Ferroglobe Plc · NASDAQ:GSM
Ferroglobe — Q3 2019 Earnings Presentation
31 slides from Ferroglobe's earnings presentation, Dec 3, 2019
Slide 1: Advancing Materials Innovation: Third Quarter 2019
Advancing Materials Innovation NASDAQ: GSM Third 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 Q3 2019 overview Near-term strategic plan Near-term outlook Appendix — supplemental financial information
Slide 4: Opening remarks
Opening remarks Q3 results highlight a continued cyclical downturn Acceleration of cost savings initiatives and cash generation plan Management changes to support execution of operational and financial plan
Slide 5: I. Q3 2019 overview
I. Q3 2019 overview
Slide 6: Volumes slowdown driven largely by customer destocking
Volumes slowdown driven largely by customer destocking (Volume change vs Q2 2019) Si Metal 11.4% Si alloys -11.8% Mn alloys -5.6% (ASP change vs Q2 2019) Si Metal -6.3% Si alloys -5.2% Mn alloys -4.0% Adjusted EBITDA $-7.2 million -243.2% vs Q2 2019 Adjusted EBITDA margin decrease of 312 bps to -1.9
Slide 7: Declining pricing environment driving weaker quarter performance
Declining pricing environment driving weaker quarter performance Declining pricing environment continues to constrain quarterly performance Increased operating efficiency and lower input prices have improved cost profile Adjusted EBITDA bridge Q3 2019 vs Q2 2019 Quarter-over-quarter evolution ($m) 5
Slide 8: Silicon metal snapshot: volume, EBITDA and pricing trends
Volume trends Sequential quarters EBITDA evolution ($m) Commentary Pricing trends ($/mt) Silicon metal snapshot Continued downward index pricing pressure in both North America and Europe with some stability of index pricing going into Q4 and early signs of recovery in the last few weeks Pricing pres
Slide 9: Silicon-based alloys snapshot: volume, EBITDA and pricing trends
Volume trends Commentary Sequential quarters EBITDA evolution ($m) Silicon-based alloys snapshot Pricing trends ($/mt) FeSi index prices decline both in North America and Europe, with signs of recovery in Europe in Q4 Volumes decrease reflecting overall slowdown in the steel sector (FeSi) and automo
Slide 10: Manganese-based alloys snapshot: volume, EBITDA and pricing trends
Volume trends Commentary Sequential quarters EBITDA evolution ($m) Manganese-based alloys snapshot Pricing trends ($/mt) Seasonality accentuated Q3 sales volume decline Improvement in quarter over quarter EBITDA, excluding inventory write down, primarily driven by lower manganese ore costs. Mn ore –
Slide 11: Manganese-based alloys profitability: market price spreads recovering
Manganese-based alloys profitability: market price spreads recovering 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 are gaining momentum in the past few months 1,200 1,000 800 600
Slide 12: Working capital and cash evolution
Working capital decreased in Q3, excluding the effect of consolidating the A/R securitization Cash proceeds from sale of FerroAtlántica have been used to repay short-term debt 389 376 280 389 Q3 2019 -$13m before consolidation of A/R securitization Working capital trends ($m) Cash(1) trends ($m) Wor
Slide 13: Free cash flow evolution and debt decrease
Free cash flow evolution Gross and net debt decreased by $110M, driven by the sale of FerroAtlántica Notes: Reported EBITDA includes impairment losses of $174.0 million for Q3 2019 and $175.4 million for 9 months 2019 Free cash flow defined as “Net cash used by operating activities“ minus “Payments
Slide 14: Q3 evolution of cash and restricted cash
Q3 evolution of cash and restricted cash Operating cash flow was negatively impacted by the deferral of cash receipts from the A/R securitization. The proceeds from the sale of non-core assets were used to repay debt, including the hydro finance leases. $168.9 million FerroAtlántica sale proceeds (n
Slide 15: Subsequent event: refinancing of RCF with new North American ABL
389 376 280 389 Subsequent event — successful refinancing of RCF with a new North American ABL on Oct. 11th The new ABL has no leveraged –based or financial-based covenants and offers reduced minimum liquidity requirements compared to the prior RCF SOURCES AND USES OF FUNDS ($m) ($m) ABL Drawn at Cl
Slide 16: II. Near-term strategic plan
II. Near-term strategic plan
Slide 17: Near term action plan focused on ensuring a path to recovery
Near term action plan focused on ensuring a path to recovery Operational Plant level cost savings Corporate Overheads costs reduction Working capital release Production curtailments to adapt to reduced demand Strategic and operational reviews Financial Improved liquidity Financial flexibility Additi
Slide 18: Operational action plan
Operational action plan Ferroglobe’s capacity curtailments have recently been followed by producers across silicon metal, ferrosilicon and manganese based alloys With reduction in demand, it is critical that the industry brings supply down to levels which support their cost structures Production cur
Slide 19: Downsizing of operational platform
Downsizing of operational platform SILICON METAL SILICON-BASED ALLOYS MANGANESE-BASED ALLOYS 325,000 281,000 242,000 186,000 Recent curtailment of 56,000 tons — Laudun — Montricher — Becancour 458,000 458,000 442,000 442,000 546,000 552,000 663,000 663,000 Recent curtailment of 88,000 tons — Chateau
Slide 20: KTM program and cost savings
KTM program Corporate Overheads Focus areas 2019 Target savings $10m $15m Savings 9M SAVINGS $7.4m $13.4m Consolidation of corporate offices (London HQ moving to Madrid) Reduction in personnel costs Reduction in use of third party consultants and services Reduction in audit fees, accounting consulta
Slide 21: Improved liquidity and financial flexibility
Improved liquidity and financial flexibility No leveraged-based nor financial ratio-based covenants Improved available liquidity compared to prior RCF, through reduced minimum liquidity requirements Ability to grow facility with market recovery North American Asset Based Loan Additional secured lien
Slide 22: III. Near-term outlook
III. Near-term outlook
Slide 23: Recent trends by end market
Recent Trends: Slowdown in overall steel production in the U.S. and Europe — continued announcements of steel capacity curtailments, particularly in Europe Stainless steel market demand dropping at a faster pace due to closure of specific plants Polysilicon / Electronics Recent Trends: Despite PV in
Slide 24: Outlook for the short term
Outlook for the short term Slow start to the contracting season due to demand side slowdown, but activity level has picked up more recently with recent pricing trends Chemical and polysilicon demand showing some positive signs of recovery; aluminum demand lagging due to automotive market dynamics Re
Slide 25: Closing remarks
Closing remarks Continued headwinds going into 2020: monitoring some positive signs Near-term strategy emphasizing cash generation and financial flexibility Management focused on supporting near-term strategy and returning to profitability
Slide 26: Q&A
Q&A
Slide 27: IV. Appendix – supplemental financial information
IV. Appendix – supplemental financial information
Slide 28: Key Performance Indicators
Key Performance Indicators Q3-19 Q2-19 Diff, % Q3-18 Diff, % Sales volumes (tons) 224.1 232.9 (3.8)% 255.9 (12.4%) Revenue ($m) 381.7 409.5 (6.8)% 524.4 (27.2)% Operating Income / (Loss) ($m) (212.7) (37.3) 469.9% 14.3 n.a. Net Income / (Loss) ($m) (140.1) (43.7) (221.0)% (2.9) n.a. Adjusted Net Inc
Slide 29: Adjusted EBITDA reconciliation
($m) Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Silicon metal 17.7 20.9 24.3 43.5 41.5 32.3 20.6 8.3 8.1 5.6 Silicon-based alloys 19.8 18.9 21.6 35.0 31.9 26.2 21.2 7.8 11.4 4.1 Manganese-based alloys 21.0 24.7 18.5 11.4 7.2 -8.6 -8.6 0.9 1.9 1.7 Other metals 4.2 2.0 6.5 7.6 8.5 7.0
Slide 30: Gross debt at September 2019
Gross debt at 30 September 2019 US$’000 Current Non-current Total balance sheet Less operating leases (1) Less AR securitization debt (2) Gross debt Bank borrowings 130,272 130,622 260,894 - (112,226) 148,668 Lease liabilities 8,218 16,417 24,635 (23,417) - 1,218 Debt instruments 2,734 343,400 346,1
Slide 31: Advancing Materials Innovation: Third Quarter 2019
Advancing Materials Innovation NASDAQ: GSM Third Quarter 2019