Apamq1

Company Name: APERAM
Company Ticker: APAM NA
Date: 2015-05-05
Event Description: Q1 2015 Earnings Call
Market Cap: 2,655.25
Current PX: 34.02
YTD Change($): +9.435
YTD Change(%): +38.377
Bloomberg Estimates - EPS
Current Quarter: 1.010
Current Year: 2.381
Bloomberg Estimates - Sales
Current Year: 5702.714
Page 1 of 14
Q1 2015 Earnings Call
Company Participants
• Timoteo Di Maulo, Chief Executive Officer
• Sandeep Jalan, Chief Financial Officer
Other Participants
• Michael Shillaker, Analyst
• Stephen Benson, Analyst
• Baskin Singovich, Analyst
• Seth Rosenfeld, Analyst
• Philip Ngotho, Analyst
• Rocas Bronlazer, Analyst
• Jean Devivi, Analyst
Presentation
Operator
Dear, analysts and investors, welcome to Aperam First Quarter 2015 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's first quarter 2015 results. Aperam managed
to deliver its best quarterly net result over the first quarter. This performance was mainly driven by the solid
contribution of the Leadership Journey the Top Line strategy. Despite some weaknesses in the Aperam's demand in
Europe and seasonal impact in South America at the beginning of the year, the level of activity of Aperam was good.
As a result of European real demand recovery from the year and the seasonality impact in the good support from our
distribution with the Service and Solution division. Hence the operational performance of Aperam continues to improve
and EBITDA in Q1 2015 increased compared to Q4 2014. Going forward, we remain cautious as a result of the
uncertainties regarding the general environment and the nickel price evolution. However, we believe Aperam is on
track to continue to improve its operational performance and get benefited from the debt restructuring action launched
since last year. As a result, we expect EBITDA to increase in Q2 compared to Q1 and the net debt to slightly decrease
in Q2.
We will now take you to Aperam's Q1 results. We'll begin with Health and Safety results. The frequency rate for the
company in Q1 was 1.3x compared to 1.8x in Q4 2014. Aperam made its yearly Health and Safety day during April
with the focus puts on fair play policy and (inaudible)
About environment and markets now. Nickel price continued to decrease since September 2014 to reach a floor of
12000-14000 [ph] $ per ton and was reflected on the full market price for stainless steel. In Europe, the imports
decreased compared to the record high level of Q4 of last year. The nickel price volatility and the will of the
distributors to keep their inventories under control have limited the Aperam's demand in Q1. The outlook for Q2 looks

Date: 2015-05-05
Current PX: 34.02
Current Year: 2.381
Page 2 of 14
better, mainly as a result of stable real demand and higher level of seasonal activity expected for the second quarter
overall in Europe.
In South America, we see an impact of the worsening macroeconomic environment. In Brazil with negative GDP
growth and we expect Brazil Stainless Steel Aperam's demand in 2015 to be lower than the level of 2014. However,
Aperam will mitigate the impact, thanks to first, the Leadership Journey gains, and second, its versatile capacity to
serve not only Stainless Steel, but different product mix. Taking benefit of improving condition on -- oriented grain
electrical steel, but also on other -- South American region in the export markets. And this season helped by the weaker
Brazilian Real.
If we go to performance and prospects, Aperam has EBITDA in Q1 2015 of $133 million compared to Q4 2014 of
$117. This segment has EBITDA of $100 million in the first quarter of 2015, including $4 million positive results from
sales of electricity surplus in Brazil compared to $94 million in the fourth quarter of 2014 including positive $13
million from the sale of electricity. Despite the impact of the traditional seasonality on volumes in Brazil, the
operational profitability improved in South America mainly due to the continuous contribution of Leadership Journey
and Top Line. The performance in Europe improved mainly as a result of better activity, as well of the good progress of
the Top Line strategy and Leadership Journey actions.
EBITDA of Service and Solutions segment increased from $13 million in Q4 to $18, mainly due to higher volumes and
the contribution of the top-line strategy. The EBITDA of Alloys & Specialty increased over the fourth quarter -- over
the quarter from 11 million to 14 million as a result of operational performance recovery. Some sign of weaknesses in
the Alloy segment have been reported recently, mainly driven by oil and gas market slowdown. We expect limited
indirect impact on our divisions, especially with a bit of luck in the growth plan of the division. However, the current
performance of Alloys & Specialties division is expected to be stable and sustainable due to its position in all the
markets.
We are proud of our Leadership Journey program, which is the only way to ensure not only survival, but prosperity in
this tough industry. It has generated about 440 million positive EBITDA impact until the end of Q1 2015 with a net of
$35 million to be realized by the end of 2016. Aperam started to elaborate the program to upgrade its best performing
downstream assets since 2014. And this year, I'm happy to announce the tranche 2 of this program, we deferred a 30
million CapEx to announce two strategic lines in Genk and Isbergues.
This new strategic plan which may include our tranches of investment will supplement our continuous cost reduction
efforts with additional productivity and cost improvements gains. Hence we are happy to announce an expansion of our
Leadership Journey target by 100 million to be realized by the end of 2017.
I will now turn the presentation over to Sandeep.
Sandeep Jalan, Chief Financial Officer
Thank you, Tim. Good afternoon, everybody. On the profit and loss highlights. As Jim mentioned, we have reported
EBITDA of $133 million for the first quarter. Depreciation and impairment expenses in the first quarter of 2015 was
$47 million and at current exchange rates, it is running at a run rate of below $200 million compared to $242 [ph]
million in 2014. Net interest expense and other net financing costs in the first quarter of 2015 was $35 million, but this
included a one-time non-recurring expense of $14 million, which is comprised of basically two elements.
First, the prepayment premium due to early redemption of $250 million high-yield bonds, which were due in 2018 and
they have been fully repaid as of 1st April 2015. The second component of this $14 million non-recurring item is the
early amortization of arrangement fees for high-yield bonds 2018 as well as the $400 million borrowing base facility,
which has now been replaced with a new facility of $500 million starting March 2015.
Realized and unrealized foreign exchange and derivative gains were $3 million in quarter one, and pre-tax income was
$54 million. Additionally, we have recorded $12 million tax expense during this quarter and this has led to a higher
record quarterly net income of $42 million reaching an EPS of $0.54 per share.

Date: 2015-05-05
Current PX: 34.02
Current Year: 2.381
Page 3 of 14
Moving to the cash flow, Aperam management continues to keep a very high focus on cash. The cash flow generation
from operations was $80 million in quarter one, including cash consumption of $43 million due to the working capital
increase during the quarter, reflecting higher activity. CapEx during the quarter was $34 million and free cash flow was
positive $46 million during this quarter.
Now moving to the balance sheet, as of March 31st, our net debt was $508 million compared to $536 million at the end
of quarter four 2014 and this represents a gearing of 22%. As of March 31st, we had a liquidity of 776 million and we
had non-current assets including intangible assets, which was representing $2.9 billion. The variation of equity and the
gearing ratio increased standardly [ph] due to the translation effect of Aperam assets which are heard mostly in euro
and in Brazilian real. And the net debt is anticipated to slightly decrease further in quarter two, since the cash
generation from the operations should compensate the impact of the increasing activity on the working capital.
Aperam net debt continues to decrease, thanks to the solid contribution of the Leadership Journey and the To Line
strategy, and the Board has decided to pursue the focus on balance sheet strengthening during 2015 and also
improvement of our rating in order to reach the benchmark in terms of interest cost during this year.
Moving to the maturity profile, since the beginning of 2014, we have extended our cost optimization focus to the
bottom line, especially our interest cost. During 2014, we had raised convertible bond of $300 million at coupon of
0.625 and redeemed high yield bonds of $250 million which were maturing in 2016. We have also put in place, on
March 6th, a new $500 million Secured Borrowing Base Revolving Credit Facility maturing in 2018 with another
extension clause of one year, which is replacing the existing facility of $400 million. On April 1st, as we said earlier,
we have also redeemed high-yield bonds of $250 million which were originally falling due for maturity in 2018. Our
ratings have been improved by another notch by both rating agencies during past week, even though it's still lagging
our performance ratios and prospects. These actions have continued to improve our debt maturity profile and are
expected to reduce our annual net interest expense and financing cost by $35 million to $40 million on a yearly run rate
basis going forward.
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
Thank you, sir. (Operator Instructions) We will now take our first question today from Mr. Michael Shillaker from
Credit Suisse. Please go ahead. Your line is open.
Michael Shillaker, Analyst
Yeah, thank you. It's Michael Shillaker from Credit Suisse. Just number of questions if I may. Firstly on the balance
sheet, you've got an incredibly strong net debt-to-EBITDA of around one times. You failed obviously to get VDM if
indeed you were, as I guess we all think you were in the bidding for it. So, what next in terms of balance sheet, it
almost [ph] too comfortable and you should be looking for a combination of growth and also shareholder returns. So
does this make you feel more compelled to look at the testing [ph] as the way as still maybe the Vallourec asset or are
you still just happy to sit there on this balance sheet and actually not expand for growth and that will then bring me on
to another question in terms of shareholder returns coming out.
Second question on Brazil, obviously the market has been weak, but you've done very well through the shift to
electrical steels. How robust is that market and what is the risk, certainly after European anti-dumping you've got some
flow back into the Americas (inaudible) and similar we're shipping Electrical sales into Europe and that has an indirect
negative impact on the Brazilian electrical steel market. On cash flow, if you could help us a little. You've got CapEx
running at about 130 odd million a year at the moment, is that where you see stable long-term CapEx or is that actually

Date: 2015-05-05
Current PX: 34.02
Current Year: 2.381
Page 4 of 14
even going to be lower than that? And Sandeep, did I get you right if I strip out the one-off in finance and interest costs,
I guess about 80 million of interest costs. And I think, you said expect a reduction of 35 million to 40 million, so does
that mean, we are basically going to be running at about 40 million interest costs, right? And then if you then circle
back with the EBITDA you've got, CapEx and interest costs, your free cash flow is going to be very strong indeed. So,
what are you thinking in terms of shareholder returns, I guess, the shareholders are hungry for dividend. What kind of
payout ratio you are looking to give? I know, it's at the end of the year, but something I guess -- you can be planning on
and thinking about that. Thanks a lot.
Yeah. Thanks for your question, Michael. First, I'll revert on the question about dividend policy which is very
important. As you know that, we have suffered in the past years due to our debt structure, as well as the cost of
financing. Our cost of financing is a line that we are not proud as a management and that's why we launched cost
optimization action on this line as well. And we continue to work on the reduction of the debt. And as you know that,
we have just repaid this high yield bonds of $250 million on 1st of April. So these actions are ongoing and our focus
remains to make strong a balance sheet for Aperam, allowing us to capture any opportunities that might be there.
Now, Board is in the process of examining, since this process is ongoing. So the Board is in process of examining the
best financial policy for the cash allocation for Aperam and this is something they will come back in the second half of
the year, once we also have a better visibility of the full year results. Second, I think, the linked question to that, you
were also asking on the cash flow and the CapEx. So on CapEx, clearly, I mean we have maintained that we have a
maintenance CapEx envelope of about $100 million on the recurrent basis. And on top, from time-to-time, we are
announcing several CapEx projects which come on top.
So, as you have seen from our announcements of last year, $52 million of CapEx, plus another $30 million that we
have announced this year. Of course, there is a cash flow facing [ph] over several years running from '14, '15 and '16
and of course that is adding to the CapEx. So yes, I mean, overall we should remain in the range of depending on the
cash flow in the range of 135 to 140-145 depending upon the year and the cash flow facing of each individual project.
That may be there.
And then for Brazil, I'll let Tim.
So, Brazil, we have some sign of weaknesses in standards and then from an electrical steel, but remember that Brazil
for us is a counter in which we have a high level of protection. And today, Brazil is also experiencing a better
competitiveness due to real exchange rate. So in Brazil, we have seen that the overall performance is good and we think
that EBITDA would increase and we see in a solid position in this market.
Okay. And so the first question was really also on acquisitions with VDM now going, is there anything else you do as
we have in mind? And Sandeep, can I just confirm that you've effectively guiding to finance interest costs of about 30
million, 35 million to 40 million. I think, you've started with 80 [ph] million ex one-offs and you said should be 35
million to 40 million lower. So, does that mean, we are looking at around 40 odd million of financing cost going
forward?

Date: 2015-05-05
Current PX: 34.02
Current Year: 2.381
Page 5 of 14
Yeah. So, first of all in quarter one, you see that the total net interest expense and all the financial costs, it is 35 million.
And it is including 14 million one-time effects. So that means, excluding this one-time items, you are taking a look at
21 and as we continued to reduce the level of net debt and continue to optimize our interest costs further in the next
quarters, this should continue to go down quarter-over-quarter. And overall, we are expecting an improvement in the
range of 40 million over the full last years. And then last full year, you had 160 million total financial cost and net
interest expense. And on a run rate basis, we should be comfortably at around $35 million to $40 million reduction
compared to this base line.
Okay, sorry. So, going forward, what can you guess is it still 80 odd million annualized or is it still a very high interest
cost relative to the level of that you go? So, how aggressively can you attack the remaining financing cost curves -- I
mean, in principle, you should be all together than aggressively given two part of that. That is it's effectively the
converts which the interest cost is almost negligible. And you've got a very, very strong balance sheet. So you should
be able to track that materially (inaudible).
Absolutely. You are right, Michael. And that is the direction in which we are going and that's why I said in my previous
remarks as well that, this process of restructuring and financial cost optimization is ongoing and of course, I think we
are making good progress with some of the restructuring which has been done over a period of last six-months to nine-
months. And hopefully, we can make further optimization of this to make even more solid progress.
Great. Okay. So Tim, just comment on hunger for acquisitions if you can?
So on M&A side, we -- as you know, I mean, we did not disclose any specific policy or intention. And clearly, we
continue to look for any good opportunity, if it is creating shareholder value and we are at that point.
Okay. All right. Thanks a lot. Well done.
Thank you.
Operator
Thank you. We will now take our next question from Stephen Benson from Goldman Sachs. Please go ahead.
Stephen Benson, Analyst

Date: 2015-05-05
Current PX: 34.02
Current Year: 2.381
Page 6 of 14
Hi there. And I had a few questions. Firstly, just on Brazil that I heard correct in the presentation that you are expecting
the market to be down in Brazil year-on-year. Is there any way you could quantify that at all? Perhaps give us an idea
of what you're expecting the market volumes or your own volumes to decline year-on-year?
No, I think that typically this kind of these kind of information quarter-on-quarter, the volatility of this kind of market
can be very high. I think that the demand in Brazil is in this moment suffering. But in Brazil, remember that the
consumption per capital of stainless steel is extremely low and has a potential to increase that which is extremely
higher. Brazil has a 5 to 10 times less consumption of stainless steel, which is the main products there, then with some
accounting and so we count on the fact that in Brazil, where we can develop market and develop consumption.
Steve, I think if I can just elaborate a little clearly in Brazil at the current situation. We are seeing some slowdown in
the domestic demand that is coming from, of course, the overall Brazilian economic situation as well as the nickel
weakening effect and as Tim said that there is a quarterly volatility and all these things are changing very fast. Nickel,
you see that it has already moved by $2000 and all those things continue to move very fast. But overall, we expect that
the domestic demand will be down compared to a growth scenario and compared to last year. However, we expect that
there is no impact on our Brazilian situation because we are able to fully offset that high, let's say, managing with our
product mix as well as doing more exports in South America and other markets.
And you can also see that clearly we have a good favorable foreign exchange position because all our cost are in
Brazilian real and the current Brazilian real, it helps.
Okay. Would you be able to comment on where you see inventory levels in Brazil at the moment and perhaps in
Europe as well?
So in Brazil, inventory are mainly in distribution and inventory in distribution effectively have been high as let say a
capital of the customer to keep their inventory high. So there can be a slowdown. If there is a slowdown of demand can
be also due to the fact of the some destocking of distribution. But this is normally on a short period in one or two
months. In Europe, we have experienced a very tough destocking in Q4 and these destocking was also some way in Q1,
but finally this destocking has finished and we see the level of stock in Europe quite normal and demand and the real
demand is sustainable. So the upper end demand is also sustainable.
Okay. And my last question was just around the EBITDA. I see in the report, you no longer giving a split of the
volumes or the EBITDA for the Stainless and Electrical division for Europe and Brazil. Is there any guidance you can
give us around the split for the last quarter? And then just on the guidance for quarterly growth. Can you help us with
the magnitude of what an increased quarter-on-quarter means is there, a period last year or some sort of range that you
could might be able to help us out with on the next quarter?

Date: 2015-05-05
Current PX: 34.02
Current Year: 2.381
Page 7 of 14
Yeah, sure, Steve. But clearly, if we see in our Brazilian results that our Brazilian results have improved compared to
previous quarter, if you exclude that electricity, because of course, in electricity income as you see that the regulatory
cap of BRL3.88 [ph] coming into picture. The income from the sale of electricity has come down to about 4 million
compared to 13 million in quarter four. But of course, if you exclude this impact, the inherent operational performance
of Brazil, it has improved during this quarter and we expect despite this weakening that Tim was describing earlier. We
expect this to continue improving in quarter two as well.
Okay. Thanks. I'll jump back in the queue. Thanks.
Thank you.
Operator
Thank you. We will now take our next question comes from Baskin Singovich from Deutsche Bank. Please go ahead.
Baskin Singovich, Analyst
Yes, good evening, gentlemen. So most of my questions have been answered and just two ones left in it. So my first
one is on the market shares in Europe. Do you believe that the reshuffling of market share in favor of the European
domestic players on account of imports will have finished in the second quarter or do you expect any further market
share gains in Europe in H2? I think, one of your peers was saying that, we will only see the full picture in the second
half of this year. And then my second question has more also housekeeping nature and it's on your P&L. And so your
depreciation was down quite significantly and I guess, that was at least partially FX driven and could you please let us
know, if there was any other reason for the decline or will be (inaudible) be a sustainable quarterly run rate? Thank
you.
Okay. Thank you for the questions. So first, market share in Europe is recovering the historical level that we had
before. The structure of imports from countries which we are applying dumping prices. So we think that Europe
remains an open market with the possibility for all of our customer to buy from many suppliers in the world. And it will
be up towards the producer in Europe to capture part or even the facilities they want of the imports depending on the
pricing that they will do and the offer that they can give to the customer. But for the moment, the major effect is that
the China and Taiwan which we are accounting at approximately 15% of imports during the worse quarter in 2014.
These volumes have been mitigated and now the level of imports is more at the normal.
Baskin, on your second question on -- regarding depreciation. So, clearly you can see that in quarter one. We are at $47
million depreciation, and as you know that in 2013, we were running at more than $300 million of depreciation. So
clearly there has been lot of reduction. Last year, we were at $251 and clearly this has two components. The first

Date: 2015-05-05
Current PX: 34.02
Current Year: 2.381
Page 8 of 14
component as we declared last year itself, that's coming from improvement in our maintenance practices of the
equipments and useful life review.
We had a reduction in depreciation base as of last year, which was roughly about $50 million. Another part of the
reduction, it is coming basically from the translation effect. As you know that and as I was explaining earlier also in
context of our equity and assets, which are mostly heard in euro and Brazilian real. So of course, when they convert
them in dollars, which is a stronger currency, you see not the depreciation as much lower in dollar terms and that is
what is happening here. So you can roughly say that about half of this reduction is coming from the Useful Life review
than last year and another 50 at this moment that is on the current exchange rates.
Okay. But that means that the current run rate is effectively sustainable or that is equal i.e., basically going to have
higher EBITDA, going to have a lower depreciation and it's kind of falling fully through to your bottom line.
Again, I mean, in terms of EBITDA, since the same element is also true for EBITDA. Because, we are declaring our
EBITDA in dollars which is again a stronger currency and we make our results in terms of the transactions from an
euro area or Brazilian reals. So of course, when the translate those income into EBITDA, we will have a lower
EBITDA to that extend. I mean, conversely what I can say is, if we were to declare our results in euros, you will see a
much stronger improvement in my euro EBITDA compared to what you see in my USD results.
No, that's clear. I think, about EBITDA -- I guess, you obviously says translation headwinds distrust that you obviously
guide for better second quarter earnings and I think that that was what I was referring to. Now, thanks for clarifying.
Then just again following up on Tim's comments. So Tim, are you saying that the imports from China and Taiwan in
the second quarter will have gone down to zero or do you think that there will be still some residual imports from those
regions in the second quarter?
Let's say that, for the moment it is impossible to have the clear figures, because normally we have figures with two or
three months delay, but it will be very difficult to understand, how this imports can happen with the duty and the
temporary duties that the commission has import of 25% from China and 11%-12% for Taiwan. So we think -- we
believe that and also our customers out there, so they are not anymore importing. So we think that this imports will be
very, very small on the products that are subjected to anti-dumping duties, because I remember that is of course on
products side.
And then maybe as a second step, have you seen any sign be it from India, be it from Korea or Russia or anywhere else,
that imports have gone up into Europe? And have you yet seen any basically -- any redirecting effect from the other
regions?

Date: 2015-05-05
Current PX: 34.02
Current Year: 2.381
Page 9 of 14
No, I think, we consider that India and Korea have never (inaudible) always being there, we did offer and decline the
possibility to offer and we have also that the price, they were not under the screen, because they were not dumping
prices at this level. They can continue to compete with European.
But so far you haven't seen any reaction or any change in trend since the --
No, we have not seen and our customers are not telling us about having shifting, if the question is that, they'll shift from
China, Taiwan to India and Korea. No, we have not seen this and in any case, there is no reason to believe it.
Okay. Thank you. Thanks so much.
Operator
Thank you. We will now our next question comes Seth Rosenfeld from Jefferies. Please go ahead.
Seth Rosenfeld, Analyst
Good evening. This is Seth Rosenfeld at Jefferies. I had a couple of questions on the outlook for your European
business again. You commented earlier that inventory destock is now largely complete and imports specialty falling
considerably. If with regards to pricing, can you comment on what sort of environment you might look to increase base
prices in Europe, and what sort of confidence that you see on the demand side. What's your (inaudible) on supply
discipline amongst your peers?
And then also lastly I guess, what the impact is that weak US dollar coming, nickel prices on your ability to support
European base prices that present? Thank you.
So, on pricing, for the moment we see no -- not PLN improvement and prices are always a balance between supply and
demand. In Europe, despite the reduction of imports from China and Taiwan, there is abundance of the supply. So we
see prices that are corresponding to the situation of the market and then remember that the Q1 was still the end of the
destocking season. So prices were under pressure for a normal competition on price. Then, concerning nickel, you
know that nickel is a part of the full price. So when you see nickel are decreasing, this is reflected in the full price and
these are the some pressure on the full price and prices have been decreasing in with the alloys of choice or the full
price.
And just one last follow-up question. Obviously, your commentary on the reduction and the imports from other
countries, just domestic supply wise and obviously, a lot of idle capacity across the European region and yourself have
some multiple capacity within Europe. How do you think about the feedback from your own operators and from your

Date: 2015-05-05
Current PX: 34.02
Current Year: 2.381
Page 10 of 14
peers in the region and potentially increase in domestic supply were replacing the excess environment that we had
before imports [ph]. Thanks.
So, let's say that -- I will take this differently. We were obliged from 2012 to further decrease the utilization rate of our
plants due to the surge of the imports. Now we are back to level of imports of 2012 for more or less and so this
decrease has been compensating. So today, we were not really reopening capacity or old capacity. We are focusing --
we are still focusing on our best plants with some plants that are out of the swing. This swing tools that allow us to
cope with the seasonality.
That's perfect. Thank you very much.
Welcome.
Operator
Thank you. We will now take our next question from Philip Ngotho from ABN AMRO. Please go ahead.
Philip Ngotho, Analyst
Hello, good evening. Thanks for taking my questions. Most have been asked. I have two actually. First of all on the
cost savings targets, can you maybe say something about this phasing of it -- the additional 100 million by 2017? And
also, where you see the improvements coming from? And then maybe also on the capacity question that was just asked.
Can you indicate, what your current utilization rate is? And at what point you might consider or it might be needed to
bring on back some -- bring back some idle capacity?
Yeah. So, thanks Philip for your questions. So regarding your first question on the cost saving, I mean, the Leadership
Journey program has been expanded by $100 million and clearly, as we have said earlier as well, that $475 million of
Leadership Journey program, it was coming basically from three pillars. First, the restructuring work which was started
in '11 and '12. Second, there were cost reduction projects and third part was coming from the continuous improvement
and the productivity improvement projects.
Now, we are extending this program by another $100 million and clearly a part of the gain will continue to come from
the continuous improvement projects. And on other hand, as we have clearly demonstrated that we have some
productivity upgrade projects as well. And we have started to announce some of these projects last year as well as we
have made a new announcement of another $30 million towards this objective, and the objective is clearly to load our
best facilities continue to debottleneck them and to improve their productivity. And clearly a part of this $100 million
cost improvement will also come from these CapEx projects.

Date: 2015-05-05
Current PX: 34.02
Current Year: 2.381
Page 11 of 14
On idle capacity and on the utilization rates, so I remember that the target of our Leadership Journey has been first of
all to reduce the footprint to the best lines and the best tools and work on these best tools in a flexible way, which
means a flexible way is a way to use these tools with a maximum utilization rate at any level of demand. So, we have
been able during the last year -- what type of the demand it was and what type of the seasonality it was to use these
tools at utilization rate close to 85%-90% and this will continue. This demand will continue to increase.
Our target is to focus on our best tools to improve the competitiveness and the productivity of these tools and this is
part of the expansion of the Leadership Journey and work on these tools with some tools -- few tools, which are the
swing ones that can adjust marginally the capacity, but (inaudible) to be for the productivity and for the bulk of the
productivity. We will focus on our footprint and the best footprint of Aperam for the next year to come.
Okay, clear. And maybe one last question. Just on the disclosure, the fact that you've done -- that you haven't reported
the EBITDA for Brazil and Europe and the shipment levels. Is there a specific reason for that and will you stop doing
that going forward as well?
Philip, I mean, this communication is fully consistent with our segmentation which is basically Stainless and Electrical
Steel. And as usual, we will continue to provide the evolution of all the macroeconomic environment, the general
market conditions, the operating performance and any specific other geographically developments including even any
specific extraordinary items like electricity et cetera that we're disclosing. So of course, we will continue to give you
enough guidance on the way. This segment underlying performance is evolving and clearly, for some of the KPIs in our
shipments and EBITDA, we will -- incorporate in our annual results.
Okay, thanks.
Operator
Thank you. We will now take our next question from Rocas Bronlazer from Kepler Cheuvreux. Please go ahead.
Rocas Bronlazer, Analyst
Yes, this is Rocas Bronlazer from Kepler Cheuvreux. Just a few questions from my side. The one is back on M&A, can
you give us a bit of a sense where your seeking [ph] is at the moment. Obviously, VDM has -- is that kind of question
of price, is it a question of fit why this hasn't maybe not worked out here? And the second question is on the import
situation. I think you've already comment a bit on potential shifts for the time being no shifts and in the import market
share between the various importing countries. Can you give us a bit of a sense how you see the magnitude of potential
circumvention of the terrorists by the Chinese by supplying hot band to Europe and other elements we might have to
look at in terms of market share shifts such as maybe the (inaudible) Turkey and so on.
And maybe again on your crude steel capability, and when you said you are operating usually at 85% to 90% right
now. What is the kind of volume upside you can still generate from your various initiatives along the Leadership
Journey program and we saw it tapping your idle capacities and can you get us maybe a bit of a better sense on what
your upside could be from in terms volumes?

Date: 2015-05-05
Current PX: 34.02
Current Year: 2.381
Page 12 of 14
Thanks, Rocas. On your first question regarding M&A, as I said previously, I mean, we did not disclose any specific
M&A plan regarding VDM. So of course, we can't say much about it. Except that, we don't see any negative impact
what so ever for our large division, which remains a part of our very core business today. And we continue to work to
make this segment, which is very stable profitability further grow and to that extent, as you remember, we have already
done two CapEx projects. We have invested in our melt shop. And last year, we have also announced in our Wire Rod
mill, where we are the largest producer worldwide.
Okay. About coming back to the shift of imports. I think that my main message is Europe is an open market. In this
open market, you can find the products that are needed for customers everywhere in the world as a tivering [ph]. So
you can find the products coming from India, Korea et cetera. But then the question is what customer expect is a price,
but also a service, a quality and proximity et cetera. In this context, despite the good offer exist in the world, only if you
provided in the European customer down to the market. Only in this case, we can assist to surge the imports as we have
experienced in the past. So, saying differently, we believe this as an European competitor, we can continue to provide a
competitive offer to European customers and so having our place in the European market.
The second point you raised about it was circumvention. So circumvention is a breaking laws. European Commission
has to survey and we are left in case of China over use of some circumvention. And about Black-Scholes,
Black-Scholes, of course can come in Europe, but then has to be converted in cold-rolled which is the product that
designed in the anti-dumping side. So to convert them in cold-rolled you need cold-rolled facility.
We know about the announcement of a POSCO to increase the capacity in Turkey, but it is based on Turkey market
that is booming mainly on Turkish market. This is about their announcement and there will be some capacity, but they
are not at the level of the 3 million and more tonnes that's having cold-rolled. And then, the tool you can import
hot-rolled and sell it at cold-rolled unless -- I repeat, you are breaking rules and for this we will -- if we have any
information, we will tell that to the commission.
For the idle capacity, I still don't have answer to the idle capacity, but I repeat what is our intention. Our intention is
having the capacity that market needs with the flexibility, the market needs with the quality, the market needs with our
best tools. And for this, we are continuing improving the speed of the performance in (inaudible) our tools. And the
Leadership Journey extension is focused on this part.
Okay. Just as a follow-up on what you said, Tim. And on this Black-Schole which obviously you shift to Europe. Can
you -- do you have a sense on what the size of that overall market is in Europe, which would spend basically -- we are
able to use that Black-scholes. And on your comments on the capacity and I think -- I guess a few way -- come from
what the aim is, in terms of your flexibility, but I guess, when it comes to the cold-rolling capacity, and obviously the
measures you are implementing this year and next, obviously, increasing the availability of capacity. Is there any
possibility to get a little bit more specific on the magnitude of some of capacity which can be -- which might be
increased here?
Okay. So to be more specific. All producer of stainless steel in Europe has their own upstream facility except one. And
this one is representing less than 5%-6% of the market. And it is supplied also by with the Black-Scholes coming from
Europe. So this is the magnitude of the problem that could happen with the Black-Scholes. But it will shift only a part

Date: 2015-05-05
Current PX: 34.02
Current Year: 2.381
Page 13 of 14
of the Black-schole from Europe to Asia. For the rest, the competition will remain exactly the same, meaning that
instead of having this producer -- having a cold-rolled offer coming from Black-schole of the European, it will have an
offer coming from Black-Scholes coming from Asia, but it's not very significant in the market. Have I answered your
question?
Yeah. And that part was definitely answered. And on the capacity, as I said, any possibility to get a bit of a more flavor,
how much the measures you're implementing as part of your Leadership Journey. How much is increasing and the
maximum available cold-rolling capacity in your footprint?
No, no. It's not something that is simple there, because all answer will be depending on the seasonality, on the volumes
we are targeting, on the varieties. So it is very difficult answer and it's the guidance for the future. So we will stick with
what we've said.
Okay. Fair enough. Thanks for your answers.
Operator
Thank you. We will now take our next question from Jean Devivi from Exan. Please go ahead.
Jean Devivi, Analyst
Yeah, good morning. I'm Jean Devivi with Exan. Thanks for taking my questions. Most have been answered. I just
have one left. On the Leadership Journey, first, do you maintain the 475 million savings for full year '15 or is still
already an impact to be expected by the additional 100 million this year already? And then on those additional $100
million savings, could you please give a kind of flavor or give your breakdown between the Wires [ph] divisions or
between Europe and Brazil? Thanks.
So, I think that the communication is -- it was relatively clear. The 475 remains the target for 2015, and we will stick to
this target. The 100 million are coming on top and it will be the new target from 2015 to 2017. Okay? A big part of this
will be of course, Europe because as you know -- as Sandeep has explained before, this is the part related to the new
CapEx that we just announced. But the rest of that will be all over the company and all the company is engaged to
continuous improvement and simplifying processes, streaming down the process and this will be spread proportionately
(inaudible) on all divisions.
Jean Devivi, Analyst
Okay. Thank you.

Date: 2015-05-05
Current PX: 34.02
Current Year: 2.381
Page 14 of 14
Operator
Thank you. That is the end of the question-and-answer session. For further questions, please contact the Investor
Relations Department. I'd like now to turn the call back over to Mr. Tim Di Maulo for any additional or closing
remarks. Please go ahead, sir.
So, thank you. Thank you very much for assisting to this earnings release call. It's clear of that for us, it has been a very
good quarter. We are proud of the results of this first quarter, because we were in some difficult environment changing
and with a lot of challenging and we have -- as a result, our best net results of the history of Aperam. And also, we have
some good cash flow and we are continuing in delivering with Leadership Journey and the Top Line. So I think that we
will continue in this way, and we are really confident on the fact that Aperam will continue to be a success story. Thank
you to all of you and bye-bye.
Operator
Thank you. That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You
may now disconnect.
This transcript may not be 100 percent accurate and may contain misspellings and other inaccuracies. This transcript
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