GSM Ferroglobe PLC

Sales of $583 Million; Net Profit of $66 Million, Adjusted EBITDA of $86 Million

Ferroglobe PLC (NASDAQ:GSM) (“Ferroglobe” or the “Company”), the world’s leading producer of silicon metal, and a leading silicon-and manganese-based specialty alloys producer, today announced results for the second quarter of 2018.

In Q2 2018, Ferroglobe posted a net profit of $66.0 million, or $0.39 per share on a fully diluted basis. On an adjusted basis, Q2 2018 net profit was $25.7 million, or $0.14 per share on a fully diluted basis.

Q2 2018 reported EBITDA was $130.9 million, up from $93.5 million in the prior quarter. On an adjusted basis, Q2 2018 EBITDA was $86.3 million, down 3.7% from Q1 2018 adjusted EBITDA of $89.6 million. The Company reported adjusted EBITDA margin of 14.8% for Q2 2018, compared to adjusted EBITDA margin of 16.0% for Q1 2018. Year-to-date (H1 2018) adjusted EBITDA was $175.9 million, up 135% from the same period in 2017.

The differences between reported and adjusted figures derive from the bargain purchase gain that has been recorded as a result of the Company’s acquisition of manganese alloys plants at Mo I Rana, Norway and Dunkirk, France.

During the second quarter, cash flow used for operations was $4.6 million, with working capital increasing by $70.0 million during the period. As a consequence, net debt was $475.3 million as of June 30, 2018, up from $449.3 million as of March 31, 2018.

Sales in Q2 2018 totaled $583.0 million, up 4.0% from $560.7 million in Q1 2018. During Q2 2018, the average selling prices for:

• Silicon metal increased by 0.4% to $2,773/MT in Q2 2018, as compared to $2,762/MT in Q1 2018;
• Silicon-based alloys decreased by 2.4% to $1,908/MT in Q2 2018, as compared to $1,956/MT in Q1 2018; and
• Manganese-based alloys decreased by 5.2% to $1,304/MT in Q2 2018, as compared to $1,375/MT in Q1 2018.

While sales volumes of:

• Silicon metal experienced a 6.2% decrease quarter-over-quarter,
• Silicon-based alloys experienced a 2.5% increase quarter-over-quarter, and
• Manganese-based alloys experienced a 51.0% increase quarter-over-quarter.

		Quarter Ended			Quarter Ended			Quarter Ended			Six Months Ended			Six Months Ended
		June 30, 2018			March 31, 2018			June 30, 2017			June 30, 2018			June 30, 2017
Shipments in metric tons:
Silicon Metal			85,913			91,615			82,881			177,528			158,634
Silicon-based Alloys			78,214			76,328			70,913			154,542			146,299
Manganese-based Alloys			107,457			71,176			64,403			178,633			128,103
Total shipments*			271,584			239,119			218,197			510,703			433,036
		Quarter Ended			Quarter Ended			Quarter Ended			Six Months Ended			Six Months Ended
		June 30, 2018			March 31, 2018			June 30, 2017			June 30, 2018			June 30, 2017
Average selling price ($/MT):
Silicon Metal		$	2,773		$	2,762		$	2,210		$	2,767		$	2,148
Silicon-based Alloys		$	1,908		$	1,956		$	1,586		$	1,932		$	1,528
Manganese-based Alloys		$	1,304		$	1,375		$	1,308		$	1,332		$	1,303
Total*		$	1,943		$	2,092		$	1,741		$	2,013		$	1,688
		Quarter Ended			Quarter Ended			Quarter Ended			Six Months Ended			Six Months Ended
		June 30, 2018			March 31, 2018			June 30, 2017			June 30, 2018			June 30, 2017
Average selling price ($/lb.):
Silicon Metal		$	1.26		$	1.25		$	1.00		$	1.26		$	0.97
Silicon-based Alloys		$	0.87		$	0.89		$	0.72		$	0.88		$	0.69
Manganese-based Alloys		$	0.59		$	0.62		$	0.59		$	0.60		$	0.59
Total*		$	0.88		$	0.95		$	0.79		$	0.91		$	0.77

* Excludes by-products and other

“This was a solid quarter for Ferroglobe, culminating a first half of the year which confirms the improved fundamentals of our business and validates the positive momentum in the markets we are serving,” said Pedro Larrea, CEO of Ferroglobe. “In the year to date we have significantly increased volumes and selling prices and our EBITDA has more than doubled compared with the same period last year. The steel industries in North America and Europe - the main end markets for most of our alloys - are experiencing strong demand and high capacity utilizations in the wake of recent trade protection measures. Prices  of our products have remained broadly stable overall, and current supply/demand dynamics in our industry should support continued healthy pricing.”

Cash flow generation impacted by acquisition related working capital

During the second quarter, cash flows used for operations was $4.6 million, the main driver being a working capital increase of $70.0 million during Q2 2018. Approximately half of that increase is from the recently acquired manganese-alloy plants that have built their operating working capital, with a further increase from seasonally high raw materials and finished products inventories in the rest of our operations.

Ferroglobe’s net debt was $475.3 million as of June 30, 2018, up from $449.3 million as of March 31, 2018. The increase in net debt is mainly due to the $70 million working capital increase noted above. Excluding the acquisition impact of the manganese-alloy plants, net debt has decreased by $1.6 million as compared with December 31, 2017. 

“We continue to be focused on cash generation and deleveraging the balance sheet,” said Phillip Murnane, Ferroglobe’s CFO. “Although the first half of the year has required meaningful cash investment in working capital for the new manganese assets, we have a rigorous cash generation initiative in place that will provide significant cash flow release in the second half of the year.”

The Company has declared an interim dividend

Ferroglobe’s Board of Directors has declared an interim dividend of $0.06 per share, further reflecting its confidence in the underlying strength of Ferroglobe’s business and long-term outlook.  The dividend will have a record date of September 5, 2018 and a payment date of September 20, 2018.

Adjusted EBITDA:

		Quarter Ended				Quarter Ended				Quarter Ended				Six Months Ended				Six Months Ended
		June 30, 2018				March 31, 2018				June 30, 2017				June 30, 2018				June 30, 2017
Profit (loss) attributable to the parent		$	67,438			$	36,680			$	2,859			$	104,118			$	(3,695	)
Loss attributable to non-controlling interest			(1,408	)			(1,066	)			(1,859	)			(2,474	)			(3,420	)
Income tax expense (benefit)			14,302				15,668				(1,949	)			29,970				(3,163	)
Net finance expense			14,412				13,156				14,547				27,568				27,517
Financial derivatives (gain) loss			(2,832	)			1,765				4,071				(1,067	)			4,071
Exchange differences			8,708				(729	)			(7,263	)			7,979				(7,243	)
Depreciation and amortization charges, operating allowances and write-downs			30,309				28,016				26,401				58,325				53,623
EBITDA			130,929				93,490				36,807				224,419				67,690
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			—				—				6,400				—				6,400
Bargain purchase gain			(44,633	)			—				—				(44,633	)			—
Share-based compensation			—				(3,886	)			—				(3,886	)			—
Adjusted EBITDA		$	86,296			$	89,604			$	43,870			$	175,900			$	74,753

Adjusted profit attributable to Ferroglobe:

		Quarter Ended				Quarter Ended				Quarter Ended				Six Months Ended				Six Months Ended
		June 30, 2018				March 31, 2018				June 30, 2017				June 30, 2018				June 30, 2017
Profit (loss) attributable to the parent		$	67,438			$	36,680			$	2,859				104,118			$	(3,695	)
Tax rate adjustment			(11,404	)			(742	)			(1,645	)			(12,146	)			126
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			—				—				4,352				—				4,352
Bargain purchase gain			(30,350	)			—				—				(30,350	)			—
Share-based compensation			—				(2,642	)			—				(2,642	)			—
Adjusted profit attributable to the parent		$	25,684			$	33,296			$	6,017				58,980			$	1,234

Adjusted diluted profit per share:

		Quarter Ended				Quarter Ended				Quarter Ended				Six Months Ended				Six Months Ended
		June 30, 2018				March 31, 2018				June 30, 2017				June 30, 2018				June 30, 2017
Diluted profit (loss) per ordinary share		$	0.39			$	0.21			$	0.02			$	0.60			$	(0.02	)
Tax rate adjustment			(0.07	)			—				(0.01	)			(0.07	)			—
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			—				—				0.03				—				0.03
Bargain purchase gain			(0.18	)			—				—				(0.18	)			—
Share-based compensation			—				(0.02	)			—				(0.02	)			—
Adjusted diluted profit per ordinary share		$	0.14			$	0.19			$	0.05			$	0.33			$	0.02

Conference Call

Ferroglobe management will review the second quarter results of 2018 during a conference call at 9 a.m. Eastern Time on Wednesday, August 22, 2018.

The dial-in number for participants in the United States is 877‑293‑5491 (conference ID 6293829). International callers should dial +1 914‑495‑8526 (conference ID 6293829). 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/5bqj5wmw 

About Ferroglobe

Ferroglobe 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 currently available to the Company and assumptions that management 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 referenced 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) are non-IFRS financial metrics that, we believe, are pertinent measures of Ferroglobe’s 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:

Phillip Murnane: +44 (0) 203 129 2265Chief Financial OfficerEmail: phillip.murnane@ferroglobe.com

Ferroglobe PLC and SubsidiariesUnaudited Condensed Consolidated Income Statement(in thousands of U.S. dollars, except per share amounts)
		Quarter Ended				Quarter Ended				Quarter Ended				Six Months Ended				Six Months Ended
		June 30, 2018				March 31, 2018				June 30, 2017				June 30, 2018				June 30, 2017
Sales		$	582,977			$	560,704			$	425,810			$	1,143,681			$	821,847
Cost of sales			(343,817	)			(320,678	)			(250,279	)			(664,495	)			(491,417	)
Other operating income			8,511				6,786				4,008				15,297				5,637
Staff costs			(88,743	)			(82,423	)			(74,168	)			(171,166	)			(140,653	)
Other operating expense			(75,384	)			(70,862	)			(65,009	)			(146,246	)			(125,133	)
Depreciation and amortization charges, operating allowances and write-downs			(30,309	)			(28,016	)			(26,401	)			(58,325	)			(53,623	)
Bargain purchase gain			44,633				—				—				44,633				—
Other gain (loss)			2,752				(37	)			(3,555	)			2,715				(2,591	)
Operating profit			100,620				65,474				10,406				166,094				14,067
Net finance expense			(14,412	)			(13,156	)			(14,547	)			(27,568	)			(27,517	)
Financial derivatives gain (loss)			2,832				(1,765	)			(4,071	)			1,067				(4,071	)
Exchange differences			(8,708	)			729				7,263				(7,979	)			7,243
Profit (loss) before tax			80,332				51,282				(949	)			131,614				(10,278	)
Income tax (expense) benefit			(14,302	)			(15,668	)			1,949				(29,970	)			3,163
Profit (loss) for the period			66,030				35,614				1,000				101,644				(7,115	)
Loss attributable to non-controlling interest			1,408				1,066				1,859				2,474				3,420
Profit (loss) attributable to the parent		$	67,438			$	36,680			$	2,859			$	104,118			$	(3,695	)
EBITDA		$	130,929			$	93,490			$	36,807			$	224,419			$	67,690
Adjusted EBITDA		$	86,296			$	89,604			$	43,870			$	175,900			$	74,753
Weighted average shares outstanding
Basic			171,987				171,977				171,947				171,982				171,947
Diluted			172,127				172,215				172,047				172,144				171,947
Profit (loss) per ordinary share
Basic		$	0.39			$	0.21			$	0.02			$	0.61			$	(0.02	)
Diluted		$	0.39			$	0.21			$	0.02			$	0.60			$	(0.02	)

Ferroglobe PLC and Subsidiaries
Unaudited Condensed Consolidated Statement of Financial Position
(in thousands of U.S. dollars)
		June 30,			March 30,			December 31,
		2018			2018			2017
ASSETS
Non-current assets
Goodwill		$	203,717		$	204,537		$	205,287
Other intangible assets			57,897			61,774			58,658
Property, plant and equipment			947,229			980,101			917,974
Non-current financial assets			116,974			147,744			89,315
Deferred tax assets			3,972			6,581			5,273
Non-current receivables from related parties			2,332			2,464			2,400
Other non-current assets			18,887			32,125			30,059
Total non-current assets			1,351,008			1,435,326			1,308,966
Current assets
Inventories			532,574			493,108			361,231
Trade and other receivables			151,062			142,641			111,463
Current receivables from related parties			5,550			8,841			4,572
Current income tax assets			10,405			6,524			17,158
Current financial assets			854			897			2,469
Other current assets			18,283			16,095			9,926
Cash and cash equivalents			155,984			197,669			184,472
Total current assets			874,712			865,775			691,291
Total assets		$	2,225,720		$	2,301,101		$	2,000,257
EQUITY AND LIABILITIES
Equity		$	1,004,125		$	979,504		$	937,758
Non-current liabilities
Deferred income			5,387			7,321			3,172
Provisions			78,767			82,957			82,397
Bank borrowings			108,143			71,242			-
Obligations under finance leases			61,078			68,101			69,713
Debt instruments			340,564			341,036			339,332
Other financial liabilities			42,138			58,288			49,011
Other non-current liabilities			21,178			64,457			3,536
Deferred tax liabilities			64,689			64,733			65,142
Total non-current liabilities			721,944			758,135			612,303
Current liabilities
Provisions			22,563			30,162			33,095
Bank borrowings			1,241			850			1,003
Obligations under finance leases			13,024			13,478			12,920
Debt instruments			10,936			2,735			10,938
Other financial liabilities			54,158			91,243			88,420
Payables to related parties			17,599			10,671			12,973
Trade and other payables			276,289			298,438			192,859
Current income tax liabilities			4,210			5,889			7,419
Other current liabilities			99,631			109,996			90,569
Total current liabilities			499,651			563,462			450,196
Total equity and liabilities		$	2,225,720		$	2,301,101		$	2,000,257

 

Ferroglobe PLC and Subsidiaries
Unaudited Condensed Consolidated Statement of Cash Flows
(in thousands of U.S. dollars)
		Quarter Ended				Quarter Ended				Quarter Ended				Six Months Ended				Six Months Ended
		June 30, 2018				March 31, 2018				June 30, 2017				June 30, 2018				June 30, 2017
Cash flows from operating activities:
Profit (loss) for the period		$	66,030			$	35,614			$	1,000			$	101,644			$	(7,115	)
Adjustments to reconcile net profit (loss) to net cash (used) provided by operating activities:
Income tax expense (benefit)			14,302				15,668				(1,949	)			29,970				(3,163	)
Depreciation and amortization charges, operating allowances and write-downs			30,309				28,016				26,401				58,325				53,623
Net finance expense			14,412				13,156				14,547				27,568				27,517
Financial derivatives (gain) loss			(2,832	)			1,765				4,071				(1,067	)			4,071
Exchange differences			8,708				(729	)			(7,263	)			7,979				(7,243	)
Bargain purchase gain			(44,633	)			—				—				(44,633	)			—
Share-based compensation			33				699				—				732				—
Other adjustments			(2,752	)			37				3,556				(2,715	)			2,592
Changes in operating assets and liabilities
(Increase) decrease in inventories			(59,050	)			(107,481	)			(11,943	)			(166,531	)			(4,835	)
(Increase) decrease in trade receivables			(19,257	)			(513	)			9,456				(19,770	)			13,221
Increase in trade payables			476				70,375				(8,943	)			70,851				9,213
Other			6,817				(49,770	)			(506	)			(42,953	)			(35,051	)
Income taxes paid			(14,186	)			(9,982	)			(3,919	)			(24,168	)			(6,216	)
Interest paid			(2,957	)			(17,301	)			(4,378	)			(20,258	)			(14,107	)
Net cash (used) provided by operating activities			(4,580	)			(20,446	)			20,130				(25,026	)			32,507
Cash flows from investing activities:
Payments due to investments:
Other intangible assets			(2,221	)			(703	)			—				(2,924	)			(410	)
Property, plant and equipment			(29,778	)			(22,531	)			(14,319	)			(52,309	)			(26,681	)
Other			(8	)			—				—				(8	)			(14	)
Disposals:
Other non-current assets			12,734				—				—				12,734				—
Other			1,904				4,010				—				5,914				—
Acquisition of subsidiary			—				(20,379	)			—				(20,379	)			—
Interest and finance income received			2,273				79				211				2,352				564
Net cash used by investing activities			(15,096	)			(39,524	)			(14,108	)			(54,620	)			(26,541	)
Cash flows from financing activities:
Dividends paid			(10,321	)			—				—				(10,321	)			—
Payment for debt issuance costs			—				(4,476	)			(3,078	)			(4,476	)			(13,555	)
Repayment of other financial liabilities			(33,096	)			—				—				(33,096	)			—
Proceeds from debt issuance			—				—				—				—				350,000
Increase/(decrease) in bank borrowings:
Borrowings			37,668				182,364				30				220,032				31,455
Payments			—				(106,514	)			(15,300	)			(106,514	)			(387,680	)
Proceeds from stock option exercises			240				—				—				240				—
Other amounts paid due to financing activities			(4,648	)			(2,987	)			(10,694	)			(7,635	)			(17,905	)
Net cash (used) provided by financing activities			(10,157	)			68,387				(29,042	)			58,230				(37,685	)
Total net cash flows for the period			(29,833	)			8,417				(23,020	)			(21,416	)			(31,719	)
Beginning balance of cash and cash equivalents			197,669				184,472				193,031				184,472				196,982
Exchange differences on cash and cash equivalents in foreign currencies			(11,852	)			4,780				13,550				(7,072	)			18,298
Ending balance of cash and cash equivalents		$	155,984			$	197,669			$	183,561			$	155,984			$	183,561