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Ferroglobe (GSM)

Participants
Beatriz García-Cos Chief Financial Officer
Marco Levi Chief Executive Officer
Call transcript
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Operator

Good morning, ladies and gentlemen, and welcome to Ferroglobe's First Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. Later we’ll conduct the question-and-answer session and instructions will be given at that time.

As a reminder, this conference call may be recorded. I would now like to turn the call over to Beatriz García-Cos, Ferroglobe's Chief Financial Officer.

begin. may You

Beatriz García-Cos

morning first Good thank for you Thank XXXX everyone, earnings Ferroglobe's quarter conference joining you. and call.

Executive Officer Joining me Benoist Deputy our Operating Officer; and and Investor EVP Lavin, Chief our Gaurav of Chief Transformation and Strategy Director today are Ollivier, Group Marco Ferroglobe's Controller. Levi, Officer; Mehta, and Relations; and Executive Jorge Chief

Statements during results expectations. can to Before differ Risk web a brief factors read conference most the that could I'm in going which slide found at those from are based we cause X to forward-looking recent statements our get management actual started are on with forward-looking some made to this www.ferroglobe.com. filings that call current on and to exhibits time. page, these Ferroglobe's Please SEC this prepared turn materially be filings, by remarks, are statement. available

are and these in net recent In earnings per addition, gross EBITDA, filings. our this debt, which measures. discussion adjusted includes adjusted be found diluted EBITDA, SEC measures may to non-IFRS Reconciliation debt most reference share, non-IFRS of

Next please. slide

Marco first additional call, financial and as operating -- our we would like Chief key Then and now will our provide the highlights drivers first we the our for as the business behind today's call During finally, environment. to plan. I will Levi, time, I our well details review turn on results. first some quarter we update will to on performance an over strategic provide this And Executive execution of At the Officer. our

please. slide Next

Marco Levi

was a quarter threat we surprise and XXXX. certainly pace to we call. caught globally, our our present of XXXX overall Despite the the the markets. by challenging in are at and pleasure recovery the going our year part, still It and pace tremendous are Year activity a customers has of And the one of all results stronger Beatriz. Thank across following welcome earnings to into many end quarter recovering of of economic the demand COVID, lingering particularly we industry capturing you, benefit caution New Ferroglobe's we In feel tone witnessing of strong the first faced uncertainty. is first

the we acceleration have and strength corner that we of this seen signs turn expected at third enter an of as firm in least quarter and XXXX, is activity to continue year. However, through demand

We products inflection are all point, by is solid portfolio. in an at which underpinned our supply-demand fundamentals our finally across

the shift compete at the to about The are the market we Ferroglobe failed market we have and strengthen us positions opportunity. backdrop, actually multiple in well positive to made on financially, fronts with the operationally this excited and business ongoing While progress on the during transform business efforts we capitalize this have quarter. first

plan, capacity previously improvement. in costs while idled restarting driving We have with selectively our been focusing by down all some long-term line on operational

of is professional relating Agreement in favorable significant fees being Note the the the and secured $XX our to made in last million refinance we notes. $XX closing now of signing successful in company highly offer exchange to million outcome is This to issuance. during noteholders an now timeline a the shorter comprehensive of our existing financing and settled. to to for advancements and notes to lower the the majority announced we of Purchase consent an $XX the given extend Additionally, push of The a and overwhelming QX million have week execute, new process

a our substitute our for Ferroglobe's strategy with is company our that stage plan an now the sustainable conditions the the towards strategy products that and turbulent competitiveness and towards of recovery. cyclical materials to track repurposed first driving on strong resilience ourselves that solutions lithium-ion the to is The report plan, navigate strategic targets recovery the advanced in supports products. It for global toward needs to our us Part that batteries. successfully value on that and we counting highly of in year. have the research phase highlight times for us, I'm can customer the of eye with efforts development quarter cost-effective to To behind hit stakeholders. execution the exciting to serve on focus support of is silicon pace our development range of helped refocused a base the we are bolstering XXXX. market in happy this Regarding of goal, important versatile discipline development a innovation be maintaining implementing the attractive The distinguish and simply anode-active an for set is current not remain

have institutions, the silicon nano for well this trend for We several developed academic companies, research and been expertise and have leading suited and technical supplying micro centers.

dedicate Overall, that users at the pilot opportunity. our to we line have on to we the Spain balance our off from in we for remains facility a right our Given foot. the efforts this on first have positive, exciting feedback pivotal and overall good started have Sabón decided year increase a has results end momentum quarter This been in business. the Ferroglobe and highlight that

please. Moving ahead to slide six

previously contribute demand driven selling previous commenting were that certainly dominantly XX% sales prices. overall quarter up will fully was through financials, The million, going the quarter pickup in higher forward. $XXX by I but in hasn't QX on by come realized First average from

increasing was part, certain with volumes a XXXX. the increase quarter, impact compared with the of some In QX demand adjusted across $XX.X XXXX this The to the inventory products lockdown in attributable for minimal X.X%. all net is to During were up total the $XXX.X had quarter levels. recovery products relatively coupled our net our in for charges. inventory throughout million our net loss first of the the EBITDA. levels year was low impairment of million previous the includes The which starting loss a quarter strong We in

XXX% $XX.X improvement During is quarter. previous QX, from EBITDA was adjusted our million, the of an which

quarter. generated of primarily ended year supported a the million debt $X.X asset-based Hence, the with reduction of flow the in we debt, better to cash. the XXXX, The increase cash a Despite was million by the and part efforts $XXX from the input $X mitigating driving growth and impact driven been particularly absorption previous generated significant in by cash our ending QX We in costs positive cost increase gross by and decreased inventories the total in quarter-over-quarter, debt million, QX. we includes with cash free with and fixed gross improved capital from some cost QX $XX working in which some during also production our net efficiency. of increased through relating the million margin operating and costs, of topline, operating as in improvement have improvement. provided one-time of taken Despite quarter actions $XXX repayment but the quarter. repayment $XX.X transaction-related our million. marked of other operations and plan. we $XX million across saw debt continuous by million $X.X experienced production Overall, flow. topline coupled the strategic throughout quarter payments, Overall, cash improved loan cash The offset restricted from $XX.X Our during the the successful million increase in decline footprint. To-date, have cost-cutting logistical to of million of

financing we improvement continues expect a see of As in and position. parts to business our improve close, naturally to the additional cash gradual

Next please. slide

over settle we quarter-over-quarter, on of all slide to finally, right pricing previous larger QX. this usual Silicon chart our the quarter improve shipments the per shows Furthermore, The from XX,XXX Volumes, business but our contracted gradually to from to late XX% realized the realized at outlook quarter XX% our All XXXX, to in trends a $X,XXX volume these contributed had quarter. ton EBITDA by per fixed and in partner that flat approximately only top silicon to in portion the $X.X prices the one, XXXX. on costs so the pricing during XX% quarter. to Ferroglobe's index million to than pricing allocated be was quarter the while offtake X tons. for first from environment considerably flat metal in a bleak contributed increased improvement million in of much European beyond. the $XX.X a in from price increase QX by lag Keep joint metal X. increased metal mind relatively was was Turning first US slide index-based during The prices prices the prior same ton quarter, the will in the the venture period. silicon has silicon QX. selling our the QX and when the increase in in QX average was quarters will improved in volume and during silicon factors market And XX% approximately index $X,XXX of the lower. in business balances

cost past, have silicon we coupled benefit cost best the from technical was million from one-off value metal we On not lockdowns. value quarters. Overall, few seen the $X.X from of for benefit impact the quarter of this pandemic key positive Restocking repeated quarter. $X.X will catalyst net finally, improved the tied chain $X.X absorption measure incurred recovery. benefit initiatives. $X million a demand which fixed driving years. And QX, our discussed continue our of side, terms. the for inventory diminished In to In had throughout net quarter, various the picture in during expenses the we four, improved specifically especially had This are is the a million initial chain the for impact energy in we had we with a contract supply/demand million have this levels on is

tied to consumption our demand high and the today sector of final for driving for However, is level chemical products. products aluminum

poised and consumables a chemical continued globally. for the the the increased an daily side investment business need and foundation for construction medical-related growth increasing strong On in of for industry infrastructure products, provide

activity as in and given the North choice aluminum into aluminum Sales is the was growing for of as auto the America recyclability. of in customers material demand our not many the has previously capacity. recovery Europe and photovoltaic as which well us the shift largely America as predominantly idled recovered North market On in restarted in towards pickup its driven by both not side, have the becomes lightweight sustainability

additional created bottlenecks supporting have the and buyers demand, raw higher sourcing environment. limiting strong to addition logistics price further In and supply material in

annual this with particularly volumes, opportunity of the combination Montricher in an to at quarter attractive has on second silicon capacity, of and for our large new XXXX. XX,XXX and capacity an pre-negotiated contracts tons stage feel Given these of restart A basis. Combined on advantage capitalize index-based XXXX the trends. part of furnace one Sabón To strong we XXXX. decided to we market, and take for this set in this demand at backdrop, quarter is the first pricing a furnace provide

Next slide, please.

alloys to slide Turning eight. silicon-based on

the quarter. in X.X% increased up from the metric $X,XXX average metric the ton, price per quarter, fourth During selling by to ton $X,XXX per

During quarter in volumes. a the increase approximately in volumes sales previous Sales QX, higher realized of we tons silicon-based tons about quarter. X,XXX metric X.X% alloys XX,XXX than the were

which the a capital. to customers going XXXX as was to working saw lockdown. end of of of alloys their declining into our the are steel silicon-based Our the XXXX, inventories steadily, also Throughout due start the manage market, during ferroalloys This hard in year. diligently we COVID, has portion with capacity market idle period had hit remarkable significant a

From recovery sales scenario of automotive where in attributable we levels Europe. Our gradual of up perspective, which sales benefit period of as quarterly improved what our restart end primarily shaping from the steel longer market. across can furnaces foundry back ferrosilicon has improvement demand be gained pre-COVID especially to capacity, on recovery Furthermore, the have began now to our strength. of is blast also the a a global is a to

from the and demand, schemes initial to impact spending infrastructure now funds deployment government of plans. monitoring are addition we In the from stimulus pent-up

was EBITDA mix started foundry. higher impacted higher offset cost and the market South the of lower by positively furnace product decided to has silicon-based facility Nearly already to March cost restart in our strength, side eMalahleni is attributable ferrosilicon half the costs. from partially absorption the of foundry we at this Europe back Africa, annual the early alloys fixed capacity portfolio, resulted in impact was to by tons. On slightly This the costs. XX,XXX in and and business volumes, our of and in which prices of where furnace have dedicated is

of Africa the of a resulted QX, approximately and Additionally, the restart terms costs having in of $X by South our in And in labor furnace related quarter-over-quarter costs negative impact Spain higher COX the in resulted million. finally, accounting in comparison. price lower in restart treatment

Next slide please.

Turning now to manganese-based alloys.

over increased per down quarter, the the quarter. quarter ton. a X,XXX average tons first XX.X% during of previous $X,XXX Shipments the by approximately selling decrease X.X% were During price to metric the

With coming our year-end, the quarter. quarter. market on low to capitalize the strong first Unfortunately, at limited the during relatively demand into for our levels inventory manganese-alloys fully ability were this demand

which million Additionally, is we versus from and attributable to was contribution in facility the in had million also production. in the some adversely positive pricing. EBITDA impacted Spain, negative $X.X downtime at predominantly $XX QX, this our quarter fourth business

the On the average was quarter-over-quarter. cost side, of ore cost manganese flat

three With an ore areas Norway, capacity second year. tons on level are due detail. call this basis. Beatriz, momentum this quarter financial in cost I to for our to of light the online, In to at adding demand, to with in be in the our expectation coming review supported steel restarting manganese of strong temporarily new would remaining business I attractive coupled of facility now anticipating turn process at demand the the the we in to of are throughout over the more Rana capacity furnace XX,XXX Mo annual of we like results outlook, spread

Beatriz García-Cos

sales $XXX Thank statement. prices, a the average few million, line of the our by a which increase prior increase, Beginning QX, were XX% during quarter. realized driven XX% specific sales portfolio. on on shipments offset Sales X% across in income you, with of $XXX will in touch in than our higher in XX, I decrease Marco. more slide the was items, This than million

the decreased efficiency doubling is quarter The This cost accounting rights. to XX% our operating income emission one-off our COX gross approximately our due in by resulting QX. in the sales quarter. which avoidance relating decrease as continued of well the of treatment the cost, as some QX, to impacted from cost to profit adversely by million other of X%, in XX% is in prior During to $X.X the the efforts due

for of production $XX.X the million the the of States in when to any because in impact was higher QX. the the income plan, has recognized marginally totaling to costs Reported strategic accounting the $XX.X mainly XXXX Although, granted in of QX, have implementation the the during during Operating is negative million United one-off not Europe in higher, previous yet. onetime positive adjusted EBITDA EBITDA allowance the million. relating $XX.X that quarter-over-quarter, given Europe been we not expenses, was quarterly, quarter than

QX $XX.X had in Next our slide single please. QX. Quarter-over-quarter, $X.X from impact our $XX.X The improvement we did have to a adjusted million in the average EBITDA, XXX% in million contributing increase million. in realized selling price largest

delivered efficiency Continued or results, first costs, program reducing our viable million. KTM $X the contributing

legal consultant pickup a having incremental the absorption, as platform adverse head some fixed decreased impact QX. attributable transactions. drove which a in expenses in work is office in The expenses cost the to production of factor and in across specific result to which an is third-party spend Additionally, a increase audit tied QX,

market adjustment please. these from an rights, increase an During slide fair for in the given the the related rights, repurchase stemming of COX adverse to XX cost had impact we quarter, our

slide our now will greater balance Turning to review I in sheet detail. XX,

cash Let the elaborating by me cash start restricted on figure. and

we at the only $XX flow. Hence, cash million cash end, end is during cash our assets this of we despite a of and had the ABL approximately of $XX.X the slight aggregated consumed, repaid not year-end of X.XX uptick were gross cash other States, prior quarter, in the the the loss our restricted. balance, million hand QX, net This the debt. $XX our decrease ABL. as the times. compared operating restricted, impact also million. cash $X.X of repayment during this back of part and previously letters specific quarter. the $X which process currently only is transaction Total on net of was the we Overall, was quarter position million approximately ABL As in quarter at transaction. and with part to The under leverage United the impact $XX due a consumption now net million over credit cash paid the billion but to of of obligations prior and The lender during refinancing at improved Of the

financing COX from $X investing attributable negative aggregate, million the activities from Next was flow cash $X.X was EBITDA rights. during operating slide QX. cash we million during flow activities of to free negative was $X.X approximately $XX.X negative repurchase The the lastly, flow cash from Reported to Cash In of turn of quarter the $X please. expenditure, for quarter. million. $XX.X million. million $XX.X activities million positive million for capital was flow And

cash the made bond ancillary required coupon payment. and ABL we repay In semiannual addition to our to the obligations,

Next slide, please.

Now turning XX. to slide

working an defined, increase working evolution, In the we please year months be have than set keep quarter our $X by capital in average is working mind the that the lower XX, which sales. We on of measured in the basis for have first reduced baseline please. at to despite to million for account average target, the Slide average XXXX looking million $XX capital words, targeting When capital rolling other during we as are XXXX. our $XX million XX cyclicality. for

loan This during United States, credit we retiring million credit program. $XX repaying the led the $XXX gross to million During of the the million. net decline quarter process to by In to decreased both by to lender as our $XXX million in including letter other decreased the debt debt settle the with the quarter. a a as well cash few $XX have while prior asset-based of obligations card

Next slide, please.

be our noteholders to their have last in of members preparation quickly arrangement. by and proceeding of with we of of now the and to enable to aggregate notes XX% respects be scheme a completed will Group in an been our into Lock-up new the update support documents entered shown senior In Hoc way the an is the the from long-form raise noteholders, to material material of purchase March lower of purchase an $XX the Lock-up the more conditions and particular, particular, the senior members million capital English -- a senior on an transaction. on agreement Ad for The as with note transaction XXth, and into at progress issuance satisfaction have otherwise This of is announcement elected Capital, cost. as Tyrus to consequence, transaction expected maturity of our million the the the by the million case has Ad The the initial would satisfying XXXX notes. of of to and proposal than a instead investors, the completely you extension made relating aggregate Agreement relation the over group has have Since exceeding in a law XX% of the know there the Group and expected. exchange precedent process the in milestones to Hoc all representing Agreement of settled. of agreement notes. Lock-up a note existing In $XX to is secured implement being Agreement initial and As approximately entered of the of company $XX offer been

considering for the We appropriate the form equity raise. are still

the You of new share equity offering at preemptive were shareholders. XX of available the in recall conducting we the may rights form to the that all announcement, raise considering time March

finalize seek option a structure and soon. the to We are still vetting

time, of to stop optimistic that and look XXth, September forward complete for prior hit the this will would provided plan. back like Agreement on Marco, Lock-Up remainder timeline update within you the reporting an to are I strategic who the to I call in date of provide back turn the long the XXXX. We transaction we will over milestones. the to to At as the additional

Marco Levi

Thank you, Beatriz.

this an strategic Now time, our At like turning a to would to take minutes on slide to plan. provide XX. I few update

let hitting on now for update on and areas. qualitative some on creation all the me execution quarterly from Given basis both initiatives of start, To that provide across a value a the reiterate highlights. our key speed our targets the we full ahead We are to intend progress year. running quantitative

$XX highlighted. XXXX which We as working incremental realize are capital million as benefit expecting to of Beatriz in of improvement, million EBITDA $XX well

which captured into that annual please target. impact, On the half we initiatives X% side, back are Also mind million through savings flows $X.XX in to the in weighted accounts the for keep tied which initiatives the P&L. specific It of the turnaround larger be year. towards plan, our not captured our fashion actual linear expected $X.XX a noting several EBITDA of is of is that million benefit to as are worth

parties these April are without on On collective the to Cinca, regards on Spain Spain, With in delivering decision regarding With to with legal the March del period in the XXXX, the we the started target. and Work authority. the agreement officially European the representation May restructuring to and XX, optimization, FerroAtlántica initiatives consultation an progressing, the collectively remain period negotiation ended and engaged the dismissal formally way we labor confident its footprint XX of X. our the France. commence between communicate In worker which Council

will to and and FerroAtlántica transparency. encourage four April del of decision. the working project on months. social is So, implies communicate management started consultation since then dialogue Ferroglobe In period officially procedure a XX, France, The its Cinca

area plan efficiency. we have Another our that significant continuous is progress

we capabilities effectively. starting stream our this our operating this several Centralized leveraging The to effort undertaking KTM and most in are work organization. function procurement the value types new also see clearly benefit quickly to we manner. aspect commend have in the a of builds terms for to of RFPs processes in are execute provided reorganize department are program. we a under consulting the are benchmarking and people how because we establishing personnel around team's program, training tremendous launched the quarter, firm on measurement see on under excitement our and of as to this was these workforce we While shift and growing revamping implementation and cultural in started projects investing this on I big by is previous In our improving platform. train first is to

opportunity As progressing to we XX we new on. excellence, commercial to used gets to savings. distinct subcategories capture this the of the formation, are broaden scope organization the there see work working strain the under On are

overall and During resources customers. serve to the and a the reviewing a account goal better most with our order customers is has focus on to partnership today has to on And customers quarter, our Through efforts centered Over our of the customer reallocating there our optimizing been products value-added enhancing book. the lastly, with seek time, on development improvement, and tremendous is develop we effort improved working having achieve key planning partnership while a and coverage, on this. management. strong of to been critical inventory capital

We targets on way base proving overall in based identified is a we such be finished the have target will both as move and initial down targets, the improvement cycle. on are improve newly but accounts the efficiency on material inventory good to Over to improvement. throughout working effort significant in way creating other seen and we to the areas the accounts Based QX. KPIs an of time, significant receivable, raw payable measured, is

seasonality. Let's to intended is account average say, rolling for the

delivering trend well. So quarter-to-quarter. fluctuate may capital remain the in Overall, on line as this working confident we target from

just and for and but our journey please will saved I different on we this training time, journey levels operator the changing forward the I This results operate global at are the by all of terms workforce the of our a line the on keeping quarters. we focused to are is open certainly with excellence DNA manner. creating starting, unifying in level At company workforce so this this fundamentally look the in a culture of updated engagement ask on over Beyond to stakeholders to far. centered overall the questions. numbers, coming

Operator

Thank Instructions] you. Thank [Operator you.

comes Our Brian first from of with DiRubbio line question the Baird.

now open. is Brian, turn would over [Operator line me Thank the back pardon is Marco… to your Instructions] open. Your now now And you. call I line

Marco Levi

Thank you.

Operator

remarks. closing for …Levi

Marco Levi

quarter first concludes Thank call. our you. That earnings

the call, of beginning the company prospects the all stats at in mentioned are parts aligned I the showing for of of As strong terms the year.

to up all opportunity. book, Now we us to progress capitalize new support improvements our of on critical to it is and the capacity the in on on addition The all operate our how also order this financing the ongoing fronts. will existing ability side company is execute the success. The to

we that we us Things nicely, have and on participation. mitigated the forward forward Now again are comfort can our you day. a for to on path we execute updated our plan. shaping Thank keep some risks, continue that progress. your provides great Have up to you look

Operator

Ladies you disconnect. may gentlemen, and now