Ferroglobe Plc · NASDAQ:GSM
Ferroglobe — Q3 2018 Earnings Presentation
35 slides from Ferroglobe's earnings presentation, Nov 26, 2018
Slide 1: Advancing Materials Innovation Third Quarter 2018
Advancing Materials Innovation NASDAQ: GSM Third Quarter 2018
Slide 2: Forward-Looking Statements and non-IFRS Financial Metrics
Forward-Looking Statements and non-IFRS Financial Metrics This presentation contains forward-looking statements within the meaning of Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States Securities Exchange Act of 1934, as amended. Forward-looking
Slide 3: Table of Contents
Table of Contents Q3 2018 Overview Selected Financial Highlights Near-Term Outlook
Slide 4: I. Q3 2018 Overview
I. Q3 2018 Overview Pedro Larrea, Chief Executive Officer
Slide 5: Q3 2018 highlights: volumes down across the portfolio
*Adjusted net profit attributable to parent Volumes down across the portfolio (Volume change vs Q2 2018) Si Metal -4.9% Si alloys -2.9% Mn alloys -8.5% (ASP change vs Q2 2018) Si Metal -4.9% Si alloys -5.6% Mn alloys -7.1% Revenue -9.6% vs Q2 2018 Adjusted EBITDA $45.0 million -47.8% vs Q2 2018 Adju
Slide 6: Quarterly and 9M Adjusted EBITDA
Quarterly Adjusted EBITDA ($m) 9M Ending 9/30/18 Adjusted EBITDA ($m) Adjusted EBITDA increased 69% year-over-year Quarter-over-quarter Adjusted EBITDA decreased 48% Weaker pricing environment and lower volumes decrease quarterly EBITDA 63.8 130.9 220.9 9M 2016 9M 2017 9M 2018 89.6 86.3 45.0 Q1 2018
Slide 7: Quarterly Trend – Revenue Contribution Per Family of Products
Quarterly Trend – Revenue Contribution Per Family of Products ($m) 396 426 452 468 561 583 Revenue remains above prior year, despite a lower quarter impacted by weaker prices Quarter-0ver-quarter revenues decreased by 9.6% 9 months revenues up by 31% year-over-year 527 158 183 194 204 253 238 215 11
Slide 8: Adjusted EBITDA Bridge — Quarter-Over-Quarter
Q3 2018 Adjusted EBITDA down $41.3 million from previous quarter Adjusted EBITDA Bridge — Quarter-Over-Quarter ($m) 30.9 43.9 56.1 53.7 89.6 86.3 45.0 - 1.6 - 28.5 - 2.1 - 6.6 - 3.3 0.8 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Adjusted EBITDA Q2 2018 Volume Price Cost Mining Energy Division Other Adjusted EBIT
Slide 9: Silicon metal snapshot: volume, pricing, EBITDA contribution
Volume Trends Sequential Quarterly Product EBITDA Contribution ($m) Commentary Pricing Trends ($/mt) Volumes impacted by trade flow movements, customer inventory builds resulting from the trade case, and some unexpected customer outages during Q3 Pricing in the US this quarter was impacted by higher
Slide 10: Silicon-based alloys snapshot
Ferrosilicon continues to enjoy stable demand Some pricing pressure in Europe, albeit from record levels, as a result of increased imports from Malaysia and other countries US pricing remained firm on the back of solid demand from the steel sector Sequential Quarterly Product EBITDA Contribution ($m
Slide 11: Manganese-based alloys snapshot
Manganese alloy prices dropped due to increased supply Ore prices have remained at high levels for an extended period of time, adversely impacting the spread Volumes down due to logistical constraints, but remain strong on the back of a strong steel demand Sequential Quarterly Product EBITDA Contrib
Slide 12: Cost trends – by product
Cost trends – by product Silicon Metal (EBITDA cost $/t) Mn Based Alloy (EBITDA cost $/t) Silicon Based Alloy (EBITDA cost $/t) Cost Components Cost Components Cost Components Avg. EBITDA costs per ton have increased 11% from Q1 2017, primarily driven by: Higher electrode prices increasing costs by
Slide 13: EBITDA reconciliation – metallurgy & other contributors
EBITDA reconciliation – metallurgy & other contributors ($m) Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Silicon metal 7.3 17.7 20.9 24.3 43.5 41.5 32.3 Silicon-based alloys 14.9 19.8 18.9 21.6 35.0 31.9 26.2 Manganese-based alloys 17.8 21.0 24.7 18.5 11.4 7.2 -8.6 Other metals 5.6 4.2 2.0 6.5 7.6 8.5
Slide 14: 9M 2018 highlights: volumes up across the portfolio
*Adjusted net profit attributable to parent Volumes up across the portfolio (Volume change vs 9M 2017) Si Metal +7.1% Si alloys +8.4% Mn alloys +37.3% (ASP change vs 9M 2017) Si Metal +23.3% Si alloys +20.8% Mn alloys -2.3% Revenue +31.2% vs 9M 2017 Adjusted EBITDA $220.9 million +68.8% vs 9M 2017 A
Slide 15: Adjusted EBITDA Bridge — YTD 2018 vs. YTD 2017
Significant improvement year to year, driven by price and volume, partially offset by cost pressure Year-to-date 2018 vs year-to-date 2017 waterfall Adjusted EBITDA Bridge — YTD 2018 vs. YTD 2017 ($m) -1.1 Mn alloys Includes -17.2m related to pre-acquisition business Power in Spain: 23.6m Electrode:
Slide 16: Selected Financial Highlights
Selected Financial Highlights Phillip Murnane, Chief Financial Officer
Slide 17: Q3 2018 key performance indicators — income statement
Q3 2018 key performance indicators — income statement Key Performance Indicators Q3 2018 Q2 2018 Q1 2018 Diff, % 9M 2018 9M 2017 Diff, % Sales volumes (tons) 255,930 271,584 239,119 (5.8%) 766,633 656,466 16.8% Revenue ($m) 526.8 583.0 560.7 (9.6%) 1,671 1,273 31.2% Operating Profit ($m) 14.3 100.6
Slide 18: Q3 2018 key performance indicators — balance sheet
Notes: Financial results are unaudited Net Debt includes finance lease obligations Capital is calculated as book equity plus net debt Free cash-flow defined as “Net cash provided by operating activities” minus “payments for property, plant & equipment” Q3 2018 key performance indicators — balance sh
Slide 19: Increase in working capital primarily driven by finished inventory build
Increase in working capital primarily driven by finished inventory build Working Capital Evolution ($m) Finished Inventory build in both existing and new plants drove increased working capital 389 376 280 282 317 348 389 55 90 95 353 389 376 280 282 317 348 55 90 95 Mar 17 Jun 17 Sept 17 Dec 17 Mar
Slide 20: Gross and Net Debt Evolution
Gross and Net Debt Evolution ($m) Increase in net debt primarily attributable to continued working capital build Gross Debt 600 618 584 571 647 631 643 407 435 394 387 449 475 511 Mar'17 Jun'17 Sep'17 Dec'17 Mar'18 Jun'18 Sept'18 Net Debt
Slide 21: 2018 Free Cash-flow Evolution
9 Months 2018 Free Cash-flow Evolution Cash-flow Impacts Increased A/R securitization program will provide additional liquidity ($35m): COMPLETED, $20m drawn, no intention to draw additional liquidity at this stage Reduction in Mn ore inventory levels, after having ramped-up the new facilities ($20m
Slide 22: Conservative capital structure — positioned to pursue growth
Conservative capital structure — company positioned to pursue growth opportunities Focus on deleveraging the balance sheet Reduction in net leverage, leverage below target of 2x in Q1 2018, Q2 2018 and Q3 2018 Continued commitment to further lowering leverage, will not meet 1.5x by year end Refinanc
Slide 23: Near-Term Outlook
Near-Term Outlook Pedro Larrea, Chief Executive Officer
Slide 24: Perspective of Ferroglobe's Evolution
Perspective of Ferroglobe´s Evolution 9M Adjusted EBITDA ($m) 2018 YTD has represented an additional step towards normalized results at Ferroglobe Severe market downturn Integration Synergies Consolidation Refinancing Market and operational discipline YTD 2018 results reflect a ‘mixed bag’ of factor
Slide 25: Continued growth for silicon metal demand into Q3
XX% XX% Continued growth for silicon metal demand into Q3 Aluminum / Automotive Chemicals / Silicones Polysilicon / Electronics Globally the market will remain in deficit in 2019 Demand supported by mega-trends (light weighting, emerging market demand, per-capita use) Headwinds in North America due
Slide 26: Positive medium term supply side dynamics
coupled with some positive medium term supply side dynamics Chinese Silicon Production and Exports Chinese Exports as % of Production Silicon Capacity Changes (ex-China) CRU 2019 Supply/Demand Outlook (ex China) 2018 — Brazil (Liasa, Minasligas, RIMA) — Iceland (PCC Bakki started) Capacity additions
Slide 27: Silicon metal oversupply sentiment may impact short term decisions
However, silicon metal industry sentiment of oversupply may impact short term decisions Quarterly Global Silicon Metal Supply/Demand Trends Factors Impacting the Supply-Demand Dynamics in the Near Term Most previously idled capacity has restarted over the past 18 months Higher than usual level of in
Slide 28: Optimizing global production footprint – Silicon Metal
Ferroglobe has taken action to optimize its global production footprint – Silicon Metal Ferroglobe Silicon Metal Capacity (´000 tons Annualized) -40k tons -36k tons (‘000 t) Rationale for Capacity Cutbacks Expected Results Inventories above desired level Suboptimal operation, with multiple facilitie
Slide 29: Optimizing global production footprint – manganese based alloys
Rationale for Capacity Cutbacks Expected Results Inventories above desired level. Loss making facilities Cost optimization across the platform Reduction of stock levels. EBITDA improvements around $2.3m in Q4. Flexibility to increase production in Q1 or Q2 if market conditions improve. Ferroglobe Mn
Slide 30: Global steel demand continues to grow into year end
XX% Global steel demand continues to grow into year end Global Steel Demand +3.9% +1.4% Global Steel Demand (ex. China) +1.4% +1.6% China Steel Demand +6.0% 0.0% Emerging Markets Steel Demand (ex. China) +3.2% +4.0% Recent Trends 2018 will mark a record year for global steel demand To date, the trad
Slide 31: Manganese alloys should start to contribute once ore prices reset
Manganese alloys should start to contribute once ore prices reset XX% New Mn Ore Capacity — Expected in 2019 Regression Illustration — Link Between Mn Alloys and Mn Ore Historical link between alloy and ore prices has been broken As new capacity hits the market, ore prices could decrease Source: All
Slide 32: Outlook for 2019
Outlook for 2019 Contracting season progressing slower than usual — customers trying to make case for lower prices while producers faced with increasing costs and seeing stable demand Some lingering impact of aluminum scrap in North America and auto emissions issue in Europe starting to play a role
Slide 33: Closing remarks
Challenges faced in Q3 likely to continue in the near-term Strong liquidity and balance sheet with a focus on positive free cash flow in 2019 Fundamental asset value based on strong market position and platform diversification Closing remarks
Slide 34: Q&A
Q&A
Slide 35: Advancing Materials Innovation Third Quarter 2018
Advancing Materials Innovation NASDAQ: GSM Third Quarter 2018 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: November 26, 2018 FERROGLOBE PLC by