fight against fire, against erosion or whatever can happen in the forest during these 7 years. After these 7 years, the wood is ready to be harvested, and it's harvested in the way you see in the picture #5 there. I always like to stress that there is no one on the forest itself. So there is no people working at the Forest that not inside state-of-the-art equipment with an economy of a business class of a plane. So a safe and comfortable way of work. That is sometimes very different from what we have as expectation in a forest business. The wood is then transported to the charcoal production units. The charcoal production takes place in furnaces like the one you see in the picture, that's how I will speak about it a bit further. Then the last step is the production of the hot metal. So then the charcoal is delivered at the node to become still, to become the greenest in the future. Well, by summarizing in those 8 steps, the production of charcoal, I would like you to have in mind that it's not only charcoal, but there is a lot of technology inside good part of this technology, technology that we sell, that we supply to the market and make money out of it. So as you're not able to go to BioEnergia here this time, so as Tim said, we hope to host you in Brazil one day. We prepared a short video that I would like you to have in mind that the real operation itself. It's the best way to have an idea. Well, sorry. [Presentation]

Well, with this ending of carbon neutral, I come to the next slide. BioEnergia is very critical for the CO2 strategy of Aperam. Before we have sequesteral a lot of C02. The forest management and the production of charcoal for the blast furnaces, only this fact is reducing in almost 1 million tons of CO2 per year we in it. So this is comparing the what we do to a situation in which we would use coke. That is what actually Asian stainless producers are doing is 1 million tonnes of CO2 per year. Also, the [ BoM ] density we have today due to the development of the clones and due to the other technology we use in the planting, only the increase in the density of the wood we are planting today assuring us a removal of 6 -- or 400,000 tons of CO2 from the atmosphere. So not only removal, but also storage. So this means 600 kilos of CO2 per ton of steel less than we would have if we would not be growing this density year-by-year. Just to put numbers on it. Between 1990 and today, the density of the wood we plant increased in 25%. Also, the 126,000 hectares, as I said, are 76,000 of forest and 40,000 of native forests. This 40,000 is a big, big action we have in terms of biodiversity. So with this, the preservation of these 40,000 hectares, indeed a very good way to improve the biodiversity. Growth. I already spoke about the density, but we also have plans of increasing out the area we planned. So at this very moment, we plan increasing 26,000 hectares. And we also have this as a road map as a way to improve our carbon footprint as a group. Well, and last but not least, we must not remember that at this very moment, down there in the forest, we have a stock of 7.8 million tons of C02 that we're taking from the atmosphere in the last 7 years and now [ they stopped ]. And we already spoke a bit about the CO2 of Aperam of Aperam of South America. And what we can tell and I will try to explain is that we are CO2 neutral in Brazil. And this neutrality is based on these 6 pillars we see there. The first one is the charcoal. So as explained, we use 100% of our blast furnaces operated with charcoal. It was not like this in the past, and it's interesting to see that even when we converted the second blast furnace from Coke to charcoal in 2012, at that time, we already spoke a lot about the C02 -- the reduction of the CO2 emissions due to that act. So at that time, 10 years ago, it was not known and spoken at as it is today, CO2 was not a subject of all of us as it is now, but we already had this in mind that, that would be a big advantage for Aperam. FSC certification having 76,000 hectares of forest does have a responsibility. We need to have it managed in the most sustainable way we could. And we have the certification, we are seeded every year, and it's a good way to double check if the operations are really sustainable and how to improve even further. The electricity matrix in Brazil is also one of the pillars of our CO2 neutrality. In Brazil, more than 80% of the energy comes from renewable sources, mainly hydro, but also wind and solar energy that are growing. And in upfront South America, we must remember, it's even more than 90% because we have 1 hydroelectric power plant that is fully dedicated to the module operations. So Brazil already is already in a good position, 80% and Aperam South America is more than 90. Then come to scrap. As Tim showed the importance of the scrap is very important on the reduction of the CO2. So it's a recycled material. In Brazil, we use less than in Europe, and one of the reasons is that the developing countries normally has less scrap available than the developed economies. But we also use. We do use. We do use more than the Asian news. So we have the alternative of using scrap. And again, what we do not use as a scrap, we use from the charcoal in the blast furnaces. So both routes are sustainable. The second situation of carbon. So I already mentioned, almost 8 million tons of CO2 stored at this very moment in the forest we have down there. And last but not least, efficiency. We've been working on the efficiency of our process for the last years from very simple ways of reducing the energy consumption like lead lighting, like efficiency of motors of drivers. Going down to more complex and CapEx-intensive alternatives like cogeneration, like production of bio oil in BioEnergia and many other initiatives that we are using to improve the efficiency and sustain even improve this neutrality. The stakeholders are our top priority. If we look at them, I will start with the first block there that are the employees. I would stress 2 points of our management of our strategy that proves how how it is important for us. The first one is health and safety. So every day, at the end of my working day, I see that we have 1 more day without an accident. And we are reaching a very good level of safety in BioEnergy and also in [ Mato ]. Just to give a real example, this year, we have not had any lost time injury in none of the operations. Not in [ beer ], not in [ tomato ]. When I say that, we have to remember that an operation steel production, forest operations working 24 hours a day, 7 days per week. So even in this environment, in these conditions, it's 0 LTI for the whole year. The second point I would like to to remember in this first stakeholder employees, is that in Brazil, we normally have business schools that are evaluating the companies to work and one here was -- got the first place as the best company to work in the agri business in Brazil for the third year in a row. So we compete with many other companies, and we were the first in the third year. It's not a subject now, but I must say also [ tomato ] was well recognized, not the first, was the second in this sector but it's still a very good result that shows that working at Aperam is good, shows that Aperam is taking care of this stakeholder employee. The second block, social engagement. We have our foundation in Brazil. The Aperam Foundation has a lot of initiatives to the communities around where we operate. I can give examples from support in the communities on the infrastructure of sewage and up to other totally different initiatives like the one you see in the picture that are honey production. Today, we have 140 families that take their living out of the production of honey inside the premises of Aperam. So we allow them to use our forest to produce honey, and we even support them with training with some of the things we can help the production there in the north of [ Minjar ] state. The third block here climate and sustainability. I think we spoke a lot about diversity about CO2. So no need to go further. The last one I would mention would be water management and what use. We had in Brazil, actually, we had in the world. So very dry years recently between 2018 and '19, we had 2 very dry years and we realized that water management would become a priority for everyone and for us as well. And since then, we improved even further many of the actions we had on water management. I will mention 2 examples. The first one, I don't know if you could see in the video, but you see in our operations, a lot of pools that we built to accumulate water during the raining period. So in Brazil and particularly where we operate, the raining season is very concentrated within 3, 4 months maximum. So we have very rainy periods with even floating and we have very dry periods like the one we are now in which we even have shortage of water. So we built many pools so that we accumulate water during the raining period to be used afterwards. And the second initiative that I would mention the recent initiative is that we are now only planting during the rainy season. It may look simple, but it is not. Actually, we have a big part of the 1,000 people in the BioEnergia working at planting. So if I don't plant during 7, 8 months of the year, what do that what does that -- those people -- that people would do. So we had to train all of them to be able to do different activities during the dry season so that we can allocate them for planting when we start planting again. Also logistically, this is quite complex because we even have some times to mobilize people to plant in France because it starts to rain. But in any way, those 3 initiatives are I would like you to have in mind because it has an important impact on this water management. And the actions we have, can be seen on this chart. This chart shows the human development index in the areas where Aperam and Asia is. And the summary is that it's higher we have our forest. So our forests are these green dots there. So you can see that clearly, it's a higher level of human development in the areas we operate. And we know that one of the reasons for that is the 1,000 employees we have with the conditions of work we supply to them, plus the suppliers we have in the surroundings that are suppliers and as a consequence, how we're employing people are also developing the area. So this is my very last slide. These 3 children, you see there Camilla, Mateos and Isabella. They are my children. At the moment of that picture, there were 15, 13 and 11. And I like to look at this picture because the moment I will be harvesting the Eucalyptos I'm planting now, there will be adults probably working as we are here now. And I want you to have in mind at the end of this presentation that upper BioEnergia is a very important part of the strategy of Aperam of producing steel today, but taking care of the next generation of the world of tomorrow. Thank you. So I'll pass it now to Nicolas.

Thank you, Frederico. So good afternoon. My name is Nicolas Changeur. I am the CEO for Services & Solutions and also the Chief Marketing Officer for [ Steels ] Europe. So the purpose of my presentation is sort of present SNS. So we have seen with Vanisha and team that Aperam is much more than only producing steel. You see that in the circular economy, we start from the scrap. We produce the steel. We use also BioEnergia. And then we deliver to the customer and Service & Solutions is the service part of Aperam. Secondly, I would like to explain to you what is our business model. Why it makes so much sense to have services and solutions inside the Aperam and and I will go through that but also to explain to you our business model. You will see this tomorrow we are able to address any customers in our market with the lowest level of cost and with half of the working capital of our competition. And this has been the very strong basis for us to improve structurally our customer mix in the past years and especially in the past 2 years. So first, a few numbers. So we are the downstream harm of Aperam. We are #1 in Europe and in South America. We are present in 36 countries, and we sell 40% of the stainless steel of Aperam. We have also the leading presence, the leading digital presence in the stainless steel with Area Aperam and our [ Eshop ]. So what do we do? We purchase so in large quantities coils from Aperam. And then we cut it into parts for customers in sheet in seated cost. We also produce tubes. And then we will deliver to those customers in just in time, either in 48 hours, 24 hours up to a few weeks. So we have a very short lead time, which is the basis of our service, and we are able to deliver interesting time our customers. One point also important to have in mind is that we deliver in terms of active customers, much more than 6,000 customers in our geography from our service centers, and we have 1,500 people. So this slide just to show you that it's also important to be heavily distributed in your market. And one of the key point of Aperam is that in our geography, we are able to serve more than 90% of the consumption in Europe in South America. We are also present in the U.S. and everywhere, we are really in the center of the industrial area. So one of the key questions we can ask ourselves, okay? Why do we have service and solutions? Why it is so important? If you don't have integrated distribution, you can only serve 30% of your market no more, which means that then you have to go through distribution which is more volatile and less loyal. Aperam, as I said, has the strongest arm among estate peers. In Europe and in South America, and we are able to deliver to small and medium customers and to be paid for service. And this is very important. And the second point of accessing to a customer base that you could not access to without integrated distribution is also that you have 2 ways synergies. When I say 2 ways, I mean, synergies for the mill and synergies for SLS. For the mill, as you go very deep into the customer base, you have a lot of market intelligence. You know what your customers are doing. You know in every segment, how it evolves and you develop a strong market intelligence and also on top of it, you are able to develop new solutions using stainless steel. And as we have seen, we have a lot of examples, it can be plastic replacement. It can be all the new energies, and we are in and we are able to capture this growth and to propose a solution in stainless steal. The second point for the mill is that, as I said, we go through more loyal customers. And when you are very big in the distribution, you are really able to reduce the volatility of your load as a mill, which is also strong basis for your cost. For SLS, I have spoken. And again, you will see that tomorrow that we have among other 2 main competitive advantage compared to the competition. One is the working capital, by being integrated in a mill, you have a secured basis of supply and you're able to get in a shorter lead time all your working capital, all your -- sorry, all your purchase and your calls will then translate into a lower working capital basis. And the second point is that we have inside the Aperam and especially at the mill, a fantastic resource human resources, especially in technology. All those people, they know everything about technology, about automation. It's really a very strong industrial work. And this, we are using, and we are using at SNS. And for example, in hand, you will see it's almost fully automatized. You get a coin at entry. At the end, you get the feet and you have almost no human intervention in between. This level of automation, you cannot find elsewhere, and this is possible, thanks to the synergies that we have with the mill. So then how can we create value? What are we doing in this market? In fact, when you look at as a distribution market, it is very interesting. Why it is very interesting because, in fact, it's still a fragmented market. You have still a lot of features. Can you imagine if you take a medium or small customer that between the mill and the customer you can have 2 players in between and sometime you may also have 3 players. So and for us, we are able to deliver, as I said, any time of customer only in 1 stop. And this requires, if you want to go to the small to medium customer, it requires a lot of manual work. You can have, for example, customers that will process from you 20 position it's not standard package. You cannot get it from your tools. You have to take different number of sheets with different sickness, different grades. And if you want to be in this market, you will have to move a lot of things. And most of the players, they move it manually. And as I said, we have been able to automatize that, and it will be very interesting for you to see how it works to more. I also think that there is -- and I'm strongly convinced about that, that there is an additional competitive advantage to be with the mill is that we see more and more our customers being interested about carbon footprint, how much carbon do you have in your product, how green you are, can we have greener product. And in fact, we know that in Europe, in the future. The -- so industrial players in Europe will have to decarbonate and you probably know that most of the imports are going through distribution, in fact, today. And by being integrated by being already a much greener player than imports. We are very well placed, and I can confuse that will play a strong role in the decarbonation and the improvement of the products going in Europe. Okay. So let's look a bit at our track record. So what I said is that we are selling approximately 40% of the tells steal produce by Aperam, so which is a very significant in terms of volume. But more important, when you look at the mill, we are able to add through a cycle on average, EUR 80 per ton of value on top of what the mill is earning and when you look at our financial performance, can you imagine that, on average, it is 14%. And in the worst here, you already get with Service & Solutions almost 12%. So I mean, the worst of the worst was 9%. The best of the best was 42%. So almost in 1 year, you pay for your working capital 2 years or you pay for your working capital. So I mean it's a very attractive return. And then in front of us, we have also a strong basis for improvement. As I said, we are very well positioned. We have competitive advantage. Our key point is to continue to improve our sales mix and to serve more service customers that are, at the end, more profitable for us. So -- that's -- these slides really summarize our strategy and on what we are really basing our strategy today. When you look at our market, we still have strong differentiation among the different customers in terms of profitability. Can you imagine that between a large customer, a medium customer and a small customer, you have so big difference of EBITDA. So when I go from a large one to a medium one, I earn 3x more in EBITDA. And when I go even to the smallest one, I can earn 6 month, which is very, of course, interesting for us. And that's why we have developed our business model. That's why we have invested in [ Han ] where with our technology, with our integration, services and solutions has almost a flat cost curve. And as I said, the more you go into the service, the more manual you will be. And so the more you will add cost on top of the cost. And here, Aperam as almost basically a flat cost curve in this industry, which is very fragmented, as I said. And on top of it, you can see that in terms of working capital requirement compared to the other players, we are at half of the industry. So that's why we will continue to expand and our [ RAM ] is really to be able to deliver in 24 hours, 1 sheet anywhere at no increased cost and half of the working capital of the competition. So let me summarize in 4 point, so what I said. We are the largest and the most profitable integrated stainless player, distribution to this player. We have a very strong business model with a flat cost curve, with half working capital compared to the competition based on our fuel automatization and our integration with the mill. We are able to deliver almost any customers in a steal fragmented industry. And we also own the leading digital presence in this industry which, of course, helps us a lot in order to acquire our customers. Thank you. So I think that now we have 15 minutes break. Thank you. Half an hour, sorry [Break]

So, good afternoon. For those of you who don't know me, my name is Sivaji. I'm the CFO of Aperam by saying not spend with the company and our cycle seen in the company just my colleagues, this is my third year and that's why I'm here. It gives me great pleasure to welcome you all to my hometown. So thanks for taking time. Some of you have spent the last 24 hours in planes. So thanks for making the effort to come and meet us in Aperam, your interest. So today, my team is going to be on a couple of things, right? So first is that we talk about the outlook. And at Aperam, we always say the first step in solving a problem is to recognizing that a problem exists. And we take pride in doing that as the first in the industry and how we respond to it. So I hope to today present you with some facts of how things are, how we look at them. Talk about short term, how do we respond and how are we investing in our company to respond to that? But also long term, what are the structural advantages we have and how are we strengthening it. And lastly, I'd like to leave you with a sense of the financials on the different industrial business and commercial advantages my colleagues has spoken about. So that's my agenda for today, right? So let me quickly get started on this chart. This is something that you would not usually see in a Capital Markets Day. But I just wanted to bring upfront these parameters which you see here, right? So there's like 6 plots. And of the 6 plots, if you read the newspapers, I bought a summary of all the newspapers you guys have been reading over the past few weeks. Things don't look rosy, right? So an important part is how we respond to this challenge, right? And very importantly -- and I'm not going to read you through these statistics because you know this much better than I do. But since I did not bring a specific slide for that, I'm going to use it as an example of how Aperam responds to this or how we prepare for it, which is the last one, interest rates, right? So if you look at it in terms of our balance sheet and liquidity, we are fully financed and liquid in terms of debt maturity for the next 6 to 7 years. Some of you who are sitting in this crowd are partners in this process. And I mean we raised this debt in January. And remember, the first half of January, when we went and said we are going to raise EUR 300 million plus EUR 500 million rolling credit facility, there was a lot of you who asked me why is Aperam raising a 0 dead company, EUR 800 million in debt for the next 6 or 7 years? When everyone was talking about Rose outlook, everyone was talking about the market's booming, right? I mean we were talking about, and we did experience 6 months after that a stable market or actually a growing market. But even then in January, we went back and did that. Why did we do that? Because end of the day, even when there were no -- forget dark gray crowds on the sky, we knew and we accept that we are in a cyclical business and in a cyclical business, liquidity is strength, balance sheet is strength. So just to give you numbers, January, when we raised it,the midyear swap was 0.6%. Today, the media swap is I don't know what happened this morning, I haven't looked at it. So my TCO interest rate for this debt for Aperam is 1.2% to 1.5%. Today, if you raise debt in a similar company like me with -- at the level of investment grade we are at, it's closer to 5%, right? This is the fact which I believe we have to look at also going through the current challenges, and we'll go through each one of these, right? I promised someone during the break that we will walk through each of these and talk about how we are dealing with them. So there's a 2.5% advantage that Aperam has on anybody who's going to raise debt. It's important because this is a KPI, you will not see in the EBITDA figure, but definitely in the cash figure, connecting it. That is why we are one of the best when it comes to cash returns to shareholders because we aim to generate cash at every line of the P&L. Let's start with the first slide. which is on stainless demand. Like I said, stainless demand is a cyclical business, right? Let's first talk about the structural advantage we have at Aperam and which we are building. My colleagues have discussed today with you how our base is broader than that of stainless. Today, I'm going to take a minute and talk about -- today, we don't see it in our order books. I'll come to that a little bit. But some of you who look at [indiscernible] scenarios in the future of a recession. -- a very important KPI, you have to look at every companies, and some of you have been doing this and asking us questions. Thank you for that. It is the fact that we have the broadest end industry portfolio in the business. If you look at that number, that is a number where you see no specific end industry, about 30%. This is why when cable trees were not being supplied when supply chain problems happened in an automobile industry went down, we did not see that demand or EBITDA earnings -- cash as much. This is why when because of supply chain shortages, sand and concrete short-up and people stop building, we did not see that cash. What I'm giving you a specific points in the quarters preceding when this demand has gone down and how Aperam has performed, which you can use this benchmark to model for your future. Very important is that we also accept, and I'll come to that real demand is in stainless connected to the domestic product or region, economic development. So when that slows, yes, obviously, there is going to be a slowdown. 15%. That was the slowdown in the COVID quarters, right? Just to give you a measure, and we'll come back and talk about it. But if you look at it, what the colleagues spoke about today in the different segments, we are derisking the segment. We are derisking the value chain, right? Because the distribution centers, they are integrated, they have synergies with our mills, but at the same time, they do generate value on their own. And like Nicolas said, until now, have generated over the cycle, EUR 80 per tonne and he's promised doubling its EBITDA to you guys, not to me, but for you guys, right, over the next 3 years. And this means that there is potential there. This is how we are developing in alloys. If you look at it, so far, we've been at an average of liner 1,000 tonnes of alloys shipments per year. We are doubling that in the next 3 years. Now this is the structural advantage we have and what we are going to develop. But I would be amiss if I don't talk about the short-term outlook. H2 of 2022, we are seeing a contraction in the specific stainless business because of record imports. We'll talk about imports in the next slide, but record imports result in destocking. And we are one of the least affected companies because of this destocking, primarily because we have our own distribution segment. I just want to make that connection please. Compared to other players who do not have access to their own distribution network, which means that these imports have temporary pastime. Our order books for the visible duration for us for the next few months continue to be stable. Now what happens in the future on a possible recession scenario. This is something that you carefully monitor. Now it is important why we do that? Because end of the day, like I started out saying, we do feel that our DNA is agility, which means we immediately react by variablizing costs. We've seen that in 2020. We've seen that in 2019 even. So for us, it's part of the DNA, but also structurally, those of you who cover other industries besides sustainless in Europe, we run electric car furnaces. Our downstream assets actually are decoupled from our upstream assets in most cases, what would be a disadvantage if you look at it for us as an advantage because we can run these assets independently and based on how the available cost are, specifically if you're talking about energy cost. We'll come to that element. What that also means is that for us, because of the presentation what you just saw from Tim, we are able to use our urban mining segment is what I like to call it, the recycling segment to access raw material for us at the best value possible. What you see there, as synergies are not just 14 million synergies used for valuation. On a day-to-day basis, they translate into competitive sourcing for us for our stainless. On a euro per tonne basis, you can do the math on our shipments in Europe. And last but not the least is about the distribution integration helps us to respond to markets. And last time I capital markets, we have presented a chart which talked about what is our principle for managing net working capital. I said maximum 1 quarter ahead of the first trend of industry slowdown, we start derisking and reducing net working capital. That is possible because of our distribution division. And we've already given your outlook that our net working capital release starts in Q3. So for us, this is an inventory cycle for the level of our order book, but we are prepared if a negative scenario comes. And I would like to repeat one statement, which is the fact that demand is the underlying determinant as you compare regions across the world for the profitability of our business. If demand is there, the variable cost would be paid by the customer. We see that on a day-to-day basis, and I have a specific chart for that in Brazil, where the demand is strongly held through compared to world over where demand is collapsing. So even between regions, demand for us is the primary driver of profitability. Moving to the next part. I did promise that I'll talk about imports to you guys. So if you look at it, the first chart shows that year-to-date this year, we've had record a lot of imports that crossed the 30% line, which is typically -- now people who are concerned by that have to take a look at the second chart, which is the green line. It is a very specific narrow window of opportunity where these imports spiked up. What the green line shows is the price gap published by CRU between European Union and Asia, landed here. You've seen that it's been relatively stable. And I'm sorry, the numbers are missing those are years, okay? The small x-axis numbers you see. It seems relatively stable till a peak in this narrow window because of a nickel crisis because the raw material is going up. And because after the first covetlockdown, finally, supply chains are getting released on Asia. As a result, there was a -- and this was before the second series of lockdown. That was a narrow window, but you've seen how this price gap has come down. Today, European prices are comparable to import prices and these large deltas you saw between Europe and import prices adjusted for -- and I'll come to that in a littebit,Brat defense has closed. That brings us to a significant difference to any last crisis you've seen. And this is a very Europe-specific chart, and I'll go through verbally other divisions in a minute. Trade protection has improved, Tim has spoken about it. First things first, is that the 2 biggest importers into Europe, India and Indonesia have today a 25% duty. This is comparable to the United States. It's better also because we have underlying a paid quota system, which powers the first barrier. It wasn't working in the past. And we have worked with the commission and they've clearly seen that the subsidies offered to players in these countries. And as a result, they put in. Again, that's an aberration in what you see there. And you can see that this trade protection is playing a role into prices. Mathematically, take a look at CRU base prices, in 2020, the worst ever. And you see where spot is at today with record imports, right? The delta is pre defense despite the huge overcapacities in Asia and the dumping prices. Transport costs still remain high. There was a tendency to go down, but the second set of lot towns have kept them at a relatively higher level, so that's something that you have to keep in mind. And I'd like to chart because I don't have specific data we usually presented in every quarter. To help you also understand that, Our decision made to import is not made at the same time addition has made and Nicolas team to sell steel in Europe. It has made 5 months ago. And today's volatility in raw material prices, it is becoming a gamble. That is the reason for us. RSS division is an asset with its -- in the past EUR 80 per tonne profitability margin, but also with its growth options. Moving to the next slide. that's a transition from how the historic average has been, how the base prices were in '19 and '20 and how they are today. Important to realize pricing is influenced typically by 3 factors. So you cannot in the sainless industry, look at pricing the same way you look at other industries like First one, pricing is obviously a translation of the raw material price. Second, it is supply-demand delta, including imports. Third and most important is what is the level of differentiation you have in your supply chain. Starting from collection of recycling your scrap till your SNS division. So if you look at it, Aperam cannot influence the supply demand of this world and imports. However, we have a stronger trade fine. Aperam cannot influence the raw material prices. However, we have started working because today, our primary raw material in Europe is for us through ELG recycling and integrated source. Aperam can influence where supply chain starts and ends to add more value, and that is what we're working on. Simple math, if you just take historical vegers published, EUR 50 per tonne on the recycling side, EUR 80 per tonne on the same SNS side, that should give you the value added compared to other players. Just talking about 2-day segments what you're presenting today. And for remind us, we make 1.2 million tonnes in Europe. It's important that maybe not all of this is visible every year, but we have always reiterated in years where there's an up-cycle, we benefit out of this as an extra delta. And you can look at the EBITDA per ton track record compared to domestic and foreign competition over the last 18 months. And in down cycles, we actually used to generate cash and this cash we return to shareholders. We'll come to that in a bit. Now let's talk quickly about raw material prices because raw material prices used to be sky high first half of the year. And there is this wonderful thing about having a supply chain, which means costs come through the inventory as you invent gets valued differently, right? So there's an inventory valuation discussion. Some of you have asked me fairable questions about your chart. For us, this is inventory sitting on our books to run our mills to serve our customers and prices has to go up and down, it's a valuation cost, right? It is typically noncash because end of the day, it means if any company says the value in getting us a cash, that means the company is going bankrupt because the only way we can get cash out of a company out of inventory valuation is if you liquidate the company because to run the company you need to me, right? So this inventory valuation we have guided clearly will reverse in the second half of the year, and we have been every quarter guiding to the positive part of the inventory valuation in our EBITDA. And this will reverse as raw material prices fall. But that is the reason we have with our distribution division, but also in divisions, which do not have distribution specifically we have our focus on net working capital release because the faster you release a talking capital, the lower the valuation gains are going to become, right? So this is something which is key for us. Now let's come to the elephant in the room for some of you, not for all of us, which is the energy cost spike in Europe. This is currently at levels, yes, unsustainable for Europe, and I'm not talking stainless, but the industry of Europe. There's some government action in an action and there's a lot of deliberations and we are working with different government bodies in the areas we operate in, right? But importantly, that is something to keep in mind. Where are we in terms of energy costs. First things first, let's walk them one by one in each division. That is the last 12 months adjusted EBITDA to different divisions. Disclaimer, South America looks a little worse than Europe just because of the fact that South America had 2 summer quarters in that, right, because of this -- the Q4 and Q1. And that -- if you look at it both in 2020 and in 2021, which is a crisis year and a peak year, South America and Europe have had the same EBITDA contribution to Aperam. Just to keep in mind in terms of derisking. And Rock has asked me this question in last quarter earnings call, and I'll repeat it. Despite the high energy cost, second half of the year, Europe will have a positive EBITDA contribution to Aperam. Now keep in mind, we have energy costs. We have the raw material squeeze coming from the long valuation effect. We have the imports which are costing destocking and volume effect, and we have prices which have come down 40%. Despite that, Europe makes positive EBITDA for those in the second half of the year. Why is that possible? My colleagues have explained that, and we've spoken about it in detail in the past quarters and the last Capital Markets Day because we place a key value on competitiveness and agility. Before energy costs, and we continue to be outside of energy cars, the most competitive player in all the regions we operate in all the segments we operate in. Our return on capital employed for every segment is the best in class. This is what we strive for. Very important in this is that utility. We had this unfortunate invasion in the conflict in Ukraine. And one of the first actions we initiated in our mill and Manish has spoke about that today, is that we installed traffic lights in every line with consumed energy. Connected to the central energy management system, which means the operator of that line, if it's 1 am in the morning or at 3 p.m. knows if it's base or peak price and can switch off and on. And because of the way our tools structure and our structural advantage, we take advantage. And sometimes the difference between basic peak is 10%, and 15%, 20%. Also, some of you have asked me about hedging and how our forwards look and let me also address that. Look, we do hedge forwards, and it is part of our strategy, okay? The point is, typically, we don't disclose it because it's competitively sensitive information, especially if someone is sitting on the other side of the earth and look trying to ship volumes 3 or 4 months into the future, if I tell them what my energy prices are going to be. I know you understand. However, I can tell you that the 2 countries which we operate our plants in France and Belgium are nuclear power primary countries. 76% of France's electricity is supposed by nuclear power. This unfortunately has come down a little bit. However, you know that the availability has gone from 34% to 47%. We check on a daily basis how that happens. This is how we try to react to the situation. And our contracts, for example, in some of the regions we operate are closely linked to industrial electricity rates. That's for Europe. Let's talk about the energy impacts in Brazil. Frederico has given you in detail. So I will just add one sentence comparing to other nations. And if I'm talking about OECD and developing countries, right? So the break nations and the OECD nations if I combine them into one block for the sake of comparison. Brazil has one of the lowest tariffs regulated. CO2 neutral 80% comes from hydroelectric power and our primary source of energy is from our own Charcoal, which means that if you're doing analysis for a producer in Asia who uses last ones to produce, we have OpEx for charcoal, not the price of sourcing coal. Thankfully, our carbon capture and storage device source is carbon for free from the air. And not through coal, which is done or 4x price come back to our [indiscernible] . The other divisions, I'll talk about S&S. S&S, we run service centers. They have very minimal impact, and let Nicolas walk you through an tomorrow, and you'll see that we try to watch stoping operations, and it's a very energy like footprint operation. Now alloys and solutions, right, is specialties. This special area because I admit, it is an area where we face high energy costs. However, why is earnings impact so low? Because our products are so specified and we sell it in kilos and not in tonnes, like Tim said, the customer is ready to pay for this energy. We have energy surcharges on that. Look, if you're making a product which from plus 200 degree Celsius used to minus 200 degree Celsius, expands only a few microns. The customer is ready to pay for a specialized products, energy costs are not. Average sales price per tonne of alleged products is somewhere between EUR 20,000 and EUR 3,000 per tonne. So the EUR 400 to EUR 300 per tonne for alloys for the customer, the value add because of this product. And just to give you a reminder, right, I would be failing a job if I didn't do it. We're doubling the EBITDA in this segment and actually making it contribute more to our overall EBITDA. Last but not the least, recycling and renewables, they are actually net reducers of energy for our company and also for our customers. So there, there is not energy cost, right? So San is the biggest source of energy for Bioenergy. So that is something which we have to make in the discussions today, and I welcome your questions, we can talk about it, but also future. Look at Aperam and see what is the impact of these different segments. Sometimes because we are the only stainless player in the middle of Europe. This discussion gets a little skewed in one direction. Also, there has been some news reports that we are shutting down our game plan, right? But this is part of this variablization. And we see that there is a demand -- not demand in the market and the energy guys said, we, obviously, we're going to reduce. And this Aperam do it because that's our DNA to be [indiscernible] and keep our cost slow. We are not going to build inventory and keep payment stocks. No. So this is quite important to keep in mind, as we move into the next year. And this is something which I've described based on the second half of this year. So there's one chart about Brazil because Frederic would love to take you to Temerty all of us and show you how the plant is, and we hope to do that soon, sometime in the future. But here is a small snapshot -- because when you look at Aperam and you look at these different divisions, I bought a few statistics to show you how has been the cost of natural gas in Brazil, per MMBtu compared to the past years. I've already spoken about hydroelectric power and charcoal, but if we use natural gas in our downstream operations and annealing, that's how the cost development is turn. And I always keep saying our ROCE target, and that's our focus financially inside the company to be the best in class in every market we operate and every division we operate in. comparable EBIT per tonne figures to North American peers, right, compared to Brazil. And we will have an opportunity to talk about Brazil in detail. But just to remind you, we have an operation which is close to 1 million tonnes out of which we produce half the capacity with stainless. And then we have 3 other products, which are growth products we'll talk about next time, grain-oriented electrical steel, non-grain oriented electrical steel and specialty carbon. The easiest way to remember the difference between grain-oriented and non grain-oriented is that grain-oriented gets the electricity from wherever it's produced to you guys at homes, at cars, wherever. And non-grain electricity is used to convert that energy and make things move, electricity motors, all kinds of e-mobility applications. That's the simplest way. But these are 2 different products. And we flexibly manage the margins in that, depending on the prices at that and actually try to benefit because of that. And you know that we are the only player in the Latin American continent, who is present in all these spaces together. Also very important as an outlook, looking at it, Brazil traditionally until 2015 has been a place where demand has been driven by a lot of industrial consumption. If you look at it since then -- since the -- I don't know if you can translate into English, but the car was scandal and the whole discussion around economy also cooling down, industrial consumption has slowed down. So the fantastic results you're seeing from Brazil over the last 2 years is driven primarily by private consumption. So looking forward, after the new elections because there has been some questions directed at me and that's the reason I'm addressing it specifically. After the elections whoever comes to power has an imperative to actually look at industrial growth and promote it because that's -- I mean, natural gas is at EUR 200 per megawatt hour in Europe. And -- we don't hear Brazil in the headlines. Don't you guys remember 4 years ago, at least the ones in Germany know how much natural gas from Brazil was in the headlines, right? So there is opportunities there on the industrial side in the midterm, which best case add-on and worst case actually would compensate if private consumption goes down. We'll talk about it in detail in the next Capital Markets Day, how we serve different products. But I wanted to give you that as a measure that even 5 years of crisis, this company has been resilient and produce enough cash to support itself and the rest of the group. So it is a business model in the app DNA that we are trying to now develop also through investments for the leadership journey, Vanisha showed you, where we are improving the mix and investing in specific products, not only in stainless, but also in electrical steel. And carbon neutral part, I'll skip because Frederic spoke about that in detail, right? So important to keep whenever you think of carbon neutrality is what I told you earlier, is -- it's not just carbon neutral, but it's also cheap compared to running it with coal or coke come back to our Asian competitors. So this -- it's a slide by which we go by when we make decisions inside Aperam. This is our financial policy, how we want to run our company. And it's familiar to most of you, but I'll take 2 minutes to walk through the different parts. The first and most important thing is a strong balance sheet. A strong balance sheet as a CFO for me is not just important because it brings low interest rates. But also after 21 years in the metal industry, I can say there is 2 important operational leverages which a strong balance sheet brings. Number one is, in times of crisis, you can leverage your balance sheet to actually create competitive EBITDA margin advantages with different parties you're negotiating with, be it suppliers or customers. And we regularly do that as reported as part of the Leadership Journey gains, we make it very transparent how much was the purchasing and sourcing gains every year. Number 2 is the fact that the market compared to 10 years ago, has been extremely volatile. I made this funny anecdote, I've been here for 3 years since my third cycle, right? It also means that raw material prices are determined by external events. And as an industrial user, our balance sheet provides us a cushion to think about long-term value creation for the shareholders instead of surviving. I'll tell you when the LME hit USD 4,000 per tonne. The clear belief was, what do we do in most companies. And Aperam, we said the fundamentals cannot keep it at 400,000. We have EUR 800 million liquidity secured for the next 6 years. So we pay the margin calls and you get the margin calls. It took us 26 days. A competitor or another player in the market may have chosen to do differently because of other liquidity leases. That is why for us, a strong balance sheet is key. Maintenance CapEx, that is for us the base. For those of you who are used to seeing that number, there's 2 deltas there. One delta is the fact that ELG is now part of our company, and we have to account for that maintenance CapEx. Second is the fact that we did announce in last Capital Markets Day, we have a EUR 200 million plan to decarbonization towards our aggressive targets to bring it down by 30%, our Co2 footprint, and that's the delta. Then we come to the dividend part. And for us, dividend is how we clearly differentiate ourselves from a very crowded metals and mining space. But when I say dividend, it's not paying the dividend part, of course, we do pay the dividend, right? It is earning the dividend part as cash, which means all of us here, me and my ELT colleagues can tell you that EUR 160 million is the cash generation potential minimum we talk about. But again, that's bare minimum. The last 5 years, on an average, we have generated EUR 250 million free cash flow after investments. And we have paid every sent back to the shareholders. Now keep in mind that in between, we did a small acquisition of EUR 500 million as well. Our cash generation potential, and we were so convinced despite raw material prices being $48,000 for nickel and $2.16 per pound of chrome and net working capital being so elevated, we have convinced in the fundamentals on the capability of the company, and that's the reason we announced another EUR 200 million share buyback, which is growing splendidly. Also, we're getting -- it is a fantastic cost for the company because right now at these prices are steel. That is the best asset lines in Aperam, right, the share buyback right now. The second branch is going on. So moving to organic growth, and that's the plan we've announced him has spoken about it, Vanish giving you specific steps we are taking, we are investing, and there is a plan to have the EUR 300 million potential over the next 3 years to get to 2025. And you've seen specifically the different parts of it. And every time you are going to report and we have been reporting what's going to achieve what's not going to. Important to realize for people who think that this is the first time Aperam does it or they are going to growth, but no. Base case again, 2020, when every company was in panic and trying to cut CapEx by 30%, 50%, we are the only one to increase CapEx. And the only ones in the industry, if I remember correctly, both in Europe and in North America and in South America, who actually did a strategic investment of EUR 135 million. Again, when we talk about growth, we talk about earnings growth, not capacity growth. The most modern gold rolling mill Best of Shanghai -- sorry, rest of Shangshun, is in an and some of you were there last year to see -- and some of you are amazed to see how much few people are working there. Productivity improvement, efficiency improvement, advantage now. That line consumes 40% less energy than the lines which use exist before. So what we do for earnings growth is largely also connected to all parameters of efficiency. Going to M&A. We have about ERG. And today, we spend a lot of time understanding the asset and tomorrow you one tip-becareful about Japan's leave them home because they contain contend which they don't like an allied segment when you go around tomorrow. But it's important that to understand that ELG, EUR 55 million over the cycle, average EUR 500 million net working capital, 10% return. The synergies are being acquired, and we expect to be slightly ahead of schedule. We announced it over 2 years, we should expect to be slightly ahead of schedule end of this year when it comes to synergies between and Aperam, reminding also for us the 3 cardinal principles when it comes to doing an M&A transaction, Number one, it doesn't destroy our balance sheet. I don't want to beat myself from 5 minutes ago. Number two, it is a space, which actually is adjustment to our space where we understand the assets. And number three, it is value accretive. It's not from day 1, at least from day 10. It is very important for us because ELG and Tim spoke about it, has been even in the downcycle value accretive. That is the reason we increased the dividend from $1 -- sorry, EUR 5 to EUR even before we got the first free cash flow out of because we are confident with our progressive dividend policy. If we raise it to EUR 2, we are not going to bring it back again down. But we know this is a value-accretive asset. That's the reason we gave this dividend EUR 2 per share since the beginning of this year already and last but not the least, I've mentioned this before, if we have excess cash, we do not believe in holding. Our strong balance sheet also gives us the option, even M&A acquisition can be managed with internal capabilities and our cash generation potential. So if we have excess cash, we paid back to the shareholders. And you see the network sort on the right side, I'm not going to talk about the chart I'm just saying that, that is our last 12-month analysis figure of 4.9%, right? So today's rates, you can look at the share price in our yield at dividend levels. And you can correct the number upwards. I mean the first one. Yes so that is the story we offer for our investors. Tim will talk about a few more things why you should invest, but from my side, that's key. Last but not the least, let's talk about debt. I've told a lot about that, but 1 technicality I have to clear up is that Aperam was close to being a zero debt company. And after ELG acquisition, I still say that Aperam is close to being a zero debt company. Because end of the day, the debt we have right now is the net working capital of ELG. If you remember closely, -- the price we paid for ELG was at a low cycle, it was an attractive price, and we paid for just net working capital and not for assets. And for, of course, the know-how of the people and the passion they bring with the knowledge of the material business, the metallurgy, knowledge, the spectrometers or the network of 3,000 suppliers, what Tim was talking about, we did not pay for that. So it's an attractive business, and the net working capital will always go with ELG, right? So -- and the debt. So this is something -- a business to understand and tomorrow, you'll see it, it's a business with 6 weeks turnaround, scrap on an average, which means that -- there are some companies which report inventory sold. Net debt or equals net debt minus inventory sold. If you look at it, that's all that kind of debt, resulted in -- that's the result. Again, I would give you the example of 2020 because only company in the industry to increase the strategic CapEx in the COVID year, earn the dividend of cash and reduce debt in a COVID year. And this is the template we follow, a balanced return to shareholders and investment in the whole company for the future and continued debt reduction. Again, I'll be very clear. The focus right now is not on debt reduction in the traditional sense. The focus is on agile management of debt per net working capital. Like I said, our net debt is 0 compared to the net working capital of ELG. So my penultimate chart is about the outlook. We've spoken about the first part, and I've been quite clear on our guidance for Q3. And that's a first measure of how Q4 is looking like. Q4 is going to be smaller than Q3. There is going to be a price cost squeeze coming in, both from raw materials because of the discussion we've had earlier and because of energy. And there's going to be a slight positive in volume because the seasonality effect is not there. Also to keep in mind in Q4, there will be this effect, which is not evidently visible here, but it is one of the first quarters where Brazil has a seasonality stepping in because they go into summer. The other part, which you see there is inventory valuation because the raw material prices have gone down, and as a result, you have a valuation adjustment. So that's the outlook, how it looks. Okay? Just the pieces, please remember the chart where I showed about the energy cost impact on each of those areas, those are the pieces. And that's my last chart. Important to understand is that my colleagues spoke about how we are de-risking creating a huge value chain in different parts of this value chain, right? I've been part of companies where they've had an [ alloys ] division, but it's completely separate from the other divisions. It is a story into differentiation and creating more value, extending the value chain, going into other products, special products, but it's also a story which is unique to Aperam in the industry. All these divisions are synergistic with each other. The costs and the cash synergies are easy to estimate. So I will walk you through each of the factors. Recycling and renewables is often -- is very evident, One is a raw material, the other one is a key fuel, which is also a raw material. I mean charcoal and [ scrap ]. And they also reduce CO2 footprint. So obviously, they supply our stainless and other divisions. Stainless and Electrical, Europe and Brazil are 2 different regions. However, they are managed in a certain sense when it comes to platforms innovation, technology, scale of synergies when it comes to sourcing because we are making stainless, so raw materials are quite similar. Right? Talking to the big mining giants 1 wise over a scale, right? So we're talking about 1.7 million tonnes of stainless. So Importantly, also ability to leverage the supply chains between the divisions during times of investments or maintenance or specific products. That's the reason you never hear from Aperam, and there is a big maintenance, we don't see earnings will take a hit this quarter because there's big maintenance. Alloys & Specialties has enough spoken about it, but it is an integrated division today also with the leadership journey for investments, which we have announced, reminding you, the cold rolling mill in the middle of France will be developed and specialized to produce products also for Alloys, thus freeing up capacity for its growth to double its EBITDA. The upstream of Stainless Europe is used to produce upstream products for specific products of Alloys & Specialties. And SNS, I will skip because Nicolas has given you the business case on shorter lead tonnes, volatility reduction. And very importantly, capital efficiency of deliveries. That's something, if you spend one minute, if you are a mill just applying to 1,000 different distributors compared to a mill which is supplying 70% to its own distribution network, there is a clear case, you can optimize how working capital is developed as an interface between the two. And as part of Leadership Journey 3, there have been investments clearly made, which has been discussed with you, where we have told how we have invested in MRPs to secure the interface between those 2 divisions to manage working capital much more efficiently. So I'll leave with that sentence, superior synergistic value chain, higher quality of earnings, but also with the fact that these divisions are separate, yet they are a unique combination, which is existing only inside Aperam for our industry. Thanks again. Thanks again for visiting and we'll have questions later. I'll now pass it back to Tim.

Okay. Thank you, Sud. So only a few minutes before going to Q&A. I realize that this Capital Market Day of this presentation have been a little bit rollercoaster in the sense that we have gone from the forest, the birds and the [indiscernible] of Federico to the energy cost and whatever is happening today with the variability, et cetera. been obliged to follow all this long-term versus short-term cycles, imports, et cetera. So it sometimes is a little bit difficult for those who are not every day on the business to follow all this. And so I would like to summarize in -- with a few concepts. We are a business that you understand, and we have the challenge that you understand. As Aperam, what we have as differentiation is our supply chain and the way we look at the sustainability. We have shown you about the improvement plan and all the investments that are today close to starting to deliver. Remember, the list of the investment that will -- that are today in ramp-up and we've become fully operational in [ 2020-- ] at the end of this year and 2023. We are solid and resilient. We are solid and resilient, and this has been proven by facts in terms of results and in terms of cash generation. We have also followed a logic of the business in which this -- the product we are selling have a great future. You have been through the challenge of the sustainability energy and Stainless Steel is a solution for many of the sector that we are fast growing. We have a team with a track record, okay? I'm really an happy CEO when I look at my team because I have people with a lot of experience, but also new guys like Sud, which has a lot of experience in other company but has already [indiscernible]. Our agility is our mantra in the sense that we are adapting every time to the situation. And also, this has been proven in the way we have managed COVID and the way we have managed every kind of -- in any kind of cycle that we have gone through. We have a plan. You have all the details of the plan. It is very clear. You have seen and you will see concretely how this plan to be an actor in the circular economy is concrete [ is ] there. and how the supply chain goes from the upstream to downstream. So you will see the 2 extreme Service and Solution and the recycling. Focus on balance sheet, okay? So they spent so much time that I suppose that is now understood. Our value creation is for all our stakeholders, we will not forget our people. We are not forgetting the community, and we are, for sure, not forgetting our investor. Thank you very much. And then I will start the Q&A after 5 minutes because we have to arrange and let you breathe a little bit before starting with Q&A.

Q&A now in the room. The first question will come from Patrick Mann from Bank of America.

It's Patrick Mann from Bank of America. I'm sorry to be the one to ask this question, I suppose, because it's going to -- it's to do with energy. And I know you've spoken a lot about cycles. But I suppose the main concern that we as analysts are hearing from investors and that we have as well is that this isn't cyclical that possibly there's a structural shift in energy and there's going to be a long term, it's not a normal cycle, and maybe it stays up here. And to something that Sud said is that it's not just stainless that doesn't work at these power prices, it's the whole of Europe industry that's really under significant pressure. So we know that you're resilient and have a strong balance sheet and in a normal down cycle you can manage, what happens in Europe if these prices don't come down or if there isn't a solution. What can you do? Or is it just the case of you move further downstream and you stick to the alloys and specialties and the specialty products?

Okay. So it's a very fair question. First of all, there is a question of how you compare results and cycle in different areas -- in different years. So I would like to make a comparison what has happened in the cycle, which has been 2019 and '20, where we had absolutely no protection. This is remember, 2018, we added the 232. All of a sudden, Indonesia has come on stream, blocked by China and then everything will happen in Europe. And at that time, in 2019 and in 2020, we had no protection at all, the flow to import, price is crushing down, never seen prices of that level. Brazil was not yet performing as it is performing with a new investment. We had partially invested with the Leadership Journey. And this is the baseline. You have seen the cycle in Venetia presentation. Now we are in 2022, and we have to look at the future. And we say, okay, what is different? Different is energy can be structural, more expensive. But in the structure and more expensive, you have, first of all, that only 50% of Aperam is exposed to this. You have seen the graph. You have that -- partially this will be mitigated by what government has to do because today, remember, a part of the energy cost is unfair. It is not true that the cost of energy is at that level. okay? It's a question of the mechanism that has been put in place by the commission and the inframarginal are absolutely not at that level of cost, okay? This is partially what has to be done, not only for us, for the full economy, they have to find the right mechanism, but they will do. They probably also have to address the fact that in the long term, the speculation is not something that is sustainable in the economy. And there is a lot of speculation in what is the gas pricing okay? All this will be mitigated. But still, there will be probably a higher cost. The higher costs will go down in the future. And this is the part that remains as negative, but on a positive -- what you have compared to '19, you have a very strong trade defense. In 2019, we had absolutely no [indiscernible] defense in Europe, 0. We had only [indiscernible] defense with cold rolled in China. In 2022, we have added the hot rolled for China. We have had Indonesia, hot rolled and cold rolled. We have added India, collateral and controlled. We have added anti-subsidy to Indonesia and India, and we have Safeguard. So nearly 90% of the possibility to imports is something like 20%, 25% duty. And this is on the full price. So you have -- from one side, yes, Europe is has an uncompetitive price of energy. From the other side, you have Europe is much more protected than was in 2019, '20. Okay? And I repeat. And as also you have said and this part of our presentation, Aperam is not only production of stainless steel in Europe. Okay? The majority of the revenue of Aperam will come from other segments.

Ioannis Masvoulas from Morgan Stanley. I guess a similar topic. In the past, you managed to reach a [ cost party ]with China, which was a major achievement for a European business. Where do you stand today on that front? How much higher are you given today's energy costs? And do you still think you can be benefiting from this protectionist measures, if you have significantly higher cost base relative to China.

So first of all, Brazil is competed with China, and it is more cost competitive overall, including energy than China. So it's a part of the fight. Second, I repeat, we have a lot of components which are not competing with China [indiscernible] is not competing with China. Alloys is not competing with China, et cetera. These parts are not. Only Europe is left. In Europe, the competition with China is under two fronts. One is the cost like the energy, et cetera. The second is labor. And the third is the raw material. The raw material in Europe in a period where it is normalized is scrap -- our raw material fundamentally scrap, we are more than 90% of scrap. Scrap is more competitive than nickel pig iron. Why is more competitive, very simple. If we cost more, there will be imports coming, which has happened. And all of a sudden, Eurodis production, there is so much scrap that goes down and eventually will be exported. But when you export the scrap, you will compare to the next buyer will be somebody based on nickel pig iron, minus the transport cost minus all the difficulty in managing scrap. They have not used on the spot business, et cetera, is extremely expensive. It is not something which is sustainable. So scrap in the long run is always a competitive raw material, okay. So added's to this, what we have said and repeated. Our Leadership Journey is deemed to be more competitive than Asia using automation, using the know-how. We have a longer know-how than Asia. We have a much better maintenance. We have a yield, which is better from all the benchmark we have been able to do, and we are continuing investing. When you see a plant like the plant we have had in Genk, explain we have shown last year. How can you compete internal with plants which are older or we did not or technology? okay? And this will continue.

That's very insightful. But like I know you've done a lot of benchmarking relative to Asia. Would you have a rough idea, if you take the pros and cons of your business relative to China where you stand today? Are you 10% or 20% above China or.

I think we will never disclose, let's say, competitive methods, never. But I'm really confident on that. What I said and you should be confident that the fact that as Sud has explained, Europe being positive when you have all the [ stars ] which are aligned against you, means that you are completely a different company compared to what you were in at the beginning of the story of Aperam with the same, let's say, external factor, the company would have been very huge negative while it is positive.

Luke Nelson, JPMorgan. Maybe just pivoting towards recycling. Obviously, a lot of focus on the division and sort of some pretty interesting themes over the medium term. In one of the slides, I think you mentioned 9% to 10% margin over net working capital. Can you maybe just again highlight exactly sort of the breakdown of the economics of how that would be achieved? And then I suppose maybe more of a theoretical question, but I mean, how do you think about sort of from our point of view, front of forecast scrap and the outlook for that division, how do you think about sort of a long-term scrap price or something that is inherently waste material. And then the third part of that is market growth as well. I think you had 5% market growth. Was that just an industry comment? Or is that actually sort of guidance for the ELG segment?

Okay. I will let the question on the margins and numbers to -- so I try to give you the answer on the last part. So the stainless steel is growing always. In the last history, if you take the last 50 years, stainless steel has always grown. Why is growing? Because it replaced application with the higher added value. what we have demonstrated today or we have at least shown today is how we believe that this will also be part of the circular economy and the absolute need to have a sustainable solution in the way we consume products. Give you an example, you have a small gift on the table. It is a bottle in stainless, which will be -- it is something which is new, okay? If you look at 5 years ago, probably it was a product which was not existing, today is everywhere. You will see that more and more you have containers for food, which are in stainless and these containers will be also for microwaves. And this will replace plastic. So stainless will grow. With the growth of stainless, you will have the growth of the industrial, let's say, scrap, but not only you have also this life cycle, so the 20 years products that -- stainless has more or less 20 years in average, not for all products, for example, a washing machine has 7 years, sometimes less even. This is coming back. In cars, you have 8 years there is stainless steel in the car is coming back. All this will come and continue to grow with the fact that the development of stainless has grown. Okay? This is the basis of the development of the scrap business. And we strongly believe that with the new countries, which are coming on, this will be even more. Remember that we import a lot of goods. So even if the stainless steel has been created in Asia, the scrap will be in Europe, because the washing machine imported is imported with the scrap inside, okay? And then we will collect the scrap.

Yes. So Luke, thanks for that question. First of all, let me start by saying scrap is not waste. So I'm going to right away -- hit it out of the ballpark, right? So please don't call scrap base again because there are published prices for CRU just similar to stainless, which correlate for your modeling. So that's a fair question with forecast. And that is a valid scrap price correlation discussion if you want to project that for your models to start with. Three points, where has traditionally ELG or any scrap recycler made money, right? The EUR 50 per tonne, which is the question you asked, right? #1 is the fact that they have the access and the trust relationship with these granular collectors and separators of scrap, place like ELG is the first place materials come together in pure play. What does that mean? Any stage before ELG, it is multiple materials in grams or kilograms LG is the first place where titanium or nickel-based alloys come as a pure play, meaning if you're disassembling a blender, it has copper, it has plastic. It has glass even. It has got stainless steel, right? And you split it out into different places and you see the stainless steel and bring it to ELG. So it is a first level of aggregation for supply to upstream assets. right? So there is a value creation because of that. #2 is the fact that their process knowledge which means that they understand where which stainless blend mix or alloy blend mix in the aerospace industry gets used and suitably supply customers with customized mixes. You can call and say, I want x percent this, y percent that, create a blend for me and give it. And they take scrap from different parts, bring it together into it. That's number two. And number three, where they have actually always made money is the fact that end of the day, if you look at it, they have the access to all these small, small mom-and-shop operations, which is not something which happens overnight. There is a trust relationship from which they create value. So metallurgy knowledge, knowledge of the customer and a knowledge of the supplier. This is where they've made money traditionally. Now compared to EUR 55 million EBITDA, we've made EUR 24 million in synergy, which is a high number that we get primarily from supply chain. Basically, we make our order books transparent. They know which specific grades to buy, our scrap ratio goes up, for specific grades instead of buying a blend and adding primary raw materials, right? So that's the reason. We believe in those synergies. And like Tim, Thomas and I said also that we are well on our track to deliver that. Now imagine, but also there is dictated terms that the growth of scrap is based not purely based on existing players continuing to grow, growth of scrap has also [ closed ] on people who are buying primary raw material, changing their habits and moving to scrap-based consumption, all across the world, right? We are talking today about stainless and alloys. You have 51 locations in the industrial hubs all across the world, from Taiwan, Japan, China to Los Angeles spanning the whole globe. So we have the it's like Starbucks, we have the prime industrial location and the metallurgical knowledge and also the access to these materials to get into recycling space. So that's a long-term upside, which we have already stated for us, which we are keen to develop in different metals, right? So that's where we see the growth also coming besides just the increase in stainless usage or alloys usage. So that's, if you want to -- I don't know if you have specific other questions, but that's probably the growth story for recycling.

Sorry, can you take the mic?

So one final follow-up. The EU obviously came out with some potential legislation around the movement of waste scrap, does that -- is that an opportunity or a risk then, I suppose, in terms of your commentary around market growth and if this is an in sort of an introduction of trade friction, how does -- do those estimates, those forecast takes potential disruptions into account?

So the regulation in Europe is not yet done. And the regulation in Europe is a concept that Europe wants to promote is that circular economy is a key focus of the European Commission for the future. And I have tried to explain why should be the key focus of all the industry around the world of all the governments around the world. So they want to bring the condition for which this circular economy became a reality. You cannot have the conditions of a circular economy. If this is based only on speculative behavior on bringing inventory from here and there, et cetera. And so the logic of this regulation, which is not done, is to say, okay, if we want to focus on the circular economy, we have to put the condition for which when you export, you are doing this, knowing that you are feeding a circular economy somewhere, which is good for the planet, okay? Because it's [ illogic ] to say, okay, we want to be exemplary in Europe in the reduction of CO2 and then putting all the condition to transfer simply the production from Europe to another country, which has absolutely not respected for the CO2, okay? This is illogic. When in this months, we have imported so much stainless steel in Europe. We have also imported 7 million tons of CO2 is huge. SP-4 Okay. If you have 1 kilo of CO2 is, if I remember well, it's something like 4 or 5-meter cube of CO2. This [ room ] field of CO2 is only a few kilos. You can image 7 million tonnes of CO2.

Rochus Brauneiser from Kepler Shore. I have a couple of questions. The one is, again, on the business in Europe. And I guess you already talked about the difficulties in the business right now. Can you put a bit more color on the actual situation in Genk. I think there has been some stoppages going on there since the summer. And my impression was that to a certain degree, this was not purely kind of energy crisis matter. It was the kind of destocking topic, which forced you to take out volumes, so what I try to understand now, as you said, the price differential to Asia is closing now. Eventually, the destocking might come to end. Maybe you can put a bit more color when you expect to see this happening. And what this means for the production volumes in the fourth quarter. And when it comes to the electricity price, I'd like to understand how you see this strategic positioning in Belgium right now, you're always stressing it's a nuclear country. But obviously, it's getting a little bit less nuclear. So how is your view on the strategic positioning of Belgium and for you as an enterprise? And the second question is on the Brazilian forest. I think you flagged again these 26 additional hectares of forest, is that a number I'm comparing with the 75, which is the current size of forest. So it's a third expansion, and what you're doing with that extra coal? Is this export it as is sold to third parties or to what extent you have still a kind of a gap internally for usage?

Okay. So you are fully right on the fact that when you read on the newspaper about Genk, you have to think at variabilization and at a response, a responsible response to the situation of the market. responsible in the sense that the first tariff, let's say, industrial love to continue to produce at full speed every time. But if you do this in a moment in which the market is not ready to absorb volumes and the costs are extremely high, it is totally [ logic ] and you consume cash for nothing, you burn cash. This has happened many times in the past, and this is part of what we call our agility and capability to variabilize cost. So in front of huge imports, a market which is not demanding because there is a destocking phase and in front of the fact that you have huge cost of production, the best way is not to bring inventory up of raw material. We could have think -- thought differently and say, okay, cost energy is extremely cheap, the raw material is extremely cheap, we continue to run a little bit more. No, that's not our response, Okay? And so it is a mix of the 2, but it's fundamentally the way we address the cycle we have the lucky to be electrical, so we can switch on and switch off plants without any problem at any moment, okay? We have not this energy which have other kind of way of producing, like when you have a blast furnace, you have much longer [indiscernible], you cannot switch on and switch off, okay? We know this is the problem. For us, it's not the problem. And so -- and the other misunderstanding is Genk is not closed. We use Genk, we reduced the volumes in Genk and an we have reduced [indiscernible] an important factor due to these 2 elements. Maybe, Frederico, you want to answer on the forest?

Yes. So your question, if it's -- this is when we flagged this 256,000 [indiscernible] this is part of a strategy of growth. And this comes with the slide of Sud when he says what kind of M&A we are looking at. It does fit our business. We have a scale that brings a lot of synergy when we add more surface to that. And then the second part of the question, what we do with that. We have 2 different moments. In the first moment, this additional area would mean competitiveness. Today, we cut our -- sometimes we have to cut our wood a bit before the ideal age of the wood. So in the first year, it would bring additional competitiveness that we must remember, as Sud also said, it's much, much more competitive today to operate in [ Chaco ] than in Coke. Coke had its price multiplied by 3 in the last years. while our [ charcol ] is an OpEx-based business. So this additional land in the first moment would bring additional competitiveness. And then eventually, in the future, we'll be able to sell Chaco. But when we say -- so Chaco, I would say this is more to work on our scope then as a business in chartitself because it would be a way, I could support my suppliers in there, which was CO2 of Scope 1 and 2 to supply to me a lower CO2 content raw material. Have I forgotten anything then?

No, it's okay. [ It indicates, ]remember, we believe in the fact that the environment and the challenge of tomorrow are there for those who invest in the circular economy. This is part of the investment. We are investing in ELG. We will expand the ELG and we will expand [indiscernible],kay? Because we know that there is a growth.

And on your question on volumes, Rochus, for Q4 on the bridge. I believe I showed it, but I'll repeat it again. We do see, for us, this Aperam, a slight improvement in volumes in Q4 compared to Q3, right? Notwithstanding the comments of destocking for the H2, we see for ourselves, I can speak for us. That's -- I showed you a small plus on that, right? So that's what we see for Q4. Okay.

Just I would like to send a message to the people who are in the webcast, so they can also put their question in the -- there is a box in the webcast. So then [ Torsten ] will transmit the question. Sorry, can you.

Yes. My question is also a follow-up on [indiscernible] and get a bit of an idea on the [ ELG ] credentials. I mean you said you have this 126,000 hectares, of which I think 50,000 or so is natural. Let me get a bit of an idea how much of that is actually mandated by law or the regulation because I think there's also a portion which is necessary no matter what you do. And then maybe also understand a bit on what happened or -- what was this forest land before you started to cultivate it? Was that also a forest or some other farmland, or how has that evolved? Also with the new 26,000 hectares that you plan on cultivating. And then also, you mentioned a lot about -- you talked a lot about technology and genetic seeds. Maybe understand a little bit, is that cross pollination of seed trade? Or is that kind of -- are these genetically modified seeds like these F1 hybrid seeds we see in corn crops, so I mean what exactly is that you're doing there?

Yes. Let me start answering from the end. So it's cross-pollenization. There is no genetic manipulation at all. Actually, FSC does not allow it to be made. So would we do genetic modification, we wouldn't be FSC-certified. So first point. The second on what it was before we planted 40 years ago. It's what we call [ Sihado ] in Brazil. There is no translation in English, but it would be the Brazilian Savanna, so there was no forest at that area of the country. It's quite a dry area, if I could say so. So even not many cultures can be planted in that area. And the eucalyptus we developed was a special one to be able to survive to low level of rains we have there. And then what is missing on my...

Just on the regulation point...

Yes, true. Yes, indeed, we have -- I don't know the number by heart. But what I can tell you is that if I'm not mistaken, is 25% or 30% of what you have as planted forest, you need to have as non planted. We have more. We have more -- we use what we have in our environmental license today. So we worked to milestone that how that we have used, but it's more than the minimum asked by the law.

Maybe just staying on the Brazilian side first, given that the conversation is ongoing. Just on that point. So what's the time scale to get to basically exploit that further 26,000 tons. And I think you talked about M&A in that context. Could you maybe just elaborate on that? And maybe also just talk briefly about how you sort of run the business in relation with ArcelorMittal's loans business? Because I remember, I think, originally, the assets were together, I think you separated. So is the plan basically when you expand it to potentially sell into that business? Is there an opportunity? Or are you basically just doing this in a collaborative type of way? And then lastly, wouldn't that mean that actually your CO2 balance for the Brazilian side of the entity actually turns negative?

Yes. So on these 26,000 hectares, it's -- part of it is already forest. Part of it is reserved due to the previous question as a part of it has to be kept. So it's not a land that we will have to produce forest from 0. Then the second point on ArcelorMittal, indeed, when we were after the merger of ArcelorMittal in 2006, we merged these operations as well. But then since the spin-off in 2011, we are a separated company. We even eventually can enjoy some synergies. We have already produced charcoal then. But today, it's 2 independent to independent companies. There was a third part of the question that I forgot or...

Just on this year to balance whether that would turn negative once you basically drive that growth.

Sorry. Could you repeat the question?

Would your CO2 balance for Brazil actually turns -- because at the moment, you're neutral.

Yes.

And I thought, basically, if you keep growing that, obviously, I guess your balance should be turning negative.

Yes. So far, what we calculate our CO2 balance based on the footprint we have. So if this -- what we can see is this what we our CO2 balance based on the footprint we have. So if this what we can see is in the mid run, we are still 0, the whole operation is neutral, but not yet negative. But we do have projects on efficiency on -- and even the growth of the forest that could make us become negative. So -- but today, what we have assured in our pockets is the neutrality.

You know how it works. I would like probably for nonexpert to try to define how it works exactly. So to do an industrial process, you need carbon, which is [ sea ] is the atom of carbon. And you combine with oxygen to make it. So this carbon is normally taken from mines. When you take from mine, you take from what was the existing underground, you combine with oxygen and the result is CO2. And so there is an emission. When you do charcoal, what you do. In fact, you take from the air, CO2. You put this and you store this in the trunk, in the root and in the leaves. It's clear data. We take only the trunk, we carbonize this with its own energy and we put in the meltshop. So the carbon for the blast furnace is coming from this trunk. Leaves, root et cetera remains as the carbon capture, remains on the ground. And then you regrow the forest and you capture other ground. So all in all, the minimum is that you are neutral. But in reality, you are capturing from the atmosphere, more than what is needed for the industrial process, okay? This is how it works.

And just maybe just briefly, given that we talk about that. So you would be able to also show that in your reporting technically with...?

Yes. We have already done. In the sustainability report, there are all the metrics for that. And they have been certified. So it is not only FSC, but we have the certification done by our auditors and with expert auditors of this.

And the M&A question, Bastian, I haven't forgotten it. Vanisha showed the different investments. There's a clear time line. We've set a target of 2025 for this growth, right? So intensifying and so. So that's the target date. Of course, we can achieve early than the target but, yes.

Okay. Then just lastly, coming briefly back on the energy crisis in Europe. Sorry for that. But I'm just wondering, I mean, given the situation, obviously, we may be in this for a much longer couple of years potentially. So I'm wondering, has this prompted any process for you internally to maybe review and accelerate your strategy of growing your exposure to renewables. I guess it's obviously not easy to probably find proper PPAs at the moment, I guess you won't be the only company. But is there any process going on for an acceleration of that part of your strategy?

Yes. What we are doing, we are focusing all our investment in the energy saving, okay? You have seen a few KPIs. For example, the fact that the investment in Genk is around 30% less energy intensive. The same, it is 40% in what we are doing in alloys. All our investments are in this direction. You have seen last year that we have the second biggest solar plant in Genk, we will be doubled, doubled this year. We are doubling all -- we are building other solar plants and wind power. But the big part is coming, to be honest, from the energy saving. And so our investments are focused on energy saving, which is the first, let's say, leverage.

Alan Spence from Jefferies. On Services & Solutions, how quickly can you reorient the portfolio mix of those customers to the smaller and medium-sized ones where you generate higher margins? And then a second one, a quick one for Sud. Just your comments around Europe remaining profitable for the second half. Does that mean you'll be profitable in both Q3 and Q4 or just the sum of those 2 quarters?

So first for Nicolas, about customers and then Sud.

Yes. So sorry, can you repeat on the small and medium customers, what was exactly your question?

How quickly can you move the portfolio of your customers more into those -- or more to servicing the smaller and medium-sized customers and away from the larger ones, as you highlighted, you generate much higher margins from them?

Yes. So we have moved already a significant part of our portfolio toward the small and medium customers. And we are doing that simply because we are able very efficiently to match their small orders with a very short lead time. And so that's the way we move towards those customers.

It's not easy to answer to your question without disclosing things that we don't want to disclose, in fact. And it is clear that we are in an area where we believe that our business model is the winning one. Services & Solutions, by the way, is nearly 100%, is close to 100% of the transaction are done through our site, Aperam, which is something really differentiating from the rest of the industry. So sorry, but the instruction has been done at Nicolas not to be to put on the market some sensitive information like this. But the speed is very fast. Once you have the competitiveness, you can get to the market you want. . And what is the point is, okay, but show me the competitiveness, how can I understand that you are more competitive, and this is the reason of the visit of tomorrow. And then the second part is, Sud.

Yes. So yes. So in terms of just energy cost, if you look at that perspective, every quarter is positive for stainless in deliveries in Europe, consolidated, right? So you have to keep in mind because I did mention clearly that there is 1 moving part, which is the value of raw materials. So -- right? So if value of non materials dropped drastically, there is going to inventory valuation. So that's the reason we always talk about ranges, right? So -- but just from the energy cost perspective, yes, both quarters are positive.

Yes, I -- Yes. I guess, three questions. The first 1 is on that 30%, 40% reduction of your energy cost that you achieved so far say that by 2025, energy prices normalize. Would that become a benefit to your current profitability target? Is it something which will actually leverage above what you're contemplating for '25? The second question is on the -- we're seeing in North America quite aggressive or rapid increase in activity in petroleum in forage and so on. Are you seeing a similar kind of development in Brazil with like maybe the Brazilian petroleum industry ordering more and more tubes and is that a big leverage again on your 2025 targets? And the third 1 is on the CO2 delta with the agents. At one point, you get the benefit of that low CO2 emission. Is it in the future based on whatever carbon rates will be imposed on them? Or is it on a price premium you will be able to achieve compared to these imports?

Okay. I will let then Frederico discuss about Brazil. First, today, we are discussing what we know and what we are engaging on. We have promised you EUR 300 million more than the average [ 16 18 ]. This will be done. Market can be volatile, can go up and give also further [ upside ]. You are right. This could be a further upside because we are strongly investing in reducing the consumption, strongly investing in having the most efficient cycles. So if all the energy, et cetera, will go down, this will be an upside because we will be in advance versus what was our previous target in terms of decarbonization. . And going in this subject, yes, our footprint is 4 to 5x lower CO2 than Asian production, which means that Asian producers have something like, let's say, 6, even 7 tons per CO2 on top compared to our production, and we will [ not ] reduce. Today, the CO2 cost in Europe is around EUR 90, EUR 100 per ton. Whenever there will be a CBAM based on this cost to establish a level play field, then we will have this part, which will be, let's say, a way to recognize all the effort, all the investment that we have done in Europe to be there, okay? And will be a premium. The other premium in between will be the fact that [ consumers ] start to understand that being greener is not an option. We have had a few conference, just recently, we have discussed with customers and they start to understand it. They want it. They are in between the saying, okay, I want it but I wanted to pay us in Asia as usual. I want this for free. Okay, for the moment, there is not a big premium. But when there will be a mandatory obligation for them also because their customer will ask them, there will be a prime. And we start to see it. We start. We are at the beginning. But it's clear that the real premium will come from a level playfield. A level playfield set is absolutely necessary because if there is no incentive for the Asian player to go green, they could produce much less CO2 when they produce nickel pig iron. But they don't, they don't care. Nobody asked them, okay? Why they should. But if there is a level playfield, and there is the right CBAM, this will happen. They will decarbonize. They will take the time, they will invest. We are far ahead of them because you have seen our investment route is very easy. It's EUR 20 million per year to 2030 and will be in advance, okay? Now, Fred.

I think answering on oil and gas in Brazil. Brazil, oil and gas industry is based on deep sea exploration. So the investments are long term. And then we don't see any new ones coming just because of the 3 center trend. But what we can say, and it's interesting to see the figures is that this business is new for us. a bit more than 10 years ago, we didn't have any volume for oil and gas in Brazil. It was all important, and we developed internally. So today, we have a reasonably high market share in this application in Brazil. That's to say that -- again, investments are in the long run, and they are happening. And if this is a wave of new investments to come, we will enjoy it a lot.

Tristan Gresser from BNP Paribas Exane. I just wanted to ask you about, Nicolas, specifically, you did mention it in this presentation, the low carbon steel demand, and I think you touched a bit on that. Can you just tell us a bit the interest from customer and not just end customer but distributors, where are you at, at the moment? Given the topic is really growing for carbon steel, I was wondering for stainless, how advanced you are, if you're ready to do maybe certificate-based sales. And also if you have any sales target? And that's my first question.

Okay. So we see a growing interest in the market. We see let's say, 2 kinds of people, some of them are interested for marketing reasons. And you can see that, for example, in the white goods because for them, for their customers, it talks to their customers to be green, to use a greener product. And then we see another type of markets such as, for example, building and construction are also in the catering market where you have big groups. Here, you have either a driver, which is a legislation and the legislation is pushing you to use a greener material and we see this trend in the market or the end customers of those capturing groups have a very strong ESG focus, and you see that, let's say, more and more in the market. So we -- as we said, we are already very green when you compare to imports. And you can find on our website how much [ Milano ] could have been saved if everybody in the market will have imported would not have imported but will have used domestic material. And this is already an interest for the distribution. And so some distributors are talking to us to understand what is the level of CO2 they have in their current purchase? How does our calculator work. And then they are also marketing in the market and explaining to our customers the difference between domestic production and of course, what you can find, for example, in China. We have invested also a lot in what we call the EPD. So we are able from external sources to justify what is the content of CO2 that we have. We are also able, of course, to give the level of scrap of our product. And this we provide to our customers. And so we are certified and they know they have a reliable source in order to understand how much CO2 we have in our product. And after, we are also able to produce even more greener product and thanks to our synergies with ELG.

And my second question is a bit more short term. You obviously are being hit by high energy cost in Europe. I'm struggling to understand a bit what prevents you to go to your stainless customer and ask for an energy surcharge as you've been doing for your large business. Does that mean that demand is really poor at the moment? Or you fear reopening [ ER ] the by doing that? -- but I can understand that 6, 7 months ago when base prices were really high, was challenging to do that, but now base prices have normalized.

So you are right. The point is that today we are in the destocking phase. Fundamentally, when you say destocking phase is meaning that whatever it is, spot demand is blocked, okay? So we have no clear price reference. Whenever there is a contract, our customers are expecting contracts and the price has been established in the frame of the contract. And so this is running smoothly. Now I cannot give any guidance on what will be our price policy for the future. What we present is what we know for the moment. We are not at the earnings release of Q3 where our guidance on will be more specific. We'll have a more, let's say, a clarity about what the market is. So we stay on what is possible to discuss today.

Yes, I have a few questions. It's Maxime Kogge from ODDO. So maybe the first is on Q3 EBITDA. I don't know to what extent you can comment on that, but it's pretty reassuring to me to see that EBITDA is still seen at [ EUR 120 million ] -- [ EUR 115 million ] with what you have indicated in the Q2 results presentation. But still, I mean, given everything that has happened in July and August and in September, should we assume this EBITDA to be rather in the low end of the range? I mean, can you...?

You go ahead.

Look, when we spoke about is an outlook also we said, right? And today, we are confirming that range and where we land on that range depends on inventory valuation. This is what we've said, right? So on 30th of September, raw material prices, right? So that's going to determine that. And we've been explicit about it. So there's nothing secret there.

All right. And I had a question, too, on the pace of improvement in EBITDA by 2025. So it is EUR 300 million. So it's basically unchanged from what you had said last year. I just had a question on the phasing of that. How much has already been achieved so far? How much has -- will be achieved by the end of 2023, which was beforehand, you Phase 4 of solidly and what will be achieved then in '24, '25, which used to be the Phase 5 of your leadership on it previously. Can you give a bit more granularity on that?

So it is impossible to go granular also because you have to look at this in this way. We take a reference '16, '18 because it's a reference in which you have a normalized condition or medium condition of the market. But you have seen 2021 is well above what could be our forecast for 2025 because the market was different has been different. What I can tell you is that the large majority of the investment that we have done for the EUR 300 million are coming in 2023 and 2024, okay? This is the large majority. Part has already come, which is ELG, for example, has already come. Another part is Genk, which you have seen running and so the ramp-up is finished, now is running. Then all the other investments are there. Some will come at the end of the year, in particular, in Brazil. Some will come mid of next year in Brazil and Chatelet. Some will come in the middle of next year, which will be DoD and Genk with all the recuperation of heating because DoD, I have not said before, but the DoD and Genk will be a fantastic opportunity to boost the return of this investment because embed there is a big cogeneration of the 2 ELD and the [ electrical formats ]. And with the actual price of energy, this is fantastic. Han is there. You will see it tomorrow. And all the other investments that are in the footprint of alloys that are in the footprint of the cold rolling mills in Gino will come in the middle of next year. So middle of next year 2024, we will have the full ramp-up of the investment launch. We are not seeking only on the past investment that we are launching. We are discussing internally what we will do for the next step. And as I said before, part of our focus has shifted to energy saving energy consumption accelerating of the CO2 in the same way because part when you save energy, in the same time, you sell Co2.

Yes. And just a last question on M&A. So you seem to be adopting a more cafes M&A than you used to. So I was wondering if you could still envisage the big acquisition that you had in it before summer for one of your main competitors in Europe or if the context that so dramatically change that it was no longer envisageable [ contemptible ] you were rather focused on smaller deals.

So Sud has already given the answer M&A has a sense. Sometimes when they have a sense, they are examined and put in the attention of the board and we decide with the Board, if it is the case to do it. There are M&A that we have done, other we have not done. And I mean, today, there is nothing more that I can discuss because we have no M&A that can be openly discussed being a strong company, what does it means? It means that you have a lot of freedom to do even M&A even of the size that you want but we have also the freedom and intelligence to this at the right moment. And when your priority is the right one, okay? Today, I will say that our priority is we are confronting to what we have launched. We want to be an actor of circular economy. This is our focus and our priority. We need to reduce the energy exposure, the cost of energy. This is our priority. We need to ramp up all the investment that we have done this is our priority. Can be, can be, in the future that we will come with other creativity.

This is Krishan from Citigroup. The focus today has been like ELG, but I think the most of the question has been on energy. I'm just trying to refine why understanding the moneymaking process in this ELG. So just bear with me if I'm being a little layman types. So your first instance of moneymaking in ELG starts when you buy the scrap at below-the-market price because that scrap is not in a usable condition. So that is the first instance of you locking in the money or locking in the margin because you bought it at a lower than the market price. And the second thing is you sort it out and then you convert it into a usable conditions so that it can go into the meltshop and then you charge a little bit of a premium for that. So my understanding is that the EUR 50 per ton, which you are talking, this is the activity where the EUR 50 per ton is actually coming from. And then the variability between EUR 20 to EUR 80 basically comes from that, okay, you have a 6 weeks turnaround time, but then the prices would have changed in those 6 weeks? And that's where the variability in the earnings come from.

I don't know if you want but it's so clear...

You can start with where they make money and then I can answer the second part, yes.

H Okay. Sure. Any business has its own typical profitability. If you don't have some kind of profitability, it disappears, okay? You have seen before that SNS, for example, as kind of profitability as around EUR 80 per ton. This is logic because this EUR 80 per ton correspond to an average ROCE of 14%, which is not bad as a return, but with a spike at 42% also [ in ] the minimum time. For the business of recycling, we are competing in the same area with others, which [ has ] to grant a minimum return and the logical return, which is the EUR 50 per ton, EUR 50, EUR 60 per ton with some spike when the market is good, EUR 70, EUR 75, when market is down, it's EUR 30, EUR 35 per ton. This is logic. Now -- and this is very important. The business model of Aperam is based on P&Ls. And ELG is run as an independent company and will continue to have this market price at which they buy from the market, they will not buy much better than other. They try to be smart by the right moment, et cetera. They have some let's say, inside from us as a supplier, we know more or less how the market is going. So we can have, let's say, from service and solution, which now the customers the mills that now this is the situation of inventory to the market, where is the right moment to buy because there is excess of material or shortage of mate. So this can be a synergy. But fundamentally, they buy at market price. And then there is a strict rule in Aperam, which is whatever division you are selling and buying at market price. Service & Solution, all the result of service and solutions are based on a pure market price. There is no transfer price, which is not market price. Also for a fiscal reason because if you cannot, for fiscal reason, have a transfer price, which is not based on pure market price. But for us, it is a kind of, let's say, logic diamond the logic. There is nothing that is done without a logic of market price. So when ELG sells to the mill, itself at market price and will do the same EUR 50, let's say. Where are coming the [ synergy ]? The synergy are coming to the fact that some part will come from a better understanding of the market, both parts. So it is parallel. It's more like this. So there is no -- nothing that you see in ELG. The other part is that we buy the best product in terms of TCO. Buying the best product in terms of TCO, you cannot understand well without having seen this product and this is interesting [ tomorrow ] because it's so large, the variety of products. And you have to understand that in a meltshop, you reduce by 1% the consumption of energy, especially today, it's huge. If you have a yield, which is -- in the scrap, you find everything. You can find plastic. You can find the ground, you can fight everything. If you have a better and cleaner scrap, you reduce even by 5% of your consumption of energy is a huge amount of gains, okay? If you reduce the use of ferronickel, which is more expensive than the nickel and scrap is another big advantage, et cetera.

So on the question of the range, right? So I hope that was a clear question, but let me just stress 1 thing, despite what Luke says, it's not wasted. It's a real market, right? It's supply and demand, both special alloys and like Tim explained. Which means that purchasing arbitrage is not the primary driver of the EUR 50 per ton. You can take it out completely, okay? There's marginal, if anything. But there is knowledge-driven purchasing like Tim said, because of our order books and access to customers, but there's no purchasing arbitrage. That is not -- if there was purchasing arbitrage, this is a crowded place. I mean we won't be the only smart guys around, okay? We are humble enough to say that we make money from metallurgy blending mix connection to suppliers, okay? So there's no purchasing arbitrage. Second thing, the variance you saw in that chart between '20 and '18 is cycle. The 20% is from COVID times, okay, when the cycle was super low. That's -- it's only the cycle effect, okay? So it's not purchasing arbitrage just to be clear.

The second question is on the guidance. I mean, you've been making a lot of effort to convey to the market that 2016 to '18 is sort of a baseline and you probably wouldn't go down below that number, and then will add EUR 300 million on top of that. So is it -- I mean there's a Slide #19, which Visha presented where you have given peaks and troughs. There's kind of a conflicting message you'd say that the trough is going to be higher than 2020 next year. So what is the message because we are in that down cycle now. So is the message clear and loud that, okay, yes, we are in the down cycle, and we will make that 2016 to '18 come what may, plus if the market improves, that probably is an upside?

So I think we cannot give you more guidance than what we have said, which is when you want to understand the cycle you have to take some reference and say this company in a downward cycle, this company and downward cycle has performed like this. Now what are the difference between this cycle and the new one. And what I said is mostly you have a defense is all the leadership journey we have then, [indiscernible] and the energy. So you took an assessment of what will be all this combined, and you see what will be the cycle.

And Tim, to add to that, just to be very explicitly clear, and we were clear last Capital Markets Day, and I got some helpful questions from other colleagues over the last year also, Krishan. So for you specifically, 2016 to '18 is what we chose as a typical over-the-cycle time. We did not guide that we will go to 2016 or '18 period. We said -- all conditions being normal 2016 to '18 in the last 10 years, if you look at it, is typical macroeconomic cycle. And we said that is the average macroeconomic cycle for the industry. And we said, if that kind of a situation exists, we would produce EUR 300 million more until 2000. So that's 1 thing. And second thing, Vanisha's chart, I think, was quite evident in saying how we are looking at the next down cycle, okay? So 2016, '18 is not a guidance, it is -- macroeconomic-wise, we consider that as a normal representative period for a cycle over the last 12 years for the stainless and alloys industry, just to be explicit.

We will close and conclude Q&A. Tom?

I'll try and give you quick, I suppose, since it's been a long afternoon for you all. Maybe one for you, Tim. You spoke very much about the benefits of using scrap instead of primary production in Europe. But interestingly in the slides, it looks like scrap demand growth is highest in China and India. How much of a risk do you see that in terms of Asian producers growing more competitive? And is there an opportunity perhaps for you to maybe get involved in the scrap side? And then one for you, Sud. So as you said, the buybacks have been the most efficient use of capital for you. I think most would agree that valuation is not demanding at current share prices, but buybacks is fourth, on your capital allocation policy, could we think about it maybe being prioritized, slightly higher while share prices are where they are?

Okay. So the use of scrap will increase in China, luckily for the world because this means less the CO2 consumption. It will be a long journey because from the actual [ 30% ], [ 35% ]. They need to increase a lot in the collection, in the sorting in all this industry -- and this is a growing industry in which we are already part of it because we have a scrap yard not in China, but close to China, and we are -- we see that this is a potential area of growth for us. When China will be on par with a long period on par with the scrap ratio of Europe, final, we will have a level play field, and they will produce with the low CO2 content and everybody will be happy, but it will take some time. It will take some time. Because today from -- in the developing countries, they need the 20 years of, let's say, life cycle which maybe can be shorter in China, but still is a long period, 20 years ago, China was not in the market nearly it was a small country for sales. For share buyback, I'd let Sud.

S thanks, Tim. So Tom, this is an answer you've gotten from me in the last 3 years, and I'd say that again. The core of our financial policy is a progressive dividend policy. The way we, as management, believe in the growth of value which we can generate for shareholders is to increase our dividends progressively like we did at the beginning of this year after 11 years of our existence, right? So this is why we have put forward and Tim's chart clearly said this EUR 300 million is going to translate in cash, and as a result, is value generation. So that's the core, right? So that's the primary value creation. Share buybacks have been our preferred instrument between share buybacks and special dividends because we believe, and it's your words not mine, because it's your job to value the company that we are undervalued. And at this point of time between -- but it's again #5 or #4 because we talk about excess cash. We do not hold excess cash for the future. we return it to the shareholders. That's the core of the message. What instrument we chose to do it depends on what the circumstances are. And we have a long way to go for that chosen instrument to change. But core of the financial policy is to progressive dividend policy of Aperam, right? Just like in January, we increased it by EUR 0.25 per share.

Okay. Thank you. I have to -- I am -- I admire you because you have been sitting here nearly 5 hours with us. And it is incredible. And the quality of the question, which are mixed within long term, short term show that it is of your interest, what we have explained. So I thank you very much for what has been happened today. I know that there are still many questions around, and I'm sorry, but as it is a webcast emission also, we have to limit the time at a certain point. You know that we have a dinner. So we will have the time to continue our discussion around this. It is always a pleasure to have you. This year has been an extremely large representative that is coming and tomorrow also. And so I wish you a good piece tomorrow. Please be careful. All the industrial plants are, let's say, you will be with people which explain you the safety, et cetera, but also behavior -- the personal behavior will be important. And enjoy the visit and thank you for the attention. We are a company which is really focused on the future with a capacity and the resilience to manage the cycle. We don't see all the cycles. We are -- I hope we have framed you this serenity, even if, of course, there is a lot of work to be done in this kind of situation and be granted that our story will continue successfully as we have done in the last 10 years. Thank you very much for those who are here and those which were listening in the webcast and have a good dinner and good [ is ] tomorrow.