Befesa is the global leader in recycling hazardous steel dust (electric arc furnace dust) into zinc oxide, with a secondary business recycling aluminum salt slags.
Prepared for: Norfund green infrastructure interview prep Date: 12 April 2026 Share price: EUR 33.80 | Market cap: EUR 1.36B | EV: EUR 1.99B
Befesa is the global leader in recycling hazardous steel dust (electric arc furnace dust) into zinc oxide, with a secondary business recycling aluminum salt slags. It operates 24+ facilities across Germany, Spain, France, Sweden, Turkey, South Korea, China, and the United States, with total steel dust recycling capacity of 1.84 million tons per year.
The company sits at the intersection of two powerful structural tailwinds: (1) the global shift from blast furnace steelmaking to electric arc furnace (EAF) steelmaking, which generates the hazardous dust Befesa recycles, and (2) tightening environmental regulation that makes proper disposal of this dust non-negotiable for steel producers.
Befesa’s stock is trading near cyclical lows after a brutal 2022-2024 period driven by weak zinc prices, compressed treatment charges, and China execution disappointments. FY2025 marked an inflection – adjusted EBITDA rose 14% to EUR 243M, margins recovered to 21%, and the company delivered record operating cash flow of EUR 212M. The stock has rallied ~50% off its October 2024 lows but remains well below normalized earning power.
Verdict: This is a high-quality, wide-moat industrial compounder trading at trough multiples. At 9x EV/EBITDA on depressed 2025 earnings, with a credible path to EUR 300-315M normalized EBITDA, the risk/reward is attractive. The Norfund angle is strong – Befesa is a direct play on steel decarbonization and circular economy.
Befesa recycles two types of hazardous industrial waste:
Steel Dust Recycling (85% of EBITDA): When steel mills melt scrap in electric arc furnaces, they generate a fine dust that contains zinc, lead, cadmium, and other heavy metals. This dust is classified as hazardous waste under EU and US regulation. Befesa collects this dust, processes it in Waelz kilns at ~1,200C, and extracts zinc oxide (called “waelz oxide”) which it sells to zinc smelters. The residual slag is either landfilled or used in construction.
Aluminum Salt Slags Recycling (15% of EBITDA): When aluminum is recycled, salt slags and spent pot linings are generated. Befesa recycles these into salt, aluminum concentrate, and aluminum oxides. The company also produces secondary aluminum alloys for automotive and construction.
Befesa earns revenue from two distinct sources, which creates a natural hedge:
Gate fees (service charges): Steel mills pay Befesa to take their hazardous dust. This is a stable, recurring revenue stream tied to volumes. Gate fees represent roughly 30% of steel dust segment revenue.
Commodity sales: Befesa sells the extracted waelz oxide to zinc smelters at a price linked to the London Metal Exchange (LME) zinc price minus a treatment charge (TC). This creates direct commodity exposure.
The pricing formula for zinc oxide: > Revenue per ton = (Payable zinc content x LME zinc price) - Treatment Charge
Payable zinc content is typically 55-65% of waelz oxide content, with 85-90% of that payable after smelting losses.
| Variable | 2024 | 2025 | 2026E |
|---|---|---|---|
| Zinc LME (USD/t) | ~$2,780 | $2,867 | ~$2,800-3,000 |
| Zinc TC (USD/t) | $165 | $80 | $100-130 |
| Coke (EUR/t) | ~$170 | ~$152 | ~$150 |
Treatment charges are set annually between zinc smelters and Befesa. The 2025 TC of $80/t was historically low, which actually benefited Befesa’s realized zinc price. TCs for 2026 are expected in the $100-130 range.
Total installed capacity: 1,840 kt steel dust | 450 kt salt slags/SPL | 205 kt secondary aluminum
| Plant | Location | Capacity |
|---|---|---|
| Palmerton | Pennsylvania | 163 kt |
| Barnwell | South Carolina | 165 kt |
| Calumet | Illinois | 142 kt |
| Rockwood | Tennessee | 147 kt |
| Plant | Location | Type | Capacity |
|---|---|---|---|
| Freiberg | Germany | Steel dust | 194 kt |
| Duisburg | Germany | Steel dust | 87 kt |
| Asua-Erandio | Spain | Steel dust | 160 kt |
| Fouquieres-les-Lens | France | Steel dust | 55 kt |
| Gravelines | France | WOX washing + stainless | 100 kt + 110 kt |
| Landskrona | Sweden | Stainless steel dust | 64 kt |
| Sondika/Amorebieta | Spain | Oxide processing | 16 kt |
| Hannover | Germany | Salt slags/SPL | 130 kt |
| Lunen | Germany | Salt slags/SPL | 170 kt |
| Valladolid | Spain | Salt slags/SPL | 150 kt |
| Les Franqueses | Spain | Secondary aluminum | 66 kt |
| Erandio | Spain | Secondary aluminum | 64 kt |
| Bernburg | Germany | Secondary aluminum | 75 kt (expanding to 135 kt) |
| Plant | Location | Capacity |
|---|---|---|
| Gyeongju | South Korea | 220 kt |
| Pohang | South Korea | 60 kt (WOX washing) |
| Iskenderun | Turkey | 110 kt |
| Changzhou | China | 110 kt (planned, currently on hold) |
| Xuchang | China | 110 kt (planned, currently on hold) |
1,758 full-time employees globally.
| Metric | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
| Revenue | 822 | 1,136 | 1,181 | 1,239 | 1,183 |
| Gross Profit | 465 | 569 | 605 | 660 | 240* |
| EBITDA (reported) | 180 | 221 | 185 | 198 | 221 |
| Adj. EBITDA | 189 | 178 | 166 | 213 | 243 |
| EBIT | 127 | 153 | 104 | 115 | 138* |
| Net Income | 100 | 106 | 58 | 51 | 81 |
| EPS (EUR) | 2.68 | 2.66 | 1.45 | 1.27 | 2.01 |
| D&A | 53 | 68 | 81 | 83 | ~83 |
*Note: FY2025 figures use reported EBITDA of EUR 221M; adjusted EBITDA of EUR 243M includes add-backs. Gross margin definitions shifted between reporting periods.
| Period | CAGR |
|---|---|
| 3-year (2022-2025) | 1.4% |
| 5-year (2020-2025) | ~11% (includes AZR acquisition step-up) |
Organic revenue growth has been muted. The big step-up came from the 2021 American Zinc Recycling acquisition which added ~$450M of annual revenue capacity.
| Metric | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
| EBITDA margin | 21.9% | 19.5% | 15.6% | 16.0% | 18.7% |
| Adj. EBITDA margin | 23.0% | 15.7% | 14.0% | 17.2% | 20.5% |
| Operating margin | 15.8% | 13.5% | 8.8% | 9.3% | 11.7% |
| Net margin | 12.1% | 9.4% | 4.9% | 4.1% | 6.8% |
The margin trajectory tells the story: FY2022-2024 was a trough driven by compressed zinc TCs, weak zinc prices in EUR terms, and US integration costs. FY2025 represents early recovery, with the steel dust segment margin jumping to 27% from 21% in 2024.
Normalized EBITDA margin should be 23-26%. Pre-AZR, Befesa was running 23-25% margins. The US operations dragged this down during integration. As Palmerton comes online and US operations reach scale, margins should revert.
| Segment | Adj. EBITDA | YoY | Margin |
|---|---|---|---|
| Steel Dust | EUR 212M | +25% | 27% |
| Aluminum | EUR 32M | -27% | ~14% |
| Corporate/Other | (EUR 1M) | – | – |
| Total | EUR 243M | +14% | ~21% |
The steel dust segment is the engine. Aluminum is small and volatile – it dragged in 2025 due to aluminum margin compression, but the Bernburg expansion (75 kt to 135 kt) targeting Q2 2026 completion should help.
| Quarter | Revenue (EUR M) | EBITDA (EUR M) | EBITDA Margin | Net Income (EUR M) |
|---|---|---|---|---|
| Q3 2024 | 294 | 42 | 14.3% | 5 |
| Q4 2024 | 324 | 56 | 17.4% | 26 |
| Q1 2025 | 308 | 55 | 17.8% | 19 |
| Q2 2025 | 293 | 60 | 20.4% | 21 |
Clear upward trend in margins. Q4 2024 to Q2 2025 shows sequential improvement driven by better zinc hedges rolling through and improved European utilization.
| Metric | FY2024 | FY2025 Prelim |
|---|---|---|
| Total Assets | EUR 1,978M | – |
| Total Debt | EUR 721M | EUR 695M |
| Cash | EUR 103M | EUR 143M |
| Net Debt | EUR 587M | EUR 552M |
| Equity | EUR 830M | ~EUR 830M |
| Goodwill | EUR 645M | – |
| Net PPE | EUR 774M | – |
| Net Leverage | 2.9x | 2.27x |
Debt Structure: - EUR 650M term loan, maturity July 2029 - Variable rate: EURIBOR + 275 bps (~5% currently) - Annual interest expense: ~EUR 40M - EUR 100M undrawn revolving credit facility - Covenant-lite term loan; RCF covenant (Net Debt/EBITDA < 4.5x) only triggers if >40% drawn - Net leverage target: below 2.0x (management expects to reach this during 2026)
The leverage picture has improved dramatically. From 2.9x at year-end 2024, they hit 2.27x by year-end 2025 and are tracking toward sub-2.0x. At EUR 243M EBITDA, the EUR 552M net debt is manageable. Even at a severe trough EBITDA of EUR 150M (never seen historically), leverage would be 3.7x – still within covenant comfort.
| Metric | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
| Operating CF | 118 | 137 | 147 | 192 | 212 |
| Capex | (78) | (107) | (105) | (79) | ~(70) |
| FCF | 40 | 31 | 43 | 113 | ~142 |
| Maintenance capex | ~40 | ~55 | ~55 | ~56 | ~45 |
| Growth capex | ~38 | ~52 | ~50 | ~23 | ~25 |
FY2025 was a record for operating cash flow at EUR 212M. FCF was approximately EUR 142M (implied), though some of this reflects working capital timing.
2026 capex guidance: below EUR 70M total (EUR 40-45M maintenance + growth capex focused on Bernburg).
After the heavy 2021-2023 investment cycle (AZR acquisition + China/Turkey buildout), capex is normalizing. This means the FCF profile going forward should be materially stronger.
FCF yield at current market cap: - FY2025: ~EUR 142M / EUR 1,358M = 10.5% (on reported operating CF minus capex) - Normalized: ~EUR 160-170M / EUR 1,358M = 12%+
| Year | DPS (EUR) | Total (EUR M) | Payout Ratio |
|---|---|---|---|
| 2019 | 1.32 | 53 | ~50% |
| 2020 | 0.73 (split) | 29 | ~55% |
| 2021 | 1.17 | 47 | ~44% |
| 2022 | 1.25 | 50 | ~47% |
| 2023 | 0.73 | 29 | ~50% |
| 2024 | 0.73 | 29 | ~57% |
| 2025 | 0.64 | 26 | ~32% |
| 2026E | 1.00 | 40 | ~50% |
Dividend policy is 40-50% of net income. The proposed 2026 dividend of EUR 1.00/share (EUR 40M) represents a meaningful step-up and 3.0% yield at current prices. The low 2025 DPS of EUR 0.64 reflected the depressed 2024 earnings base.
This is the core of the Befesa thesis and the reason this stock matters for a Norfund interview.
Global EAF share of steel production: - 2020: ~27% - 2024: 29.1% - 2030E: 36-40% (IEA target: 37%)
Every ton of EAF steel produces 15-20 kg of hazardous dust. More EAF steel = more dust = more demand for Befesa’s services.
Key regional dynamics: - EU: EAF share expected to rise from 45% to ~57% by 2030. This is driven by the EU Green Deal and the shift from BF-BOF to scrap-based steelmaking. EU is Befesa’s home market. - China: EAF share expected to rise from ~10% to ~22% by 2030. China has targeted 15% EAF share by end-2025 and 20%+ by 2028-2030. This is the big optionality in Befesa’s story (more below). - US: Already at ~70% EAF share but volumes are growing. Befesa’s Palmerton expansion positions it for this.
The emissions math makes the EAF transition inevitable: BF-BOF emits 2.33 tCO2/ton of crude steel vs. 0.68 tCO2/ton for scrap-based EAF. That is a 71% reduction.
1. Palmerton expansion (USA) – Completed July 2025 - Second kiln commissioned, adding capacity - Expected US volume increase of 60,000-70,000 tons in 2026 - New EAF customer supply contracts ramping through Q4 2025 and into 2026 - Targeting breakeven on the zinc refining asset by 2025/26, which was a EUR 15M annual drag
2. Bernburg expansion (Germany) – Targeting Q2 2026 completion - Secondary aluminum capacity expansion from 75 kt to 135 kt (+60 kt) - Total Befesa secondary aluminum capacity: 205 kt to 265 kt - 12-month build + 6-month ramp, creating 30 new jobs - Driven by growing demand for recycled aluminum in automotive
3. European utilization improvement - Q4 2025 European plant load factor hit 94%, the highest in years - US load factor at 71%, Korea at 76% – still room to grow - Full system utilization of ~70% in 2025 means significant latent capacity exists
4. China optionality (longer-term) - Two plants (Changzhou and Xuchang) with 220 kt combined capacity are on hold - Management stopped China plants 3, 4, and 5 for the next years - If EAF adoption accelerates per government targets, expansion could restart quickly - Current contribution: approximately breakeven
| Year | Deal | Value | Impact |
|---|---|---|---|
| 2021 | American Zinc Recycling | $450M | +620 kt capacity, +40% to group capacity |
| 2024 | Recytech (remaining 50%) | EUR 40M | Full ownership of French JV |
The AZR acquisition was transformational – it made Befesa the clear global #1 by acquiring the US #3 player. The deal math: $450M for 620 kt of capacity = ~$0.7M per kt, which is roughly replacement cost.
The 5-year revenue CAGR of ~11% is almost entirely from the AZR acquisition. Organic volume growth has been modest (1-2% p.a. in Europe, volatile in Asia). The real organic growth driver is utilization improvement and zinc price/TC recovery rather than building new greenfield capacity.
| Scenario | EBITDA Margin | Commentary |
|---|---|---|
| Trough (FY2023) | 14% | Low zinc prices, high TCs, US integration drag |
| Current (FY2025) | 20.5% | Recovery started, good hedges rolling in |
| Normalized | 23-26% | Full utilization, US at scale, favorable TCs |
| Peak (FY2021) | 23% | Pre-AZR, high zinc, tight EAF dust market |
The current 20.5% is NOT yet normalized. The path to 23-26% requires: - US operations reaching steady-state (eliminating EUR 15M zinc refining drag) - Utilization moving from ~70% to ~80% - Treatment charges stabilizing at ~$150-200/t (vs. $80 in 2025)
This is the single most important variable for Befesa’s earnings. The company hedges 60-75% of its zinc exposure 1-3 years forward.
Current hedge book: - 2025: $2,923/t average - 2026: $2,990/t average - 2027: $3,000/t - H1 2028: $3,100/t
Approximate EBITDA sensitivity (annual, on unhedged portion):
| Zinc Price (USD/t) | Impact vs. Base | Estimated EBITDA |
|---|---|---|
| $2,000 | -$25-30M | EUR 215-220M |
| $2,500 | -$10-15M | EUR 230-235M |
| $2,800 (base) | 0 | EUR 243M |
| $3,000 | +$5-10M | EUR 250-255M |
| $3,500 | +$15-25M | EUR 260-270M |
Note: Sensitivity is dampened by the hedge book in the near term. By 2028+ when hedges roll off, exposure increases materially.
| Metric | FY2024 | FY2025 |
|---|---|---|
| ROE | 6.1% | 9.6% |
| ROA | ~2.6% | ~4.1% |
| ROIC (est.) | ~7.5% | ~10% |
Returns are recovering from trough levels. At normalized EBITDA of EUR 300M+, ROIC should exceed 13-15%, which comfortably exceeds the ~8% WACC.
| Metric | FY2024 | FY2025 | Normalized |
|---|---|---|---|
| Total capex | EUR 79M | ~EUR 70M | EUR 60-70M |
| Maintenance capex | EUR 56M | EUR 45M | EUR 40-45M |
| Growth capex | EUR 23M | EUR 25M | EUR 15-25M |
| Capex / Revenue | 6.4% | 5.9% | 5-6% |
| D&A | EUR 83M | EUR 83M | EUR 80-85M |
Capex is now below D&A, which is typical for a company past its investment cycle. Maintenance capex of EUR 40-45M annually keeps the Waelz kilns running. Growth capex is discretionary and declining.
Befesa is the undisputed global leader in EAF dust recycling:
| Region | Befesa Capacity | Market Position |
|---|---|---|
| Europe | ~760 kt | #1, dominant share (est. 50%+) |
| USA | 617 kt | #1 (post-AZR acquisition) |
| South Korea | 280 kt | #1 |
| Turkey | 110 kt | Major player |
| China | 220 kt (on hold) | Early stage |
Total: 1,840 kt installed steel dust capacity across 12+ Waelz kiln facilities.
| Company | Region | Scale | Notes |
|---|---|---|---|
| Global Steel Dust (GSD) | USA | ~200 kt | Smaller US player |
| Zinc Nacional | Mexico | ~150 kt | Latin American focus |
| Marzinc | Turkey/Middle East | ~80 kt | Regional player |
| Zochem | USA | Small | Zinc oxide producer |
| Grupo Promax | Mexico | Moderate | Latin American focus |
After acquiring AZR (formerly the #3 global player), Befesa consolidated its lead. There is no competitor of comparable scale globally.
This is where Befesa’s moat is strongest:
Environmental regulation: EAF dust is classified as hazardous waste in the EU (European Waste Catalogue) and US (RCRA listed waste K061). Handling, transport, and treatment require extensive permits and regulatory compliance. If a steel mill mishandles its dust, it risks production shutdown. This is not optional.
Permitting: A new recycling plant requires multiple authorizations before opening. Regulators will not issue new permits if existing capacity is sufficient – this creates a de facto barrier against oversupply.
Customer lock-in: Befesa typically has ~15 customers per kiln. Steel mills pay a relatively small fee (gate fee) for a critical service – proper hazardous waste disposal. The cost of switching or non-compliance (production shutdown) vastly exceeds the fee. Contracts are typically long-term.
Capital intensity: Building a new Waelz kiln costs approximately EUR 0.7M per kt of capacity. A 100 kt plant costs ~EUR 70M. Combined with permitting timelines of 2-5 years, this deters new entrants.
Technical know-how: Befesa’s SDHL Waelz process is proprietary and continuously improved. Operating efficiency, recovery rates, and environmental compliance require decades of accumulated expertise.
Geographic proximity: EAF dust is heavy and hazardous, making transport expensive and logistically complex. Plants must be located near steel mills, creating a local network effect.
Moat assessment: Wide and durable. This is a regulated waste management business with high barriers, limited competition, and structural demand growth. The moat is widening as regulation tightens and Befesa’s scale advantage grows.
| Name | Role | Since | Total Comp (2024) |
|---|---|---|---|
| Javier Molina Montes | Executive Chair (transitioning to Non-Executive Chair Feb 2026) | 2000 | EUR 2.29M |
| Asier Zarraonandia Ayo | CEO | 2022 (joined 2001) | EUR 2.18M |
| Rafael Perez Gomez | CFO & IR | – | – |
| Birke Fuchs | General Counsel & Board Secretary | – | – |
Javier Molina (age 66) has been the driving force behind Befesa since 2000. He led the company through the Triton buyout (2013), IPO (2017), and the transformational AZR acquisition (2021). His transition to Non-Executive Chair in February 2026 signals generational succession.
Asier Zarraonandia (age 58) is a 25-year Befesa veteran. He ran the steel dust division (the core business) from 2006-2022 before becoming CEO. This is a deep operator, not an outside hire. He purchased 40,000 shares post-promotion (~EUR 1.2M invested) and bought 10,000 more shares at EUR 20 in December 2024.
Management assessment: Competent, experienced operators who know the business inside-out. Not flashy. They describe themselves modestly but have a solid track record of execution. The insider buying at the lows is a strong positive signal.
| Holder | Stake |
|---|---|
| Insiders (management) | 5.4% |
| Institutional investors | 58.1% |
| Free float | ~95% |
| Triton Partners (recent re-entry) | <5% (acquired March 2025) |
Triton’s return is notable – they originally owned Befesa, exited in 2019, and have now rebuilt a position. This suggests the PE firm sees value at current levels.
Top institutional holders include Vanguard, DFA, iShares, Fidelity, and Harbor International – all passive/value-oriented. No single activist or concentrated holder.
| Priority | Assessment |
|---|---|
| Organic investment | Good. Palmerton expansion, Bernburg completed on time/budget. China plants appropriately paused. |
| M&A | Mixed to good. AZR acquisition was strategically sound but integration was slower than expected. Recytech buyout was tidy. |
| Dividends | Consistent 40-50% payout policy. Adjusted down in tough years, stepping up for 2026. |
| Buybacks | None. No buyback program. |
| Deleveraging | Strong. Net leverage down from 2.9x to 2.27x in one year. On track for sub-2.0x. |
The AZR acquisition deserves scrutiny. At $450M for the US #3 player, it was strategically compelling – it eliminated a competitor and gave Befesa dominant US market share. But the integration dragged: the zinc refining asset was a EUR 15M annual EBITDA drag through 2024, and Palmerton’s second kiln didn’t commission until July 2025. Management acknowledged this was harder than expected. The good news: they are now through the worst of it.
1. Zinc Price Risk (HIGH) Befesa’s earnings are directly tied to LME zinc prices. Every $100/t change in zinc price impacts EBITDA by approximately EUR 5-8M annually (after hedging). The hedge book provides 2-3 years of protection, but eventually spot prices matter. A prolonged zinc downturn below $2,000/t would compress margins significantly.
Mitigant: 60-75% hedged 1-3 years forward. Current hedge book extends to H1 2028 at attractive prices ($2,990-3,100/t). Zinc fundamentals are supported by decarbonization-related demand (galvanized steel, batteries).
2. China Execution Risk (MEDIUM-HIGH) Two plants with 220 kt of combined capacity are on hold. China’s EAF adoption has been slower than expected, and Befesa faces local competition in a market where regulatory enforcement is inconsistent. Plants 3, 4, and 5 are stopped indefinitely.
Mitigant: Management has correctly pulled back rather than throwing good money after bad. Sunk cost is manageable. If China EAF adoption accelerates per government targets (20%+ by 2028-2030), these plants could restart quickly. This is optionality, not a requirement for the thesis.
3. Steel Production Cyclicality (MEDIUM) Befesa’s volumes are tied to EAF steel production. A deep recession that cuts steel production would reduce dust volumes and gate fees. Europe is particularly vulnerable given manufacturing weakness.
Mitigant: Even in the 2020 COVID crash, Befesa’s EBITDA never dropped below EUR 115M. Steel dust recycling is a necessity, not a discretionary service. Load factors at 70% in 2025 mean there is significant buffer before revenue declines.
4. Regulatory Risk (LOW-MEDIUM) Changes in environmental regulation – either relaxation (reducing the need for dust recycling) or tightening (increasing compliance costs for Befesa) – could impact the business.
Mitigant: Regulatory trajectory is firmly toward tighter rules globally. The EU Green Deal and similar policies are strengthening, not weakening, the regulatory moat.
5. Customer Concentration (LOW) Befesa has ~15 customers per kiln, with relationships across hundreds of steel mills globally. No single customer represents a disproportionate share.
6. Leverage/Refinancing Risk (LOW) Net leverage at 2.27x is comfortable. Term loan matures July 2029, giving three years of runway. Covenant-lite structure. EUR 100M undrawn RCF.
7. Alternative Technology Risk (LOW) No commercially viable alternative to the Waelz kiln process has emerged in 30+ years. Hydrometallurgical processes have been explored but none has achieved commercial scale for EAF dust. The installed base and regulatory approvals for Waelz kilns create massive inertia.
| Metric | Value |
|---|---|
| Market cap | EUR 1.36B |
| Enterprise value | EUR 1.99B |
| EV/EBITDA (reported) | 9.0x |
| EV/Adj. EBITDA (FY2025) | 8.2x |
| P/E (trailing) | 15.6x |
| P/E (FY2025 adj. EPS EUR 2.01) | 16.8x |
| P/E (FY2026E consensus EUR 2.70) | 12.5x |
| Price/Book | 1.65x |
| FCF yield | ~10.5% |
| Dividend yield | 1.9% (current) / 3.0% (2026E) |
| Period | EV/EBITDA Range | Average |
|---|---|---|
| Since IPO (2017-2026) | 6x - 15x | ~10x |
| Excluding COVID (2017-2019) | 10x - 15x | ~12x |
| Current cycle (2022-2026) | 6x - 10x | ~8x |
| Current | 8.2x | – |
The stock is trading near the bottom of its historical range. At the IPO, Befesa was valued at 12-13x EBITDA. It peaked near 15x in 2021 when zinc was strong and the AZR deal closed.
Evidence FOR trough: - FY2025 adj. EBITDA of EUR 243M is already up 14% from FY2024 - Steel dust segment margin recovered to 27% (from 21%) - Zinc hedges at $2,990-3,100/t locked in through 2028 - Palmerton drag should reverse in 2026 - Net leverage declining rapidly (2.27x heading to <2.0x) - Record operating cash flow of EUR 212M - Management and Triton buying stock
Evidence AGAINST trough (why it could get worse): - Zinc spot prices could collapse in a global recession - EU steel production weakness could persist - China plants are still dead capital - Treatment charges are volatile and could compress again - Aluminum segment deteriorated in 2025
Verdict: The earnings trough was FY2023 (adj. EBITDA EUR 166M). We are now in early-to-mid recovery. The question is not whether we are past trough, but how far the recovery goes.
Using the Scolopax research framework as a cross-reference, normalized EBITDA can be estimated at EUR 300-315M, assuming: - 80% utilization (vs. ~70% today) - Zinc at EUR 2,600/t (roughly current level) - Treatment charges at $150-200/t - US operations at full run-rate - Aluminum segment normalized
| Assumption | EV/EBITDA | Implied EV | Implied Equity | Implied Share Price | Upside |
|---|---|---|---|---|---|
| Trough EBITDA EUR 243M @ 8x | 8x | EUR 1,944M | EUR 1,392M | EUR 34.80 | +3% |
| Current EBITDA EUR 243M @ 10x | 10x | EUR 2,430M | EUR 1,878M | EUR 46.95 | +39% |
| Normalized EBITDA EUR 300M @ 8x | 8x | EUR 2,400M | EUR 1,848M | EUR 46.20 | +37% |
| Normalized EBITDA EUR 300M @ 10x | 10x | EUR 3,000M | EUR 2,448M | EUR 61.20 | +81% |
| Normalized EBITDA EUR 315M @ 9x | 9x | EUR 2,835M | EUR 2,283M | EUR 57.08 | +69% |
Assumptions common to all cases: - Entry price: EUR 33.80 - Shares: 40M outstanding (no dilution) - Net debt declines to EUR 400M by 2031 through FCF
| Scenario | 2031 EBITDA | Exit Multiple | Exit EV | Exit Equity | Exit Price | Total Return | 5-Yr IRR |
|---|---|---|---|---|---|---|---|
| Bear | EUR 220M | 7x | EUR 1,540M | EUR 1,140M | EUR 28.50 | -8% (incl. divs) | -2% |
| Base | EUR 300M | 8x | EUR 2,400M | EUR 2,000M | EUR 50.00 | +58% (incl. divs) | 10% |
| Bull | EUR 350M | 10x | EUR 3,500M | EUR 3,100M | EUR 77.50 | +143% (incl. divs) | 20% |
Bear case: Zinc collapses, EU recession persists, China plants permanently impaired. EBITDA stagnates at depressed levels, multiple compresses.
Base case: Gradual utilization recovery to 80%, zinc stable at $2,800-3,000/t, US operations normalize, Bernburg ramps. Multiple stays at 8x (below historical average).
Bull case: EAF adoption accelerates globally, zinc prices rise on decarbonization demand, China plants restart, EBITDA reaches normalized potential. Multiple re-rates toward historical average of 10x.
| Metric | Consensus |
|---|---|
| Rating | 1.6 (Strong Buy) – 7 Buy, 2 Hold, 0 Sell |
| Target price (mean) | EUR 38.33 |
| Target price (median) | EUR 38.00 |
| Target price (high) | EUR 42.00 |
| Target price (low) | EUR 33.00 |
| FY2026E EPS | EUR 2.70 |
| FY2027E EPS | EUR 2.52 |
| FY2026E Revenue | EUR 1,301M (+10%) |
Consensus targets imply ~13% upside, which understates the opportunity if normalization plays out.
A reality check on valuation: - Steel dust capacity: 1,840 kt x EUR 0.7M/kt = EUR 1,288M - Aluminum operations: ~EUR 300M - Total replacement cost: ~EUR 1,588M - Current EV: EUR 1,989M
Befesa trades at 1.25x replacement cost. Not cheap on this basis, but this includes the goodwill from AZR and Recytech. Excluding goodwill (EUR 645M), the tangible asset base is reasonably priced.
Why Befesa matters for a Norfund green infrastructure conversation:
1. Direct decarbonization play. EAF steel produces 71% less CO2 than blast furnace steel. Every ton of EAF dust Befesa recycles represents waste from a cleaner steelmaking process. More EAF adoption = more Befesa business.
2. Circular economy at scale. Befesa converts hazardous waste into useful commodities (zinc oxide, aluminum alloys). This is the circular economy made real, not a marketing slogan.
3. Regulatory tailwinds aligned with DFI mandates. The EU Green Deal, CBAM (Carbon Border Adjustment Mechanism), and tightening waste regulation globally are structural drivers. These are the same policy frameworks DFIs like Norfund are built to support.
4. Emerging market optionality. China, Turkey, and South Korea operations give Befesa exposure to the developing world’s steel sector transition. If Norfund’s mandate expanded beyond renewable energy to industrial decarbonization, Befesa-type investments would be central.
5. Proven business model with measurable impact. Over 650,000 tons of hazardous waste recycled annually. This is quantifiable environmental impact with commercial viability – exactly what DFIs look for.
Interview talking points: - EAF adoption as the most capital-efficient path to steel decarbonization - How Befesa’s moat (regulation + permits + scale) creates durable competitive advantage - The tension between commodity exposure and the utility-like service business - Why this is a circular economy investment, not just a zinc play - Emerging market dimension: Turkey, Korea, China as growth vectors
Thesis: Befesa is a wide-moat industrial compounder at cyclical trough valuations, positioned to benefit from the structural shift toward EAF steelmaking. At 8.2x EV/adj. EBITDA on recovering but still-depressed earnings, with a credible path to EUR 300M+ normalized EBITDA, the risk/reward is asymmetric to the upside.
What you are buying: - The global #1 in a regulated, high-barrier niche - A natural beneficiary of steel decarbonization - Recovery from trough with margins inflecting upward - 10%+ FCF yield with declining leverage - Management team with skin in the game buying at the lows
What you are paying: - 8.2x EV/adj. EBITDA (vs. 10-12x historical average) - 15.6x trailing P/E (12.5x on FY2026 consensus) - 1.65x P/B (vs. 2-3x in better times)
Positive: - FY2025 final results and FY2026 formal guidance (Q1 2026) - US volume ramp: 60-70 kt additional in 2026 - Bernburg aluminum expansion completion (Q2 2026) - Zinc refining breakeven eliminates EUR 15M annual drag - Net leverage below 2.0x unlocks capital return optionality - China EAF adoption acceleration (longer-term)
Negative: - Zinc price collapse below $2,000/t for extended period - European recession cutting steel production - Unexpected operational issues at US plants - Treatment charge compression below $80/t
| Risk Tolerance | Allocation |
|---|---|
| Conservative | 2-3% |
| Moderate | 3-5% |
| Aggressive | 5-7% |
The commodity exposure (zinc) warrants a moderate sizing. This is not a capital-at-risk story – the downside is limited by the regulated service component – but zinc volatility means you need to size for 20-30% drawdowns.
Upgrade to High Conviction if: - FY2026 EBITDA exceeds EUR 280M - US operations achieve breakeven on zinc refining - China announces concrete EAF capacity targets with enforcement
Downgrade to Hold if: - Zinc falls below $2,200/t for 6+ months - European plant utilization drops below 65% - Management takes on leverage for a large acquisition - Competitive dynamics shift (new large-scale entrant)
Sell if: - Zinc falls below $1,800/t with no hedge protection - Net leverage rises above 3.5x - Regulatory relaxation undermines the moat - Management changes signal strategic shift