Quarterly Report • Jul 31, 2023
Quarterly Report
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H1 2023 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 ………………………………………………………………………………………………………………………………………… | 7 |
| Outlook ……………………………………………………………………………………………………………………………………………………… | 7 |
| Statement of financial position …………………………………………………………………………………………………………… | 8 |
|---|---|
| Income statement ……………………………………………………………………………………………………………………………… | 10 |
| Statement of comprehensive income …………………………………………………………………………………………………… | 11 |
| Statement of changes in equity ………………………………………………………………………………………………………… | 12 |
| Statement of cash flows ………………………………………………………………………………………………………………… | 13 |
| Notes to the condensed interim consolidated financial statements …………………………………………… | 14 |
| Management's responsibility statement ……………………………………………………………………………………………. | 30 |
| Segmentation overview - Key metrics …………………………………………………………………………………………………… | 31 |
|---|---|
| Financial calendar and IR contact ……………………………………………………………………………………………………… | 32 |
| Disclaimer ……………………………………………………………………………………………………………………………………………… | 32 |
| H1 2023 | H1 2022 | Change | Q2 2023 | Q2 2022 | Change | |
|---|---|---|---|---|---|---|
| Key operational data (tonnes, unless specified otherwise) | ||||||
| Electric arc furnace steel dust (EAFD) throughput | 592,335 | 629,661 | (5.9) % | 305,266 | 292,295 | 4.4 % |
| Waelz oxide (WOX) sold | 197,238 | 213,889 | (7.8) % | 97,406 | 110,158 | (11.6) % |
| Salt slags and Spent Pot Linings (SPL) recycled | 171,076 | 172,949 | (1.1) % | 88,783 | 85,497 | 3.8 % |
| Secondary aluminium alloys produced | 87,151 | 84,645 | 3.0 % | 43,471 | 42,401 | 2.5 % |
| Zinc LME average price (€ / tonne) | 2,624 | 3,510 | (25.3) % | 2,331 | 3,683 | (36.7) % |
| Zinc blended price (€ / tonne) | 2,464 | 2,668 | (7.6) % | 2,290 | 2,789 | (17.9) % |
| Aluminium alloy FMB average price (€ / tonne) | 2,243 | 2,558 | (12.3) % | 2,184 | 2,488 | (12.2) % |
| Key financial data (€ million, unless specified otherwise) | ||||||
| Revenue | 615.5 | 572.5 | 7.5 % | 293.5 | 311.1 | (5.7) % |
| EBITDA | 90.8 | 115.7 | (21.5) % | 41.5 | 55.7 | (25.5) % |
| EBITDA margin | 14.8 % | 20.2 % | (545) bps | 14.1 % | 17.9 % | (377) bps |
| Adjusted EBITDA | 94.7 | 118.0 | (19.7) % | 44.6 | 56.9 | (21.5) % |
| Adjusted EBITDA margin | 15.4 % | 20.6 % | (521) bps | 15.2 % | 18.3 % | (307) bps |
| EBIT | 50.4 | 80.3 | (37.2) % | 21.4 | 37.4 | (42.9) % |
| EBIT margin | 8.2 % | 14.0 % | (583) bps | 7.3 % | 12.0 % | (475) bps |
| Adjusted EBIT | 55.1 | 82.6 | (33.3) % | 25.2 | 38.6 | (34.7) % |
| Adjusted EBIT margin | 9.0 % | 14.4 % | (548) bps | 8.6 % | 12.4 % | (381) bps |
| Financial result | (19.6) | (12.3) | 59.2 % | (13.0) | (5.4) | > 100 % |
| Profit before taxes and minority interests | 30.8 | 68.0 | (54.7) % | 8.4 | 32.0 | (73.8) % |
| Net profit attributable to shareholders of Befesa S.A. | 20.2 | 50.0 | (59.5) % | 5.1 | 23.0 | (77.9) % |
| EPS (in €) | 0.51 | 1.25 | (59.5) % | 0.13 | 0.58 | (77.9) % |
| Total assets | 2,017.0 | 1,968.5 | 2.5 % | 2,017.0 | 1,968.5 | 2.5 % |
| Capital expenditures | 53.9 | 54.2 | (0.6) % | 22.9 | 33.2 | (30.9) % |
| Cash flow from operating activities | 42.0 | 64.0 | (34.4) % | 29.0 | 38.3 | (24.2) % |
| Cash and cash equivalents at the end of the period | 143.5 | 238.7 | (39.9) % | 143.5 | 238.7 | (39.9) % |
| Net debt | 567.0 | 470.9 | 20.4 % | 567.0 | 470.9 | 20.4 % |
| Net leverage | x2.96 | x2.13 | x 0.84 | x2.96 | x2.13 | x 0.84 |
| Number of employees (as of end of the period) | 1,814 | 1,583 | 14.6 % | 1,814 | 1,583 | 14.6 % |
Total revenue increased by 7.5% yoy to €615.5 million in H1 2023 (H1 2022: €572.5 million). The increase was primarily attributable to the contribution from the zinc refining operations in the US.
Total adjusted EBITDA decreased by 19.7% yoy to €94.7 million in H1 2023 (H1 2022: €118.0 million) was primarily driven by lower zinc LME prices, as well as by the unfavourable increase in zinc TC (19% year-on-year). Detailed by volume, price, and cost components, the €23.2 million yoy decrease is explained as follows:
Total adjusted EBIT decreased by 33.3% yoy to €55.1 million in H1 2023 (H1 2022: €82.6 million).
Total EBITDA and EBIT were adjusted for €3.9 million and €4.7 million respectively in H1 2023, mainly driven by impacts from the ramp up of some facilities. Total reported EBITDA amounted to €90.8 million in H1 2023 (-21.5% yoy). Total reported EBIT amounted to €50.4 million in H1 2023 (-37.2% yoy).
Total net financial result decreased by 59.2% yoy to -€19.6 million in H1 2023 (H1 2022: -€12.3 million). This decrease was primarily driven by two factors: on the one hand, the higher margin applicable to the Term Loan B (TLB), which increased in December 2022 by 25 bps to Euribor plus 200 bps due to the increase on the leverage ratio. On the other hand, the yoy higher Euribor, from 0% in H1 2022 to 1%— 3% applicable in H1 2023.
Total net profit attributable to the shareholders in H1 2023 decreased by 59.5% yoy to €20.2 million (H1 2022: €50.0 million). This development was primarily due to the aforementioned negative drivers impacting EBITDA and EBIT. As a result, earnings per share (EPS) in H1 2023 decreased accordingly by 59.5% yoy to €0.51 (H1 2022: €1.25).
Gross debt at 30 June 2023 remained stable at €710.5 million (31 December 2022: €710.8 million).
Net debt at 30 June 2023 increased by 3.3% to €567.0 million (31 December 2022: €549.0 million). This is mainly explained by the decrease in cash balance.
Net leverage of x2.96 at Q2 2023 closing (year-end 2022: x2.56) based on the underlying net debt of €567.0 million and LTM adjusted EBITDA of €191.4 million.
Befesa continues to be compliant with all debt covenants.
Net debt (€ million)
| 30 June | 31 December | |
|---|---|---|
| 2023 | 2022 | |
| Non-current financial indebtedness | 673.7 | 677.4 |
| + Current financial indebtedness | 36.8 | 33.3 |
| Financial indebtedness | 710.5 | 710.8 |
| – Cash and cash equivalents | (143.5) | (161.8) |
| – Other current financial assets1 | (0.1) | (0.1) |
| Net debt | 567.0 | 549.0 |
| LTM Adjusted EBITDA | 191.4 | 214.6 |
| Net leverage ratio | x2.96 | x2.56 |
1 Other current financial assets adjusted by hedging valuation and restricted deposits
Operating cash flow in H1 2023 amounted to €42.0 million, 34.4% lower yoy (H1 2022: €64.0 million).
The change in working capital impacted operating cash flow by €28 million in H1 2023, without cash consumption in Q2 2023. Interests paid in H1 2023 increased by 12.7% yoy to €13.4 million (H1 2022: €11.9 million).
In H1 2023, Befesa's capex was €53.3 million (H1 2022: €57.5 million) to fund regular maintenance capex, the recovery of the Hanover plant and US operational excellence / synergies, as well as growth investments. The latter are mainly related to the second plant in China, partially funded through local loan.
After funding working capital, interests, taxes and capex, total cash flow in H1 2023 amounted to -€18.3 million. Cash on hand stood at €143.5 million, which together with the €75.0 million RCF, entirely undrawn, provides Befesa with more than €200 million liquidity.
Volumes of EAFD recycled in H1 2023 decreased by 5.9% yoy to 592,335 tonnes (H1 2022: 629,661 tonnes). With these volumes, Befesa's EAFD recycling plants ran at an average load factor of 71%. The volume of Waelz oxide (WOX) sold in H1 2023 decreased by 7.8% yoy to 197,238 tonnes (H1 2022: 203,889 tonnes). These lower volumes were primarily driven by the US operations and the earthquake in Turkey. Overall, volumes in Steel Dust continue to be affected by the ongoing challenging global steel industry environment.
Revenue in the Steel Dust business increased by 13.9% yoy to €403.0 million in H1 2023 (H1 2022: €353.8 million), primarily attributed to the contribution from the US zinc refining operations.
Adjusted EBITDA in the Steel Dust business decreased by 29.3% yoy to €67.2 million in H1 2023 (H1 2022: €95.0 million).
The yoy -€27.8 million EBITDA development was mainly impacted by the lower zinc LME prices (-25% yoy) – partially offset by higher zinc hedging prices –, the unfavourable zinc TC at \$274 per tonne (+19% yoy), the lower EAFD volumes (-6% yoy), and the higher coke prices (+25% yoy) partially offset by the positive impact from productivity and synergies. Consequently, EBITDA as a percent of revenue stands at 17% in H1 2023 compared to 27% in H1 2022. The yoy profitability decrease was due to two effects: firstly, the impact of the items affecting EBITDA as explained above, and secondly, a change in the business mix with the incorporation of the zinc refining plant which brings high volume of revenue and lower EBITDA margin.
Adjusted EBIT in the Steel Dust business came in at €36.4 million in H1 2023, down 46.8% yoy (H1 2022: €68.4 million), following similar drivers explained referring to the
EBITDA and EBIT in the Steel Dust business were adjusted for €3.8 million and €4.5 million respectively in H1 2023, mainly driven by impacts from the ramp up of some facilities. Total reported EBITDA amounted to €63.4 million in H1 2023 (-33.3% yoy). Total reported EBIT amounted to €31.8 million in H1 2023 (-53.4% yoy).
EBITDA development.
Salt slags and SPL recycled volumes in H1 2023 amounted to 171,076 tonnes, down 1.1% yoy (H1 2022: 172,949 tonnes), primarily due to the ramp up of the Hanover plant. On average, Salt Slags recycling plants operated at 73% in H1 2023 of the latest installed annual recycling capacity of 470,000 tonnes.
Revenue in the Salt Slags subsegment remained stable yoy at €41.3 million in H1 2023.
EBITDA slightly decreased by 2.1% yoy to €14.3 million in H1 2023 (H1 2022: €14.6 million). The positive impact from lower energy prices was offset by lower aluminium alloy FMB market prices. Consequently, EBITDA as a percent of revenue in the Salt Slags subsegment remained at 35% in H1 2023.
EBIT decreased by 5.4% yoy to €9.6 million in H1 2023 (H1 2022: €4.0 million), following similar drivers explained referring to the EBITDA development.
Aluminium alloy production volumes increased by 3.0% yoy to 87,151 tonnes in H1 2023 (H1 2022: 84,645 tonnes). Secondary Aluminium production plants overall operated at around 86% utilisation rate on average in H1 2023.
Revenue in the Secondary Aluminium subsegment amounted to €195.2 million in H1 2023, down 10.3% yoy (H1 2022: €217.7 million). The yoy higher volumes were offset with the lower aluminium alloy FMB market prices.
EBITDA in the Secondary Aluminium subsegment increased by 48.1% yoy to €13.4 million in H1 2023 (H1 2022: €9.0 million). The yoy EBITDA improvement was mainly explained by lower costs, primarily through the lower gas and electricity prices –reduced further and back at 2021 average levels –, and the higher aluminium metal margins.
EBIT in the Secondary Aluminium subsegment increased by 88.5% yoy to €9.5 million in H1 2023 (H1 2022: €5.0 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 in the Annual Report 2022, pages 70-76.
Hedging Befesa's hedging strategy is unchanged and continues to be a key element of Befesa's business model, providing zinc price visibility, lowering the impact from zinc price volatility and therefore improving the stability and visibility of earnings and cash flow across the economic cycle. Further details are available in the Befesa Annual Report 2022 (pages 38-39).
Befesa's current hedging volume run rate is to hedge around 38 thousand tonnes of zinc per quarter or around 152 thousand tonnes per year.
The combined global hedge book in place as of the date of this H1 2023 Interim Report provides Befesa with improved zinc price visibility up to July 2025, therefore for the following two years, at increasing hedging average prices: around €2,400 per tonne in 2023, around €2,500 per tonne in 2024 and around €2,650 per tonne for the first half of 2025.
Befesa's Sustainable Global Growth Plan (SGGP) is progressing as planned. In the US, Befesa continues the gradual improvement of the performance of its zinc refining operations in Rutherford County, North Carolina. The refurbishment of the plant in Palmerton, Pennsylvania, is on track as well, and it will continue during the rest of 2023 and 2024, and will allow Befesa to capture the incremental EAFD volumes expected in the US market over the coming years.
Befesa's expansion in China continued to progress, with the start of operations at the second Chinese plant, in Henan. The two existing Chinese plants in Jiangsu and Henan are operating and will contribute to earnings in H2 2023. Furthermore, Befesa is preparing its next EAFD recycling plant – the third in China and thirteenth globally – in the province of Guangdong.
On 30 June 2023, Befesa published its ESG Progress Report 2022 available on the Befesa website. This edition includes Befesa's progress on CO2 intensity reduction plan and EU Taxonomy alignment disclosures. The report also covers three new topics: Scope 3 emissions; production of green metals from 100% recycled material; and contribution to biodiversity.
As of 30 June 2023, the ESG ratings from six renowned international ESG rating agencies following Befesa were as follows:
| 30 June 2023 | 31 December 2022 |
|---|---|
| B / Prime | Top 3 of 69 |
| #181/430 | #181 / 430 |
| #7/103 | #7 / 103 |
| BBB | BBB |
| Top 12% | Top $5%$ |
| Top 15% | Top 15% |
There are no events between the financial statement date (30 June 2023) and the date of presentation of this H1 2023 Interim Report (27 July 2023) which would materially affect the Group's assets or the Group's financial and/or earnings position.
Befesa expects a stronger overall second half of the year 2023. This confidence is mainly based on the temporary nature of the external pressures, including an expected recovery in zinc market prices, a reduction of coke price, and improved volumes.
As a result, Befesa confirms its full-year guidance, with 2023 EBITDA expected at between €200 million and €230 million ( -7% to +7% yoy).
| Note(s) | 30 June 2023 | 31 December 2022 |
|---|---|---|
| 583,209 | 587,853 | |
| 4 | 104,271 | 106,114 |
| 687,480 | 693,967 | |
| 9 | 31,598 | 30,895 |
| 5 | 690,561 | 682,809 |
| 43 | 45 | |
| 6–10 | 89,580 | 44,521 |
| 89,623 | 44,566 | |
| 89,405 | 103,647 | |
| 1,588,667 | 1,555,884 | |
| 7 | 103,252 | 102,539 |
| 88,146 | 107,591 | |
| 16 | 581 | 1,039 |
| 13 | 24,095 | 19,566 |
| 27,896 | 26,898 | |
| 40,908 | 1,342 | |
| 143,463 | 161,751 | |
| 428,341 | 420,726 | |
| 2,017,008 | 1,976,610 | |
| (€ thousand) | Note(s) | 30 June 2023 | 31 December 2022 |
|---|---|---|---|
| Equity: | |||
| Parent Company | |||
| Share capital | 8 | 111,048 | 111,048 |
| Share premium | 8 | 532,867 | 532,867 |
| Hedging reserves | 109,163 | (2,573) | |
| Other reserves | 93,661 | 37,340 | |
| Translation differences | (1,863) | 20,197 | |
| Net profit/(loss) for the period | 20,249 | 106,220 | |
| Equity attributable to the owners of the Company | 865,125 | 805,099 | |
| Non-controlling interests | 21,641 | 14,153 | |
| Total equity | 886,766 | 819,252 | |
| Non-current liabilities: | |||
| Long-term provisions | 11 | 14,878 | 18,518 |
| Loans and borrowings | 9 | 656,820 | 663,448 |
| Lease liabilities | 9 | 16,883 | 13,988 |
| Other non-current financial liabilities | 10 | - | 12,875 |
| Other non-current liabilities | 8,572 | 7,831 | |
| Deferred tax liabilities | 115,949 | 107,633 | |
| Total non-current liabilities | 813,102 | 824,293 | |
| Current liabilities: | |||
| Loans and borrowings | 9 | 28,094 | 23,038 |
| Lease liabilities | 9 | 8,745 | 10,298 |
| Other current financial liabilities | 10 | 90 | 38,223 |
| Trade payables to related companies | 16 | - | 1,573 |
| Trade and other payables | 171,897 | 198,870 | |
| Other payables | |||
| Accounts payable to public administrations | 13 | 25,898 | 14,220 |
| Other current liabilities | 8 | 82,416 | 46,843 |
| 108,314 | 61,063 | ||
| Total current liabilities | 317,140 | 333,065 | |
| Total equity and liabilities | 2,017,008 | 1,976,610 |
| (€ thousand) | Note(s) | H1 2023 | H1 2022 | Change | Q2 2023 | Q2 2022 | Change |
|---|---|---|---|---|---|---|---|
| Revenue | 615,492 | 572,535 | 7.5 % | 293,490 | 311,128 | (5.7) % | |
| Changes in inventories of finished goods and work-in-progress | (2,677) | (7,366) | - | (1,476) | (22,140) | - | |
| Procurements | (303,948) | (286,241) | 6.2 % | (144,708) | (156,481) | (7.5) % | |
| Other operating income | 7,597 | 30,246 | (74.9) % | 4,450 | 5,375 | (17.2) % | |
| Personnel expenses | (74,483) | (62,348) | 19.5 % | (36,007) | (30,657) | 17.5 % | |
| Other operating expenses | (151,177) | (131,152) | 15.3 % | (74,238) | (51,495) | 44.2 % | |
| Amortisation/depreciation, impairment and provisions | (40,360) | (35,346) | 14.2 % | (20,155) | (18,308) | 10.1 % | |
| Operating profit/(loss) | 50,444 | 80,328 | (37.2) % | 21,356 | 37,422 | (42.9) % | |
| Finance income | 5,979 | 316 | > 100 % | 3,139 | 164 | > 100 % | |
| Finance expenses | (20,778) | (13,327) | 55.9 % | (10,897) | (6,056) | 79.9 % | |
| Net exchange differences | (4,807) | 697 | - | (5,217) | 454 | - | |
| Net finance income/(loss) | (19,606) | (12,314) | 59.2 % | (12,975) | (5,438) | > 100 % | |
| Profit/(loss) before tax | 30,838 | 68,014 | (54.7) % | 8,381 | 31,984 | (73.8) % | |
| Corporate income tax | (11,298) | (14,633) | (22.8) % | (2,842) | (7,176) | (60.4) % | |
| Profit/(loss) for the period | 19,540 | 53,381 | (63.4) % | 5,539 | 24,808 | (77.7) % | |
| Attributable to: | |||||||
| Parent Company's owners | 20,249 | 50,033 | (59.5) % | 5,090 | 23,040 | (77.9) % | |
| Non-controlling interests | (709) | 3,348 | - | 449 | 1,768 | - | |
| Earnings/(losses) per share attributable to Parent Company's owners (in euros per share) |
14 | 0.51 | 1.25 | (59.5) % | 0.13 | 0.58 | (77.9) % |
| (€ thousand) | Note(s) | H1 2023 | H1 2022 |
|---|---|---|---|
| Consolidated profit/(loss) for the period | 19,540 | 53,381 | |
| Items that may subsequently be reclassified to income statement: | |||
| Income and expense recognised directly in equity | 98,215 | 33,197 | |
| ‒ Cash-flow hedges | 10 | 138,885 | (7,559) |
| ‒ Translation differences | (13,863) | 38,488 | |
| ‒ Tax effect | (26,807) | 2,268 | |
| Transfers to the income statement | (342) | 47,106 | |
| ‒ Cash-flow hedges | 10 | 1,343 | 64,848 |
| ‒ Tax effect | (1,685) | (17,742) | |
| Other comprehensive income/(loss) for the period, net of tax | 97,873 | 80,303 | |
| Total comprehensive income/(loss) for the period | 117,413 | 133,684 | |
| Attributable to: | |||
| ‒ Parent Company's owners | 109,925 | 131,292 | |
| ‒ Non-controlling interests | 7,488 | 2,392 |
| 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 2022 | 111,048 | 532,867 | (2,573) | 37,340 | - | 20,197 | 106,220 | 14,153 | 819,252 |
| Total comprehensive income/(loss) for the period |
- | - | 111,736 | - | - | (22,060) | 20,249 | 7,488 | 117,413 |
| Distribution of profit/(loss) for the period | |||||||||
| Reserves | - | - | - | 106,220 | - | - | (106,220) | - | - |
| Dividends | - | - | - | (50,000) | - | - | - | - | (50,000) |
| Other movements | - | - | - | 101 | - | - | - | - | 101 |
| Balances at 30 June 2023 | 111,048 | 532,867 | 109,163 | 93,661 | - | (1,863) | 20,249 | 21,641 | 886,766 |
| 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 of profit/(loss) for the period | |||||||||
| Reserves | - | - | - | 99,745 | - | - | (99,745) | - | - |
| Dividends | - | - | - | (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 |
| (€ thousand) | H1 2023 | H1 2022 | Q2 2023 | Q2 2022 | Q1 2023 |
|---|---|---|---|---|---|
| Profit/(loss) for the period before tax | 30,838 | 68,014 | 8,381 | 31,984 | 22,457 |
| Adjustments for: | 55,961 | 46,555 | 32,752 | 25,416 | 23,209 |
| Depreciation and amortisation | 40,360 | 35,346 | 20,155 | 18,308 | 20,205 |
| Changes in provisions | (3,640) | (740) | (195) | 1,818 | (3,445) |
| Interest income | (5,979) | (316) | (3,139) | (164) | (2,840) |
| Finance costs | 20,778 | 13,327 | 10,897 | 6,056 | 9,881 |
| Other profit/(loss) | (365) | (365) | (183) | (148) | (182) |
| Exchange differences | 4,807 | (697) | 5,217 | (454) | (410) |
| Changes in working capital: | (20,047) | (22,791) | 3,447 | (3,223) | (23,494) |
| Trade receivables and other current assets | 22,947 | (56,859) | 38,529 | (40,521) | (15,582) |
| Inventories | (1,512) | (2,601) | 2,118 | 9,711 | (3,630) |
| Trade payables | (41,482) | 36,669 | (37,200) | 27,587 | (4,282) |
| Other cash flows from operating activities: | (24,800) | (27,819) | (15,582) | (15,917) | (9,218) |
| Interest paid | (13,434) | (11,918) | (6,594) | (4,610) | (6,840) |
| Taxes paid | (11,366) | (15,901) | (8,988) | (11,307) | (2,378) |
| Net cash flows from/(used in) operating activities (I) | 41,952 | 63,959 | 28,998 | 38,260 | 12,954 |
| Cash flows from investing activities: | |||||
| Investments in intangible assets | (113) | (307) | 111 | (49) | (224) |
| Investments in property, plant and equipment | (53,132) | (57,209) | (21,635) | (31,678) | (31,497) |
| Collections from disposal of Group and associated companies, net of cash | 113 | - | - | - | 113 |
| Collections from sale of property, plant and equipment | - | - | - | (35) | - |
| Net cash flows from/(used in) investing activities (II) | (53,132) | (57,516) | (21,524) | (31,762) | (31,608) |
| Cash flows from financing activities: | |||||
| Cash inflows from bank borrowings and other liabilities | 4,069 | 19,879 | 121 | 4,560 | 3,948 |
| Cash outflows from bank borrowings and other liabilities | (10,040) | (11,677) | (6,823) | (9,469) | (3,217) |
| Net cash flows from/(used in) financing activities (III) | (5,971) | 8,202 | (6,702) | (4,909) | 731 |
| Effect of foreign exchange rate changes on cash & cash equivalents (IV) | (1,137) | (32) | (299) | 11 | (838) |
| Net increase/(decrease) in cash and cash equivalents (I+II+III+IV) | (18,288) | 14,613 | 473 | 1,600 | (18,761) |
| Cash and cash equivalents at the beginning of the period | 161,751 | 224,089 | 142,990 | 237,102 | 161,751 |
| Cash and cash equivalents at the end of the period | 143,463 | 238,702 | 143,463 | 238,702 | 142,990 |
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 2022. These condensed interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended 31 December 2022, 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 2022.
There are no changes in the scope of consolidation in H1 2023. Note that in September 2022, the Group acquired the remaining 93.1% interest in American Zinc Products, LLC (currently, Befesa Zinc Metal, LLC). Befesa already owned 6.9% of the zinc refining asset since August 2021 (Note 6 of the 2022 consolidated financial statements).
There were no changes in the scope of consolidation in H1 2022.
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 adjusted by non-cash items. 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.
Reconciliation net debt to the relevant statement of financial position line items:
| 30 June 2023 |
31 December 2022 |
|
|---|---|---|
| Non-current financial debt (Note 9) | 656,820 | 663,448 |
| Non-current lease liabilty (Note 9) | 16,883 | 13,988 |
| Current financial debt (Note 9) | 28,094 | 23,038 |
| Current lease liability (Note 9) | 8,745 | 10,298 |
| Cash and cash equivalents | (143,463) | (161,751) |
| Other current financial assets adjusted by non-cash items | (75) | (60) |
| Net debt | 567,004 | 548,961 |
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 non-recurrent costs/incomes.
EBITDA margin is defined as EBITDA divided by revenue. The Company believes that EBITDA and EBITDA margin are useful supplemental indicators that may be used to assist in evaluating the Group's operating performance.
Reconciliation EBITDA and adjusted EBITDA to the consolidated income statement line items from which it is derived:
| 30 June 2023 |
30 June 2022 |
|
|---|---|---|
| Revenue | 615,492 | 572,535 |
| Income/expenses from operations (except revenue, depreciation and amortisation/depreciation charge and provisions) |
(524,688) | (456,861) |
| Amortisation/depreciation, impairment and provisions (a) | (40,360) | (35,346) |
| EBIT (Operating profit/(loss)) (b) | 50,444 | 80,328 |
| EBITDA (Operating profit/(loss) before amortisation/depreciation and provisions) (a+b) |
90,804 | 115,674 |
| Non-recurrent costs/income | 3,932 | 2,288 |
| Adjusted EBITDA | 94,736 | 117,962 |
Reconciliation EBITDA margin and adjusted EBITDA margin:
| 30 June 2023 |
30 June 2022 |
|
|---|---|---|
| Revenue (a) | 615,492 | 572,535 |
| EBITDA (b) | 90,804 | 115,674 |
| Non-recurrent costs/income | 3,932 | 2,288 |
| Adjusted EBITDA (c) | 94,736 | 117,962 |
| EBITDA margin (%) (b/a) | 15% | 20% |
| Adjusted EBITDA margin (%) (c/a) | 15% | 21% |
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 non-recurrent costs/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.
Reconciliation EBIT and adjusted EBIT to the income statement line items from which it is derived:
| 30 June 2023 |
30 June 2022 |
|
|---|---|---|
| Revenue | 615,492 | 572,535 |
| Income/expenses from operations (except revenue, depreciation and amortisation/depreciation charge and provisions) |
(524,688) | (456,861) |
| Amortisation/depreciation, impairment and provisions | (40,360) | (35,346) |
| EBIT (Operating profit/(loss)) | 50,444 | 80,328 |
| Non-recurrent costs/incomes EBIT | 719 | - |
| Non-recurrent costs/incomes EBITDA | 3,932 | 2,288 |
| Adjusted EBIT | 55,095 | 82,616 |
Reconciliation EBIT margin and Adjusted EBIT margin:
| 30 June 2023 |
30 June 2022 |
|
|---|---|---|
| Revenue (a) | 615,492 | 572,535 |
| EBIT (b) | 50,444 | 80,328 |
| Non-recurrent costs/incomes EBIT | 719 | - |
| Non-recurrent costs/incomes EBITDA | 3,932 | 2,288 |
| Adjusted EBIT (c) | 55,095 | 82,616 |
| EBIT margin (%) (b/a) | 8% | 14% |
| Adjusted EBIT margin (%) (c/a) | 9% | 14% |
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.
Reconciliation net debt/adjusted EBITDA ratio to net debt and adjusted EBITDA:
| 30 June 2023 |
30 June 2022 |
|
|---|---|---|
| Net debt | 567,004 | 470,888 |
| Adjusted EBITDA LTM | 191,374 | 221,403 |
| Net debt/Adjusted EBITDA | 2.96 | 2.13 |
Capex is defined as the cash payments made during the period for investments in intangible assets, property plant and equipment, and right-of-use assets.
The Company 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.
Reconciliation capex to the cash flow statement line items from which it is derived:
| 30 June 2023 |
30 June 2022 |
|
|---|---|---|
| Cash flows from investing activities: | ||
| Investments in intangible assets | 113 | 307 |
| Investments in property, plant and equipment | 53,132 | 57,209 |
| Capex | 53,245 | 57,516 |
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 2022.
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:
Group's assets and liabilities measured at fair value at 30 June 2023 and at 31 December 2022:
| Level 2 | Total | |
|---|---|---|
| 30 June 2023 | ||
| Assets | ||
| - Derivatives (Notes 6–10) | 125,094 | 125,094 |
| Total assets at fair value | 125,094 | 125,094 |
| Liabilities | ||
| - Derivatives (Note 10) | 90 | 90 |
| Total liabilities at fair value | 90 | 90 |
| Level 2 | Total | |
|---|---|---|
| 31 December 2022 | ||
| Assets | ||
| - Derivatives (Notes 6–10) | 40,947 | 40,947 |
| Total assets at fair value | 40,947 | 40,947 |
| Liabilities | ||
| - Derivatives (Note 10) | 51,098 | 51,098 |
| Total liabilities at fair value | 51,098 | 51,098 |
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 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 Group's products have only one performance obligation: delivery of WOX, green zinc (SHG), or 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.
Distribution by segment of adjusted EBITDA and adjusted EBIT for the six-month period ended 30 June 2023, and for the six-month period ended 30 June 2022:
| 30 June 2023 | |||||
|---|---|---|---|---|---|
| Steel Dust | Salt Slags | Secondaty Aluminium |
Corporate, other minor & eliminations |
Total | |
| Revenue | 403,007 | 41,268 | 195,231 | (24,014) | 615,492 |
| Income/expenses from operations (except revenue, depreciation and amortisation/depreciation charge and provisions) |
(339,642) | (26,946) | (181,877) | 23,777 | (524,688) |
| Amortisation/depreciation, impairment and provisions (a) | (31,520) | (4,746) | (3,890) | (204) | (40,360) |
| EBIT (Operating profit/(loss)) (b) | 31,845 | 9,576 | 9,464 | (441) | 50,444 |
| EBITDA (Operating profit/(loss) before amortisation) (a) + (b) |
63,365 | 14,322 | 13,354 | (237) | 90,804 |
| Non-recurrent costs/incomes EBIT | 719 | - | - | - | 719 |
| Non-recurrent costs/incomes EBITDA | 3,823 | - | - | 109 | 3,932 |
| Adjusted EBIT (Operating profit/(loss) | 36,387 | 9,576 | 9,464 | (332) | 55,095 |
| Adjusted EBITDA (Operating profit/(loss) | 67,188 | 14,322 | 13,354 | (128) | 94,736 |
| 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 |
| Non-recurrent costs/incomes EBITDA | - | - | - | 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 |
Reconciliation adjusted EBITDA and adjusted EBIT to results attributable to the Parent Company:
| 30 June 2023 |
30 June 2022 |
|
|---|---|---|
| Adjusted EBITDA | 94,736 | 117,962 |
| – Non-recurrent costs/incomes EBIT | 719 | - |
| Amortisation/depreciation, impairment and provisions | (40,360) | (35,346) |
| Adjusted EBIT | 55,095 | 82,616 |
| – Non-recurrent costs/incomes EBITDA & EBIT | 4,651 | 2,288 |
| EBIT - Operating profit/(loss) | 50,444 | 80,328 |
| Finance income (cost) | (19,606) | (12,314) |
| Corporate income tax | (11,298) | (14,633) |
| Profit/(loss) | 19,540 | 53,381 |
| Non-controlling interests | (709) | 3,348 |
| Profit/(loss) attributed to the Parent Company | 20,249 | 50,033 |
Details of revenues by geographical segment for the six-month period ended 30 June 2023, and for the six-month period ended 30 June 2022:
| 30 June | 30 June | |||
|---|---|---|---|---|
| Geographical area | 2023 | % | 2022 | % |
| Spain | 106,502 | 17% | 113,155 | 20% |
| Germany | 64,698 | 11% | 59,428 | 10% |
| France | 28,066 | 5% | 15,006 | 3% |
| Belgium | 26,102 | 4% | 33,058 | 6% |
| Norway | 24,712 | 4% | 18,071 | 3% |
| Finland | 21,515 | 3% | 22,077 | 4% |
| Netherlands | 13,997 | 2% | 21,491 | 4% |
| Sweden | 10,585 | 2% | 11,559 | 2% |
| Portugal | 10,336 | 2% | 8,934 | 2% |
| Italy | 9,984 | 2% | 30,755 | 5% |
| Rest of Europe | 23,475 | 4% | 21,899 | 4% |
| USA | 185,332 | 30% | 113,415 | 20% |
| Japan | 33,791 | 5% | 25,686 | 4% |
| Brazil | 11,156 | 2% | 11,314 | 2% |
| South Korea | 10,516 | 2% | 18,261 | 3% |
| China | 8,538 | 1% | 7,269 | 1% |
| Singanpore | 8,129 | 1% | 13,842 | 2% |
| Australia | 6,853 | 1% | 15,372 | 3% |
| Rest of the world | 11,205 | 2% | 11,943 | 2% |
| Total | 615,492 | 100% | 572,535 | 100% |
Details of the segment assets and liabilities for the six-month period ended 30 June 2023, and for the full-year period ended 31 December 2022:
| 30 June 2023 | |||||
|---|---|---|---|---|---|
| Steel Dust | Salt Slags | Secondary Aluminium |
Corporate, other minor & eliminations |
Total | |
| Assets | |||||
| Intangible assets | 622,658 | 51,137 | 13,598 | 87 | 687,480 |
| Right-of-use assets | 25,664 | 4,863 | 553 | 518 | 31,598 |
| Property, plant and equipment | 554,094 | 81,961 | 54,031 | 475 | 690,561 |
| Investments in associates and other non-current assets | 95,986 | 41 | 30,140 | 52,861 | 179,028 |
| Current assets | 306,262 | 16,139 | 70,370 | 35,570 | 428,341 |
| Total assets | 1,604,664 | 154,141 | 168,692 | 89,511 | 2,017,008 |
| Equity and liabilities | |||||
| Equity | 414,758 | 76,162 | 39,542 | 356,304 | 886,766 |
| Non-current liabilities | 990,985 | 65,210 | 47,394 | (290,487) | 813,102 |
| Current liabilities | 198,921 | 12,769 | 81,756 | 23,694 | 317,140 |
| Total equity and liabilities | 1,604,664 | 154,141 | 168,692 | 89,511 | 2,017,008 |
| 31 December 2022 | |||||
|---|---|---|---|---|---|
| Steel Dust | Salt Slags | Secondary Aluminium |
Corporate, other minor & eliminations |
Total | |
| Assets | |||||
| Intangible assets | 628,231 | 51,636 | 13,985 | 115 | 693,967 |
| Right-of-use assets | 25,157 | 4,851 | 592 | 295 | 30,895 |
| Property, plant and equipment | 555,526 | 70,276 | 56,483 | 524 | 682,809 |
| Investments in associates and other non-current assets | 66,209 | 41 | 35,259 | 46,704 | 148,213 |
| Current assets | 289,757 | 27,405 | 79,055 | 24,509 | 420,726 |
| Total assets | 1,564,880 | 154,209 | 185,374 | 72,147 | 1,976,610 |
| Equity & liabilities | |||||
| Equity | 321,151 | 69,287 | 35,863 | 392,951 | 819,252 |
| Non-current liabilities | 992,780 | 67,625 | 67,245 | (303,357) | 824,293 |
| Current liabilities | 250,949 | 17,297 | 82,266 | (17,447) | 333,065 |
| Total equity and liabilities | 1,564,880 | 154,209 | 185,374 | 72,147 | 1,976,610 |
During the six-month period ended 30 June 2023, there are no significant additions, nor disposals within 'Other intangible assets, net'.
During the six-month period ended 30 June 2022, there are no significant additions, nor disposals within 'Other intangible assets, net'.
At 30 June 2023 and 31 December 2022, the Group had no significant investment commitments.
The movements of the 'Property, plant and equipment' balance in the six-month period ended 30 June 2023 includes additions amounting to €53.8 million. These were mainly related to the investments made in the US to upgrade the plants and annual maintenance investments of €27.5 million, and a €13.8 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 €32.1 million.
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.
During the six-month period ending 30 June 2023 and 30 June 2022 no significant impairments were recognised in 'Property, plant and equipment'.
At 30 June 2023, the investment commitments amounted to €23.2 million mainly due to the investments in the plants of Hanover and Lunen (€7.4 million for the reconstruction of the plant and environmental investments), and the revamping of the plant in Palmerton in the US (€6.9 million).
At 31 December 2022, the Group had investment commitments amounting to €28.8 million mainly due to the expansion project in China and the US.
Classification of financial assets by category and class:
| 30 June 2023 | 31 December 2022 | |||
|---|---|---|---|---|
| Current | Non-current | Current | Non-current | |
| Financial assets at amortised cost | ||||
| Loans | ||||
| Variable rate | - | 1,666 | - | 1,666 |
| Impairment | - | (1,104) | - | (1,104) |
| Trade and other receivables | 140,718 | - | 155,094 | - |
| Security deposits | 605 | 4,228 | 887 | 3,467 |
| Financial assets measured at fair value | ||||
| Hedging derivatives (Note 10) | 40,303 | 84,790 | 455 | 40,492 |
| Total financial assets | 181,626 | 89,580 | 156,436 | 44,521 |
The fair value of financial assets does not differ significantly from their carrying amount.
Details of 'Inventories' in the accompanying condensed interim consolidated statement of financial position at 30 June 2023 and 31 December 2022:
| 30 June 2023 |
31 December 2022 |
|
|---|---|---|
| Finished goods | 24,480 | 28,928 |
| Goods in progress and semi-finished goods | 4,868 | 6,817 |
| Raw materials | 40,018 | 36,124 |
| Other | 33,886 | 30,670 |
| 103,252 | 102,539 |
'Other' at 30 June 2023 and 31 December 2022 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.
Shareholder structure as at 30 June 2023 and at 31 December 2022:
| Percentage of ownership | |||
|---|---|---|---|
| 30 June 2023 |
31 December 2022 |
||
| Freefloat | 100.0% | 100.0% |
The number of shares as at 30 June 2023 and as at 31 December 2022 is 39,999,998 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 2023, Befesa distributed to its shareholders a dividend of €1.25 per share, amounting to €50.0 million, as approved by the AGM held on 15 June 2023, so as at 30 June 2023 the €50.0 million are reported in 'Other current liabilities' in the statement of financial position.
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.
Details of the related line items in the accompanying consolidated statement of financial position:
| 30 June 2023 | 31 December 2022 | ||||
|---|---|---|---|---|---|
| Current maturity |
Non-current maturity |
Current maturity |
Non-current maturity |
||
| Bank loans and credit facilities | 22,545 | 656,820 | 18,349 | 663,448 | |
| Unmatured accrued interest | 5,549 | - | 4,689 | - | |
| Finance lease payables | 8,745 | 16,883 | 10,298 | 13,988 | |
| Total | 36,839 | 673,703 | 33,336 | 677,436 |
Fair values of borrowings are not materially different to their carrying amounts since the interest payable is close to current market rates.
Main terms and conditions of the borrowings:
| 30 June 2023 | 31 December 2022 | ||||||
|---|---|---|---|---|---|---|---|
| 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 + 2.00% | 2026 | 5,353 | 614,408 | 4,604 | 612,519 |
| Jiangsu | CNY 220,000 | LIR (NBIC) + 25bps |
2026 | 7,280 | 16,776 | 6,832 | 21,065 |
| Henan | CNY 260,000 | LPR (NBIC) + 25bps |
2027 | 3,823 | 24,957 | 3,469 | 29,182 |
| Others | 20,383 | 17,562 | 18,431 | 14,670 | |||
| 36,839 | 673,703 | 33,336 | 677,436 |
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.
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.
In December 2022, the margin applicable to the TLB was increased by 25 bps to Euribor plus 200 bps due to the increase 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 2023 and 31 December 2022, 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 the plants in China (Jiangsu and Henan). The notional and the rest of the conditions signed are shown in the table above.
At 30 June 2023 and 31 December 2022, 'Other' mainly includes short-term financing of Befesa Silvermet Iskenderun, debt related to the financial leases and the incorporation of Befesa Zinc Metal, LLC to the consolidation perimeter in 2022.
At 30 June 2023 and 31 December 2022, 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.
Details of the balances that reflect the measurement of derivatives in the accompanying condensed interim consolidated statement of financial position at 30 June 2023 and 31 December 2022:
| 30 June | 31 December | |
|---|---|---|
| 2023 | 2022 | |
| Cash flow hedges non-current assets | ||
| Swap contracts for zinc | 52,927 | 9,369 |
| Interest rate swap | 31,864 | 31,123 |
| 84,791 | 40,492 | |
| Cash flow hedges current assets: | ||
| Swap contracts for zinc | 40,303 | 438 |
| Foreign currency swap | - | 17 |
| 40,303 | 455 | |
| Total assets | 125,094 | 40,947 |
| Cash flow hedges non-current liabilities: | ||
| Swap contracts for zinc | - | 12,875 |
| 0 | 12,875 | |
| Cash flow hedges current liabilities: | ||
| Swap contracts for zinc | - | 38,223 |
| Foreign currency swap | 90 | - |
| 90 | 38,223 | |
| Total liabilities | 90 | 51,098 |
| Provisions for litigation, pensions and similar obligations |
Other provisions for contingencies and charges |
Total long-term provisions |
|
|---|---|---|---|
| Balance at 31 December 2022 | 9,795 | 8,723 | 18,518 |
| Profit and loss impact | 1,446 | 122 | 1,568 |
| Payment | (180) | (73) | (253) |
| Transfers | (4,923) | - | (4,923) |
| Conversion differences | 59 | (91) | (32) |
| Balance at 30 June 2023 | 6,197 | 8,681 | 14,878 |
At 30 June 2023, the Group recognised a provision of €1.0 million (€4.5 million at 31 December 2022) related to the compensation plans described in Note 24 of the 2022 consolidated financial statements. At 30 June 2023 and at 31 December 2022, the 'Profit and loss impact' is mainly related to this provision and 'Transfers' corresponds to the liability payable in the short term, which has been recognised as 'Remuneration payable' at 30 June 2023 and at 31 December 2022.
The Group company Befesa Valera, S.A.S. recognised a provision of approximately €1.9 million at 30 June 2023 as well as at 31 December 2022 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 a 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 €6.1 million at 30 June 2023 for the present value of estimated costs (€6.1 million at 31 December 2022).
Details of revenues by category for the six-month period ended 30 June 2023 and 30 June 2022:
| 30 June 2023 | % | 30 June 2022 | % | |
|---|---|---|---|---|
| Steel Dust | 403,007 | 65% | 353,818 | 62% |
| -Sale of WOX and others metals | 240,153 | 39% | 310,397 | 54% |
| -Service fees | 55,724 | 9% | 43,421 | 8% |
| -Smelting: sale of metals and by-products | 173,267 | 28% | - | - |
| -Eliminations (*) | (66,137) | (11%) | - | - |
| Salt Slags | 41,268 | 7% | 41,308 | 7% |
| -Sale of aluminium concentrates and melting salt | 24,426 | 4% | 27,863 | 5% |
| -Fees for recycling salt slags and SPL | 16,842 | 3% | 13,445 | 2% |
| Secondary Aluminium | 195,231 | 32% | 217,714 | 38% |
| -Sale of secondary aluminium alloys | 185,153 | 30% | 199,199 | 35% |
| -Technology division & others | 10,078 | 2% | 18,515 | 3% |
| Corporate, other minor eliminations | (24,014) | (40,305) | ||
| Total | 615,492 | 572,535 |
(*) Eliminations in the Steel Dust segment correspond to the elimination of sales between Befesa Zinc US, Inc. and Befesa Zinc Metal, LLC following the acquisition of the latter in 2022 given that Befesa Zinc US, Inc. sells 100% of its production to Befesa Zinc Metal, LLC, which processes Waelz oxide (WOX) and transforms it into special high-grade zinc (SHG).
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 2023, the accounts arising as a result of the Income Tax estimation for the six-month period ended 30 June 2023, 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 calculation:
| 30 June 2023 | 30 June 2022 | |||
|---|---|---|---|---|
| Total amount in € thousand |
Earnings per share in € |
Total amount Earnings in € thousand per share in € |
||
| Net income (attributable to Befesa S.A.'s shareholders) |
20,249 | 0.51 | 50,033 | 1.25 |
| Weighted average shares | 39,999,998 | 39,999,998 |
At 30 June 2023, a number of Group companies had provided guarantees for an overall amount of approximately €77.9 million (31 December 2022: €76.1 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 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 2023) and the date of presentation of this H1 2023 Interim Report (27 July 2023) which would materially affect the Group's assets or the Group's financial and/or earnings position.
We, Javier Molina Montes and Rafael Pérez Gómez, respectively Executive Chair and Chief Financial Officer, confirm, to the best of our knowledge, that:
Luxembourg, 26 July 2023
Javier Molina Montes Rafael Pérez Gómez
| H1 2023 | H1 2022 | Change | Q2 2023 | Q2 2022 | Change | |
|---|---|---|---|---|---|---|
| Key operational data (tonnes, unless specified otherwise) | ||||||
| EAFD throughput | 592,335 | 629,661 | (5.9) % | 305,266 | 292,295 | 4.4 % |
| WOX sold | 197,238 | 213,889 | (7.8) % | 97,406 | 110,158 | (11.6) % |
| Zinc blended price (€ / tonne) | 2,464 | 2,668 | (7.6) % | 2,290 | 2,789 | (17.9) % |
| Total installed capacity | 1,693,026 | 1,555,300 | 8.9 % | 1,693,026 | 1,555,300 | 8.9 % |
| Utilisation (%) | 70.6 % | 81.6 % | (1,109) bps | 72.3 % | 75.4 % | (306) bps |
| Key financial data (€ million, unless specified otherwise) | ||||||
| Revenue | 403.0 | 353.8 | 13.9 % | 186.7 | 197.9 | (5.6) % |
| EBITDA | 63.4 | 95.0 | (33.3) % | 26.3 | 40.2 | (34.5) % |
| EBITDA margin | 15.7 % | 26.8 % | (1,113) bps | 14.1 % | 20.3 % | (621) bps |
| Adjusted EBITDA | 67.2 | 95.0 | (29.3) % | 30.2 | 40.2 | (25.0) % |
| Adjusted EBITDA margin | 16.7 % | 26.8 % | (1,018) bps | 16.2 % | 20.3 % | (417) bps |
| EBIT | 31.8 | 68.4 | (53.4) % | 10.6 | 26.1 | (59.5) % |
| EBIT margin | 7.9 % | 19.3 % | (1,142) bps | 5.7 % | 13.2 % | (753) bps |
| Adjusted EBIT | 36.4 | 68.4 | (46.8) % | 15.1 | 26.1 | (42.1) % |
| Adjusted EBIT margin | 9.0 % | 19.3 % | (1,029) bps | 8.1 % | 13.2 % | (510) bps |
Salt Slags subsegment
| H1 2023 | H1 2022 | Change | Q2 2023 | Q2 2022 | Change | |
|---|---|---|---|---|---|---|
| Key operational data (tonnes, unless specified otherwise) | ||||||
| Salt slags and SPL recycled | 171,076 | 172,949 | (1.1) % | 88,783 | 85,497 | 3.8 % |
| Total installed capacity | 470,000 | 470,000 | - | 470,000 | 470,000 | - |
| Utilisation (%) | 73.4 % | 74.2% | (80) bps | 75.8 % | 73.0% | 280 bps |
| Key financial data (€ million, unless specified otherwise) | ||||||
| Revenue | 41.3 | 41.3 | (0.1) % | 20.4 | 22.1 | (7.6) % |
| EBITDA | 14.3 | 14.6 | (2.1) % | 7.7 | 8.2 | (5.9) % |
| EBITDA margin | 34.7 % | 35.4 % | (71) bps | 37.9 % | 37.2 % | 70 bps |
| EBIT | 9.6 | 10.1 | (5.4) % | 5.4 | 6.1 | (10.9) % |
| EBIT margin | 23.2 % | 24.5 % | (130) bps | 26.5 % | 27.5 % | (99) bps |
| H1 2023 | H1 2022 | Change | Q2 2023 | Q2 2022 | Change | |
|---|---|---|---|---|---|---|
| Key operational data (tonnes, unless specified otherwise) | ||||||
| Secondary aluminium alloys produced | 87,151 | 84,645 | 3.0 % | 43,471 | 42,401 | 2.5 % |
| Aluminium alloy FMB price (€ / tonne) | 2,243 | 2,558 | (12.3) % | 2,184 | 2,488 | (12.2) % |
| Total installed capacity | 205,000 | 205,000 | - | 205,000 | 205,000 | - |
| Utilisation (%) | 85.7 % | 83.3 % | 247 bps | 85.1 % | 83.0 % | 209 bps |
| Key financial data (€ million, unless specified otherwise) | ||||||
| Revenue | 195.2 | 217.7 | (10.3) % | 99.4 | 119.8 | (17.0) % |
| EBITDA | 13.4 | 9.0 | 48.1 % | 6.1 | 7.8 | (21.8) % |
| EBITDA margin | 6.8 % | 4.1 % | 270 bps | 6.2 % | 6.5 % | (37) bps |
| EBIT | 9.5 | 5.0 | 88.5 % | 4.2 | 5.9 | (29.1) % |
| EBIT margin | 4.8 % | 2.3 % | 254 bps | 4.2 % | 4.9 % | (72) bps |
Note: Segment splits, revenue and earnings contributions do not take into account corporate nor the inter-segment eliminations.
Thursday, 26 October 2023 Q3 2023 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
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.
Second quarter and first half 2023 figures are unaudited.
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
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