Ferroglobe PLC
Nov 27, 2017
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Ferroglobe Reports Results for Third Quarter 2017

LONDON, Nov. 27, 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, today announced results for the third quarter of 2017.

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

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

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

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

____________________________

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


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

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

Strong cash flow generation continues to support liquidity

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

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

Adjusted EBITDA:

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

Adjusted net profit (loss) attributable to Ferroglobe:

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

Adjusted diluted profit (loss) per share:

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

Recent developments

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

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

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

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

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

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

Conference Call

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

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

About Ferroglobe

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

Forward-Looking Statements

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

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

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

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

Non-IFRS Measures

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

INVESTOR CONTACT:

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


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

 

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

 

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


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Source: Ferroglobe PLC

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