Ferroglobe Plc · NASDAQ:GSM
Ferroglobe — Q2 2019 Earnings Presentation
31 slides from Ferroglobe's earnings presentation, Sep 3, 2019
Slide 1: Advancing Materials Innovation Second Quarter 2019
Advancing Materials Innovation NASDAQ: GSM Second Quarter 2019
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 Q2 2019 overview Update on corporate initiatives Near-term outlook Appendix — supplemental financial information
Slide 4: Opening remarks
Opening remarks Q2 results reflect the continued slowdown in end-market demand and weak pricing environment Successful closing of FerroAtlántica1 divestiture significantly improves balance sheet Focus on improving operational and financial flexibility Note: 1 FerroAtlántica, SAU is the owner of ten
Slide 5: I. Q2 2019 overview
I. Q2 2019 overview
Slide 6: Volumes slowdown driven by shift in end customer sentiment
* Adjusted net loss attributable to parent Note: The amounts for prior periods have been restated to show the results of Spanish hydroelectric plants within (Loss) profit for the period from discontinued operations Volumes slowdown driven by shift in end customer sentiment (Volume change vs Q1 2019)
Slide 7: Quarterly trend – revenue and adjusted EBITDA
Quarterly trend – revenue contribution per family of products ($m) Quarterly trend – adjusted EBITDA ($m) Quarterly sales decreased by 8.5% in Q2 vs. Q1, while Adjusted EBITDA increased 51% Note: The amounts for prior periods have been restated to show the results of Spanish hydroelectric plants wit
Slide 8: Declining pricing environment driving weaker quarter performance
Declining pricing environment driving weaker quarter performance Declining pricing environment continues to constrain quarterly performance Lower commodity prices and increased operating efficiency have improved cost profile Adjusted EBITDA bridge Q2 2019 vs Q1 2019 Quarter-over-quarter evolution ($
Slide 9: Silicon metal snapshot
Volume trends Sequential quarters EBITDA evolution ($m) Commentary Pricing trends ($/mt) Silicon metal snapshot Significant demand slowdown across the auto, chemicals and solar end markets Continuous effort to right-size the production base: Additional production cutback in Polokwane (South Africa)
Slide 10: Pro forma silicon metal capacity
Pro forma silicon metal capacity (‘000 tons annual production capacity, excl. third party share of JV) Source: Ferroglobe End of 2017: all SiM furnaces running except: 2 furnaces Polokwane 1 furnace Sabón (FeSi) + 2 furnaces Polokwane - 2 furnaces Selma - 1 furnace Beverly - 2 furnaces Château-Feuil
Slide 11: Silicon-based alloys snapshot
Volume trends Commentary Sequential quarters EBITDA evolution ($m) Silicon-based alloys snapshot Pricing trends ($/mt) FeSi index pricing has continued to erode during Q2 and into Q3 to levels likely to generate losses across a significant part of the industry Volumes remain strong, despite ongoing
Slide 12: Manganese-based alloys snapshot
Volume trends Commentary Sequential quarters EBITDA evolution ($m) Manganese-based alloys snapshot Pricing trends ($/mt) Index prices in Europe largely stable throughout the past 12 months Continuous ore price decline is starting to have positive impact on production costs Other production costs neg
Slide 13: Working capital and cash trends
Working capital due to an increase in finished goods inventories Cash decreased but remained at healthy levels of $188m 389 376 280 389 Q2 2019 +$59m Working capital trends ($m) Cash trends ($m) Working capital increase driven by inventory build 353 389 376 280 337 407 443 356 351 410 Mar'17 Jun'17
Slide 14: FY2019 free cash-flow evolution and debt
FY2019 free cash-flow evolution Increase in net debt attributable to an increase in working capital Gross Debt ($m) Net Debt ($m) Note: Free cash-flow defined as “Net cash provided by operating activities“ minus “Payments for property, plant & equipment” Debt evolution 647 631 643 645 636 666 449 47
Slide 15: II. Update on Corporate Initiatives
II. Update on Corporate Initiatives
Slide 16: Positive progress across corporate initiatives
Positive progress across corporate initiatives 1 2 3 Successful closing of FerroAtlántica, S.A.U. divestiture Refinancing process ongoing Cost savings plan on-track 4 Positive update on other strategic and cash generating initiatives
Slide 17: Divestiture of FerroAtlántica, S.A.U. successfully closed
Divestiture of FerroAtlántica, S.A.U. successfully closed at an attractive valuation of 12.7x1 1 Transaction highlights Closing Transaction closed on August 30, 2019 Tolling agreement and supply agreement effective immediately Transaction value: €170m (approx. $188m) Gross proceeds: €156.4m (approx.
Slide 18: The divestiture significantly enhances Ferroglobe's balance sheet
The divestiture significantly enhances Ferroglobe´s balance sheet Pro forma net debt reduced to $308 million Pro forma cash of $298 million 1 ILLUSTRATIVE SOURCES OF FUNDS FROM TRANSACTON ILLUSTRATIVE USES OF FUNDS FROM TRANSATION ($m) ($m) Acquisition price 188.0 Mandatory repayments relating to th
Slide 19: Update on refinancing
Update on refinancing 2 Currently making progress in the refinancing of the RCF, aiming to increase access to cash and improve leverage based financial covenants and minimum liquidity thresholds Different refinancing alternatives being analyzed, focusing on asset backed facilities (i.e., ABL, term l
Slide 20: Cost savings plan: KTM program and corporate overheads
KTM program Corporate Overheads Focus areas 2019 Target savings $10m $15m Savings 1H SAVINGS $7.7m $1.5m Consolidation of corporate offices (London HQ moving to Madrid) Reduction in personnel costs Reduction in use of third party consultants and services Reduction in audit fees, accounting consultan
Slide 21: Update on other corporate initiatives
Divestiture of Poland Cored Wire Divestiture of South African Timberlands Commentary Expected cash proceeds ($m) $9.4m $3.5m Net Proceeds Received approval for the sale from the Competition Commission on August 6, 2019 Closing and funding expected around the end of Q3 Sale in the final stages of neg
Slide 22: III. Near-term outlook
III. Near-term outlook
Slide 23: Recent trends across end markets
Recent Trends: US continues to benefit from trade actions, while EU challenged by lower volumes and greater imports Chinese steel demand expected to contract for the first time since 2015 — outcome dependent on the stimulus measures Recent announcement of significant global players curtailing produc
Slide 24: Outlook for the short term
Outlook for the short term Continued erosion of index prices, more sustained in North America, expected to affect selling prices into Q3 2019, but fixed priced contracts and floors in indexed contracts expected to soften the impact Potential upside as volume activity picks up towards year-end Recent
Slide 25: Closing remarks
Closing remarks Organization focused on cost cutting and cash generation $75m of ‘run-rate’ cost cutting initiatives Rightsizing the operations to evolving market conditions Slowdown in product demand delaying turnaround Track record of navigating cyclical downturns Fundamental asset value of a uniq
Slide 26: Q&A
Q&A
Slide 27: Appendix – supplemental financial information
Appendix – supplemental financial information
Slide 28: Key Performance Indicators – income statement
Key Performance Indicators Q2-19 Q1-19 Diff, % Q2-18 Diff, % Sales volumes (tons) 232.9 247.7 (6.0)% 271.6 (14.2%) Revenue ($m) 409.5 447.4 (8.5)% 577.9 (29.1)% Operating Income / (Loss) ($m) (37.3) (27.0) (38.0)% 98.5 n.a. Net Income / (Loss) ($m) (43.7) (28.6) (52.9)% 66.0 n.a. Adjusted Net Income
Slide 29: Adjusted EBITDA reconciliation
($m) Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Silicon metal 17.7 20.9 24.3 43.5 41.5 32.3 20.6 8.3 8.1 Silicon-based alloys 19.8 18.9 21.6 35.0 31.9 26.2 21.2 7.8 11.4 Manganese-based alloys 21.0 24.7 18.5 11.4 7.2 -8.6 -8.6 0.9 1.9 Other metals 4.2 2.0 6.5 7.6 8.5 7.0 8.0 3.3 4.3 Mines
Slide 30: Key performance indicators — balance sheet
Notes: Financial results are unaudited Net Debt includes finance lease obligations Adjusted EBITDA is before the impact of any discontinued operations Capital is calculated as book equity plus net debt Balance sheet 3/31/20181 6/30/20181 9/30/20181 12/31/2018 3/31/20191 6/30/20191 Total Working Capi
Slide 31: Advancing Materials Innovation Second Quarter 2019
Advancing Materials Innovation NASDAQ: GSM Second Quarter 2019 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: September 3, 2019 FERROGLOBE PLC b