GSM Ferroglobe PLC

Ferroglobe PLC (NASDAQ:GSM), the world’s leading producer of silicon metal, and a leading silicon- and manganese-based specialty alloys producer, today announced results for the third quarter of 2017.

In Q3 2017, Ferroglobe posted a net loss of $(5.0) million, or $(0.02) per share on a fully diluted basis. On an adjusted basis, Q3 2017 net profit was $9.2 million, or $0.05 per share on a fully diluted basis.

Q3 2017 reported EBITDA was $54.3 million, up from $36.8 million in the prior quarter. On an adjusted basis, Q3 2017 EBITDA was $56.1 million, up 27.9% from Q2 2017 adjusted EBITDA of $43.9 million. The company reported adjusted EBITDA margins of 12.4% for Q3 2017, compared to adjusted EBITDA margins of 10.3% for Q2 2017.

Net sales in Q3 2017 totaled $451.6 million, up 6.1% from $425.8 million in Q2 2017. Selling prices for Ferroglobe’s key products continued to improve over the course of the quarter across both the U.S. and Europe:

• The average selling price for silicon metal increased by 5.4% from $2,210/MT in Q2 2017 to $2,330/MT in Q3 2017, a significant improvement driven mainly by the market impact of the ongoing trade cases in the United States;  
• The average selling price for silicon-based alloys increased 3.7% to $1,645/MT in the quarter from $1,586/MT in the prior quarter;
• The average selling price for manganese alloys increased 3.1% to $1,349/MT in Q3 as compared to $1,308/MT in the prior quarter; and,
• In addition to these pricing trends, Ferroglobe continued to realize average sales prices in excess of the index.

In addition to improved pricing, the company also saw stabilization of demand and volumes across its key products. In terms of sales volumes, silicon metal experienced a 0.7% increase quarter-over-quarter, manganese alloys experienced a 14.3% increase quarter-over-quarter and silicon alloys experienced a 5.7% decrease quarter-over-quarter.  

____________________________

1 As of September 30, 2017, the balance sheet includes the securitized accounts receivables under the Company’s new global accounts receivables securitization program which began in July 2017.  As such, $120.1M is included in debt and accounts receivables in the balance sheet as of September 30, 2017, which reflects the receivables sold into the program.  However, the impact of the securitization is included in the calculation of certain key metrics, such as net debt, working capital, cash flows from operations and free cash flow in order make such metrics comparable.

					Quarter Ended September 30, 2017			Quarter Ended  June 30, 2017			Quarter Ended September 30, 2016			Nine Months Ended September 30, 2017			Nine Months Ended September 30, 2016
Shipments in metric tons:
	Silicon Metal					83,465			82,881			81,091			242,099			259,016
	Silicon-based Alloys					66,873			70,913			69,539			212,622			218,271
	Manganese-based Alloys					73,642			64,403			59,368			201,745			193,985
		Total shipments*				223,980			218,197			209,998			656,466			671,272
					Quarter Ended September 30, 2017			Quarter Ended June 30, 2017			Quarter Ended September 30, 2016			Nine Months Ended September 30, 2017			Nine Months Ended September 30, 2016
Average selling price ($/MT):
	Silicon Metal				$2,330			$2,210			$2,090			$2,211			$2,240
	Silicon-based Alloys				$1,645			$1,586			$1,391			$1,564			$1,421
	Manganese-based Alloys				$1,349			$1,308			$865			$1,320			$801
		Total*			$1,803			$1,741			$1,512			$1,727			$1,558
					Quarter Ended September 30, 2017			Quarter Ended June 30, 2017			Quarter Ended September 30, 2016			Nine Months Ended September 30, 2017			Nine Months Ended September 30, 2016
Average selling price ($/lb.):
	Silicon Metal				$1.06			$1.00			$0.95			$1.00			$1.02
	Silicon-based Alloys				$0.75			$0.72			$0.63			$0.71			$0.64
	Manganese-based Alloys				$0.61			$0.59			$0.39			$0.60			$0.36
		Total*			$0.82			$0.79			$0.69			$0.78			$0.71
* Excludes by-products and other

“Ferroglobe delivered strong performance with quarter-over-quarter earnings growth and improved profitability. The ongoing trade cases in the United States resulted in continued pricing improvement for silicon metal in that market and sustained strong end-market demand continued to drive the stabilization of shipment volumes,” said CEO Pedro Larrea. “The business continues to perform through the recovery, and we are focused on carefully managing our costs to fully capture the benefits of the new market environment. At the same time, as the recently announced deal with Glencore proves, we are increasing our presence in the core businesses. We expect prices to continue to improve through the year and we remain focused on sustained performance across all business segments as we move into the final quarter of 2017 and beyond.”

Strong cash flow generation continues to support liquidity

Working capital decreased by $11.6 million1 during the quarter, primarily a result of the increased securitization of receivables. Year-to-date the company has increased total working capital by $8.6 million1 due to the recovery cycle. Ferroglobe continued to generate positive cash flows. During the third quarter, the company generated operating cash flows of $67.4 million1, free cash flow of $52.7 million1, with total free cash flow of $58.5 million1 year to date.

Ferroglobe’s net debt was $394.3 million1 at the end of Q3 2017, down compared to $434.6 million at the end of Q2 2017.

Adjusted EBITDA:

		Quarter Ended September 30, 2017				Quarter Ended June 30, 2017				Quarter Ended September 30, 2016				Nine Months Ended September 30, 2017				Nine Months Ended September 30, 2016
(Loss) profit  attributable to the parent	$	(3,347	)			2,859				(28,523	)			(7,042	)			(96,460	)
Loss attributable to non-controlling interest		(1,640	)			(1,859	)			(2,545	)			(5,060	)			(15,836	)
Income tax expense (benefit)		14,364				(1,949	)			(10,158	)			11,201				(38,419	)
Net finance expense		14,528				14,547				6,693				42,045				21,216
Financial derivatives loss		1,823				4,071				-				5,894				-
Exchange differences		1,529				(7,263	)			876				(5,714	)			2,880
Depreciation and amortization charges, operating allowances and write-downs		27,076				26,401				30,440				80,699				97,972
EBITDA		54,333				36,807				(3,217	)			122,023				(28,647	)
Non-controlling interest settlement		-				1,751				-				1,751				-
Power credit		-				(3,696	)			-				(3,696	)			-
Long lived asset charge due to reclassification of discontinued operations to continuing operations		-				2,608				-				2,608				-
Accrual of contingent liabilities related to commercial disputes		-				6,400				-				6,400				-
Impairment loss		-				-				9,043				-				67,630
Transaction and due diligence expenses		-				-				111				-				7,979
Business interruption		(1,980	)			-				2,532				(1,980	)			2,532
Inventory impairment		-				-				4,330				-				4,330
Step-up valuation adjustment		3,757				-				-				3,757				-
Globe purchase price allocation adjustments		-				-				-				-				10,022
Adjusted EBITDA	$	56,110				43,870				12,799				130,863				63,846

Adjusted net profit (loss) attributable to Ferroglobe:

			Quarter Ended September 30, 2017				Quarter EndedJune 30, 2017				Quarter Ended September 30, 2016				Nine Months Ended September 30, 2017				Nine Months Ended September 30, 2016
(Loss) profit attributable to the parent		$	(3,347	)			2,859				(28,523	)			(7,042	)			(96,460	)
	Tax rate adjustment		11,363				(1,645	)			3,035				11,489				9,810
	Non-controlling interest settlement		-				1,191				-				1,191				-
	Power credit		-				(2,513	)			-				(2,513	)			-
	Long lived asset charge due to reclassification of discontinued operations to continuing operations		-				1,773				-				1,773				-
	Accrual of contingent liabilities related to commercial disputes		-				4,352				-				4,352				-
	Impairment loss		-				-				6,149				-				45,988
	Transaction and due diligence expenses		-				-				75				-				5,426
	Business interruption		(1,346	)			-				1,722				(1,346	)			1,722
	Inventory impairment		-				-				2,944				-				2,944
	Step-up valuation adjustment		2,555				-				-				2,555				-
	Globe purchase price allocation adjustments		-				-				-				-				6,815
Adjusted profit (loss) attributable to the parent		$	9,225				6,017				(14,598	)			10,459				(23,755	)

Adjusted diluted profit (loss) per share:

			Quarter EndedSeptember 30, 2017				Quarter Ended June 30, 2017				Quarter Ended September 30, 2016				Nine Months Ended September 30, 2017				Nine Months Ended September 30, 2016
Diluted profit (loss) per ordinary share			(0.02	)			0.02				(0.17	)			(0.04	)			(0.56	)
	Tax rate adjustment		0.07				(0.01	)			0.01				0.07				0.06
	Non-controlling interest settlement		-				0.01				-				0.01				-
	Power credit		-				(0.01	)			-				(0.01	)			-
	Long lived asset charge due to reclassification of discontinued operations to continuing operations		-				0.01				-				0.01				-
	Accrual of contingent liabilities related to commercial disputes		-				0.03				-				0.03				-
	Impairment loss		-				-				0.04				-				0.27
	Transaction and due diligence expenses		-				-				-				-				0.03
	Business interruption		(0.01	)			-				0.01				(0.01	)			0.01
	Inventory impairment		-				-				0.02				-				0.02
	Executive severance		-				-				-				-				-
	Step-up valuation adjustment		0.01				-				-				0.01				-
	Globe purchase price allocation adjustments		-				-				-				-				0.04
Adjusted diluted profit (loss) per ordinary share			0.05				0.05				(0.09	)			0.07				(0.13	)

Recent developments

The trade cases in the United States and the favorable demand environment have allowed Ferroglobe to return to close to full capacity utilization. The Selma facility (Alabama, US) has restarted operations, and the remainder of Ferroglobe’s European and North American plants are running at full capacity. Facilities in Argentina and South Africa are at 50% and 65% utilization, respectively, as a result of unfavorable local conditions, but are planning to restart full operations in the near future. Ferroglobe’s plant in Venezuela has halted operations since May, as the company awaits further developments in the country. 

In the ongoing trade cases that Ferroglobe filed in the U.S., the Department of Commerce (“DOC”) issued preliminary determinations on August 7, 2017 imposing countervailing duties on silicon metal imports from Australia, Brazil and Kazakhstan. The duties imposed ranged from 3.69% to 120%. The DOC made preliminary determinations on October 5, 2017 in the antidumping cases against Australia, Brazil and Norway. The antidumping duties imposed ranged from 3.74% to 134.92%. Now more than 63% of silicon metal imports into the U.S. are subject to cash deposit requirements.  

On November 2, 2017, the Canadian International Trade Tribunal (“CITT”) determined that dumped silicon metal imports from Laos and Thailand, subsidized imports from Norway, and dumped and subsidized imports from Brazil, Kazakhstan and Malaysia had not caused injury and were not threatening to cause injury to the sole Canadian producer, Quebec Silicon Limited Partnership and QSIP Canada ULC (“Quebec Silicon”).

The CITT issued its reasons for decision on November 17, 2017. We believe the CITT made several critical errors regarding, among others, the impact and relevance of global price declines on Canadian market pricing and the basis on which silicon metal is negotiated and sold to customers in Canada. Ferroglobe intends to appeal the CITT’s decision to the Federal Court of Appeal.

We note this decision has no relevance for or impact on the ongoing antidumping and countervailing duty cases in the United States against silicon metal imports from Australia, Brazil, Kazakhstan and Norway because these are different proceedings in different jurisdictions, based on different facts and different legal standards. 

On November 21, Ferroglobe announced that it has entered into an agreement for the acquisition of a 100% interest in Glencore’s manganese alloys plants in Dunkirk (France) and Mo I Rana (Norway). The parties expect the transaction to close in the first quarter of 2018, subject to obtaining certain regulatory approvals in France, Germany and Poland and other customary conditions.

Conference Call

Ferroglobe will review the results for the third quarter of 2017 during a conference call at 9:00 a.m. Eastern Time on Tuesday, November 28, 2017.

The dial-in number for the call for participants in the United States is +1 877-293-5491 (conference ID 4495559). International callers should dial +1 914-495-8526 (conference ID 4495559).  Please dial in at least five minutes prior to the call to register. The call may also be accessed via an audio webcast available at https://edge.media-server.com/m6/p/zre43hs5

About Ferroglobe

Ferroglobe PLC is one of the world’s leading suppliers of silicon metal, silicon-based specialty alloys, and ferroalloys serving a customer base across the globe in dynamic and fast-growing end markets, such as solar, automotive, consumer products, construction and energy. The company is based in London. For more information, visit http://investor.ferroglobe.com.

Forward-Looking Statements

This release contains "forward-looking statements" within the meaning of U.S. securities laws. Forward-looking statements are not historical facts but are based on certain assumptions of management and describe the Company's future plans, strategies and expectations. Forward-looking statements often use forward-looking terminology, including words such as "anticipate", "believe", "could", "estimate", "expect", "forecast", "guidance", "intends", "likely", "may", "plan", "potential", "predicts", "seek", "will" and  words of similar meaning or the negative thereof.

Forward-looking statements contained in this press release are based on information presently available to the Company and assumptions that we believe to be reasonable, but are inherently uncertain. As a result, Ferroglobe's actual results, performance or achievements may differ materially from those expressed or implied by these forward-looking statements, which are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond the Company's control.

Forward-looking financial information and other metrics presented herein represent the Company's goals and are not intended as guidance or projections for the periods presented herein or any future periods.

All information in this press release is as of the date of its release. Ferroglobe does not undertake any obligation to update publicly any of the forward-looking statements contained herein to reflect new information, events or circumstances arising after the date of this press release. You should not place undue reliance on any forward-looking statements, which are made only as of the date of this press release.

Non-IFRS Measures

EBITDA, adjusted EBITDA, adjusted diluted profit (loss) per ordinary share and adjusted profit (loss) attributable to the parent are, we believe, pertinent non-IFRS financial metrics that Ferroglobe utilizes to measure its success. Ferroglobe has included these financial metrics to provide supplemental measures of its performance. The Company believes these metrics are important because they eliminate items that have less bearing on the Company’s current and future operating performance and highlight trends in its core business that may not otherwise be apparent when relying solely on IFRS financial measures

INVESTOR CONTACT:

Ferroglobe PLCJoe Ragan, US: +1 786 509 6925, UK: +44 (0) 7827 227 688Chief Financial OfficerEmail: jragan@ferroglobe.com

Ferroglobe PLC and Subsidiaries
Unaudited Condensed Consolidated Income Statement
(in thousands of U.S. dollars, except per share amounts)
			Quarter Ended September 30, 2017				Quarter EndedJune 30, 2017				Quarter Ended September 30, 2016				Nine Months Ended September 30, 2017				Nine Months Ended September 30, 2016
Sales		$	451,628				425,810				364,727				1,273,475				1,186,159
Cost of sales			(267,364	)			(250,279	)			(236,631	)			(758,781	)			(771,238	)
Other operating income			7,404				4,008				4,963				13,041				11,013
Staff costs			(74,183	)			(74,168	)			(67,586	)			(214,836	)			(206,819	)
Other operating expense			(59,741	)			(65,009	)			(60,490	)			(184,874	)			(179,805	)
Depreciation and amortization charges, operating allowances and write-downs			(27,076	)			(26,401	)			(30,440	)			(80,699	)			(97,972	)
Impairment losses			(98	)			-				(9,044	)			(98	)			(67,631	)
Other gain (loss)			(3,313	)			(3,555	)			844				(5,904	)			(326	)
Operating profit (loss)			27,257				10,406				(33,657	)			41,324				(126,619	)
Finance income			258				162				548				1,215				1,233
Finance expense			(14,786	)			(14,709	)			(7,241	)			(43,260	)			(22,449	)
Financial derivatives loss			(1,823	)			(4,071	)			-				(5,894	)			-
Exchange differences			(1,529	)			7,263				(876	)			5,714				(2,880	)
Profit (loss) before tax			9,377				(949	)			(41,226	)			(901	)			(150,715	)
Income tax (expense) benefit			(14,364	)			1,949				10,158				(11,201	)			38,419
(Loss) profit for the period			(4,987	)			1,000				(31,068	)			(12,102	)			(112,296	)
Loss attributable to non-controlling interest			1,640				1,859				2,545				5,060				15,836
(Loss) profit attributable to the parent		$	(3,347	)			2,859				(28,523	)			(7,042	)			(96,460	)
EBITDA			54,333				36,807				(3,217	)			122,023				(28,647	)
Adjusted EBITDA			56,110				43,870				12,799				130,863				63,846
Weighted average shares outstanding
Basic			171,947				171,947				171,838				171,947				171,838
Diluted			171,947				172,047				171,838				171,947				171,838
(Loss) profit per ordinary share
Basic			(0.02	)			0.02				(0.17	)			(0.04	)			(0.56	)
Diluted			(0.02	)			0.02				(0.17	)			(0.04	)			(0.56	)

 

Ferroglobe PLC and Subsidiaries
Unaudited Condensed Consolidated Statement of Financial Position
(in thousands of U.S. dollars)
			September 30,		June 30,		December 31,
			2017		2017		2016
ASSETS
Non-current assets
	Goodwill	$	234,613		232,250		230,210
	Other intangible assets		59,120		60,282		62,839
	Property, plant and equipment		890,084		888,844		781,606
	Non-current financial assets		6,372		6,198		5,823
	Non-current financial assets from related parties		-		-		9,845
	Deferred tax assets		49,463		52,214		44,950
	Non-current receivables from related parties		2,363		2,282		2,108
	Other non-current assets		21,971		22,337		20,245
Total non-current assets			1,263,986		1,264,407		1,157,626
Current assets
	Inventories		353,296		337,555		316,702
	Trade and other receivables		328,056		229,703		209,406
	Current receivables from related parties		3,351		3,684		11,971
	Current income tax assets		7,896		11,272		19,869
	Current financial assets		3,681		3,661		4,049
	Other current assets		12,834		12,568		9,810
	Cash and cash equivalents		189,763		183,561		196,931
	Assets and disposal groups classified as held for sale		-		-		92,937
Total current assets			898,877		782,004		861,675
Total assets		$	2,162,863		2,046,411		2,019,301
EQUITY AND LIABILITIES
Equity		$	915,837		906,518		892,042
Non-current liabilities
	Deferred income		5,077		5,960		3,949
	Provisions		87,490		85,029		81,957
	Bank borrowings		-		62,776		179,473
	Obligations under finance leases		71,894		72,647		3,385
	Debt instruments		338,772		338,202		-
	Other financial liabilities		97,560		116,492		86,467
	Other non-current liabilities		2,385		2,449		5,737
	Deferred tax liabilities		143,789		144,345		139,535
Total non-current liabilities			746,967		827,900		500,503
Current liabilities
	Provisions		23,736		22,091		19,627
	Bank borrowings *		146,221		1,021		241,818
	Obligations under finance leases		12,572		12,030		1,852
	Debt instruments		2,738		12,537		-
	Other financial liabilities		34,375		2,460		1,592
	Payables to related parties		10,466		8,813		30,738
	Trade and other payables		184,244		178,602		157,706
	Current income tax liabilities		8,350		4,673		961
	Other current liabilities		77,357		69,766		64,780
	Liabilities associated with assets classified as held for sale		-		-		107,682
Total current liabilities			500,059		311,993		626,756
Total equity and liabilities		$	2,162,863		2,046,411		2,019,301
* As of September 30, 2017, includes financing of $120,091 related to the Company's accounts receivable securitization program.

 

Ferroglobe PLC and Subsidiaries
Unaudited Condensed Consolidated Statement of Cash Flows
(in thousands of U.S. dollars)
				Quarter Ended September 30, 2017				Quarter Ended June 30, 2017				Quarter Ended September 30, 2016				Nine Months Ended September 30, 2017				Nine Months Ended September 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
(Loss) profit for the period			$	(4,987	)			1,000				(31,068	)			(12,102	)			(112,296	)
Adjustments to reconcile net loss to net cash provided by operating activities:
	Income tax expense (benefit)			14,364				(1,949	)			(10,158	)			11,201				(38,419	)
	Depreciation and amortization charges, operating allowances and write-downs			27,076				26,401				30,440				80,699				97,972
	Finance income			(258	)			(162	)			(548	)			(1,215	)			(1,233	)
	Finance expense			14,786				14,709				7,241				43,260				22,449
	Financial derivatives loss			1,823				4,071				-				5,894				-
	Exchange differences			1,529				(7,263	)			876				(5,714	)			2,880
	Impairment losses			98				-				9,044				98				67,631
	(Gain) loss on disposals of non-current and financial assets			3,711				1,348				217				4,501				408
	Other adjustments			(364	)			2,208				3,269				1,438				4,248
Changes in operating assets and liabilities
	(Increase) decrease in inventories			(4,372	)			(11,943	)			2,135				(9,207	)			59,831
	(Increase) decrease in trade receivables			(90,108	)			9,456				17,547				(76,887	)			71,783
	Increase (Decrease) increase in trade payables			3,370				(8,943	)			9,834				12,583				1,093
	Other*			6,631				(506	)			(603	)			(28,420	)			(59,504	)
Income taxes paid				(3,768	)			(3,919	)			(8,911	)			(9,984	)			(20,188	)
Interest paid				(22,249	)			(4,378	)			(6,837	)			(36,356	)			(20,306	)
Net cash (used) provided by operating activities				(52,718	)			20,130				22,478				(20,211	)			76,349
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments due to investments:
	Other intangible assets			(88	)			-				(2,020	)			(498	)			(2,543	)
	Property, plant and equipment			(14,692	)			(14,319	)			(10,805	)			(41,373	)			(53,289	)
	Non-current financial assets			-				-				(411	)			(14	)			(684	)
	Current financial assets			-				-				3,988				-				(9,930	)
Disposals:
	Current financial assets			-				-				(99	)			-				-
Interest received				54				211				1,328				618				2,037
Net cash used by investing activities				(14,726	)			(14,108	)			(8,019	)			(41,267	)			(64,409	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid				-				-				(27,496	)			-				(41,243	)
Payment for debt issuance costs				(3,210	)			(3,078	)			-				(16,765	)			-
Proceeds from debt issuance				-				-				-				350,000				-
Increase/(decrease) in bank borrowings:
	Borrowings			118,468				30				22,362				149,923				105,331
	Payments			(38,296	)			(15,300	)			(19,623	)			(425,976	)			(57,698	)
Other amounts paid due to financing activities				(990	)			(10,694	)			(3,750	)			(18,895	)			(8,313	)
Net cash provided (used) by financing activities				75,972				(29,042	)			(28,507	)			38,287				(1,923	)
TOTAL NET CASH FLOWS FOR THE PERIOD				8,528				(23,020	)			(14,048	)			(23,191	)			10,017
Beginning balance of cash and cash equivalents				183,561				193,031				135,774				196,982				116,666
Exchange differences on cash and cash equivalents in foreign currencies				(2,326	)			13,550				(2,560	)			15,972				(7,517	)
Ending balance of cash and cash equivalents			$	189,763				183,561				119,166				189,763				119,166
* Includes the cash outflow impact of the $32.5M shareholder settlement during the quarter ended March 31, 2016.