Befesa is optimistic about near-future growth trajectory post resounding Q3 success

Befesa S.A., a hazardous aluminium and steel recycling service provider, has promising gains in the second quarter of the fiscal year with double-digit adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA).

Image Source: Linkedin (Befesa)

Headquartered in Luxembourg, the company expects solid double-digit EBITDA growth in the coming year, implying several favourable factors. Despite some serendipity, such as zinc treatment costs, zinc prices and secondary aluminium margins, the company says its disciplined strategy to capital budget backs its strategic endeavours and appoints the company for success.

Company CEO Asier Zarraonandia says, "Befesa has delivered solid Q3 results, demonstrating our resilience in a challenging market... This performance and a positive Q4 outlook allow us to expect full-year adjusted EBITDA in the range of 210-215 million euros (USD 228.45 million to USD 233.89 million). Looking ahead, we are focused on deleveraging and executing the approved expansion projects at our Palmerton (Pennsylvania) and Bernburg (Germany) plants. These projects will allow us to capture growth in our key markets."

The firm has announced a total revenue generation for nine months in 2024 to increase by 1 per cent to €915 million (USD 995 million), compared to the same nine months in 2023 and by 2 per cent to 294 million euros (USD 319.83 million) for the third quarter relative the third quarter of the previous year. The company attributes the increase in revenue to higher salt slag activity. Befesa also says it achieved double-digit adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) growth of 11 per cent to reach €152 million, or USD 165.35 million, in the first nine months of this year compared with €137 million (USD 149.04 million) for the same period in 2023 and by 16 per cent to 49 million euros in Q3 compared with €42 million in last year's third quarter.

The Aluminium Salt Slags segment encountered a number of speed-breakers in Q3 2024, principally due to the weak European automotive industry affecting the market for secondary aluminium. This and scheduled plant maintenance shutdowns impacted volumes during the quarter. Despite these hindrances, the company has attained solid Salt Slag volume gain, with plants harbouring high utilisation rates. Befesa acquired improvements in recycled volumes of aluminium salt slags, which increased by 2 per cent to 318 kt in 9M 2024 and to 97 kt Q3 2024 (+12 per cent Y-o-Y), with an average capacity utilisation of around 90% (+17 per cent Y-o-Y). Secondary aluminium alloy volumes also raised to 128 kt in 9M 2024 (+2 per cent Y-o-Y), with a drop in Q3 2024 to 37kt (-3 per cent Y-o-Y) and average total utilisation of around 84 per cent.

As per the Recycling Today's and Sharewise's report for base metal prices, 9M 2024 LME zinc price was 2,472 Euros per tonne on average, which was a stable Y-o-Y rate, after a mini sustained increase in May 2024 (9M 2023: 2,493 Euros per tonne). The lower aluminium LME price negatively impacted the Salt Slags recycling business. Aluminium metal margin suffered havoc compression during the period caused by a weak European automotive industry.

The company expects its full-year adjusted EBITDA to be between €210 and €215 million, reflecting its encouraging Q4 performance.

Befesa is optimistic about its prospects for 2025, anticipating double-digit solid EBITDA growth. This optimistic perspective is underpinned by

its commitment to disciplined capital management and deleveraging, targeting a leverage ratio of x3.0 by year-end 2024 and x2.5 by year-end 2025.