Quarterly Report • Aug 2, 2022
Quarterly Report
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H1 2022 Interim Report
BEFESA
| Key figures ……………………………………………………………………………………………………………………… | 3 |
|---|---|
| Highlights ………………………………………………………………………………………………………………………. | 4 |
| Results of operations, financial position & liquidity ……………………………………………………………… | 5 |
|---|---|
| Segment information ………………………………………………………………………………………………………… | 6 |
| Risks & opportunities ……………………………………………………………………………………………………………… | 7 |
| Strategy ……………………………………………………………………………………………………………………………… | 7 |
| Subsequent events ………………………………………………………………………………………………………………. | 8 |
| Outlook 2022 ……………………………………………………………………………………………………………………… | 8 |
| Statement of financial position …………………………………………………………………………………………… | 9 |
|---|---|
| Income statement ………………………………………………………………………………………………………… | 11 |
| Statement of comprehensive income ………………………………………………………………………………… | 12 |
| Statement of changes in equity ………………………………………………………………………………………… | 13 |
| Statement of cash flows …………………………………………………………………………………………………… | 14 |
| Notes to the condensed interim consolidatd financial statements ………………………………………… | 15 |
| Management's responsibility statement ……………………………………………………………………………… | 31 |
| Segmentation overview - Key metrics ………………………………………………………………………………… | 32 |
|---|---|
| Financial calendar and IR contact ……………………………………………………………………………………… | 33 |
| Disclaimer ……………………………………………………………………………………………………………………… | 33 |
| H1 2022 | H1 2021 | Change | Q2 2022 | Q2 2021 | Change | |
|---|---|---|---|---|---|---|
| Key operational data (tonnes, unless specified otherwise) | ||||||
| Electric arc furnace steel dust (EAFD) throughput | 629,661 | 340,668 | 84.8 % | 292,295 | 159,573 | 83.2 % |
| Waelz oxide (WOX) sold | 213,804 | 119,334 | 79.2 % | 110,073 | 52,608 | 109.2 % |
| Salt slags and Spent Pot Linings (SPL) recycled | 172,949 | 195,764 | (11.7) % | 85,497 | 91,334 | (6.4) % |
| Secondary aluminium alloys produced | 84,645 | 99,453 | (14.9) % | 42,401 | 48,170 | (12.0) % |
| Zinc LME average price (€ / tonne) | 3,510 | 2,349 | 49.4 % | 3,683 | 2,418 | 52.3 % |
| Zinc blended price (€ / tonne) | 2,668 | 2,254 | 18.4 % | 2,789 | 2,275 | 22.6 % |
| Aluminium alloy FMB average price (€ / tonne) | 2,558 | 1,965 | 30.2 % | 2,488 | 1,947 | 27.8 % |
| Key financial data (€ million, unless specified otherwise) | ||||||
| Revenue | 572.5 | 384.2 | 49.0 % | 311.1 | 191.6 | 62.4 % |
| EBITDA | 115.7 | 94.1 | 22.9 % | 55.7 | 45.3 | 23.1 % |
| EBITDA margin | 20.2 % | 24.5 % | (429) bps | 17.9 % | 23.6 % | (572) bps |
| Adjusted EBITDA1 | 118.0 | 94.1 | 25.3 % | 56.9 | 45.3 | 25.6 % |
| Adjusted EBITDA margin1 | 20.6 % | 24.5 % | (389) bps | 18.3 % | 23.6 % | (535) bps |
| EBIT | 80.3 | 75.5 | 6.4 % | 37.4 | 36.1 | 3.8 % |
| EBIT margin | 14.0 % | 19.6 % | (562) bps | 12.0 % | 18.8 % | (679) bps |
| Adjusted EBIT1 | 82.6 | 75.5 | 9.4 % | 38.6 | 36.1 | 7.0 % |
| Adjusted EBIT margin1 | 14.4 % | 19.6 % | (522) bps | 12.4 % | 18.8 % | (642) bps |
| Financial result | (12.3) | (10.2) | 20.9 % | (5.4) | (5.5) | (0.8) % |
| Profit before taxes and minority interests | 68.0 | 65.3 | 4.2 % | 32.0 | 30.6 | 4.6 % |
| Net profit attributable to shareholders of Befesa S.A. | 50.0 | 45.6 | 9.7 % | 23.0 | 20.8 | 10.7 % |
| EPS (in €)2 | 1.25 | 1.32 | (5.3) % | 0.58 | 0.60 | (3.2) % |
| Total assets | 1,968.5 | 1,539.8 | 27.8 % | 1,968.5 | 1,539.8 | 27.8 % |
| Capital expenditures | 54.2 | 44.0 | 23.1 % | 33.2 | 16.3 | 104.0 % |
| Cash flow from operating activities | 64.0 | 70.2 | (8.9) % | 38.3 | 43.7 | (12.5) % |
| Cash and cash equivalents at the end of the period | 238.7 | 196.6 | 21.4 % | 238.7 | 196.6 | 21.4 % |
| Net debt | 470.9 | 371.4 | 26.8 % | 470.9 | 371.4 | 26.8 % |
| Net leverage | x 2.09 | x 2.24 | (x 0.15) | x 2.09 | x 2.24 | (x 0.15) |
| Number of employees (as of end of the period) | 1,583 | 1,195 | 32.5 % | 1,583 | 1,195 | 32.5 % |
1 EBITDA and EBIT adjusted for AZR acquisition-related costs of €1.1m and €2.3m in Q2'22 and H1'22 respectively
2 Q2'21 EPS is based on 34,979,519 weighted average number of shares; H1'21 is based on 34,525,634 shares; Q2'22 and H1'22 are based on 39,999,998 outstanding shares after the 5,933,293 shares emitted to partly fund the AZR acquisition in June 2021
Total revenue increased by 49.0% yoy to €572.5 million in H1'22 (H1'21: €384.2 million) and by 62.4% to €311.1 million in Q2'22 (Q2'21: €191.6 million). The increase was primarily driven by volume growth in Steel Dust Recycling Services including the contribution from the US zinc operations, the stronger zinc and aluminium alloy market prices as well as the higher zinc hedging prices. These positive effects were partially offset by the unfavourable higher zinc treatment charge (TC), referenced at \$230 per tonne in 2022 (2021: \$159 per tonne), and the lower volumes treated in Aluminium Salt Slags.
Total adjusted EBITDA in H1'22 increased by 25.3% yoy to €118.0 million (H1'21: €94.1 million) and by 25.6% to €56.9 million in Q2'22 (Q2'21: €45.3 million).
Overall, Befesa's expansion initiatives are delivering earnings growth and even in this volatile environment Befesa was able to offset inflationary pressures, mainly energy, through higher prices.
The €23.8 million adjusted EBITDA improvement yoy in H1'22 was mainly driven by the following components:
Total adjusted EBIT increased by 9.4% yoy to €82.6 million in H1'22 (H1'21: €75.5 million) and by 7.0% yoy to €38.6 million in Q2'22 (Q2'21: €36.1 million), following similar drivers which impacted the EBITDA development.
Total EBITDA and Total EBIT were adjusted for AZR acquisition-related costs of €2.3 million and €1.1 million in H1'22 and Q2'22, respectively. Total reported EBITDA amounted to €115.7 million in H1'22 (+22.9% yoy) and to €55.7 million in Q2'22 (+23.1% yoy). Total reported EBIT amounted to €80.3 million in H1'22 (+6.4% yoy) and to €37.4 million in Q2'22 (+3.8% yoy).
Total net financial result in H1'22 came in at -€12.3 million (H1'21: -€10.2 million). The yoy development is mainly due to the €100 million TLB add-on to partially fund the AZR acquisition, and local loans in China.
Total net profit attributable to the shareholders in H1'22 increased by 9.7% yoy to €50.0 million (H1'21: €45.6 million). This improvement was primarily due to the positive drivers impacting EBITDA and EBIT. Earnings per share (EPS) in H1'22 decreased yoy to €1.25 (H1'21: €1.32) explained by the 17.4% increase in the number of shares to 39,999,998. Once the US synergies are fully realised, EPS is expected to improve accordingly.
Gross debt increased by €14.9 million to €709.7 million at Q2'22 closing (year-end 2021: €694.7 million), explained primarily by local loans in China to fund the Henan plant.
Net debt at Q2'22 closing amounted to €470.9 million, flat compared to year-end 2021 at €470.6 million.
The last-twelve-months (LTM) adjusted EBITDA of €225.4 million at Q2'22 incorporates full-twelve-rolling months of the US operations.
Net leverage further improved to x2.09 at Q2'22 closing (year-end 2021: x2.16) due to the underlying higher lasttwelve-months (LTM) EBITDA.
Befesa continues to be compliant with all debt covenants.
| 30 June 2022 |
31 December 2021 |
|
|---|---|---|
| Non-current financial indebtedness | 684.4 | 669.3 |
| + Current financial indebtedness | 25.2 | 25.4 |
| Financial indebtedness | 709.7 | 694.7 |
| – Cash and cash equivalents | (238.7) | (224.1) |
| – Other current financial assets1 | (0.1) | (0.1) |
| Net debt | 470.9 | 470.6 |
| LTM adjusted EBITDA2 | 225.4 | 217.8 |
| Net leverage ratio | x 2.09 | x 2.16 |
1 Other current financial assets adjusted by non-cash items
2 LTM adjusted EBITDA incorporates full-twelve-rolling months of the US operations
Operating cash flow in H1'22 amounted to €64.0 million, 8.9% lower yoy (H1'21: €70.2 million). This development was mainly driven by the about -€26 million change in working capital primarily explained by seasonality/timing which is expected to reduce by year-end 2022. Interests paid in H1'22 increased by 56% yoy to €11.9 million (H1'21: €7.6 million) mainly as a result of the higher gross debt (€100 million TLB add-on to partially fund the AZR acquisition, and Chinese local loans), and because the TLB interest payments are made quarterly in 2022 versus bi-annually in 2021.
In H1'22, Befesa invested €57.5 million (H1'21: €43.1 million) to fund regular maintenance capex, the recovery of the Hanover plant and US operational excellence / synergies, as well as growth investments. The latter mainly related to the second plant in China, partially funded through local loan.
After funding working capital, interests, taxes and capex, total cash flow generated in H1'22 amounted to €14.6 million, improving Befesa's cash on hand to €238.7 million from €224.1 million at year-end 2021. The €238.7 million cash balance together with the €75.0 million RCF, entirely undrawn, provides Befesa with more than €300 million liquidity. This supports the enhanced credit ratings of Befesa assigned in Q2'22 by Moody's, who improved outlook to 'positive' from 'stable' and affirmed 'Ba2', as well as by S&P, who maintained the 'BB+, outlook stable' rating.
Volumes of EAFD recycled in H1'22 increased by 84.8% yoy to 629,661 tonnes (H1'21: 340,668 tonnes). In Q2'22, 292,295 tonnes of EAFD were recycled, up 83.2% yoy (Q2'21: 159,573 tonnes). With these volumes, Befesa's EAFD recycling plants continued to run at average load factors of 82% and 75% - in H1 and Q2, respectively – of the installed annual recycling capacity of c. 1,555,300 tonnes, including c. 620,000 tonnes from the acquired US recycling plants and 110,000 tonnes from the state-of-theart plant at Jiangsu, China.
The volume of Waelz oxide (WOX) sold in H1'22 increased by 79.2% yoy to 213,804 tonnes (H1'21: 119,334 tonnes) and approximately doubled yoy to 110,073 tonnes in Q2'22 (Q2'21: 52,608 tonnes).
Revenue in the Steel Dust business increased by 81.2% yoy to €353.8 million in H1'22 (H1'21: €195.3 million) and by 109.6% yoy to €197.9 million in Q2'22 (Q2'21: €94.4
EBITDA increased by 37.2% yoy to €95.0 million in H1'22 (H1'21: €69.2 million) and by 22.9% yoy to €40.2 million in Q2'22 (Q2'21: €32.7 million). The yoy increases in EBITDA are primarily explained by the US operations, which are delivering as planned. The yoy higher zinc market prices mostly offset the higher inflation, mainly energy cost, and the unfavourable zinc TC.
million).
EBIT came in at €68.4 million in H1'22, up 14.7% yoy (H1'21: €59.6 million), following similar drivers explained referring to the EBITDA development, and at €26.1 million in Q2'22, a 6.7% decrease yoy (Q2'21: €28.0 million).
Salt slags and SPL recycled volumes in H1'22 amounted to 172,949 tonnes, down 11.7% yoy (H1'21: 195,764 tonnes). Volumes recycled in Q2'22 amounted to 85,497 tonnes, 6.4% lower yoy (Q2'21: 91,334 tonnes). This development was primarily driven by the current challenging European aluminium industry environment. On average, Salt Slags recycling plants operated at 78% and 76% utilisation rates – in H1 and Q2, respectively – of the latest installed annual recycling capacity of 450,000 tonnes.
Revenue in the Salt Slags subsegment increased by 10.7% yoy to €41.3 million in H1'22 (H1'21: €37.3 million). In Q2'22, revenue improved by 26.5% yoy to €22.1 million (Q2'21: €17.5 million).
EBITDA increased by 31.4% yoy to €14.6 million in H1'22 (H1'21: €11.1 million) and by 57.2% yoy to €8.2 million in Q2'22 (Q2'21: €5.2 million). The yoy EBITDA increases were primarily explained by the higher aluminium alloy FMB prices, which averaged €2,558 per tonne in H1'22, up 30.2% yoy (H1'21: €1,965 per tonne), and €2,488 per tonne in Q2'22, up 27.8% yoy (Q2'21: €1,947 per tonne). The positive effects from yoy higher aluminium market prices were partially offset by the higher inflation, mainly energy cost, and the lower volume.
EBIT increased by 56.6% yoy to €10.1 million in H1'22 (H1'21: €6.5 million) and approximately doubled yoy to €6.1 million in Q2'22 (Q2'21: €2.9 million), following similar drivers explained referring to the EBITDA development.
Aluminium alloy production volumes in H1'22 amounted to 84,645 tonnes, 14.9% lower yoy (H1'21: 99,453 tonnes). In Q2'22, volumes amounted to 42,401 tonnes, down 12.0% yoy (Q2'21: 48,170 tonnes). This development was primarily driven by the current challenging European automotive and aluminium industry environment. Nevertheless, even under the current volatile market environment, Secondary Aluminium production plants overall operated at around 83% utilisation rate on average in H1 and Q2 of 2022.
Revenue in the Secondary Aluminium subsegment amounted to €217.7 million in H1'22, up 26.4% yoy (H1'21: €172.3 million). In Q2'22, revenue increased by 33.3% yoy to €119.8 million (Q2'21: €89.8 million). The positive revenue development follows the favourable aluminium alloy FMB prices partially offset with the lower volumes.
EBITDA came in at €9.0 million in H1'22, 34.2% lower yoy (H1'21: €13.7 million). In Q2'22, EBITDA increased by 7.3% yoy to €7.8 million (Q2'21: €7.3 million). The yoy EBITDA development was mainly impacted by the higher inflation / energy cost trends, with particularly high gas prices in Europe. In H1'22, the inflationary pressures were higher than the increases in aluminium market prices, but offset by the latter in Q2'22.
EBIT came in at €5.0 million in H1'22, down 47.5% yoy (H1'21: €9.6 million), and at €5.9 million in Q2'22, up 12.6% yoy (Q2'21: €5.2 million), following similar drivers which impacted the EBITDA development.
No material risks or opportunities for the prospective development of the Company have emerged against the comprehensive disclosures, including the ones related to the COVID pandemic, in the Annual Report 2021, pages 62-68.
Hedging strategy Befesa's hedging strategy is unchanged and continues to be a key element of Befesa's business model to manage the zinc price volatility and therefore improve the stability and visibility of earnings and cash flow across the economic cycle. Further details are available in Befesa's Annual Report 2021 on page 33.
The combined global hedge book in place as of the date of this H1 Interim Report provides Befesa with improved pricing visibility up to January 2025, therefore for the following c. 2.5 years. The average hedged prices and volumes for each of the periods are:
| Period | Average hedged price (€ per tonne) |
Zinc content in WOX hedged (tonnes) |
|---|---|---|
| 2021 | €2,151 | 120,013 |
| 2022 | c. €2,3501 | 155,818 |
| 2023 | c. €2,4501 | 150,955 |
| 2024 | c. €2,5001 | 152,400 |
1 FX US dollar/euro forward rates assumed are 1.07 for 2022 and 2023, and 1.10 for 2024
During Q2 2022, the expansion of the Steel Dust Recycling Services operations into China continued progressing in both provinces – Jiangsu and Henan – while managing the operational disruptions due to COVID.
The two plants in Jiangsu and Henan are designed to recycle each 110,000 tonnes of EAFD per year and represent Befesa's 11th and 12th EAFD recycling sites globally, along with the existing sites in Europe, Turkey, South Korea and the US. Befesa continues to work on new projects and further expansion.
The US operations are delivering as planned and positively contributed to Befesa's H1/Q2 earnings. The positive impact demonstrates the benefits of the acquisition of one of the US market leaders in EAFD recycling services and the success of Befesa's strategy of accelerating the expansion of its global footprint.
Befesa continues to drive progress on the integration and the related synergies of its US operations.
On 29 June 2022, Befesa published its ESG Report 2021, which provides an insight into the developments achieved in ESG during 2021 and an update on the main ESG performance indicators. Befesa dedicates a special chapter to Climate Change, in which it is explained how Befesa is positioned regarding this important challenge, including Befesa's Climate Action Plan. Befesa is committing to a 20% GHG emission intensity reduction by 2030, supported by a roadmap to achieve the target, especially via green energy sourcing, electricity efficiency, process optimisation and raw material substitution. Also, Befesa is aiming at net zero emission by 2050 provided that certain technologies currently under development become technically viable and economically feasible by investing today into new technologies, partnering with relevant stakeholders, and reinforcing the sustainability ecosystem. As a pure circular economy player, Befesa is fully committed to making a strong contribution towards creating a more sustainable world.
The Befesa ESG Report 2021 also includes eligibility disclosures under the EU Taxonomy: Befesa expects 100% eligibility with the EU Taxonomy, based on expert talks, advisors and own estimates, i.e. 100% of Befesa's revenue, capex and operating expenses are eligible and aligned, due to activities relating to the Recyclable Materials being covered in the technical screening criteria, under the environmental objective of 'Transition to a circular economy'. More details are shown in the Befesa ESG Report 2021 available on Befesa's website (www.befesa.com).
A new Sustainability Committee was established, comprising Directors of Befesa who have strong experience in the ESG, technology and energy transition. This committee will discuss sustainability plans and progress within Befesa on a quarterly basis.
As of 30 June 2022, the ESG ratings from the five wellknown international ESG rating agencies following Befesa were as follows:
Subsequent events
There are no events between the financial statement date (30 June 2022) and the date of presentation of this H1 2022 Interim Report (28 July 2022) which would materially affect the Group's assets or the Group's financial and/or earnings position.
Full year 2022 guidance confirmed, including EBITDA at €220–270 million, equal to 11% to 37% yoy growth (2021: €197.6 million).
Assets
| (€ thousand) | Note(s) | 30 June 2022 | 31 December 2021 |
|---|---|---|---|
| Non-current assets: | |||
| Intangible assets | |||
| Goodwill | 594,629 | 573,151 | |
| Other intangible assets | 4 | 105,307 | 104,418 |
| 699,936 | 677,569 | ||
| Right-of-use assets | 9 | 30,732 | 30,335 |
| Property, plant and equipment | 5 | 551,373 | 509,075 |
| Non-current financial assets | |||
| Investments in Group companies and associates | 46 | 46 | |
| Other non-current financial assets | 6–10 | 42,319 | 15,953 |
| 42,365 | 15,999 | ||
| Deferred tax assets | 127,930 | 125,462 | |
| Total non-current assets | 1,452,336 | 1,358,440 | |
| Current assets: | |||
| Inventories | 7 | 69,321 | 67,477 |
| Trade and other receivables | 164,957 | 113,229 | |
| Trade receivables from related companies | 16 | 2,600 | 917 |
| Accounts receivables from public authorities | 13 | 16,201 | 10,671 |
| Other receivables | 23,376 | 20,561 | |
| Other current financial assets | 1,018 | 825 | |
| Cash and cash equivalents | 238,702 | 224,089 | |
| Total current assets | 516,175 | 437,769 | |
| Total assets | 1,968,511 | 1,796,209 |
| (€ thousand) | Note(s) | 30 June 2022 | 31 December 2021 |
|---|---|---|---|
| Equity: | |||
| Parent Company | |||
| Share capital | 8 | 111,048 | 111,048 |
| Share premium | 8 | 532,867 | 532,867 |
| Hedging reserves | (55,015) | (96,830) | |
| Other reserves | 31,806 | (19,915) | |
| Translation differences | 35,364 | (4,080) | |
| Net profit/(loss) for the period | 50,033 | 99,745 | |
| Interim dividend | - | - | |
| Equity attributable to the owners of the Company | 706,103 | 622,835 | |
| Non-controlling interests | 11,104 | 8,712 | |
| Total equity | 717,207 | 631,547 | |
| Non-current liabilities: | |||
| Long-term provisions | 11 | 21,527 | 22,267 |
| Loans and borrowings | 9 | 668,854 | 653,571 |
| Lease liabilities | 9 | 15,559 | 15,756 |
| Other non-current financial liabilities | 10 | 41,150 | 56,700 |
| Other non-current liabilities | 4,266 | 4,621 | |
| Deferred tax liabilities | 96,244 | 91,946 | |
| Total non-current liabilities | 847,600 | 844,861 | |
| Current liabilities: | |||
| Loans and borrowings | 9 | 17,180 | 17,791 |
| Lease liabilities | 9 | 8,065 | 7,612 |
| Other current financial liabilities | 10 | 63,824 | 75,650 |
| Trade payables to related companies | 16 | 1,244 | 1,436 |
| Trade and other payables | 184,893 | 151,414 | |
| Other payables | |||
| Accounts payable to public administrations | 13 | 30,620 | 17,855 |
| Other current liabilities | 8 | 97,878 | 48,043 |
| 128,498 | 65,898 | ||
| Total current liabilities | 403,704 | 319,801 | |
| Total equity and liabilities | 1,968,511 | 1,796,209 |
| Note(s) | H1 2022 | H1 2021 | Change | Q2 2022 | Q2 2021 | Change |
|---|---|---|---|---|---|---|
| 572,535 | 384,236 | 49.0 % | 311,128 | 191,596 | 62.4 % | |
| (7,366) | (5,648) | 30.4 % | (22,140) | (1,646) | > 100 % | |
| (286,241) | (171,908) | 66.5 % | (156,481) | (88,715) | 76.4 % | |
| 16,289 | 2,889 | > 100 % | 5,375 | 1,411 | > 100 % | |
| (62,348) | (42,080) | 48.2 % | (30,657) | (21,014) | 45.9 % | |
| (117,195) | (73,360) | 59.8 % | (51,495) | (36,349) | 41.7 % | |
| (35,346) | (18,642) | 89.6 % | (18,308) | (9,223) | 98.5 % | |
| 80,328 | 75,487 | 6.4 % | 37,422 | 36,060 | 3.8 % | |
| 316 | 45 | > 100 % | 164 | 21 | > 100 % | |
| (13,327) | (10,021) | 33.0 % | (6,056) | (4,732) | 28.0 % | |
| 697 | (211) | - | 454 | (771) | - | |
| (12,314) | (10,187) | 20.9 % | (5,438) | (5,482) | (0.8) % | |
| 68,014 | 65,300 | 4.2 % | 31,984 | 30,578 | 4.6 % | |
| (14,633) | (17,768) | (17.6) % | (7,176) | (8,571) | (16.3) % | |
| 53,381 | 47,532 | 12.3 % | 24,808 | 22,007 | 12.7 % | |
| 50,033 | 45,594 | 9.7 % | 23,040 | 20,814 | 10.7 % | |
| 3,348 | 1,938 | 72.8 % | 1,768 | 1,193 | 48.2 % | |
| 14 | 1.25 | 1.32 | (5.3) % | 0.58 | 0.60 | (3.2) % |
| (€ thousand) | Note(s) | H1 2022 | H1 2021 |
|---|---|---|---|
| Consolidated profit/(loss) for the period | 53,381 | 47,532 | |
| Items that may subsequently be reclassified to income statement: | |||
| Income and expense recognised directly in equity | 33,197 | (35,888) | |
| ‒ Cash-flow hedges | 10 | (7,559) | (48,339) |
| ‒ Translation differences | 38,488 | (2,051) | |
| ‒ Tax effect | 2,268 | 14,502 | |
| Transfers to the income statement | 47,106 | 5,721 | |
| ‒ Cash-flow hedges | 10 | 64,848 | 7,823 |
| ‒ Tax effect | (17,742) | (2,102) | |
| Other comprehensive income/(loss) for the period, net of tax | 80,303 | (30,167) | |
| Total comprehensive income/(loss) for the period | 133,684 | 17,365 | |
| Attributable to: | |||
| ‒ Parent Company's owners | 131,292 | 16,449 | |
| ‒ Non-controlling interests | 2,392 | 916 |
| Equity attributable to the Parent Company's owners | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Share capital |
Share premium |
Hedging reserves (Note 2) |
Other reserves |
Interim dividend |
Translation differences |
Net profit/(loss) for the period |
Non controlling interests |
Total equity | |
| Balances at 31 December 2021 | 111,048 | 532,867 | (96,830) | (19,915) | - | (4,080) | 99,745 | 8,712 | 631,547 |
| Total comprehensive income/(loss) for the period |
- | - | 41,815 | - | - | 39,444 | 50,033 | 2,392 | 133,684 |
| Distribution profit/(loss) for the period | |||||||||
| Reserves | - | - | - | 99,745 | - | - | (99,745) | - | - |
| Dividends (Note 8) | - | - | - | (50,000) | - | - | - | - | (50,000) |
| Other movements | - | - | - | 1,976 | - | - | - | - | 1,976 |
| Balances at 30 June 2022 | 111,048 | 532,867 | (55,015) | 31,806 | - | 35,364 | 50,033 | 11,104 | 717,207 |
| Balances at 31 December 2020 Total comprehensive income/(loss) for the period |
94,576 - |
263,875 - |
(9,509) (28,116) |
(54,306) - |
(9,880) - |
(15,077) (1,029) |
47,608 45,594 |
10,294 916 |
327,581 17,365 |
| Distribution profit/(loss) for the period | |||||||||
| Reserves | - | - | - | 47,608 | - | - | (47,608) | - | - |
| Dividends (Note 8) | - | (46,800) | - | (9,880) | 9,880 | - | - | - | (46,800) |
| Capital increase (Note 8) | 16,472 | 315,792 | - | (1,661) | - | - | - | - | 330,603 |
| Other movements | - | - | - | 240 | - | - | - | - | 240 |
| Balances at 30 June 2021 | 111,048 | 532,867 | (37,625) | (17,999) | - | (16,106) | 45,594 | 11,210 | 628,989 |
| (€ thousand) | H1 2022 | H1 2021 | Q2 2022 | Q2 2021 |
|---|---|---|---|---|
| Profit/(loss) for the period before tax | 68,014 | 65,300 | 31,984 | 30,578 |
| Adjustments for: | 46,555 | 29,163 | 25,416 | 15,961 |
| Depreciation and amortisation | 35,346 | 18,642 | 18,308 | 9,223 |
| Changes in provisions | (740) | 710 | 1,818 | 1,450 |
| Interest income | (316) | (45) | (164) | (21) |
| Finance costs | 13,327 | 10,021 | 6,056 | 4,732 |
| Other profit/(loss) Exchange differences |
(365) (697) |
(376) 211 |
(148) (454) |
(194) 771 |
| Changes in working capital: | (22,791) | (7,327) | (3,223) | 4,392 |
| Trade receivables and other current assets | (56,859) | (22,668) | (40,521) | 1,213 |
| Inventories | (2,601) | 478 | 9,711 | (582) |
| Trade payables | 36,669 | 14,863 | 27,587 | 3,761 |
| Other cash flows from operating activities: | (27,819) | (16,898) | (15,917) | (7,196) |
| Interest paid | (11,918) | (7,638) | (4,610) | (1,291) |
| Taxes paid | (15,901) | (9,260) | (11,307) | (5,905) |
| Net cash flows from/(used in) operating activities (I) | 63,959 | 70,238 | 38,260 | 43,735 |
| Cash flows from investing activities: | ||||
| Investments in intangible assets | (307) | (150) | (49) | (150) |
| Investments in property, plant and equipment | (57,209) | (42,977) | (31,678) | (14,961) |
| Collections from sale of property, plant and equipment | - | - | (35) | - |
| Investments/(Divestments) in other current financial assets | - | (43) | - | (46) |
| Net cash flows from/(used in) investing activities (II) | (57,516) | (43,170) | (31,762) | (15,157) |
| Cash flows from financing activities: | ||||
| Equity issuance | - | 330,603 | - | 330,603 |
| Cash inflows from bank borrowings and other liabilities | 19,879 | 18,034 | 4,560 | 6,421 |
| Cash outflows from bank borrowings and other liabilities | (11,677) | (3,063) | (9,469) | (2,038) |
| Net cash flows from/(used in) financing activities (III) | 8,202 | 345,574 | (4,909) | 334,986 |
| Effect of foreign exchange rate changes on cash & cash equivalents (IV) | (32) | 32 | 11 | (321) |
| Net increase/(decrease) in cash and cash equivalents (I+II+III+IV) | 14,613 | 372,674 | 1,600 | 363,243 |
| Cash and cash equivalents at the beginning of the period | 224,089 | 154,558 | 237,102 | 163,989 |
| Cash and cash equivalents at the end of the period | 238,702 | 527,232 | 238,702 | 527,232 |
These condensed interim consolidated financial statements have been prepared in accordance with IAS 34, 'Interim Financial Reporting'. The accounting policies used in the preparation of these condensed interim consolidated financial statements are consistent with those used in the consolidated financial statements for the year ended 31 December 2021. These condensed interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended 31 December 2021, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standard Board (IASB) and in conformity with IFRS as adopted by the European Union (EU).
The preparation of the condensed interim consolidated financial statements in conformity with IFRS-EU requires management to make certain accounting estimates and assumptions that might affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the financial statement dates, and the reported amounts of revenues and expenses for the reported periods. Actual results may differ from these estimates.
The criteria that have been considered in the consolidation process are not different to the ones utilised in the consolidation process of the financial statements for the year ended 31 December 2021.
There are no changes in the scope of consolidation in June 2022. Note that in August 2021, the Group completed the acquisition of 100% of the shares of American Zinc Recycling Corp. (AZR) (currently Befesa Zinc US Inc.) (Note 6 of the 2021 consolidated financial statements).
There were no changes in the scope of consolidation in June 2021.
The Company regularly reports alternative performance measures (APM) not defined by IFRS that management believes are relevant indicators of the performance of the Group.
Alternative performance measures are used to provide readers with additional financial information that is regularly reviewed by management and used to make decisions about operating matters. These measures are also used for defining senior management's variable remuneration. They are useful in terms of relating to discussions with the investment analysts' community.
However, these APM are not uniformly disclosed by all companies, including those in the Group's industry. Accordingly, it may not be comparable with similarly titled measures and disclosures by other companies. Additionally, certain information presented is derived from amounts calculated in accordance with IFRS but is not itself an expressly permitted GAAP measure. Such measures should not be viewed in isolation or as an alternative to the equivalent IFRS measure.
Definitions, use and reconciliations to the closest IFRS measures are presented below.
Net debt is defined as current and non-current financial debt plus current and non-current liabilities less cash and cash equivalents and less other current financial assets net from derivative financial instruments. The Group believes that net debt is relevant to investors, since it gives an indication of the absolute level of non-equity funding of the business.
This can be compared to the income and cash flows generated by the business, and available undrawn facilities.
The following table reconciles net debt to the relevant statement of financial position line items:
| 30 June 2022 |
31 December 2021 |
|
|---|---|---|
| Non-current financial debt (Note 9) | 668,854 | 653,571 |
| Non-current lease liabilty (Note 9) | 15,559 | 15,756 |
| Current financial debt (Note 9) | 17,180 | 17,791 |
| Current lease liability (Note 9) | 8,065 | 7,612 |
| Cash and cash equivalents | (238,702) | (224,089) |
| Other current financial assets net of derivative financial instruments |
(68) | (61) |
| Net debt | 470,888 | 470,580 |
EBITDA is defined as operating profit for the period before the impact of amortisation, depreciation, impairment and provisions.
Adjusted EBITDA is defined as EBITDA adjusted by any one-time projects/non-recurrent charges or income.
EBITDA margin is defined as EBITDA divided by revenue. Befesa uses EBITDA and EBITDA margin as best indicators for the Group's operating performance.
The following table reconciles EBITDA and adjusted EBITDA to the consolidated income statement line items from which it is derived:
| 30 June 2022 |
30 June 2021 |
|
|---|---|---|
| Revenue | 572,535 | 384,236 |
| Income/expenses from operations (except revenue, depreciation and amortisation/depreciation charge and provisions) |
(456,861) | (290,107) |
| Amortisation/depreciation, impairment and provisions (a) | (35,346) | (18,642) |
| EBIT (Operating profit/(loss)) (b) | 80,328 | 75,487 |
| EBITDA (Operating profit/(loss) before amortisation/depreciation and provisions) (a+b) |
115,674 | 94,129 |
| One-time projects | 2,288 | - |
| Non-recurrent charges/income | - | - |
| Adjusted EBITDA | 117,962 | 94,129 |
The following table provides a reconciliation of EBITDA margin and adjusted EBITDA margin:
| 30 June 2022 |
30 June 2021 |
|
|---|---|---|
| Revenue (a) | 572,535 | 384,236 |
| EBITDA (b) | 115,674 | 94,129 |
| One-time projects | 2,288 | - |
| Non-recurrent charges/income | - | - |
| Adjusted EBITDA (c) | 117,962 | 94,129 |
| EBITDA margin (%) (b/a) | 20% | 24% |
| Adjusted EBITDA margin (%) (c/a) | 21% | 24% |
EBIT is defined as operating profit for the year. Befesa uses EBIT to monitor its financial return after both operating expenses and a charge representing the cost of usage of both its property, plant and equipment and definite-life intangible assets.
Adjusted EBIT is defined as EBIT adjusted by any one-time projects/non-recurrent charges or incomes.
EBIT margin and Adjusted EBIT margin is defined as EBIT and adjusted EBIT as a percentage of revenue. Befesa believes that these ratios are useful measures to demonstrate the proportion of revenue that has been realised as EBIT and adjusted EBIT, and therefore indicators of profitability.
The following table reconciles EBIT and adjusted EBIT to the income statement line items from which it is derived:
| 30 June 2022 |
30 June 2021 |
|
|---|---|---|
| Revenue | 572,535 | 384,236 |
| Income/expenses from operations (except revenue, depreciation and amortisation/depreciation charge and provisions) |
(456,861) | (290,107) |
| Amortisation/depreciation, impairment and provisions | (35,346) | (18,642) |
| EBIT (Operating profit/(loss)) | 80,328 | 75,487 |
| Extraordinary impairments/provisions | - | - |
| EBITDA adjustments | 2,288 | - |
| Adjusted EBIT | 82,616 | 75,487 |
The following table provides a reconciliation of EBIT margin and Adjusted EBIT margin:
| 30 June 2022 |
30 June 2021 |
|
|---|---|---|
| Revenue (a) | 572,535 | 384,236 |
| EBIT (b) | 80,328 | 75,487 |
| Extraordinary impairments/provisions | - | - |
| EBITDA adjustments | 2,288 | - |
| Adjusted EBIT (c) | 82,616 | 75,487 |
| EBIT margin (%) (b/a) | 14% | 20% |
| Adjusted EBIT margin (%) (c/a) | 14% | 20% |
Net debt/Adjusted EBITDA ratio is defined as net debt divided by adjusted EBITDA. Befesa believes that this ratio is a useful measure to show its ability to generate the income needed to be able to settle its loans and borrowings as they fall due.
The following table reconciles the net debt/Adjusted EBITDA ratio to net debt and adjusted EBITDA:
| 30 June 2022 |
30 June 2021 |
|
|---|---|---|
| Net debt | 470,888 | 371,436 |
| Adjusted EBITDA LTM | 225,389 | 165,822 |
| Net debt/Adjusted EBITDA | 2.09 | 2.24 |
Capex is defined as the cash payments made during the period for investments in intangible assets and property plant and equipment.
Befesa believes that this measure is useful to understand the effort made by the Company each year to acquire, upgrade and maintain physical assets such as property, industrial buildings or equipment.
The following table reconciles capex to the cash flow statement line items from which it is derived:
| 30 June 2022 |
30 June 2021 |
|
|---|---|---|
| Cash flows from investing activities: | ||
| Investments in intangible assets | 307 | 150 |
| Investments in property, plant and equipment | 57,209 | 42,977 |
| Capex | 57,516 | 43,127 |
The activities carried on by Befesa through its business segments are exposed to several financial risks: market risk (including foreign currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and capital risk. The Group Risk Management Model focuses on the uncertainty in financial markets and attempts to minimise the potential adverse effects on Group's earnings.
There were no changes in the risk management policies since 31 December 2021.
Fair value estimation
On the basis of IFRS 13 and in accordance with IFRS 7 on financial instruments measured at fair value, the Group reports the estimation of fair value by level according to the following hierarchy:
The tables below show the Group's assets and liabilities that were measured at fair value at 30 June 2022 and at 31 December 2021:
| Level 2 | Level 3 | Total | |
|---|---|---|---|
| 30 June 2022 | |||
| Assets | |||
| - Equity instruments (Note 6) | - | 9,627 | 9,627 |
| - Derivatives (Notes 6–10) | 25,968 | - | 25,968 |
| Total assets at fair value | 25,968 | 9,627 | 35,595 |
| Liabilities | |||
| - Derivatives (Note 10) | 104,974 | - | 104,974 |
| Total liabilities at fair value | 104,974 | - | 104,974 |
| Level 2 | Level 3 | Total | |
|---|---|---|---|
| 31 December 2021 | |||
| Assets | |||
| - Equity instruments (Note 6) | - | 8,829 | 8,829 |
| - Derivatives (Notes 6–10) | 1,200 | - | 1,200 |
| Total assets at fair value | 1,200 | 8,829 | 10,029 |
| Liabilities | |||
| - Derivatives (Note 10) | 132,350 | - | 132,350 |
| Total liabilities at fair value | 132,350 | - | 132,350 |
The fair value of financial instruments not traded in an active market is determined using valuation techniques. The Group uses a variety of methods such as estimated discounted cash flows and uses assumptions based on the market conditions at each financial statement date. If all significant data required to calculate the fair value of an instrument are observable, the instrument is included in Level 2.
Specific techniques for measuring financial instruments include:
The instruments included in Level 2 relate to derivative financial instruments (Note 10).
The Group records under this level of financial instruments the investment acquired in 2021 in the company American Zinc Products, LLC (AZP) (Note 10 of the 2021 consolidated financial statements) since its fair value includes unobservable variables.
The Board of Directors is ultimately responsible for making the Group's operational decisions as the Chief Operating Decision Maker (CODM). The Board of Directors reviews the Group's internal financial information in order to assess its performance and allocate resources to the segments.
The Board of Directors analyses the business based on the two segments indicated below:
These segments correspond to the Group's principal activities (products and services), the sales of which (fee for the services and/or sale of the recycled residues) determine the Group's revenue (Note 12).
The Board of Directors assesses the performance of the operating segments largely based on operating income before interest and taxes (EBIT), depreciation/amortisation and provisions (EBITDA).
The financial information received by the Board of Directors also includes financial income and expenses and tax aspects, as well as cash flow and net debt.
Detailed definition of EBIT and EBITDA is shown in Note 1.3.
The accounting policies and measurement bases applied to the information furnished to the Board of Directors are consistent with those applied in the consolidated financial statements.
In relation with revenue recognition, the Group considers that under IFRS 15 there is only one kind of contract with customers, the assessment is supported by the fact that main sales of the Company's products do not have more than one performance obligation: delivery of steel and delivery of aluminium. Furthermore, the products are not dependent on or connected to other products or services. Consequently, as there are no delayed performance obligations, the revenue is recognised fully after the passing of control to the customer.
Based on this, the Group discloses revenue by reporting segment and geographical area.
Set out below is the distribution by segment of adjusted EBITDA and adjusted EBIT for the six-month period ended 30 June 2022, and for the six-month period ended 30 June 2021:
| 30 June 2022 | |||||
|---|---|---|---|---|---|
| Steel Dust | Salt Slags | Secondaty Aluminium |
Corporate, other minor & eliminations |
Total | |
| Revenue | 353,818 | 41,308 | 217,714 | (40,305) | 572,535 |
| Income/expenses from operations (except revenue, depreciation and amortisation/depreciation charge and provisions) |
(258,819) | (26,677) | (208,696) | 37,331 | (456,861) |
| Amortisation/depreciation, impairment and provisions (a) | (26,636) | (4,509) | (3,996) | (205) | (35,346) |
| EBIT (Operating profit/(loss)) (b) | 68,363 | 10,122 | 5,022 | (3,179) | 80,328 |
| EBITDA (Operating profit/(loss) before amortisation) (a) + (b) |
94,999 | 14,631 | 9,018 | (2,974) | 115,674 |
| EBITDA adjustments | - | - | - | 2,288 | 2,288 |
| Adjusted EBIT (Operating profit/(loss) | 68,363 | 10,122 | 5,022 | (891) | 82,616 |
| Adjusted EBITDA (Operating profit/(loss) | 94,999 | 14,631 | 9,018 | (686) | 117,962 |
| 30 June 2021 | |||||
|---|---|---|---|---|---|
| Steel Dust | Salt Slags | Secondaty Aluminium |
Corporate, other minor & eliminations |
Total | |
| Revenue | 195,306 | 37,316 | 172,279 | (20,665) | 384,236 |
| Income/expenses from operations (except revenue, depreciation and amortisation/depreciation charge and provisions) |
(126,088) | (26,185) | (158,579) | 20,745 | (290,107) |
| Amortisation/depreciation, impairment and provisions (a) | (9,641) | (4,667) | (4,127) | (207) | (18,642) |
| EBIT (Operating profit/(loss)) (b) | 59,577 | 6,464 | 9,573 | (127) | 75,487 |
| EBITDA (Operating profit/(loss) before amortisation) (a) + (b) |
69,218 | 11,131 | 13,700 | 80 | 94,129 |
| EBITDA adjustments | - | - | - | - | - |
| Adjusted EBIT (Operating profit/(loss) | 59,577 | 6,464 | 9,573 | (127) | 75,487 |
| Adjusted EBITDA (Operating profit/(loss) | 69,218 | 11,131 | 13,700 | 80 | 94,129 |
The reconciliation of adjusted EBITDA and adjusted EBIT to results attributable to the Parent Company is as follows:
| 30 June 2022 |
30 June 2021 |
|
|---|---|---|
| Adjusted EBITDA | 117,962 | 94,129 |
| – One-time projects | ||
| – Non-recurrent costs/incomes | ||
| Amortisation/depreciation, impairment and provisions | (35,346) | (18,642) |
| Adjusted EBIT | 82,616 | 75,487 |
| – One-time projects | (2,288) | - |
| – Non-recurrent costs/incomes | - | - |
| EBIT - Operating profit/(loss) | 80,328 | 75,487 |
| Finance income (cost) | (12,314) | (10,187) |
| Corporate income tax | (14,633) | (17,768) |
| Profit/(loss) | 53,381 | 47,532 |
| Non-controlling interests | 3,348 | 1,938 |
| Profit/(loss) attributed to the Parent Company | 50,033 | 45,594 |
The detail of sales by geographical segment for the six-month period ended 30 June 2022, and for the six-month period ended 30 June 2021 is as follows:
| 30 June | 30 June | |||
|---|---|---|---|---|
| Geographical area | 2022 | % | 2021 | % |
| Spain | 113,155 | 20% | 95,045 | 25% |
| Germany | 59,428 | 11% | 63,477 | 17% |
| Belgium | 33,058 | 6% | 27,298 | 7% |
| Italy | 30,755 | 5% | 16,134 | 4% |
| Finland | 22,077 | 4% | 15,636 | 4% |
| Netherlands | 21,491 | 4% | 23,131 | 6% |
| Norway | 18,071 | 3% | 19,284 | 5% |
| France | 15,006 | 3% | 11,606 | 3% |
| Sweden | 11,559 | 2% | 8,067 | 2% |
| Portugal | 8,934 | 2% | 7,475 | 2% |
| Rest of Europe | 21,899 | 3% | 13,813 | 3% |
| US | 113,415 | 20% | 2 | 0% |
| Japan | 25,686 | 4% | 29,952 | 8% |
| South Korea | 18,261 | 3% | 14,041 | 4% |
| Australia | 15,372 | 3% | 10,994 | 3% |
| Singanpore | 13,842 | 2% | 4,472 | 1% |
| Brazil | 11,314 | 2% | 7,931 | 2% |
| China | 7,269 | 1% | 10,239 | 3% |
| Rest of the world | 11,943 | 2% | 5,639 | 1% |
| Total | 572,535 | 100% | 384,236 | 100% |
The detail of the segment assets and liabilities for the six-month period ended 30 June 2022, and for the full-year period ended 31 December 2021 is as follows:
| 30 June 2022 | |||||
|---|---|---|---|---|---|
| Steel Dust | Salt Slags | Secondary Aluminium |
Corporate, other minor & eliminations |
Total | |
| Assets | |||||
| Intangible assets | 635,480 | 51,428 | 12,879 | 149 | 699,936 |
| Property, plant and equipment | 429,555 | 62,670 | 58,578 | 570 | 551,373 |
| Right-of-use assets | 24,079 | 5,484 | 768 | 401 | 30,732 |
| Investments in associates and other non-current assets | 93,781 | 1,014 | 61,576 | 13,924 | 170,295 |
| Current assets | 267,337 | 24,246 | 110,678 | 113,914 | 516,175 |
| Total assets | 1,450,232 | 144,842 | 244,479 | 128,958 | 1,968,511 |
| Equity and liabilities | |||||
| Equity | 312,385 | 30,203 | 57,957 | 316,662 | 717,207 |
| Non-current liabilities | 887,465 | 85,041 | 80,894 | (205,800) | 847,600 |
| Current liabilities | 250,382 | 29,598 | 105,628 | 18,096 | 403,704 |
| Total equity and liabilities | 1,450,232 | 144,842 | 244,479 | 128,958 | 1,968,511 |
| 31 December 2021 | |||||
|---|---|---|---|---|---|
| Steel Dust | Salt Slags | Secondary Aluminium |
Corporate, other minor & eliminations |
Total | |
| Assets | |||||
| Intangible assets | 612,342 | 51,858 | 13,184 | 185 | 677,569 |
| Property, plant and equipment | 397,004 | 49,802 | 61,654 | 615 | 509,075 |
| Right-of-use assets | 22,787 | 5,972 | 1,080 | 496 | 30,335 |
| Investments in associates and other non-current assets | 83,808 | 1,014 | 58,214 | (1,575) | 141,461 |
| Current assets | 236,296 | 20,388 | 91,646 | 89,439 | 437,769 |
| Total assets | 1,352,237 | 129,034 | 225,778 | 89,160 | 1,796,209 |
| Equity & liabilities | |||||
| Equity | 196,114 | 28,508 | 50,251 | 356,674 | 631,547 |
| Non-current liabilities | 910,276 | 84,887 | 87,764 | (238,066) | 844,861 |
| Current liabilities | 245,847 | 15,639 | 87,763 | (29,448) | 319,801 |
| Total equity and liabilities | 1,352,237 | 129,034 | 225,778 | 89,160 | 1,796,209 |
During the six-month period ended 30 June 2022, there are no significant additions, nor disposals within 'Other intangible assets, net'.
During the six-month period ended 30 June 2021, there are no significant additions, nor disposals within 'Other intangible assets, net'.
At 30 June 2022 and 31 December 2021, the Group had no significant investment commitments.
The movements of the 'Property, plant and equipment' balance in the six-month period ended 30 June 2022 includes additions amounting to €54.0 million, mainly related to the organic projects in China (plants in Henan and Jiangsu) by €19.2 million, investments made in Befesa Holding US, Inc amounting to €13.2 million and a €15.6 million investment of Befesa Salzschlacke, GmbH in the plant of Hanover due to the fire suffered in 2021.
There were no significant disposals in the period.
The amortisation of the period amounted to €29.1 million.
The movements of the 'Property, plant and equipment' balance in the six-month period ended 30 June 2021 includes additions amounting to €43.8 million, mainly related to the expansion projects in China (plants in Henan and Jiangsu).
There were no significant disposals in the period.
The amortisation of the period amounted to €15.8 million.
During the six-month period ending 30 June 2022 no significant impairments were recognised in 'Property, plant and equipment'.
During the six-month period ending 30 June 2021 no significant impairments were recognised in 'Property, plant and equipment'.
At 30 June 2022, the investment commitments amounted to €46.5 million mainly due to the expansion projects in China and investments in the plant of Hanover.
At 31 December 2021, the Group had investment commitments amounting to €33.7 million mainly due to the expansion project in China.
The classification of financial assets by category and class is as follows:
| 30 June 2022 | 31 December 2021 | |||
|---|---|---|---|---|
| Current | Non-current | Current | Non-current | |
| Financial assets measured at fair value through profit or loss |
||||
| Equity instruments (Note 2) | - | 9,627 | - | 8,829 |
| Financial assets at amortised cost | ||||
| Loans | ||||
| Variable rate | - | 5,391 | - | 4,724 |
| Impairment | - | - | - | - |
| Trade and other receivables | 207,134 | - | 145,378 | - |
| Security deposits | 1,018 | 1,333 | 825 | 1,200 |
| Financial assets measured at fair value | ||||
| Hedging derivatives (Note 10) | - | 25,968 | - | 1,200 |
| Total financial assets | 208,152 | 42,319 | 146,203 | 15,953 |
The fair value of financial assets does not differ significantly from their carrying amount.
As part of the agreements explained in Note 6 of the 2021 consolidated financial statements, Befesa acquired in 2021 a minority stake of 6.9% of the equity interests in American Zinc Products, LLC (AZP), AZR's zinc refining subsidiary, for €8.5 million (\$10 million).
The detail of 'Inventories' in the accompanying condensed interim consolidated statement of financial position at 30 June 2022 and 31 December 2021 is as follows:
| 30 June 2022 |
31 December 2021 |
|
|---|---|---|
| Finished goods | 28,123 | 28,858 |
| Goods in progress and semi-finished goods | 1,564 | 1,238 |
| Raw materials | 19,821 | 20,014 |
| Other | 19,813 | 17,367 |
| 69,321 | 67,477 |
'Other' at 30 June 2022 and 31 December 2021 mainly includes spare parts for the Group's facilities.
The Group has taken out insurance policies to cover risks relating to inventories. The coverage provided by these policies is considered to be sufficient.
The shareholder structure as at 30 June 2022 and at 31 December 2021 was as follows:
| Percentage of ownership | |||
|---|---|---|---|
| 30 June 2022 |
31 December 2021 |
||
| Freefloat | 100.0% | 100.0% |
The number of shares as at 30 June 2022 is 39,999,998 with a par value of €2.78 each. (30 December 2021: 34,066,705, with a par value of €2.78 each). All shares are listed in the Frankfurt Stock Exchange and have the same rights.
The authorised capital of the Company (including, for the avoidance of doubt, the Company's issued share capital) is set at 39,999,998 shares.
On 16 June 2021, the Company issued 5,933,293 new shares each with par value of €2.78 (€16,472 thousand) and share premium of €53.22 (€315,792 thousand). The new shares were included in the existing listing of Befesa's shares at the Frankfurt Stock Exchange. The Company has recognised €3,648 thousand of issuance costs as a reduction in equity instruments issued.
On 6 July 2022, Befesa distributed to its shareholders a dividend of €1.25 per share, amounting to €50.0 million, as approved by the AGM held on 16 June 2022, so as at 30 June 2022 the €50.0 million are reported in 'Other current liabilities' in the statement of financial position.
On 14 July 2021, Befesa distributed to its shareholders a dividend of €1.17 per share (repayment of the share premium), amounting to €46.8 million, as approved by the AGM held on 30 June 2021.
The detail of the related line items in the accompanying consolidated statement of financial position is as follows:
| 30 June 2022 | 31 December 2021 | ||||
|---|---|---|---|---|---|
| Current maturity |
Non-current maturity |
Current maturity |
Non-current maturity |
||
| Bank loans and credit facilities | 14,214 | 668,854 | 12,010 | 653,571 | |
| Unmatured accrued interest | 2,966 | 5,781 | |||
| Finance lease payables | 8,065 | 15,559 | 7,612 | 15,756 | |
| Total | 25,245 | 684,413 | 25,403 | 669,327 |
Fair values of borrowings are not materially different to their carrying amounts since the interest payable is close to current market rates.
The main terms and conditions of the borrowings are as follows:
| 30 June 2022 31 December 2021 |
|||||||
|---|---|---|---|---|---|---|---|
| Type | Limit in nominal (thousands of currency) |
Interest rate | Maturity date | Current maturity |
Non-current maturity |
Current maturity |
Non-current maturity |
| Facilities Agreement | EUR 736,000 | Euribor + 1.75% | 2026 | 2,966 | 610,742 | 5,691 | 608,901 |
| Jiangsu | CNY 220,000 | LIR (NBIC) + 25bps |
2026 | 3,950 | 24,417 | 3,513 | 22,058 |
| Henan | CNY 260,000 | LPR (NBIC) + 25bps |
2027 | 3,352 | 32,648 | 1,591 | 18,610 |
| Others | 14,977 | 16,606 | 14,608 | 19,758 | |||
| 25,245 | 684,413 | 25,403 | 669,327 |
On 19 October 2017, in order to standardise the financial structure of the Group, the Company as Parent and certain subsidiaries as borrowers and guarantors entered into a €636.0 million Facilities Agreement. This post-IPO agreement is intended to raise financing for the entire Group and cancel the Group's previous current and non-current borrowings in connection with the €300.0 million Zinc Notes, €150.0 million PIK Notes and the €167.5 million Syndicated Loan.
Upon completion of the IPO on 3 November 2017 the Facilities Agreement took effect on 7 December 2017.
On 9 July 2019, the refinancing of the existing capital structure was successfully completed in a leverage neutral transaction that a) extends Befesa's debt maturity up to June 2026 with a seven-year tenor of the covenant-lite Term Loan B (TLB) at attractive interest rates, and b) increases loan baskets to accommodate Befesa's growth roadmap including China.
The Facility Agreement has been signed by the Parent of the Group (Befesa, S.A.) and has been designed to meet the financing needs of all Group companies.
The Facilities Agreement comprises:
Interest on the initial TLB facility was Euribor plus a spread of 2.75%, and 2.50% in the case of the RCF. These spreads could be adjusted depending on the ratio of net financial debt/EBITDA.
After the refinancing in July 2019, the margin was set to 250 bps for the following nine months.
On 17 February 2020, Befesa repriced its TLB reducing its interest rate by 50 bps to Euribor + 200 bps with a floor of 0%. The facility's long-term July 2026 maturity date and all other documentation terms remain without further amendment.
The Group analysed in 2020 whether there was a substantial modification of the conditions, having concluded that there was no cancellation of the original liabilities because the only change corresponds to the reduction in the nominal interest rate (repricing) and, the discounted present value of the cash flows under the new terms is a 3% from the discounted present value of the remaining cash flow of the original financial liability. However, this modification entailed recognising finance income of €15 million as the new future cash flows were discounted at the original effective rate of 2.7%.
On 2 July 2021, with the purpose of Financing the Acquisition of AZR (including but not limited to any costs and expenses relating to the acquisition and any refinancing of financial indebtedness of the target group), and general corporate purposes, together with the accelerated equity offering (AEO) Befesa signed an incremental term facility for an additional €100 million add-on Term Loan B. The maturity and rest of documentation terms remain in line with existing TLB.
In August 2021, the margin applicable to TLB was reduced by 25 bps to Euribor plus 175 bps due to the decrease on the leverage ratio.
The Facilities Agreement provides a financial covenant based on the net leverage which shall not exceed the ratio 4.5:1 for any relevant period. The covenant only applies if the total amount of all drawings under the RCF exceeds 40% of the commitments under the RCF. At 30 June 2022 and 31 December 2021, the RCF has not yet been drawn and no financial covenant applies.
The Facilities Agreement limits dividend distribution if any Group company incurs an event of default as defined in the agreement.
In 2020, Befesa closed the financing structure for both plants under construction in China (Jiangsu and Henan). The notional and the rest of the conditions signed are shown in the table above.
At 30 June 2022 and 31 December 2021, 'Other' mainly includes short-term financing of Befesa Silvermet Iskenderun and debt related to the financial leases.
At 30 June 2022 and 31 December 2021, an amount of €75 million was undrawn from the syndicated financing arrangement.
The Group uses derivative financial instruments to hedge the risks to which its activities, operations and future cash flows are exposed, which are mainly risks arising from changes in exchange rates, interest rates and the market price of certain metals, mainly zinc. The detail of the balances that reflect the measurement of derivatives in the accompanying condensed interim consolidated statement of financial position at 30 June 2022 and 31 December 2021 is as follows:
| 30 June | 31 December | ||
|---|---|---|---|
| 2022 | 2021 | ||
| Cash flow hedges non-current assets | |||
| Swap contracts for zinc | 7,734 | - | |
| Interest rate swap | 18,234 | 1,200 | |
| 25,968 | 1,200 | ||
| Cash flow hedges current assets: | |||
| Swap contracts for zinc | - | - | |
| - | - | ||
| Total assets | 25,968 | 1,200 | |
| Cash flow hedges non-current liabilities: | |||
| Swap contracts for zinc | 41,150 | 56,700 | |
| 41,150 | 56,700 | ||
| Cash flow hedges current liabilities: | |||
| Swap contracts for zinc | 63,285 | 75,573 | |
| Swap foreign currency | 539 | 77 | |
| 63,824 | 75,650 | ||
| Total liabilities | 104,974 | 132,350 |
| Provisions for litigation, pensions and similar obligations |
Other provisions for contingencies and charges |
Total long-term provisions |
||
|---|---|---|---|---|
| Balance at 31 December 2021 | 13,936 | 8,331 | 22,267 | |
| Profit and loss impact | 2,170 | (57) | 2,113 | |
| Payment | (480) | - | (480) | |
| Transfers | (3,279) | - | (3,279) | |
| Conversion differences | 340 | 566 | 906 | |
| Balance at 30 June 2022 | 12,687 | 8,840 | 21,527 |
At 30 June 2022, the Group recognised a provision of €6.3 million (€7.5 million at 31 December 2021) related to the compensation plans described in Note 24 of the 2021 consolidated financial statements. At 30 June 2022, the Group charged to the income statement €2.2 million (€2.7 million at 30 June 2021) and reclassified to 'Remuneration payable' €3.2 million related to this provision (€1.9 million at 30 June 2021).
The Group company Befesa Valera, S.A.S. recognised a provision of approximately €1.9 million at 30 June 2022 as well as at 31 December 2021 for the present value of the estimated costs of dismantling the concession for the performance of their activities at the Port of Dunkirk (France) following its termination.
In addition, the Group recognised other provisions under 'Other provisions for contingencies and charges' to meet liabilities, whether legal or implicit, probable or certain, due to contingencies, ongoing litigations and tax obligations, which arise as the result of past events and are more likely than not to require an outflow of resources embodying economic benefits from the Group to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation.
Befesa Zinc US Inc. recognised asset retirement obligations linked to its different facilities in the US of €6.2 million at June 2022 for the present value of estimated costs (€5.6 million at 31 December 2021).
Details of revenues by category for the six-month period ended 30 June 2022 and 30 June 2021 are as follows:
| 30 June 2022 % |
30 June 2021 | % | ||
|---|---|---|---|---|
| Steel Dust | 353,818 | 62% | 195,306 | 51% |
| -Sale of WOX and others metals | 310,397 | 54% | 168,277 | 44% |
| -Service fees | 43,421 | 8% | 27,029 | 7% |
| Salt Slags | 41,308 | 7% | 37,316 | 10% |
| -Sale of aluminium concentrates and melting salt | 27,863 | 5% | 22,456 | 6% |
| -Fees for recycling salt slags and SPL | 13,445 | 2% | 14,860 | 4% |
| Secondary Aluminium | 217,714 | 38% | 172,279 | 45% |
| -Sale of secondary aluminium alloys | 199,199 | 35% | 164,045 | 43% |
| -Technology division & others | 18,515 | 3% | 8,234 | 2% |
| Corporate, other minor eliminations | (40,305) | (20,665) | ||
| Total | 572,535 | 384,236 |
The Group discloses revenue by reporting segment and geographical area in Note 3.
Income tax is calculated as of the closing date on the basis of the applicable tax regulation. Nevertheless, any alteration on the applicable tax framework, would be accordingly considered on the financial statements prepared immediately after the date such regulation comes into effect.
At 30 June 2022, the accounts arising as a result of the Income Tax estimation for the six-month period ended 30 June 2022, is recorded under 'Accounts receivables from public authorities' and 'Accounts payables to public administrations' on the condensed interim consolidated statement of financial position included in these condensed interim consolidated financial statements.
Basic earnings per share are calculated as follows:
| 30 June 2022 | 30 June 2021 | ||||
|---|---|---|---|---|---|
| Total amount in € thousand |
Earnings per share in € |
Total amount in € thousand |
Earnings per share in € |
||
| Net income (attributable to Befesa S.A.'s shareholders) |
50,033 | 1.25 | 45,594 | 1.32 | |
| Weighted average shares | 39,999,998 | 34,525,634 |
At 30 June 2022, a number of Group companies had provided guarantees for an overall amount of approximately €67.1 million (31 December 2021: €50.7 million) to guarantee their operations vis-à-vis customers, banks, government agencies and other third parties.
The Group has contingent liabilities for litigation arising in the ordinary course of business from which no significant liabilities are expected to arise other than those for which provisions have already been recognised.
All the significant balances at period-end between the consolidated companies and the effect of the transactions between them were eliminated on consolidation.
The detail of the balances with shareholders and Group and related companies at 30 June 2022 and 31 December 2021 is as follows:
| 30 June 2022 | 30 June 2021 | ||||
|---|---|---|---|---|---|
| Sales and other income |
Purchases and other expenses |
Sales and other income |
Purchases and other expenses |
||
| Recytech S.A. | 869 | (8,189) | 889 | (4,777) |
| 30 June 2022 | 31 December 2021 | ||||
|---|---|---|---|---|---|
| Accounts receivable and other current financial assets |
Accounts payable |
Accounts receivable and other current financial assets |
Accounts payable |
||
| Recytech S.A. | 290 | 1,244 | 258 | 1436 | |
| Befesa Zinc (Thailand) Ltd. | 2,310 | - | 659 | - | |
| 2,600 | 1,244 | 917 | 1,436 |
The balances and transactions of Group companies relate to sale and purchase transactions and other commercial operations on an arm's length basis.
All transactions are commercial and do not accrue interest, except for loans and the above credit facilities with the Group, carried out on an arm's length basis, the maturity of which are ordinary for these types of transactions.
As transactions with related parties are carried out on an arm's length basis, the Parent Company's Directors do not consider that this could give rise to significant liabilities in the future.
There are no events between the financial statement date (30 June 2022) and the date of presentation of this H1 2022 Interim Report (28 July 2022) which would materially affect the Group's assets or the Group's financial and/or earnings position.
We, Javier Molina Montes and Wolf Uwe Lehmann, respectively Executive Chair and Chief Financial Officer, confirm, to the best of our knowledge, that:
Luxembourg, 27 July 2022
Javier Molina Montes Wolf Uwe Lehmann
| H1 2022 | H1 2021 | Change | Q2 2022 | Q2 2021 | Change | |
|---|---|---|---|---|---|---|
| Key operational data (tonnes, unless specified otherwise) | ||||||
| EAFD throughput1 | 629,661 | 340,668 | 84.8 % | 292,295 | 159,573 | 83.2 % |
| WOX sold | 213,804 | 119,334 | 79.2 % | 110,073 | 52,608 | 109.2 % |
| Zinc blended price (€ / tonne) | 2,668 | 2,254 | 18.4 % | 2,789 | 2,275 | 22.6 % |
| Total installed capacity2 | 1,555,300 | 825,300 | 88.5 % | 1,555,300 | 825,300 | 88.5 % |
| Utilisation (%)2 | 81.6 % | 83.2 % | (160) bps | 75.4 % | 77.6 % | (217) bps |
| Key financial data (€ million, unless specified otherwise) | ||||||
| Revenue | 353.8 | 195.3 | 81.2 % | 197.9 | 94.4 | 109.6 % |
| EBITDA | 95.0 | 69.2 | 37.2 % | 40.2 | 32.7 | 22.9 % |
| EBITDA margin | 26.8 % | 35.4 % | (859) bps | 20.3 % | 34.6 % | (1,432) bps |
| EBIT | 68.4 | 59.6 | 14.7 % | 26.1 | 28.0 | (6.7) % |
| EBIT margin | 19.3 % | 30.5 % | (1,118) bps | 13.2 % | 29.6 % | (1,643) bps |
Salt Slags subsegment
| H1 2022 | H1 2021 | Change | Q2 2022 | Q2 2021 | Change | |
|---|---|---|---|---|---|---|
| Key operational data (tonnes, unless specified otherwise) | ||||||
| Salt slags and SPL recycled | 172,949 | 195,764 | (11.7) % | 85,497 | 91,334 | (6.4) % |
| Total installed capacity | 450,000 | 450,000 | 0.0 % | 450,000 | 450,000 | 0.0 % |
| Utilisation (%)3 | 77.5 % | 87.7% | (1,022) bps | 76.2 % | 81.4% | (520) bps |
| Key financial data (€ million, unless specified otherwise) | ||||||
| Revenue | 41.3 | 37.3 | 10.7 % | 22.1 | 17.5 | 26.5 % |
| EBITDA | 14.6 | 11.1 | 31.4 % | 8.2 | 5.2 | 57.2 % |
| EBITDA margin | 35.4 % | 29.8 % | 559 bps | 37.2 % | 29.9 % | 726 bps |
| EBIT | 10.1 | 6.5 | 56.6 % | 6.1 | 2.9 | 110.6 % |
| EBIT margin | 24.5 % | 17.3 % | 718 bps | 27.5 % | 16.5 % | 1,097 bps |
| H1 2022 | H1 2021 | Change | Q2 2022 | Q2 2021 | Change | |
|---|---|---|---|---|---|---|
| Key operational data (tonnes, unless specified otherwise) | ||||||
| Secondary aluminium alloys produced | 84,645 | 99,453 | (14.9) % | 42,401 | 48,170 | (12.0) % |
| Aluminium alloy FMB price (€ / tonne)4 | 2,558 | 1,965 | 30.2 % | 2,488 | 1,947 | 27.8 % |
| Total installed capacity | 205,000 | 205,000 | 0.0 % | 205,000 | 205,000 | 0.0 % |
| Utilisation (%)5 | 83.3 % | 97.8 % | (1,457) bps | 83.0 % | 94.2 % | (1,129) bps |
| Key financial data (€ million, unless specified otherwise) | ||||||
| Revenue | 217.7 | 172.3 | 26.4 % | 119.8 | 89.8 | 33.3 % |
| EBITDA | 9.0 | 13.7 | (34.2) % | 7.8 | 7.3 | 7.3 % |
| EBITDA margin | 4.1 % | 8.0 % | (381) bps | 6.5 % | 8.1 % | (159) bps |
| EBIT | 5.0 | 9.6 | (47.5) % | 5.9 | 5.2 | 12.6 % |
| EBIT margin | 2.3 % | 5.6 % | (325) bps | 4.9 % | 5.8 % | (91) bps |
1 EAFD throughput does not include stainless steel dust treated volumes
2 Total installed capacity in Steel Dust does not include 174,000 tonnes per year of stainless-steel dust recycling operations; The increase in annual installed capacity to 1,555,300 tonnes reflects c.620,000 tonnes contributed by the acquired US recycling plants and 110,000 tonnes from Jiangsu (China); Utilisation represents EAFD processed against annual installed recycling capacity
3 Utilisation represents the volume of salt slags & SPL recycled against annual installed capacity; Total annual installed capacity figures do not include the 100,000 tonnes idled capacity at Töging, Germany
4 Aluminium Scrap and Foundry Ingots Aluminium pressure diecasting ingot DIN226/A380 European Metal Bulletin Free Market Duty paid delivered works
5 Utilisation represents the volume of secondary aluminium alloys produced against annual installed production capacity
Thursday, 27 October 2022 Q3 2022 Statement & Conference Call
Notes: Befesa's financial reports and statements are published at 7:30 am CEST Befesa cannot rule out changes of dates and recommends checking them at the Investor Relations / Investor's Agenda section of Befesa's website www.befesa.com
Director of Investor Relations & Strategy Phone: +49 (0) 2102 1001 0 email: [email protected]
All Befesa publications are available in the Investor Relations / Reports and Presentations section of Befesa's website www.befesa.com
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Disclaimer This report contains forward-looking statements and information relating to Befesa and its affiliates that are based on the beliefs of its management, including assumptions, opinions and views of Befesa and its affiliates as well as information cited from third party sources. Such statements reflect the current views of Befesa and its affiliates or of such third parties with respect to future events and are subject to risks, uncertainties and assumptions.
Many factors could cause the actual results, performance or achievements of Befesa and its affiliates to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others: changes in general economic, political, governmental and business conditions globally and in the countries in which Befesa and its affiliates do business; changes in interest rates; changes in inflation rates; changes in prices; changes to national and international laws and policies that support industrial waste recycling; legal challenges to regulations, subsidies and incentives that support industrial waste recycling; extensive governmental regulation in a number of different jurisdictions, including stringent environmental regulation; management of exposure to credit, interest rate, exchange rate and commodity price risks; acquisitions or investments in joint ventures with third parties; inability to obtain new sites and expand existing ones; failure to maintain safe work environments; effects of catastrophes, natural disasters, adverse weather conditions, unexpected geological or other physical conditions, or criminal or terrorist acts at one or more of Befesa's plants; insufficient insurance coverage and increases in insurance cost; loss of senior management and key personnel; unauthorised use of Befesa's intellectual property and claims of infringement by Befesa of others' intellectual property; Befesa's ability to generate cash to service indebtedness changes in business strategy and various other factors.
Should one or more of these risks or uncertainties materialise, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or targeted. Befesa and its affiliates do not assume any guarantee that the assumptions underlying forward-looking statements are free of errors nor do they accept any responsibility for the future accuracy of the opinions expressed herein or the actual occurrence of the forecasted developments. No representation (express or implied) is made as to, and no reliance should be placed on, any information, including projections, estimates, targets and opinions, contained herein, and no liability whatsoever is accepted as to any errors, omissions or misstatements contained herein or otherwise resulting, directly or indirectly, from the use of this document.
This report is intended for information only and should not be treated as investment advice. It is not intended as an offer for sale, or as a solicitation of an offer to purchase or subscribe to, any securities in any jurisdiction. Neither this report nor anything contained therein shall form the basis of, or be relied upon in connection with, any commitment or contract whatsoever. This report may not, at any time, be reproduced, distributed or published (in whole or in part) without prior written consent of Befesa.
First half and second quarter 2022 figures contained in this report have not been audited or reviewed by external auditors.
This report includes Alternative Performance Measures (APM), including EBITDA, EBITDA margin, EBIT, EBIT margin, Adjusted EBIT, Adjusted EBIT margin, net debt and capital expenditures which are not measures of liquidity or financial performance under International Financial Reporting Standards (IFRS). EBITDA is defined as operating profit for the period (i.e. EBIT) before the impact of amortisation, depreciation, impairment and provisions. EBITDA margin is defined as EBITDA divided by revenue. EBIT is defined as Operating profit for the year. The Company uses EBIT to monitor its financial return after both operating expenses and a charge representing the cost of usage of both its property, plant and equipment and definite‑life intangible assets. EBIT margin is defined as EBIT as a percentage of revenue. These non-IFRS measures should not be considered in isolation or as an alternative to results from operating activities, cash flow from operating, investing or financing activities, or other financial measures of Befesa's results of operations or liquidity derived in accordance with IFRS. Befesa believes that the APM included in this report are useful measures of its performance and liquidity. Other companies, including those in the industry in which Befesa operates, may calculate similarly titled financial measures differently than Befesa does. Because all companies do not calculate these financial measures in the same manner, Befesa's presentation of such financial measures may not be comparable to other similarly titled measures of other companies. These APM are not audited.
Befesa S.A. 68-70, Boulevard de la Pétrusse L-2320 Luxembourg Grand Duchy of Luxembourg www.befesa.com
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