Ferroglobe PLC
May 21, 2017
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Ferroglobe Reports Results for First Quarter 2017

LONDON, May 21, 2017 (GLOBE NEWSWIRE) -- 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 first quarter of 2017.

Of note, the company's non-core Energy division has been classified as "held for sale," and its results are consolidated only at the net income level.2 There are no "non-recurring" items that require adjustments to net income or EBITDA for Q1 2017.

In Q1 2017, Ferroglobe posted a net loss of $(8.1) million, or $(0.04) per share on a fully diluted basis. Ferroglobe's EBITDA of $26.6 million for Q1 2017, excluding the non-core Energy division, represents an increase of 257% compared to adjusted EBITDA of $7.5 million in Q4 2016. While this represents Ferroglobe's strongest quarterly EBITDA performance in the last twelve months, the company is confident that improving prices and a continued reduction in operating costs will help ensure a return to Ferroglobe's historic margins and performance. The company reported EBITDA margins of 6.8% for Q1 2017, compared to adjusted EBITDA margins of 1.9% for Q4 2016. If the non-core Energy division were to be included, EBITDA would have been $6.6 million in Q4 2016 and $30.9 million in Q1 2017.

Net sales in Q1 2017 totaled $388.2 million, flat from $386.8 million in Q4 2016. Selling prices for Ferroglobe's key products continued to improve over the course of the quarter across both the U.S. and Europe:

In terms of sales volumes, silicon metal experienced an 8% decrease quarter-over-quarter, silicon alloys experienced a 4% decrease quarter-over-quarter, and manganese alloys experienced a 17% decrease quarter-over-quarter. Silicon metal sales volumes were affected by the aforementioned strike at a key customer's facility, which has now been resolved. In order to preserve margins in manganese alloys, the company reduced production in response to a significant increase in the cost of manganese ore at the end of 2016, which negatively impacted manganese alloy volumes in Q1 2017. These conditions were temporary and volume trends are expected to normalize in Q2 2017.

            
     Quarter Ended
March 31, 2017
 Quarter Ended
December 31, 2016
 Quarter Ended
March 31, 2016
 Year Ended
December 31, 2016
Shipments in metric tons:        
 Silicon Metal    75,753    82,372    90,105    341,388
 Silicon Alloys    75,386    78,698    73,473    297,669
 Manganese Alloys    63,700    76,445    63,575    270,430
  Total shipments*    214,839    237,515    227,153    909,487
            
            
     Quarter Ended
March 31, 2017
 Quarter Ended
December 31, 2016
 Quarter Ended
March 31, 2016
 Year Ended
December 31, 2016
Average selling price ($/MT):       
 Silicon Metal $2,080 $2,080 $2,387 $2,201
 Silicon Alloys $1,473 $ 1,340 $1,433 $1,400
 Manganese Alloys $1,298 $890 $764 $826
   Total* $1,635 $1,452 $1,624 $1,530
            
            
     Quarter Ended
March 31, 2017
 Quarter Ended
December 31, 2016
 Quarter Ended
March 31, 2016
 Year Ended
December 31, 2016
Average selling price ($/lb.):       
 Silicon Metal $0.94 $0.94 $1.08 $1.00
 Silicon Alloys $0.67 $0.61 $0.65 $0.64
 Manganese Alloys $0.59 $0.40 $0.35 $0.37
  Total* $0.74 $0.66 $0.74 $0.69
            
* Excludes by-products and other      
            

"Ferroglobe experienced an improved start to the year, achieving EBITDA almost four times greater than the prior quarter. Despite a decrease in our shipments, the significant margin improvement reflects solid demand across end markets and a continued improvement in the overall pricing environment," said CEO Pedro Larrea. "We are confident in the actions we took during the market downturn over the few past quarters: we moved aggressively to manage our cost structure and actively identified markets and products that were experiencing an improved supply and demand environment. This, combined with our strong diversified portfolio, enabled us to capture the benefits of these improving trends. We are still in a recovery period from the bottom of the cycle, but are confident that we have passed the inflection point and optimistic about the remainder of 2017 and beyond. Moving forward, we will remain focused on improving our volumes and margins."

Continued focus on liquidity and cash-flow generation

Ferroglobe generated operating cash flows of $1.2 million in Q1 2017.3 Part of the operating cash flow comes from working capital improvements of $18 million during Q1 2017, which implies a total working capital reduction of more than $200 million since December 2015, more than double the initial target. Ferroglobe's net debt was $407 million at the end of Q1 2017, compared to $405 million at the end of Q4 2016, despite a one-time disbursement of $24 million for an exceptional severance payment.

"We remain committed to generating cash flow and ensuring strict control in our operations. This financial discipline has allowed us to continue improving working capital in the beginning of this recovery period and to keep net debt constant, despite extraordinary cash outflows," said CFO Joe Ragan.

            
Adjusted EBITDA:           
            
  Quarter Ended
March 31, 2017
  Quarter Ended
December 31, 2016
  Quarter Ended
March 31, 2016
  Year Ended
December 31, 2016
Loss attributable to the parent$  (6,554)    (241,964)    (25,699)    (338,427)
Loss attributable to non-controlling interest    (1,561)    (4,350)    (6,211)    (20,186)
(Profit) loss from discontinued operations   (2,494)    2,095     (338)    3,065 
Income tax (benefit) expense   (2,167)    (7,816)    455      (46,609)
Net finance expense   12,124     6,507      5,287     23,051 
Exchange differences   20     628     1,727     3,513 
Depreciation and amortization charges, operating allowances and write-downs   27,219     27,007      41,778     121,346 
EBITDA    26,587      (217,893)    16,999       (254,247)
Transaction and due diligence expenses   -      -      2,641     7,979 
Impairment loss   -      199,834     -      267,449 
Globe purchase price allocation adjustments   -      -      10,022     10,022 
Business interruption   -      -      -      2,532 
Inventory impairment   -      1,080     -      5,410 
Executive severance   -      24,430     -      24,430 
Adjusted EBITDA, excluding above items$  26,587      7,451      29,662      63,575  
            


Adjusted diluted loss per share:   
              
    Quarter Ended
March 31, 2017
  Quarter
Ended December 31, 2016
  Quarter Ended
March 31, 2016
  Year Ended
December 31, 2016
Diluted loss per ordinary share  $   (0.04)    (1.41)    (0.15)    (1.97)
 Tax rate adjustment    0.01     0.42     0.06     0.48 
 Transaction and due diligence expenses    -      -      0.01     0.03 
 Impairment loss    -      0.79     -      1.06 
 Globe purchase price allocation adjustments    -      -      0.04     0.04 
 Business interruption    -      -      -      0.01 
 Inventory impairment    -      -      -      0.02 
 Executive severance    -      0.10     -      0.10 
Adjusted diluted loss per ordinary share  $   (0.03)    (0.10)    (0.04)    (0.23)
               


Adjusted net loss attributable to Ferroglobe: 
      
            
   Quarter Ended
March 31, 2017
  Quarter Ended
December 31, 2016
  Quarter Ended
March 31, 2016
  Year Ended
December 31, 2016
             
Loss attributable to the parent $   (6,554)    (241,964)    (25,699)    (338,427)
 Tax rate adjustment   1,921     72,835     10,629     82,081 
 Transaction and due diligence expenses   -      -      1,796     5,426 
 Impairment loss   -      135,887     -      181,865 
 Globe purchase price allocation adjustments   -      -      6,815     6,815 
 Business interruption   -       -      -      1,722 
 Inventory impairment   -      734     -       3,679 
 Executive severance   -      16,612     -      16,612 
Adjusted loss attributable to the parent $   (4,633)    (15,896)    (6,459)    (40,227)
             

___________________________

1 In Q1 2017 reported and adjusted EBITDA are equal, given that there are no "non-recurring" items that require adjustments to net income or EBITDA.

2 Operating results exclude this division both for Q1 2017 and for any other comparable period.

3 Operating cash flow and free cash flow include $(24) million of cash outflow for the actual disbursement of the severance payment occasioned by the departure of the company's Executive Chairman in December 2016.

Recent developments

As previously disclosed, on February 1, 2017, the company announced that it entered into a definitive agreement to sell the hydro-electric operations of its non-core Energy division in Spain for estimated gross cash proceeds of €255 million. The company made progress during Q1 2017 to gain further support, and during the month of May has filed all the formal requests with the relevant governmental authorities in order to obtain the necessary regulatory approvals.

Regarding the ongoing trade cases Ferroglobe filed in Canada and the U.S., the respective government agencies have decided to move forward with their investigations, as a result of favorable first milestones:

Both timelines are subject to change as the respective agencies continue their investigations.

Conference Call

Ferroglobe will review the results for the first quarter of 2017 results during a conference call at 9:00 a.m. Eastern Time on May 22, 2017. The dial-in number for the call for participants in the United States is 877-293-5491 (conference ID 23656251). International callers should dial 914-495-8526 (conference ID 23656251). 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/bg28ifsu

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" or "forecast," 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 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.

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 not limited to: (i) risks relating to unanticipated costs of integration, including operating costs, customer loss and business disruption being greater than expected; (ii) Ferroglobe's 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 for 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. Ferroglobe does not give any assurance (1) that the company will achieve its 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 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 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 the company updates one or more forward-looking statements, no inference should be drawn that it will make additional updates with respect to those or other forward-looking statements. The company cautions you not to place undue reliance on any forward-looking statements, which are made only as of the date of this press release.

Non-GAAP Measures

EBITDA, adjusted EBITDA, adjusted loss attributable to the Ferroglobe parent entity and adjusted diluted loss per ordinary share are pertinent non-GAAP 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 U.S. GAAP financial measures. Reconciliations of these measures to the comparable U.S. GAAP financial measures are provided above and in the attached financial statements.

 
Ferroglobe PLC and Subsidiaries
Unaudited Condensed Consolidated Income Statement
(in thousands of U.S. dollars, except per share amounts)
             
   Quarter Ended
March 31, 2017
  Quarter Ended
December 31, 2016
  Quarter Ended
March 31, 2016
  Year Ended
December 31, 2016
             
Sales  $   388,241   $   386,833   $   415,544   $   1,555,657 
Cost of sales    (241,074)    (272,141)    (281,479)    (1,043,000)
Other operating income     1,583     15,079     2,220     25,712 
Staff costs    (65,818)    (88,780)    (66,368)    (293,032)
Other operating expense     (57,309)    (61,566)    (52,281)    (234,326)
Depreciation and amortization charges, operating allowances and write-downs    (27,219)    (27,007)    (41,778)    (121,346)
Impairment losses     -      (199,834)    -      (267,449)
Other gain (loss)    964     2,516     (637)    2,191 
Operating loss    (632)    (244,900)    (24,779)    (375,593)
Finance income    377     321     243     1,534 
Finance expense    (12,501)    (6,828)    (5,530)    (24,585)
Exchange differences    (20)    (628)    (1,727)    (3,513)
Loss before tax    (12,776)    (252,035)    (31,793)    (402,157)
Income tax benefit (expense)     2,167     7,816      (455)    46,609 
Loss for the period from continuing operations    (10,609)    (244,219)    (32,248)    (355,548)
Profit (loss) from discontinued operations    2,494     (2,095)    338     (3,065)
Loss for the period    (8,115)    (246,314)    (31,910)    (358,613)
Loss attributable to non-controlling interest    1,561     4,350     6,211     20,186 
Loss attributable to the parent  $   (6,554)  $   (241,964)  $   (25,699)  $   (338,427)
             
             
EBITDA    26,587     (217,893)    16,999     (254,247)
Adjusted EBITDA    26,587     7,451     29,662     63,575 
              
Weighted average shares outstanding            
Basic    171,838     171,838     171,838     171,838 
Diluted    171,838     171,838      171,838     171,838 
             
Loss per ordinary share             
Basic    (0.04)    (1.41)    (0.15)    (1.97)
Diluted    (0.04)    (1.41)    (0.15)    (1.97)
             


 Ferroglobe PLC and Subsidiaries
 Unaudited Condensed Consolidated Statement of Financial Position
 (in thousands of U.S. dollars)
 
   March 31, December 31, 
   2017 2016 
ASSETS
Non-current assets     
 Goodwill $   230,733   230,210 
 Other intangible assets   56,854   62,839 
 Property, plant and equipment   790,501   781,606 
 Non-current financial assets    5,967   5,823 
 Non-current financial assets from related parties   -    9,845 
 Deferred tax assets   47,768   44,950 
 Non-current receivables from related parties   2,139   2,108 
 Other non-current assets   20,892   20,245 
Total non-current assets   1,154,854    1,157,626  
Current assets     
 Inventories    312,757   316,702 
 Trade and other receivables   214,738   209,406 
 Current receivables from related parties   5,576   11,971 
 Current income tax assets   16,614   19,869 
 Current financial assets   3,640   4,049 
 Other current assets   10,703   9,810 
 Cash and cash equivalents   172,647   196,931 
 Assets and disposal groups classified as held for sale   120,094   92,937 
Total current assets   856,769    861,675  
Total assets $   2,011,623    2,019,301  
       
EQUITY AND LIABILITIES
Equity $   902,872    892,042  
Non-current liabilities     
 Deferred income   3,656   3,949 
 Provisions   83,993   81,957 
 Bank borrowings   78,123    179,473 
 Obligations under finance leases   1,906   3,385 
 Debt instruments    339,693   -  
 Other financial liabilities   86,962   86,467 
 Other non-current liabilities   2,317   5,737 
 Deferred tax liabilities   132,753   139,535 
Total non-current liabilities   729,403    500,503  
Current liabilities      
 Provisions   11,915   19,627 
 Bank borrowings   1,545   241,818 
 Obligations under finance leases   586   1,852  
 Debt instruments    4,156   -  
 Other financial liabilities   1,616   1,592 
 Payables to related parties   10,283   30,738 
 Trade and other payables   177,015   157,706 
 Current income tax liabilities   3,616   961 
 Other current liabilities   63,346   64,780 
 Liabilities associated with assets clasiffied as held for sale    105,270   107,682 
Total current liabilities    379,348    626,756  
Total equity and liabilities $   2,011,623    2,019,301  
         


Ferroglobe PLC and Subsidiaries   
Unaudited Condensed Consolidated Statement of Cash Flows   
(in thousands of U.S. dollars)   
              
    Quarter Ended
March 31, 2017
  Quarter Ended
December 31, 2016
  Quarter Ended
March 31, 2016
  Year Ended
December 31, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:           
Loss for the period$(8,115) $(246,314)$ (31,910)  (358,613)
Adjustments to reconcile net loss to net cash provided by operating activities:           
 Income tax benefit   (1,214)  (8,276)  777   (46,695)
 Depreciation and amortization charges, operating allowances and write-downs   27,222   27,705   42,998   125,677 
 Finance income   (795)   (321)  (243)  (1,554)
 Finance expense   13,765   7,820   7,858   30,269 
 Exchange differences   20   633   1,728   3,513 
 Impairment losses   -    200,458   -   268,089 
 Loss on disposals of non-current and financial assets   (558)  (748)  (51)  (340)
 Other adjustments   (406)  (6,099)  688   (1,851)
Changes in operating assets and liabilities           
 Decrease in inventories   7,108   48,376   43,349   108,207 
 Decrease (increase) in trade receivables   3,765   (15,486)  25,797   56,297 
 Increase in trade payables   17,085   27,479   1,910   28,572 
 Other*   (38,213)  9,500   (42,851)  (50,001)
Income taxes (paid) received   (1,825)  9,255   (12,774)  (10,933)
Interest paid   (16,651)  (9,162)  (7,702)  (29,468)
Net cash provided by operating activities 1,188   44,820   29,574   121,169 
CASH FLOWS FROM INVESTING ACTIVITIES:           
Payments due to investments:           
 Other intangible assets (410)  (2,371)  (436)  (4,914)
 Property, plant and equipment (12,362)  (17,830)  (26,808)  (71,119)
 Non-current financial assets (14)  (9,123)  -   (9,807)
 Current financial assets -   9,825   (53)  (105)
Disposals:           
 Intangible assets -   -   30   - 
 Property, plant and equipment -   -   104   - 
 Non-current financial assets  -    -    -   11 
 Current financial assets -   99   -    99 
Interest received 1,005    (483)  243   1,554 
Net cash used by investing activities (11,781)  (19,883)  (26,920 )  (84,281)
CASH FLOWS FROM FINANCING ACTIVITIES:           
Dividends paid -    (13,745)  (13,747)  (54,988)
Increase/(decrease) in bank borrowings:           
 Borrowings 31,425   19,053   56,991   124,384 
 Payments (172,380)  (23,539)  (49,698)  (81,237)
Other amounts paid due to financing activities 144,111   70,071   (712)  61,758 
Net cash provided (used) by financing activities 3,156   51,840   (7,166)  49,917 
TOTAL NET CASH FLOWS FOR THE PERIOD (7,437)  76,777   (4,512)  86,805 
Beginning balance of cash and cash equivalents 196,982   119,166   116,666   116,666 
Exchange differences on cash and cash equivalents in foreign currencies 3,486   1,039   1,865   (6,489)
Ending balance of cash and cash equivalents$193,031  $196,982 $ 114,019   196,982 
              
              
* Includes the cash outflow impact of the $32.5M shareholder settlement during the quarter ended March 31, 2016
              
INVESTOR CONTACT:

Ferroglobe PLC

Joe Ragan, US: +1 917 2098581, UK: +44 (0) 7827 227 688

Chief Financial Officer

Email: jragan@ferroglobe.com

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Source: Ferroglobe PLC

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