Apamfy2014

Company Name: APERAM
Company Ticker: APAM NA
Date: 2015-02-12
Event Description: Y 2014 Earnings Call
Market Cap: 2,031.24
Current PX: 26.025
YTD Change($): +1.44
YTD Change(%): +5.857
Bloomberg Estimates - EPS
Current Quarter: 0.820
Current Year: 2.088
Bloomberg Estimates - Sales
Current Year: 5930.800
Page 1 of 14
Y 2014 Earnings Call
Company Participants
• Timoteo Di Maulo, Chief Executive Officer
• Sandeep Jalan, Chief Financial Officer
Other Participants
• Michael Shillaker, Analyst
• Baskin Singovich, Analyst
• Philip Ngotho, Analyst
• Jean Devivi, Analyst
• Rocas Bronlazer, Analyst
• Stephen Benson, Analyst
Presentation
Operator
Dear, analysts and investors, welcome to Aperam Fourth Quarter and Full Year 2014 Results Conference Call.
I'll leave the floor now to Tim Di Maulo, Chief Executive Officer; and Sandeep Jalan, Chief Financial Officer. Please
go ahead.
Timoteo Di Maulo, Chief Executive Officer
Okay. Good afternoon, and thank you very much for attending Aperam's earning conference call. Next to me is
Sandeep Jalan, Aperam's CFO; and together we will present the company full year and fourth quarter 2014 results.
In 2014, despite an historical high level of stainless steel import in Europe, we were able to return to positive net result
and reach our net debt target, thanks to the contribution of the Leadership Journey and the Top Line strategy.
Market condition were more challenging in Q4 compared to the previous quarter, primarily due to the year-end period
and seasonality, and a continuous high level of imports in Europe. Then, however, our EBITDA over Q4 confirmed the
continuous increase of operational performance achieved since the fourth quarter of 2013.
Going forward, also the fundamentals of the stainless steel market are improving, we remain cautious, considering the
general environment and the nickel price evolution.
In Europe, we believe that the customer destocking started during Q4 due to the increase in import levels over the
second half of the year will remain. This trend should therefore continue on the beginning of 2015, although we expect
that the European demand in Q1 will benefit from seasonal recovery compared to Q4 2014. Overall, the real European
stainless steel demand is expected to increase by 1% to 2% year-on-year in 2015.
In South America, we believe that the stainless steel demand in 2015 should remain comparable to the year 2014. So
our focus remains on improvement of our operational performance and balance sheet to be in a good position to capture
any potential opportunities.

Date: 2015-02-12
Current PX: 26.025
Current Year: 2.088
Page 2 of 14
We'll now take you to Aperam's Q4 results. If you go to page four, first of all, we begin with health and safety results.
The frequency rate of the company improved from 1.3 to 1.1 between 2013 to 2014. The good performance is mainly
the result of the implementation of strong action plan both internally and with our subcontractors. However, the
deterioration of our safety performance over Q4 show clearly that we must remain vigilant and that targeting a zero
accident environment is a continuous and never-ending journey.
Now we can go to environment and market, so page six. Nickel price decreased during the third quarter 2014, and was
volatile in the range of $14,500 to $17,000. With regards to the stainless steel market and as expected, the destocking
phase started in Q4 on top of historical high level of imports in Europe. This destocking phase continues, but slowing
down, putting this price under pressure in Q1. We also believe that uncertainties regarding the nickel price evolution
together with the summer seasonal impact in Brazil and the continuous destocking trend in Europe are likely to keep
pressure off stainless steel prices over the first quarter of 2015. However, the good result and good progress in Top
Line strategy to better product mix management and long-term partnership with our key customers should improve our
resilience and should fully mitigate that impact.
If you go to performance and prospects, we are in page eight. I will now discuss about Aperam performance in 2014.
Aperam launched its Leadership Journey in 2011 to focus its production flow on its best asset, organize [ph] its limited
CapEx spend on improving the productivity of open tools and focus on continuous improvement action and therefore
improve its cost competitiveness and its utilization rate.
This Leadership Journey coupled with our topline strategy enabled Aperam to show a very good resilience in a
deteriorating environment, thanks to a flexible and efficient organization. We have continued to improve our results in
2014 coming to 10% EBITDA margin and returning to positive net income with positive EPS of 1.21 as you can see.
If we go to the next page, nine, Aperam had EBITDA in Q4 of US$117 million compared to 137 million in Q3 2014.
EBITDA for Stainless & Electrical Steel segment decrease from 109 million in Q3 to 94 million in Q4; this includes 10
million in Q3, and 5.30 [ph] million in Q4, resulting from positive sales of electricity surplus in Brazil.
Decrease in EBITDA in Europe was primarily driven by a more challenging environment as a result of some customer
destocking and the continuous high level of the imports in Europe. This was partially compensated by good product
mix and the continuous contribution of the Leadership Journey.
In South America, the lower level of shipments over the quarter due to the traditional seasonal slowdown was more
than offset mainly as a result of better operational performance over the quarter.
The EBITDA of Services & Solutions segment decreased from 21 million in Q3 to 13 million in Q4, mainly due to
lower volumes and some negative stock effect related to the nickel price. Finally, the performance of Alloys &
Specialties segment, decreased in the quarter with EBITDA of 11 million compared to 12 million in the third quarter of
2014, as a result of a production issue over the fourth quarter which has been resolved.
If you go to page 10, about our Leadership Journey; since the beginning of 2011, this Leadership Journey has had a
positive 428 million EBITDA impact, with about 50 million of positive contribution to be implemented by the end of
2015. The investments of production upgraded to our launch in 2014 are all on track. These projects are expected to be
implemented by the end of 2015, and will contribute to a more competitive asset base and a sustainable Top Line
strategy.
Now I'll turn the presentation over to Sandeep.
Sandeep Jalan, Chief Financial Officer
Thank you, Tim. Good afternoon, everybody. As Tim mentioned, we have reported EBITDA $117 million for the
fourth quarter. Depreciation and impairment expenses in the fourth quarter was $64 million. Total net interest and
financing costs were $30 million. It includes the two elements: first the net interest expense and other financing costs,
which was $21 million; and secondly, it also includes a loss from other investments of $9 million, which is relating to

Date: 2015-02-12
Current PX: 26.025
Current Year: 2.088
Page 3 of 14
the impairments on our minority stakes in Gerdau and in General Moly.
Realized and unrealized foreign exchange and derivative gains were $2 million in the fourth quarter of 2014; pretax
income of $25 million with EPS of US$0.24. And additionally, we recorded a US$6 million tax expense during the
quarter and resulting in a net income of $19 million with an EPS of US$0.24.
On slide 13, I'll move to the cash flow. We had a continued good cash flow generation from operations of $108 million
in quarter four compared to $65 million that we had recorded in the previous quarter. Working capital remained
comparable to quarter four -- quarter three level. CapEx during the fourth quarter was at $38 million and resulting in a
cash flow which was positive $70 million for this quarter.
Let me [ph] now move to the balance sheet on slide 14. As of December 31, you can see our net debt has reached $536
million, which is fully in line with our target that we had announced. And this compares to $591 million that we had at
the end of quarter three and $690 million at the end of December 2013. This represents a gearing of 20%, which has
continued to improve from last year's level of 23%. Net debt is anticipated to further slightly decrease in quarter one,
primarily as a consequence of continued cash generation. As of December 31, we had liquidity of $597 million and
non-current assets including intangible assets represented $3.2 billion.
On slide 15, you can see Aperam has met its net debt target fully at the end of 2014, thanks to a continuous strong cash
generation from the operations. And this achievement was done, thanks to the good contribution of both the Leadership
Journey and Top Line strategy on our EBITDA, as well as a strong focus on the working capital management, which is
at the benchmark levels of the industry. Management continues to target further strengthening Aperam's balance sheet.
Moving to slide 16, towards our objective of a strong balance sheet and a competitive cost of financing, we have
undertaken several debt restructuring actions during 2014. And we continue the debt restructuring actions during 2015
as well. During 2014, we had raised convertible bonds of $300 million at coupon of 0.625 and redeemed high yield
bonds of $250 million, which were originally to mature in 2016. Now we have also announced our intention to redeem
high yield bonds of $250 million, which were originally falling due for maturity in 2018. This we intend to mature --
redeem during the second quarter of 2015.
Further, we have also secured an in-principle agreement of our existing pool of banks to set up US$500 million Secured
Borrowing Base Revolving Credit Facility, which will be for a period of three years plus one-year extension. This is
being realized at very competitive terms and this facility will replace the existing facility of US$400 million. These
actions will significantly improve our debt maturity profile, and at the same time, are aiming at reducing our annual net
interest expense and financing costs over 2015.
Thank you very much. We are now happy to take your questions. And I'll return the call back to the operator.
Questions And Answers
Operator
Certainly. Thank you, sir. (Operator Instructions) And we'll now move to our first question today from Michael
Shillaker form Credit Suisse. Please go ahead.
Michael Shillaker, Analyst
Yeah. Thank you very much. I've got three questions, if I may. First question really for Tim. Tim, you've basically
inherited the company which has spent the last four years restructuring itself, is now incredibly lean, that's clearly
coming through the numbers. The balance sheet, you've got net debt around one times EBITDA, which I don't think is
challenging in anyone's book. So inheriting in this company, what do you do, what are you looking for, what are you
looking to do over the next three or four years in terms of capital allocation, capital usage?

Date: 2015-02-12
Current PX: 26.025
Current Year: 2.088
Page 4 of 14
You can't, I guess, go on downscaling the company forever, that's kind of already been done. The balance sheet is in
good shape. So and obviously you're not going to talk about VDM and the rumors. But can you give us a sense of
whether you'd like to go out and be acquisitive given the balance sheet clearly is in shape for that, and there's probably
not an awful lot internally you can do to improve the profitability of the company anyway?
The second question, just can you give us a little bit more help possibly, and I think the answer would be no, but I'm
going to ask in terms of the magnitude of Q1, saying, Q1 is going be better than Q4 is pretty open-ended. Can you give
us any kind of help in terms of the magnitude of that?
And the third question on currencies. That we'll see various dynamics work on currencies, given your dollar entity one
would have expected you've got some negative translation on the European profitability in the Q1 numbers. But
ultimately the currency should make the European operations more efficient and -- or more competitive, and also
ultimately one would think the euro stimulate some demand in Europe, which some of the (inaudible) the carbon steel
companies have been suggesting. So can you give us your sense of where we are in terms of the currency dynamic and
how that's working on your business? Thanks a lot.
Operator
So thank you for your question. So, you're right, inheriting a company that is -- that has done such a good journey is
always a challenge. I think we have not finished our journey. First of all, we have -- still had to work on the
competitiveness; second, as we have often said, our target is to have a better balance sheet and a reduction of the cost of
debt. This is still our priorities of today. Having a better balance sheet, having a low cost of debt will open us for any
opportunity, okay -- but in any case, we are examining many opportunities. Our strategy is in any case to remain and to
go for being one of the most competitive -- most competitive -- competitor in the steel sector.
So then you have asked -- and this season in -- say, one very challenging strategy to remain ahead of -- in the run. The
second is that magnitude of Q1, of course, we have said that it's better, will be better, and nothing is concluded. As you
know, we don't give a precise number in our guidance. But this for the moment is the maximum we can say.
On currency, Michael, clearly, the current weakening of both the currencies euro as well as Brazilian reais, it enhances
the overall competitivity of Aperam in both of our geographics. And as you also mentioned that first of all, there is a
translation impact of our European and Brazilian results then convert it into dollars, you see a translation impact, which
is minus.
But then at the same time there is an improvement in the competitivity and which has to be connected, let's say, also
with the competitive landscape in which we are operating and subject to this destocking pressures in Europe in quarter
one. So we have to ultimately exist in a pricing environment, which is in the market, and that is determining the overall
profitability.
That's great. If I could -- if I just follow-up very quickly, Tim, on the first point. So when you look around the
environment at the moment, would you say you would see a range of potential opportunities out there for capital
allocation on the acquisition front, potentially? And can you give us any sort of sense of the magnitude that you
prepared to go up to transaction size?

Date: 2015-02-12
Current PX: 26.025
Current Year: 2.088
Page 5 of 14
No, I think, this is typically in our strategy work and for the moment we are not disclosing, but I can grant you that
we're active on this.
Okay. Very clear. Thanks a lot. Well done.
Operator
Thank you. We'll now move to our next question from Baskin Singovich of Deutsche Bank. Please go ahead.
Baskin Singovich, Analyst
Yes. Good evening, gentlemen. I just have two very quick questions. Firstly, obviously there's a lot of uncertainty
around the Brazilian market linked to drought and possibly constraints caused by this. And certainly this has worsened
the demand outlook over the last three months, say, since we spoke last time really. So could you please give us any
update on what you see in this market and then also whether you expect further benefit from electricity 2015?
And then secondly, what is your view on European prices? I know it's a very difficult environment (inaudible) so far
prices have obviously been trending very weak in dollar terms, why not having move to lot in euro terms, so they have
not really, say, been adjsuted back up to dollar parity. So how far or maybe also you on that front falling scrap prices
now an advantage to you relative to your Asian competitors, which I guess in most cases are not even paying for this
e-content [ph] in the NPI? Thank you.
Okay. So for Brazil, the market in Brazil is not expected to increase so much in -- as you've seen. But for us the
capacity of the company are fit for this market. And we see that the impact of the slowdown will be on part of the
products and typically on electrical field. So it's limited and our potential to sharing this market remains intact. We
have a dominant position, a good position in stainless steel. And the stainless steel also present a very high potential of
growth, because the consumption of stainless steel per capita in Brazil is still one of the lowest in the world, and the
possibility to increase it is still -- the potential of increase it is still there.
Concerning electricity, we will not have the same effect in 2015, because, and this is what we are not anymore
expecting, because in 2015, there is a ceiling in the price that have been set by the government.
For European prices, for the moment, European prices in term of that they are to expect -- the nickel has an impact on
the alloy surcharge. So this is something that has a direct impact on price, but also in the cost in parallel, so it's not
affecting directly results, because our alloy surcharge is following both nickel and excahge rate in the -- so is neutral
from this point of view. The pressure on prices has been mainly due to the fact of the destocking phase, but we count
on the reduction of this pressure due to a better seasonality in Q1 and typical in Q2 compared to Q4.
Okay. Thank you. Maybe just one more word on basically your cost advantage relative to the Asians considering the
drop in scrap prices, is it any meaningful to you? And then maybe also regarding the import situation, I mean, you
apparently have a relatively positive view on Q1 volumes in Europe, I guess, your Finnish competitor said the same
today. It's very difficult, I guess, really to get the head around the sitaution, but how far you think is the basically the
volume situation, which is despite destocking driven by basically your clients switching back to US supplier rather than

Date: 2015-02-12
Current PX: 26.025
Current Year: 2.088
Page 6 of 14
Asian competitors?
So I think that as for any market, there is a balance between volumes availability and prices of competitive raw
material. So ferronickel is competing against scrap and nickel pig iron is competing against scrap. So globally, we see
that the cost and the price of LME is following the nickel pig iron ore and there is a strict link with the level of prices in
scrap, so this is global.
And of course, now that there is a pressure on nickel, so -- and there is a pressure on nickel pig iron, there is also
pressure on scrap. And as you have seen this is something that gives us not real advantage on China, on the Asian
producer, but let us compete with something that is more, let's say, favorable than in the past, where nickel pig iron and
ferronickel or LME were completely decorrelated and the cost advantage of China was really high on the cost of the
charge.
Okay. Thank you for that clarification. Now on the import situation, I mean, do you have a view on how far the positive
volume trend in the first quarter, is actually driven by the fact that your clients are switching back to the domestic
European stainless suppliers from imports given that obviously in the third [ph] half of 2014, the import share has been
incredibly high?
We have no visibility for the moment, because you remember that normally we know about the import with the delay
of two or three -- two months at least. So we have no -- we can consider but the acceleration of the import in Q3 and
Q4 was due to -- a part was the -- the anticipation of the expectation on nickel during Q3 and the part was in the
anticipation of the possible (inaudible).
So this was a part of the story in 2014. In 2015, the condition are different. So the expectation of further increased
inventory on the commodity, especially coming from Asia, are due to anticipation of nickel is not -- has no sense in this
moment. And even if somebody is importing betting against the (inaudible) has no reason to do this now, because it
could be a risk in term -- or in term of duties.
Okay. Thank you.
So finally, we don't know, but we believe that the pressure will be slightly lower than in the past. But China is not the
only country. China and Taiwan not the only country import in Europe. This is a global market with so many other
country production stainless.
Operator
Thank you. Now I move to our next question from Philip Ngotho from ABN AMRO. Please go ahead.

Date: 2015-02-12
Current PX: 26.025
Current Year: 2.088
Page 7 of 14
Philip Ngotho, Analyst
Yeah. Good evening, gentlemen. Thank you for taking my question. I have a number, maybe to start with on the
outlook for Q1 2015 that you expect a better EBITDA. I was just wondering if you could maybe give in feeling of
maybe on both on Brazil and Europe where this should come from, given the fact that, if I'm correct, from your earlier
statements that you do not expect a significant gain from the electricity surplus in Q1. So in what way are you going to
compensate the 13 million in that sense, or where do you see it coming from?
And maybe also related to that fact that the Brazilian operations that there were lower shipments, but improvement in
EBITDA. Could you just maybe give a bit more insights into what was really driving that and whether we can expect
further improvements in the coming quarters? Those are my questions for now.
So Philip, I think you're asking about a view about 2015 overall performance, right?
Sorry?
You are asking specifically about quarter one or 2015 --
Yeah, quarter one, yeah. The first one is on quarter one, and then on Brazil, maybe on -- yeah, if you can give a bit
more insight in the operational performance, which you expect for the rest of the year, let's say, --
Okay.
I think so continuous one?
So if we take by division, yeah, in Europe we expect a volume increase following the destocking phase that could --
that should reduce during Q1, okay. And on top, there is a seasonal effect, Q1 is always much stronger than Q4 in -- as
number of days et cetera. So Europe will be definitely the better in volumes than Q4. In Brazil, on the contrary, you
know that there is a seasonal effect, for them it's more the summer season. So this effect is limited in term of results by
the better performance of the plants.
For alloys, we expect a better performance due to the fact that we have sold the very short-term problems we have had
in term of production in Q4. And finally, in service and solution, despite there's still destocking trend, volume should
increase because of the season and there will be less effect on the price volatility of nickel in the result of service and

Date: 2015-02-12
Current PX: 26.025
Current Year: 2.088
Page 8 of 14
solution.
So all in all, Q1 that will be better in volumes globally for Aperam with less production problems, we are not expecting
production problems.
Okay.
This was your [ph] question.
So on the bond that you'll be planning to buyback, I was just wondering, are you planning to, I don't know if you can
say anything on that, issuing new bond or will you be financing from the current means?
No. As you can see, I mean, we have not announced any specific plans on refinancing of those bonds. But clearly, these
high-yield bonds, as you can see, they are at a very high level of coupons, 7.75%, clearly in our objective to continue to
reduce our cost of debt, this remians one of the priority. You can, first of all, see very clearly that we are continuously
generating good amount of cash, and of course, we have some further plans to work on our debt restructuring, which is
still not finished. And clearly with these actions, we hope to redeem these bonds during quarter two of 2015.
Okay. Then maybe one last question. Is there any particular reason for increasing the size of the revolving facility,
credit facility?
First of all, we are redeeming the bonds, and clearly we have taken a look at our facility. This facility, they were
maturing 2016, and now we are entering into a facility, which is set up for three year plus one, so it's going until 2018
and '19. So clearly, we would like to have an appropriate level of liquidity for Aperam and that is the intention, and
that's why we have reorganized it like that.
Okay. Thank you.
Operator
Thank you. (Operator Instructions) We'll now move to our next question from Rocas Bronlazer of Kepler Cheuvreux.
Please go ahead.

Date: 2015-02-12
Current PX: 26.025
Current Year: 2.088
Page 9 of 14
Rocas Bronlazer, Analyst
Yes. Hi. This is Rocas Bronlazer from Kepler Cheuvreux. Yeah, briefing on a few points again, I guess, obviously, no
symbolic dividend has been decided for 2014, and can you maybe comment on that in a sense, what is your priority on
dividends? Obviously the flexibility is going now with your deleveraging having massively progressed and obviously
you are looking at all opportunities in terms of gross. So is that implying or signalling to us that even a symbolic
dividend is not of such a high priority at the moment even though you have pretty good cash flow generation?
And secondly on your market share performance in Europe, if I look at recent market data, it appears that you have --
further lost some share in the market. Is this solely due to the fact that imports are still pressuring into Europe, or can
you see any other shifts in terms of market balance in the European arena?
Then thirdly, I guess the tone today is that the focus remains on cost efficiency and competitiveness, wasn't it the time,
may be, to further extend your Leadership Journey program as you're just left with another $50 million to go for in
2015?
And finally, on your European outlook, I guess, it's clearly better on quarter basis. Any indications how much it could
be down on a year-over-year basis as we are moving to destocking then the restocking mode as last year. So is it more
like a single digit number we can expect or could it be even more than that?
Okay. First of all, regarding the dividend, so we have done great level of improvement in our cost through Leadership
Journey, but our cost of debt has remained significantly high. And this is one item which we are not happy about this,
this is consuming more than 20% of our EBITDA if you take a look at the numbers of last year. And we are also not
happy with our rating. So our focus, clearly, is to implement a strong Leadership Journey also in our cost of debt and
strengthen our balance sheet and also improve our rating.
After this target is realized, clearly Board of Aperam aims to finalize a long-term strategy in financial policy regarding
Aperam cash deployment. And clearly, I mean, your question on symbolic dividend, it's something we should come
back when we have a clarity about reduction in our cost of debt, and also clarity on the long-term strategy, and this is
something we'll come back.
Okay. About market share, so it's clear, but the pressure coming from Asia was very tough in 2014. What -- we don't
have the final figures of 2014, but what we expect is that our market share of Aperam remains stable, meaning that we
have been able to keep our position against the imports in the market, our traditional market, and our traditional
customers with Aperam. This has been very difficult to be done, but it's a great success that we can be proud on -- for
2015 - '14, sorry.
On cost efficiency, okay, probably, we are used to announce about Leadership Journey, it's a little bit repetitive, but I
can grant you that it's not so repetitive to increase each year by 50 million to 70 million of cost saving. Each time is
something new and we have to work on debottlenecking, reliability of lines, yield, et cetera. So the program we have
for this year is a big challenge. And we have, first of all, to concentrate to focus on succeed in the challenge of this
year. In the same time, we have structure. We haven't named them (inaudible) will be to define the industrial roadmap
for the next year to come.
And then on European outlook, what was the question? Sorry.

Date: 2015-02-12
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Current Year: 2.088
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Year to year?
Year to year?
Yes.
Let's say that we are expecting Europe being at least at the same level of demand with -- as low increase in demand, on
the real demand in 2015. Probably some of our customer will start to benefit during the year of the exchange rate, the
customer which are exporting goods, and we will have a positive effect of the increase of exports coming from these
customers. And some countries are showing some better activity and typically Spain is in this moment showing some
good signs. So this is something that gives us some hope on 2015.
Okay. I guess my volume question was not so much related to on what you see on the underlying demand. And I guess
I would fully agree with you. That point is more that the first quarter, in particular, last year was boosted in volumes by
the restocking in the market and you had quite a great level of volumes in Q1. So as we are now not in a restocking
mood I would consider that volumes have to be down, the question was more -- is it more like single or two-digit
number we have to pencil [ph] in here?
No. Of course that Q1 will be -- we want to be -- as apparent [ph] demand, the same level of 2014. 2014 was extremely
high, because Q4 2013 was very, very low in terms of the inventory. At the end of 2013, we had the historical low level
of inventory, so Q1 was the rebuilding of these inventories. This year is not at all the case, we have on the contrary, we
have had in 2014, Q4 was a destocking phase, because inventories were very high due to our imports as we said. So
this phase of the destocking still lasting a little bit in Q1. So, Q1 won't be a two-digit quarter. Nevertheless, it will be a
good quarter for us and as we -- as annoucned.
Okay. Just a follow-up on your comments on the dividend. I fully understand the moving parts in your decision
making. However, if you're saying, okay, you have to consider first what's going on in terms of strategy or potential
M&A, and so this -- does this sound like that it is a kind of an either ordered -- either you can pay a proper dividend or
you're going to grow -- is that the message behind or isn't an aim to have a certain minimum payout whatever the
growth strategy would be?
Look clearly, as we mentioned earlier that we are still finalizing our long-term strategy and strategic options. And once
we have realigned our first announced goal to reduce our cost of debt, and once we have clarity on our strategic

Date: 2015-02-12
Current PX: 26.025
Current Year: 2.088
Page 11 of 14
options, clearly we'll come back with a clear-cut strategy and financial policy in this regard.
Okay. Fair enough. Thank you.
Operator
Thank you. We now move to our next question from Jean Devivi of Exan. Please go ahead.
Jean Devivi, Analyst
Yeah, good evening gentlemen. This is Jean Devivi from Exan. Thanks for taking my question. The first one is really
on the Q1 guidance. So you're expecting an improvement versus Q4 EBITDA, is that on the reported figure, i.e. 170
million or is that on the, let's say, underlying figure we stated from the -- for the electricity gain in Brazil, that's my first
question?
Yeah. The guidance that we have given is an increase on the reported EBITDA numbers, we expect an increase in
EBITDA over quarter four.
Okay. Very clear. Thanks. And then in terms of savings related to the refinancing actions that were made over 2014
and what you announced 2015, what kind of savings on the financial costs would you expect typically versus the 116
million charge that was reported for 2014 as a whole?
Clearly the level of 116 million cost that we had as of last year is very, very high. And the debt restructuring that we are
undergoing is not complete and we have not given a specific number in terms of our cost reduction target on the cost of
debt. However, you can see the restructuring which has been already completed, but clearly, we have repaid some of
the bonds, and we are utilizing a cheaper sources of financing. So I mean you can work the math, and of course, there is
a double-digit in terms of percentage reduction that we are looking for.
Okay, understood. Thanks. And finally on the cash generation side, could you provide a CapEx guidance for 2015, how
do you see? The CapEx has been pretty low for past, let's say, three to four years, would you expect the CapEx to
increase at some point in time in the coming years. And do you see further potential to lower the working capital
further, after I think, steady good performance in 2014?

Date: 2015-02-12
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Current Year: 2.088
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So, our guidance, globally, is to remain at the level of CapEx that is the CapEx, the maintenance CapEx of 100 million
plus project to date will be launched or have been launched during last year. We have on going US$52 million
investment that are mainly in the cost improvements in debottlenecking and in the improvement of the mix of our
products. So we will stick to this policy and we will -- we are always searching for new opportunity and we will -- we
have a very dynamic way of managing this CapEx.
On working capital, I will say that the working capital is now at the benchmark in this sector. And we are not using our
working capital for cash generation mainly from now on, the cash generation will come from EBITIDA and working
capital is (inaudible) to sustain the activity.
And if we need more working capital or less working capital depending of the situation of the volumes and prices, we
will be able do it.
Okay. Thanks. Just a quick follow-up on the CapEx side, on the 52 million that are the ongoing investment on growth
and productivity projects. I guess this was spread over 2014, '15 and maybe '16. Am I right or is that only the -- let's say
the gross figure for 2015?
No. The majority is '14, '15.
Okay. Understood. Thank you.
Operator
Thank you. (Operator Instructions) We now move to our next question from Stephen Benson of Goldman Sachs. Please
go ahead.
Stephen Benson, Analyst
Hi. It's Steve here from Goldman Sachs. Just a question on the guidance, in the past Sandeep, I think even in the last
quarter you helped ourselves in terms of an upper limit by referring to a quarter prior. So if you are saying, it will be
more than 117, I mean, back in the middle of last year, you did 145 or in the third quarter, you did 127, excluding the
electricity gains. I mean, are those sort of levels possible again in the first quarter or is it more marginal than that?
Clearly, I mean, as Tim mentioned earlier that quarter one of 2014, we had a very strong restocking that we have seen
last year. And what we are guiding at the moment that in quarter one, we should see an increase in our reported
EBITDA over quarter four. And as you know that in quarter four, we had $13 million of electricity income. That
means, on an underlying basis, we should see a much stronger improvement in quarter two.

Date: 2015-02-12
Current PX: 26.025
Current Year: 2.088
Page 13 of 14
Okay. Thank you. Could you just touch on where inventory levels are today in Brazil and in Europe?
Yeah, so in terms of rotation days as you can -- I mean, we are remaining more or less at the level of 48, 49 days, and
this is the overall level of the working capital. And in terms of inventory, we had done some inventory buildup,
particularly here in Europe, we took care of certain maintenance work that we had on our equipments.
And how about the market? So your feel for where inventories sitting in the market, we had a high level, normal level
in February?
So, let's say, that we see -- we have seen high level of inventory during Q4. Now, the situation is normalizing -- on top
is normalizing, because also the demand is higher in Q1 due to seasonal effect than in Q4. So inventory are at normal --
will be in normal level at the end of February.
Okay. And I know that nickel has been weak. But your seasonal restocking normally I think -- we've seen base price
attempts in the first quarter. Do you think the industry is holding back at the moment because of the trade cases?
Difficult to say, but it's difficult to anticipate and speculate on what will be the kind of (inaudible).
Okay. And just one last question. Do you have any guidance in on what you're -- what you think the year-on-year
decline in your finance, net financing charges will be for '15 versus '14?
So, Stephen as I mentioned earlier as well that at this moment, we are not giving a number as the restructuring work on
the debt it's still not complete, so this is ongoing action. But clearly you can see from the actions that we have already
enumerated on slide 15 - 16. You can see and -- I mean, it's also from maths [ph] you can work out. There is strong
reduction in this cost which is being planed and this remains our target.
Hey. Can I just clarify one point going back to the guidance, did you say that 2Q '15 is going to be better than 1Q -- 2Q
'15 is going to be better than 1Q '15 or did you say that 1Q '15 will be better than 2Q '14?

Date: 2015-02-12
Current PX: 26.025
Current Year: 2.088
Page 14 of 14
No. We mentioned about quarter one being better than quarter four of 2014, clearly.
Okay. Perfect. Thanks very much.
Operator
Thank you. That is the end of the question-and-answer session. For further questions, please contact the Investor
Relations department. I'd now like to turn the call back to Mr. Di Maulo for any additional or closing remarks. Please
go ahead.
Okay. Thank you. I appreciate a lot. We had discussion on the question that's asked been done and are really confident
on the performance of the company for the year of 2015. This is a company that has realized a fantastic Leadership
Journey. We are inheriting of this and we will have a very good position to -- for the 2014 in any condition. We are not
expecting from outside that something in (inaudible) happening in the market et cetera. But we are really confident on
our client and we will continue in our strategy based on Leadership Journey and Top Line. See you soon and thank you
very much for the participation to this conference call.
Thank you.
Operator
Thank you, gentlemen. That will conclude today's conference call. Thanks for your participation. You may now
disconnect.
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