Aperam SA
AEX:APAM
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Estee Lauder Companies Inc
NYSE:EL
|
Consumer products
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Church & Dwight Co Inc
NYSE:CHD
|
Consumer products
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
American Express Co
NYSE:AXP
|
Financial Services
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Target Corp
NYSE:TGT
|
Retail
|
| US |
|
Walt Disney Co
NYSE:DIS
|
Media
|
| US |
|
Mueller Industries Inc
NYSE:MLI
|
Machinery
|
| US |
|
PayPal Holdings Inc
NASDAQ:PYPL
|
Technology
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
23.04
33.26
|
| Price Target |
|
We'll email you a reminder when the closing price reaches EUR.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Estee Lauder Companies Inc
NYSE:EL
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Church & Dwight Co Inc
NYSE:CHD
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
American Express Co
NYSE:AXP
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Target Corp
NYSE:TGT
|
US |
|
|
Walt Disney Co
NYSE:DIS
|
US |
|
|
Mueller Industries Inc
NYSE:MLI
|
US |
|
|
PayPal Holdings Inc
NASDAQ:PYPL
|
US |
This alert will be permanently deleted.
Aperam SA
You don't have any saved screeners yet
Welcome to the Aperam Q1 2020 Results Q&A Conference Call. My name is Julie, and I'll be the coordinator for today's event. [Operator Instructions]
I would like to hand you over to your host, Tim Di Maulo, CEO, to begin today's conference. Thank you.
Hello, good afternoon. I hope that everybody is well and that you have had the possibility to listen to our presentation on -- in our podcast and have an idea about the -- our results. So I think that we can go directly to the Q&A, which will be done with Sudhakar Sivaji, which is with me. Thank you.
And I open to the next questions.
[Operator Instructions] The first question in the queue is coming from the line of Carsten Riek from Credit Suisse.
Two from my side. The first one is on the ELG business, which we see for the first time in more detail. It looks like this business is either a very -- rather low profitability or got some hit this quarter. Maybe you can shed some light about the profitability in ELG in this quarter and how you actually expect them to do going forward? That's the first one.
Okay. So just to remember, we have both the ELG for recurrent annual results of about EUR 55 million per year, this is what has been also disclosed. So this is a business in which there could be a quarter in -- with higher and lower results. Last year, you remember that this business had a result of EUR 68 million. We are expecting a better second quarter. So we believe that we are fully in line with a good year for ELG.
Okay. Perfect. The second question I have is on the Services & Solutions business, which did extremely well, probably EUR 73 million adjusted EBITDA was quite a statement here. Was it -- was this business particularly benefiting from the price volatility we have seen? Or how do you explain that extraordinary good results here?
So there are a few explanations. First of all, the volumes were good with the market in which the prices were increasing, it is clear that the spot demand has profited the most of this increase of price.
On top, S&S has some inventory gains because it is a business based on the fact that we have inventory. So all in all, I will say that the progress of S&S, the growth of S&S, and the oriented the very efficient commercial policy that we have done in S&S explains the results that you are seeing there. Remember that they are around 25% higher volume than in Q4. So this was already visible in Q4 that S&S in a regime of increase of prices, they capture the best out of the market.
Perfect. And then maybe my last one is on the outlook. You guided for slightly higher EBITDA in the next quarter. Would that be true also including potential inventory-related gains or would be without those gains, would that be rather flattish, the results quarter-on-quarter?
So I think that we -- what we are seeing is that quarter-after-quarter, despite the increase of all the cost or material, whatever cost it is, we have been able to continuously increase our prices and progress with the margins. Next quarter will be a quarter with a higher, let's say, volumes, slightly higher volumes because there is also a question of mix in Brazil. There will be, as I told before, some increase in the results of the part of the recycling. So all different aspects means that, okay, even if the stock effect will be similar or slightly higher in Q2 than in Q1, fundamentally, is a good, let's say, it's -- Q2 is a good quarter with volumes and high margins.
And the next question is coming from the line of Luke Nelson from JPMorgan.
Firstly, just on Recycling and Renewables. You've re-segmented the BioEnergia into that division. Just relative to your comments -- your prior comments when you bought ELG around the -- through-the-cycle earnings, which I think was around the 60 million, 65 million EBITDA level. Can you just let us know what the incremental addition of BioEnergia into that division means for mid-cycle earnings going forward?
So Tim if I may?
Yes.
Look, so we guided last year to EUR 68 million in the earnings of ELG. Now do remember that besides BioEnergia, Aperam as such before that the ELG had its own recycling plant, right? So we have spoken about it. We've had a recycling part and we've had also a recycle, which is a part, which is the nickel and pure metal equivalent of what, for example, the [indiscernible], right, for a lot of dust collection and converting them into valuable metal for use in the industry.
So these items have also been moved to the Recycling and Renewables segment. So when we said ELG is through the cycle, EUR 55 million. That's the number which we gave out, right? And the addition of the other elements we've said has come to EUR 75 million to EUR 100 million segment. So that should give you midpoint references, right?
Okay. No, that's very clear. Then just a few questions on the cash flow guidance or the net debt guidance for slightly lower. Can you just talk through, firstly, what the assumptions are within that of -- around the buyback or the pace of the buyback?
And then also, any comments on working capital in your pre-recorded message this morning, you said there'd be additional build, but some additional granularity around that. And then I suppose as well, there was a margin call, I think, around 30 million? Or is that included in that working -- in the working capital build? And will that fully unwind in the current quarter?
So thanks, Luke. So the first question was on your -- yes. So let me take it from the last one at first. The EUR 47 million -- it is EUR 47 million margin call. And no, it's not included in the working capital, okay? So it is basically a financial cash flow, right, receivables up, financial receivables up and cash down and it should rise next quarter.
The second thing is that when we talk about a net working capital build, it's basically a build due to price, okay? There is like Tim mentioned earlier, increase in activity, primarily in our Brazilian division. But we should be compensating that with net working capital release. So it is primarily a price-related build, okay? So -- and we are, like we announced this morning planning at just -- at a high stable level of prices going into next quarter as well. So a lot of that depends on that as we saw this quarter and the previous quarter, right? So that's that.
And could you please remind me your first question again, sorry?
It was around what assumptions were for the buyback within the net debt guidance.
Yes. So the -- in the net debt guidance, we have planned a proportional buyback going in, so.
The next question is coming from the line of Krishan Agarwal from Citibank.
My question is basically an extension of Luke's question on cash flows. The 100 million buyback is sort of a positive surprise from the market expectation point of view. And then given that your capital return policy is distributing the excess cash. So is it fair to assume that you sort of have taken a view in terms of good visibility on working capital outflows reversing in the year? And then there's sort of excess cash available into the balance sheet for the distribution? Or has the no distribution policy being -- not been realized a little bit in that context?
No, the distribution policy is relaxed, our financial policy remains the same. So we always look at cash flow, right? And if you look at our free cash flow from last year, we looked at it. And in the current environment, we are confident with the networking capital build primarily because of pricing reasons to distribute the free cash flow from last year, right? So we announced an increase in dividend, if you remember, Krishan, to EUR 2 per share, right? So that combined with the now 200 million share buyback is the distribution of the excess cash, right?
What gives us confidence is the fact that we look at this net working capital and see it surprising, and it's good because this also means that we are pricing the whole increase in raw materials up until the customer. So that's something, which gives us the confidence. And that's the reason we said, okay, so last year's excess cash we will return to shareholders.
Okay. Good. My second question is around the energy cost in Europe. Your competitors sort of have been telling that either they are exposed to the spot or they have no hedges in place. Where does your energy exposure stand in that context? And also, I mean, has there been any kind of Alloys Surcharges, which you have introduced to pass on that extraordinarily high energy costs to the customers?
So yes, Tim, go ahead. If you want to start, then I'll pass on.
Yes. So first of all, I think that we have to take in mind that we are -- in our cost, around 40% of our energy is in Brazil where we have the lowest cost in the world for Energia because it's hydro and it is internal.
In second part, yes, we have a part of the -- our energy that is also hedged on all the part. So there is an advantage for some -- in some markets in Europe, et cetera. But fundamentally, what you have to take in mind is the global cost and the efficiency of the plant. So we -- it is not an [indiscernible] that we continue to increase our EBITDA per ton versus the average. It is because it is a mix of, okay, cost of energy, but also the efficiency in which this energy is used and the productivity of the plant.
So all in all, what we look at more than the specific cost factor is, what is the EBITDA per ton that we can generate after having all the costs and having pricing, the big part of the market?
Just to give a measure on that question on the last point, which Tim mentioned, right? So if you take Q4 and Q1, energy costs have been broadly flat for us being both winter quarters, and I can talk about us, right? So broadly flat for us between Q4 and Q1. And you can see that for our Stainless and Electrical segment based on the numbers we have provided you, the EBITDA per ton remains at a constant EUR 620 to EUR 630 per ton, which I again, reiterate is probably something which is above the industry average, which is why we say that we have the cost leadership in the markets we operate in.
And compared to the -- you had the second question about Alloys Surcharge, correct?
Yes.
So remember that this is one of the way we price in the market. So we have always priced with Alloys Surcharge or a fixed price or hedge price of the nickel at certain moment for contracts, but nickel is always a pass-through. So nickel and other material are pass through to customers. So -- and we have been able to continue to use the different mechanisms, which are, let's say, depending a lot on the commission of the market on the kind of customers.
If customers have contracts at fixed price from -- for their finished products, they tend to ask for fixed price. If they are more, let's say, indexing to the raw material, they take on raw material. Or if they want to mitigate the risk, they index on our raw material. So -- but for us, it is one of the way to price and all the pricing system have a pass-through to the final price.
And the next question in the queue is coming from the line of Tristan Gresser from BNP Paribas Exane.
The first one -- question on demand. Can you discuss a little bit the activity levels you've seen at end customers, notably in Europe in recent weeks. I believe you sounded a bit more positive now on autos, a bit more cautious for the construction industry. So just trying to reconcile a bit your positive real demand comments and also the decline in the order book you've seen.
So I will start from the second. So the decline in order book is not a real decline, the sense that is more a normalization. We have never had such long order books in the story as in the last, let's say, 12 months, but it was due to very specific reason, if you remember.
This specific reason were the fact that all the supply chain was disrupted. There were a lot of incidents in all the transports all over the world. There were incidents in, let's say, problems in some kind of products. Still, today, some shortage were, let's say, very evident in some kind of, let's say, raw material or even components. So at the moment, customers were having all the same preoccupation and try to be secure -- try to secure the supply chain and the supply and so they tend to book very, very long.
Now part of this has been sold. So the -- all the transport and the supply chain, et cetera, has been an integrated big part. And part is also, let's say, logic because there is a kind of uncertainty in the future for the economy. And so people are trying to short their view and they shorten the order book.
But what is important for us is the underlying demand. We see an underlying demand, which is stable with sector which are better performing than others. So the construction is a little bit, let's say, DE ratio because of many components as the cost of some raw materials, even shortage of some raw material, which is linked to the cost. Some problems in finding workers.
But other sectors like in catering in the collectivities in what is food, et cetera, which are performing very well, and there has been a recovery in demand also in automotive. So we see good demand and stable demand in the, let's say, in the scope of the next 3 months.
All right. That's clear. And my second question is more on the imports. So you commented about the surge in Q1, the return of Chinese material. You also mentioned that the EC could maybe be a bit more productive and act on safeguard. What measures do you believe are needed? Is it a quarter for China or any other country maybe you have in mind as being problematic of late?
So as you know, we have a new set of measures for anti-subsidies in Q1. This sets measures that are concerning India and Indonesia that were the 2 most aggressive countries in last year are extremely important because it's a kind of protection and replacing at a level play field for the most aggressive. And in particular, Indonesia, which has a unique, let's say, kind of subsidies and advantages on the rest of the world.
Of course, China, which is in a very difficult moment today with margins which are extremely low locally has found a way to sell much more than in the past, despite the anti-dumping measures. So there has been a recovery or a restart of the imports. So this can last a certain moment than whenever those people -- those typically distributor have, let's say, profit of the temporary gap. This normally should be -- should come down.
And on top, new measure will be announced, and you have seen also already that the South Africa has been included in the [indiscernible]. Okay, it's not a big actor, but still. And then there will be also for China, the inclusion in the [indiscernible]. So -- and whatever will be the behavior if there will be a dumping behavior, a new dumping behavior I think that the Commission has been supportive and continue and will continue to be supportive.
[Operator Instructions] The next question is coming from the line of Christian Georges from Societe Generale.
Just to continue on this import issue, I mean, because it's quite a dramatic increase in the first quarter. Is that continuous? Should we be worried that it could influence prices negatively over the summer?
So it is clear that the import is always putting pressure on the market. And this can be, let's say, this can be seen as a test. But first of all, these imports are purely China. And we believe that the Commission will address this. As I told you, China will be part of the [indiscernible]. We trust that the Commission will address this.
And then there is a question of you can -- okay, you can do a certain level of the imports, but not more, then there will be some part of calm down because those distributors who have imported so much, they will be starting to -- also important, remember, it is a cost because you have to pay a relatively short-term. So it is a cash issue.
So for the moment, we don't see huge inventories, all the monitoring is showing that inventory are at the right level. Maybe they were a little bit low. So this was linked to the -- this was, let's say, one of the reasons for a long order book. Now inventory are more normal, but you have seen there is no big inventory for the moment.
Okay. And my second question is with regards to Brazil. Last year, Brazil was contributing almost the same amount to EBITDA as Europe on the stainless division. Now I appreciate you don't provide any quarterly update on this. But looking at the current year, do you think we should have -- we could have a similar picture again? Because I remember that at the end of last year, you had a bit of worries with regards to the outlook for the Brazilian economy. Q1 seems to have been okay, but do you think we could achieve again an EBITDA in Brazil of roughly the same magnitude as Europe in 2022?
So I think we have a semi-satisfied Brazil. I will not give, in fact, the guidance, but we have still, very satisfied with Brazil, especially because Brazil has a lot of, let's say, good factors, in particular, they are extremely cost competitive. And in a period we are in which prices globally are high, the competitiveness of Brazil is a bigger set. On top of Brazil, remember that has this product mix, which is interesting. And this is something, which gives Brazil to switch from one product to another, and as we can see are in a good moment. Remember always that whenever prices are good, so when prices are high, mathematically, automatically, this is good for Brazil because the parity, the internalization of price is submitted to import duties, and this is a leverage for better prices in Brazil.
Okay. So that's a pretty confident view for the full year, right?
Yes.
Okay. And the last question is on cost inflation, not just energy, but in general. I mean, is there a lot more to come in Q2 versus Q1? Or have we seen a lot of the cost inflation already reflected into your current results?
Look, what are our costs -- our costs are labor costs and all the negotiations for labor have been done already. So this is relatively -- this is under control. We have already spoken about energy and gas, which are the other 2 costs. And then there are raw materials and the raw material is you pass through the raw materials, and this is the most important.
And the next question is coming from the line of Rochus Brauneiser from Kepler.
It’s Rochus Brauneiser from Kepler. A few questions, if I may. The one is back on your European Stainless Steel Business. If I got you right, are you still seeing overall good EBITDA per ton progression. Purely, if I look at the Q1 mathematically, if I deduct the EUR 30 million accounting effect from last quarter, it appears that the margin seems to be a little bit lighter compared to Q4, which is despite the better volume, despite the higher inventory gains, and also because of -- despite the leadership journey gains. So in terms of getting pricing and cost together, is this signaling that at the moment, the energy cost inflation is no longer being compensated by the base prices or by the realized prices you're having in your books at the moment? That's the first question.
Also thanks for that question. I -- the numbers if you look at it, and we announced for the Stainless and Electrical Segment for Q4, EUR 305 million. If you take out the year-end effect, which came completely in Stainless and Electrical Steel like we guided last time, it's EUR 275 million and the shipments were 432,000 tons, right? So this gives you EUR 630 per ton EBITDA.
Now if you go to Q1, EUR 272 million EBITDA, 445,000 tons mg gives it EUR 612 per ton. So if you're talking about close to EUR 18 per ton, this primarily comes from, like Tim explained before -- you see Q1 in Brazil is a seasonally weak quarter. So we always try to improve the mix. But end of the day, if stainless is weak in Q1 because of they are -- some are lower demand, we supply some mix to -- lower mix to ensure the utilization, and we've explained this detail in the past. And so that's the reason for this margin of EUR 10 to EUR 20 per ton difference. And there is no effect of the energy cost or anything in this Q4 to Q1 data. Like I said, the energy will be flat between Q4 and Q1.
On the -- on your new line, the recycling business, obviously, it has this slower start with 10% volume decline. Would you still expect for the whole year to be more in a flattish token compared to last year in terms of volumes? And can you give us some indication how much your volume share of ELG is internally? So how much of that volumes are being consumed in your group?
And let's say that we are not changing the business model of ELG, of what we call now Aperam Recycling. This is a division that we operate in the market and will continue to be considered as a profit center. So they will continue to sell at the best condition of the market to the best customers. And therefore, for the same reason, Stainless Europe will continue to purchase from other suppliers in a way to be sure that we collect the market, we collect the scrap at the best, let's say, price and with the best logistics because the logistic is extremely important in this kind of business, which is, let's say, with lower debt value the -- it is not a capital intensive as it is in a [indiscernible]. You have only to collect, soft the scrap, and put -- and the rest is the cost of logistics, transport, et cetera.
So Q1 has indeed been impacted by all this disruption in nickel, et cetera, which has, let's say, reduced the volumes because for 15 days, the market was nearly closed. But this as we said, we will be compensated with a strong Q2. And so all in all, we are satisfied of this operation.
Okay. And then on your forest business, I think you're flagging in your slides that you are increasing your forest capacity. Can you give us a sense about what you're doing with this increased charcoal capability? I don't -- I'm not aware that you're planning to increase your blast furnace capacity in Brazil. So how is this being used? Are you trying to sell that coal to third parties? Or what's the idea behind?
So we have been always 100% of our blast furnace is on with Charcoal. Sometimes we have to buy on the market some charcoal. And with this acquisition, we can be sure that not only we don't buy in the market, eventually we can sell some extra quantity if we held to the market with a very reasonable profit, a very good profit, I will say.
This acquisition, it is important because we want to be sure in the future that we will continue in the way of reducing our CO2 footprint. I don't know if you have noticed, but the most important announcement maybe that we have done is that we have completely re-audited the company in every aspect, and we can publish today a result of the final audit certified by auditors and certified also by PwC, which is our main audit firm with a 330 kilo per ton of stainless produce, which is 1/3 of the average of the stainless industry.
This acquisition in BioEnergia is a relevant one. It is an extension of 28,000 hectares. It is a big land that we will be used to produce 75,000 tons more of charcoal, which adds to our CO2 footprint and give us the possibility to have a good return. As usual, it is not only -- even without counting because for the moment, there is not a real market on the CO2, even without counting this, it has a return an ERA, which is above 15%.
So this is a fantastic acquisition done at the right moment with a very good price, and we continue to focus on the forest because our target is to continue to be the benchmark in the sustainability and in particular in the CO2 footprint of all the steel industry.
And it sounds very exciting. So I guess there's -- any excess charcoal you are having available that would be kind of opportunistic business in the region. So this is only being consumed in Brazil, I guess, yes?
It will be consumed in Brazil, but there is a market from Brazil in this moment is an extremely interesting market, extremely interesting market for charcoal. I can tell you, because always charcoal is cheaper than coal. And in this moment, it is not cheaper than coal. Also you have a fantastic business. It will be a dream for me to take you there and see by yourself what is this? Because this forest apart -- you can be impressed by how huge they are, but the fundamental is the fact that Aperam is not any more a simple stainless steel producer.
Sometimes we compare to other, let's say, stainless steel producer, which are very commodity. But this segment, which is recycling in the renewables is becoming 1/3 of the company, it will have a sustainable EBITDA of -- in a range of EUR 100 billion, and we want to expand it and will give us not only -- it is also we have the biggest producer in the world of charcoal has to be in the mine, and we are continuing to expand, and we are also find ways with drones and with, let's say, biological competition to the best to be the cleanest in the world. We preserve a forest from fire.
So I really hope that it will be possible that some of you or all of you, if possible come and see.
Okay. Very, very interesting.
Just to add one point, you said to remind everyone what we discussed in the Capital Markets Day last September, right? So the 300 million sustainable improvement in our EBITDA, which we announced there, if you remember the details, 2/3 of this will come from the segment, which Tim has been talking about like alloys, S&S, all the new recycling and renewables segment. So that's something to keep in mind how important these segments are going to become for our future. And you can see demonstrably last year already, we make 92 million proforma EBITDA in the segment.
[Operator Instructions] The next question is coming from the line of Bastian Synagowitz from Deutsche Bank.
I still have 3 quick questions and maybe I start with one on the forest business as well. Just to stay on the topic, and I have to say your CO2 footprint looks very impressive or even more impressive after the restatement. If I look at the chart there, there's a [indiscernible] in the density by 2030 already and you're obviously not expanding the business. So can you let us know how far this stand-alone measure or the business will drive your CO2 per ton metric?
So we have already engaged ourselves to 30% decrease of the CO2, and it will be done on the restated scope versus 2015. So it will be a further decrease in this. But one, let's say, it is only one part of our scope and say that 1/3 will be on the forest. And other will be on heat recuperation and efficiency projects and other will be in direct, let's say, substitution of natural gas with electricity, green electricity.
Okay. Perfect. That answers my question. And then my second one is also related to BioEnergia and [indiscernible] housekeeping one probably for suit. Does the entity shift on a cost-plus basis? Or will we see the fluctuating market prices for charcoal reflected in that recycling business? From the podcast, I understood that it will likely be cost plus and profit shows in stainless, but just wanted to double check.
Yes. You are -- it's not a cost-plus model. It is a market reference model, right? But the charcoal market, like Tim said, is quite attractive in Brazil, but there's also low supply, which is one of the reasons we wanted to get in there as biomass, right? Because it's also green charcoal, right, because of our forests. So -- which is why we wanted to get in. So not to have too many fluctuations on a month-to-month or a quarter-to-quarter. We have indexed on the market, but it's -- yes, that's the reference. So -- but any local or interim jumps is not reflected there.
Okay. Understood. Perfect. And then my last one is just finally on the impact of rising metal prices in the first and second quarter. Obviously, I think the effects are going to be very significant. So I was wondering whether you can maybe provide a bit more color around this, this time. Are we looking at a EUR 30 million to EUR 40 million negative in Q1, which will maybe swing into the same numbers with a positive foci in the second quarter? Or how should we look at this?
I'm not sure how you get to the EUR 30 million to EUR 40 million. But yes, there has been a slight impact, but it's not to the tune of what you're mentioning.
Okay. Got it. So the negative impact, basically, if we look at both hedging and also the timing effect has been less than the number and then the positive effect in the second quarter is also going to be lower than that. Is that correct?
No. So like hedging effect and timing effect are for us the same thing, right? So end of the day, once the hedging effect and it gets compensated by the timing effect as the physical settlements come into you. So that's why I said the effect is it's quite low.
Understood. But from what you're saying is also that the second quarter numbers, which obviously are going to be very strong, they're not going to have like a really material booster from realizing these inventory timing gains.
No. See, we said that there will be inventory valuation gains, but Tim has also explained the fundamentals, which are improving in the business. So that will be the primary driver.
And the next question is coming from the line of Patrick Mann from Bank of America.
Look, most of the questions have been answered. So very quick follow-ups. One, you spoke about the Commission addressing the surge in imports. I mean when should we expect or when are you expecting we might see some kind of action? Or can you give us an idea on timing? Or alternative -- and maybe related to that, is this just related to China lockdowns? And if China lockdowns ease, you'd expect it to normalize? And then the second thing is just on the -- just on share buyback. Can you just help us think about how you plan this, how you think about it, and whether it could change before next year's AGM? Or would that be premature and you'll look at it again at the AGM.
So the timing of the Commission are always uncertain. But on the [indiscernible] as I said, there will be already something that should be announced at the end of Q2. So then depending on the kind of file you are referring to, there will be longer time. Always if you are referring [indiscernible] filed, this will be -- will take longer.
Concerning what is happening in China, as always, it is unclear. What is clear is that today, the level of margins, which are, let's say, seen, recorded in China is extremely low, quite typically negative. And this has always historically led to some, let's say, a reduction of the capacities. We -- but I cannot explain more or say more because this is only based on the past experience. China has been -- all the margins China has been positive during the last 2 years. And today, we see a very, very low level of margin. So we believe that this is a cycle, and then it should be normalized in the future.
On the share buyback, what we see as I said already by Sudha, we have not changed at all our policy. So we are referring to the extra cash. We have a solid balance sheet. So we stay in below 50% of net financial debt versus EBITDA. This is the actual level. We have an absolute confidence in the cash generation of the company. As we have said, the actual level of working capital is related to price. We don't, let's say, play gains in reducing or increasing inventories because of the, let's say, cash [indiscernible] we are only using the working capital for the management of the business to have the right inventory, and we have a long supply chain from scrap to service and solution.
Evidently, we have a longer supply chain. This is what we want. This is what we want to generate more profit and generate more EBITDA per ton. But of course, when you have a long supply chain, you have more inventory and the price has an impact. This is something which will revert when prices will go down. So you see that in Q1, for example, the big result of Service & Solution and the Aperam Recycling and Renewables have generated EUR 73 million is a big part of our EBITDA. And for this, we have invested in inventory.
And the final question is coming from the line as a follow-up question, sorry, from Krishan Agarwal from Citibank.
A quick follow-up or maybe a housekeeping question first. So in the Recycling and Renewables, the proforma numbers, which you have provided for last year, I can see that Q2 '21 EBITDA fell dramatically from 34 million to 6 million last year. So when we do our modeling for Q2 this year, should we be aware of any kind of a seasonal impact or one-off impact you had in this business last year?
No, Krishan, like Tim explained before, this business is a business where you see, especially the repacking part, there could be shifts from one quarter to another quarter depending on how customers price their quotation period. So that's the reason for the difference. If you want to model it, I would suggest, we said last year was an above average year of EUR 68 million for the recycling part. And that's kind of the run rate you have to expect for the first half of the year.
Okay. And then broadly, Q2 will be improving sequentially?
Yes. I mean we expect Q2 to improve. It depends also on how -- because -- it depends on how the customers and markets [indiscernible]. The same question hangs on the broader economic [ environment ]. But we expect this year to be definitely a good year above the average year, which we stated during the acquisition.
Okay. Thank you, everyone, for your questions. I'll now hand it back over to your host to conclude today's call.
Okay. So just wanted to thank you for listening to our call. Now, what is clear is that Q1 has been the fifth record in a row. Q2 will be the same. But I also invite you to look at a more long-term and more structural transformation of the company. The more long-term, the more structural is that the competitiveness is our main driver, and this can be demonstrated because whatever has been the cost of the raw material of energy, whatever has been, we still continue to improve our EBITDA per ton and [indiscernible] any benchmark that you can find in the market.
The second is that also comparing to the rest of the market, our long-term story is a story of not being only a stainless steel producer, but having a large scope, which is from collecting scrap to serving directly end user with the new division which are Recyclable and Renewable and Service & Solutions and with the division of Alloys.
And the third one is that we are, and we want to stay well-ahead every kind of steel producer in the CO2 footprint and the sustainability, and this is the part of our goal.
So thank you very much, and have a nice day and see you for the next quarter or during our, let's say, road show. Bye-bye.
Thank you, everyone, for joining us on today's call. You may now disconnect your handsets.