Companhia Brasileira de Alumínio (CBAV3) Earnings Call Transcript & Summary

Hello, everyone. Good morning, everyone. I'm Amabile Silva, the IR Director at CBA. Welcome to our earnings call for the fourth quarter of 2022. Today, we have Ricardo de Carvalho, the CEO of CBA; and Luciano Alves, the CFO and Investor Relations Director. We'd like to let you know that this event is being recorded, and all participants will only be listeners during the presentation. [Operator Instructions] This event will be -- the presentation will be available on the Investor Relations website. And before we proceed, I'd like to say that any statements here are just expectations or trends and are based on some hypothesis and current perspectives of the company's management, there may be significant variations in the results and future events, which do not represent a forecast. So the actual results could differ significantly from those listed in these statements as a result of many factors such as the general conditions and economic conditions in Brazil and other countries, the interest rate levels, protection measures in Brazil and in other countries, changes in laws and regulations and general competitive factors nationally, globally or regionally. And now I would like to pass on the floor to Ricardo de Carvalho. He's going to be talking about the main highlights in the fourth quarter and in the year of 2022. Please, Ricardo?

Thank you, Amabile. Good morning, everyone. Thank you so much for participating today in another earnings call at CBA. I'd like to start off saying that we have some highlights for 2022. The last year was really involving a lot of volatility and uncertainties in the national market -- international market. We've noticed that over the past few months, there was a significant increase in prices of many different raw materials that are very important, such as power, caustic soda and Coke and other aspects, which kept this cost curve for aluminum a little higher and steeper. And so as a consequence, the industry's margins were very pressured. In the first semester last year, the LME was levered by the recovery in the demand and especially the fears in the [ Russian metal ] that did not take place as expected, but with this expectation, aluminum reached $4,000 per ton. And then it dropped until the end of the year to about $2,100 per tonne. So it even reached this point, right, $2,100. Despite the market challenges, we were resilient and we were able to have favorable results that were better than the average in the industry that we've also been advancing in our strategy, performing the investments or divestments as necessary as well as entry a new market segment with the acquisition of Alux. And we also had a follow-on with the objectives of improving liquidity in the company, reaching an ADTV of an average of BRL 50 million. Besides this, CBA B3's stock entered all of the ESG indexes for B3; GPTW, ISE and others. So on ESG still, it's important to mention that CBA was listed as in the climate change index as well, an important achievement and benchmark. Finally, we announced a change in the organizational structure in the company that will start being valid from May 2023. As you all know, I won't be the CEO anymore, and I'll take on the position as a board member, and my successor will be Luciano as well as Camila Abel, which will be taking on the role of CFO and Investor Relations as well. Now I'll pass on the floor to Luciano who's going to bring in more details on the aluminum market and CBA's financial performance.

Thank you, Ricardo. Good morning, everyone. I will start giving an overview of the aluminum market globally. So in 2022, we had a deficit and stocks below the levels expected to be considerable. But we had a [indiscernible] of 129. We could say the market is pretty much balanced because of the results of considering the energy crisis in China and Europe were offset by a slowdown in the aluminum consumption. The industry's dynamic was very different when we compare the first and second semester. In second semester we had an increase in inflation, peak in interest rates and other restrictions that pressured the consumption of aluminum a lot more, and that's why prices appear to be a little more pressured. There is still some uncertainty but there's a perspective with the opening in China after the flexibility in the COVID 0 policy. So there are still some other restrictions and other cases with cuts on production due to energy crisis. So on the next slide, we can see how the premiums and prices of aluminum behaved in the last few months. So in the beginning of 2023, the news on the reopening of China brought in some optimism, making the LME that was about $2,200 would go over $2,600 per ton, but the recovery in the demand in China is an important driver for prices, but the speed in which this will happen is still uncertain. So all around the rest of the world, the concerns with economic growth are still present, although they are smaller than a few months before, providing some kind of [indiscernible]to the LME. About the regional premiums, the averages observed in the fourth quarter were smaller than the ones in the previous quarter and in the same period of 2021. The reduction in international freights and the uncertainties on the demand made the premiums follow this drop track record in the last months. Another important factor was the decision from the American government to start the [ rate ] of 200% on Russian aluminum that will start being applicable from March 10 onwards. These fees are going to be applied on the aluminum, like the billets and also other aluminum products. The imports of aluminum -- Russian primary aluminum were about 200,000 tonnes, about 5%. However, this is not that relevant. So how -- but it's still not clear what will be the impact for the global prices. There was no major changes in the LME after this news. And according to CRU, it's possible that the deployment of these kind of fees could generate some volatility in the American premium. On Slide 6, I want to talk about the cost in the industry. So in the fourth quarter of 2022 the margins of the smelters. We're still very pressured. As you can see, there's a drop of over 50% in regards to the margins in the fourth quarter of 2021. So there are very little variation. Although there was a drop in prices in some raw materials, but even with the drop in aluminum in the fourth quarter of 2022, prices went up again because over 40% were operating -- refineries were operating with prices above the international costs. And when it comes to the energy prices in countries, excluding China there is a reduction in regard to the prior quarter, but prices are still high compared to the fourth quarter of 2021 in China, the price of energy went up again compared to the third quarter. And there is a worsening also in the energy crisis there. Another important input is the anode paste, which is considering basically the international prices that are still high for coke and pitch and in CBA, we produce our anode paste but we recently had a drop in the quality of this input that has been impacting the costs in our furnaces and to improve this, we developed a blend with [ petroleum, coke and pitch ] and this imported material is a little more expensive. But besides the impact in the price of the raw materials, we have this additional impact that remains up ahead. To summarize this, we still see a structure of costs. It's really higher for the global industry with a good part of the smelters operating with costs above the LME. And despite this pressure, CBA remains resilient following the first quarter of the global cost curve. On the next slide, I'm going to talk about the Brazilian market. In 2022, the aluminum demand had a small reduction, but still at a very healthy levels in 2021, the demand had gone up a lot, over 10%. So the important -- there was [indiscernible] in the measures for restriction in COVID, and that's why it's pretty high comparison basis in regards to 2022. So the consumer goods sector had an influence of a small drop, but the demand for house renovations is still pressured, and both segments were really levered in 2021 after the recovery post pandemic. Now with the increase in inflation and dilution of the benefits, we've noticed a correction in this demand. Some other sectors that are also performing very well, like the auto sector and the packages, especially for the flexible packaging and the reduction of the semiconductors production of light vehicles went up again, benefiting the consumption of aluminum. In the fourth quarter of 2022, we had some increases in imports, but volumes are still lower than what we expected in 2021, the level of imports were increased due to a stronger domestic demand. And when it comes to the Brazilian premium, we had a drop compared to the same period in 2021, following the same trends of the international premiums. But despite this, it is important to mention that the Brazilian premium had less volatility. In '23, we still have a scenario of a lot of uncertainties, politically and economically. The highlight for this quarter was a decision from the government to implement a fee of about 15% on imports from sheets and slates and about 30% of the volume is imported. And in the next chapter, I'm going to talk about the performance of the financial indicators at CBA. In the fourth quarter of '22, the volume of sales was stable, about 122,000 tonnes and the drops in primary volumes that were offset by an increase in recycled sale, recyclables, and on annual comparison, the volumes are very similar with the first semester a little weaker and recovery in the second semester. In primary again the volume of sales in the quarter was up 5% lower than the fourth quarter in '21 due to the auto construction sector, which took a step back in some of the income transfer program and increase of the inflation. And with this, we had a drop in the sales of billets but this was pretty much offset with the other sales in the market. And in transformed to industrialized goods, this was mainly pushed by sheets. And on the other hand, we should also mention that the increase in sheets, especially for flexible packaging and [ HHF ] took place in this quarter. When an important highlight in the recycling business, an increase of the 30% sales, especially considering the integration of the volumes of Alux, we would assume. On the next slide, we're going to talk about our financial indicator performance. 2022 was a year with all-time highs for CBA with a net revenue that's consolidated about BRL 8.8 billion, an increase of 5% compared to 2021, the adjusted EBITDA is about BRL 1.6 billion, a growth of 6% compared to '21 with an EBITDA margin of 18%, stable on our net income that's historical of BRL 957 million versus BRL 838 million in '21. The increase of 11% in the average aluminum price in the LME in 2022 was the main lever for these results considering the first semester was very strong in regards to the prices and premiums and the second semester is a little more pressured. On the other hand, you had an increase of 6% in the cost of the products sold in '22, mainly due to the inflation in the global industry as well besides the adjustments in the average prices. When we get into the next part with the quarter results, the net revenue reached BRL 1.9 billion in the fourth quarter, with a reduction of 19% compared to the BRL 2.4 billion in the fourth quarter of '21, especially considering the reduction of BRL 415 million in the aluminum business in the period -- the comparable periods. The drop in the net revenue is mainly due to the end of the operation with the ingot trading and compared to the fourth quarter of 2021. If we can set aside this delay in the impact on our sales of about 45 days, this reduction in the aluminum price is probably even higher. But on the other hand, this drop was basically partially offset by the recovery of the strategic hedge in the end of this operation that didn't occur in the fourth quarter this year. So in regards to the cost of the products sold, it was pretty much stable compared to the fourth quarter in '21, although the continuity of the inflation, some inputs would still impact the production. So there's a drop of BRL 108 million due to the -- in the aluminum business, with the end of this ingot trading business. And we had an increase of BRL 132 million in the fourth quarter, with the increase of energy prices due to the increase in the average price of the energy contracts. The adjusted EBITDA was BRL 103 million in the quarter, 79% lower than the previous year. The EBITDA margin consolidated about 5% with a drop of 16 percentage points compared to the fourth quarter of '21. And considering the impact in the revenue and costs, we have some other accounting adjustments as well. So the main adjustments are in the EBITDA, the reversal of the impairment, considering the update of the ARO, environmental liability in Niquelândia and reclassification of the investments in MRN was in this [ asset ] and also the sale of the nickel asset in Sao Miquel Paulista. And finally, the last quarter,'22 had a net loss of BRL 80 million versus net income of BRL 615 million, especially due to the drop in revenue in these periods. As I mentioned previously in the next slide, we're going to talk about investments. So the total CapEx was BRL 1 billion showing the increase in our investment portfolio. And over half of the project -- of the CapEx was expected in expansion projects and the rest of the CapEx was split between maintenance and fixing the furnaces and hot pot lines. And so we've also had an upgrade in the anode paste room. Another project also for electro-mechanic assembly process and also the additional protection of recycled aluminum with the increase in recycling at Metalex and the project ReAl, which are both deployment and they have a startup forecasted for the second semester of '23. Well, on the next slide, I'm going to talk about the free cash flow. CBA saw the free cash flow was negative by BRL 481 million in the fourth quarter and BRL 624 million in the year, where the main effect was the negative working capital variation period and the inflation of the main inputs such as the coke, pitch, soda and gas. In the fourth quarter, especially the working capital was negative by BRL 58 million with a positive effect regarding the increase in the balance of suppliers and drawn risk and also the increase of the cost for this main inputs at the volume of suppliers related to the CapEx. These effects were offset by the increase in the balance of the stocks and inventories. The effect -- also the net effect of the tax is to pay and to receive and also the recognition of the accounts payable regarding the second installment that should be paid in 2023 due to the acquisitions of Alux in the quarter. On the next slide, I'm going to talk about our debt profile. At CBA, we ended the year with a very good comfortable capital structure with an extended debt profile and other fundraising with the ESG bias. In November, we started some funding with FINEP as well to develop some projects for innovation and research with about BRL 109 million, the total period is 10 years. And in December 2022, we had the first release of BRL 36 million. We also established 2 contracts to BNDES to have funding for the modernization of our technology in some of the pot lines and also the deployment of a new treatment center and Metalex for scraps and funding was also considered to be a credit facility related to the environment, and so we have better conditions and the release of the resources will take place as you prove the expenses, and this will take place throughout the execution of the project. It is worth to mention that CBA's debt continues to be dollarized, about 89% in dollars, including the swap contract due to -- with the funding at BNDES considering the IPCA in Reals and the fixed rate in dollars. We ended '22 with BRL 1.2 billion in cash with 38% considered to be in dollars. CBA still has a rotating credit facility of about BRL 100 million that guarantees additional liquidity for the company that could be accessed in a moment. Finally, the net debt in December was BRL 1.7 billion and the leverage, considering the net debt-to-EBITDA in the last 12 months was 1.05x in December '22. Well, now I'm going to invite Ricardo once again to talk about some of the ESG highlights. Thank you and see you during the Q&A.

Thank you, Luciano. Now as important ESG highlights, in the environmental front, one of the main highlights was our participation in the A List at CDP which represents leadership and transparency from a corporate level and also our performance in regards to climate change. So this is a worldwide benchmark as well in the aluminum industry with this rating A. And also we would like to present some of the initiatives to reduce emissions in the aluminum industry contributions for a low-carbon economy. We participated in the 27th edition of COP27 and also the first company in Brazil adhered to the program called the First Movers Coalition, which is a partnership with the World Economic Forum in the U.S. as well, focused on decarbonization. We also launched our Alennium seal, which guarantees and ensures that our aluminum is low carbon and was produced with 100% renewable energy. These are the main highlights when it comes to environmental matters and moving on to the next slide. When we get into some of the social aspects, we reached 17% woman in our company. In leadership, this is about 21%, and the growth is relevant. We ended completing 59 different initiatives from the social front and the main areas we focus on education, public management support and income generation. We also started participating in all the ESG B3 indexes when it comes to governance and our first year after the IPO, and in ESG index, we were able to take on the sixth position in the ranking. This is very relevant since it's the first time we're entering the index. CBA was considered a company that's like an ambassador of the 100% transparency movement for the global pact and also other contracts to fund projects that have an ESG approach with FINEP, adding up to BRL 109 million as well as with the National Bank for Economic Development, BNDES. And so these are some of the main highlights from an ESG perspective. And now we -- that we wanted to share with you today. So some of the main messages here -- the average cost in the industry continues to be at high levels. We had industry cost inflation was very high last year, but CBA continues to be resilient despite this moment because we are in the first quartile. This resilience is what we can share. And there still is, of course, a lot of uncertainty in regards to the recovery in demand in China and of course, keeping this kind of volatility in the prices of aluminum. So the drop of the LME along with the cost pressure impacted our performance financially in the quarter. And however, on the other side, we were able to keep up firmly in our projects and our commitments for modernization and expansion as well as our growth strategies in the company. So -- and many other ESG achievements as well as I mentioned. So these are the main highlights that we wanted to share with you. And now I will pass the floor on to Amabile for the Q&A session, so we can begin.

Thank you, Ricardo. [Operator Instructions] The first question is from Thiago Lofiego from Bradesco BBI. Thiago, you may proceed.

Hi. Good morning, everyone.

Yes, we can hear you. Good morning, Thiago.

So the first question I have is about energy in nickel that has been a drag in you guys' results. So what's the expectation for these 2 lines in the next quarters? And also the second question is about premiums. So for this year, we should be expecting maybe as a reference of Rotterdam still? Or what's this premium dynamic like in 2023?

Thanks, Thiago, for the questions. For nickel, I think we didn't have that many changes. Maybe there is like an occasional impact with -- due to the success in sales at Sao Miguel Paulista that impacted the fourth quarter a little more, but these are occasional expenses. So we've been searching for alternatives now on this site in Niquelândia, which is still applicable. So when it comes to energy, there's an interesting dynamic here. You can remember, we have an average generation at CBA that is the same as the consumption in the company, we can see pretty much the same as we generate in energy, but on average annually. So normally, we generate more in the first quarter, still a lot in the second quarter, but a smaller generation in the third and fourth quarter due to seasonality and the rain period in the country. So this is always going to be the dynamic. But in practical terms, whenever we generate more, we have an exceeding amount of energy where we have the purchase of energy, and this is commercialized in the market. So what happens now is that it's been a very good year, which means also that the plants have been generating a lot, not only in CBA but the overall market. For us, of course, it's natural in the generation. On the other hand, we have an exceeding amount of energy as well. And when you look at this market price, we still are at a very low level. So the potential benefit you could have here also. And you have some market prices as well. And as you have a market with a bigger offering with higher rates of rain, you also have some reliance on the prospective prices that you have in the next months so that this can actually reflect some of the CBA's results as well.

And so in practical terms, generation is doing pretty well. And of course, you have this process at market prices. So if I could just get back on nickel. What would be the timing for this in your opinion to be able to kind of clean out this line and solve these issues?

Well, I think it's very difficult to provide some timing, but we also do desire to find some kind of solution quickly. So it's something we've been working on a lot. So about some of the premiums you mentioned, we always try to show that the Rotterdam premium and the Midwest premium is important because it -- it's an important reference, but it's not the main reference in the market because it was really volatile ever since 2018 with all of the American measures in that market. And nowadays it reflects more of a local dynamic, maybe than an actual international dynamics such that at Rotterdam it's probably more related to the local premium in Brazil. So we should have some kind of correlation. It's not perfect, right? So one goes up and not necessarily does everyone go up, but there's a bit of a correlation where they kind of meet at certain points. So that's where you could maybe suppose that the premium should kind of follow the European premiums. There are very similar market dynamics and that's pretty much our vision on this matter.

And what about perspectives for these premiums in this year?

Well, what we had were some premiums that are on a dropping trend in the end of last year. If you keep up with Rotterdam, they still had a drop. And now they started going up again. So the premiums last year were at levels that were historically pretty high because of 2 factors. One, it's a factor where you have as a consequence of the pandemic and the inflation in prices, where the freight costs went up a lot and actually this impacts the premiums back there? And then the second factor is the local demand and supply dynamic, which is influenced by a lot of extraordinary factors throughout the year. So you had some premiums at bigger levels. And over time, they'll get back to like a normality. So the point here is that it really depends on a supply and demand issue. So maybe abroad at this moment, they are more impacted by a reduction in demand that's very occasional that could be recovered in the future. But here in Brazil, it's pretty stable. So I would say that we are at a level where if you look at the historical levels of price, it's a level that you could consider up ahead. But of course, this is subject to some other effects that could take place regarding -- depending on the variables in the market.

Now we have another question here. The next one comes from [ Guillame Inics from XP ]. Guillame, you may proceed, please.

Well, a question here that's more focused on cost, which I think is what has been discussed here more, and it's what most concerns the market. So we've seen that CPP when continued to go up a bit, maybe at a slower pace, about 3 or 4% on average in the quarter, it was lower than when it went up and impacted the last quarter, but it's still pretty high. So since there's a bit of a delay in the CPP to move on to the CPV, then I think we could imagine that maybe in the first quarter of 2023, you guys still have costs being pretty pressured. And if I'm wrong, correct me, but I would like to know from a perspective up ahead when we should expect some stability in these costs and an improvement in the margins? That's my first question. And my second question is from the perspective of a demand dynamic, right? So the split between the global market and the internal market. And we saw that in the past China really flooded the market with aluminum, which made prices drop a lot. But I wanted to understand when you look at what you've seen in the first quarter in the global scenario and even in the internal scenario, what you guys have expected in regards to the exports volumes in China and the prices in the international market and also from an internal demand perspective?

So thank you for the questions. And about costs. So the fixed cost kind of follow the [ persistent ] inflation. But when we look at the 3 main cost factors of CBA; area of electric power, aluminum and the anode paste; in the electric power, you have this behavior which is kind of what I mentioned to Thiago before, which is, it's seasonal. So it's natural it had moments where you have energy and power costs that are lower in the first and second quarters due to seasonality because of the rains and the hydro power plant. So that's natural. But we need to be careful because in [ this year ] specifically, whenever we generate more of the power plants, you also end up having cost of generation that's lower at CBA, but have an exceeding amount that's going to be commercialized. So it depends a bit on the prices, then you have margins that could be higher or lower in the Energy segment and commercialization of energy. So that's just the warning I wanted to share. And when it comes to aluminum, last year was interesting because a lot of the players in the aluminum market would produce aluminum they had at growing cost. And the caustic soda is also one of the main impact also on the transportation costs, right, from transportation of the [ bauxite ] all the way to the factory as well. So you saw this in our results. But if you're buying aluminum, we even showed this in our presentation, right, the aluminum prices dropped last year. So basically, you had an occasional inversion in values, which is not very common, but it's because the aluminum market prices were also just as pressured as the aluminum prices. So it shouldn't be like this forever, right? But that's kind of what happened last year. So when you look at us now, you can see that we have a cost until the end of 2022, but from now onwards, it's really going to depend on the behavior of the items here that I mentioned. So basically, freight, natural gas and caustic soda. And I want to remind you that from the moment when you start buying the raw materials at lower prices or more expensive prices then this price reflects in the CPP as you all mentioned. Even if I start buying from now on, it's going to take a while until this is impacting our cost. So when you look at the market indicators, and you see some indicators that kind of forecast the price references, eventually you may even see a drop throughout the year, but it's not going to be such a big drop like you'd be able to see in the numbers of forecasting. So once again, it happens, but it happens in a way that it impacts our results because it takes a few months until this is actually going to be reflected. So this is a point. It's important and eventually depending on the behavior this could continue to follow this trend that the market is projecting. And finally, in the anode paste, it's kind of what we mentioned in the presentation. So we have an effect -- it's a natural fact with the increase in the fixed pitch and coke prices and for us at CBA it is another important factor, which is since we have purchases of raw materials that have worst quality, we have to consider like the structural aspects of raw materials that are used to produce the petroleum coke we buy. So we have some impacts between the costs. That was pretty much the issue that I mentioned previously, but also the needs that we had to perform a blend. So stopped using a certain type of materials considering a composition of import materials as well. And this maybe had a bigger impact than others. So this is a change that remains. So the fact that we have this kind of quality in raw materials, we also have the need to start having to buy this import material from now on. So also about your question, it really depends on the price component. So the cost I just mentioned as well, which will, of course, depend on the price dynamics a lot. So we have a price of aluminum in the market, which they don't compensate adequately. And we can see the industry still has high cost and a price of aluminum that is not going to actually compensate this cost in the actual -- in the corrected way. But our margins also, of course, depend on how the price will behave. The price and the premium will behave, right. And finally, when we talk about demand, I think the global demand really depends on China. So of course, we have uncertainties. But I think that maybe the market today is really influenced by the uncertainties coming from China, so China had a drop in demand, especially in the civil construction market and there's an expectation for the recovery of these volumes with the reopenings that they had recently but the level or the intensity of this recovery is what's going to define eventually some kind of an improvement in the demand in the market. So since China has 60% of the market of aluminum and the marketing -- civil construction is very relevant as well for China, then monitoring this variable is really important to help us understand what happens with the global demand. When it comes to the supply, I think there's no major surprises. What we expected was in the market. We had the closing of the capacity that remain up until now. We have some additional closing in capacity, which is still marginal in China in the Hunan province due to a very occasional situation with an energy crisis but in practical terms, I would say that the most important variable is the demand at this moment and not the supply. And then finally, -- we already talked about this in the past, but whenever we have the Brazilian market that is not demanding the products offered by CBA, we have the opportunity to explore. We said we did this in the past and this explore, it was bigger in the beginning of the year and smaller in the end of the year. But in practical terms, it really depends on the market dynamics. So what we feel about in certain segments is that the market is pretty stable. So we can't see one segment being a lot worse than the other. But I want to remind you that in the year 2021, it was very good. We had a really high basis. '22 had a trend and a drop in certain markets and '23 kind of follows the same pace. But for CBA when it comes to sales, the similar behavior with a certain seasonality in our sales. So start smaller, and it kind of follows this growing trend, which is where our customers kind of stack up. So it's natural that we would do this kind of behavior. What we're expecting is that there would be kind of similar behavior than what we've historically had towards our sales.

Now here, we have one more, and it comes from [ Okaya Guitanair from BTG Petro. ] Okaya you may proceed.

So hey, good morning, everyone. I would like to explore the price topic once again. We are seeing that this moment is really bad for the overall industry. And what most calls our attention is how this shock and the cost curve seems to not generate much of an effect. And it seems like it's not leading to so many impact on prices. So it -- you spent quite a while explaining this. And I want to understand your more recent performance. But now with the reopening and reacceleration of the Chinese economy, we consider that consumption should recover. And when we see the performance of aluminum versus other commodities that have a positioning that's pretty similar with [indiscernible] consumption chains such as copper and even steel, they're doing a lot better than aluminum throughout the year. So what I wanted to hear from you is understand -- understanding why aluminum is still behind, right? And why there's still about 50% of the cost curve operating kind of negative? And I saw -- I wanted to know if you have any information that could explain why this is happening specifically with aluminum? And my second question is a little quicker here. It is about the leverage. So CBA went from over onetime leverage and it should continue to accelerate in the next quarters. But we just wanted to understand a bit of what's the tolerable level for leverage today, right? And if you guys are already at a moment where the internal guidance is to preserve the cash position or we should start seeing some CapEx for expansion and modernization being postponed and how you're looking at this leverage issue?

Thank you, Okaya, for the questions. About pricing, it's pretty much -- your question is also ours. But just to bring in a little more color maybe on this topic, if you look on the fundamentals of the industry, it doesn't make sense because in practical terms, it's maybe not compensating the global industry, right, on average? And so what we feel is that maybe the prices in aluminum today are a lot more influenced by macroeconomic factors than the actual industry fundamentals. So that's maybe one of the explanations. And then the macro perspective, basically, it's a bit of what we mentioned previously, which is there's a recovery in the Chinese demand as well. But apparently, this is not at the expected level. So in the beginning, we're expecting to be a little bigger than that, right? So I think it's too early still to say if yes or no, but the pace and expand of this is really going to determine the behavior of the prices in the next month. I think this is a variable we need to look at carefully and all around the rest of the world, I'd say that having an offering that has pretty much no surprises because you have the same assets operating and the European assets continue to be closed, but eventually with some adjustments here that are pretty much marginal, we don't have any changes. When you look at the demand, I would say that the scenario we see is pretty much priced in this way, and it's not much of a surprise in a way where we kind of focus our discussion to China. And as I mentioned, we have to really look at the civil construction market there because it's a lot more relevant than the worldwide average, where civil construction is relevant, but auto is as well and packaging is as well. So civil construction is really the most important; if not the most important, it's probably very important. So I think this is the segment we need to look at. And I want to remind you all that for other metals, consumption is still at other moments. So aluminum comes more in at the end of a construction process, et cetera. So eventually have this kind of delay in regards to other metals. But about the leverage, just to remind you all, we have a financial policy that places a limited view to net debt to EBITDA, and we understand that this kind of management, anything between 2x EBITDA will be ideal, which is kind of what we're going to be searching for in a normal cycle period. But eventually, it could be lower than onetime EBITDA, as you were last year or even above 2x EBITDA in a way where this could be managed, right? So when you look at this up ahead, I see that even when I'm above the policy, we are going to be able to bring this leverage back to a more normalized level. So for now, we're kind of moving along with our schedule for the projects we spoke about. These projects a lot throughout the years. And up until now, we have not changed their deadlines. We were able to accelerate the Line 3, and we've been able to follow with the other ones. But yes, this is already a big change as well that we've implemented probably and with bigger cash generation we've had. So we kind of follow this very accelerated pace to try to deliver this before expected. So what's happening now recently in the market is that we had to return this pace to a little closer than what was expected. So that's pretty much the dynamic we have so far. So we're continuing as expected and what we're looking at, at least now when we consider the perspectives for the business at the moment.

Our next question comes from [ Edgar from Etalbo Byan ]

My first question is really just to understand a bit more about the market dynamic and competition in the internal market. How do you consider the competitive dynamics from the domestic market considering the recovery of [indiscernible]. And of course, we had seen the market -- the national market as a market that really depended on imports in some way. And how are you considering the competition when you look up ahead, maybe these levels of imports are reducing and the volumes are gaining more share versus exports. Is the market really tighter and maybe you'll have to lean on exports a little more? So if you could explain a bit of the competitive dynamic for the internal market, that would help us a lot. So then the second question, guys, is that it's a bit of a follow-up from Okaya's question. What's your mindset on CapEx in 2023. So I understand you're not going to accelerate the projects more. But considering the cash generation, that's a little more limited, considering the levels of aluminum in the current moments, what's your minded towards the CapEx this year? And also a follow-up on cost. So what's your opinion about this when you look at the consolidated results in 2023. I think throughout 2022, we had some pressure with higher prices for petroleum coke. And I understand also that you would have this blend factor with imported products. So in the all-in, how are you looking at the consolidated cost of aluminum -- net aluminum -- liquid aluminum production as well for 2023? That would also help if we could get an insight on that.

Okay. So when we talk about the dynamics in the market, I'm going to split this into few different points, I think at this point with aluminum and imports. So the perspectives we have is that you'd have a substitution in the import. So I want to remind you all that in our case, we always focus a lot on the sale of products that have more added value. So the industrialized products, the billet, ingots and ingots for us, which is pretty much a commodity ends up being kind of like an additional sale when we look at the added value products. So if you take a look at this, Brazil has always been a main import of ingots. So this is a smaller volume than the other products, and that's why the impact is also minimized. But even if it is, in practical terms, it's really a substitution of the import. So you had a market that was more of an importer, now it's a little less, but the prices and premiums kind of follows same dynamic. So we shouldn't see major distortions because in practical terms, you always have an alternative to import if you would like to, but you also have an alternative to export if you're selling metal. So I think that I would not consider there to be a big change as an assumption in the market due to this. So that's pretty much the model. And then when we talk about exports and our exports specifically per billets, we'd say that we have about 10% of our volume exported. And this is an export that's recurring. And it happens, especially in the American market with the sheets and other products, and this is kept. So we don't have that much of a variation. So what could happen is that we could maybe have some additional exports for those volumes not being able to sell in the internal market. So this is dropping over the year. But in the first quarter, we had some exports as well with billets that are bigger, and this is always going to be an alternative. So just to give you -- I don't want to give you guidance here, whenever we have this, we would also have the alternative export, our products ingots and billets are going to be really well accepted in the market regardless of an offering demand, since it's a product with low carbon footprint and this will not be a difficulty to place the product. So this is a dynamic that we would have to see because, as I mentioned it is 10% of the exports that are relatively constant. But whenever you have this kind of occasional volume in exports, it won't be going over 2% or 3%, so in practical terms, in our total sales mix. So there's a bit of stability when you look at this year-over-year in our earnings of CBA. So for CapEx, we normally don't mention a guidance that occur but in practical terms, when you keep this normalized market situation, we should expect a year that is similar to last year. But of course, everything depends on some variables. Last year, when we were in a better moment in the market with better cash in addition, we were able to accelerate our investments. This possibility will always exist. So whenever we have additional cash generation, we'll make a decision if it makes sense or not to accelerate the investments there if you capture the risks before. But generally, we kind of follow a scenario of normality and a perspective that's very similar to what occurred last year. And last, where the cost here really depends on the market dynamics. So last year, we had a growth in costs over the year from the first through the fourth quarter. This was a growing cost, but it was basically having pretty high speed. So you had a quick growth. When we look up ahead now, we see the prospect is in the market. Even if there's some kind of a reduction, it will be smaller, and it will be more phased out. So when you compare the average against the average, you have a year where you maybe have very strong growth and a year where you have a drop, but it's a little softer. And naturally, you would have a cost component that could be more impacted. But anyways, even with higher costs, as we just mentioned in the fourth quarter, we still are going through the first quartile and the industry is suffering just as much with higher costs of raw materials. It's something that's impacting the whole industry, right? So this is a bit of an overview on how this dynamic will take place.

Well, guys. Since we do not have other questions, we will now pass the baton to Ricardo for his final remarks, but I want to remind you always that any additional questions can be sent to the IR team that will be available to support you. Ricardo?

Okay. Thank you, Amabile. And first of all, I just want to thank you all for participation in this other earnings call as well. And also thank you all for the relationship we've had in the past 2 years. This is my last earnings call that I'll participate in. From May onwards, Luciano will take on as the CEO at CBA in a process for a transition that we have been working on since November when we first announced this move and this change. Luciano is not only prepared and skillful but qualified, but choosing him was a natural process, the Board chose him naturally, the shareholders already believed and bet on him and kind of incentivizing the path CBA has been setting ever since a few years when we started some big transformations in the company that led to an IPO and now as we talk to you, investors, I want to thank you all once again for this opportunity and the relationship which has always been really based on transparency and information and quite frequent is also Camila that appears now as you can see here in the video, she will be taking on as CFO in the company as well. So it's a great pleasure to have her. She has already been participating in these calls with [indiscernible] for quite a while ever since we went public, and she's also extremely qualified and has a lot of experience. So I just wanted to end by thanking you all and warm regards and we'll see each other soon.

Thank you, Ricardo. It's an honor and privilege to have been working with you and we'll continue now with you and the Board, and welcome Camila. Thank you all guys.

Thank you, all. Have a great day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]