Sep 3, 2019

Ferroglobe Reports Second Quarter Results of 2019

Sales of $409.5 million; Net Loss of $(43.7) million; Adjusted EBITDA of $5.0 million
  • Q2 sales of $409.5 million, compared to $447.4 million in Q1 2019 and $577.9 million in Q2 2018
  • Q2 net loss of $(43.7) million compared to a net loss of $(28.6) million in Q1 2019 and a net profit of $66.0 million in Q2 2018
  • Q2 adjusted net loss attributable to parent of $(22.2) million compared to a net loss of $(21.9) million in Q1 2019 and a net profit of $25.6 million in Q2 2018
  • Q2 adjusted EBITDA of $5.0 million compared to $3.3 million in Q1 2019 and $83.0 million in Q2 2018
  • Successful closing of the divestiture of FerroAtlántica, S.A.U. on August 30, 2019, resulting in gross proceeds of €156.4 million
  • Suspension of 39,000 tons of annual silicon metal production capacity
  • Progress ongoing in the refinancing of the existing Revolving Credit Facility, targeting closing around the end of Q3 2019

LONDON, Sept. 03, 2019 (GLOBE NEWSWIRE) -- Ferroglobe PLC (NASDAQ: GSM) (“Ferroglobe”, the “Company”, or the “Parent”), the world’s leading producer of silicon metal, and a leading silicon- and manganese-based specialty alloys producer, today announced results for the second quarter of 2019.

Earnings Highlights

In Q2 2019, Ferroglobe posted a net loss of $(43.7) million, or $(0.24) per share on a fully diluted basis. On an adjusted basis, Q2 2019 net loss was $(22.2) million, or $(0.13) per share on a fully diluted basis.

Q2 2019 reported EBITDA was $(7.1) million, down from $3.3 million in the prior quarter. On an adjusted basis, Q2 2019 EBITDA was $5.0 million, up from Q1 2019 adjusted EBITDA of $3.3 million. The Company reported an adjusted EBITDA margin of 1.2% for Q2 2019, compared to an adjusted EBITDA margin of 0.7% for Q1 2019.

                     
    Quarter Ended   Quarter Ended   Quarter Ended   Six Months Ended   Six Months Ended
$,000 (unaudited)   June 30, 2019   March 31, 2019   June 30, 2018   June 30, 2019   June 30, 2018
                               
Sales
  $ 409,479     $ 447,391     $ 577,881     $ 856,870     $ 1,126,543  
Net (loss) profit   $ (43,658 )   $ (28,554 )   $ 66,030
    $ (72,212 )   $ 101,644
 
Diluted EPS   $ (0.24 )   $ (0.16 )   $ 0.39     $ (0.40 )   $ 0.60  
Adjusted net (loss) income attributable to the parent   $ (22,221 )   $ (21,894 )   $ 25,648     $ (44,115 )   $ 59,323  
Adjusted diluted EPS   $ (0.13 )   $ (0.13 )   $ 0.14     $ (0.26 )   $ 0.33  
Adjusted EBITDA   $ 5,035     $ 3,327     $ 83,000     $ 8,362     $ 163,003  
Adjusted EBITDA margin     1.2 %     0.7 %     14.4 %     1.0 %     14.5 %
                                         

* The amounts for prior periods have been restated to reflect the impact of the profit / (loss) from discontinued operations associated with the sale of our Spanish hydroelectric plants.

Cash Flow and Balance Sheet

Cash used in operations during Q2 2019 was $(37.4) million, with working capital increasing by $59.3 million. Net debt was $478.3 million as of June 30, 2019, up from $419.7 million as of March 31, 2019.

Pedro Larrea, Ferroglobe’s Chief Executive Officer commented, “The decline in end market demand continues to put pressure on our sales prices resulting in disappointing results for the quarter.  We expect these headwinds to linger in the second half of the year.  Accordingly, we are focused on operational adjustments and cash generating initiatives, designed to reduce the Company’s risk profile and provide adequate resources to weather this cyclical downturn.”  Mr. Larrea continued, “We are also cutting silicon production and monitoring other parts of the business for further cost reductions and operating efficiencies. The inherent flexibility in the Company’s operating platform and product base is key to positioning the Company for recovery.”

Successful closing of the divestiture of FerroAtlántica, S.A.U.

On August 30, 2019Ferroglobe successfully completed and closed the previously-announced sale of its 100% interest in subsidiary FerroAtlántica, S.A.U. (“FerroAtlántica”) to investment vehicles affiliates with TPG Sixth Street Partners.  The transaction, valued at €170 million, provides the Company with gross proceeds of €156.4 million, after closing adjustments.  Further details on this transaction appear in a separate press release issued concurrently herewith.

Other recent developments

Ferroglobe is making progress in pursuing financing alternatives and other opportunities to improve its capital structure. The terms, timing and structure of such transaction(s) will depend on market conditions and ongoing discussions in the coming weeks. The Company is targeting closing this refinancing around the end of Q3 2019.

To reduce corporate overhead costs and optimize operations, the Company is moving its headquarters from London (U.K.) to Madrid (Spain).  This move – expected to conclude in Q4 2019 - will consolidate key corporate functions in a single location, enhancing efficiency and management effectiveness in a lower cost environment.

To improve its production platform and release working capital, the Company has idled its silicon metal production facility at Polokwane (South Africa) and restarted one furnace at Sabon (Spain), reducing annual production capacity by 39,000 tons.

Discussion of Second Quarter 2019 Results

Sales

Sales for Q2 2019 were $409.5 million, down 8.5% compared to $447.4 million in Q1 2019. For Q2 2019, total shipments were down 6.0% and the average selling price was down 3.2% compared with Q1 2019.

                                 
    Quarter Ended   Quarter Ended       Quarter Ended       Six Months Ended   Six Months Ended    
    June 30, 2019   March 31, 2019   Change   June 30, 2018   Change   June 30, 2019   June 30, 2018   Change
Shipments in metric tons:                                          
Silicon Metal     54,084     62,269   -13.1 %     85,913   -37.0 %     116,353     177,528   -34.5 %
Silicon-based Alloys     79,264     81,801   -3.1 %     78,214   1.3 %     161,065     154,542   4.2 %
Manganese-based Alloys     99,555     103,669   -4.0 %     107,457   -7.4 %     203,224     178,633   13.8 %
Total shipments*     232,903     247,739   -6.0 %     271,584   -14.2 %     480,642     510,703   -5.9 %
                                           
Average selling price ($/MT):                                          
Silicon Metal   $ 2,320   $ 2,358   -1.6 %   $ 2,773   -16.3 %   $ 2,340   $ 2,767   -15.4 %
Silicon-based Alloys   $ 1,572   $ 1,669   -5.8 %   $ 1,908   -17.6 %   $ 1,621   $ 1,932   -16.1 %
Manganese-based Alloys   $ 1,188   $ 1,172   1.4 %   $ 1,304   -8.9 %   $ 1,180   $ 1,332   -11.4 %
Total*   $ 1,582   $ 1,634   -3.2 %   $ 1,943   -18.6 %   $ 1,609   $ 2,013   -20.1 %
                                           
Average selling price ($/lb.):                                          
Silicon Metal   $ 1.05   $ 1.07   -1.6 %   $ 1.26   -16.3 %   $ 1.06   $ 1.26   -15.4 %
Silicon-based Alloys   $ 0.71   $ 0.76   -5.8 %   $ 0.87   -17.6 %   $ 0.74   $ 0.88   -16.1 %
Manganese-based Alloys   $ 0.54   $ 0.53   1.4 %   $ 0.59   -8.9 %   $ 0.54   $ 0.60   -11.4 %
Total*   $ 0.72   $ 0.74   -3.2 %   $ 0.88   -18.6 %   $ 0.73   $ 0.91   -20.1 %
                                           
* Excludes by-products and other                                          
                                           

Sales Prices & Volumes By Product

During Q2 2019, total product average selling prices decreased by 3.2% versus Q1 2019.  Q2 average selling prices of silicon metal decreased 1.6%, silicon-based alloys decreased 5.8%, and manganese-based alloys increased 1.4%. During Q2 2019, sales volumes decreased by 6.0% versus Q1 2019.  Q2 sales volumes of silicon metal decreased 13.1%, silicon-based alloys decreased 3.1%, and manganese-based alloys decreased 4.0% versus Q1 2019.

Cost of Sales

Cost of sales was $292.4 million in Q2 2019, a decrease from $329.4 million from Q1 2019.  Cost of sales as a percentage of sales decreased to 71.4% in Q2 2019 from 73.6% for Q1 2019.

Other Operating Expenses

Other operating expenses was $62.9 million in Q2 2019, an increase from $53.9 million from Q1 2019, which is primarily due to contract termination costs. 

Net Loss Attributable to the Parent

In Q2 2019, net loss attributable to the Parent was $(40.8) million, or $(0.24) per diluted share, compared to a net loss attributable to the Parent of $(26.8) million, or $(0.16) per diluted share in Q1 2019.

Adjusted EBITDA

In Q2 2019, adjusted EBITDA was $5.0 million, or 1.2% of sales, compared to adjusted EBITDA of $3.3 million, or 0.7% of sales in Q1 2019.

Conference Call

Ferroglobe management will review the second quarter results of 2019 during a conference call at 9:00 a.m. Eastern Time on September 4, 2019.

The dial-in number for participants in the United States is 877‑293‑5491 (conference ID 8287856). International callers should dial +1 914‑495‑8526 (conference ID 8287856). 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/mmc/p/9678r4sf.

About Ferroglobe

Ferroglobe is one of the world’s leading suppliers of silicon metal, silicon-based and manganese-based specialty alloys and other 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”, “target”, “will” and words of similar meaning or the negative thereof.

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

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

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

Non-IFRS Measures

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

INVESTOR CONTACT:
Gaurav Mehta
EVP – Investor Relations 
Email:   investor.relations@ferroglobe.com

 
Ferroglobe PLC and Subsidiaries
Unaudited Condensed Consolidated Income Statement
(in thousands of U.S. dollars, except per share amounts)
                               
    Quarter Ended   Quarter Ended   Quarter Ended   Six Months Ended   Six Months Ended
    June 30, 2019   March 31, 2019*   June 30, 2018*   June 30, 2019   June 30, 2018*
Sales   $ 409,479     $ 447,391     $ 577,881     $ 856,870     $ 1,126,543  
Cost of sales     (292,432 )     (329,368 )     (343,753 )     (621,800 )     (664,289 )
Other operating income     14,530       14,021       8,512       28,551       15,295  
Staff costs     (74,852 )     (74,263 )     (88,180 )     (149,115 )     (170,072 )
Other operating expense     (62,924 )     (53,917 )     (74,212 )     (116,841 )     (143,303 )
Depreciation and amortization charges, operating allowances and write-downs     (30,204 )     (30,370 )     (29,118 )     (60,574 )     (55,905 )
Bargain purchase gain                 44,633             44,633  
Impairment losses     (1,195 )     (140 )           (1,335 )      
Other gain (loss)     275       (397 )     2,752       (122 )     2,715  
Operating (loss) profit       (37,323 )       (27,043 )       98,515         (64,366 )       155,617  
Net finance expense     (15,047 )     (13,823 )     (13,233 )     (28,870 )     (25,300 )
Financial derivatives (loss) gain     (295 )     1,264       2,832       969       1,067  
Exchange differences     5,080       (1,479 )     (8,708 )     3,601       (7,979 )
(Loss) profit before tax       (47,585 )       (41,081 )       79,406         (88,666 )       123,405  
Income tax benefit (expense)     4,890       8,210       (13,970 )     13,100       (27,687 )
(Loss) profit for the period from continuing operations       (42,695 )       (32,871 )       65,436         (75,566 )       95,718  
(Loss) profit for the period from discontinued operations     (963 )     4,317       594       3,354       5,926  
(Loss) profit for the period       (43,658 )       (28,554 )       66,030         (72,212 )       101,644  
Loss attributable to non-controlling interest     2,835       1,724       1,408       4,559       2,474  
(Loss) profit attributable to the parent   $   (40,823 )   $   (26,830 )   $   67,438     $   (67,653 )   $   104,118  
                               
                               
EBITDA   $ (7,119 )   $ 3,327     $ 127,633     $ (3,792 )   $ 211,522  
Adjusted EBITDA   $ 5,035     $ 3,327     $ 83,000     $ 8,362     $ 163,003  
                               
Weighted average shares outstanding                              
Basic     169,123       169,123       171,987       169,123       171,982  
Diluted     169,123       169,123       172,127       169,123       172,144  
                               
(Loss) profit per ordinary share                              
Basic   $ (0.24 )   $ (0.16 )   $ 0.39     $ (0.40 )   $ 0.61  
Diluted   $ (0.24 )   $ (0.16 )   $ 0.39     $ (0.40 )   $ 0.60  
                                         

* The amounts for prior periods have been restated to reflect the impact of the profit / (loss) from discontinued operations associated with the sale of our Spanish hydroelectric plants.


 
Ferroglobe PLC and Subsidiaries
Unaudited Condensed Consolidated Statement of Financial Position
(in thousands of U.S. dollars)
                         
    June 30,   March 31,   December 31,
    2019   2019   2018
ASSETS
Non-current assets                        
Goodwill   $ 204,089     $ 203,472     $ 202,848  
Other intangible assets     62,778       69,399       51,822  
Property, plant and equipment     784,272       890,436       888,862  
Other non-current financial assets     20,042       54,979       70,343  
Deferred tax assets     22,915       7,135       14,589  
Non-current receivables from related parties     2,276       2,247       2,288  
Other non-current assets     9,746       10,435       10,486  
Total non-current assets       1,106,118         1,238,103         1,241,238  
Current assets                        
Inventories     504,527       451,753       456,970  
Trade and other receivables     158,252       127,992       155,996  
Current receivables from related parties     3,000       6,556       14,226  
Current income tax assets     31,610       26,855       27,404  
Other current financial assets     7,840       2,191       2,523  
Other current assets     12,289       13,721       8,813  
Cash and cash equivalents     187,673       216,627       216,647  
Assets and disposal groups classified as held for sale     97,862              
Total current assets       1,003,053         845,695         882,579  
Total assets   $   2,109,171     $   2,083,798     $   2,123,817  
                         
EQUITY AND LIABILITIES
Equity   $   816,080     $   855,099     $   884,372  
Non-current liabilities                        
Deferred income     8,108       11,676       1,434  
Provisions     80,218       76,613       75,787  
Bank borrowings           131,366       132,821  
Lease liabilities     18,629       66,992       53,472  
Debt instruments     342,806       342,222       341,657  
Other financial liabilities     24,585       27,109       32,788  
Other non-current liabilities     25,246       25,080       25,030  
Deferred tax liabilities     64,520       61,887       77,379  
Total non-current liabilities       564,112         742,945         740,368  
Current liabilities                        
Provisions     44,007       47,619       40,570  
Bank borrowings     172,890       19,100       8,191  
Lease liabilities     8,692       20,616       12,999  
Debt instruments     10,938       2,734       10,937  
Other financial liabilities     52,594       51,618       52,524  
Payables to related parties     9,884       12,199       11,128  
Trade and other payables     252,372       228,649       256,823  
Current income tax liabilities     1,766       4,369       2,335  
Other current liabilities     95,150       98,850       103,570  
Liabilities associated with assets classified as held for sale     80,686              
Total current liabilities       728,979         485,754         499,077  
Total equity and liabilities   $   2,109,171     $   2,083,798     $   2,123,817  
                         
                         

 

 
Ferroglobe PLC and Subsidiaries
Unaudited Condensed Consolidated Statement of Cash Flows
(in thousands of U.S. dollars)
                               
    Quarter Ended   Quarter Ended   Quarter Ended   Six Months Ended   Six Months Ended
    June 30, 2019   March 31, 2019   June 30, 2018   June 30, 2019   June 30, 2018
Cash flows from operating activities:                              
(Loss) profit for the period   $   (43,658 )   $   (28,554 )   $   66,030     $   (72,212 )   $   101,644  
Adjustments to reconcile net (loss) profit to net cash used by operating activities:                              
Income tax (benefit) expense     (5,215 )     (6,704 )     14,302       (11,919 )     29,970  
Depreciation and amortization charges, operating allowances and write-downs     31,327       32,077       30,309       63,404       58,325  
Net finance expense     16,145       14,756       14,412       30,901       27,568  
Financial derivatives loss (gain)     295       (1,264 )     (2,832 )     (969 )     (1,067 )
Exchange differences     (5,080 )     1,479       8,708       (3,601 )     7,979  
Impairment losses     1,195       140             1,335        
Bargain purchase gain                 (44,633 )           (44,633 )
Share-based compensation     933       1,332       33       2,265       732  
Other adjustments     (275 )     397       (2,752 )     122       (2,715 )
Changes in operating assets and liabilities                              
(Increase) decrease  in inventories     (46,950 )     35       (59,050 )     (46,915 )     (166,531 )
(Increase) decrease in trade receivables     (32,316 )     28,371       (19,257 )     (3,945 )     (19,770 )
Increase (decrease) in trade payables     21,625       (22,967 )     476       (1,342 )     70,851  
Other     28,472       9,787       6,817       38,259       (42,953 )
Income taxes paid     (540 )     (1,680 )     (14,186 )     (2,220 )     (24,168 )
Interest paid     (3,341 )     (18,508 )     (2,957 )     (21,849 )     (20,258 )
Net cash (used) provided by operating activities       (37,383 )       8,697         (4,580 )       (28,686 )       (25,026 )
Cash flows from investing activities:                              
Interest and finance income received     486       390       2,273       876       2,352  
Payments due to investments:                              
Acquisition of subsidiary                             (20,379 )
Other intangible assets     (50 )     (134 )     (2,221 )     (184 )     (2,924 )
Property, plant and equipment     (7,128 )     (13,448 )     (29,786 )     (20,576 )     (52,317 )
Other     (627 )                 (627 )      
Disposals:                              
Other non-current assets                 12,734             12,734  
Other     1,638       1,759       1,904       3,397       5,914  
Net cash used by investing activities       (5,681 )       (11,433 )       (15,096 )       (17,114 )       (54,620 )
Cash flows from financing activities:                              
Dividends paid                 (10,321 )           (10,321 )
Payment for debt issuance costs           (705 )           (705 )     (4,476 )
Repayment of other financial liabilities                 (33,096 )           (33,096 )
Increase/(decrease) in bank borrowings:                              
Borrowings     39,649       31,850       37,668       71,499       220,032  
Payments     (18,252 )     (20,811 )           (39,063 )     (106,514 )
Proceeds from stock option exercises                 240             240  
Other amounts paid due to financing activities     (7,236 )     (5,708 )     (4,648 )     (12,944 )     (7,635 )
Net cash provided (used) by financing activities       14,161         4,626         (10,157 )       18,787         58,230  
Total net cash flows for the period       (28,903 )       1,890         (29,833 )       (27,013 )       (21,416 )
Beginning balance of cash and cash equivalents     216,627       216,647       197,669       216,647       184,472  
Exchange differences on cash and cash equivalents in foreign currencies     321       (1,910 )     (11,852 )     (1,589 )     (7,072 )
Ending balance of cash and cash equivalents   $   188,045     $   216,627     $   155,984     $   188,045     $   155,984  
Ending balance of cash and cash equivalents from statement of financial position     187,673       216,627       155,984       187,673       155,984  
Ending balance of cash and cash equivalents included within assets and disposal groups classified as held for sale     372                   372        
                                         

Adjusted EBITDA ($, 000):  

                     
    Quarter Ended   Quarter Ended   Quarter Ended   Six Months Ended   Six Months Ended
    June 30, 2019   March 31, 2019   June 30, 2018   June 30, 2019   June 30, 2018
(Loss) profit attributable to the parent   $   (40,823 )   $   (26,830 )   $   67,438     $   (67,653 )   $   104,118  
Loss (profit) for the period from discontinued operations     963       (4,317 )     (594 )     (3,354 )     (5,926 )
Loss attributable to non-controlling interest     (2,835 )     (1,724 )     (1,408 )     (4,559 )     (2,474 )
Income tax (benefit) expense     (4,890 )     (8,210 )     13,970       (13,100 )     27,687  
Net finance expense     15,047       13,823       13,233       28,870       25,300  
Financial derivatives loss (gain)     295       (1,264 )     (2,832 )     (969 )     (1,067 )
Exchange differences     (5,080 )     1,479       8,708       (3,601 )     7,979  
Depreciation and amortization charges, operating allowances and write-downs     30,204       30,370       29,118       60,574       55,905  
EBITDA       (7,119 )       3,327         127,633         (3,792 )       211,522  
Contract termination costs     9,260                   9,260        
Restructuring and termination costs     2,894                   2,894        
Bargain purchase gain                 (44,633 )           (44,633 )
Share-based compensation                             (3,886 )
Adjusted EBITDA   $   5,035     $   3,327     $   83,000     $   8,362     $   163,003  
                               

Adjusted profit attributable to Ferroglobe ($, 000):   

                     
    Quarter Ended   Quarter Ended   Quarter Ended   Six Months Ended   Six Months Ended
    June 30, 2019   March 31, 2019   June 30, 2018   June 30, 2019   June 30, 2018
(Loss) profit attributable to the parent   $   (40,823 )   $   (26,830 )   $   67,438     $   (67,653 )   $   104,118  
Tax rate adjustment     10,337       4,936       (11,440 )     15,273       (11,803 )
Contract termination costs     6,297                   6,297        
Restructuring and termination costs     1,968                   1,968        
Bargain purchase gain                 (30,350 )           (30,350 )
Share-based compensation                             (2,642 )
Adjusted (loss) profit attributable to the parent   $   (22,221 )   $   (21,894 )   $   25,648     $   (44,115 )   $   59,323  
                               

Adjusted diluted profit per share:   

                     
    Quarter Ended   Quarter Ended   Quarter Ended   Six Months Ended   Six Months Ended
    June 30, 2019   March 31, 2019   June 30, 2018   June 30, 2019   June 30, 2018
Diluted (loss) profit per ordinary share   $   (0.24 )   $   (0.16 )   $   0.39     $   (0.40 )   $   0.60  
Tax rate adjustment     0.06       0.03       (0.07 )     0.09       (0.07 )
Contract termination costs     0.04                   0.04        
Restructuring and termination costs     0.01                   0.01        
Bargain purchase gain                 (0.18 )           (0.18 )
Share-based compensation                             (0.02 )
Adjusted diluted (loss) profit per ordinary share   $   (0.13 )   $   (0.13 )   $   0.14     $   (0.26 )   $   0.33  
                               

FERROGLOBE_BRAND-01.jpg

Source: Ferroglobe PLC