NASDAQ:GSM Ferroglobe Q2 2024 Earnings Report $3.72 -0.03 (-0.67%) As of 11:09 AM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings HistoryForecast Ferroglobe EPS ResultsActual EPS$0.13Consensus EPS $0.08Beat/MissBeat by +$0.05One Year Ago EPS$0.30Ferroglobe Revenue ResultsActual Revenue$451.05 millionExpected Revenue$425.55 millionBeat/MissBeat by +$25.50 millionYoY Revenue GrowthN/AFerroglobe Announcement DetailsQuarterQ2 2024Date8/5/2024TimeAfter Market ClosesConference Call DateTuesday, August 6, 2024Conference Call Time8:30AM ETUpcoming EarningsFerroglobe's Q1 2025 earnings is scheduled for Tuesday, May 13, 2025, with a conference call scheduled on Thursday, May 8, 2025 at 8:30 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Ferroglobe Q2 2024 Earnings Call TranscriptProvided by QuartrAugust 6, 2024 ShareLink copied to clipboard.There are 6 speakers on the call. Operator00:00:00Good morning, good afternoon, ladies and gentlemen. Welcome to Ferroglobe's Second Quarter 2024 Earnings Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will be given at that time. As a reminder, this conference call may be recorded. Operator00:00:18I would now like to turn the conference over to Alex Rotonen, Ferroglobe's Vice President of Investor Relations. You may begin. Speaker 100:00:27Thanks, Roz. Good morning, everyone, and thank you for joining Ferroglobe's Q2 2024 Conference Call. Joining me today are Marco Levy, our Chief Executive Officer and Beatrice Garcia Kos, our Chief Financial Officer. Before we get started with some prepared remarks, I'm going to read a brief statement. Please turn to Slide 2 at this time. Speaker 100:00:55Statements made by management during this conference call that are forward looking are based on current expectations. Factors that could cause actual results to differ materially from these forward looking statements can be found in Ferroglobe's most recent SEC filings and the exhibit to those filings, which are available on our webpage atferroglobe.com. In addition, this discussion includes references to EBITDA, adjusted EBITDA, adjusted gross debt, net debt and adjusted diluted earnings per share among other non IFRS measures. Reconciliations of non IFRS measures may be found in our most recent SEC filings. Before I turn the call over to Marco Levy, our Chief Executive Officer, I want to announce that we'll be participating in Seaport Research Partners' Annual Summer Investor Conference on August 20 21. Speaker 100:01:55We hope to see you there. Marco? Speaker 200:01:58Thank you, Alex, and good morning, good day and good evening to everyone. Thanks for joining us on the call today. We appreciate your interest in Ferroglobe. Before I begin with our quarterly earnings update, I want to inform you with deep regret that Juan Miguel Guilhermeir, Founder and Former Chairman of FerroAtlantica, our legacy company, passed away last month. I would like to express our deepest condolences to East family. Speaker 200:02:35In Q2, we continue to execute well, driving strong financial performance with increased volumes, revenues and adjusted EBITDA. As we discussed in our Q1 call, in May of this year, the U. S. International Trade Commission recognized that the imports of ferrosilicon from Russia, Kazakhstan, Malaysia and Brazil, which represented approximately 70% of all imports in 2023 are injuring our U. S. Speaker 200:03:13Operation. The substantial government subsidies are received in these countries and the low selling prices of these imports have adversely impacted U. S. Pharmaceutical market, hurting local producers and their ability to compete. The ITC's final decision will be made in October. Speaker 200:03:39On June 24, the U. S. Department of Commerce announced preliminary antidumping and countervailing duties of 283% 748%, respectively, on all Russian importers of ferrosilicon. As a result, all importers of Russian ferrosilicon are required to post cash deposits or bonds to cover these duties. Russia represents approximately 35 percent of all ferrosilicon imports into the U. Speaker 200:04:17S. In 2023. This is a significant victory for our industry, allowing us to compete on a level playing field. The investigations of the remaining 3 countries, Kazakh contamination and Brazil are still underway. The International Trade Commission will announce by eliminating the terminations for countervailing duties expected in August and anti dumping duties in October. Speaker 200:04:47We believe these decisions will have a positive impact on our business in 2025 as inventory in the channel is depleted. As you recall, during the Q1, we signed an MoU with Core Shell to further develop batteries for EVs using silicon rich channels. We are very excited about this relationship as it enables us to take part in the evolution of EV batteries. In testing, core shell has achieved a high cycle lifetime using an 80% ferroglobe silicon content anode in a core shell battery. This improvement in battery performance is an important milestone. Speaker 200:05:36The benefit to consumers is that the silicon rich channel significantly reduces the cost of batteries, speeds up the charging time to just 10 minutes and increases the range up to 40%. The next step is to produce a commercial size battery that OEMs can begin testing, sorry. CoreShell has closed its financial round targeting the development of a pilot plant that will produce larger 60 ampere cells for the OEM testings. This project is on track with commissioning schedule to begin in Q4 of this year and testing at OEMs expected in early 2025. We'll keep you informed as we continue to achieve new milestones. Speaker 200:06:30In addition to develop silicon to developing silicon ray channels with CarShell, we are working approximately with 70 ED battery companies who also developed other silicon based technologies, such as silicon carbon composites and silicon monoxide anodes for batteries. These technologies, while less efficient than silicon batteries, are either in use or expected to enter the market in 2020. While wet prices in general have been strong during the first half of the year, they have been very they're even more by supply constraint than a fundamental improvement in demand. Strong index prices in the 2nd quarter should drive solid results in Q3. However, we are still cautious about the Q4 given the uncertainty in the market, especially as it relates to the aluminum, foundry and steel sectors. Speaker 200:07:40We continue to announce our capital return policy in addition to paying a quarterly dividend of $0.01.8 per share, our share buyback program was approved in June. We are narrowing the adjusted EBITDA guidance range from $130,000,000 to $170,000,000 to $150,000,000 to $170,000,000 The strong second quarter combined with higher interest prices should positively impact the 3rd quarter, which gives us more confidence for the second half of the year. However, given the weak demand, we are still cautious about the Q4. And combined with the idling of French operations, we anticipate having the lowest adjusted EBITDA of the year in the 4th quarter. Next slide, please. Speaker 200:08:40Our Q2 performance was strong with total sales increasing by 15% from the prior quarter to $451,000,000 and adjusted EBITDA reaching $58,000,000 up from $26,000,000 driven by strong pricing and sales volumes. Operating cash flow and free cash flow were $2,000,000 and negative $20,000,000 respectively, due to inventory build as we have started France and made a calculated decision to purchase incremental tons of manganese ore in anticipation of price increases. The efforts will discuss this in more details as Shira reviews the financial results. Next slide please. Typical metal revenue in the 2nd quarter was $204,000,000 up 22% from the prior year quarter. Speaker 200:09:41This increase was a result of higher prices and higher volumes. Average realized prices increased 2.8%, while shipments increased 18.2% to almost 63,000 tons, driven primarily by strong sales to the chemical sector in Europe. The volume shift in the Q2 was the highest level in the past 2 years. Index prices in Europe, which were down slightly in the Q2, were negatively impacted by lower priced Chinese exports and weakened the market, particularly the aluminum sector, which was affected by high energy prices in Europe. Prices in North America were strong in the Q2 as they benefited from supply constraints such as the Baltimore Bridge accident. Speaker 200:10:38In addition, high tariffs make Chinese silicon metal imports a known factor in the U. S. Market. Silicon Metal adjusted EBITDA was $35,000,000 an increase of 115% over the full year quarter, driven by strong volumes, higher prices and lower costs. Given weak demand in end markets and easing supply constraints, we expect the indices to soften into the 3rd and 4th quarters. Speaker 200:11:12With a typical 3 month lag in pricing, we expect the Q3 results to be relatively stable, but weaker in the Q4. In addition, we expect France to be idle toward the end of the year, which will also impact 4th quarter results. Next slide please. Pivicon based alloys. Revenue in the 2nd quarter was $105,000,000 down 6% from the period quarter. Speaker 200:11:43This revenue decline was a result of lower shipments, which were down 8% from the prior quarter, partially offset by a 2.4% increase in prices. Index prices in North America were up versus the Q1, while Europe was relatively flat during the Q2. Adjusted EBITDA was $10,000,000 in the 2nd quarter, down 29% from the Q1. This decrease was the result of a higher cost due to the idling of French operation in the Q1 and lower absorption cost in the U. S. Speaker 200:12:25Weak shipments were primarily driven by inventories due to Russia selling subsidized low price Phase II production in the U. S. Excessive Russian shipments have led to a high level of inventory in the channel, which we expect will be depleted over the next couple of quarters. This will negatively impact demand until inventory levels normalize. However, as a result of the tariffs recently imposed on U. Speaker 200:13:04S. Imports of FASI, we anticipate an increasing demand beginning in Q1 of 2025 as imports from the affected countries will be in the years. This is expected to give Ferroglobe an opportunity to expand its market share in the region. Given the current economic uncertainty, we expect European and U. S. Speaker 200:13:28Steel demand to remain soft for the second half of the year. To the next slide please. Turning now to manganese based alloys. Manganese based alloys revenue in the 2nd quarter was $98,000,000 up 48% from the prior quarter. This revenue increase was a result of higher shipments of 81,000 tons, up 31% from the prior quarter, higher realized prices increased 13%. Speaker 200:14:03We capitalized on South 32 high grade manganese ore mine shutdown, which was damaged by Cyclone Megan in late March by building higher inventory levels of manganese ore before the resulting shortage drove market prices higher. This enabled us to ship the highest volume of manganese alloys in the past 8 quarters. Manganese alloys index price increased during the Q2, driven by a shortage of high grade manganese ore caused by this shutdown. Adjusted EBITDA was $14,000,000 up from $6,000,000 in the first quarter. This represents an increase of over 150%. Speaker 200:14:52Price and to a lesser extent volume drove the increase in EBITDA, partially offset by higher costs. European end markets continue to be weak, and we expect our volume to normalize in the second half. It is important to note that nearly all our end market for manganese alloys is in Europe. Now I would like to turn the call over to Beatriz Garcia Kos, our Chief Financial Officer, to review the financial results in more detail. Beatriz? Speaker 300:15:28Thank you, Marco. Please turn to Slide 10 for a review of the income statement. Sales increased 50% in the 2nd quarter to $451,000,000 up from $392,000,000 in the prior quarter. During the Q2, we saw increased volumes in silicon metals and manganese alloys and higher selling prices across all three segments. Raw material and energy consumption for production remained broadly flat and decreased as a percentage of sales from 66% to 59% in the Q2, primarily due to effective cost management and higher fixed cost absorption as a result of increased volumes. Speaker 300:16:18Other operating expenses for the quarter increased by 64% to $86,000,000 partially driven by a $19,000,000 increase due to the fair value adjustment of the free carbon credit. This is fully offset by an increase in other income. Staff cost decreased by $3,000,000 in the 2nd quarter to $67,000,000 due to the profit sharing arrangement in Europe during the Q1. Adjusted EBITDA in the 2nd quarter more than doubled to $58,000,000 from $26,000,000 in the prior quarter. During the quarter, we earned approximately $8,000,000 from our 2024 French Energy Agreement, in line with the Q1. Speaker 300:17:08As a reminder, cash from these benefits is expected in early 2025. Net financial expenses for the quarter declined 31 percent to $5,000,000 due to the full redemption of the senior secured notes in February. Going forward, we expect interest expenses to normalize below this level. Next slide, please. Our adjusted EBITDA margin increased from 7% in the 1st quarter to 13% in the 2nd quarter, primarily due to increased pricing and volumes, which impact EBITDA by $80,000,000 $11,000,000 respectively, relative to the Q1. Speaker 300:17:55The higher cost was driven by the mark to market earn out provision in the manganese business, partially offset by higher fixed cost absorption in France and Spain. Overall, average selling prices increased by 2.5%, positively impacting adjusted EBITDA by $80,000,000 $10,000,000 of which was from manganese based alloys. Total volume increased by 50% with an $11,000,000 impact on adjusted EBITDA compared to the prior quarter, thanks to increased silicon metal sales to the chemical sector in Europe. Head office and non core business contributed approximately $5,000,000 to increased EBITDA, driven by lower G and A costs. Slide 12, please. Speaker 300:18:53During the Q2, we consumed free cash flow of $20,000,000 primarily due to the need to build up inventories from the end of Q1, during which the French plants were idle and higher manganese oil prices following South 32 May 8 shutdown. Working capital was a use of $30,000,000 cash $30,000,000 driven by a $37,000,000 inventory build as we restart operations in France. In addition, after the South 32 minutee disruption, repurchased incremental inventory of Magnereso. This inventory increase was partially offset CapEx outflows in the Q1 were $22,000,000 versus $80,000,000 in the prior quarter. In addition, we paid cash taxes totaling $9,000,000 related to 2023, an estimated tax payments for 2024. Speaker 300:20:01Last quarter, we continue our quarterly dividend in the amount of $0.0103 per share, which was paid on June 27. And we will be paying our 3rd quarter dividend of $0.0103 per share on September 37. In a net force to continue enhancing our capital allocation policy, we have finalized the share buyback program, which was approved at the June AGM. We have authorization to repurchase up to 37,800,000 shares over a 5 year period through both discretionary and non discretionary purchases. Next slide, please. Speaker 300:20:44We ended the 2nd quarter with a cash balance of $144,000,000 down from $160,000,000 in the 1st quarter. This reduction in cash is driven by the inventory buildup as I have just discussed. We continue to run the business on a net cash positive basis for the Q2 in a row. Our gross debt remained flat at $81,000,000 We remain committed to maintain a conservative balance sheet. However, we continuously explore opportunities to prudently add additional liquidity to enhance our financial flexibility. Speaker 300:21:23At this time, I will turn the call back over to Marco. Next slide, please. Speaker 200:21:29Thank you, Beatrice. Moving to the key takeaways on Slide 15. We had a strong second quarter growing sales by 15% versus the 1st quarter and adjusted EBITDA growing 120 4%, with adjusted EBITDA margin expanding by 600 basis points to 13%. Given the strong performance, we are increasing our adjusted EBITDA guidance range to 150 dollars to $170,000,000 We were successful in our efforts to level the playing field in U. S. Speaker 200:22:07Ferrosilicon market, resulting in trade action against predatory Russian imports. As a result, we have a significant opportunity to increase our market share starting in early 2025. We continue to make significant progress with our core share relationship, achieving excellent results in testing, validating their technology and the use of silicon rich materials in EV batteries. As mentioned before, we have enhanced our capital return program by having the share repurchase program approved by the June AGM. Operator, we are ready for questions. Speaker 200:22:51Thank you. Operator00:22:54Thank you, sir. The question comes from the line of Lucas Pipes from B. Riley Securities. Please ask your question. Speaker 400:23:37Thank you very much, operator. Good morning, good afternoon, everyone. Good to see the solid results and to bump in guidance. Marco, you mentioned in your prepared remarks the outlook for the second half of this year and you called out kind of Q4 as the weakest period. And if I heard you right, you cited pricing as one of the drivers for that. Speaker 400:24:01And I wondered if you could maybe elaborate on that, kind of given how index pricing has moved over the last 9 months, 10 months or so. I would have thought we would have passed the valley, so to speak, in pricing, but would appreciate your thoughts on that and how lags, mix, etcetera, might impact pricing? Thank you very much. Speaker 200:24:25Thank you. Well, we have a good visibility on Q3, of course, as a large bunch of our business is contra related with index pricing. This is why we have a good reading of the Q3 and we expect to at least confirm the level of Q2 and beyond Q3. Q4 is impacted by what we see in the market. Demand is weak in most of the segments. Speaker 200:25:06Steel, as crude in India, steel production in the world is down versus estimate when it's not in negative territories in certain geographies like U. S, for example. Aluminum is pretty stable in U. S, but weak, extremely weak in Europe. Chemicals are rather stable. Speaker 200:25:40Solar has a significant slowdown in Asia, mainly driven by the dramatic drop of polysilicon price, but also by the new investigation of U. S. Authorities, which are definitely slowing down the export of solar supply chain elements to U. S. So having this picture, we have already seen indexes weakening during the Q3. Speaker 200:26:18And as a consequence, we are extremely cautious on our outlook on quarter 4. So weaker volume, weaker pricing in Q4. Speaker 400:26:34That is helpful. Thank you, Marco. And you cited the Core Shell investment and technology. Could you elaborate on those results? What exactly was so positive? Speaker 400:26:54Was this a surprise either in terms of the results or the timing? Would appreciate your thoughts on that. Thank you so much. Speaker 200:27:02Well, I would be very even more positive when our batteries will start getting tested by the OEMs. But in the meantime, samples we contain 80% of our silicon metal have achieved almost 1,000 cycles of charging and discharging with a retention of 80% of their properties. These are, in our case, unprecedented results that are justifying the move of core shell toward producing pilot quantities of batteries and these 60 ohm per batteries that will be tested by the OEMs. So of course, we need more and more testing. We need the real testing by the OEMs. Speaker 200:28:05But it looks like we are close to solve the old problem of being able to address the swelling of silicon metal in the battery. Speaker 400:28:24That is really good to hear Marco. I really appreciate those comments. Really quickly, maybe for Beatrice as well. You stockpile some manganese ore ore on the back of the supply disruption. When would you expect your stockpiles there to normalize? Speaker 400:28:45And as it relates to kind of cash flow and working capital release, any comments as it relates to taking advantage of that buyback authorization? Thank you both. Speaker 300:28:57Yes. Thank you, Lucas. No, as I was mentioning in the call, so we have been taking advantage in Q2. So we have been seeing already the impact of lower manganese ore pricing, higher prices in Q2. And as you said, we take we bought some we purchased manganese ore in Q2, and we expect to see the release of this. Speaker 300:29:23And of course, we expect pricings to hold in Q3, and therefore, going to be a positive impact in working capital in Q3, but could be offset maybe with all the business. We expect that release of working capital overall could be more in Q4, Lukas. Speaker 400:29:47Any thoughts on the buyback authorization? Speaker 300:29:51Well, maybe what we said on the call, first, the AGM approved the share buyback program at the end of June. So we didn't have a lot of time to react on that, right, because the closing period came just started. And I think what is more relevant for us is when you hear Marco talking about the outlook on the 2nd part of the year and the market conditions, we want to take a conservative approach and preserve our cash and our liquidity. So for the time being, we're going to be we want to be prudent in the use of our cash and liquidity. Speaker 400:30:40I appreciate that. Thank you so much for all of your comments and continued best of luck. Keep up the good work. Thank Operator00:30:50you. Thank you. Thank you. We are now going to proceed with our next question. The questions come from the line of Martin Englert from Seaport Research Partners. Operator00:31:23Please ask your question. Speaker 500:31:25Hello. Good afternoon, everyone. So going back on silicon metal and price weakness, how much of the 4Q price weakness is associated with the weaker Asia market and maybe more favorably priced product being exported there from South Africa, so more of a negative mix shift implicating prices at the segment level? Speaker 200:31:55Let me talk about facts. Like in most of the businesses, China has built over capacity. And with the current crisis that they are going through, they are supporting everything that they can. We see that in silicon metal imports from China into Europe in the Q2, which have significantly increased. Prices are extremely low and these have an impact on the overall index. Speaker 200:32:44It is true that due to the quality that they export, they tend to supply mainly metallurgical silicon for aluminum. But they are definitely moving their product outside of China. And I have seen we have seen the same something that we need to test with imports in U. S. From Angola, where Chinese relocated apparently some of their old furnaces and silicon metal is exported out of Angola to U. Speaker 200:33:23S. The other part of your question is around solar demand. Our sales of silicon metal to Asia for solar have been rather stable in Q2. We foresee a slowdown in the second half of the year, which is related to this U. S. Speaker 200:33:56Investigation that basically blocks the export of solar supply chain elements to the U. S. So even the major players are concerned about being forced to pay duties in case they continue to do business. Honestly, we believe that this situation is not sustainable for the U. S. Speaker 200:34:27And I can add other comments, but at the moment, the offtake of silicon metal in Asia for solar has gone down. Speaker 500:34:42Thank you for all the detail there. That's helpful. I wanted to circle back on the ferrosilicon trade case. And it seems like there was maybe some pre buying ahead of that and elevated channel inventories. So you're expecting muted or depressed volumes in U. Speaker 500:35:04S. Ferrosilicon throughout the balance of the year, but then you expect an uptick into 2025. Is that correct? Speaker 200:35:15Yes. Well, I think I also made this comment in the previous quarter. Massive quantities of ferrosilicon have been delivered to U. S. In the last few months from Russia. Speaker 200:35:34And we estimate an amount of 120,000 tons of ferrosilicon that corresponds to 1 year supply of Russian ferrosilicon to the U. S. On top of it, we have seen like everywhere else massive increases of export outside of additional capacity of ferrosilicon out of Kazakhstan. And to combine this situation in U. S, we have seen increased export out of Brazil, some minor suppliers of Brazil of ferrosilicon plus Malaysia. Speaker 200:36:21So the situation combined with the we estimate the estimated drop of production of steel in U. S. About 3.3% below last year, year to date as stressed the environment. So pricing has gone out based on the announcement of the authorities, but we don't see too much liquidity yet. I can share with you a general comment that we perceive the need of securing supply of ferrosilicon next year in the American market because we are getting contacted by several steel manufacturers who want to secure volumes for next year. Speaker 500:37:21Are you aware of any alternative key sources that if these countries are blocked out of the U. S. Market due to the trade case that consumers in the U. S. May source from alternatively to kind of fill the holes or are they going to be largely fully reliant on U. Speaker 500:37:48S. Production? Speaker 200:37:50No, no, no. The first of all, there is quite significant free capacity now in the U. S. We are 2 local players and we have capacity. Of course, we can support demand also outside of our most competitive assets in U. Speaker 200:38:16S. And South Africa if needed. For sure, then you have the Brazil, some of the Brazilians who can supply more and some of the Asians who can supply more. So I don't think the U. S. Speaker 200:38:37Is going to suffer lack of ferrosilicon. Remember also that we our plant in Selma is down as we speak, and we could be going to Selma to ferrosilicon production in a quarter. Speaker 500:39:02Okay. I appreciate all the detail and congratulations on the results. Speaker 200:39:07Thank you. Thank you, Martin. Operator00:39:16Thank you. We have no further questions at this time. I will now hand back to Marco Levy for closing remarks. Speaker 200:39:24Thank you, and thank you again for your participation. We look forward to hearing from you on the next call in November. Have a great day. Operator00:39:35This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you and have a great day.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallFerroglobe Q2 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K) Ferroglobe Earnings HeadlinesFerroglobe PLC Schedules First Quarter 2025 Earnings Call for May 8, 2025April 24 at 5:00 PM | globenewswire.comFinancial Survey: Ferroglobe (NASDAQ:GSM) versus Santa Fe Gold (OTCMKTS:SFEG)April 22 at 1:36 AM | americanbankingnews.comReal Americans Don’t Wait on Wall Street’s Next MoveWhat's happening in the markets right now should concern every freedom-loving American who's worked hard and saved smart. Your 401(k) doesn't deserve to be dragged through the mud by tariffs, trade wars, reckless spending, and political standoffs. And you don't have to stand by while Wall Street plays roulette with your future.April 25, 2025 | Premier Gold Co (Ad)Comparing Ferroglobe (NASDAQ:GSM) and Battle North Gold (OTCMKTS:BNAUF)April 17, 2025 | americanbankingnews.comReturns On Capital Are Showing Encouraging Signs At Ferroglobe (NASDAQ:GSM)April 14, 2025 | finance.yahoo.comFerroglobe PLC (GSM): Among the Best Magnesium Stocks to Buy Right NowMarch 24, 2025 | msn.comSee More Ferroglobe Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Ferroglobe? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Ferroglobe and other key companies, straight to your email. Email Address About FerroglobeFerroglobe (NASDAQ:GSM) produces and sells silicon metal, and silicon and manganese-based ferroalloys in the United States, Europe, and internationally. It provides silicone chemicals that are used in a range of applications, including personal care items, construction-related products, health care products, and electronics; and silicon metal for primary and secondary aluminum producers. The company also offers silicomanganese, which is used as deoxidizing agent in the steel manufacturing process; and ferromanganese that is used as a deoxidizing, desulphurizing, and degassing agent in the removal of nitrogen and other harmful elements from steel. In addition, it offers ferrosilicon products that are used to produce stainless steel, carbon steel, and various other steel alloys, as well as to manufacture electrodes and aluminum; calcium silicon, which is used in the deoxidation and desulfurization of liquid steel, and production of coatings for cast iron pipes, as well as in the welding process of powder metal and in pyrotechnics; and nodularizers and inoculants, which are used in the production of iron. Further, the company provides silica fume, a by-product of the electrometallurgical process of silicon metal and ferrosilicon. Additionally, it operates quartz mines in South Africa, Spain, the United States, and Canada; and low-ash metallurgical coal mines in the United States; and a charcoal production facility in South Africa, as well as holds interests in hydroelectric power plant in France. The company serves silicone chemical producers; aluminum and steel manufacturers; auto companies and their suppliers; ductile iron foundries; manufacturers of photovoltaic solar cells and computer chips; and concrete producers. Ferroglobe PLC was formerly known as VeloNewco Limited and changed its name to Ferroglobe PLC in December 2015. The company was incorporated in 2015 and is headquartered in London, the United Kingdom.View Ferroglobe ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Market Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of EarningsAmazon's Earnings Could Fuel a Rapid Breakout Tesla Earnings Miss, But Musk Refocuses and Bulls ReactQualcomm’s Range Narrows Ahead of Earnings as Bulls Step In Upcoming Earnings Cadence Design Systems (4/28/2025)Welltower (4/28/2025)Waste Management (4/28/2025)AstraZeneca (4/29/2025)Booking (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Regeneron Pharmaceuticals (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 6 speakers on the call. Operator00:00:00Good morning, good afternoon, ladies and gentlemen. Welcome to Ferroglobe's Second Quarter 2024 Earnings Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will be given at that time. As a reminder, this conference call may be recorded. Operator00:00:18I would now like to turn the conference over to Alex Rotonen, Ferroglobe's Vice President of Investor Relations. You may begin. Speaker 100:00:27Thanks, Roz. Good morning, everyone, and thank you for joining Ferroglobe's Q2 2024 Conference Call. Joining me today are Marco Levy, our Chief Executive Officer and Beatrice Garcia Kos, our Chief Financial Officer. Before we get started with some prepared remarks, I'm going to read a brief statement. Please turn to Slide 2 at this time. Speaker 100:00:55Statements made by management during this conference call that are forward looking are based on current expectations. Factors that could cause actual results to differ materially from these forward looking statements can be found in Ferroglobe's most recent SEC filings and the exhibit to those filings, which are available on our webpage atferroglobe.com. In addition, this discussion includes references to EBITDA, adjusted EBITDA, adjusted gross debt, net debt and adjusted diluted earnings per share among other non IFRS measures. Reconciliations of non IFRS measures may be found in our most recent SEC filings. Before I turn the call over to Marco Levy, our Chief Executive Officer, I want to announce that we'll be participating in Seaport Research Partners' Annual Summer Investor Conference on August 20 21. Speaker 100:01:55We hope to see you there. Marco? Speaker 200:01:58Thank you, Alex, and good morning, good day and good evening to everyone. Thanks for joining us on the call today. We appreciate your interest in Ferroglobe. Before I begin with our quarterly earnings update, I want to inform you with deep regret that Juan Miguel Guilhermeir, Founder and Former Chairman of FerroAtlantica, our legacy company, passed away last month. I would like to express our deepest condolences to East family. Speaker 200:02:35In Q2, we continue to execute well, driving strong financial performance with increased volumes, revenues and adjusted EBITDA. As we discussed in our Q1 call, in May of this year, the U. S. International Trade Commission recognized that the imports of ferrosilicon from Russia, Kazakhstan, Malaysia and Brazil, which represented approximately 70% of all imports in 2023 are injuring our U. S. Speaker 200:03:13Operation. The substantial government subsidies are received in these countries and the low selling prices of these imports have adversely impacted U. S. Pharmaceutical market, hurting local producers and their ability to compete. The ITC's final decision will be made in October. Speaker 200:03:39On June 24, the U. S. Department of Commerce announced preliminary antidumping and countervailing duties of 283% 748%, respectively, on all Russian importers of ferrosilicon. As a result, all importers of Russian ferrosilicon are required to post cash deposits or bonds to cover these duties. Russia represents approximately 35 percent of all ferrosilicon imports into the U. Speaker 200:04:17S. In 2023. This is a significant victory for our industry, allowing us to compete on a level playing field. The investigations of the remaining 3 countries, Kazakh contamination and Brazil are still underway. The International Trade Commission will announce by eliminating the terminations for countervailing duties expected in August and anti dumping duties in October. Speaker 200:04:47We believe these decisions will have a positive impact on our business in 2025 as inventory in the channel is depleted. As you recall, during the Q1, we signed an MoU with Core Shell to further develop batteries for EVs using silicon rich channels. We are very excited about this relationship as it enables us to take part in the evolution of EV batteries. In testing, core shell has achieved a high cycle lifetime using an 80% ferroglobe silicon content anode in a core shell battery. This improvement in battery performance is an important milestone. Speaker 200:05:36The benefit to consumers is that the silicon rich channel significantly reduces the cost of batteries, speeds up the charging time to just 10 minutes and increases the range up to 40%. The next step is to produce a commercial size battery that OEMs can begin testing, sorry. CoreShell has closed its financial round targeting the development of a pilot plant that will produce larger 60 ampere cells for the OEM testings. This project is on track with commissioning schedule to begin in Q4 of this year and testing at OEMs expected in early 2025. We'll keep you informed as we continue to achieve new milestones. Speaker 200:06:30In addition to develop silicon to developing silicon ray channels with CarShell, we are working approximately with 70 ED battery companies who also developed other silicon based technologies, such as silicon carbon composites and silicon monoxide anodes for batteries. These technologies, while less efficient than silicon batteries, are either in use or expected to enter the market in 2020. While wet prices in general have been strong during the first half of the year, they have been very they're even more by supply constraint than a fundamental improvement in demand. Strong index prices in the 2nd quarter should drive solid results in Q3. However, we are still cautious about the Q4 given the uncertainty in the market, especially as it relates to the aluminum, foundry and steel sectors. Speaker 200:07:40We continue to announce our capital return policy in addition to paying a quarterly dividend of $0.01.8 per share, our share buyback program was approved in June. We are narrowing the adjusted EBITDA guidance range from $130,000,000 to $170,000,000 to $150,000,000 to $170,000,000 The strong second quarter combined with higher interest prices should positively impact the 3rd quarter, which gives us more confidence for the second half of the year. However, given the weak demand, we are still cautious about the Q4. And combined with the idling of French operations, we anticipate having the lowest adjusted EBITDA of the year in the 4th quarter. Next slide, please. Speaker 200:08:40Our Q2 performance was strong with total sales increasing by 15% from the prior quarter to $451,000,000 and adjusted EBITDA reaching $58,000,000 up from $26,000,000 driven by strong pricing and sales volumes. Operating cash flow and free cash flow were $2,000,000 and negative $20,000,000 respectively, due to inventory build as we have started France and made a calculated decision to purchase incremental tons of manganese ore in anticipation of price increases. The efforts will discuss this in more details as Shira reviews the financial results. Next slide please. Typical metal revenue in the 2nd quarter was $204,000,000 up 22% from the prior year quarter. Speaker 200:09:41This increase was a result of higher prices and higher volumes. Average realized prices increased 2.8%, while shipments increased 18.2% to almost 63,000 tons, driven primarily by strong sales to the chemical sector in Europe. The volume shift in the Q2 was the highest level in the past 2 years. Index prices in Europe, which were down slightly in the Q2, were negatively impacted by lower priced Chinese exports and weakened the market, particularly the aluminum sector, which was affected by high energy prices in Europe. Prices in North America were strong in the Q2 as they benefited from supply constraints such as the Baltimore Bridge accident. Speaker 200:10:38In addition, high tariffs make Chinese silicon metal imports a known factor in the U. S. Market. Silicon Metal adjusted EBITDA was $35,000,000 an increase of 115% over the full year quarter, driven by strong volumes, higher prices and lower costs. Given weak demand in end markets and easing supply constraints, we expect the indices to soften into the 3rd and 4th quarters. Speaker 200:11:12With a typical 3 month lag in pricing, we expect the Q3 results to be relatively stable, but weaker in the Q4. In addition, we expect France to be idle toward the end of the year, which will also impact 4th quarter results. Next slide please. Pivicon based alloys. Revenue in the 2nd quarter was $105,000,000 down 6% from the period quarter. Speaker 200:11:43This revenue decline was a result of lower shipments, which were down 8% from the prior quarter, partially offset by a 2.4% increase in prices. Index prices in North America were up versus the Q1, while Europe was relatively flat during the Q2. Adjusted EBITDA was $10,000,000 in the 2nd quarter, down 29% from the Q1. This decrease was the result of a higher cost due to the idling of French operation in the Q1 and lower absorption cost in the U. S. Speaker 200:12:25Weak shipments were primarily driven by inventories due to Russia selling subsidized low price Phase II production in the U. S. Excessive Russian shipments have led to a high level of inventory in the channel, which we expect will be depleted over the next couple of quarters. This will negatively impact demand until inventory levels normalize. However, as a result of the tariffs recently imposed on U. Speaker 200:13:04S. Imports of FASI, we anticipate an increasing demand beginning in Q1 of 2025 as imports from the affected countries will be in the years. This is expected to give Ferroglobe an opportunity to expand its market share in the region. Given the current economic uncertainty, we expect European and U. S. Speaker 200:13:28Steel demand to remain soft for the second half of the year. To the next slide please. Turning now to manganese based alloys. Manganese based alloys revenue in the 2nd quarter was $98,000,000 up 48% from the prior quarter. This revenue increase was a result of higher shipments of 81,000 tons, up 31% from the prior quarter, higher realized prices increased 13%. Speaker 200:14:03We capitalized on South 32 high grade manganese ore mine shutdown, which was damaged by Cyclone Megan in late March by building higher inventory levels of manganese ore before the resulting shortage drove market prices higher. This enabled us to ship the highest volume of manganese alloys in the past 8 quarters. Manganese alloys index price increased during the Q2, driven by a shortage of high grade manganese ore caused by this shutdown. Adjusted EBITDA was $14,000,000 up from $6,000,000 in the first quarter. This represents an increase of over 150%. Speaker 200:14:52Price and to a lesser extent volume drove the increase in EBITDA, partially offset by higher costs. European end markets continue to be weak, and we expect our volume to normalize in the second half. It is important to note that nearly all our end market for manganese alloys is in Europe. Now I would like to turn the call over to Beatriz Garcia Kos, our Chief Financial Officer, to review the financial results in more detail. Beatriz? Speaker 300:15:28Thank you, Marco. Please turn to Slide 10 for a review of the income statement. Sales increased 50% in the 2nd quarter to $451,000,000 up from $392,000,000 in the prior quarter. During the Q2, we saw increased volumes in silicon metals and manganese alloys and higher selling prices across all three segments. Raw material and energy consumption for production remained broadly flat and decreased as a percentage of sales from 66% to 59% in the Q2, primarily due to effective cost management and higher fixed cost absorption as a result of increased volumes. Speaker 300:16:18Other operating expenses for the quarter increased by 64% to $86,000,000 partially driven by a $19,000,000 increase due to the fair value adjustment of the free carbon credit. This is fully offset by an increase in other income. Staff cost decreased by $3,000,000 in the 2nd quarter to $67,000,000 due to the profit sharing arrangement in Europe during the Q1. Adjusted EBITDA in the 2nd quarter more than doubled to $58,000,000 from $26,000,000 in the prior quarter. During the quarter, we earned approximately $8,000,000 from our 2024 French Energy Agreement, in line with the Q1. Speaker 300:17:08As a reminder, cash from these benefits is expected in early 2025. Net financial expenses for the quarter declined 31 percent to $5,000,000 due to the full redemption of the senior secured notes in February. Going forward, we expect interest expenses to normalize below this level. Next slide, please. Our adjusted EBITDA margin increased from 7% in the 1st quarter to 13% in the 2nd quarter, primarily due to increased pricing and volumes, which impact EBITDA by $80,000,000 $11,000,000 respectively, relative to the Q1. Speaker 300:17:55The higher cost was driven by the mark to market earn out provision in the manganese business, partially offset by higher fixed cost absorption in France and Spain. Overall, average selling prices increased by 2.5%, positively impacting adjusted EBITDA by $80,000,000 $10,000,000 of which was from manganese based alloys. Total volume increased by 50% with an $11,000,000 impact on adjusted EBITDA compared to the prior quarter, thanks to increased silicon metal sales to the chemical sector in Europe. Head office and non core business contributed approximately $5,000,000 to increased EBITDA, driven by lower G and A costs. Slide 12, please. Speaker 300:18:53During the Q2, we consumed free cash flow of $20,000,000 primarily due to the need to build up inventories from the end of Q1, during which the French plants were idle and higher manganese oil prices following South 32 May 8 shutdown. Working capital was a use of $30,000,000 cash $30,000,000 driven by a $37,000,000 inventory build as we restart operations in France. In addition, after the South 32 minutee disruption, repurchased incremental inventory of Magnereso. This inventory increase was partially offset CapEx outflows in the Q1 were $22,000,000 versus $80,000,000 in the prior quarter. In addition, we paid cash taxes totaling $9,000,000 related to 2023, an estimated tax payments for 2024. Speaker 300:20:01Last quarter, we continue our quarterly dividend in the amount of $0.0103 per share, which was paid on June 27. And we will be paying our 3rd quarter dividend of $0.0103 per share on September 37. In a net force to continue enhancing our capital allocation policy, we have finalized the share buyback program, which was approved at the June AGM. We have authorization to repurchase up to 37,800,000 shares over a 5 year period through both discretionary and non discretionary purchases. Next slide, please. Speaker 300:20:44We ended the 2nd quarter with a cash balance of $144,000,000 down from $160,000,000 in the 1st quarter. This reduction in cash is driven by the inventory buildup as I have just discussed. We continue to run the business on a net cash positive basis for the Q2 in a row. Our gross debt remained flat at $81,000,000 We remain committed to maintain a conservative balance sheet. However, we continuously explore opportunities to prudently add additional liquidity to enhance our financial flexibility. Speaker 300:21:23At this time, I will turn the call back over to Marco. Next slide, please. Speaker 200:21:29Thank you, Beatrice. Moving to the key takeaways on Slide 15. We had a strong second quarter growing sales by 15% versus the 1st quarter and adjusted EBITDA growing 120 4%, with adjusted EBITDA margin expanding by 600 basis points to 13%. Given the strong performance, we are increasing our adjusted EBITDA guidance range to 150 dollars to $170,000,000 We were successful in our efforts to level the playing field in U. S. Speaker 200:22:07Ferrosilicon market, resulting in trade action against predatory Russian imports. As a result, we have a significant opportunity to increase our market share starting in early 2025. We continue to make significant progress with our core share relationship, achieving excellent results in testing, validating their technology and the use of silicon rich materials in EV batteries. As mentioned before, we have enhanced our capital return program by having the share repurchase program approved by the June AGM. Operator, we are ready for questions. Speaker 200:22:51Thank you. Operator00:22:54Thank you, sir. The question comes from the line of Lucas Pipes from B. Riley Securities. Please ask your question. Speaker 400:23:37Thank you very much, operator. Good morning, good afternoon, everyone. Good to see the solid results and to bump in guidance. Marco, you mentioned in your prepared remarks the outlook for the second half of this year and you called out kind of Q4 as the weakest period. And if I heard you right, you cited pricing as one of the drivers for that. Speaker 400:24:01And I wondered if you could maybe elaborate on that, kind of given how index pricing has moved over the last 9 months, 10 months or so. I would have thought we would have passed the valley, so to speak, in pricing, but would appreciate your thoughts on that and how lags, mix, etcetera, might impact pricing? Thank you very much. Speaker 200:24:25Thank you. Well, we have a good visibility on Q3, of course, as a large bunch of our business is contra related with index pricing. This is why we have a good reading of the Q3 and we expect to at least confirm the level of Q2 and beyond Q3. Q4 is impacted by what we see in the market. Demand is weak in most of the segments. Speaker 200:25:06Steel, as crude in India, steel production in the world is down versus estimate when it's not in negative territories in certain geographies like U. S, for example. Aluminum is pretty stable in U. S, but weak, extremely weak in Europe. Chemicals are rather stable. Speaker 200:25:40Solar has a significant slowdown in Asia, mainly driven by the dramatic drop of polysilicon price, but also by the new investigation of U. S. Authorities, which are definitely slowing down the export of solar supply chain elements to U. S. So having this picture, we have already seen indexes weakening during the Q3. Speaker 200:26:18And as a consequence, we are extremely cautious on our outlook on quarter 4. So weaker volume, weaker pricing in Q4. Speaker 400:26:34That is helpful. Thank you, Marco. And you cited the Core Shell investment and technology. Could you elaborate on those results? What exactly was so positive? Speaker 400:26:54Was this a surprise either in terms of the results or the timing? Would appreciate your thoughts on that. Thank you so much. Speaker 200:27:02Well, I would be very even more positive when our batteries will start getting tested by the OEMs. But in the meantime, samples we contain 80% of our silicon metal have achieved almost 1,000 cycles of charging and discharging with a retention of 80% of their properties. These are, in our case, unprecedented results that are justifying the move of core shell toward producing pilot quantities of batteries and these 60 ohm per batteries that will be tested by the OEMs. So of course, we need more and more testing. We need the real testing by the OEMs. Speaker 200:28:05But it looks like we are close to solve the old problem of being able to address the swelling of silicon metal in the battery. Speaker 400:28:24That is really good to hear Marco. I really appreciate those comments. Really quickly, maybe for Beatrice as well. You stockpile some manganese ore ore on the back of the supply disruption. When would you expect your stockpiles there to normalize? Speaker 400:28:45And as it relates to kind of cash flow and working capital release, any comments as it relates to taking advantage of that buyback authorization? Thank you both. Speaker 300:28:57Yes. Thank you, Lucas. No, as I was mentioning in the call, so we have been taking advantage in Q2. So we have been seeing already the impact of lower manganese ore pricing, higher prices in Q2. And as you said, we take we bought some we purchased manganese ore in Q2, and we expect to see the release of this. Speaker 300:29:23And of course, we expect pricings to hold in Q3, and therefore, going to be a positive impact in working capital in Q3, but could be offset maybe with all the business. We expect that release of working capital overall could be more in Q4, Lukas. Speaker 400:29:47Any thoughts on the buyback authorization? Speaker 300:29:51Well, maybe what we said on the call, first, the AGM approved the share buyback program at the end of June. So we didn't have a lot of time to react on that, right, because the closing period came just started. And I think what is more relevant for us is when you hear Marco talking about the outlook on the 2nd part of the year and the market conditions, we want to take a conservative approach and preserve our cash and our liquidity. So for the time being, we're going to be we want to be prudent in the use of our cash and liquidity. Speaker 400:30:40I appreciate that. Thank you so much for all of your comments and continued best of luck. Keep up the good work. Thank Operator00:30:50you. Thank you. Thank you. We are now going to proceed with our next question. The questions come from the line of Martin Englert from Seaport Research Partners. Operator00:31:23Please ask your question. Speaker 500:31:25Hello. Good afternoon, everyone. So going back on silicon metal and price weakness, how much of the 4Q price weakness is associated with the weaker Asia market and maybe more favorably priced product being exported there from South Africa, so more of a negative mix shift implicating prices at the segment level? Speaker 200:31:55Let me talk about facts. Like in most of the businesses, China has built over capacity. And with the current crisis that they are going through, they are supporting everything that they can. We see that in silicon metal imports from China into Europe in the Q2, which have significantly increased. Prices are extremely low and these have an impact on the overall index. Speaker 200:32:44It is true that due to the quality that they export, they tend to supply mainly metallurgical silicon for aluminum. But they are definitely moving their product outside of China. And I have seen we have seen the same something that we need to test with imports in U. S. From Angola, where Chinese relocated apparently some of their old furnaces and silicon metal is exported out of Angola to U. Speaker 200:33:23S. The other part of your question is around solar demand. Our sales of silicon metal to Asia for solar have been rather stable in Q2. We foresee a slowdown in the second half of the year, which is related to this U. S. Speaker 200:33:56Investigation that basically blocks the export of solar supply chain elements to the U. S. So even the major players are concerned about being forced to pay duties in case they continue to do business. Honestly, we believe that this situation is not sustainable for the U. S. Speaker 200:34:27And I can add other comments, but at the moment, the offtake of silicon metal in Asia for solar has gone down. Speaker 500:34:42Thank you for all the detail there. That's helpful. I wanted to circle back on the ferrosilicon trade case. And it seems like there was maybe some pre buying ahead of that and elevated channel inventories. So you're expecting muted or depressed volumes in U. Speaker 500:35:04S. Ferrosilicon throughout the balance of the year, but then you expect an uptick into 2025. Is that correct? Speaker 200:35:15Yes. Well, I think I also made this comment in the previous quarter. Massive quantities of ferrosilicon have been delivered to U. S. In the last few months from Russia. Speaker 200:35:34And we estimate an amount of 120,000 tons of ferrosilicon that corresponds to 1 year supply of Russian ferrosilicon to the U. S. On top of it, we have seen like everywhere else massive increases of export outside of additional capacity of ferrosilicon out of Kazakhstan. And to combine this situation in U. S, we have seen increased export out of Brazil, some minor suppliers of Brazil of ferrosilicon plus Malaysia. Speaker 200:36:21So the situation combined with the we estimate the estimated drop of production of steel in U. S. About 3.3% below last year, year to date as stressed the environment. So pricing has gone out based on the announcement of the authorities, but we don't see too much liquidity yet. I can share with you a general comment that we perceive the need of securing supply of ferrosilicon next year in the American market because we are getting contacted by several steel manufacturers who want to secure volumes for next year. Speaker 500:37:21Are you aware of any alternative key sources that if these countries are blocked out of the U. S. Market due to the trade case that consumers in the U. S. May source from alternatively to kind of fill the holes or are they going to be largely fully reliant on U. Speaker 500:37:48S. Production? Speaker 200:37:50No, no, no. The first of all, there is quite significant free capacity now in the U. S. We are 2 local players and we have capacity. Of course, we can support demand also outside of our most competitive assets in U. Speaker 200:38:16S. And South Africa if needed. For sure, then you have the Brazil, some of the Brazilians who can supply more and some of the Asians who can supply more. So I don't think the U. S. Speaker 200:38:37Is going to suffer lack of ferrosilicon. Remember also that we our plant in Selma is down as we speak, and we could be going to Selma to ferrosilicon production in a quarter. Speaker 500:39:02Okay. I appreciate all the detail and congratulations on the results. Speaker 200:39:07Thank you. Thank you, Martin. Operator00:39:16Thank you. We have no further questions at this time. I will now hand back to Marco Levy for closing remarks. Speaker 200:39:24Thank you, and thank you again for your participation. We look forward to hearing from you on the next call in November. Have a great day. Operator00:39:35This concludes today's conference call. Thank you all for participating. 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