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Good morning. My name is Lydia, and I will be your conference operator today. At this time, I would like to welcome everyone to Befesa First Quarter 2021 Results Presentation. [Operator Instructions] I would now like to turn the call over to Rafael Perez, Director of Investor Relations and Strategy. Please, sir, go ahead.
Good morning, and welcome to the First Quarter 2021 Results Conference Call of Befesa. I am Rafael Perez, Head of Strategy and Investor Relations of Befesa. And today, as usual, we have with us Javier Molina, CEO of Befesa; and Wolf Lehmann, CFO of Befesa. Javier Molina will start with an executive summary of the first quarter, covering the main highlights of the period. Then Wolf will review the full year financials in total and by business units as well as the cash flow. Javier will close this presentation providing an update on our growth projects as well as an outlook on 2021. Finally, we will open the line for the Q&A session.Before getting started, let me remind you that this conference call is being webcasted live. You can find the link to the webcast as well as the first quarter 2021 results presentation on our website, www.befesa.com. Now let me turn this call over to our CEO. Javier, please?
Thanks, Rafael. Good morning, and thank you for attending this conference call. The first quarter of 2021 has been the best quarter in the history of Befesa. We have achieved nearly EUR 49 million of EBITDA, which is an increase of 46% compared to last year, but also 15% better than the previous quarter. This shows that the recovery that we have started to see already in the third quarter last year is fully confirmed, and we are back to pre-COVID levels. As such, we expect 2021 to be a year of strong earning growth, as I will explain in more detail later in the presentation.The main driver for this increase has been a favorable market price environment in the first quarter with a recovery in the price of zinc and aluminum as well as favorable zinc treatment charge for 2021. In the first quarter, LME zinc price has been EUR 2,279, up 18% compared to last year. In the case of aluminum alloys, the average price during the quarter has been EUR 1,982, up 38% compared to the same period of last year.Regarding treatment charge for zinc, the benchmark treatment charge has been settled at $159 with no escalators compared to $300 in 2020. This difference of $140 per tonne is very positive for Befesa and will definitely contribute positively to the earning growth we will achieve in 2021. All these favorable price elements have resulted in a combined price effect of 41% compared to last year.During the first quarter, we have also taken the opportunity of favorable price to extend our hedging book further up in January 2024 at attractive price. And today, we enjoyed nearly 3 years of hedging going forward, which provides high visibility and predictability. Wolf Lehmann will provide more details later in the presentation. Plant utilization has been strong during the quarter, reaching pre-COVID levels of 90% in the case of Steel Dust, 94% in the case of Salt Slags and 100% for Secondary Aluminum. The market environment in the main industries where we operate have seen a positive level of activity during this quarter, continuing the recovery territory already experienced in the last quarter of 2020. As such, the production of steel in Europe in the first quarter of this year has increased 3% compared to 2020.The automotive industry in Europe has strong signals of recovery in the first quarter as well. Car registrations increased in this quarter 3% compared to last year with an increase in March of 87%. The generation of cash during the quarter has been very strong, and this has enabled us to finish the first quarter with EUR 164 million of cash on hand and a leverage ratio of 2.8x.Our growth plant in China continue as planned on schedule and on budget. The construction of the plant in Jiangsu is now completed, and the commissioning of the plant is currently underway. We expect to start processing steel dust in the coming weeks and start with commercial operations in the second half of the year. We also continued the construction works of our second plant in Henan, which we expect to be finished after the summer of this year. Regarding the outlook for this year, we expect strong growth supported by continued favorable price environment as well as a recovery on the underlying industries where we operate, like the steel production and automotive. Based on this, we expect full year 2021 EBITDA to be between EUR 165 million and EUR 190 million, which means between 30% to 50% growth year-on-year. I will provide more details on the full year guidance later in the presentation. Finally, on ESG. Following the publication of our 2020 annual report in March, today, we have published our 2020 ESG progress update, which provides an insight into the developments achieved in ESG during the year and an update on the main ESG performance indicators.A critical part of the circular economy, we are very committed to making a strong contribution towards creating a more sustainable world. Our business strategy is fully aligned with our ESG strategy and is rooted in an increased contribution to the circular economy as we deploy our business model in new markets and geographies.Now Wolf Lehmann will explain the financials in more detail. Wolf, please?
Good morning. Please turn to Page 6, the first quarter 2021 consolidated financial highlights. As explained by Javier, Befesa delivered a new record quarterly EBITDA of EUR 48.8 million in Q1 2021, up 46% from first quarter 2020. The highest so far was fourth quarter 2018 with 47.1. The main drivers of the year-over-year EUR 15.3 million EBITDA improvement are as follows. A positive EUR 16.6 million price effect where we benefited from a favorable market price environment with the following components: EUR 5 million from higher zinc LME prices at EUR 2,279 per tonne, up 18% year-over-year; secondly, EUR 8 million due to the reference zinc treatment charges settled favorably at $159 per tonne versus $300 in 2020; slight EUR 1 million negative from lower zinc hedging prices partially offset the zinc LME market price increase; a positive EUR 4.5 million from higher aluminum alloy F&B prices, which averaged EUR 1,982 per tonne, up 38% year-over-year. Secondly, a minor EUR 1.3 million volume impact negative, mainly due to the lower volumes treated in Salt Slags and spent pot lining as a result of the U.K. plant closure last year. Other than this, volumes were at pre-COVID-19 levels with strong plant utilization levels at or above 90%. Finally, on cost and other, no net impact year-over-year. We are executing and tracking our operational excellence projects project-by-project and month-by-month, and those efficiencies, unlike in previous years, supporting to offset any inflationary other pressures.In summary, net-net, Befesa delivered high pre-COVID-19 plant utilization levels at or above 90% overall and benefited from a favorable market price environment in Q1 2021, which enabled us to deliver our best quarter ever at EUR 48.8 million EBITDA and 25% EBITDA margin.Aligned with EBITDA, net profit was up 69% or up EUR 10 million year-over-year to achieve EUR 24.8 million in Q1, equal to EUR 0.73 earnings per share. We achieved strong cash net debt and leverage results, which I will explain later on Page 8 -- on Page 9, sorry. Turning to Page 7, the Steel Dust Recycling Services results. Steel Dust Recycling Services achieved EUR 36.5 million EBITDA in Q1, up EUR 10.6 million or 41% year-over-year. The achieved EBITDA margin is 36%. The price level was positive by EUR 11 million year-over-year, being the main driver behind the positive EBITDA development, slightly offset by a minor negative 0.5 volume impact, including the stainless operations.Looking at selected operational metrics on the lower part of the page. Volume for electric arc furnace steel dust throughput remained approximately stable at 181,000 tonnes, only slightly below Q1 last year. Overall, plant utilization levels are back at pre-COVID levels of around 90%. The average zinc LME market prices stood at EUR 2,279 per tonne in Q1, up 18% year-over-year. Our zinc hedging prices in Q1 were slightly lower year-over-year as well as compared to the spot average prices in Q1 [ 2020 ]. Combined, the resulting zinc blended price came in at EUR 2,237 per tonne, up EUR 123 per tonne or 6% year-over-year. Correspondingly, the positive EBITDA effect from the higher zinc LME market prices of gross EUR 5 million up was slightly offset by a negative EUR 1 million due to the slightly lower hedges, resulting net in a positive EUR 4 million effect. In addition, the zinc treatment charge referenced was settled at EUR 159 -- $159 per tonne for 2021. TCs are valid from 1st of January, and favorably impacted our first quarter EBITDA by EUR 8 million. Combined, the net price effect in Q1 2021 was approximately 41% year-over-year.Overall, Steel Dust Recycling Services delivered EUR 36.5 million EBITDA in Q1 with a strong 36% EBITDA margin and around 90% plant utilization, clearly back at pre-COVID levels. Going now to Page 8, the results of our Aluminum Salt Slags Recycling Services segment. Aluminum Salt Slags Recycling Services achieved EUR 12.3 million EBITDA in Q1, up EUR 3.7 million or 43% year-over-year. The EBITDA increase was primarily driven by the price lever, with aluminum alloy free metal board market prices showing a 38% year-over-year increase, which drove a positive EUR 4.5 million EBITDA effect year-over-year. This was slightly offset by a minor 0.8 negative year-over-year impact in volume. Salt slags and spent pot lining volume treated amounted to 104,000 tonnes in Q1, down 16% year-over-year. This development was primarily due to the plant in the U.K., which contributed during 2020 and was permanently shut down since year-end 2020. Excluding or adjusting for the U.K., overall plant utilization rate remained resilient at 94% of the latest installed annual recycling capacity of 550,000 tonnes and at pre-COVID levels. Secondary aluminum volume produced was 51,000 tonnes in Q1, up 7% year-over-year with plants running at full capacity. Overall, Aluminum Salt Slags Recycling Services delivered a strong EUR 12 million EBITDA in Q1, with EBITDA margin for the Salt Slags and Spent Pot Lining Hazardous Waste Recycling core segment back at 30%, and overall plant utilization recovered to pre-COVID-19 levels at above 90%. Turning to Page 9, the cash flow, net debt and leverage results. On the EBITDA to total cash flow bridge, starting with EUR 48.8 million EBITDA on the left hand and walking to the right. Working capital was slightly up by EUR 13 million year-over-year, mainly seasonally driven by higher quarter-over-quarter sales and increased receivables, including adjusting for the favorable and lower reference zinc treatment charges. Interest, as expected, of negative EUR 6 million, with the first of the Dubai annual term loan B interest payments made in January. Taxes, EUR 3 million, also as expected, resulting in a strong operating cash flow of EUR 26.5 million, up EUR 18.1 million year-over-year, more than 3x higher versus the EUR 8.4 million at Q1 last year. Note that on a 12-month LTM basis, the operating cash flow amounts to EUR 111 million, well above the pre-COVID levels. We spent maintenance CapEx of approximately EUR 4.5 million, plus gross CapEx of approximately EUR 23.5 million, totaling EUR 28 million CapEx, of which EUR 12 million was funded through the China local loans for our 2 plants at Jiangsu and Henan, resulting in a total cash flow of a positive EUR 9.4 million in the first quarter of '21.The EUR 9.4 million total cash flow improved cash on hand from EUR 154.6 million at year-end 2020 to EUR 164 million at Q1 closing. Cash on hand of EUR 164 million, together with our entirely undrawn EUR 75 million revolving credit line, provides Befesa with a strong liquidity of EUR 240 million.Net debt stood approximately stable at EUR 395 million. And with the last 12 months rolling, EUR 142 million EBITDA results in a 2.8x net leverage, reduced from 3.1x at year-end 2020. Please note, on the last 6 months view, net leverage stands lower and is at 2.2x leverage, similar to the moderate leverage levels back in 2018. We continue to be compliant with all debt covenants and have no applicable covenants. The capital structure remains unchanged and long term, all set to July 2026, and we cannot be charged more than 2% interest rate. Summarizing. The backbone of Befesa is strong, and we continue to manage conservatively. The 3 main levers of this backbone are: number one, the capital structure, long term, all set up to mid-2026, and at efficient rates as we cannot be charged more than 2% interest. Secondly, cash. We manage cash and liquidity conservatively. Even at the peak of COVID-19, we held more than EUR 00 million cash and now more than EUR 160 million cash on hand at first quarter closing. Number three, hedging. Our strong and long-term hedge book reaching out to January 2024, thus, for the next 3 years, and I will explain on the next page in more detail. Those 3 levers from the strong backbone of Befesa's financial and capital structure had served us very well in crisis situations like the COVID-19 pandemic. This allowed and allows us to go -- continue to go full speed ahead on our growth expansion in China and stay on budget and on time. Turning to Page 10 on hedging. In first quarter 2021, we continued our hedging rigor and extended our zinc hedge book further up to and including January 2024. For this year 2021, next year 2022 and for 2023, the first, second and third quarter of 2023, we are fully hedged at the targeted [ 23,100 ] tonnes per quarter or 92,400 tonnes annually. The fourth quarter '23, November, December and January 2024, we have a first tranche of 4,500 tonnes on the books already and are working the remaining tonnage. Thus, overall, more than 2.5 years hedges on the books. 2021 is hedged at around EUR 2,150 per tonne sold forward prices, 2022 at around EUR 2,200 per tonne and 2023 at EUR 2,300 per tonne. The hedging provides Befesa with improved pricing, earnings and cash flow visibility to allow to fund our growth initiatives organically. Our hedging strategy remains unchanged. We hedge 1 to 3 years out. We target 60% to 75% of our zinc equivalent volume. The majority, about 80% is in euro, the rest in Korean won. No collateral. The risk is transferred entirely to our hedging partners. Referring to Q1, the lower left section on Page 10. In first quarter 2021, the average zinc LME market price was EUR 2,279 per tonne. Our hedges were locked in at EUR 2,201 per tonne on average, slightly below the strong spot prices in first quarter. Overall, the blended zinc price in first quarter averaged at EUR 2,237 per tonne, up 6% or EUR 123 per tonne year-over-year.Summarizing the financial section before we turn to growth and the outlook, 3 points. Number one, Befesa delivered in first quarter the highest quarter in the history of the company at EUR 48.8 million EBITDA, up 46% over last year and had a great start to the year in terms of operating cash flow, cash and leverage. Secondly, our financial backbone is strong. We extended our hedges out to January 2024. Our capital structure is efficient and long term, resulting in a stable and strong liquidity. Three, based on this strong backbone, we funded our expansion in China, even during this challenging pandemic, full speed. In China, we are on schedule and budget.Back to Javier, He will provide you the latest on our China expansion and our full year guidance.
Thanks, Wolf. I would like to finish the call providing some more details and thoughts on the outlook for this year. 2021 is an exciting year for Befesa and truly an important milestone in the development of the company, as we are completing the construction and start operations of our first 2 steel dust recycling plants at the Jiangsu and Henan province in China. At Jiangsu province, we have completed the construction, as you can see from the pictures on the presentation. We are right in the middle of the commissioning of the plant, and we expect to start with the ramp-up in June. We have invested around EUR 42 million in each of the 2 plants, and we have closed the long-term local financing of 50%. Regarding the ramp-up for Jiangsu, as you know, we reserved the entire first half of this year for commissioning, pilot batch and commercial contract negotiation. We plan for commercial output and a positive earnings contribution in the second part of the year. We have already secured the steel dust volume from customers to do the trials, which will start over the coming weeks.Our second plant in the province on Henan is developing as planned, on budget and on time and with schedule around 6 months after the Jiangsu plant. We expect to complete the construction by the end of the summer. Moving now to the market environment. We have seen over the first quarter a recovery of the steel production industry in Europe, and we expect the current level of steel production to be maintained throughout this 2021, which will represent a higher production over last year. The automotive industry in Europe is also showing some signs of recovery, and we will see how this develops over the rest of the year. As you know, a positive development in the automotive industry will support our secondary revenue as well as our salt slag volumes.Let me now explain some details on the outlook for this year. As explained at the beginning of the call, for the full year 2021, we expect a total EBITDA between EUR 165 million and EUR 190 million. At the lower end of the guidance range, we expect to achieve around EUR 165 million of EBITDA, which is higher than the EUR 150 million we achieved in 2019 before COVID started. This is based on a moderate recovery from COVID-19, with an overall capacity utilization around 85% and China ramping up and delivering commercial output in the second half of the year on schedule.From the price environment point of view, this lower part of the guidance considers that zinc and aluminum market price will be slowing down in the second part of the year compared to the strong levels achieved in the first quarter of 2021. The high end of the guidance at EUR 190 million, which represent a new historical record for our company. This scenario is based on a continuation of the strong recovery from COVID-19 seen already in the first quarter, representing an overall capacity utilization around 90% to 95%, and similarly, China ramping up and delivering commercial output in the second half of the year on schedule. From the metal price environment, this scenario considers that the strong levels achieved during the first quarter are maintained for the rest of the year, which see LME around $2,750 per tonne and aluminum alloy around EUR 2,000 per tonne. Let me say that today, the steel price is EUR 100 above this figure. In both low and higher scenarios, the treatment charge reference that has been considered is the same at $159 per tonne.Cash flow generation is expected to be strong in 2021, and we expect to end the year with a leverage ratio between 2.1x and 2.5x. We expect total CapEx around EUR 75 million to EUR 90 million, of which around EUR 50 million to EUR 60 million will be dedicated to growth in China and the remaining EUR 25 million to EUR 30 million will go to regular maintenance.On dividend, we will continue to carefully manage dividend stability and dividend yield, cash flow, leverage and the funding of the organic growth. For this year, we want to propose a dividend distribution of EUR 40 million, which means EUR 1.17 per share, which would basically mean distributing 50% of the net profit on a 2-year due.Finally, on ESG, I would like to stress once again that we are doing a lot of efforts to make sure that the market understands how Befesa is part of the circular economy and contributes with its business to environmental protection by recycling more than 1.5 million tonnes of hazardous residues annually and producing more than 1.3 million tonnes of new materials, reducing the consumption of natural resources. We have been the backbone of the business since the company started more than 3 decades ago. Thank you very much.
Thank you, Javier. We will now open the line for your questions.
[Operator Instructions] The first question comes from Benjamin Pfannes-Varrow from Berenberg.
Just a few for me, please. Firstly, maybe on the throughput levels in Q1. Could you give us an update on the development by end market for the Steel Dust business? And also the target utilization then for each end market for the full year, just to get a picture of the development.
Thanks, Benjamin. Regarding the steel production in the first quarter, the figures we have today is that Europe has grown 3.1% compared to the previous year; China, 15.6%; South Korea, 3.8%; and Turkey, 9.5%; while the U.S. declined 6.3%.Well, if you -- the second part of your question is our forecast for the full year, Benjamin?
Yes, yes. Sorry. Yes, exactly. So more so for the throughput in each of your end markets. So how that developed in Q1? And your expectation then for each end markets for throughput for the full year.
Well, we don't have a forecast for the full year. We expect that the market will do better than in the previous year. I think we will achieve pre-COVID levels. So we will be more in the range than the figures we saw in 2019. I don't know if this answers your question, Benjamin.
Yes. Sure. And then looking at China, could you give us some detail on what you're factoring into guidance for China output or earnings contribution? And is that the same in both the lower end and the upper end guidance scenarios?
Okay. Well, we are -- basically, we are doing the -- considering the same volume in China, both in the lower and in the higher scenarios of our guidance, because we consider that, taking account our situation today, we have a very good visibility about what is going to happen in China, at least in terms of volume.In terms of volume, what we are considering in China is that we will start operations in Jiangsu in the second part of the year. So that means commercial production, let's say, around July. And based on that, we expect to achieve a volume of between 50% to 70% of the capacity of the plant in the second part of the year, considering that the plant has a capacity of between 100,000 and 110,000 tonnes. So divide by 2 and multiply by 50% or 70%. And consistent -- and in Henan, the commercial production will be very small as we are going to start the ramp-up in -- after the summer. So the second part of the year will be for commissioning, trials, et cetera.And then the big question regarding China is, we have 2 or 3 open question as of today, which is collection fee, transfer costs and fee containing the dust. So it's not very easy to forecast, which will be the earning contribution for China in this year. But any case, any case, no matter how strong is the contribution of China in 2021, it's not going to affect dramatically the profit of the company during 2021.
Okay. That's clear. And last one, just on China again. Do you expect -- with the contract negotiations, do you expect to secure those before you start the commercial production in the second half of the year?
Well, we don't have any doubt that we will get the volumes that we need to feed the plan in -- during the year. We are, today, in the middle of the negotiation with, let me say, of all our future customers. This negotiation is an individual negotiation, and it depends of the distance from our plant. It depends on the quality of the dust. It depends of different factors. And we are now in the negotiation. So we know -- we see the volume in front of us in the area. I think, for us, the important point is not to get contract signed before we start operations. The important is to get the volume to start operations, and that this is what we are working on really.
The next question comes from Ingo Schachel from Commerzbank.
And the first one would be on China, too. Now that you've completed the commissioning, I was just wondering whether you can tell us, whether you experience any, let's say, technical challenges in the commissioning phase or anything which was, say, different in terms of technical ramp-up from what you've seen in Turkey, for example, or whether the commissioning was very smooth from a ramp-up perspectives.And the second on China would be just regarding quality of steel dust. I guess, you have already seen a few samples and received a bit of information from your Chinese dust suppliers. Is there anything that surprised you with regards to quality of the dust so far, both in terms of zinc content as well as with regards to, for example, country-specific impurities?
Thanks, Ingo. Two very good questions. From the technical point of view, the commissioning is going very well. In a commissioning, you never know what is going to happen until the commissioning is totally finished. But so far, we are not seeing any relevant issuing front of us. So it seems that we will have a smooth commissioning, let's say. But well, in case we need to finish to -- until the last data, as I said before. But we don't expect any major problems. And the quality of steel dust, well, this is a good -- a big point for us. We have explained several times that we have done samples. But one thing is to get the sample from the steel dust of a steelmaker, and a very different thing is to treat 1,000 tonnes every month from the same customer, which is our main -- our first expectation is that the quality of the dust, so the zinc containing the dust at least in the first year of operation will be slightly below the zinc content we are achieving in Europe and even in Turkey. But we expect that in the next future, in the next years, we will see an improving -- clear improvement in the quality of the dust base because, today, there are some Chinese steelmakers that are using -- or in other words, that are not using 100% of its scrap in their electric car furnace because the availability of scrap is growing every day. So we expect to start with lower zinc content than in our -- basically our European plant. But in the next years, we expect to grow the -- and to improve the quality of the dust.
Okay. That's a good point with regards to scrap availability. And just one more on the secondary aluminum segment, if I may. I think the performance has been very impressive, and you've probably also been surprised by the strong rebound of profitability there and also the strong rebound of utilization. So I was just wondering, for example, Bilbao, I guess, it's already running at high utilization. The trend towards more aluminum and passenger vehicle is probably accelerating. And then you even have a few greenfields automotive plant in proximity to your Bilbao plant. Do you see any scope to debottleneck the plant to increase output? Or should we rather assume that the capacity is fixed? So then if demand improves, you would rather focus on improving margins further in the secondary aluminum segment rather than trying to increase volumes?
Okay. As you said, the -- it has been an excellent quarter for our secondary aluminum business and has been our record year in the history and has been based in the fantastic performance of the automotive industry in Europe in the first quarter. Well, we are not totally convinced that the rest of the year will be at the same high level that we have seen in the first part of the year. And to -- many of you are more expert than us in the automotive industry, so I would like to be prudent talking about that. But well, there are some signs that a slight, let me say, decrease in the production of cars in Europe in the second quarter compared to the first quarter. And regarding Bilbao, well, it's -- Bilbao is perfectly well located. It's in the middle of the most relevant area of Europe in terms of automotive production. So in that sense, it's a great location. And today, we are running at full capacity. Well, it's in -- the possibility to increase the capacity of the plant is something that we have as with on mine. But on the other hand, we need to -- we should be prudent. And we would like to be more confident in the evolution of the automotive industry in Europe in the next years.
The next question comes from Olivier Calvet from Kepler Cheuvreux.
Yes. I would have a few questions. I'll take them one by one, a few remaining. I was just wondering on the -- in China and the zinc content in the dust that you are seeing. Can you give us a time line of the first few batches that you will see from steelmakers in the country, which is now I understand you've mostly sold samples? But what about the first, let's say, a few tonnes of dust?
Okay. Well, which is the program we have in front us. Now we are doing the commissioning. You know that the first part of the commissioning is called cold commissioning. And then later, you have the hot commission. The hot commissioning should be done with the raw materials, so with dust. But in that -- in the focus in dust part in the commissioning is not in the quality of the dust we are treating. There is the focus in the commissioning is -- in the performance of the different [ sweeping ] of the plan to achieve and to get the levels of productivity, efficiency, et cetera, cetera. So when we will see really the quality of the dust? When we start commercial operations, and that will be the real moment, once you start to get 1,000 tonnes from the different customers. That will be -- it's something that happened in Europe. We have customers in Europe with more than 30% of zinc in the dust, and we have customers in Europe with 10%. So at the end, it's an average. Then the reason to why it's difficult to forecast this average zinc contained in the dust is because each customer will have a different zinc content, then we need to see which are the customers we are close in contract with and which is the zinc contained in this dust, which -- and then we will get an average at the end of the year. We need probably at the end of this year, where we will be in a position to say, hey, the zinc contained in the dust in China will be in this range at least for the next year, okay?
Yes, yes. Okay. Makes a lot of sense. And I'm just wondering if you can give us a sort of indication in terms of the assumption you are making on EBITDA for -- and EBITDA contribution for China over the full year.
Well, I think -- I was -- I tried -- I answered this question to Benjamin at the beginning. But basically, we are considering a very stable situation in China, which is that, in the Jiangsu plant, we will achieve a total load factor in the second part of -- in the second 6 month of the year between 60% to 70%. And practically, a very marginal contribution from Henan, you can say, near 0. So the total contribution of China this year is not going to be more than 30,000, 40,000 tonnes. And considering the question marks, we have around the quality of seeing collection fee, et cetera. The EBITDA of this year is not going to change dramatically because if the Chinese contribution is slightly higher of -- or lower. That will happen really next year, where we will have 2 plants running at full capacity or near full capacity.
Okay. Okay. That makes sense. And then I'm just wondering if you are seeing any competition start in -- on the ground, I mean, beyond the players you've voted before.
Not really. We don't have any real competition in front of us. When I say real competition, I'm referring to companies with the quality, let me say, from an environmental point of view of Befesa. We don't know any projects of any new recycling plant based on best available technology and doing a complete recycling process. But in practice, we have competition. And the competition, what we have is local competitor. And it's something that we have seen in the past in Europe many years ago, in our [indiscernible] South Korea some years ago at the beginning. Until the market is, let me say, complete orders or organized that you will see, local people doing some kind of recycling operations, that's -- and people who are really needed because somebody needs to treat the steel dust in a better or in the best possible way until you have a good number of projects that could do a proper recycle -- recycling. But so far, we didn't see any, let's say, foreign company or a strong local group starting the construction of a recycling plant.
Okay. Okay. And then a couple left. One is, what is the average zinc and aluminum prices that you are assuming for the full year in the lower end of your guidance? That will be the question.
In the lower end of the guidance, we are considering -- I don't want to make any stake, but I think in the lower part, we are considering price of zinc around $2,500 per tonne and aluminum price of EUR 1,600 per tonne. I think these are the considerations. And in the higher part, we are considering zinc price of around $2,750 per tonne. Today, well, I didn't see it this morning. But yesterday, the zinc price finished the day more than $100 above that figure. So that would be a buffer for Befesa. Okay.
Yes. Sure. And then the last question I have, just a technical one. Can you come back on the TC receivables? And how long it typically takes for the smelters to compensate you once the benchmark TCs are defined?
Well, we -- now we are closing the contract with our customers. And what we basically -- or every year, we get is that we follow totally the benchmark, in that case, the $159 per tonne. And normally, we are able to get something better, but it's on a small amount of $2, $3, $4, no more than that. But -- and right now, we are closing this contract. That will take effect from the beginning of this year. So you can consider that this treatment charge will be our treatment charge for the full year.
No, sure. I just -- I was talking about the -- in terms of -- this is on Slide 9. You are talking about the -- on your cash flow, the effect of TCs in terms of the working capital change and other...
Okay. Wolf, don't you mind to answer this question?
No, absolutely. Correct, Olivier. So what you saw is that working capital went up. This is seasonal. The sales went in the fourth quarter were EUR 158 million, and in the first quarter, EUR 193 million. So you had quarter-over-quarter, EUR 35 million more sales. The treatment charge are backdated to 1st of January, right, and they are now affected or already reflected in the sales accrual. As such, the working capital, a good chunk of that is receivables because the -- if you look at receivables, the balance is up EUR 24 million quarter-over-quarter or from year-end to first quarter end. Inventory basically was flat. And half of the residual impact was offset through higher payables, obviously, from our growth projects. And so you have net-net, about EUR 12 million, EUR 13 million working capital impact. And the back charging off of treatment charge is part of that. Does that explain the question, Olivier?
Yes. No. I was just trying to get at how much it is and how fast the smelters typically pay this back.
Well, that's -- it's standard, quite frankly, Olivier, every year. The sales accruals are then adjusted and as part of the regular receivables billing. So there's no issue around that.
[Operator Instructions] The next question comes from Oscar Val Mas from JPMorgan.
I had 2 questions. The first one was on the U.K. plant closure. Can you remind us what happens to the volume that you were treating there and why you can't treat that in your existing plants in Germany? And then are there any one-off closing costs? Or will you sell that U.K. site? That's the first question. And then the second question is on treatment charges. There's a big improvement this year. Can you remind us internally, when you run your forecast, what is your long-term treatment charge level that we should be thinking about in the long term?
Okay. Thank you, Oscar. Regarding the first question, the U.K. plan. Well, the plan is totally shut down, and all the cost has been accounted in the 2020 year. So we don't expect any additional cost to be account this year. And in -- regarding the volumes, well, the -- one of the reasons to shut down the plant is that we lost a big contract with a traditional customer in U.K. So -- and then what we are trying to do is to be able to treat the remaining tonnes in our German plants. That means that we are -- we have been suffering some problems. Some of them linked with Brexit, et cetera, because to get the different parameters, et cetera, has been really very painful during the first part of the year. But I can say that, as of today, we are starting to free the remaining volume in our German plant. So we expect to, at the end of this year, to treat 20,000 to 30,000 tonnes of salt slag that we were featuring in U.K. in our German plants.Well, regarding treatment charge. This is really, this year, a very, very difficult question. So additionally, the treatment charge -- if you analyze the average treatment charge during the last, I would say, 15 years, has been in a range between 9% to 11% compared to the zinc price -- LME zinc price in the -- each year. That range changed in 2018 when the treatment charge went down to levels of 6%, something like that. And change in a different -- in a totally different direction in 2020, where the treatment charge went to levels of 14%, 15% of the zinc price. This year, we are again in low levels, around -- let's say, we would be today around 6% or something like that. So it's really difficult to forecast a long-term treatment charge. We -- what we do internally is we do -- we use the average treatment -- percentage of treatment charge during the last 10 to 15 years. So we will be more in levels of 9% to 10%, but let's see what happens.
Okay. Great. No, I understand it's very difficult. It's just useful to understand how you think about that long term.
Thank you, Oscar.
The next question comes from Michael Hoffman from Stifel.
Javier, could you share a little bit of your -- what your assumptions are for the macro environment? What would we need to see in the economy that would push your guidance to the low end versus what would we need to see in the economy to see it push to the high end?
You made a very good question, Michael. Okay. Well, let me difference in steel and aluminum. In steel, I think we have a more stable situation in front of us. At least we have a very clear view for the first 6 months of the year, where we have -- we see a very stable market, high level of productions, pre-COVID levels, et cetera. We have -- we see more uncertainty in the aluminum business. But based in the uncertainty that we see in the automotive industry. First quarter of automotive industry has been very strong, I think, worldwide, at least in the market we know better, which are Europe and Asia. But we are not totally sure that the second quarter will be in the same level, and let's see what's happening in the second part of the year. So based on that, what we are forecasting is that in the low -- lower part of the range, it will be more in low factors around 85% or slightly above 85%. And in the high part of the range, we will be more in levels of near 95%. In -- yes, to define more how we see the macro will be difficult. Any case, any case, we are not forecasting in our guidance a dramatic change in the current situation. We think that during this year, as I said before, we will be in low factors or in utilization levels between 85% to 94%.
Okay. And is some of your concern on auto less about demand than it is the disruptions related to the chips and the supplies and plants having to take downtime because they can't get the chips? Or is it a demand concern?
Well, this one -- it is one of the concerns where we have -- for example, in the second part -- the second quarter, we are suffering from change in the orders we get from the automotive industry in Europe based on shutdowns because the chips situation and -- well, everything at the end of the day will affect the market. But taking into account, as you know very well, Michael, that steel dust represent near 80% of our P&L. Well, I don't see that any change in the automotive industry. So in the -- our aluminum business will affect dramatically our P&L. I think that we can -- today, I would say that we should be taking into account the situation we have in front of us, I feel that we will be more in the high part of the range than in the lower part of the range.
Okay. Fair enough. And then, Javier, I always have to ask this, as you start -- starting up China, when do we start layering in hedges for China?
Well, to start with the hedging in China, we need to be totally convinced about the levels of production we are going to get. And on the other hand, we are learning that hedging in China will not be totally similar to the situation we have in the rest of the world. The first -- based on the first part of the answer, next year, we should start to hedge in China, probably the levels of hedging that we are going to do in the first year are not going to be 70%. We can start with lower levels, just to be sure. And on the other hand, we need to definitely learn about the hedging market in China. We need to find counter partners in China, and probably we will need to hedge in the Shanghai Metal Exchange to do in the London Metal Exchange. But we are now in the middle of this process.
Okay. And then, Wolf, what is your assumption for the full year for your -- in your cash flow for working capital? Is it a source, or use, or is it neutral?
Thank you, Michael. As usual, Michael, you can pencil in the buffer on working capital as something like EUR 10 million usage as we -- EUR 10 million to EUR 50 million as we grow. And then as you know, we had years where we didn't really didn't need that buffer, but I would put in EUR 10 million to $50 million just to be conservative.
The next question comes from Jaime Escribano from Banco Santander.
So I had a question regarding margins. So the margin has been around 25%. And out of that, steel dust around 36%, 30% in salt slags and around close to 8% in secondary aluminum. My question would be how should we think about these margins per division and -- going forward in Q2, Q3, Q4? And particularly to understand the salt slags, so this 30%, I guess, is due to the shutdown of U.K. and probably high aluminum prices and also in secondary aluminum. But I just want to know if there is any seasonality where margins came better than expected, like in secondary aluminum. Or is this something that we should expect in following quarters?
Thank you, Jaime. Well, I -- for us, it's extremely difficult to precise the margin quarter-by-quarter. But considering the full year, I think that 25% of average margin for the full year for us is an excellent margin. I think the best margin we have achieved in the past has been 40 -- 24 -- on average, 24-point something. So to get 25% on average will be great. And regarding the different business, 36% in steel dust is something that we have seen in the past and 30% in the salt slag as well. 8% in secondary aluminum is a very good margin. So summarizing, for us, to achieve in the full year a full margin of 20 -- or 25 pretty close, 25 sourcing could be excellent.
Ladies and gentlemen, there are no further questions. I will now place back the floor to our speakers. Thank you.
Thank you all for your questions. You can also contact the investor relations team of Befesa for any further clarification. We will now conclude the conference call and the Q&A session. Let me remind you that you can find the webcast on the dial-in details to access the recording of this conference call on our website, www.befesa.com. Thank you very much to all.