Aperam SA

MAD:APAM

Earnings Call Transcript 2018-Q4

[Operator]

Dear analysts and investors, welcome to the Aperam Fourth Quarter and All Year 2018 Results Conference Call.I leave the floor now to Tim Di Maulo, Chief Executive Officer. Please go ahead, sir.

[Timoteo Di Maulo, Chief Executive Officer]

Good afternoon, and thank you very much for attending Aperam's earning conference call. So today our CFO, Sandeep Jalan, won't be here as he had to leave for India yesterday to attend a family grief. All my deep thought to him and his family. But I will be supported by Thorsten Zimmermann, Head of Investor Relations and Guillaume Bazetoux, Head of Finance.Now moving to Slide 3, where we present the operational and financial highlights. Aperam achieved a solid 2018 result with EBITDA of EUR 504 million despite an extremely challenging market environment in Europe caused by unprecedent import pressure in the wake of ineffective provisional European safeguard measure together with raw material induced negative inventory valuation, especially in the second half of the year.With market turmoil in Europe, I'm happy to report that Phase 3 of the Leadership Journey program is progressing as planned with an annualized gain of EUR 33 million by the end of Q4.We made good progress in all identified pillars. As part of our strategic review, we were able to raise our total saving together by 33% to EUR 200 million. We will discuss this later in more detail. 2019 will bring the majority part in realized annualized gains.We remain satisfied with our investment project. In January 2018, Aperam announced an investment in its Genk plant, consisting in a new cold rolling mill and annealing and pickling line. This project remain on track with CapEx of around EUR 130 million and will give us new capability and competitiveness. On the other hand, the AOD furnace that we had subsequently announced has now been put on hold in light of the changed market environment.With regards to the fourth quarter financial, I am pleased to report that Aperam is delivering a solid Q4 '18 EBITDA at EUR 90 million thanks to our resilient business model. We achieved this despite extremely challenging market condition in European business. High imports, destocking and one-time inventory valuation effects all have put pressure on margins.While these items will also affect the Q1, they are transient in nature. With weak market condition prevailing due to further destocking and despite the seasonal demand increase, we expect Q1 2019 EBITDA at a comparable level to Q4 2018.Definitive safeguard measure come into effect this week. We expect this to play an important role in restoring a normal functioning of the market from the end of Q1 onwards. In 2018, thanks to our strong balance sheet and cash generation, we had handed back EUR 200 million to shareholders in form of dividends and share buybacks while also strengthening Aperam by investing in sustaining and upgrading the company's asset base.For 2019, in line with our financial policy for the allocation of profit, we propose to raise the dividend to EUR 1.75 per share, subject to shareholder approval and to supplement this by share buyback of up to EUR 100 million. This is a record payout and makes us one of the highest-yielding stocks in the Europe material space.I will now comment on the pricing environment in Page 4.The nickel price knew only one way during the fourth quarter. Starting in October around USD 12,500, the price dropped to USD 10,600 at the end of the year. The same was true for chrome. The Q1 2019 European benchmark for charge on ferrochrome has been set at USD 1.12 per pound, which represented 10% drop from the $1.24 in Q4 and dropped almost 20% versus Q3. Nickel had a substantial rebound to above $13,000 since then. However, the price development impacted our Q4 and the first part of Q1 results by causing substantially negative inventory valuation effect.The sales price in Europe reflect the lower load in companies and low base prices that found a floor during Q4 in line with our forecast. The price delta versus China have reduced considerably and imports have started to decline in the fourth quarter already.With regards to reducing inventory, the industry has made some progress during Q4. But considering the seasonality, inventories remain on a slightly elevated level. Destocking continues in Q1 2019. We see therefore similar force at work in Q1 2019 compared to Q4 2018 which cut short term pricing upside. However, with the safeguard measure now we think that an improvement is possible from the end of Q1 onwards.Going to the safeguard in Page 5. Definitive measure has just come into effect at the beginning of February and will run until July 2021. This should support the European community in resolving unfair trade situation.We think safeguard will help to restore a normal functioning market in Europe from the second quarter for similar reason. The introduction of country-based quotas for the biggest importer as well as the quarterly quota for the rest will ensure a more even flow of imports. This will be easier to deal with compared to the volatile flow that we experienced in 2018.The second important point is the requirement to make a 25% deposit once the quota exceeded 90%, which act as an effective backstop and should make importers wary to fully utilize the quarterly quota. We would have preferred to see Indonesia included in country-based quotas. However, note that the European Commission is reacting to changes in import flows as indicated by the inclusion of Thailand in the cold rolled quota. This clearly limits the option of other currently exempt country to gain market share especially as the safeguard will be reviewed in July 2019.We know that imports have declined during Q4 as the onward spike eroded. This was a singular event that will not reoccur in 2019. The weak point of the safeguard is the 5% quota relaxation per year, which is likely above demand growth. However, there is still room for improvement as the measure will be reviewed next time in July 2019.Finally, we are convinced that definitive measure are a substantial improvement versus the ineffective preliminary ones. We also trust that the European Commission will further strengthen the measure if changes in import flow warrant further adjustment.We now take a closer look at the Leadership Journey on Slide 6. As already mentioned, we achieved annualized saving of EUR 33 million by the end of 2018. This is below the run rate of initial target at EUR 150 million savings by the end of 2020. But please, note that we spent EUR 64 million cumulative CapEx which is a major share of the program already.This took time to accomplish, but now will start yielding gains. 2019 should bring a step change in realized annualized gain already. As part of our annual strategic review, we have fully reviewed the program to account for market turmoil in Europe and to strengthen our competitiveness in light of new challenges. So we have raised our year-end 2020 saving target by 33% to EUR 200 million and capped associated CapEx by 33% to EUR 100 million. The increase in cost saving is partially due to the expansion of scope. We now include procurement saving. This is a milestone in narrowing the unfair competitive advantage that Indonesia enjoyed. The remaining gain will come from fixed and variable cost savings and improvement in distribution and top line.Given the currently challenging market environment, we have reviewed all the project included in the leadership program and decided to postpone some high CapEx absorbing project that had longer payback period. We have more than compensated this by adding procurement saving to the overall Leadership Journey Phase 3. This require no CapEx, but gains can be realized in shorter term.We explain how we could arrive at this saving target and the new planned CapEx at the same time. We are convinced that the updated program addresses the challenges we face and make our firm an even stronger company.I'm turning to the outlook on Slide 7.Base price were at a low level in Q4 due to destocking and still high import pressure due to the ineffective safeguard measure. As projected, base price found a floor during Q4 2018 which market had troughed. With further destocking taking place in Q1, we see similar forces at work in Q1 which leads to a comparable EBITDA level for Q1, comparable to Q4.Having said this, I want to state clearly that we do not consider EUR 90 million EBITDA per quarter as the new normal. With improved safeguard measure now in effect and higher Leadership Journey contribution, we think an improvement is there for Q2 onwards. You can take the announced shareholder return policy with a record value of EUR 240 million as a sign of confidence from us in the future development.We expect financial debt to remain at low level in Q1 2019 despite the seasonal increase in working capital.Some more items to assist in your modeling. We plan with a CapEx budget of EUR 170 million for 2019. And this includes our maintenance CapEx in the range of EUR 100 million, EUR 120 million, the CapEx for Leadership Journey and further CapEx for the Genk cold rolling mill project. We expect depreciation in the range of EUR 150 million, EUR 160 million.So we are now ready to take your questions. Thanks.

[Operator]

[Operator Instructions] And we are now taking your first question from Luke Nelson from JPMorgan.

[Luke Nelson, Research Analyst]

Can you just give some granularity on what you're forecasting within the Q1 EBITDA guidance around nickel and chrome pricing and therefore the likely revaluation impact that might occur? And then also if there's any volume impact within that revaluation? That's my first question.

[Timoteo Di Maulo, Chief Executive Officer]

So your question is about the valuation effect of inventories. So as you know, we don't give a clear statement on this because there are so much volatility. But in general, you know that there is a lag effect from the nickel that enter in our inventory. And this lag effect is coming from Q4. And the second effect is the chrome, which has decreased by 10% compared to Q4. And remember that 17% of our inventories are containing chrome. So it's an important element. The rest, you know more or less on this. So indeed, the valuation effect will penalize -- will have an importance in the Q1 result.

[Luke Nelson, Research Analyst]

Okay. And second question is just on the different project at Genk. Just remind me if I'm wrong, but I thought previously when this was first announced you indicated the return from that project were sort of above a 15% IRR. So just what has changed in that? Is that more conservatism now around your assumptions on pricing and the economics of that project or is it just you're taking more conservative view around your balance sheet?

[Timoteo Di Maulo, Chief Executive Officer]

No, no. So the 15% is the stretched minimum, absolute minimum that we consider when we take any kind of investment. And in this case, it has even more interest in this investment because it's a pure cost in competitiveness investment. So in this scenario, there is no impact from, let's say, prices on market, et cetera. But this is a very strong investment with the threshold and with a return which is higher, well higher than threshold.

[Operator]

We are now taking your next question from Cedar Ekblom from Bank of America.

[Cedar Ekblom, Analyst]

I've got one question, just on capital allocation. I want to understand how you're thinking about capital allocation in the context of announcing a buyback program, but at the same time stalling the investment in the AOD and also shrinking some of the CapEx that you can on spending at the Leadership Journey. I mean, you've just spoken about the returns of that project being very compelling and yet you're stalling that project, which the intention probably is to improve the competitiveness of the business in the long term. But then prioritizing buybacks even though the business has low leverage. I just don't understand how those all go together. Is there not scope to actually continue these investments at the expense of the buyback or in fact do both because your balance sheet is unlevered?

[Timoteo Di Maulo, Chief Executive Officer]

So you know about our financial policy that you have in the Slide #18. In this financial policy, the target of the company is to maintain a strong balance sheet, which is the case with a level of net debt which is close to 0. And to have some priority in the way we allocate the cash, which is clearly first to invest in sustaining and upgrading our assets; and second in M&A; third in the dividend policy which is with an increasing, let's say, dividend policy with the confirmation of the result. And only, only when there is an extra cash, the extra cash will be dedicated to a payout to shareholder in a range of 50% to 100%.So this is exactly what we have done. The first has been, we have a solid balance sheet. We are confident about what is our cash generation and we have a clear view and we are confident about it. The second is every situation of the market imply that you act considering what are the strength -- what is the way to strengthen the company. And today, due to the arrival of new players and the, let's say, the commodity pressure that we see on the market, we have focused the team and focused all the -- our action in what is the correct answer mostly on shorter term that we had in mind with the last year.So we have partially transferred the focus on more longer term to short term. But the longer term is not a tool out of scope. First of all, with the level of investment of CapEx of EUR 175 million in total, we are closer to last year at EUR 190 million. And this is the figure at the beginning of the year. And second, the investment which were in the long term are there. So the CapEx in Genk is there. It will be ramping up in the second part of 2021. So we are investing for the future. It will be with a thought for a specific situation of the market. We have reassessed this. We are thinking that is a wise, let's say, policy of the company to confront every decision that has been taken at the beginning of last year to the evolution of the market, and this is what we have decided. Hopefully, this is the answer to your question.

[Operator]

We are now taking your next question, and it comes from Rochus Brauneiser from Kepler Cheuvreux.

[Rochus Brauneiser, Head of Steel Research]

My first question is on the Leadership Journey program and the increase of the program scope to the EUR 200 million. Can you give us a sense how much of this is now coming purely from cost and the procurement side? And why is this being done now? Because usually, I would have considered that if you have this kind of low-hanging fruit with procurement saving that this would have been done prior to this CapEx-heavy saving effect. That's the first question. And regarding this postponed AOD investment, can you give us a sense how the AOD project differs from the cold rolling new project, why this one is being continued and the other is not continued? And then maybe a quick question on your seasonality in Q1. I guess, Tim, you mentioned that Q1 is usually better quarter-on-quarter. What shall we expect this time because Q4 obviously was very heavy in terms of destocking because of these market turbulences? Is it a kind of a normal Q1 or is it exaggerate because of what happened last year?

[Timoteo Di Maulo, Chief Executive Officer]

Okay. Thank you very much for your question. So first of all, you have in Page 7 a clear view of what is the proportion of the different gains that we want to achieve. So your question is very interesting. Why we are on procurement today, which was a low-hanging fruit. In fact, it's not at all low-hanging fruit. What was made into a low-hanging fruit have been captured before. Now the way we see the situation is that for a new situation of the market imposed by new competitors coming from countries which have very low cost in raw material, in all kind of procurement, we need to be ready to compete with this group and the way of working with our supplier. And we are doing it to adapt globally and in partnership with our supplier the, let's say, the total cost of the company and improve the competitiveness. So this is a program, is a program of 2 years, is not something which will be easy to achieve as every part of the Leadership Journey. But it has been, let's say, structured in a list of many projects with teams at work and with partnership of the supplier to find better solution and compete. And we are quite confident that this will result in a structural different way of having this part of the cost. And the rest will be the typical cost.So your second part is why AOD and not the Genk. So because as I tried to say before, the AOD was giving us flexibility and was based on strengthening the productivity and a certain level of cost, including the cost of raw material, et cetera. This is today, let's say, due to the new situation of the raw material, due to the new situation of the volumes, et cetera, less priority than the CapEx that we have in Genk, which is pure cost and which will increase our competitiveness in, let's say, without any compromise on volumes.Third question you asked is the Q1. So Q1, just remember that for Aperam Q1 is one of the 2 best quarter for Europe, but the weakest quarter for Brazil. So this is in terms of seasonality and impact, which means that the Q1 is normally lower than, for example, Q2. This is the first effect in seasonality. The second effect that we have is that the destocking was not totally achieved in Q4 for a very good reason. Q4 in terms of seasonality in Europe is always a very, let's say, is one of the weak quarter. So it has not been possible to achieve the full destocking. And destocking is still ongoing in the first part of Q1. And third point, which is about raw material, I told before, but it is important as an effect so I prefer to repeat. In Q1, we still have a valuation effect in the inventory due to the combined effect of chrome and the lag in the effect of nickel which translate in the stock in Q1.

[Rochus Brauneiser, Head of Steel Research]

Okay. On this Leadership Journey slide you mentioned. Maybe I'm wrong, but I cannot really reconcile the effect coming from the procurement. So when you are reducing your CapEx by EUR 50 million, does that mean that the saving effect from the CapEx program is EUR 50 million lower now, is that the kind of assumption I shall take?

[Timoteo Di Maulo, Chief Executive Officer]

No, no, no. So what we have -- the previous plan was EUR 150 million CapEx for EUR 150 million recurring gain at the end of 2020. Of course, in EUR 150 million CapEx which were a list of -- I don't remember how many, but nearly 100 different projects, at least a part were more long term, so were not totally captured during the period of 2018 - 2020. So we have postponed the CapEx which were longer term. We have maintained the CapEx which are shorter term. So you have this, and you have an addition of part which is procurement. It's clear, I hope.

[Operator]

We are now taking the next question from Carsten Riek from UBS.

[Carsten Riek]

Two left from my side. The first one is, Tim, you said, there's a chance of improving market environment conditions by the end of the first quarter. What is the evidence so far that it could happen? And what do you still need to see in order to be more confident? That's the first one. The second one I have is, as VDM has not materialized, are there any other major projects you could consider over the next 12 to 24 months?

[Timoteo Di Maulo, Chief Executive Officer]

So the evidence are, let's say, first of all, that we had no safeguard or no efficient safeguard until now. And we have an efficient safeguard now. The second is that inventory are decreasing. There is a chart that you can see, but there are many publications which can show you that inventory in Europe are decreasing. The second is that you remember that in this business when raw material price goes down and typically nickel, this put a pressure and this is an incentive for a big part of the spot market to destock and to put pressure on price, also in base price. Now you see that nickel is recovering. The chrome is more or less, let's say, has decreased only by 10%, but nickel has significantly increased. So the combined effect of safeguard becoming efficient, destocking, which is a reality and evident because stocks are lower, and the fact that prices, the nickel prices will be supportive, this combined effect will have an impact on the European market.

[Carsten Riek]

Perfect. And on the potential major projects after VDM, are there any in the pipeline?

[Timoteo Di Maulo, Chief Executive Officer]

Yes. So as you know, we have always said that we have a very active M&A team working on possible project, but we will come with the project when this will have some concrete, let's say, possibility to realize.

[Carsten Riek]

Is there anything in the pipeline at the moment of the size of VDM or that can offset?

[Timoteo Di Maulo, Chief Executive Officer]

This is not formal discussion for this kind of audience.

[Operator]

Your next question comes from Seth Rosenfeld of Jefferies.

[Seth R. Rosenfeld, Equity Analyst]

A couple of questions focused on the Brazilian business, please. Obviously, Brazil saw very strong EBITDA growth last year despite sharply weakening global prices. Can you just touch on in your base case if you're expecting Brazilian EBITDA to continue to rise in 2019 or do you expect the progression to be much more linked to global prices than in the last year? And then secondly, the Brazilian government spoke about an interest in cutting import tariffs. Can you give us a bit of color on how that would impact your margins and also the relative attractiveness of domestic versus export sales if those import tariffs are reduced?

[Timoteo Di Maulo, Chief Executive Officer]

Okay. So Brazil indeed has recovered some kind of growth in 2018. And with the growth, what is important to see is that Brazil has maintained a good profitability and is showing a completely different atmosphere in the economic outlook globally in Brazil. So we are confident on the fact that Brazil will continue to increase as an economy. Now how much this will translate immediately in the results is more long term because remember that Brazil has been -- the crisis of Brazil has been in 2 parts. Mostly of what is consumer goods have maintained, a good health has continued. But it was in the majority of capital goods, all the big project, infrastructure, oil and gas, et cetera, which have dropped significantly and even disappeared. So the speed at which this will come back, it has to be seen it will come. But before that new project becomes a real consumption of stainless steel, there is always a lag of quarters or years. And it is in any case a good, let's say, there is a good outlook, we have a good vision about Brazil.Then the second question is about what the -- some announcement made by the government to decrease the import duties. We have had many discussion with the government and this government is really focused to boost the industry of Brazil. And what they will do is to check and to find a way to, let's say, increase the competitiveness of the Brazilian industry before applying a progressive decrease of the import duties, knowing that a big part of our cost also are subject to import duties. So we consider that this approach is positive because will allow Brazil to not to have any shock from the decrease of the import duties, but on the contrary to acquire new competitiveness. How it will be put in place, at which speed, et cetera, this is not known for the moment. What we know, in any case, is that the authority in Brazil are very sensitive to the protection of the industry at the point that the new antidumping duties have been just released even with the government. So which means that the attention to the protection of the industry is still there.

[Seth R. Rosenfeld, Equity Analyst]

Just one follow-up, please. I think you've talked a lot in the past about being able to adjust your product and distribution mix from the Brazilian business of selling 3 different grades of steel and you have the export market. And I think you said in the past that stainless has consistently been the highest margin -- domestic stainless has been the highest margin sale for you. If those tariffs are to fall, will that no longer be the case? I think that many of us are quite excited that if Brazilian demand comes back, that's going to drive a margin expansion story for your business. But ultimately, might that not be the case if you see a lower premium on domestic sales? How do you think about that versus the cost benefits you just mentioned?

[Timoteo Di Maulo, Chief Executive Officer]

I think it's, indeed, the stainless steel is the best of our products in a sense because we are the only one producer in Brazil, first of all. Second, because we have a good range of products and good service, et cetera. So typically, our margin was better in stainless steel. We believe that stainless steel has the highest potential to grow because the consumption per capita is the lowest in the world for big countries with 1.4 kilo per capita. So if you compare this with the developed country at between 7 to 10, there is a big potential. So we do believe that stainless steel will remain the main, let's say, the main product and main asset of Brazil. We are also developing other grades. And you know that we have electrical steel oriented grain which are a kind of specialty there and non-electrical grain for which we are investing in special products and typically for new grades with higher, let's say, electrical properties.

[Operator]

We will now take your next question from Bastian Synagowitz from Deutsche Bank.

[Bastian Synagowitz, Research Analyst]

I've got 2 questions. Just on the safeguard measures, and you seem to be quite positive on that front. Firstly, could you please let us know, Tim, whether you mostly expect a volume benefit to you and your European competition or do you actually expect a price recovery as well as we go into the second quarter when you said you would expect some sort of recovery? And then secondly, my understanding is that Indonesia has already reached the 3% threshold for several months last year, and at the same time, the other imports should now come down at least a little, which means that if Indonesia keeps the current run rate, it will surely slip above the 3% threshold. Is this inclusion of developing countries, once they've reached the 3% threshold a pure mathematic formula and Indonesia would automatically be included if they keep their run rate or is your understanding that the review in June is made on a case-by-case basis?

[Timoteo Di Maulo, Chief Executive Officer]

Okay. So the question of volume versus price is always difficult. So first, the question of premium that stainless steel European producer have on import. As you can see from a graph sourced from public data, the premium has decreased a lot after the first part of the year in which the premium was very high. And we've taken this as a benchmark to China. Because of the lack of volumes. So of course, when volumes -- when a market is highly penetrated by imports, they put a pressure on the market. And this premium, which is normative, which is normal for a profitable business, becomes very tight. Now we believe that with the normalization of the volumes and with some limit to counter which were admittedly of dumping, the condition in the European market, there will be a normalization of the base price and normalization of the level of volumes. So both effect will be positive.Then in the mechanism of the European consumers, we have seen is that Indonesia has not been taken in account because the calculation were made previously to the surge of Indonesia, but now the new calculation of the Eurostat will take in account the second part of the year. And so Indonesia will be in the 3%. The best, let's say, forecast is that the European Commission will include in the next few months Indonesia or as they meet with the review in July at the beginning of July 2019. But from what we see, Indonesia will be taken in the quarter because as it has happened to Thailand, now the new safeguard taking account the developing country which have above the 3%.

[Bastian Synagowitz, Research Analyst]

And how would this -- just if you know, how would this be handled? Will they basically be put into the quota with basically a fixed 3% market share? Because theoretically, if they would look at just the, say, 2015 to '17 import run rate, they would be basically be set back to 0 and would have to pay 25% on every single tonne they ship. So how would this be handled?

[Timoteo Di Maulo, Chief Executive Officer]

For the moment, what we know is that this country will be in the global quota. So you know that for the big importer countries there is a country quota and then there is a residual which is the quota which is pooled about the other countries. So this developing country are in the pool.

[Bastian Synagowitz, Research Analyst]

Got it. So it would actually be indeed like an actual incremental tightening of import volumes versus what we have today?

[Timoteo Di Maulo, Chief Executive Officer]

Yes. There is no doubt that this new safeguard is completely different from what we have experienced. Remember that there are many reasons why the safeguard was not at all inefficient while we can even say it has attracted some import because of being too late in application, threatened but too late in application. The spread of prices between Europe and Asia was extremely high at that moment. There was no shipping clause. There was no limit for developing countries. So all this condition have disappeared today.

[Operator]

We now take your next question from the line of Menno Sanderse from Morgan Stanley.

[Menno Gerard Cornelis Sanderse, Managing Director]

Just quickly on the comments you made around Indonesia and raw material cost and trying to get equivalents in Aperam's business. Do you think the low prices of Indonesia are driven by generally lower raw material costs or is most of it driven by the fact that their cost of capital is 0 and they don't care so much about immediate shareholder value? If it is real raw material cost, what part of your cost base can you address competitively? Are you talking about scrap only or are you looking at the whole picture?

[Timoteo Di Maulo, Chief Executive Officer]

So I think Indonesia has 3 aspect to be -- for Indonesia, it has to be considered in all 3 aspect. The first aspect, indeed, they have a cost advantage in raw material. Second, they have had advantage which, let's say, not normal in the way, in the subsidy they receive in the financial, in tax holiday, et cetera, et cetera. And the third one, which is for me extremely important in this moment, Indonesia was confronted to a situation in which they had a ramp-up of a huge plant of 3 million tonnes with no market and with the threat of China to close the market due to antidumping. So in this condition, it is very well understandable that Indonesia, even having, let's say, having had some cost advantage have pushed a lot to find new customer. And when you want to enter in a market, you have to pay the ticket, okay? When you are smaller, the ticket is only you that you pay. In this case, as they were very big, the ticket is being paid by a lot of people. But this is when you set up and you start your operation. Now on long term, this part which is the entry ticket will progressively disappear.The second is, yes, indeed, we had a cost competitive disadvantage with Indonesia which we are taking care of. If you look at the magnitude of the Leadership Journey and the gains that we are doing and the fact that we are developing on top of it new footprint to be more cost competitive, this should address the largest part of the cost gap, including the fact that Indonesia will continue to have, let's say, transport cost and they are not the pure producer of finished products. So they sell only a part of the semi products and a small part of the finished products. So all in all, with the safeguard, we are confident that this effect of Indonesia will, I will say, slow down and normalize starting from the second quarter.

[Menno Gerard Cornelis Sanderse, Managing Director]

Okay. And a quick follow-up, Brazil. Obviously, in 2007 and '08, EBITDA was about EUR 400 million, but your same shipments 1.9 million. Last year, very good year, EUR 162 million. The bridge between the EUR 400 million and the EUR 162 million, can you give us a feel for how much of that is mix, i.e. domestic versus export and how much is absolute price levels if you're able to give a feel for that?

[Timoteo Di Maulo, Chief Executive Officer]

So when you go back into those years, it is impossible to make. I remember that in Europe we made also EUR 1 billion in 1 year, but that's not fair to be compared because it's too far away. And on quota, at that time, there was also for every producer, there was the effect of nickel, of the nickel increase which reached the $52,000. So what I can say is that Brazil indeed is not yet back to what has been Brazil as a developing country. Brazil has developed for many years with an increase between 7% to 8%. But still Brazil remains very profitable and you can see in Page 23 that compared to the best-in-class, Brazil remains in EBITDA on sales extremely profitable. What is missing in Brazil is volumes. When volumes come back and when the market will develop from 1.4-kilo per capita to more, this will be -- will boost back Brazil to good performance.

[Menno Gerard Cornelis Sanderse, Managing Director]

Okay. A quick follow-up. You said on obviously with restocking and destocking, clearly, traders and wholesalers are looking at this nickel price as well. In your experience over the last 10 years, when does that group of market participants get trigger-happy post a 25% nickel price increase? Do they wait for 1 week, 2 weeks, 3 weeks or do I think about it the wrong way?

[Timoteo Di Maulo, Chief Executive Officer]

So let me recount, my experience is 30 years or so, but I'm only joking. I'm joking. So the point is the following. In the past, people were speculating much more than the need actually. So I will say that today, when you consider that 15 to 30 days is the level of, let's say, of holder of a stock that people are disposed to accumulate. And in very specific situation, as I repeat, because remember that in the last, let's say, 5 years, we have, as Aperam, discussed about restocking and destocking of the market only in 2 occasion. One was 2014 when there was the ban of Indonesian nickel ore. And so the nickel price reached the $25,000. And at that time, everybody rushed on buying because nickel was forecasted even at $40,000, $50,000. And the second has been this year because of the announcement of the safeguard, but the announcement was made after the, let's say, the implementation in the 1st of March of the 232. And there was the deflection of the volumes which were for United States. So in only these 2 occasion we have seen a real restocking and destocking phase. For the rest, stock have been more or less normalized. So when the safeguard will become really operational, I believe, I personally believe that the market will normalize.

[Operator]

We will now take your next question from the line of Christian Georges from Societe Generale.

[Christian Eric Andre Georges, Equity Analyst]

I only have one question, I suppose. You've seen the political reaction to the EU blocking that merger between Siemens and Alstom. And I'm just wondering whether, if there were to be some rapid change of policy, perhaps applied at different level, I mean, within the next 12 months, is VDM in that case back into play for you or do you see VDM as something which may be sold to somebody else or not anymore part of your plans?

[Timoteo Di Maulo, Chief Executive Officer]

Look, VDM has been a really good project for Aperam. And we deeply regret that we have not been able to do this for this ideologic, let's say, thought of the Commission, which is the same that we see for Alstom-Siemens. I can't comment on the fact that we can be back on this project because there are too many, let's say, question mark. First of all, the first question mark is, should the Commission be able to change the rules in the short term? So we see this as a long way in what do they do and all the, let's say, the revisiting of rules, et cetera, the Commission is extremely slow. So it's not likely that will happen in the short term. And second, we are not at all, not at all, the idea of what the shareholder of VDM will do. So what I can tell you that in case the new condition will be possible, we will re-examine the file. And as it was extremely interesting in 2018, it should be or could be interesting in the future and we will take position at that moment. But I don't see this as something which will happen in the very short term.

[Operator]

And we will now take your next question from the line of Kevin Hellegård from Goldman Sachs.

[Kevin Hellegård Nielsen, Analyst]

Just a quick follow-up actually. In terms of your outlook of expectation of improvement into 2Q, like have you seen anything in base prices yet? And on your comments on safeguarding being more effective now, have you seen any actual change in bias behavior or are you just expecting that because of reading the ruling from the European Commission?

[Timoteo Di Maulo, Chief Executive Officer]

Look, this safeguard has been -- it was 3 or 4 days ago so we can't already see, but it is so logical. From the point of view of an importer, you have a limited amount that you can import. From the 90% of this limited amount, you have to put, let's say, a 25% amount cash at the disposal of the European Commission. So this will be effective. Now you know that prices are decided on the basis of true demand so the prices will evolve. We are confident that prices will evolve. And it is a question of weeks or even days that this will be seen by the market. But I will not comment directly on our price policy here, it is not compliant.

[Operator]

Thank you. Ladies and gentlemen, that is the end of the question-and-answer session. For further questions, please contact the Investor Relations Department.I would now like to turn the call back to Mr. Di Maulo for any additional closing remarks. Please go ahead, sir.

[Timoteo Di Maulo, Chief Executive Officer]

Okay. Thank you very much to the assistance to this call. It is important to say that 2018 has been very tough, very, very tough for us. But despite the strong headwind, we have seen that this company has been able to react and have a sustainable result. What we have shown is that we have some confidence in the future of the company, in the future of this market, which is a healthy market, have been impacted by some events which are unique. So a series of coincidence between different events which have, let's say, put under stress Europe. But we see that many of our division are performing extremely well like Brazil, like the alloys. That we have a plan which is extremely ambitious for increasing our cost competitiveness. And with this, I'm strongly confident that what we have announced also in terms of shareholder payout will be, let's say, in line with the expectation of our shareholder. So thank you very much for having assisting and let's see in the next Q or on the next quarterly release. Bye-bye, thank you very much.

[Operator]

That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.