Aperam SA

MAD:APAM

Earnings Call Transcript 2020-Q4

[Operator]

Hello, and welcome to the Aperam Q4 2020 Results Call. My name is Monique, and I'll be your coordinator for today's event. Please note, this conference is being recorded. [Operator Instructions] I will now turn you over to your host, Tim Di Maulo, CEO of Aperam, to begin today's conference. Thank you.

[Timoteo Di Maulo, Chief Executive Officer]

Good afternoon, everybody, and thank you all for attending Aperam's earnings conference call. Together with Sud Sivaji, Aperam's CFO. I will present the results for the fourth quarter 2020. Please take note of our disclaimer regarding forward-looking statements on Page 2. Let me start with a bit of a history. On 25th of January, Aperam turned 10 years old, and we are proud of how the company has developed. 2020 was a tough year with a major recession. The beginning of 2011 was also tough with the global financial crisis and with substantial overcapacities in Europe. Back then, nobody deemed it possible that Aperam could generate free cash flow and the positive net income in a major recession. But over the years, we have realized more than EUR 700 million gains through the leadership journey, and this transformed Aperam into a resilient, profitable and cash-generative company. In 2020, we generated more than 5x the free cash flow compared to 2011. This formed the basis of our solid, safe and stable dividend and our strong balance sheet. We were spun off with EUR 800 million of net debt and have turned debt to an almost debt-free balance sheet today. On the environmental side, we reduced our CO2 footprint by 1/3 by switching to charcoal in Brazil and Aperam produced a green stainless steel globally today. In Europe, we are already compliant with the taxonomy, which classifies us as a sustainable operation. And we are not done yet. Phase 4 of the Leadership Journey defends our cost leadership, but for the first time also has the meaningful growth component. We have many more ideas, and there is much more change to come. So please move to the key developments on Slide 3 (sic) [ Slide 4 ]. I am happy to present to you the best fourth quarter adjusted EBITDA since the 2017 peak. Our downturn proven flexible business model also delivered in the recovery. 3 main factors contributed to this result. First one, the demand was better in Europe and strong in Brazil. Group shipments grew by 7% versus last year. Prices started to move higher later in the quarter but just compensated higher raw material costs. A second point, in Brazil, we also benefited from a strong mix, which resulted in a solid earning contribution. And finally, we were quite successful in controlling costs as evidenced by the leadership journey. We completed Phase 3, more than 10% above target as our procurement function was not notably successful. Finally, we are making another big step towards becoming carbon neutral by 2050. We have doubled our CO2 reduction target to 30% by 2030 versus 2015. Let me stress that these objectives -- the objective is in line with the European Commission objective for 2030. Our CTO function, who drives process innovation, has contributed significantly to this goal and will improve our environmental performance also in the future. Contrary to other industry, we think we can reach the target with a CapEx-light approach, by there carbonize our input factors. To properly incentivize the organization, we have also doubled the internal CO2 price for projects to EUR 60 per tonne. Let me remind you that Aperam is the stainless steel company with the smallest CO2 footprint globally. However, we also are an enabler for many green technology, something which we might not have emphasized enough in the past. Please turn to the Slide #4 (sic) [ Slide #5 ]. Our products, namely: electrical steel, high nickel alloys and stainless steel are very special materials with unique properties. The realization of green project that you see on this side crucially depends on our products. Electrical vehicles, renewable energy and water supply contains large amounts of stainless steel. Cryogen application and hydrogen economy could turn into high future growth area for us because we are expert in special grades for low-temperature applications. It is also important to note that no substitute for our products exist with the same performance and lower GHG emission. Because of our leading CO2 footprint and our contribution to zero carbon industry, we can proudly say that we are part of the solution. I now hand over to Sud for the financial review.

[Sudhakar Sivaji, Chief Financial Officer]

Thank you, Tim, and a warm welcome from my side as well. Please turn to Slide 5 (sic) [ Slide 6 ]. Commenting on the quarter, demand was good but shipments are flat quarter-on-quarter as S&S shipped more Aperam material. The positive effect of slightly higher prices and the positive mix in Brazil resulted in a 9% increase in sales. The higher volume, the positive mix and cost control translated into highest Q4 adjusted EBITDA since the 2017 peak. Please note that it also includes a very low double-digit inventory valuation gain. In the stated EBITDA at EUR 159 million, we have a net EUR 50 million exceptional gain. This is made out of EUR 65 million, a PIS/COFINS tax credit, refund in Brazil booking and a EUR 15 million provision as a first tranche for the Phase 4 restructuring. Another EUR 51 million interest related component of the PIS/COFINS tax refund was booked in the financial result, which turned positive at EUR 42 million. Please note that the tax rate because of this exceptional booking was high at 36% for Q4. Let me confirm that we still have no final ruling by the Supreme Court. However, waiting further could have risk losing the assets due to expiration because we had a 55-year term since we first booked the asset last year. We booked it in consultation with our auditors and the consolidation of opinion in lower courts. Always note that the P&L effect is visible this quarter, but the cash, as guided in previous quarters, will only be collected over the next 3 to 4 years. Operating cash flow was strong at EUR 106 million despite managing working capital in a reasonable way. That is in line with our outlook for higher volumes in Q1. A property litigation win in Brazil and some early spending on the Leadership Journey Phase 4 are the reasons for why the CapEx ran marginally above guidance in 2020. However, the free cash flow was sufficient to cover our dividend and even reduce our net debt, in line with guidance to only EUR 67 million. At just 0.2x net debt to EBITDA, we retain our solid balance sheet. I now hand over back to Tim for a review of the markets.

[Timoteo Di Maulo, Chief Executive Officer]

Thank you, Sud. Please turn to Slide 6 (sic) [ Slide 7 ] to discuss the market environment. As already mentioned, Brazil has a stronger Q4, which is normal -- normally seasonally a weaker -- a weakly quarter. However, with the exception of oil and gas, all other sectors recorded a strong demand. We also noted some restocking and altogether, this created a positive pricing environment. The positive trend continues in Q1. However, this is a seasonal trough quarter. In Europe now, Q4 brought the expected seasonal improvement and volumes increased versus Q3. Business has remained good to strong in all major end markets, except for hospitality, restaurant and oil and gas. Automotive and white goods were the bright spot while construction has softened a bit. Price improved late in the quarter as a reaction to higher raw material costs, but accelerated in Q1. The distribution business was normal in Europe despite low inventory and the higher nickel price, we not -- we did not see restocking from distributors. Import continued to decline and their market share dropped below 20%. Cold rolling -- cold-rolled imports dropped by 25% quarter-on-quarter as the price delta to Asia was relatively narrow and the market share reduced to 21%. We hope that a favorable antidumping decision against Indonesia and India in May could hold it at this level. In hot-rolled, we see this already with imports down to -- down by 77% year-on-year. I give back to Sud for the Phase 4 of the Leadership Journey.

[Sudhakar Sivaji, Chief Financial Officer]

Thank you, Tim. Please move to Slide 7 (sic) [ Slide 8 ]. As a reminder, we announced Phase 4 of the Leadership Journey targeting accumulative improvement of EUR 150 million till the end of 2023. We want to achieve this via a combination of structural cost cuts, mixed improvement and growth measures. Now we've shown the slide before but added more detail on the industrial plan. At the core of the first stage are 2 key items: first, the ramp-up of our 2 brand-new lines in Genk. This is the most cost-efficient production in Europe and ideal to produce standard grades competitive. Secondly, our Gueugnon plant will be transformed into a specialized center. By bundling volumes and expertise at the most efficient lines, this will substantially increase productivity. As a result, we can reduce the number of cold rolling sectors we have. In a second step, the specialization also allows us to develop new capacity for value-added and specialty products in alloys and in stainless steel. We plan to spend the majority of the cash out on various specific projects for debottlenecking and mix improvement. Mainly this means to grow the Alloys business and upgrade our product portfolio. Together these will form the growth component of the plan that runs to 2025. Across all 3 years, the tried and tested cost improvement measures via procurement savings, automatization, centralization, setting up platforms will run in parallel. The efficiency gains from the footprint change will also result in meaningful FTE reductions. Please turn to the next slide for the planned distribution of gains and cash out. We expect to realize about 25% of gains in 2021 because we need some time to ramp up gains and to put the footprint changes into action. Once these are fully in place, we expect about 40% in 2022 as the efficiency gains can be realized. The remaining are realized then from our growth initiatives and will primarily come in 2023. We are convinced that we have a very realistic and reasonable target savings mix. Variable and fixed cost savings account for majority of our savings at 60%. Another 15% come from procurement and the remaining from specific growth initiatives.Cash out is front-end loaded as restructuring payments and CapEx for the technology and product upgrade come comparatively early in the program. We expect to spend more than 50% of the cash out as CapEx for the whole program. And please bear in mind that the 2021 tranche is already included in our group CapEx guidance. We are confident that Phase 4 of the Leadership Journey will help us defend our cost leadership position in Europe. And a significant step in restoring a normal level of profitability.I now hand back to Tim for the outlook.

[Timoteo Di Maulo, Chief Executive Officer]

Thank you, Sud. So let's move to the Q1 outlook, which is in Slide 9 (sic) [ Slide 10 ].Q1 is a seasonally stronger quarter in Europe, but a seasonal trough quarter in Brazil. We expect a good demand to prevail in both regions and further price improvements. Against this, we see a normalizing mix in Brazil and the softer order book in alloys, which we have flagged for some time. As a consequence, we guide for a slightly higher Q1 adjusted EBITDA versus high Q4 base. We plan with a CapEx budget of EUR 130 million for 2021. This comprises roughly EUR 8 million for maintenance. The rest is growth and Leadership Journey Phase 4. We expect a tax rate of about 20% for 2021. Please remember that due to noncash financial charges and deferred tax asset only, about half of this will be paid in cash and appear in the cash flow statement. In line with our progressive dividend policy, we suggest to maintain the dividend at EUR 1.75 per share, which amounts to a dividend payment of EUR 140 million. This implies a solid yield just of 5%. We are confident that our recession proven business model will also generate an attractive free cash flow in a recovery scenario. However, we think that it is not the right time to announce additional cash return to shareholders despite a positive business outlook.The antidumping decision on cold-rolled is pending until May and the safeguard could potentially expire at the midyear, so some risks remain that could alter the business environment in the second half. We have, therefore, postponed the decision for the time being, but we remain firmly committed to return excess cash back to investors.So we end this introduction with our corporate access schedule. We will be happy to communicate with you at one of these events. We are looking forward to talk to you soon, and we are now ready to take your questions. Thank you.

[Operator]

[Operator Instructions] Our first question comes from the line of Patrick Mann from Bank of America.

[Patrick Mann, VP & Research Analyst]

I wanted to ask just around your view on the antidumping duties and understanding your hesitance to increase shareholder returns until you've got some clarity on that. How would you view it if the safeguard quotas were to expire, but the anti-dumping duties were to come in? What would that do overall to the market?And then my second question, I think, just trying to understand exactly what happened in the fourth quarter in alloys. Volumes were down, prices were down, revenue was down, but EBITDA came up quite nicely. I understand there's a bit of inventory revaluation in there. But if you could just give us a bit more details around that. So we know what's going to happen this year.

[Timoteo Di Maulo, Chief Executive Officer]

Okay. Thank you. First of all, I will not link the decision of shareholder return to antidumping. That's not what is the sense of our answer. The sense of our answer is that globally, the company -- the policy of Aperam is always clear. The excess of cash will be allocated in the most efficient way. One of these is the share buyback. So the -- with the free cash flow of last year that you can see in the numbers, we have considered that looking ahead and with the visibility that we have today, it is wise for a company like us to strengthen the company, strengthen and launch a new leadership journey with some growth and efficiency plan and have a solid dividend and postpone or have the discussion on the excess cash later. This is the question.Then on the antidumping. So you know that the commission is due to, let's say, respond to the file, which is against Indonesia and India on the cold-rolled at the end of April and beginning of May, so we expect this decision as an important one to restore a level play field on the cold-rolled sales, and this will be a support to the business because we'll cancel as it has been the case of the hot-rolled from Indonesia and [ China Council ] be -- dumping behaviors that are still existing in the market and put a kind of, let's say, headwind in the price recovery.Then for alloys, maybe, Sud, you want to take it?

[Sudhakar Sivaji, Chief Financial Officer]

Sure. Let me take the alloys question. So the alloys question, basically -- so first, straight off the bat, your question on inventory valuation. Alloys. It's a very small single-digit effect alloys, inventory valuation effect. So that doesn't explain the incomes. Primarily in alloys, as Tim explained in the market outlook at the beginning, we have a product mix and we see that certain parts of our product mix have in the order book being hit more. And it's actually the income gain or the EBITDA effect, primarily you see in Q4 is the result of the order book where we had a better mix in Q4 coming on our strip products. So we see weakness also on our long products part in the order book, which we have [ marked ] for some time now. Does that answer your question, Patrick?

[Patrick Mann, VP & Research Analyst]

Yes, it does. It's mix in the fourth quarter. Sorry, if I could just follow-up, maybe ask the antidumping and safeguard quote the question differently. Do you still need -- or do you still need safeguards in place if the antidumping comes in? Or do you think they may become irrelevant?

[Timoteo Di Maulo, Chief Executive Officer]

So I think that safeguard as an important tool, which is in place and will regulate this problem of distortion coming from the 232 [ to 1 ]. This was the aim. So we know that the Europe in general is asking is -- and when I say Europe, it's the member states are asking to the European Commission to review and continue and to maintain the safeguard for the period in which this 232, at least for the period in which [ this started with ] is still ongoing. So the discussion is there. It is some -- it is, of course, of help because it helps also the market to be better regulated as the quarterly -- quarter are there. So there is a contribution of the safeguard, that -- and this is why the member states and on the request of EUROFER are asking the commission to maintain the safeguard.

[Operator]

Our next question comes from the line of Seth Rosenfeld from Exane BNP.

[Seth R. Rosenfeld, Research Analyst]

I have a couple of questions, please, with regards to the European stainless market dynamics. In your prepared remarks, I think you noted no restocking to date, obviously, despite very sharply rising transaction prices. Just wondering what you're hearing from your customers. Are they attempting to restock but frustrated just due to lack of supply? Or is there an unwillingness to restock for some reason, be it price or demand led? I'll start there, please.

[Timoteo Di Maulo, Chief Executive Officer]

So the view we have is that there are segments in which the consumption of the real demand is healthy. So even if it is not the maximum of what has been in the last 5 years. But these segments, what we have put in green in our presentation, this segment seems healthy. There is some effect of the restarting of the supply chain. You typically have this when you are going through a trough like what has been in Q2, some recovery in Q3, but Q4 has been also a little bit boosted by this. But fundamentally, we see that inventory are not high. The imports are down. The consumption of segments -- the real consumption of the majority of segments is correct or good. Exceptions are for oil and gas, of course, on the some capital goods segments. So all in all, we see that the demand is there for Q1 for the visibility we have.Now there are a lot of -- there is a lot of volatility in this business. So we don't dare to give you any kind of guidance on the rest of the year. What I can tell is that the volatility of raw material is not, in my opinion, the reason for this demand. So there is no, let's say, speculation, anticipation in the inventory due to prices. There is a stress on price, of course. There is a stress on price because the price are increasing in all raw material and nickel ferrochrome, et cetera.

[Seth R. Rosenfeld, Research Analyst]

And just to follow-up on your last comments. Obviously, part of that is the sharp rise in your own cost base. Can you touch on your expectations for margins going into Q1? And if you can into Q2? Have you been able to fully pass on those higher raw materials cost to customers? Or will there be a temporary margin squeeze? It seems like your guidance implies at the group level, lower margins Q-over-Q, but wondering if that's done by Europe or just lower contribution from Brazil.

[Timoteo Di Maulo, Chief Executive Officer]

So I'm not able to follow the link between our guidance and the margin squeeze. What is clear is that our guidance is on a mix of Europe recovering volumes and Brazil in the low seasonality, okay? And with some effect also, some headwind in the mix that we see in Q1 for the alloys. These are the effect. Concerning margin, remember that our policy is, has always been to look at a price at replacement value. So we are a pass-through of the raw material. Of course, in markets which are extremely competitive there are some stress on the margins, but this is all the sense of continuing fighting for cost. This is the essence of what we are doing in the leadership journey to maintain margin despite the aggressive competition.

[Operator]

Our next question comes from the line of Ioannis Masvoulas from Morgan Stanley.

[Ioannis Masvoulas, Equity Analyst]

3 questions from my side, and I'll take them one at a time, if that's okay. The first one, in terms of scrap availability in Europe, we're seeing a better demand momentum. And I'm just wondering whether the stainless industry and particularly Aperam is able to produce sufficient raw materials to deliver the required volumes? So whether we may see a bit of a squeeze on the scrap side, not just in terms of price but also in terms of availability.

[Timoteo Di Maulo, Chief Executive Officer]

I think that the availability is something which depends a lot of the activity. So we have had, let's say, more or less a period in which the available -- sorry. The availability is more or less there, which depends on -- of the collect also of the scrap. And for example, there was lower availability in the period around April and May when some of the customers were closed and the logistics was difficult, et cetera. So the collection in general was more difficult. So today, we don't see this as a shortage. So it's clear that when all the raw materials are, let's say, increased price, there is a general impact on all raw material, including the scrap, which is our raw material. So -- but this is a more general plan. I will not say today that there is a shortage for any reason.

[Ioannis Masvoulas, Equity Analyst]

Understood. That's very clear. The second question is on cash needs for the business. You have provided guidance around CapEx and cash taxes. But I'd like to ask you in terms of working capital in today's environment of recovering volumes and higher raw material prices. Shall we think about the potential investment required for 2021? And also as part of Leadership Journey for -- could you just remind us what sort of cash effects we should be expecting for the year beyond just the CapEx that you're spending there?

[Sudhakar Sivaji, Chief Financial Officer]

So let me take it in 2 parts first on net working cap [ m e ]. So we've said that. And if you look at our 2020 performance and Q4 performance, we prudently managed the working capital for the end of 2020 as well. We have -- there is no year-end release as you are probably used to. But end of the day, that helps us also to keep, and that's the reason we guide our debt for Q1 at a comparable level. Now going forward towards Q2 with all the market conditions and the different parameters, which Tim has discussed and we've discussed in the first part of this presentation. We'll keep monitoring that. Look, for us, Ioannis, cash is something we are -- working capital release is something which we manage on a very rational basis, which means that we don't take orders. We don't produce without orders, and we have clear guidelines on that. So if we see the market, unfortunately, take a downturn, then we'll release cash. And so for now, for the visibility we have, we've guided you that the cash needs for working capital are also going to be flat, okay? So this is on the working capital. And for 2021, we'll talk next quarter when we have visibility of how it happens.On the Leadership Journey, so we've guided you for gains on the Leadership Journey, EUR 150 million, right? So this EBITDA gain. So the usual, I would supply, then you have the split and you have the cash ratio also on our EBITDA. So that should give you idea for your models, what should work?

[Ioannis Masvoulas, Equity Analyst]

Okay. Understood. And just a last question for me. It's interesting to see the more ambitious carbon reduction target of 30% by 2030. Could you perhaps elaborate a bit on the main drivers of that incremental reduction and potential CapEx associated with it?

[Timoteo Di Maulo, Chief Executive Officer]

So typically, you have to look at Aperam as a recycler of stainless steel and with a very low CO2 content. So we are the greenest, which is why we can pretend to be the greenest one. To reduce the CO2 content for us is a sum of small investment. So we have not to do the huge, let's say, investment that are required to capture CO2 or to transfer our energy to hydrogen for the moment, even if this in the future could be one of the energy we will use. That is a progression versus the more efficiency in the heating and efficiency in the use of the electricity or the -- of renewable sources. So it's a low intensive CapEx and a lot of small projects, which will lead us to that point.

[Ioannis Masvoulas, Equity Analyst]

Okay. So it's more scope 2 than scope 1 in terms of incremental reduction?

[Timoteo Di Maulo, Chief Executive Officer]

It's scope 1 and 2 in global, and we are in that -- the perimeter, yes.

[Operator]

Our next question comes from the line of Christian Georges from Societe Generale.

[Christian Eric Andre Georges, Equity Analyst]

Yes, I have 2 questions as well. 2 very different ones. I mean the first one is, I know we've been there before, but ThyssenKrupp is, I think, looking at getting out of [ engines ] in the next 12 months, if they can. And I mean, I know your point of view, generally, but do you need to actually look at these assets again? Would it be only because it's no good to a competitor you wouldn't want to let come in Europe? Is this a factor? And the third question on this. Aeromet is also getting out of some nickel-related operations. I mean, maybe is that something you will be looking into?

[Timoteo Di Maulo, Chief Executive Officer]

So it's clear that if we had news, we will share. And so we have no news on any kind of something. But let's look back at what is our mindset. It is always to look at any possibility, we will always look at any possibility. We have an M&A department, which is, let's say, always active. Whenever there will be a possibility, we will look. There is a very old story since 2012, where we missed [ the timing ], we have continued to have this question. Is it interesting for us or not? I don't know because to -- if it's interesting, you need a real industrial plan, which is not, for the moment, at all available. So the day in which there will be something, let's say, a strong conviction for us, we will come with something.

[Christian Eric Andre Georges, Equity Analyst]

Okay. And for Aeromet, I mean are there assets which you are looking at selling?

[Timoteo Di Maulo, Chief Executive Officer]

So Aeromet is also -- is a public news, but it's a very big, let's say, perimeter. We don't know if there could be, let's say, if Aperam could be a good operator for Aeromet, we absolutely don't know. So it is something we are not in aerospace, at all, so they are fully in aerospace. So the synergy there can be really limited and with a very, very high level of, let's say, question mark on this sector. So for the moment, I cannot say anything about the interest for us for that.

[Christian Eric Andre Georges, Equity Analyst]

Okay. And my second question is very different. I missed the beginning of the call, but I hope you haven't been asked already, but these financial items, we've got about obviously, the EUR 51 million, I think, from taxes. So a, do we have more of those to come in the next 12 months? And b, what is the delta with the overall financial items for the last quarter?

[Sudhakar Sivaji, Chief Financial Officer]

So -- yes. So Georges, base question. I mentioned it in my address, so I can repeat it. So we had 2 impacts, which is one a net EUR 50 million impact on the EBITDA based on a part of the EUR 65 million PIS/COFINS and EUR 15 million restructuring charges. And another EUR 51 million impact on the financial charges, as positive, is coming from the PIS/COFINS. So based on this, the entire PIS/COFINS P&L effect has been now booked on our books. What will come? And this is something which we've been saying for about more than a year now is that the cash effects from these bookings, from these credit bookings over the next 3, 4 years. We've had already 1 year in 2020, where we have had the cash effects. So a further 3 to 4 years of cash effects from these bookings we'll have.

[Operator]

Our next question comes from the line of Faisal Qureshi from Jefferies.

[Faisal Anwar Qureshi, Equity Associate]

So your balance sheet at the moment is very healthy. You are at 0.2x net debt to EBITDA. So my question was, I mean, what next? What is the sustainable capital structure for your business? And if you did think about let's say, not returning capital at the time being. So what type of assets would you consider looking at in terms of either downstream M&A or asset expansion?

[Timoteo Di Maulo, Chief Executive Officer]

So thank you for the question. I mean, the question is the typical question of what is our financial policy, which you can find in our slide, and we always present with priorities. So our top priority is to strengthen our footprint and to make it sustainable. So as you have seen, all over the years, we have always given a privilege on all the initiatives, which are linked to Leadership Journey and linked to meet the Leadership Journey. And there will be 2 aspects, one is the cost competitiveness, the sustainability, et cetera, what is structural. And second, what is the improvement of the mix, the growth, the growth of the service, all the added value that we can give to our customers. And we will continue to invest there. And so this is, as said, the first part of the -- and the most important part of the -- our cash policy. If there will be M&A, which is accretive and which we believe, which will increase the value of the company, which respond to certain criteria, which are a very strict threshold on IRR, et cetera. We will be interested on it. As we said before, we have a department which is looking at all the opportunity, and this is something that we can do because we have a very strong balance sheet. So we have the opportunity to jump at any opportunity that could arise as we have tried to do in the past.Then we have the dividend. So the dividend is published. And the -- as I said before, if there is an extra cash, depending on what is the forecast of the company for the next, let's say, quarters, not 1 quarter, but next quarters. We will propose it to the Board to allocate the extra cash most efficient. We'll not keep the cash in hand. That's clear. This is a clear engagement that it is not efficient. So -- or we have a project in the Leadership Journey or we have eventual M&A or after dividend we will go for an extra, let's say, cash return unto shareholder.

[Operator]

Our next question comes from the line of Rochus Brauneiser from Kepler Cheuvreux.

[Rochus Brauneiser, Head of Steel Research]

It's Rochus Brauneiser from Kepler. Yes. Most questions are answered now. But maybe can you elaborate a little bit on the mix effects in Brazil? I guess it was one of the contributors to the great results in Q4. Can you put any numbers behind the mix improvement? How much more stainless steel has been sold in Brazil? Or eventually, what was the EBITDA effect singled out from these shifts in the fourth quarter?

[Sudhakar Sivaji, Chief Financial Officer]

Rochus, thanks for the question. So I can give you some color on that. So when we discussed Q3, we were talking about in Brazil, the volumes were strong despite COVID, but we did ship a lot of carbon steel and electrical steel into our stainless. So in Brazil, we have a business model, as you remember, where our volumes are -- we try to keep our cost base low by using our flexible product portfolio, right? So there was a temporary effect in Q3. And this actually, once the COVID effect, the first wave went past in Brazil also, what we see as a recovery in Europe comes across as a mix improvement in Brazil, where the stainless goes back to normal levels. That's point #1. Point #2 is that Brazil now summer begins around December. So traditionally has been also a slower quarter. And this year coming out of the COVID first wave, on absolute volumes, you don't see a big change, but it -- the recovery of the COVID had also [ announces ] that in Q4 you have the stainless volumes going back to normal levels, which you typically see in years, which are not on 2020. So if you compare those numbers, you should get a color for that.

[Rochus Brauneiser, Head of Steel Research]

Okay. Maybe a word on the restructuring, I guess, on the EUR 15 million, you have only booked a part or a fraction of what is planned for restructuring. So can you give us a sense when these talks are being concluded? And what shall we expect on top [ line ] in terms of restructuring charges for 2021?

[Sudhakar Sivaji, Chief Financial Officer]

So look, the thing is that we said that CapEx and restructuring together for the Leadership Journey is about EUR 90 million. And we've also said that more than 50% of that is CapEx. So that gives you a spread of the restructuring charges. So you have a delta there. And the delta will be spread out, not just on 2021, but also in 2023. Because we feel that we do all these changes, and we do it at a prudent face -- pace, sorry. And yes, that's how you split it.

[Rochus Brauneiser, Head of Steel Research]

Can you talk a bit more in detail about what it was changing? I think you mentioned that Gueugnon is being more focused on specialties and your cutting down -- shutting down some of the cold rolling assets. Can you give us idea where these cold rolling assets are located? And how much of the FTE reduction is related to the actual operational footprint change? And how much of the change is more referring to admin-related cuts?

[Sudhakar Sivaji, Chief Financial Officer]

So also point is that what I was trying to make is that Gueugnon will evolve from a broad-based production center to specialized products. So which will produce more than one type of specialty product. And when you're talking about cutting our cold rolling centers, we are talking about our entire Europe footprint. So we have in Europe, basically 5 locations where we produce. And in these, there are different cold rolling centers. So we are already talking about reduction of cold rolling centers. And in terms of FTEs, at this point of time, since the discussions are going on, I would rather not speak in detail about that.

[Operator]

Our next question comes from the line of Bastian Synagowitz from Deutsche Bank.

[Bastian Synagowitz, Research Analyst]

I've got 2 questions left, 2 quick ones. And the first one is on prices. So if we look at the European price situation here, I think and compare that relative to the scrap prices, I think at least the spreads here are suggesting that the margins are literally back to the peak levels, which we've last seen around 2017 and 2018. Is this what you can see in your order book as well, the way you read the market? I guess, unfortunately, a lot of the data probably has become less reliable, which is available out there. So I'd be really curious to get your view on how you see it.

[Timoteo Di Maulo, Chief Executive Officer]

You see, it is a difficult question to answer because, indeed, there is a correlation between the raw material on the pricing. But you have a time lag, which gives this -- introduce a difficulty for an external view to really link to the -- relink this to the margins. What we see at Aperam is that we have a strict price discipline for which we are passing to the raw material to customers with upside that can come from the fact that the market is less dumped from the imports, which we can see, for example, in the case of hot-rolled coils. And so the tension that we will -- will be on the price, will be lower due to the lower, let's say, in imports. But there is a time lag. There are effects there that are really difficult to give a precise answer on that.

[Bastian Synagowitz, Research Analyst]

Okay. Okay. Fair enough. But just maybe on the price dynamics, given the spread we have now seen, which has opened up again versus the Asian market, have you seen any indication in the market that the -- maybe Asian material, which comes in from outside Europe has started to turn a bit more proactive again versus the reasonably low import levels, which were seen in Q4?

[Timoteo Di Maulo, Chief Executive Officer]

What we see is that the statistics are there to show that the anti-dumping measure that are active are efficient. Now we will see if [ indeed ] the evolution of the prices knowing that in Asia, there is also a good market, so there is less, let's say, incentive to go and dump Europe. I think also Asia will sooner or later understand that continuously dumping is not leading them to have a sustainable market share in Europe.

[Bastian Synagowitz, Research Analyst]

Okay. Maybe one quick and last follow up if I may, and that is on your alloys business. So you've obviously been indicating that there has been a bit of a softness in the Alloys business. And that's what I understood it, thought it's more like a mix softness rather than an actual volume softness. Have you seen any signs of recovery in these more profitable customer segments, which will lead you slightly down in the first quarter?

[Timoteo Di Maulo, Chief Executive Officer]

So what I would like to stress is that even if there is some mix effect due to the combination of length of contract mix with 1 segment and other, the loan products with the [ long product ] strips, et cetera. And so you can have some volatility in quarter-on-quarter on the result of alloys. Alloys remains a strong division, which has faced the downturn in 2020 with a strong resilience that you can see in the results. And so we know that in the world of alloys, and we know perfectly that this world has been strongly impacted by this 2020. And I'm really proud of what this division has done and even if there is some, let's say, small volatility due to the mix, due to the contract going in and going out. I'm really happy of this division and count on them for the future of Aperam.

[Bastian Synagowitz, Research Analyst]

Okay. So basically, what we see in Q1 is not basically anything which worries you at all?

[Timoteo Di Maulo, Chief Executive Officer]

Absolutely, not.

[Operator]

We have 1 final question in the queue. [Operator Instructions] Our final question comes from the line of Luke Nelson from JPMorgan.

[Luke Nelson, Research Analyst]

Just 1 question from me. Just more from a modeling point of view from the -- on the Leadership Journey Phase 4. You've obviously given the cumulative gains over the next 3 years by composition. I was wondering if you could just give a bit more granularity of how that will evolve by division? Clearly, stainless is obviously going to be the lion's share of that, but any granularity you could give by division, that would be appreciated.

[Sudhakar Sivaji, Chief Financial Officer]

So more -- typically, on Leadership Journey, we report at Aperam level because a lot of these savings are also coming across division. So I'm sorry at this point of time, I wouldn't be able to provide that split by division for you. I hope you understand.

[Operator]

There is 1 final question in the queue. A follow-up question from the line of Ioannis Masvoulas from Morgan Stanley.

[Ioannis Masvoulas, Equity Analyst]

Just a quick follow-up on beyond the dumping case in Europe. Is there a risk that the much higher prices we're seeing now in the domestic markets and margin recovery as well as the subdued imports could make it less obvious for the European Commission to go ahead with a meaningful antidumping duty? I'm just trying to think if the commission will take into account current dynamics, which would not really favor the case for prohibitive duties against India and Indonesia? Any thoughts on that would be very useful.

[Timoteo Di Maulo, Chief Executive Officer]

How it works the antidumping story. It works on the fact that whatever is the market, the behavior is a behavior of dumping. So not having the -- not respecting the fair rules on trade, which have been established. And this once is proven with an history, which is not only a couple of months or a couple of quarters of ups and down in prices. Then there is something, which is lasting 5 years. And this 5 years represent the fact that antidumping is not something that is, let's say, linked to a specific moment of the story of prices. But it is mostly linked to the fact that the -- a fairer market has to be granted for a longer period. So I don't see personally any, let's say, downside in the fact that we are leading a moment in which all the commodities are going up everywhere in the world. So we are translating a level of price from [ 0.6 to 0.1 ]. But without erasing the fact that somebody who has dumped is a dumper and has to respect the law. And therefore, if it's not respecting the law and this is demonstrating during a period of time, which is the reference period taken by the commission, the law imposed that there are duties. Okay. I don't know if I'm clear, but it is not for 1 quarter that we can see risk of a change in decision of the commission. The decision of the commission will be based on facts and/or long-term and not on the short term.

[Operator]

There are no further questions in the queue. So I'll hand you back over to your host.

[Timoteo Di Maulo, Chief Executive Officer]

Okay. Thank you very much for this call. So this year, finally is ending 2020 because really, 2020 has been a very challenging year. This 2020 is also the tenth year of Aperam. And I would say that 2020 is representing a little bit what has been our story of the 10 years. So within -- we have started the year with some expectation, which have not been, let's say, respected because we have faced something, which is -- which was an unbelievable, this COVID. And then we have worked on that, and we have strengthened the company and at the end of -- we have had a very good result.I think that it is visible to all of you that even if Q4 has been globally better, but still for us, Q4 is showing the second best performance ever in terms of Q4, which is something -- which show the dedication of the team to be more and more competitive and to be attached to the market and to the best offer to customers.So with this, I thank you for the participation to this call, and we will be happy to have more exchange during the days of the investor meetings. Thank you, and bye-bye.

[Operator]

Thank you for joining today's call. You may now disconnect.