Befesa sees revenue increase while earnings decrease

Befesa S.A., with headquarters in Luxembourg, reports total revenue for the first nine months of the year at 904 million euros ($953.9 million), an 8 percent increase over the same period in 2022, while adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) totaled 137 million euros ($144.6 million).

Total revenue for the third quarter also increased by 8 percent to 288.7 million euros ($304.6 million), up from 268 million euros ($282.8 million) in the comparable quarter in 2022. The company attributes the increase to the contribution from its U.S. zinc refining operation, Metals Recovery Holdings LLC, Pittsburgh. Befesa says the EBITDA decrease largely was because of lower zinc London Metal Exchange (LME) prices, the unfavorable increase in zinc treatment charges (up 19 percent year over year) and higher coke prices, partially offset by better zinc hedges, lower energy prices and synergies.

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“[This year] has been a challenging year, affected by a convergence of temporary external factors, from high zinc treatment charges and low zinc prices to all-time-high coke prices and some operational delays in the U.S. and China," Befesa Executive Chair Javier Molina says. "The improvement in the macroeconomic environment that we expected for H2 2023 has not occurred and, now, we expect the current challenging conditions to continue throughout the rest of the year. However, going into 2024, we see tailwinds driven by the reversal of many of the 2023 headwinds, such as coke price normalization, more favorable zinc TC [treatment charges] and LME price combination, better zinc hedges, growth in our U.S. business and a positive contribution from China. We are committed to rigorously execute our growth projects, which will position the company strongly for the years ahead.”

Regarding volume, Befesa's electric arc furnace (EAF) steel dust throughput remained roughly flat at 890,0000 metric tons over the first nine months of the year and increased 11 percent year over year to 297,000 metric tons in Q3 2023. The company's average capacity utilization was roughly 70 percent, with mixed performance across Befesa’s markets. In Europe, EAF steel dust volumes Befesa treated remained at solid levels despite challenging steel production levels. In China, volumes remained affected by the real estate crisis.

The company says its zinc refining plant in North Carolina ran at high utilization levels, with a focus on gradually improving profitability. The recycled volumes of aluminum salt slags increased by 7 percent to 258,000 metric tons over the first three quarters of 2023 and by 30 percent to 87,000 metric tons in Q3, with average capacity utilization being roughly 73 percent.

Secondary aluminum alloys volumes increased by 3 percent to 126,000 metric tons over the first nine months of 2023 and by 4 percent to 39,000 metric tons in the third quarter. Average capacity utilization was approximately 80 percent. The annual volume increase in aluminum salt slags was driven mostly by the resumption of operations of the Hannover plant in Germany.

The company says zinc LME prices were persistently low compared with the prior year and averaged 2,493 euros ($2,630) per metric ton over from January through September, which was 27 percent lower than in the first nine months of 2022. That price averaged 2,232 euros ($2,355) per metric ton in the recently completed quarter, a decline of 31 percent from Q3 2022. Higher zinc hedging prices partially compensated for the lower zinc LME prices, Befesa says. Zinc treatment costs were $274 per metric ton for this year compared with $230 per metric ton in 2022. Aluminum alloy prices averaged 2,186 euros ($2,306) per metric ton over the first three quarters of this year, a decrease of 12 percent year over year, and 2,074 euros ($2,188)  per metric ton in Q3, 11 percent lower than Q3 2022.

Energy prices had a mixed impact on the company so far this year. After reaching all-time-high levels in the first half of 2023, its coke price started to reduce in Q3 by 4 percent compared with the second quarter of this year. However, the average coke price for the first three quarters of this year was still nearly 15 percent greater than the comparable period in 2022 and around 85 percent greater than the average level of 2019—2021, Befesa says, which adversely affected its Steel Dust operations. Conversely, gas and electricity prices in for the recently completed quarter maintained at 2021 average levels, which had a positive effect on the Aluminum Salt Slags operations.