Befesa S.A. (BFSA) Earnings Call Transcript

Good morning. My name is Lydia, and I will be your conference operator today. At this time, I would like to welcome everyone to the Befesa Preliminary Full Year 2020 Results. [Operator Instructions] Now I would like to turn the call over to Rafael Pérez, Director of Investor Relations and Strategy. Please, sir, go ahead.

Good morning, and welcome to the Preliminary Full Year 2020 Results Conference Call of Befesa. I am Rafael Pérez, Head of Strategy and Investor Relations of Befesa. And today, as usual, we have with us Javier Molina, CEO of Befesa; and Wolf Lehmann, CFO of Befesa. Javier will start with an executive summary of the full year covering the main highlights of the period. Then Wolf will review the full year financials in total and by business units as well as cash flow. Javier will close this presentation providing an update on our growth projects as well as preliminary view on the outlook for 2021. Finally, we will open the lines for the Q&A session. Before getting started, let me remind you that this conference call is being webcasted live. You can find a link to the webcast and preliminary full year results presentation on our website, www.befesa.com. Now let me turn this call over to our CEO. Javier, please?

Thank you, Rafael. Good morning, and thank you for attending this conference call. 2020 has been certainly a challenging year for Befesa. Nevertheless, we have been able to manage the crisis well, making a strong strategic progress and delivering within the upper part of the guidance. The fourth quarter has been the strongest quarter in 2020, confirming the continuation of the gradual recovery that we started already in the third quarter. In the fourth quarter of 2020, we have achieved an EBITDA of EUR 42 million, which is similar to the last quarter of the previous year. Looking at the quarter-on-quarter development in 2020, over the last 2 quarters, we have increased our EBITDA by 35% in the third one and by 45% in the fourth one. The main drivers for this increase has been the recovery in the plant utilization, reaching nearly 90% in the case of steel dust and 84% in the case of aluminum [ salt slag ] as well as a recovery in zinc price during the last quarter with an average of EUR 2,203 compared with EUR 1,997 in the previous year -- in the previous quarter, sorry. This strong performance on the last quarter of the year has enabled us to achieve a total EBITDA of EUR 127 million in the full year 2020, which is in the upper [ third ] of the initial guidance provided and better than the consensus of our analysts of EUR 120 million. Compared to the previous year, 2020 EBITDA has been mainly impacted by a decrease in average zinc price of 13% as well as higher premium charge of $300 compared with $245 in 2019. Additionally, the volume in the Aluminum Salt Slags division has been 10% lower than the previous year, driven by a weak automotive industry in Europe, which has been partially offset by a slight decrease -- increase in steel volume, mainly driven by Turkey. In 2020, we have run our plants at an average capacity utilization of around 85%. The main industries that represent our markets have seen during the fourth quarter a recovery in the level of activity. As such, the production of steel in Europe in the last quarter has increased 5% compared to 2019. However, for the full year, the production of steel in Europe has decreased 12%. As in the past, the part of the steeling industry that we serve, the electric arc furnace steel produced, has performed better than the overall steel industry, as demonstrated by Germany, where the blast furnace steel production has decreased 13% compared to electric arc furnace steel production, which has decreased only 3% in 2020. The automotive industry in Europe has seen a better second half of the year than the first one, ending the year with a decrease of 24% in car sales compared to the previous year. This has affected the volume of aluminum salt slags that we have been able to process in 2020. Metal prices have suffered great volatility during 2020 and have recovered during the last quarter from the low levels achieved during the second quarter because of COVID-19. As such, average zinc LME has been EUR 1,979 per tonne compared to EUR 2,276 in 2019. This has been partially offset by our hedges, as Wolf will explain later in more detail. During the last quarter of 2020 and early 2021, we have extended our hedging book until October 2023 at attractive prices. And today, we view more than 2.5 years of hedging going forward, which provides high visibility and predictability. The generation of cash during last year has been very strong. And this has enabled us to finish the year with more than EUR 150 million on cash on hand and a leverage ratio slightly above 3x. Despite the challenging environment of 2020 created by COVID-19, due to our strong liquidity and capital structure, we have continued our growth plans with our investments in China. We continue the construction works of our 2 steel dust recycling plants in Jiangsu and Henan on time and on budget. We expect to have the first plant ready over the coming weeks and to carry out the cold and hot commissioning in March and April. The plant in Henan is expected to be finished after the summer of this year. Finally, on ESG, 2020 has been a year where we have made significant progress. It is very clear that society and investors put more and more [ emphasis] for sustainable solutions, which is very much aligned with Befesa. What we do is a vital part of the circular economy. We recycle 1.5 million tonnes of hazardous residues for our customers in the steel and aluminum industries to extract valuable natural resources like zinc, aluminum and salt. Furthermore, and especially over the last 5 years, we focused on all the aspects of ESG: compliance, environmental, health and safety, employees and governance. The efforts that the entire organization is making across these areas are being reflected in our ESG ratings improvement. We are very proud of the progress we are making on ESG, which is a recognition from the market on the contribution Befesa makes to a more sustainable world. Now Wolf Lehmann will explain the financials in more detail.

Good morning. Please turn to Page 6, the 2020 consolidated financial highlights. As we explained, the quarter-over-quarter recovery is on track, and the fourth quarter of 2020 has been strong at EUR 42.4 million EBITDA, back to the level of fourth quarter 2019, resulting in a full year adjusted EBITDA of EUR 127 million, down EUR 32.6 million or 20% compared to 2019. The main drivers of the year-over-year EBITDA bridge are as follows: one, a minor EUR 0.6 million volume impact, higher volume in electric arc furnace dust due to Turkey was offset through less volume in stainless and alu salt slags and SPL. Second, a material EUR 32.5 million impact on prices. The different price impacts are as follows: EUR 45 million lower EBITDA from LME marketing prices; EUR 24 million positive from hedging, thus offsetting more than half of the zinc market price pressure; negative EUR 12 million from treatment charges at record high unfavorable levels of $300 per tonne. Third, on cost/other, we achieved a positive plus EUR 0.5 million year-over-year. We executed and tracked more than 50 operational excellence projects, and those efficiencies more than offset any inflationary and other pressures. In summary, the minor down in volume is being offset with the minor up in cost/other. Net-net, the year was impacted by EUR 32.5 million due to unfavorable metal prices in the wake of COVID pandemic. Aligned with EBITDA, net profit is down EUR 35.1 million year-over-year and stands at EUR 47.6 million for 2020, equal to EUR 1.40 earnings per share. We achieved a very good cash, net debt and leverage results, which I will explain later on Page 9. Turning to Page 7, the Steel Dust Recycling Services results. Steel Dust Recycling Services achieved EUR 97.7 million EBITDA, down EUR 27.6 million year-over-year or 22%. The levers volume and cost/other were positive, each around EUR 2.5 million to EUR 3 million year-over-year and partially offset the negative EUR 33 million from the COVID-impacted price. Looking at selected operational metrics on the lower part of the page. Volume for electric arc furnace dust throughput slightly improved to 687,000 tonnes, 3% up year-over-year, with our operation in Turkey back online after the expansion the year before. Plant utilization stood resilient at 83%. The average zinc LME market price was EUR 1,979 per tonne in 2020, down 13% year-over-year. But our hedges were favorable and in the money at EUR 2,239 per tonne and improved our zinc blended price to come in at EUR 2,136 per tonne, down 6% year-over-year. Correspondingly, the EBITDA impact from the lower zinc LME market price of gross EUR 45 million was offset by EUR 24 million due to the favorable hedges, resulting net in a negative EUR 21 million impact. In addition, treatment charges were unfavorable at a record high of $300 per tonne of works in 2020, impacting EBITDA year-over-year by negative EUR 12 million. We expect this to normalize in 2021 in this year. Overall, Steel Dust Recycling Services delivered EUR 98 million EBITDA at resilient 28% margin and solid 83% capacity utilization. Going now to Page 8, the results of our Aluminum Salt Slags Recycling Services segment. 2020 adjusted EBITDA is EUR 28.8 million, down EUR 4.2 million or 12.7%. The EBITDA decrease was mainly driven by volume impacting by around EUR 3.5 million year-over-year. Salt slags and spent pot lining volume treated was 445,000 tonnes, down 9.7% year-over-year, still at a resilient 84% capacity utilization rate. And secondary aluminum volume produced was 174,000 tonnes, down only 1% year-over-year, with capacity utilization at a solid 85%. Furthermore, EBITDA year-over-year was impacted slightly positive by EUR 0.6 million through moderately higher aluminum alloy prices, which partly offset the minor EUR 1.3 million negative year-over-year impact in cost and other. Overall, Aluminum Salt Slags Recycling Services delivered EUR 29 million EBITDA at resilient 25% margin for the salt slags and spent pot lining hazardous waste recycling core business and demonstrated resilient 84%, 85% plant capacity utilization levels during this COVID-impacted year. Turning to Page 9, the cash flow, net debt and leverage results. On the EBITDA to total cash flow bridge we're showing, starting with EUR 127 million EBITDA on the left-hand side and walking to the right. Working capital was approximately flat year-over-year, and both interest and taxes, as expected, around EUR 17 million each, resulting in solid operating cash flow of EUR 92.5 million. We spent maintenance CapEx of EUR 25 million, plus growth CapEx of EUR 29 million, for a total of EUR 54 million CapEx, of which EUR 15 million was funded through the China local loans for our 2 plants at Jiangsu and Henan. EUR 25 million dividend was paid out in 2 steps, EUR 15 million in July and EUR 10 million in December, resulting in a total cash flow of positive EUR 29 million. The EUR 29 million total cash flow improved cash on hand from EUR 125.5 million at year-end 2019 to a EUR 154.6 million at year-end 2020. Cash on hand at EUR 155 million, plus our entirely unused EUR 75 million revolving credit line, provides strong EUR 230 million liquidity to Befesa. Net debt improved from EUR 417 million to EUR 394 million and, with EUR 127 million EBITDA, results in a temporarily higher but very, very manageable 3.1x leverage. We target and expect to return to around the leverage levels of 2019 as we go through this year, 2021. We continue to be compliant with all debt covenants and have no applicable covenants. The capital structure remains unchanged and long term set up to July 2026, and we cannot be priced above 2% interest. Summarizing. The backbone of Befesa is strong, and we manage very conservatively based on 3 levers. Number one, the capital structure is long term, up to mid-2026 and at efficient rates as we cannot be charged more than 2% interest. Secondly, cash. We manage cash and liquidity conservatively. Even at the peak of corona, we had more than EUR 100 million cash and, at year-end, even more than EUR 150 million. Three, hedging our strong and long-term hedge book, and we are hedged for more than 2.5 years, and I will explain on the next page in more detail. Those 3 levers form the strong backbone of Befesa's financial and capital structure and serve us very well in crisis situations like the COVID-19 pandemic. This allowed and allows us to continue to grow full speed ahead on our growth expansion in China and stay on budget and time schedule. Turning to Page 10 on hedging. During fourth quarter 2020 and early 2021, we extended zinc hedges further up to and including October 2023. So that's for the next more than 2.5 years. Hedges for this year, for 2021, are at around EUR 2,150/tonnes sold forward prices; 2022 at around EUR 2,200; and 2023 at EUR 2,300 per tonne. The hedging provides Befesa with improved pricing, earnings and cash flow visibility to allow to fund our growth initiatives organically. Our hedging strategy remains unchanged. We hedge 1 to 3 years out. We target 60% to 75% of our zinc equivalent volume. The majority, about 80% is in euro, the rest in Korean won. No collateral, the risks are transferred entirely to our hedging partners. Our hedging approach very much worked. In 2020, the average LME zinc price was EUR 1,979 per tonne. Our hedges were in the money and locked in at EUR 2,239, which stabilized the blended zinc price to a total of EUR 2,136 per tonne. Note, we added various financial and operational data tables with quarterly, annual and multiyear views for your reference in the appendix. Summarizing the financial section before we turn to the growth and outlook, 3 points. One, our quarter-over-quarter recovery is on track. Second quarter was low at EUR 22 million. In Q3, we delivered EUR 29 million, and Q4 EBITDA is at EUR 42 million and back at 2019 levels. Second, our financial backbone is strong. We extended our hedges out to October 2023. Our capital structure is efficient and long term, resulting in stable and strong liquidity. Three, we funded our expansion in China even during this challenging pandemic, full speed, which serves us well in this year in 2021 and over the coming years. Back to Javier to review our growth projects and initial outlook.

Thanks, Wolf. Please move to Page 12 and 13 of the presentation. I would like to finish the call providing some thoughts on our growth projects, the market environment and the outlook for this year 2021. Let me start by providing some thoughts about our business opportunity in China. 2020 has been a very challenging year in many regards. However, on the other hand, 2020 has proven that the decision to invest in China we made in 2018 was the right thing to do. Firstly, over the last 5 years, China more than doubled its electric arc furnace steel production to more than 100 million tonnes. Today, China is by far the largest electric arc furnace steel market in the world, representing a market of near 2 million tonnes of steel dust. Second, China has navigated the COVID crisis pretty well. And while most of the countries in the world are suffering decrease in their GDP, China has increased its GDP by more than 2%. Similarly, China has continued to grow its steel production by 5% year-on-year. Third, China is very committed to reducing its CO2 footprint. Primary steelmaking from blast furnace produced 7x more CO2 per tonne of steel compared to the secondary steelmakers using steel scrap, which are our customer base. And today, only 10% of the steel produced in China is from scrap compared to 30% as an average in the world, 40% in Europe of -- or near 70% in U.S. Strong rules and regulation has been put in place in China in order to favor secondary electric arc furnace steelmakers, our customers. And according to the latest market forecast, the steel dust market in China will continue to grow from the current size of 2 million tonnes or near 2 million tonnes to more than 5 million tonnes over the next 5 to 7 years. This means that the market in China is already the biggest market in the world, but also is a rapidly growing market. 2021 is an exciting year for Befesa and truly an important milestone in the development of the company as we will complete the construction and start the operations of our first 2 electric arc furnace steel dust recycling plant at the Jiangsu and Henan province. At Jiangsu province, we are practically done with constructions, as you can see from the pictures in the presentation. Right after the Chinese New Year break, so this week, we will start the cold and hot commissioning in March and April. The construction is progressing and, as expected, on budget and on time. We are investing EUR 42 million in each of the 2 plants, and we have closed the long-term local financing. Regarding the ramp-up for Jiangsu, we reserved the entire first half of the year for commissioning, pilot batches and commercial contract negotiation. We plan for commercial output and positive earnings contributions in the second part of this year. We have already secured the steel dust volume from customers to do the trials. Our second plant in the province of Henan is developing as planned, on budget and on time and which are scheduled around 6 months after Jiangsu. We expect to complete the construction by the end of the summer. Moving now to the market environment. We have seen over the last quarter a recovery of the steel production industry in Europe, and we expect the current levels of steel production to be maintained throughout this 2021, which will represent a higher production over last year. The automotive industry in Europe is also showing signs of recovery, and we expect this to continue over the coming quarters in 2021 and support secondary aluminum as well as salt slag volumes. This recovery in Europe should be supported by a strong demand from secondary aluminum alloys in Asia as well. Let me share now some initial thoughts on the outlook for this year 2021. As in the past, we will provide the direct guidance in our Q1 earnings presentation end of April 1 once we know what level of treatment charge is being agreed in the steel industry. On volume and capacity utilization, we expect a better year and a good year and an improvement over 2020 based in 2 drivers. First, for 2021, the base volume of steel dust is expected to be higher, achieving more regular levels and capacity utilization. Additionally, on steel dust in China, Befesa expects to have volume contribution from the second half of 2021 coming from the start of commercial operations in the first plant of Befesa in the Chinese province of Jiangsu. Second, in aluminum salt slags, the company also expects some volume recovery, driving up capacity utilization compared to the level achieved in 2020. With regard to price of steel and aluminum, 2020 was characterized by high volatility throughout the year with very low price levels in the second and third quarters and prices already recovering in the fourth quarter. In 2021, the market has started with more normalized price environment. Overall, we expect higher average price than 2020, returning to pre-COVID levels. Similarly, we expect some normalization in the level of treatment charge for zinc, which were extraordinarily high and unfavorable in 2020. This will represent a very positive earnings contribution for Befesa in 2021. In summary, considering the above-mentioned operational growth and expected price environment, plus treatment charge, we expect substantial earnings growth in 2021. Regarding recurrent maintenance and capital expenditures, we expect similar levels to the year pre-COVID around EUR 25 million. On growth capital expenditures in 2021, the focus will remain on funding the growth in China. For this year, EUR 50 million to EUR 60 million will be invested in China in the 2 plants that we are building in Jiangsu and Henan. On dividend, we will continue to carefully manage the dividend stability and dividend yield, cash flow, leverage and the funding of the organic growth. We maintain our dividend policy to distribute between 40% to 50% of the net profit as dividend. But for 2021, we want to propose a dividend distribution between EUR 30 million to EUR 40 million. This would consider our regular dividend and additionally, a catch-up on the lower dividend distributed last year. We will make the final decision after the first quarter results once guidance has been provided at the end of April. From the leverage point of view, Befesa expects to return to maintain levels below 3x net debt/EBITDA, similar to 2019. Finally, I would like to highlight that we are doing a lot of efforts to make sure that the market understands how Befesa is part of the circular economy and contribute with its business to environmental protection by recycling more than 1.5 million tonnes of hazardous wastes annually and producing more than 1.3 million tonnes of new materials, reducing the consumption of natural resources. This has been the backbone of the business since the company started more than 3 decades ago. So in summary, 2020 was challenging, but we delivered sound results. And we are looking forward to 2021, which we expect to be a growth year for Befesa, financially, operationally as well as from the strategic point of view. Thank you very much.

Thank you, Javier. We will now open the lines for your questions.

[Operator Instructions] The first question comes from Ingo Schachel from Commerzbank.

First question would be on China. And specifically, I would be interested to understand a bit better what we should expect to see between now and the next time we speak on the 29th of April. I mean you're doing the hot commissioning, you're doing the first trials. Can you tell us what the expected quantity of steel dust would be that you process in April? And also whether it's, let's say, very specially selected high zinc dust samples that you're taking? Or would you already expect to have a good visibility on the technical operational performance of the plant by the end of April? Or does it really take a more and more random selection of field dust samples before you can really comment on the operational performance?

Thanks, Ingo. Okay. Now we are finishing the new year break in China. The construction will restart next week really because, as you know, new year is a real -- really the yearly holidays for the construction sector in the country. So now, next step, we are working in different levels at the same time. The most important one, construction, where we are focused to finish totally the plant and to start cold commissioning that will happen in March and hot commissioning that probably will be in April. So at the same time, we are securing the steel dust that we need to run the trial, which is a very important part of the ramp-up is really the moment that -- where we are going to confirm all the progress in the plant. Just to give you an example, we are going to send a solid team of European people from Germany and Spain to China. And all of them will need to do a quarantine period for 14 days to be able to go there. But this is essential. This part of the process is essential. So now the main focus is to do the -- to ramp properly cold and hot commissioning and do the trials. And so our initial lead is to dedicate the second quarter of the year to do the ramp-up, to do their trial, et cetera. At the same time, we are in the middle of the negotiations with the steelmakers regarding the supply of steel dust. As you can imagine, this is a tough negotiation. It's a case-by-case negotiation with each steelmakers. As I have explained in other times, we are not talking with 1,000 customers. We are talking with [ friends ] in the case of Jiangsu. So it's a real individual negotiation that really depends on different factors: the quality of the steel dust that they produce, the zinc contained, the distance to the plant, the position of the landfills around the producers, et cetera, et cetera, et cetera. So my expectation for the next earning call end of April is that we will be able to confirm that the plant is running properly and that we are making progress with the steelmakers. Probably it will be soon to confirm which are the type of contracts we are signing, the collection fee or the quality of steel dust. That will be provided with more certainty in the earnings call that we will hold in July. Okay?

Okay. Yes, thanks for the very clear road map. And maybe one question on the numbers, and thanks for making it very transparent, what the swing factors on the earnings bridge for steel dust recycling has been and I think the contribution of the EUR 2.6 million operational excellence and other, I think, was quite positive and maybe overlooked to a certain degree in all this metal price volatility. Just looking at next year, do you think you can report a positive number again as an operational excellence swing factor in 2021 compared to 2020? Or would you rather see some of those costs coming back after a few instruments like short-term work have since expired?

I think we will be in a similar situation than the previous year. It's clear that every year, it's more difficult for us to find ways to reduce cost or to get earnings increase through operational excellence, but -- and which is clear at the same time is that we need to invest some money to get these cost reductions or earnings improvement. But still, we are in a position to say that in 2020, we will get similar figures in that regard than the previous year. Okay?

Yes. Just quick one on the salt slags plant closure in the U.K. Can you remind us what the EBITDA contribution of the salt slags U.K. plant has been? And whether you expect any major cash outflows this year, for example, for environmental remediation in context of this plant closure?

The first thing we would like to highlight is that the plant is totally closed. We have only 3 people there that will be 3 -- 1 quarter more, more -- basically just to finish all the last actions we need to do there. But the plant is totally closed. Second, there is a contribution in the past, on average, has been around EUR 1 million per year, so not -- it's not a busy year. And we don't expect any further investment regarding remediation, et cetera, et cetera.

The next question comes from Michael Hoffman from Stifel.

Wolf, where is your thinking with regards to not only the negotiating for volume from China, but beginning to introduce your hedging on the future -- that future volume? When do you think you'll start including that into the hedges from a tonnage standpoint?

Michael, thank you very much. Yes, when we have stable plant output, we will start topping up the hedges also for the China volume. So as Javier mentioned, Michael, we'll have commercial output for the first plant in Jiangsu in the second half of the year. And we're now looking at preparing hedging. But as you know, we never do speculative hedges. We always do operational hedges. So when we see the stable plant output in the second half of the year, we'll then start hedging additional volume.

So from our standpoint, and I understand we need to wait until April to get a full year detail of -- we have the task of having to build a model. Should we use, as a conservative approach, we'll get 1 full quarter of 110,000? So sort of fourth quarter is a normal quarter and the first half is about the shakedown, 3Q is about ramping slowly, and 4Q, you're at your full pace?

I think for the second half of the year, we would say we plan for about 70% capacity utilization. That's normally what we do after ramp-up, and that would mean, for 6 months, 70%. So you're talking somewhere around 30,000, 35,000 tonnes or so. And again, we'll come back to you with more guidance on that after the successful cold and hot commissioning. But this is a ballpark first number.

Okay. And given where everything has landed at the end of this year, and I know I'm trying to front run guidance, but I'm -- but what I'm really looking for is a framework. It would appear the data would support that you ought to be able to at least replicate 2019, that we're fully back there on a profit basis.

I guess your first part of the sentence, Michael, was right. You are a little bit ahead of the game, yes.

Yes, I know. But that's what I got to do for a living.

But I think Javier already highlighted the framework. Look, it's different factors. Volume, base volume, we're clearly continuing the recovery, as Javier explained. So that is positive. Then on top of that, you have incremental volume from China. Metal prices, we have a great start in the year, right? So obviously, that's a little bit too early to tell. That's why we want to go through the first quarter and then on top of that, learn about treatment charges, which indications are that treatment charges are normalizing. So that's also positive. And as such, yes, we feel good, and we will validate the guidance after the first quarter earnings call, yes? Or with the...

Let me add, Michael, that we have -- we are seeing a strong start of the year. January has been a solid month, and February will be as well. So I think we are in a good case.

Yes. Okay, that helps. And I do appreciate that. From your perspective, what is the -- what are you hearing from your -- the auto customer? So I guess -- I get it's downstream from your production. But what are you hearing from the auto production side? Do you think that auto production will get back to a more normalized level and then sales can sort of pick back up again?

Yes. This is what we are hearing in the market clearly and what we are seeing in the first month of the year. So clearly, we expect to see that at pre-COVID levels.

The next question comes from Charlie Mortimer from Citigroup.

Thanks for the presentation, a very, very good presentation, I must agree. And a question starting on the growth Capex and the EUR 50 million to EUR 60 million, what of that is included? What is -- what are the current 2 plants does that account for? And what is the additional growth CapEx? If we could just break that down a bit, please?

Sure. Please?

Yes. Charlie, so for -- I'll just give you the full picture on the CapEx, as Javier mentioned, on this year in 2021. So let's start with the usual bucket, which is maintenance. Maintenance in the broader sense, Charlie, this is IT, productivity, compliance as well as classic maintenance. We spent EUR 25 million last year in 2020. And this year, we're thinking EUR 25 million to EUR 30 million, somewhere in that ballpark. For growth, we penciled in EUR 40 million to EUR 50 million, and this is primarily for China, yes, for our 2 plants in China. So you come to an overall EUR 65 million to EUR 80 million gross. But please note that EUR 45 million of that is funded through the China local loans that are in place and that we already started to draw on last year, at the end of last year. So you're talking about EUR 25 million to EUR 35 million net CapEx after the funding through the local loans of the 2 plants in China. Yes? Does that answer the question?

Yes, that does. Just to confirm then that the growth CapEx that you alluded to only refers to CapEx that is going into the 2 plants currently under construction?

Yes, that's correct. Yes.

Okay. And another question on the utilization, I mean, back to 89%. Could you just remind us what the maximum capacity utilization you feel is for the steel dust plants and the aluminum plant?

Yes, around 90% is quite full utilization. You need to understand that we -- when we talk about plant utilization, we include the annual maintenance shutdown of the plant. The maintenance shutdown would be between 3, 4 weeks. So to get more than 94% is impossible for that reason. So to get 90% is, we can consider, which is quite full utilization, really.

Okay. That's very clear. And then just again, helping slightly with the model on the treatment charge, do you have an expectation of a ballpark of where it might land for this year?

Okay. We are in the middle of the negotiations. There are a lot of rumors in the market. The first movement we have seen is apparently mining companies are offering $100 and smelters companies are talking about $300. So the solution will be in the middle. But it's difficult to say today, it will be $200, $240, I don't know, something in that range.

Okay. And just finally, you mentioned the collection fees with the contract negotiations. Do you feel there's an expectation that you will be able to get collection fees from the plants in China?

It's too soon to say to give you an answer. We are discovering that Chinese people are good negotiators. So -- and we are in the middle of this process. And it's difficult because it's an individual negotiation. But at the same time, it's a steelmaker looking what's happening around themselves. So probably in the next conference call, we will be able to provide a better view than today.

The next question comes from Sylvia Barker from JPMorgan.

I'll take them one by one. Could you maybe just comment on South Korea and Turkey volumes in full year 2020 and also your expectations for '21?

Okay. Thank you for the question. Volumes last year in both Europe is -- in Turkey, we finished in the year with a good utilization level, around 70,000 tonnes in the year. And our expectation for the next year is to stay at those levels. In Turkey, we are suffering for the last -- it's something that is happening in the last 5 years. There is an import bank to import steel dust that is putting some travels in the market. So what is 100% of utilization before the -- before to get out the import bank will be difficult. And so a stable market and a similar amount for this year than the previous year. And regarding South Korea, remember that in South Korea, in 2020, we treat 60% of our supply from the local market, and this has been -- this figure is very stable, slightly growing every day, and we didn't suffer any major problems in 2020. Where we suffered some issues was the imports of the steel dust around the surrounding countries, but more for logistic and transport cost issues due to the COVID crisis than production problem. So this year, we expect to recover or even to improve the levels we achieved in South Korea in 2019.

Makes sense. Could you share just the tonnes roughly or global utilization?

Excuse me?

I was just wondering if you could just share the full year '20 kind of final outcome in terms of the tonnes or the utilization.

We don't -- we prefer to not split the figures in the different geographies because we manage that internally. We don't like to confuse our investors because sometimes we treat some quantities in one geography or another depending in logistic issues effect. So that's why we prefer to provide total figures. In that sense, in 2020, at the end, we improved the throughput of steel dust in 3% from 665,000 tonnes in '19 to near 690,000 in '20, and we expect to improve these figures this year.

Okay. And then 2 follow-up quick questions. One, just on kind of China and further expansion. Obviously, now that we're coming to the end of the construction for the first 2 plants, when could we expect further news flow around you kind of looking to either expand these existing locations or look for new provinces? And then secondly, just thinking about, I guess, the green spend in Europe. Is there any shift there from BOF to kind of EAF where your clients might be required to shift or their clients might be required to shift anything that might actually drive that penetration of EAF further within Europe?

Thank you, Sylvia. Thank you. Okay, regarding the additional expansion in China, first, I would like to remark the market opportunity we have in front of us. Today, China is producing more than 1.5 million tonnes of steel dust. This is more than the total European production. On the other hand, the quality of the dust will be still clearly below the European standards because they are using different, not only scraps, some peak iron as well. But clearly, we have a big market opportunity in front of us. And additionally, the expected market growth in China regarding electric arc furnace, as I explained during the presentation, is that in the next 5 to 7 years, the proportion of steel produced in China from scrap will go from less than 10% today to more than 30%. That means that we will have in front of us a market of around 5 million tonnes of steel dust. This is the name of the game in China. So clearly, we want to build more than 2 plants in China. It's difficult to say today how many plants we will be able to build in the country. That will depend on many different factors. It's not only on our side. But clearly, we want to build more than 2 plants. First thing we need to do is to start operations of the -- at least the first plant, to confirm all the hypothesis we analyze when we took the decision to base it in China some years ago. And then that will be the moment to decide or to announce the construction of the third plant. Remember that probably before to go to a new province, we will -- we have the opportunity to build new kilns in the province of Jiangsu and Henan. As we have explained in the past, we have -- we acquired enough land to add new things to the -- to both plants in both geographies. When will be the exact moment? Well, let me be prudent. Let's ask -- start operations, confirm the hypothesis and then it will be the right moment to take the decision. It's okay?

Yes, okay.

And maybe, Javier, I can -- Sylvia, if you want, on the second question on Europe, on the EAF penetration, I think the -- I think at some point in time, Sylvia, we had shared the study of the International Energy Agency who had reviewed deeply the impact of the various countries looking to reduce the CO2 footprint. And fact is, for your question, basic oxygen furnaces, primary steelmaking takes 7x more CO2 per tonne of steel production compared to electric arc furnace steelmaking, yes, which is our customer base. So the Energy Agency had forecasted that there is, over the next years, a structural change happening. I think their forecast was to gradually change from currently in Europe, you have 40% of the steel is produced through electric arc furnaces, that would gradually increase to about 50%. So...