Ferroglobe PLC
Aug 29, 2017
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Ferroglobe Reports Results for Second Quarter 2017

LONDON, Aug. 29, 2017 (GLOBE NEWSWIRE) -- Ferroglobe PLC (NASDAQ:GSM), ("Ferroglobe" or the "Company"), one of the world's largest producers of silicon metal and silicon- and manganese-based alloys, today announced results for the second quarter of 2017.

In Q2 2017, Ferroglobe posted a net profit of $1.0 million, or $0.02 per share on a fully diluted basis. On an adjusted basis, Q2 2017 net profit attributable to the parent was $6.0 million, or $0.05 per share on a fully diluted basis.

Q2 2017 reported EBITDA was $36.8 million, up from $30.9 million in the prior quarter. On an adjusted basis, Q2 2017 EBITDA was $43.9 million, up 42% from Q1 2017 adjusted EBITDA of $30.9 million. The Company reported adjusted EBITDA margins of 10.3% for Q2 2017, compared to adjusted EBITDA margins of 7.8% for Q1 2017.

Net sales in Q2 2017 totaled $425.8 million, up 8% from $396.0 million in Q1 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 Company also saw stabilization of demand and volumes across its key products. In terms of sales volumes, silicon metal experienced a 9.4% increase quarter-over-quarter, silicon-based alloys experienced a 5.9% decrease quarter-over-quarter and manganese-based alloys experienced a 1.1% increase quarter-over-quarter.

              
      Quarter Ended
June 30, 2017
 Quarter Ended
March 31, 2017
 Quarter Ended
June 30, 2016
 Six Months Ended
June 30, 2017
 Six Months Ended
June 30, 2016
Shipments in metric tons:          
 Silicon Metal  82,881  75,753  85,242  158,634  175,347
 Silicon-based Alloys  70,913  75,386  74,786  146,299  148,259
 Manganese-based Alloys  64,403  63,700  70,756  128,103  134,331
  Total shipments*  218,197  214,839  230,784  433,036  457,937
              
              
     Quarter Ended
June 30, 2017
 Quarter Ended
March 31, 2017
 Quarter Ended
June 30, 2016
 Six Months Ended
June 30, 2017
 Six Months Ended
June 30, 2016
Average selling price ($/MT):         
 Silicon Metal $2,210 $2,080 $2,230 $2,148 $2,311
 Silicon-based Alloys $1,586 $1,473 $1,430 $1,528 $1,432
 Manganese-based Alloys $1,308 $1,298 $777  $1,303 $771
  Total* $1,741 $1,635  $1,525 $1,688 $1,574
              
               
     Quarter Ended
June 30, 2017
 Quarter Ended
March 31, 2017
 Quarter Ended
June 30, 2016
 Six Months Ended
June 30, 2017
 Six Months Ended
June 30, 2016
Average selling price ($/lb.):          
 Silicon Metal $1.00 $0.94 $1.01 $0.97 $1.05
 Silicon-based Alloys $0.72 $0.67 $0.65 $0.69 $0.65
 Manganese-based Alloys $0.59 $0.59 $0.35  $0.59 $0.35
  Total* $0.79 $0.74 $0.69 $0.77 $0.71
              
* Excludes by-products and other        
              

"Ferroglobe delivered strong performance in Q2 2017 with quarter-over-quarter earnings growth and improved profitability, having delivered positive net income for the first time since the merger. A significant reduction in the flow of low-priced imports of silicon metal resulted in continued pricing improvement particularly in North America and sustained strong end-market demand across all our products continued to drive the stabilization of shipment volumes. We continue to benefit from our diversification strategy, with the business now generating almost equal earnings from our three main products," said CEO Pedro Larrea. "Having focused on carefully managing our cost structure in prior quarters, combined with disciplined execution of our commercial strategy, we have been able to capture the benefits of the market environment with a significant improvement in our margins. We expect prices to continue to improve through the year and we remain focused on sustained performance across all business segments as we move through the remainder of 2017."

Strong cash flow generation continues to support liquidity

Working capital increased by $35.4 million during Q2 2017, primarily a result of the recovery cycle - year-to-date the Company has increased total working capital by $20.3 million. Ferroglobe continued to generate positive cash flows. During the quarter, the Company generated operating cash flow of $20.1 million and free cash flow of $5.8 million.

Ferroglobe's net debt was $435 million at the end of Q2 2017, up by $28 million compared to $407 million at the end of Q1 2017. To further strengthen liquidity, on July 31, 2017 Ferroglobe entered into a $250 million accounts receivable securitization to obtain financing in connection with its receivables generated in the U.S., Canada, Spain and France under one program. This arrangement provides several benefits to the Company, including risk mitigation, liquidity maximization and the ability to replace multiple factoring arrangements with one consolidated, centrally-managed program.

               
  Quarter Ended
June 30, 2017
  Quarter Ended
March 31, 2017
  Quarter Ended
June 30, 2016
  Six Months Ended
June 30, 2017
  Six Months Ended
June 30, 2016
Profit (loss) attributable to the parent$  2,859      (6,554)     (42,238)    (3,695)    (67,937)
Loss attributable to non-controlling interest (1,859)  (1,561)  (7,080)  (3,420)  (13,291)
Income tax benefit (1,949)  (1,214)  (29,038)  (3,163)  (28,261)
Net finance expense 14,547   12,970   6,908   27,517   14,523 
Financial derivatives loss 4,071   -   -   4,071   - 
Exchange differences (7,263)  20   276   (7,243)  2,004 
Depreciation and amortization charges, operating allowances and write-downs 26,401   27,222   24,534   53,623    67,532 
EBITDA   36,807      30,883      (46,638)    67,690       (25,430)
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 -   -   58,587   -   58,587 
Transaction and due diligence expenses -   -   5,227   -   7,868 
Globe purchase price allocation adjustments -   -   -   -   10,022 
Adjusted EBITDA$  43,870      30,883      17,176      74,753      51,047  
                    


                 
   Quarter Ended
June 30, 2017
  Quarter Ended
March 31, 2017
  Quarter Ended
June 30, 2016
  Six Months Ended
June 30, 2017
  Six Months Ended
June 30, 2016
                
Profit (loss) attributable to the parent $   2,859      (6,554)    (42,238)    (3,695)    (67,937)
 Tax rate adjustment (1,645)  1,771   (3,964)  126   6,775 
 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 -   -   39,839   -   39,839 
 Transaction and due diligence expenses -    -   3,555   -   5,351 
 Globe purchase price allocation adjustments -   -   -   -   6,815 
Adjusted profit (loss) attributable to the parent $   6,017      (4,783)    (2,808)    1,234      (9,157)
                


                
   Quarter Ended
June 30, 2017
  Quarter Ended
March 31, 2017
  Quarter Ended
June 30, 2016
  Six Months Ended
June 30, 2017
  Six Months Ended
June 30, 2016
Diluted profit (loss) per ordinary share   0.02      (0.04)    (0.25)    (0.02)    (0.40)
 Tax rate adjustment (0.01)  0.01   (0.01)  0.00    0.05 
 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 -   -   0.23   -   0.23 
 Transaction and due diligence expenses -   -   0.02   -   0.03 
 Globe purchase price allocation adjustments -   -   -   -   0.04 
Adjusted diluted profit (loss) per ordinary share   0.05      (0.03)    (0.01)    0.02      (0.05)
                

Recent developments

The favorable demand environment has allowed Ferroglobe to return to close to full capacity utilization. The Selma facility (Alabama, US) restarted one of its two furnaces. Ferroglobe's European and other North American plants are now running at full capacity. Facilities in Argentina and South Africa are currently at 50% and 65% utilization, respectively, in Q2 2017 as a result of unfavorable local conditions. Ferroglobe's plant in Venezuela has halted operations since May 2017, as the Company awaits further developments in the country. 

Regarding the ongoing trade cases that Ferroglobe filed in the United States, the Department of Commerce (the "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%, with more than 54% of silicon metal imports into the United States being subject to cash deposit requirements. The Company has also filed antidumping cases against imports from Australia, Brazil, and Norway to address unfairly low import pricing. The DOC is expected to make preliminary determinations in the antidumping cases on October 4, 2017, which may result in the imposition of additional duties.

Ferroglobe Executive Chairman, Javier López Madrid, commented, "We are confident that the affirmative preliminary determinations issued on August 7, 2017 will be the first step in ensuring a more competitive and fair silicon metal market in the U.S., and we look forward to receiving a favorable outcome in the ongoing antidumping investigations."

Regarding the ongoing trade case filed in Canada, the Canadian Border Services Agency (the "Agency") issued its preliminary determinations on July 5, 2017. The Agency found dumping and/or subsidy margins for Brazil, Kazakhstan, Laos, Malaysia, Norway and Thailand. It terminated its investigation against Russia on the basis of insufficient import volumes. The final determination of the Agency's investigations is expected to be issued on October 3, 2017. The Canadian International Trade Tribunal hearing is scheduled to take place on October 2, 2017, with a final finding expected to be issued on November 2, 2017.

The Company announced on July 26, 2017 that it has not received the required regulatory approvals to divest hydro-electric operations in Spain. The Company will continue to explore all options, including further efforts to gain formal approval for the divestiture of these non-core assets to capture the assets full value.

_____________________

1 Q1 2017 income statement has been revised to include Ferroglobe's energy business in Spain as no longer discontinued operations, including sales, net profit and reported and adjusted EBITDA.  

Conference Call

Ferroglobe will review the results for the second quarter of 2017 during a conference call at 9:00 a.m. Eastern Time on Wednesday, August 30, 2017.

The dial-in number for the call for participants in the United States is 877-293-5491 (conference ID 69657476). International callers should dial 914-495-8526 (conference ID 69657476). 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/xyge3xid

About Ferroglobe

Ferroglobe PLC is one of the world's largest producers of silicon metal and silicon- and manganese-based alloys, 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 headquartered 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-IFRS Financial Metrics

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. Reconciliations of these measures to the comparable IFRS 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
June 30, 2017
  Quarter Ended
March 31, 2017*
  Quarter Ended
June 30, 2016
  Six Months Ended
June 30, 2017
  Six Months Ended
June 30, 2016
                
Sales $425,810   396,037   397,953   821,847   821,432 
Cost of sales  (250,279)  (241,138)  (252,764)  (491,417)  (534,607)
Other operating income  4,008   1,629   3,717   5,637    6,050 
Staff costs  (74,168)  (66,485)  (72,050)  (140,653)  (139,233)
Other operating expense  (65,009)  (60,124)  (64,374 )  (125,133)  (119,315)
Depreciation and amortization charges, operating allowances and write-downs  (26,401)  (27,222)  (24,534)  (53,623)  (67,532)
Impairment losses  -   -   (58,587)  -   (58,587)
Other (loss) gain  (3,555)  964   (533)  (2,591)  (1,170)
Operating profit (loss)     10,406      3,661      (71,172)    14,067      (92,962)
Finance income  162   795   442   957   685 
Finance expense  (14,709)  (13,765)  (7,350)  (28,474)  (15,208)
Financial derivatives loss  (4,071)  -   -   (4,071)  - 
Exchange differences  7,263   (20 )  (276)  7,243   (2,004)
Loss before tax    (949)    (9,329)    (78,356)    (10,278)    (109,489)
Income tax benefit  1,949   1,214   29,038   3,163   28,261 
Profit (loss) for the period    1,000      (8,115)    (49,318)    (7,115)    (81,228)
Loss attributable to non-controlling interest  1,859   1,561   7,080   3,420   13,291 
Profit (loss) attributable to the parent $  2,859      (6,554)    (42,238)    (3,695)    (67,937)
                
                
EBITDA  36,807   30,883   (46,638)  67,690   (25,430 )
Adjusted EBITDA  43,870   30,883   17,176   74,753   51,047 
                
Weighted average shares outstanding               
Basic  171,947   171,838   171,838   171,947   171,838 
Diluted  172,047   171,838   171,838   171,947   171,838 
                
Profit (loss) per ordinary share               
Basic  0.02   (0.04)  (0.25)  (0.02)  (0.40)
Diluted  0.02   (0.04)  (0.25)  (0.02)  (0.40)
                
*  Revised data presents the results of Ferroglobe's energy business in Spain as no longer discontinued operations.
                 


Ferroglobe PLC and Subsidiaries      
Unaudited Condensed Consolidated Statement of Financial Position      
(in thousands of U.S. dollars)      
        
   June 30, March 31 , December 31,
   2017 2017 2016
       
ASSETS
Non-current assets      
 Goodwill $ 232,250 230,733 230,210
 Other intangible assets 60,282 56,854 62,839
 Property, plant and equipment 888,844 790,501 781,606
  Non-current financial assets 6,198 5,967 5,823
 Non-current financial assets from related parties - -  9,845
 Deferred tax assets 52,214 47,768 44,950
 Non-current receivables from related parties 2,282 2,139 2,108
 Other non-current assets 22,337 20,892 20,245
Total non-current assets   1,264,407    1,154,854    1,157,626
Current assets       
 Inventories 337,555 312,757 316,702
 Trade and other receivables  229,703 214,738 209,406
 Current receivables from related parties 3,684 5,576 11,971
 Current income tax assets 11,272 16,614 19,869
 Current financial assets 3,661 3,640  4,049
 Other current assets 12,568 10,703 9,810
 Cash and cash equivalents 183,561 172,647 196,931
 Assets and disposal groups classified as held for sale - 120,094 92,937
Total current assets   782,004    856,769    861,675
Total assets $   2,046,411    2,011,623    2,019,301
        
EQUITY AND LIABILITIES
Equity $   906,518    902,872    892,042
Non-current liabilities      
 Deferred income 5,960 3,656 3,949
 Provisions 85,029 83,993 81,957
 Bank borrowings 62,776 78,123 179,473
 Obligations under finance leases 72,647 1,906 3,385
 Debt instruments 338,202 339,693 -
 Other financial liabilities 116,492 86,962 86,467
 Other non-current liabilities 2,449 2,317 5,737
 Deferred tax liabilities 144,345 132,753 139,535
Total non-current liabilities   827,900    729,403    500,503
Current liabilities      
 Provisions 22,091 11,915 19,627
 Bank borrowings 1,021 1,545 241,818
 Obligations under finance leases 12,030 586 1,852
 Debt instruments 12,537 4,156 -
 Other financial liabilities 2,460 1,616 1,592
 Payables to related parties 8,813 10,283 30,738
 Trade and other payables 178,602 177,015 157,706
 Current income tax liabilities 4,673 3,616 961
 Other current liabilities 69,766 63,346 64,780
 Liabilities associated with assets classified as held for sale - 105,270 107,682
Total current liabilities   311,993    379,348    626,756
Total equity and liabilities $   2,046,411    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
June 30, 2017
   Quarter Ended
March 31, 2017
  Quarter Ended
June 30, 2016
  Six Months Ended
June 30, 2017
  Six Months Ended
June 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:              
Profit (loss) for the period$1,000   (8,115)  (49,318)  (7,115)  (81,228)
Adjustments to reconcile net loss to net cash provided by operating activities:              
 Income tax benefit (1,949)  (1,214)  (29,038)  (3,163)  (28,261)
 Depreciation and amortization charges, operating allowances and write-downs 26,401   27,222   24,534   53,623   67,532 
 Finance income (162)  (795)  (442)  (957)  (685)
 Finance expense 14,709   13,765   7,350   28,474   15,208 
 Financial derivatives loss 4,071   -   -   4,071   - 
 Exchange differences  (7,263)  20   276   (7,243)  2,004 
 Impairment losses -   -   58,587   -   58,587 
 Loss on disposals of non-current and financial assets 1,348   (558)  242   790   191 
 Other adjustments 2,208   (406)  291   1,802   979 
Changes in operating assets and liabilities              
 (Increase) decrease in inventories (11,943)  7,108   14,347   (4,835)  57,696 
 Decrease in trade receivables 9,456   3,765   28,439   13,221   54,236 
 (Decrease) increase in trade payables (8,943)  18,156   (10,651)  9,213   (8,741)
 Other* (506)  (34,545)  (16,050)  (35,051)  (58,901)
Income taxes (paid) received (3,919)  (2,297)  1,497    (6,216)  (11,277)
Interest paid (4,378)   (9,729)  (5,767)  (14,107)  (13,469)
Net cash provided by operating activities 20,130   12,377   24,297   32,507   53,871 
CASH FLOWS FROM INVESTING ACTIVITIES:              
Payments due to investments:              
 Other intangible assets -   (410)  (87)  (410)  (523)
 Property, plant and equipment (14,319)  (12,362)  (15,676)  (26,681)  (42,484)
 Non-current financial assets -   (14)  (273)  (14)  (273)
 Current financial assets -   -   (13,865)  -   (13,918)
Disposals:              
 Intangible assets -   -   (30)  -   - 
 Property, plant and equipment -   -   (104)  -   - 
 Current financial assets -   -   99   -   99 
Interest received 211   353   466   564   709 
Net cash used by investing activities (14,108)  (12,433)  (29,470)  (26,541)  (56,390)
CASH FLOWS FROM FINANCING ACTIVITIES:              
Dividends paid -   -   -   -   (13,747)
Payment for debt issuance costs (3,078)  (10,477)  -   (13,555)  - 
Proceeds from debt issuance -   350,000   -   350,000   - 
Increase/(decrease) in bank borrowings:              
 Borrowings 30   31,425   25,978   31,455   82,969 
 Payments (15,300)  (372,380)  11,623   (387,680)  (38,075)
Other amounts paid due to financing activities (10,694)  (7,211)  (3,851)  (17,905)  (4,563)
Net cash (used) provided by financing activities (29,042)  (8,643)  33,750   (37,685)  26,584 
TOTAL NET CASH FLOWS FOR THE PERIOD (23,020)  (8,699)  28,577   (31,719)  24,065 
Beginning balance of cash and cash equivalents 193,031   196,982   114,019   196,982   116,666 
Exchange differences on cash and cash equivalents in foreign currencies 13,550   4,748   (6,822)  18,298   (4,957)
Ending balance of cash and cash equivalents$183,561   193,031   135,774   183,561   135,774 
                 
                 
* 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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