Elvalhalcor Hellenic Copper and Aluminium Industry S.A. (ELHA) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome. Thank you for joining the live webcast of ElvalHalcor for the Half 1 2026 financial results. Mr. Spyros Kokkolis, Vice Chairman and Executive Member of the Board; Mr. Angelos Giazitzoglou, Deputy Chief Financial Officer of the ElvalHalcor Group; and I, Nikos Kallergis, Consolidation and IR Manager of the group, are going to provide you with key insights into our performance. After the end of the presentation, we will conduct a Q&A session where you are welcome to ask any questions regarding our group and its financial performance. Now I will turn the floor to Mr. Kokkolis for his opening remarks and his perspective on the market environment.

Thank you, Nikos, and good afternoon, and welcome, everyone. During the second quarter, we operated in a far from stable environment. The war in the Gulf, which began at the end of February, caused significant disruptions to the global supply chains of oil, gas and aluminum, among other things. Our first concern was to secure a supply of aluminum and special slabs as a large part of our current contracts were for materials produced in this area. As we said on the first quarter call, we had already secured our quantities throughout August. We can now safely say that we're well supplied for the whole year and beyond. On the side of copper, we have 2 things affecting copper. Although no primary copper is produced in the region, a lot of sulfuric acid is, and this is necessary for the production of copper concentrate. In addition, the expected decision on U.S. tariff on copper cathodes expected to come out on June 30 created again a modest arbitrage window between prices in the LME and COMEX, which drew some more cathodes to the U.S. However, at no point did we face issues with our copper supply. Of course, the situation in the Gulf has yet to be resolved and its duration may have broader implications on energy prices, on inflation, on interest rates and the situation still seems to be very volatile, as we all know, and there can be no certainty about when it will end and what will the long-term effect be? Before I pass the floor to my colleagues to give you a full view of results for the period, allow me to take this opportunity to both thank and congratulate everyone in the financial department of the company, but also of the group. This year, the group decided to improve closing procedures and to publish results for all companies in the beginning of August rather than September, without losing any accuracy, which is very important to us. Despite the extra pressure our recent share capital increase has put on the financial department, they were so effective with these new procedures that we were able to bring the results announcement date even earlier. Again, thanks and well done. And now I'll pass the floor to Nick.

Thank you, Mr. K. Now let me walk you through the presentation and the highlights of the semester. ElvalHalcor delivered a strong first half amid a challenging and volatile economic environment. The Aluminum segment grew sales volume by 7% to 227,000 tonnes, led by packaging and transportation, while copper volumes held steady at 91,000 tonnes. Higher sales volumes, partially offset by inflationary pressures resulted in increased operational profitability with adjusted EBITDA reaching EUR 143 million, up by 7% compared to the prior year respective period. Earnings before taxes surged to EUR 159 million, mostly affected by the positive accounting method results, which rose by EUR 71 million year-on-year. Net debt stood at EUR 548 million, down by EUR 82 million from the first half of 2027, thanks to a robust operational profitability and strong cash generation, which more than covered working capital needs, capital expenditure and the increased dividend of EUR 41 million. Compared to the year-end, net debt decreased by EUR 57 million despite the sharp rise in LME prices that drove higher working capital needs through the period. Deleveraging continued with a net debt to adjusted EBITDA ratio improved to 2.2x from 2.4x in the first half of 2025. At this point, I will hand over to Mr. Giazitzoglou, who will cover the details of our performance.

Thank you, Nick. Before we see numbers and performance, let me present the macro environment in which we operate during the first half of the year. From the graph for natural gas and electricity prices, it is evident that during the second quarter, geopolitical developments in the Middle East contributed to upward pressure in energy markets. However, the first semester had no material impact with energy costs remaining at lower levels than the corresponding period of '25. Electricity costs were lower year-over-year with down prices down 15% versus '25 and TTF broadly stable. Eurozone inflation increased from 2.2% to 2.6%, meaning labor, third-party services and other production costs remained under pressure. Euribor stayed stable at June, reducing net financial costs. So the cost environment was mixed. Energy and rates were supportive, but inflationary pressures remain visible and energy trends upward over the period-end. Moving on the next slide about the LME prices. Both metals followed the same trend that started in '25. Aluminum price is up 24% year-over-year, while copper is up 30%. Copper hit historic highs in May. So higher metal prices supported revenue and metal results, but also increased working capital intensity and underpin market volatility. The next question is how these external conditions affected the group's cost base. Total costs, excluding metal costs, increased by 5% to EUR 367 million versus EUR 349 million in '25. Employee benefits remained the largest cost category at 28% and third-party fees increased to 17%, both reflecting inflationary pressures. Energy declined from 16% to 13%, helped by lower electricity prices. The message is balanced. Inflation was visible, but lower energy costs and operating discipline limited the impact on adjusted profitability. Now let's look at where the operational growth came from, starting with the aluminum volumes and market mix. Starting from the graph at the top of the slide, we see that for a second consecutive quarter, aluminum volumes stood higher than the respective quarters of the previous year, up 8% and 6%. The momentum remained positive with volumes rising to 227,000 tonnes in '26, up 7% year-over-year. Transportation increased strongly by 34%, reaching 15% of segment volumes, while Rigid packaging remained the largest market at 51% of volumes and grew approximately 9%. Flexible packaging, HVAC and industrial applications were stable, while building and construction moved lower. Aluminum growth is not only volume driven, but also tied to attractive end markets linked to megatrends such as circularity and lightweighting. Moving to copper volumes. The copper segment demonstrated resilient performance during the second quarter, focused on shifting to higher value products and markets rather than increasing volumes in unprofitable markets. Volumes reached 91,000 tonnes, up 0.6% year-over-year. Energy and Power Networks grew by 8%, supported by grid investment across Europe, industrial applications by 9% and HVAC by 4%, underpinned by heat pumps installation, air conditioning and data centers projects. This was offset by a 20% decline in building and construction and 5% decline in transportation, mirroring the reduced output from European automotive manufacturers. With the end market picture covered, let's move to the geographical revenue mix across both segments. Starting with the Aluminum segment. On the left-hand side, we see that the geographic mix remained stable. Europe continues to be the dominant market, while the Americas remained significant at 13% despite duties. Now moving to the copper segment. Europe stands out as the dominant market with our presence in other areas remaining stable. It is evident that the group has diversified the international footprint with providing the core revenue base. Okay. Having reviewed now volume and revenue mix, let's move to profitability. The second quarter was particularly strong for the Aluminum segment at EUR 51 million, up 10% year-over-year following an equal positive first quarter. Adjusted EBITDA is EUR 91 million in the first semester compared to EUR 81 million in '25 and the adjusted EBITDA per tonne increased from 383 per tonne to 401, up by 5%. The drivers for this performance were volume growth, improved margins and lower energy costs. The segment benefits from prior investments, operational improvement and favorable product mix. Now on this slide, we have a graph showing EBITDA per tonne, which is a very useful indicator of value creation in both segments. And before discussing the trend, let me briefly explain the metric. Our industrial value-added represents the value created by our industrial transformation processes and excludes the direct impact of metal prices. So when adjusted EBITDA per ton tells us how much profitability we get from it, EVA per ton tell us how the quality and the value we generate from every ton sold. Aluminum EVA per ton increased by 3% compared to the previous year and is moving at the same positive direction as adjusted EBITDA per ton. Now moving to the copper segment. During the second quarter, the copper segment experienced a more competitive environment with pricing pressures and cost inflation. However, it maintained operational profitability of EUR 52 million in '26, slightly below 53 million in '25. EBITDA per ton from 584 to 572. On this slide, I will emphasize EVA, which is likely more engaging and insightful. Despite the challenging pricing environment and margin pressure in some product categories, EVA increased by 5%. The increase in per ton indicates that our product mix and value-added positioning improved, which underpins the strategic shift toward higher value-added products like energy, infrastructure, industrial applications and data centers. Now let's bring all these developments together into a consolidated financial picture. This slide provides the best summary of the group's overall performance. Volumes increased by approximately 5% to 390,000 tonnes, reflecting continued momentum in aluminum and the resilient performance in copper. Revenue increased by 18% to approximately EUR 2.2 billion, supported by higher volumes and significantly higher aluminum and copper prices. Most importantly, adjusted EBITDA increased to EUR 143 million, up approximately 7% year-over-year. Despite inflationary pressure on labor, services and product costs, the group delivered higher adjusted profitability through volume growth, improved product mix and continued operational discipline. In addition, the metal result increased significantly, reaching approximately 78 million versus EUR 7 million last year. As a result, EBITDA increased by approximately 52% to 212 million and EBIT increased by approximately 17% to 159 million. The next slide illustrates the EBITDA increase and shows which factors drove the year-over-year bridge. The EBIT bridge demonstrate that the first semester of '26 earnings growth was driven by both strong operating performance and highly supportive metal price environment, resulting in a significant increase in reported profitability. EBITDA increased from approximately EUR 89 million in '25 to 159 million in '26, a very strong year-over-year improvement. The largest contributor was the result, which added approximately EUR 71 million. This reflects the significantly higher aluminum and copper price environment during the first half and explains most of the increase in reported profitability. Volumes contributed approximately 11 million, demonstrating underlying demand resilience and good operating execution, particularly in aluminum. Offsetting factors included EUR 4 million from price cost and mix, EUR 4 million from SG&A and EUR 5 million from other income expenses, while financial costs were broadly stable. Having explained the P&L bridge, let's show how this translated into cash flow. While adjusted EBITDA and evaluate performance, free cash flow reveals the actual cash generated for shareholder value. During the first semester, the group posted a very strong free cash flow of EUR 97 million. EBITDA was EUR 212 million. The main cash outflows were interest paid of EUR 8 million, working capital at EUR 39 million, affected by higher metal prices and investments of $56 million. Moreover, we paid EUR 6 million in debt and paid a higher dividend of EUR 41 million. Moving to the balance sheet. The slide illustrates how strong cash flow generation and disciplined working capital management enabled the group to reduce net debt and improve leverage despite higher metal prices, increased CapEx and dividend payments. Working capital was EUR 596 million in June '26, up 7% versus year-end, reflecting elevated LME prices. However, it remained materially lower year-over-year despite much higher metal prices, demonstrating tight inventory and receivables control. Net debt was EUR 548 million, down EUR 57 million from year-end and EUR 82 million year-over-year. Leverage improved to 2.2x, while financial costs declined to EUR 17 million, reflecting lower rates and lower debt levels. Finally, let's look at our CapEx -- we recently completed 250 million share capital increase to finance a 455 million CapEx program. These new investments will enable us to increase final capacity in the aluminum segment and increase the usage of recycled materials in both segments. For the first semester, CapEx is targeted to support future growth, efficiency and operational flexibility. Before we move to the Q&A session, let me summarize the group's performance during the first semester of '26. The group delivered a strong first half, combining volume growth, strong adjusted profitability and a much stronger EBITDA. Volumes increased, indicating continued momentum in key markets despite the challenging macroeconomic and geopolitical environment. The 7% increase in adjusted EBITDA that operating execution remains strong and that we successfully navigated cost inflation. Despite working capital needs, CapEx and dividends, the financial position continues to strengthen with the group further reducing net debt and improving leverage. And most importantly, all the above were achieved in a very demanding environment due to geopolitical tensions, inflationary pressures and metal price volatility. I think now we can take your questions.

I noticed that there was working capital went very well, the management of working capital this quarter was very well. Can you elaborate on what actions you took -- that's one. And if you can discuss what is driving the increase in industrial value in the segment and whether we should be expecting that to hold or even increase going I will start with the...

That the LME price, the elevated prices put some pressure in our working capital. Of course, we have to say that working capital is always rising in the first months of the year and improves as the year progresses towards the end. In order to mitigate the risk on the volatility of the LME prices and the increased working capital, we are optimizing our inventory monitoring to better control the price impact. We had some issues during '25 with the disruptions that we experienced in the raw material market with the imposition of tariffs. As said at the beginning of the presentation, we managed to secure our raw materials for '26 during first quarter until August. Now we are secured for the whole year. And we believe that the way that we control our inventories during the year will give us the opportunity to improve our working capital for the future months. Now about the EVA, I think that your question was what the improvement of Eva and copper suggest and if we can further improve E per ton. Am I correct?

Yes. Sorry, I was muted and I didn't manage to speak before. I will cover that. The question was about the increase in the industrial value added of the copper segment. Also, I have to add that 2024, which shows a larger was just seasonal. The average for the year was lower. Our target is definitely to improve and increase. What we are actively doing at the moment is decreasing the quantities of extruded brass products. So one reason why we had a very small increase overall for the semester in copper volumes was that we cut down 2,500 tonnes of brass rod production. So this helps improve the industrial value added of the segment. But also, we are generally turning even in the sectors of the -- that we are increasing in quantities to even higher value-added products all the time. So I believe that covers your question. And the target is for it to go higher. I will add also for the working capital to what Angelos said, that we can definitely go for the end of the year to even better figures than we had in the end of 2025. Of course, working capital and especially inventory is something that we target. We do not always guarantee that we will do it because it's also affected by external factors like supply chain disruptions, like metal price spikes that have various direct or indirect effects that are beyond our immediate and easy control. We have a written question by Mr. Which export markets are showing the strongest growth momentum?

We have a question from a lot of questions, I think. I believe the first one about the working capital is already addressed. The second is about was the volume growth in packaging driven by market growth or by market share gains? What is the driver, how pricing in rigid packaging compares to other end markets? Okay. I will start with the growth in rigid packaging. Growth in packaging comes from market growth. The market is experiencing steady growth and because it is fully aligned with future megatrends of sustainability and green transition, we expect it to maintain that growth and likely accelerate. The market is undersupplied by domestic producers, creating for us a market opportunity in the next year. Now about pricing. In the market, there are products like beverages, whose prices are not at the upper end, but they are -- but they give us a lot of quantities. So we benefit from this to increase our profitability. But in this sector, we have products like food products where prices are very profitable. what has been the benefit on the results from the recent high premium through the recycling activity. On the flip side, what has been the cost impact of the Middle East disruption on the supply of ingots and slabs. I will start with premiums. The reason we are trying in both segments to increase our consumption of recycled materials is because the profit from the premium is significant. And yes, during the second quarter, higher premiums boosted our profitability. It is evident. After all, that is one of the reasons we are planning to further invest in scrap consumption in aluminum and copper. About the impact of the Middle East disruption on the supply of, I think Spiros has already addressed this topic, this issue. We...

Think it addresses the cost side, which has not been significant because we had new contracts for new quantities. There's no significant difference between...

Okay. Moving on to the next question. Can you please -- this is regarding the copper segment. Can you please elaborate on the competitive pricing pressure and cost inflation? And how do you see them affecting performance over the next quarters? Okay. I will start with the extruded products. where imports from lower-cost countries such as China, Mexico, Vietnam and others account for almost 23% of European imports. So it is evident that pricing pressure is material. Now this is one of the reasons an anti-dumping investigation is already underway against those countries. We expect to be concluded positively in the end of the year. And I must say that we're already seeing the first ripple effects from customers that are placing orders to avoid the retrospective duties. Now regarding inflationary pressure, okay, inflation -- but as a group, we are trying through our selective investments, not only to unlock extra capacity, but also to achieve efficiencies that will enable us to capitalize on our advantages over competitors such as quality and trustworthiness. And this is also relates to the question of room for further growth. Of course, there is room for growth, especially in markets like heat pumps where we expect to see growth in the future. And because we are in a stronger position relative to our competitors, we are well positioned to gain this extra volume.

And we have the capacity...

Okay. Let's move to the next question.

Yes. Mr. asks, which export markets are showing the strongest growth momentum? And how is geopolitical uncertainty affecting demand?

Well, I will say that as you see from the chart, our export markets are the EU and European countries. However, we managed to retain a good presence in the U.S. Long term, with 50% duties, it's something that's perhaps not sustainable. Now geopolitical uncertainty is affecting demand both ways. In one sense, it's decreasing demand. In another sense, it might be creating some panic buying. But we believe that -- this has not happened significantly, and we expect no change in demand. Of course, it yet remains to be seen. And as I said in my opening statement, nobody knows yet what the long-term implications are going to be. And if this continues for long, I'm sure there are going to be significant long-term implications like increased global growth rates and long-term higher prices, which, of course, nobody wishes for. So everybody wishes for the fast resolution of this issue. But on the other hand, we go through a cautious hour every day, it starts again, it stops. I don't know if it stopped again since we started the call. We have to say. Let's go to the next.

Yes. Moving on to Mr. Murph's question. Could you please comment on how the third quarter has started? Are you seeing the strong momentum of the first half continuing in terms of demand and order intake? Or have recent geopolitical developments entirely changed the picture in any way?

I think I already covered that in my previous answer. It's too early to say because doing our call earlier than usual also means that we see not much of the -- we see July. July is doing great, nothing to comment, not out of line. But what will happen is yet to be seen.

Mr. asks, how is the adjusted EBITDA per type, both for aluminum and copper going to be affected if the geopolitical tensions rise even more, say if the price of these commodities get plus 15% more than average price for the rest of the year?

Not much. As we said, our adjusted EBITDA, we said a lot of times, which is the most representative metric of our operational profitability is not directly affected by the prices of the commodities because we pass through everything. There are indirect effects. And like what Angelos said before, we get a better benefit from scrap prices because the discounts that we buy our scrap, it's 10%, it's different if it's 10% on EUR 10,000 or 10% on EUR 20,000. It's a different discount. So there are other indirect effects like, for example, higher interest rate, of course, this does not affect the EBITDA. Maybe customers get scared and short term decrease their orders, but it is from the price movements. long term, the substitution, which has been done a lot in copper. We don't expect any more. We don't expect substitution in aluminum at reasonable prices, of course. So it's not going to affect the adjusted EBITDA.

Moving on to Mr. last question regarding CBAM. You mentioned in the press release that CBAM already in place, but there's no tangible benefits as of yet. Can you please discuss what the benefits will be for you and the potential financial impact and the likely timing that they will accrue?