SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16
under the Securities Exchange Act of 1934
For the Month of November, 2016
Commission File Number: 001-37668
FERROGLOBE PLC
(Name of Registrant)
c/o Legalinx Ltd
One Fetter Lane,
London, EC4A 1BR
(Address of Principal Executive Office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes ☐ No ☒
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A
This Form 6-K consists of the following materials, which appear immediately following this page:
| • | Press release dated November 13, 2016 announcing results for the quarter ended September 30, 2016 |
| • | Third quarter earnings call presentation |
Ferroglobe Reports Results for Third Quarter 2016
| • | Q3 2016 revenue of $365.0 million, down from $398.0 million in Q2 2016 |
| • | Net loss of $(28.5) million, or $(0.17) on a fully diluted per share basis; Adjusted net loss of $(14.6) million, or $(0.09) on a fully diluted per share basis for the quarter |
| • | Reported EBITDA loss of $(3.2) million, which includes an impairment charge of $9.0 million for the company’s mining operations in South Africa as well as an inventory impairment charge of $4.3 million; Adjusted EBITDA of $12.8 million for the quarter |
| • | Operating cash flow generation of $22.5 million and free cash flow generation of $11.7 million for Q3 |
| • | Exceeded working capital synergies target of $100 million by reducing working capital by $136.5 million year-to-date |
| • | Increased synergies target to $85 million annualized, up from $65 million previously |
| • | Maintained dividend, reflecting confidence in underlying strength of the business |
LONDON, November 14, 2016 – Ferroglobe PLC (NASDAQ: GSM), the world’s leading producer of silicon metal, and a leading silicon- and manganese-based specialty alloys producer, announced today results for the third quarter of 2016.
In the third quarter of 2016, Ferroglobe posted a net loss of $(28.5) million, or $(0.17) per share on a fully diluted basis. Excluding an inventory impairment charge and an additional impairment charge for South Africa, the company posted an adjusted net loss of $(14.6) million, or $(0.09) per share on a fully diluted basis.
Ferroglobe reported an EBITDA loss of $(3.2) million for the third quarter due to an inventory impairment charge of $4.3 million in Venezuela and China, and a further $9.0 million impairment charge of the company’s mining assets in South Africa. Excluding these charges Q3 2016 adjusted EBITDA was $12.8 million.
Net sales in the third quarter totalled $365.0 million, down from $398.0 million sequentially. In the third quarter, Ferroglobe’s average selling price for silicon metal declined by 6% from the previous quarter’s average selling price, primarily due to pressure from low-priced imports. During this period, the average selling price for silicon-based alloys decreased 3% from the second quarter of 2016 and the average selling price for manganese alloys increased 11% from the second quarter of 2016.
In terms of sales volumes, silicon metal experienced a decline of 5% quarter over quarter, silicon alloys experienced a decline of 7% quarter over quarter, and manganese alloys experienced a decline of 16% quarter over quarter, reflecting some seasonality of demand in summer months.
1
| Nine Months Ended September 30, 2016 |
Quarter Ended September 30, 2016 |
Quarter Ended June 30, 2016 |
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| Shipments in metric tons: |
||||||||||||
| Silicon Metal |
259,016 | 81,091 | 85,242 | |||||||||
| Silicon Alloys |
218,271 | 69,539 | 74,786 | |||||||||
| Manganese Alloys |
193,985 | 59,368 | 70,756 | |||||||||
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| Total shipments* |
671,272 | 209,998 | 230,784 | |||||||||
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| Nine Months Ended September 30, 2016 |
Quarter Ended September 30, 2016 |
Quarter Ended June 30, 2016 |
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| Average selling price ($/MT): |
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| Silicon Metal |
$ | 2,240 | $ | 2,090 | $ | 2,230 | ||||||
| Silicon Alloys |
$ | 1,421 | $ | 1,391 | $ | 1,430 | ||||||
| Manganese Alloys |
$ | 801 | $ | 865 | $ | 777 | ||||||
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| Total* |
$ | 1,558 | $ | 1,512 | $ | 1,525 | ||||||
| Nine Months Ended September 30, 2016 |
Quarter Ended September 30, 2016 |
Quarter Ended June 30, 2016 |
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| Average selling price ($/lb.): |
||||||||||||
| Silicon Metal |
$ | 1.02 | $ | 0.95 | $ | 1.01 | ||||||
| Silicon Alloys |
$ | 0.64 | $ | 0.63 | $ | 0.65 | ||||||
| Manganese Alloys |
$ | 0.36 | $ | 0.39 | $ | 0.35 | ||||||
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| Total* |
$ | 0.71 | $ | 0.69 | $ | 0.69 | ||||||
| * | Excludes by-products and other |
“Despite the poor results this quarter, primarily as a result of this year’s pricing pressures caused by low priced imports, we are now in the pricing season for 2017 and we are beginning to see some meaningful improvements. The market is adjusting to the realities of production costs, rebalanced inventories and idle capacity, with prices above the reported indexes. Additionally, we are changing our contract structures by removing all discounts to index for silicon metal, and will be utilizing those index providers who modify their reporting criteria to better reflect the overall market,” said CEO Pedro Larrea. “In the meantime, we have adapted to circumstances by relentlessly pursuing increased efficiencies, driving higher-than-expected synergies from our merger, and positioning ourselves to benefit from the forthcoming improving pricing environment. To that end, we have taken proactive steps to optimize our asset portfolio and achieved a 13% reduction in our overall cost structure as compared to pro-forma 2015. Combined, these measures have driven positive free cash flow and positive EBITDA on an adjusted basis and our balance sheet remains strong. We are well-positioned to benefit once prices recover,” concluded Larrea.
Financial discipline and cost management remain core priorities
Ferroglobe reported an EBITDA loss of $(3.2) million, primarily due to the impact of a continued challenging pricing environment as well as inventory impairment charges and an additional impairment charge of our South African mining assets.
Excluding these charges, Q3 2016 adjusted EBITDA was $12.8 million. Overall the price decline adversely impacted EBITDA by $6.5 million quarter-over-quarter in addition to volume declines of $1.6 million which were partially offset by reductions in production costs.
Ferroglobe is increasing its expectations for synergy attainment to $85 million on a run rate basis, up from $65 million previously. Year-to-date, already $43 million in synergies have been captured, and a total of $60 million is expected to be achieved in full year 2016. All in all, production costs have been reduced by $13%year-to-date.
2
In addition to cost management, the company also takes a proactive approach to managing its asset portfolio. As part of this, the company is currently pursuing strategic options regarding its hydro-electric assets in Spain and France. These discussions are at a preliminary stage and the company will provide further detail as and when appropriate.
Ferroglobe generated operating cash flows of $22.5 million in Q3 2016, or $76.3 million year-to-date. A significant part of the operating cash flows comes from working capital improvements of $39.9 million during Q3 2016, bringing improvements year-to-date to $136.5 million. The company has generated $23.1 million of free cash flow year-to-date, of which $11.7 million was generated during Q3 2016.1 Ferroglobe’s net debt was $430 million at the end of Q3 2016, compared to $422 million at the end of Q2 2016.
The Board has decided to maintain the quarterly interim dividend of $0.08 per share, further reflecting the confidence in the underlying strength of the business and the company’s long-term outlook. The dividend will have a record date of December 8, 2016 and a payment date of December 29, 2016.
| 1 | Free cash-flow defined as “Net cash provided by operating activities” minus “Payments for property, plant and equipment.”. |
3
Adjusted EBITDA:
| Nine Months Ended September 30, 2016 |
Quarter Ended September 30, 2016 |
Quarter Ended June 30, 2016 |
||||||||||
| Loss attributable to the parent |
$ | (96,460 | ) | (28,523 | ) | (42,238 | ) | |||||
| Loss attributable to non-controlling interest |
(15,836 | ) | (2,545 | ) | (7,080 | ) | ||||||
| Income tax benefit |
(38,419 | ) | (10,158 | ) | (29,038 | ) | ||||||
| Net finance expense |
21,216 | 6,693 | 6,908 | |||||||||
| Exchange differences |
2,880 | 876 | 276 | |||||||||
| Depreciation and amortization charges, operating allowances and write-downs |
97,972 | 30,440 | 24,534 | |||||||||
| EBITDA |
(28,647 | ) | (3,217 | ) | (46,638 | ) | ||||||
| Transaction and due diligence expenses |
7,979 | 111 | 5,227 | |||||||||
| Impairment loss |
67,630 | 9,043 | 58,587 | |||||||||
| Globe purchase price allocation adjustments |
10,022 | — | — | |||||||||
| Business interruption |
2,532 | 2,532 | — | |||||||||
| Inventory impairment |
4,330 | 4,330 | — | |||||||||
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| Adjusted EBITDA, excluding above items |
$ | 63,846 | 12,799 | 17,176 | ||||||||
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Adjusted diluted loss per share:
| Nine Months Ended September 30, 2016 |
Quarter Ended September 30, 2016 |
Quarter Ended June 30, 2016 |
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| Diluted loss per ordinary share |
(0.56 | ) | (0.17 | ) | (0.25 | ) | ||||||
| Tax rate adjustment |
0.06 | 0.01 | (0.01 | ) | ||||||||
| Transaction and due diligence expenses |
0.03 | — | 0.02 | |||||||||
| Impairment loss |
0.27 | 0.04 | 0.23 | |||||||||
| Globe purchase price allocation adjustments |
0.04 | — | — | |||||||||
| Business interruption |
0.01 | 0.01 | — | |||||||||
| Inventory impairment |
0.02 | 0.02 | — | |||||||||
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| Adjusted diluted loss per ordinary share |
(0.13 | ) | (0.09 | ) | (0.01 | ) | ||||||
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Adjusted net loss attributable to Ferroglobe:
| Nine Months Ended September 30, 2016 |
Quarter Ended September 30, 2016 |
Quarter Ended June 30, 2016 |
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| Loss attributable to the parent |
$ | (96,460 | ) | (28,523 | ) | (42,238 | ) | |||||
| Tax rate adjustment |
9,810 | 3,035 | (3,964 | ) | ||||||||
| Transaction and due diligence expenses |
5,426 | 75 | 3,555 | |||||||||
| Impairment loss |
45,988 | 6,149 | 39,839 | |||||||||
| Globe purchase price allocation adjustments |
6,815 | — | — | |||||||||
| Business interruption |
1,722 | 1,722 | — | |||||||||
| Inventory impairment |
2,944 | 2,944 | — | |||||||||
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| Adjusted loss attributable to the parent |
$ | (23,755 | ) | (14,598 | ) | (2,808 | ) | |||||
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Conference Call
Ferroglobe will review third quarter 2016 results during a conference call at 9:00 a.m. Eastern Time on November 14, 2016. The dial-in number for the call for participants in the United States is 877-293-5491 (conference ID 16304340). International callers should dial +1 914-495-8526 (conference ID 16304340). 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 http://edge.media-server.com/m/p/p9w9vtyt.
4
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 Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States Securities Exchange Act of 1934, as amended. 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 generally can be identified by the use of forward-looking terminology, including, but not limited to, “may,” “could,” “seek,” “guidance,” “predicts,” “potential,” “likely,” “believe,” “will,” “expect,” “anticipate,: “estimate,” “plan,” “intends,” “forecast” or variations of these terms and similar expressions, or the negative of these terms or similar expressions.
Forward-looking statements contained in this press release are based on information presently available to us and assumptions that we believe to be reasonable, but are inherently uncertain. As a result, our 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 our control.
You are cautioned that all such statements involve risks and uncertainties, including without limitation, risks that the legacy businesses of Globe and FerroAtlántica will not be integrated successfully or that we will not realize estimated cost savings, value of certain tax assets, synergies and growth, or that such benefits may take longer to realize than expected. Important factors that may cause actual results to differ include, but are limited to: (i) risks relating to unanticipated costs of integration, including operating costs, customer loss and business disruption being greater than expected; (ii) our organizational and governance structure; (iii) the ability to hire and retain key personnel; (iv) regional, national or global political, economic, business, competitive, market and regulatory conditions including, among others, changes in metals prices; (v) increases in the cost of raw materials or energy; (vi) competition in the metals and foundry industries; (vii) environmental and regulatory risks; (viii) ability to identify liabilities associated with acquired properties prior to their acquisition; (ix) ability to manage price and operational risks including industrial accidents and natural disasters; (x) ability to manage foreign operations; (xi) changes in technology; (xii) ability to acquire or renew permits and approvals; (xiii) changes in legislation or governmental regulations affecting Ferroglobe; (xiv) conditions in the credit markets; (xv) risks associated with assumptions made in connection with critical accounting estimates and legal proceedings; (xvi) Ferroglobe’s international operations, which are subject to the risks of currency fluctuations and foreign exchange controls; and (xvii) the potential of international unrest, economic downturn or effects of currencies, tax assessments, tax adjustments, anticipated tax rates, raw material costs or availability or other regulatory compliance costs. The foregoing list is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties that affect our business, including those described in the “Risk Factors” section of our Annual Reports on Form 20-F, Current Reports on Form 6-K and other documents we file from time to time with the United States Securities and Exchange Commission. We do not give any assurance (1) that we will achieve our expectations or (2) concerning any result or the timing thereof, in each case, with respect to any regulatory action, administrative proceedings, government investigations, litigation, warning letters, consent decree, cost reductions, business strategies, earnings or revenue trends or future financial results. Forward-looking financial information and other metrics presented herein represent our key 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. We do not undertake or assume any obligation to update publicly any of the forward-looking statements in this press release to reflect actual results, new information or future events, changes in assumptions or changes in other factors affecting forward-looking statements. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. We caution you not to place undue reliance on any forward-looking statements, which are made only as of the date of this press release.
5
Non-GAAP Measures
EBITDA, adjusted EBITDA, adjusted loss attributable to parent and adjusted diluted loss per ordinary share are non-GAAP measures.
We have included these measures to provide supplemental measures of our performance which we believe are important because they eliminate items that have less bearing on our current and future operating performance and so highlights trends in our core business that may not otherwise be apparent when relying solely on GAAP financial measures. Reconciliations of these measures to the comparable GAAP financial measures are provided above and in the attached financial statements.
* * *
INVESTOR CONTACT:
Ferroglobe PLC
Joe Ragan, 786-509-6925
Chief Financial Officer
Email: jragan@ferroglobe.com
6
Ferroglobe PLC and Subsidiaries
Unaudited Condensed Consolidated Income Statement
(in thousands of U.S. dollars, except per share amounts)
| Nine Months Ended September 30, 2016 |
Quarter Ended September 30, 2016 |
Quarter Ended June 30, 2016 |
Year Ended December 31, 2015 * |
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| Sales |
$ | 1,186,159 | $ | 364,727 | $ | 397,953 | $ | 2,039,608 | ||||||||
| Cost of sales |
(771,238 | ) | (236,631 | ) | (252,764 | ) | (1,225,313 | ) | ||||||||
| Other operating income |
11,013 | 4,963 | 3,717 | 20,455 | ||||||||||||
| Staff costs |
(206,819 | ) | (67,586 | ) | (72,050 | ) | (330,382 | ) | ||||||||
| Other operating expense |
(179,805 | ) | (60,490 | ) | (64,374 | ) | (351,929 | ) | ||||||||
| Depreciation and amortization charges, operating allowances and write-downs |
(97,972 | ) | (30,440 | ) | (24,534 | ) | (141,097 | ) | ||||||||
| Impairment losses |
(67,631 | ) | (9,044 | ) | (58,587 | ) | (52,042 | ) | ||||||||
| Other (loss) gain |
(326 | ) | 844 | (533 | ) | (3,473 | ) | |||||||||
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| Operating loss |
(126,619 | ) | (33,657 | ) | (71,172 | ) | (44,173 | ) | ||||||||
| Finance income |
1,233 | 548 | 442 | 1,343 | ||||||||||||
| Finance expense |
(22,449 | ) | (7,241 | ) | (7,350 | ) | (34,521 | ) | ||||||||
| Exchange differences |
(2,880 | ) | (876 | ) | (276 | ) | 29,993 | |||||||||
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| Loss before tax |
(150,715 | ) | (41,226 | ) | (78,356 | ) | (47,358 | ) | ||||||||
| Income tax benefit (expense) |
38,419 | 10,158 | 29,038 | (62,546 | ) | |||||||||||
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| Loss for the period |
(112,296 | ) | (31,068 | ) | (49,318 | ) | (109,904 | ) | ||||||||
| Loss attributable to non-controlling interest |
15,836 | 2,545 | 7,080 | 13,308 | ||||||||||||
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| Loss attributable to the parent |
$ | (96,460 | ) | $ | (28,523 | ) | $ | (42,238 | ) | $ | (96,596 | ) | ||||
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| EBITDA |
(28,647 | ) | (3,217 | ) | (46,638 | ) | 96,924 | |||||||||
| Adjusted EBITDA |
63,846 | 12,799 | 17,176 | 294,799 | ||||||||||||
| Weighted average shares outstanding |
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| Basic |
171,838 | 171,838 | 171,838 | |||||||||||||
| Diluted |
171,838 | 171,838 | 171,838 | |||||||||||||
| Loss per ordinary share |
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| Basic |
(0.56 | ) | (0.17 | ) | (0.25 | ) | ||||||||||
| Diluted |
(0.56 | ) | (0.17 | ) | (0.25 | ) | ||||||||||
| * | — Represents combined Globe and FerroAtlantica results on a pro forma basis. |
Ferroglobe PLC and Subsidiaries
Unaudited Condensed Consolidated Statement of Financial Position
(in thousands of U.S. dollars)
| September 30, 2016 |
June 30, 2016 |
December 31, 2015 |
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| ASSETS |
| |||||||||||
| Non-current assets |
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| Goodwill |
$ | 402,491 | 404,015 | 403,929 | ||||||||
| Other intangible assets |
70,130 | 71,247 | 71,619 | |||||||||
| Property, plant and equipment |
929,217 | 941,580 | 1,012,367 | |||||||||
| Non-current financial assets |
10,541 | 10,091 | 9,672 | |||||||||
| Deferred tax assets |
55,228 | 51,337 | 36,098 | |||||||||
| Non-current receivables from related parties |
2,233 | — | — | |||||||||
| Other non-current assets |
21,302 | 21,881 | 20,615 | |||||||||
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| Total non-current assets |
1,491,142 | 1,500,151 | 1,554,300 | |||||||||
| Current assets |
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| Inventories |
369,996 | 374,795 | 425,372 | |||||||||
| Trade and other receivables |
197,817 | 216,322 | 275,254 | |||||||||
| Current receivables from related parties |
10,312 | 3,705 | 10,950 | |||||||||
| Current income tax assets |
30,826 | 22,302 | 9,273 | |||||||||
| Current financial assets |
14,204 | 18,005 | 4,112 | |||||||||
| Other current assets |
13,236 | 12,299 | 10,134 | |||||||||
| Cash and cash equivalents |
119,166 | 135,774 | 116,666 | |||||||||
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| Total current assets |
755,557 | 783,202 | 851,761 | |||||||||
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| Total assets |
$ | 2,246,699 | 2,283,353 | 2,406,061 | ||||||||
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| EQUITY AND LIABILITIES |
| |||||||||||
| Equity |
$ | 1,170,774 | 1,220,184 | 1,294,973 | ||||||||
| Non-current liabilities |
||||||||||||
| Deferred income |
5,259 | 6,512 | 4,389 | |||||||||
| Provisions |
85,846 | 82,250 | 81,853 | |||||||||
| Bank borrowings |
96,870 | 231,202 | 223,676 | |||||||||
| Obligations under finance leases |
79,780 | 84,059 | 89,768 | |||||||||
| Other financial liabilities |
7,748 | 8,283 | 7,549 | |||||||||
| Other non-current liabilities |
4,295 | 3,741 | 4,517 | |||||||||
| Deferred tax liabilities |
178,577 | 183,878 | 206,648 | |||||||||
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| Total non-current liabilities |
458,375 | 599,925 | 618,400 | |||||||||
| Current liabilities |
||||||||||||
| Provisions |
17,688 | 13,867 | 9,010 | |||||||||
| Bank borrowings |
357,004 | 219,922 | 182,554 | |||||||||
| Obligations under finance leases |
15,118 | 13,841 | 13,429 | |||||||||
| Payables to related parties |
6,220 | 2,353 | 7,827 | |||||||||
| Trade and other payables |
150,733 | 134,122 | 147,073 | |||||||||
| Current income tax liabilities |
4,987 | 2,139 | 10,887 | |||||||||
| Other current liabilities |
65,800 | 77,000 | 121,908 | |||||||||
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| Total current liabilities |
617,550 | 463,244 | 492,688 | |||||||||
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| Total equity and liabilities |
$ | 2,246,699 | 2,283,353 | 2,406,061 | ||||||||
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Ferroglobe PLC and Subsidiaries
Unaudited Condensed Consolidated Statement of Cash Flows
(in thousands of U.S. dollars)
| Nine Months Ended September 30, 2016 |
Quarter Ended September 30, 2016 |
Quarter Ended June 30, 2016 |
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| CASH FLOWS FROM OPERATING ACTIVITIES: |
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| Loss for the period |
$ | (112,296 | ) | $ | (31,068 | ) | $ | (49,318 | ) | |||
| Adjustments to reconcile net loss to net cash provided by operating activities: |
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| Income tax benefit |
(38,419 | ) | (10,158 | ) | (29,038 | ) | ||||||
| Depreciation and amortization charges, operating allowances and write-downs |
97,972 | 30,440 | 24,534 | |||||||||
| Finance income |
(1,233 | ) | (548 | ) | (442 | ) | ||||||
| Finance expense |
22,449 | 7,241 | 7,350 | |||||||||
| Exchange differences |
2,880 | 876 | 276 | |||||||||
| Impairment losses |
67,631 | 9,044 | 58,587 | |||||||||
| Loss on disposals of non-current and financial assets |
408 | 217 | 242 | |||||||||
| Other adjustments |
4,248 | 3,269 | 291 | |||||||||
| Changes in operating assets and liabilities |
||||||||||||
| Decrease in inventories |
59,831 | 2,135 | 14,347 | |||||||||
| Decrease in trade receivables |
71,783 | 17,547 | 28,439 | |||||||||
| Increase in trade payables |
1,093 | 9,834 | (10,651 | ) | ||||||||
| Other* |
(59,504 | ) | (603 | ) | (16,050 | ) | ||||||
| Income taxes (paid) received |
(20,188 | ) | (8,911 | ) | 1,497 | |||||||
| Interest paid |
(20,306 | ) | (6,837 | ) | (5,767 | ) | ||||||
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|||||||
| Net cash provided by operating activities |
76,349 | 22,478 | 24,297 | |||||||||
|
|
|
|
|
|
|
|||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||||||
| Payments due to investments: |
||||||||||||
| Other intangible assets |
(2,543 | ) | (2,020 | ) | (87 | ) | ||||||
| Property, plant and equipment |
(53,289 | ) | (10,805 | ) | (15,676 | ) | ||||||
| Non-current financial assets |
(684 | ) | (411 | ) | (273 | ) | ||||||
| Current financial assets |
(9,930 | ) | 3,988 | (13,865 | ) | |||||||
| Disposals: |
||||||||||||
| Intangible assets |
— | — | (30 | ) | ||||||||
| Property, plant and equipment |
— | — | (104 | ) | ||||||||
| Current financial assets |
— | (99 | ) | 99 | ||||||||
| Interest received |
2,037 | 1,328 | 466 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net cash used by investing activities |
(64,409 | ) | (8,019 | ) | (29,470 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||||||
| Dividends paid |
(41,243 | ) | (27,496 | ) | — | |||||||
| Increase/(decrease) in bank borrowings: |
||||||||||||
| Borrowings |
105,331 | 22,362 | 25,978 | |||||||||
| Payments |
(57,698 | ) | (19,623 | ) | 11,623 | |||||||
| Other amounts paid due to financing activities |
(8,313 | ) | (3,750 | ) | (3,851 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net cash (used) provided by financing activities |
(1,923 | ) | (28,507 | ) | 33,750 | |||||||
|
|
|
|
|
|
|
|||||||
| TOTAL NET CASH FLOWS FOR THE PERIOD |
10,017 | (14,048 | ) | 28,577 | ||||||||
|
|
|
|
|
|
|
|||||||
| Beginning balance of cash and cash equivalents |
116,666 | 135,774 | 114,019 | |||||||||
| Exchange differences on cash and cash equivalents in foreign currencies |
(7,517 | ) | (2,560 | ) | (6,822 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Ending balance of cash and cash equivalents |
$ | 119,166 | $ | 119,166 | $ | 135,774 | ||||||
|
|
|
|
|
|
|
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| * | Includes the cash outflow impact of the $32.5M shareholder settlement during the quarter ended March 31, 2016. |
Advancing Materials Innovation NASDAQ: GSM Third Quarter 2016
Forward-Looking Statement This presentation contains forward-looking statements within the meaning of Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States Securities Exchange Act of 1934, as amended. Forward-looking statements are not historical facts but are based on certain assumptions of management and describe our future plans, strategies and expectations. Forward-looking statements can generally be identified by the use of forward-looking terminology, including, but not limited to, "may," “could,” “seek,” “guidance,” “predict,” “potential,” “likely,” "believe," "will," "expect," "anticipate," "estimate," "plan," "intend," "forecast," or variations of these terms and similar expressions, or the negative of these terms or similar expressions. Forward-looking statements contained in this presentation are based on information presently available to us and assumptions that we believe to be reasonable, but are inherently uncertain. As a result, our 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 our control. You are cautioned that all such statements involve risks and uncertainties, including without limitation, risks that the businesses of Globe Specialty Metals Inc. and Grupo FerroAtlántica (together, “we,” “us,” “Ferroglobe,” the “Company”) will not be integrated successfully or that we will not realize estimated cost savings, value of certain tax assets, synergies and growth, or that such benefits may take longer to realize than expected. Important factors that may cause actual results to differ include, but are limited to: (i) risks relating to unanticipated costs of integration, including operating costs, customer loss and business disruption being greater than expected; (ii) our organizational and governance structure; (iii) the ability to hire and retain key personnel; (iv) regional, national or global political, economic, business, competitive, market and regulatory conditions including, among others, changes in metals prices; (v) increases in the cost of raw materials or energy; (vi) competition in the metals and foundry industries; (vii) environmental and regulatory risks; (viii) ability to identify liabilities associated with acquired properties prior to their acquisition; (ix) ability to manage price and operational risks including industrial accidents and natural disasters; (x) ability to manage foreign operations; (xi) changes in technology; (xii) ability to acquire or renew permits and approvals; (xiii) changes in legislation or governmental regulations affecting Ferroglobe; (xiv) conditions in the credit markets; (xv) risks associated with assumptions made in connection with critical accounting estimates and legal proceedings; (xvi) Ferroglobe's international operations, which are subject to the risks of currency fluctuations and foreign exchange controls; and (xvii) the potential of international unrest, economic downturn or effects of currencies, tax assessments, tax adjustments, anticipated tax rates, raw material costs or availability or other regulatory compliance costs. The foregoing list is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties that affect our business, including those described in the “Risk Factors” section of our Registration Statement on Form F-1, Annual Reports on Form 20-F, Current Reports on Form 6-K and other documents we file from time to time with the United States Securities and Exchange Commission. We do not give any assurance (1) that we will achieve our expectations or (2) concerning any result or the timing thereof, in each case, with respect to any regulatory action, administrative proceedings, government investigations, litigation, warning letters, consent decree, cost reductions, business strategies, earnings or revenue trends or future financial results. Forward- looking financial information and other metrics presented herein represent our key goals and are not intended as guidance or projections for the periods presented herein or any future periods. We do not undertake or assume any obligation to update publicly any of the forward- looking statements in this presentation to reflect actual results, new information or future events, changes in assumptions or changes in other factors affecting forward-looking statements. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. We caution you not to place undue reliance on any forward-looking statements, which are made only as of the date of this presentation.
Table of contents Q3 overview Selected financial highlights
Q3 overview
Source: Company information Silicon metal price of $0.95 per pound, down 6% Silicon-based alloys price of $0.63 per pound, down 3% Manganese alloys price of $865/MT, up 11% Silicon metal (39% of sales): prices remained under pressure as a result of low-priced imports Silicon alloy (33% of sales): Slight softening of demand has put further pressure on prices Manganese alloy (28% of sales): significant decline in demand, down by 16% quarter-over-quarter, reflecting seasonality of demand in summer months Challenging pricing environment persisted in Q3
Pricing dynamics starting to improve over the last weeks Bulk ferroalloys (FeSi and Mn alloys) prices above levels one year ago Mn alloys rapidly following ore evolution, and signaling supply side constraints FeSi showing less volatility but gradually increasing prices Significant price decline through first half of 2016, linked to low-priced imports Stabilization in the last few months, signaling unsustainable situation First signs of index price recovery
Positive market outlook for 2017 Signs of meaningful improvements – driven by: Market starting to adjust to increased production costs in importing countries due to increased energy costs and to exchange rates Rebalanced global inventories Increase in idle capacity Continued strong demand from our key end-markets Market trends Actions Ferroglobe is taking: our strategy Prices well above reported indexes Achieved prices 15% above index 100% of 2017 contracts closed to date above index pricing Similar trends across all geographies Removing all discounts to index in contract structure for silicon metal Utilizing index providers who modify pricing criteria to better reflect overall market Favoring fixed prices, with shorter term if necessary There is consensus in the market that silicon metal prices and ferroalloy prices are beginning to recover
Run-rate synergy potential updated: ~$85 million 33% above initial estimation of $65 M Fast implementation: 69% of total potential captured in first year 50% of total potential already captured Synergies captured through a variety of initiatives in the technical, purchasing and SG&A areas Current expectation for FY2016 Revised expected 2017 run rate Total operational synergies captured (M$) Working capital improvement (M$) Initial target of $100M for two years, exceeded in 9 months $83M captured through specific A/R initiatives: DSO reduced from 53 to 43 days Factored 20% of A/R $33M of inventory reductions $100M Original target for two years Strong progress on synergies: run-rate potential increased to $85m
Synergies have been achieved through specific initiatives Technical synergies $8.9M - better performance (energy and raw materials efficiency) through benchmarking of European vs. American silicon plants $7.0M – sharing of casting technologies between Cee, Bridgeport and Laudun plants $4.0M – improvement of electrode breakage, downtime and energy efficiency in Becancour through management change and best practices implementation Purchasing improvements $4.9M – improved pricing in secondary raw materials through consolidated volumes and change in procedures $3.1M – coal supply optimization with changed specifications and sizing $1.3M – improved purchasing procedures for general materials SG&A $8.0M savings in already implemented initiatives, and additional $13M run-rate in identified initiatives pending full implementation Headcount reduced by 83 in corporate offices, and by 38 in SG&A functions in the operating units Streamlined commercial agents in North America and Europe, with savings of $2.1M
Silicon metal: significantly reduced production cost profile enhances leverage to price recovery Made significant progress to further reduce costs in the silicon metal business Silicon production costs reduced by ~22% since January 2015 Key drivers of cost reduction: Leveraging diversified footprint, benefitting from input cost and currency hedges Improved technical performance New power supply arrangements Raw materials selection Ferroglobe among the lowest cost producers in the industry Improves position for price recovery
Ferroglobe´s business is well leveraged to price and cost improvements Relatively modest improvements in production costs or prices have a significant impact on financial results Cost improvements that have been achieved prepare Ferroglobe for fully benefiting from price recovery
Reported EBITDA loss of $(3.2) million1 Adjusted EBITDA of $12.8 million for the quarter Generated $11.7 million of free cash flow2 in Q3 2016 Generated $136.5 million in working capital synergies year-to-date $40 million improvement in working capital in Q3 2016 $262.8 million in working capital improvements over the last 12 months, well ahead of original three-year projection of $100 million Further working capital synergies expected through the remainder of 2016 Maintained strong balance sheet Net debt of $430 million at end of Q3 1 Reported EBITDA includes an impairment charge of $9.0 million for our mining operations in South Africa as well as an inventory impairment charge of $4.3 million in Venezuela and China 2 Free cash flow defined as “Net cash provided by operating activities” minus “Payments for property, plant and equipment.” Source: Company information Financial discipline combined with approach to sales delivering results
Opportunities for long-term value creation Strong balance sheet gives company ability to grow organically and inorganically Generating cash flow, even in down cycle and identifying non-core asset divestitures Strong market position and multiple levers to pull given diversified products, end markets & geographies
Selected financial highlights
Q3 key performance indicators and overview 1 Free cash flow defined as “Net cash provided by operating activities” minus “Payments for property, plant and equipment”, calculated excluding the impact of the $32.5 million shareholder settlement paid during the quarter ended March 31, 2016. Source: Company information Key performance indicators Nine months ended Sept. 30, 2016 Q3 2016 Q2 2016 Pro Forma CY 2015 Sales ($m) 1,186.2 364.7 398.0 2,039.6 Operating Profit ($m) -126.6 -33.7 -71.2 -44.2 Profit Attributable to the Parent ($m) -96.5 -28.5 -42.2 -96.6 Adjusted EBITDA ($m) 63.8 12.8 17.2 294.8 Adjusted EBITDA Margin 5.4% 3.5% 4.3% 14.5% Working capital ($m) 417.1 417.1 457.0 553.6 Free Cash Flow1 ($m) 23.1 11.7 8.6 113.3
Silicon metal sales (ton) FeSi sales (ton) Other Silicon Alloys sales (ton) Manganese Alloys sales (ton) Sales volumes evolution (ton) (Q1 2015 thru Q3 2016)
Monthly sales prices ($/ton) Silicon Metal Ferrosilicon Other Silicon Alloys Manganese Alloys - -
Steadily lowering costs Cost evolution of Ferroglobe business – including all products Systematic and holistic approach to cost management Made significant improvements to cost profile of entire business 13% cost reduction achieved year-to-date Delivering on the benefits and cost rationalization potential of merger Continue to identify further opportunities for cost reductions
Balance sheet summary ($mm) Q3 20161 Q2 20161 12/31/2015 Total Assets 2,247 2,283 2,406 Net Debt2 430 413 393 Book Equity 1,171 1,220 1,295 Net Debt2 / Total Assets 19.5% 18.1% 16.3% Net Debt2 / Capital3 27.2% 25.3% 23.3% Financial results are unaudited Net Debt includes finance lease obligations Capital is calculated as book equity plus net debt
Q&A
Advancing Materials Innovation NASDAQ: GSM Third Quarter 2016
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: November 13, 2016 FERROGLOBE PLC | ||
| By: | /s/ Nick Deeming | |
| Name: Nick Deeming Title: Corporate Secretary | ||