Ferroglobe Plc · NASDAQ:GSM
Ferroglobe — Q1 2019 Earnings Presentation
29 slides from Ferroglobe's earnings presentation, Jun 3, 2019
Slide 1: Advancing Materials Innovation First Quarter 2019
Advancing Materials Innovation NASDAQ: GSM First 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 Q1 2019 financial highlights Near-term outlook & plan
Slide 4: Opening remarks
Opening remarks Results affected by general slowdown in end-market demand Strong liquidity and balance sheet, proving ability to generate cash Successful deleveraging through non-core asset divestiture and refinancing Assets divestiture signed: $190m proceeds reduce net debt to $236m (pro-forma) Pro
Slide 5: I. Q1 2019 financial highlights
I. Q1 2019 financial highlights
Slide 6: Q1 2019 impacted by cyclical demand slowdown and continued pricing pressures
*Adjusted net loss attributable to parent Q1 2019 impacted by cyclical demand slowdown and continued pricing pressures Volumes slowdown driven by shift in end customer sentiment (Volume change vs Q4 2018) Si Metal -33.3% Si alloys +0.7% Mn alloys -29.7% (ASP change vs Q4 2018) Si Metal -2.9% Si allo
Slide 7: Quarterly sales decreased by 24% in Q1 leading to a 63% drop in EBITDA
Quarterly sales decreased by 24% in Q1 leading to a 63% drop in EBITDA Weaker prices and volumes contributed to a significant decrease in revenue and EBITDA Quarterly Trend – Revenue Contribution Per Family of Products ($m) 396 426 452 468 561 583 527 604 457 Quarterly Trend – Adjusted EBITDA ($m) 3
Slide 8: Adjusted EBITDA bridge Q1 2019 vs Q4 2018
Adjusted EBITDA bridge Q1 2019 vs Q4 2018 Quarter-over-quarter evolution ($m) Declining pricing environment driving weaker quarter performance Declining pricing environment driving weaker quarter performance Includes: $2.1m of Mn ore cost improvements $(5.4)m reduction in interruptibility rebate in
Slide 9: Silicon metal snapshot
Silicon metal snapshot Volume trends Pricing trends Sequential quarters EBITDA evolution ($m) Commentary The US index pricing slightly declined at the beginning of the year and was flat from mid-February through the end of Q1. The European pricing was slightly up at the end of Q1 from year-end level
Slide 10: Silicon-based alloys snapshot
Silicon-based alloys snapshot Volume trends Pricing trends ($/mt) Commentary Stable demand for silicon-based alloys during the quarter Pricing pressures on FeSi continued into Q1 in both the US and Europe, as capacity from new market entrants and converted capacity from silicon metal impacted supply
Slide 11: Manganese-based alloys snapshot
Manganese-based alloys snapshot Volume trends Pricing trends ($/mt) Commentary Sequential quarters EBITDA evolution ($m) Significant drop in volumes attributable to the capacity curtailments at year end and to exceptional volume in Q4 (spill-over from Q3) Fairly stable index price for both FeMn and
Slide 12: Decrease in net debt attributable to continued cash generating initiatives
Decrease in net debt attributable to continued cash generating initiatives Continued reduction in gross and net debt levels 1.85x 1.66x 2.40x 1.86x 1.70x 5.82x 4.50x 2.82x 2.10x Gross Debt ($m) Net Debt ($m) Leverage (net debt/adj.EBITDA) 600 618 584 571 647 631 643 645 636 407 435 394 387 449 475 5
Slide 13: FY2019 Free Cash-flow Evolution and 2019 Initiatives
FY2019 Free Cash-flow Evolution 2019 Initiatives Delivering on commitment to deleverage and to strengthen the balance sheet Note: Free cash-flow defined as “Net cash provided by operating activities“ minus “Payments for property, plant & equipment” Maintaining net debt target at $200m De-risking the
Slide 14: II. Near-term outlook & plan
II. Near-term outlook & plan
Slide 15: Recent Trends by end market
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 16: Outlook for 2019
Outlook for 2019 Some recent capacity curtailments announced by industry participants — expect additional announcements from others Continued erosion of index prices, more sustained in North America, should affect selling prices into Q2 2019 Tightness in supply / demand. Potential upside as volume a
Slide 17: Raw materials price improvements to benefit costs
Coal Manganese Ore Met Coke Graphite Electrodes Despite challenging operating environment, costs to benefit from raw materials price improvements Source: API2 Index, shown in $/t Source: CRU - Chinese Lump (44%), shown in $/dmtu Source: Bloomberg, shown in $/t Note: Bloomberg – Chinese graphite elec
Slide 18: Manganese-based alloys profitability: market price spreads continuing to recover
Manganese-based alloys profitability: market price spreads continuing to recover Illustrative Spread Evolution for Mn Alloys1 Source: CRU, Ferroglobe. Note: 1 Illustration based on published index prices for SiMn and Mn-Ore (44%) (‘000 t) Spreads (based on published market prices) started to recover
Slide 19: Actions to generate cash, deleverage and strengthen the balance sheet
Currently making progress in the refinancing of the RCF, which is expected to remove leverage-based financial covenants Refinancing structure based on: First-lien senior secured term loan, secured with U.S. PP&E: up to $125m (expected close June 2019) ABL secured with North American A/R and inventor
Slide 20: Transaction for divestiture of Spanish assets already signed and committed
Transaction for divestiture of Spanish assets already signed and committed $190m divestiture and associated tolling agreement to be completed during Q3 Only pending administrative approval: lease contract to be unwound Tolling agreement Sale and Purchase Agreement Investor will acquire 100% of Ferro
Slide 21: The divestiture will significantly deleverage Ferroglobe's balance sheet
The divestiture will significantly deleverage Ferroglobe´s balance sheet Closing of the transaction expected in Q3 Net debt reduced to $236m (pro-forma) ILLUSTRATIVE PRO FORMA DEBT PROFILE (1) ILLUSTRATIVE PRO FORMA PROCEEDS FROM THE TRANSACTION ($m) ($m) Net Debt at 3/31/2019 420,0 Transaction valu
Slide 22: Cost savings plan: KTM program, corporate overheads, plant fixed costs
KTM program Corporate Overheads Focus Areas 2019 TARGET SAVINGS $10m $15m Savings FY19E RUN RATE $25m $25m Consolidation of corporate offices Reduction of third party consultants and services Reduction in audit fees, accounting consultancy fees, etc. Revised travel policies and guidelines Reduced ou
Slide 23: Organization focused on cost cutting and cash generation; closing remarks
Organization focused on cost cutting and cash generation $75m in cost cutting initiatives Rightsizing the operations to evolving market conditions Slowdown in product demand delaying turnaround Track record of navigating cyclical downturns Fundamental asset value of a unique global platform Closing
Slide 24: Q&A
Q&A
Slide 25: Appendix
Appendix
Slide 26: Q1 2019 key performance indicators — income statement
Q1 2019 key performance indicators — income statement Key Performance Indicators Q1 2019 Q4 2018 Diff, % Q1 2018 Diff, % Sales volumes (tons) 247.7 322.0 (23.1)% 239.1 3.6% Revenue ($m) 456.8 603.5 (24.3)% 560.7 (18.5)% Operating Income / (Loss) ($m) (20.3) (63.6) (68.1)% 65.5 n.a. Net Income / (Los
Slide 27: Adjusted EBITDA reconciliation – metallurgy & other contributors
Adjusted EBITDA reconciliation – metallurgy & other contributors ($m) Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Silicon metal 7.3 17.7 20.9 24.3 43.5 41.5 32.3 20.6 8.3 Silicon-based alloys 14.9 19.8 18.9 21.6 35.0 31.9 26.2 21.2 7.8 Manganese-based alloys 17.8 21.0 24.7 18.5 11.4 7.2 -8
Slide 28: Q1 2019 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 Q1 2019 key performance indicators — balance sheet Balance sheet 31/03/20191 31/12/2018 30/09/20181 30/06/20181 31/03/20181 Total Working Capital ($m) 351.1 356.1 443
Slide 29: Advancing Materials Innovation First Quarter 2019
Advancing Materials Innovation NASDAQ: GSM First 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: June 3, 2019 FERROGLOBE PLC by /s/