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Ferroglobe Reports Results for First Quarter 2017

Ferroglobe Reports Results for First Quarter 2017

  • Q1 2017 revenue of $388.2 million, flat compared to $386.8 million in Q4 2016
  • Q1 2017 net loss of $(8.1) million, or $(0.04) on a fully diluted per share basis, up from $(246.3) million, or $(1.41) on a fully diluted per share basis, in the prior quarter
  • Q1 2017 EBITDA1 of $26.6 million, which excludes the non-core Energy division that has been classified as "held for sale". Q1 EBITDA is up 257% compared to $7.5 million adjusted EBITDA in the previous quarter
  • Continued to reduce working capital, with $18 million achieved in Q1 2017 and $201 million since the closing of the business combination in December 2015
  • Maintained strong balance sheet with Q1 2017 net debt of $407 million compared to $405 in Q4 2016

LONDON, May 21, 2017 (GLOBE NEWSWIRE) -- Ferroglobe PLC (NASDAQ:GSM), the world's leading producer of silicon metal, and a leading silicon- and manganese-based specialty alloys producer, announced today results for the first quarter of 2017.

Of note, the company's non-core Energy division has been classified as "held for sale," and its results are consolidated only at the net income level.2 There are no "non-recurring" items that require adjustments to net income or EBITDA for Q1 2017.

In Q1 2017, Ferroglobe posted a net loss of $(8.1) million, or $(0.04) per share on a fully diluted basis. Ferroglobe's EBITDA of $26.6 million for Q1 2017, excluding the non-core Energy division, represents an increase of 257% compared to adjusted EBITDA of $7.5 million in Q4 2016. While this represents Ferroglobe's strongest quarterly EBITDA performance in the last twelve months, the company is confident that improving prices and a continued reduction in operating costs will help ensure a return to Ferroglobe's historic margins and performance. The company reported EBITDA margins of 6.8% for Q1 2017, compared to adjusted EBITDA margins of 1.9% for Q4 2016. If the non-core Energy division were to be included, EBITDA would have been $6.6 million in Q4 2016 and $30.9 million in Q1 2017.

Net sales in Q1 2017 totaled $388.2 million, flat from $386.8 million in Q4 2016. Selling prices for Ferroglobe's key products continued to improve over the course of the quarter across both the U.S. and Europe:

  • The average selling price for manganese alloys increased as much as 46% from Q4 2016. Taking into account the increase in manganese ore prices, the spread (average selling price of manganese alloys minus cost of manganese ore to produce those alloys) increased by 25% over that same period.
  • The average selling price for silicon-based alloys increased 10% from Q4 2016.
  • The average selling price for silicon metal remained flat from Q4 2016. A now-resolved strike at a large customer and rollover of below-market contract prices from Q4 2016 negatively impacted average selling prices in the quarter. Market prices have increased in North America, and the company is now starting to benefit from this improvement.
  • We continue to realize average sales prices greater than index prices.

In terms of sales volumes, silicon metal experienced an 8% decrease quarter-over-quarter, silicon alloys experienced a 4% decrease quarter-over-quarter, and manganese alloys experienced a 17% decrease quarter-over-quarter. Silicon metal sales volumes were affected by the aforementioned strike at a key customer's facility, which has now been resolved. In order to preserve margins in manganese alloys, the company reduced production in response to a significant increase in the cost of manganese ore at the end of 2016, which negatively impacted manganese alloy volumes in Q1 2017. These conditions were temporary and volume trends are expected to normalize in Q2 2017.

                       
          Quarter Ended
March 31, 2017
  Quarter Ended
December 31, 2016
  Quarter Ended
March 31, 2016
  Year Ended
December 31, 2016
Shipments in metric tons:                
  Silicon Metal       75,753       82,372       90,105       341,388
  Silicon Alloys       75,386       78,698       73,473       297,669
  Manganese Alloys       63,700       76,445       63,575       270,430
    Total shipments*       214,839       237,515       227,153       909,487
                       
                       
          Quarter Ended
March 31, 2017
  Quarter Ended
December 31, 2016
  Quarter Ended
March 31, 2016
  Year Ended
December 31, 2016
Average selling price ($/MT):              
  Silicon Metal   $ 2,080   $ 2,080   $ 2,387   $ 2,201
  Silicon Alloys   $ 1,473   $ 1,340   $ 1,433   $ 1,400
  Manganese Alloys   $ 1,298   $ 890   $ 764   $ 826
    Total*   $ 1,635   $ 1,452   $ 1,624   $ 1,530
                       
                       
          Quarter Ended
March 31, 2017
  Quarter Ended
December 31, 2016
  Quarter Ended
March 31, 2016
  Year Ended
December 31, 2016
Average selling price ($/lb.):              
  Silicon Metal   $ 0.94   $ 0.94   $ 1.08   $ 1.00
  Silicon Alloys   $ 0.67   $ 0.61   $ 0.65   $ 0.64
  Manganese Alloys   $ 0.59   $ 0.40   $ 0.35   $ 0.37
    Total*   $ 0.74   $ 0.66   $ 0.74   $ 0.69
                       
* Excludes by-products and other            
                       

"Ferroglobe experienced an improved start to the year, achieving EBITDA almost four times greater than the prior quarter. Despite a decrease in our shipments, the significant margin improvement reflects solid demand across end markets and a continued improvement in the overall pricing environment," said CEO Pedro Larrea. "We are confident in the actions we took during the market downturn over the few past quarters: we moved aggressively to manage our cost structure and actively identified markets and products that were experiencing an improved supply and demand environment. This, combined with our strong diversified portfolio, enabled us to capture the benefits of these improving trends. We are still in a recovery period from the bottom of the cycle, but are confident that we have passed the inflection point and optimistic about the remainder of 2017 and beyond. Moving forward, we will remain focused on improving our volumes and margins."

Continued focus on liquidity and cash-flow generation

Ferroglobe generated operating cash flows of $1.2 million in Q1 2017.3 Part of the operating cash flow comes from working capital improvements of $18 million during Q1 2017, which implies a total working capital reduction of more than $200 million since December 2015, more than double the initial target. Ferroglobe's net debt was $407 million at the end of Q1 2017, compared to $405 million at the end of Q4 2016, despite a one-time disbursement of $24 million for an exceptional severance payment.

"We remain committed to generating cash flow and ensuring strict control in our operations. This financial discipline has allowed us to continue improving working capital in the beginning of this recovery period and to keep net debt constant, despite extraordinary cash outflows," said CFO Joe Ragan.

                       
Adjusted EBITDA:                      
                       
    Quarter Ended
March 31, 2017
    Quarter Ended
December 31, 2016
    Quarter Ended
March 31, 2016
    Year Ended
December 31, 2016
Loss attributable to the parent $   (6,554)         (241,964)        (25,699)        (338,427)  
Loss attributable to non-controlling interest     (1,561)         (4,350)         (6,211)         (20,186)  
(Profit) loss from discontinued operations     (2,494)         2,095         (338)         3,065  
Income tax (benefit) expense     (2,167)         (7,816)         455         (46,609)  
Net finance expense     12,124         6,507         5,287         23,051  
Exchange differences     20         628         1,727         3,513  
Depreciation and amortization charges, operating allowances and write-downs     27,219         27,007         41,778         121,346  
EBITDA     26,587         (217,893)         16,999        (254,247)  
Transaction and due diligence expenses     -          -          2,641         7,979  
Impairment loss     -          199,834         -          267,449  
Globe purchase price allocation adjustments     -          -          10,022         10,022  
Business interruption     -          -          -          2,532  
Inventory impairment     -          1,080         -          5,410  
Executive severance     -          24,430         -          24,430  
Adjusted EBITDA, excluding above items $   26,587         7,451         29,662         63,575  
                       

 

Adjusted diluted loss per share:      
                           
        Quarter Ended
March 31, 2017
    Quarter
Ended December 31, 2016
    Quarter Ended
March 31, 2016
    Year Ended
December 31, 2016
Diluted loss per ordinary share    $    (0.04)         (1.41)         (0.15)         (1.97)  
 Tax rate adjustment       0.01         0.42         0.06         0.48  
 Transaction and due diligence expenses       -          -          0.01         0.03  
 Impairment loss       -          0.79         -          1.06  
 Globe purchase price allocation adjustments       -          -          0.04         0.04  
 Business interruption       -          -          -          0.01  
 Inventory impairment       -          -          -          0.02  
 Executive severance       -          0.10         -          0.10  
Adjusted diluted loss per ordinary share     $    (0.03)         (0.10)         (0.04)         (0.23)  
                           

 

Adjusted net loss attributable to Ferroglobe: 
           
                       
      Quarter Ended
March 31, 2017
    Quarter Ended
December 31, 2016
    Quarter Ended
March 31, 2016
    Year Ended
December 31, 2016
                         
Loss attributable to the parent  $    (6,554)         (241,964)         (25,699)         (338,427)  
  Tax rate adjustment     1,921         72,835         10,629         82,081  
  Transaction and due diligence expenses     -          -          1,796         5,426  
  Impairment loss     -          135,887         -          181,865  
  Globe purchase price allocation adjustments     -          -          6,815         6,815  
  Business interruption     -          -          -          1,722  
  Inventory impairment     -          734         -          3,679  
  Executive severance     -          16,612         -          16,612  
Adjusted loss attributable to the parent  $    (4,633)         (15,896)         (6,459)         (40,227)  
                         

___________________________

1 In Q1 2017 reported and adjusted EBITDA are equal, given that there are no "non-recurring" items that require adjustments to net income or EBITDA.

2 Operating results exclude this division both for Q1 2017 and for any other comparable period.

3 Operating cash flow and free cash flow include $(24) million of cash outflow for the actual disbursement of the severance payment occasioned by the departure of the company's Executive Chairman in December 2016.

Recent developments

As previously disclosed, on February 1, 2017, the company announced that it entered into a definitive agreement to sell the hydro-electric operations of its non-core Energy division in Spain for estimated gross cash proceeds of €255 million. The company made progress during Q1 2017 to gain further support, and during the month of May has filed all the formal requests with the relevant governmental authorities in order to obtain the necessary regulatory approvals.

Regarding the ongoing trade cases Ferroglobe filed in Canada and the U.S., the respective government agencies have decided to move forward with their investigations, as a result of favorable first milestones:

  • On May 16, 2017, the CBSA exercised an extension for 45 days to complete its review for this phase of the investigation. The preliminary determinations for anti-dumping and countervailing duties will now take effect on or around July 5, 2017.
  • The company expects that the U.S. Department of Commerce will make preliminary determinations on countervailing duties in the third quarter, and on anti-dumping duties early in the fourth quarter of 2017.

Both timelines are subject to change as the respective agencies continue their investigations.

Conference Call

Ferroglobe will review the results for the first quarter of 2017 results during a conference call at 9:00 a.m. Eastern Time on May 22, 2017. The dial-in number for the call for participants in the United States is 877-293-5491 (conference ID 23656251). International callers should dial 914-495-8526 (conference ID 23656251). 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 http://edge.media-server.com/m/p/bg28ifsu

About Ferroglobe

Ferroglobe PLC is one of the world's leading suppliers of silicon metal, silicon-based specialty alloys, and 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 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 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 generally can be identified by the use of forward-looking terminology, including, but not limited to, "may," "could," "seek," "guidance," "predicts," "potential," "likely," "believe," "will," "expect," "anticipate,: "estimate," "plan," "intends" or "forecast," variations of these terms and similar expressions, or the negative of these terms or similar expressions.

Forward-looking statements contained in this press release are based on information presently available to the company and assumptions that we 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.

You are cautioned that all such statements involve risks and uncertainties, including, without limitation, risks that the legacy businesses of Globe and FerroAtlántica will not be integrated successfully or that we will not realize estimated cost savings, value of certain tax assets, synergies and growth, or that such benefits may take longer to realize than expected. Important factors that may cause actual results to differ include, but are not limited to: (i) risks relating to unanticipated costs of integration, including operating costs, customer loss and business disruption being greater than expected; (ii) Ferroglobe's organizational and governance structure; (iii) the ability to hire and retain key personnel; (iv) regional, national or global political, economic, business, competitive, market and regulatory conditions including, among others, changes in metals prices; (v) increases in the cost of raw materials or energy; (vi) competition in the metals and foundry industries; (vii) environmental and regulatory risks; (viii) ability to identify liabilities associated with acquired properties prior to their acquisition; (ix) ability to manage price and operational risks including industrial accidents and natural disasters; (x) ability to manage foreign operations; (xi) changes in technology; (xii) ability to acquire or renew permits and approvals; (xiii) changes in legislation or governmental regulations affecting Ferroglobe; (xiv) conditions in the credit markets; (xv) risks associated with assumptions made in connection with critical accounting estimates and legal proceedings; (xvi) Ferroglobe's international operations, which are subject to the risks of currency fluctuations and foreign exchange controls; and (xvii) the potential for international unrest, economic downturn or effects of currencies, tax assessments, tax adjustments, anticipated tax rates, raw material costs or availability or other regulatory compliance costs. The foregoing list is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties that affect our business, including those described in the "Risk Factors" section of our Annual Reports on Form 20-F, Current Reports on Form 6-K and other documents we file from time to time with the United States Securities and Exchange Commission. Ferroglobe does not give any assurance (1) that the company will achieve its expectations or (2) concerning any result or the timing thereof, in each case, with respect to any regulatory action, administrative proceedings, government investigations, litigation, warning letters, consent decree, cost reductions, business strategies, earnings or revenue trends or future financial results. 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 presented herein or any future periods.

All information in this press release is as of the date of its release. Ferroglobe does not undertake or assume any obligation to update publicly any of the forward-looking statements in this press release to reflect actual results, new information or future events, changes in assumptions or changes in other factors affecting forward-looking statements. If the company updates one or more forward-looking statements, no inference should be drawn that it will make additional updates with respect to those or other forward-looking statements. The company cautions you not to place undue reliance on any forward-looking statements, which are made only as of the date of this press release.

Non-GAAP Measures

EBITDA, adjusted EBITDA, adjusted loss attributable to the Ferroglobe parent entity and adjusted diluted loss per ordinary share are pertinent non-GAAP financial metrics that Ferroglobe utilizes to measure its 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 U.S. GAAP financial measures. Reconciliations of these measures to the comparable U.S. GAAP financial measures are provided above and in the attached financial statements.

 
Ferroglobe PLC and Subsidiaries
Unaudited Condensed Consolidated Income Statement
(in thousands of U.S. dollars, except per share amounts)
                         
      Quarter Ended
March 31, 2017
    Quarter Ended
December 31, 2016
    Quarter Ended
March 31, 2016
    Year Ended
December 31, 2016
                         
Sales    $    388,241      $    386,833      $    415,544      $    1,555,657  
Cost of sales      (241,074)         (272,141)        (281,479)        (1,043,000)  
Other operating income       1,583         15,079         2,220         25,712  
Staff costs       (65,818)         (88,780)         (66,368)         (293,032)  
Other operating expense       (57,309)         (61,566)         (52,281)         (234,326)  
Depreciation and amortization charges, operating allowances and write-downs       (27,219)         (27,007)         (41,778)         (121,346)  
Impairment losses       -          (199,834)         -          (267,449)  
Other gain (loss)       964         2,516         (637)         2,191  
Operating loss       (632)        (244,900)        (24,779)        (375,593)  
Finance income       377         321         243         1,534  
Finance expense       (12,501)         (6,828)         (5,530)         (24,585)  
Exchange differences       (20)         (628)         (1,727)         (3,513)  
Loss before tax      (12,776)        (252,035)        (31,793)        (402,157)  
Income tax benefit (expense)        2,167         7,816         (455)         46,609  
Loss for the period from continuing operations       (10,609)        (244,219)        (32,248)        (355,548)  
Profit (loss) from discontinued operations       2,494         (2,095)         338         (3,065)  
Loss for the period       (8,115)        (246,314)        (31,910)        (358,613)  
Loss attributable to non-controlling interest       1,561         4,350         6,211         20,186  
Loss attributable to the parent    $   (6,554)      $   (241,964)      $   (25,699)      $   (338,427)  
                         
                         
EBITDA       26,587         (217,893)         16,999         (254,247)  
Adjusted EBITDA       26,587         7,451         29,662         63,575  
                         
Weighted average shares outstanding                        
Basic       171,838         171,838         171,838         171,838  
Diluted       171,838         171,838         171,838         171,838  
                         
Loss per ordinary share                        
Basic       (0.04)         (1.41)         (0.15)         (1.97)  
Diluted       (0.04)         (1.41)         (0.15)         (1.97)  
                         

 

 Ferroglobe PLC and Subsidiaries
 Unaudited Condensed Consolidated Statement of Financial Position
 (in thousands of U.S. dollars)
 
      March 31,   December 31,  
      2017   2016  
ASSETS
Non-current assets          
 Goodwill  $    230,733     230,210  
 Other intangible assets     56,854     62,839  
 Property, plant and equipment     790,501     781,606  
 Non-current financial assets      5,967     5,823  
 Non-current financial assets from related parties     -      9,845  
 Deferred tax assets     47,768     44,950  
 Non-current receivables from related parties     2,139     2,108  
 Other non-current assets     20,892     20,245  
Total non-current assets     1,154,854     1,157,626  
Current assets          
 Inventories     312,757     316,702  
 Trade and other receivables     214,738     209,406  
 Current receivables from related parties     5,576     11,971  
 Current income tax assets     16,614     19,869  
 Current financial assets     3,640     4,049  
 Other current assets     10,703     9,810  
 Cash and cash equivalents     172,647     196,931  
 Assets and disposal groups classified as held for sale     120,094     92,937  
Total current assets     856,769     861,675  
Total assets  $    2,011,623     2,019,301  
             
EQUITY AND LIABILITIES
Equity  $    902,872     892,042  
Non-current liabilities          
 Deferred income     3,656     3,949  
 Provisions     83,993     81,957  
 Bank borrowings     78,123     179,473  
 Obligations under finance leases     1,906     3,385  
 Debt instruments      339,693     -   
 Other financial liabilities     86,962     86,467  
 Other non-current liabilities     2,317     5,737  
 Deferred tax liabilities     132,753     139,535  
Total non-current liabilities     729,403     500,503  
Current liabilities            
 Provisions     11,915     19,627  
 Bank borrowings     1,545     241,818  
 Obligations under finance leases     586     1,852  
 Debt instruments      4,156     -   
 Other financial liabilities     1,616     1,592  
 Payables to related parties     10,283     30,738  
 Trade and other payables     177,015     157,706  
 Current income tax liabilities     3,616     961  
 Other current liabilities     63,346     64,780  
 Liabilities associated with assets clasiffied as held for sale     105,270     107,682  
Total current liabilities       379,348     626,756  
Total equity and liabilities  $    2,011,623     2,019,301  
               

 

Ferroglobe PLC and Subsidiaries      
Unaudited Condensed Consolidated Statement of Cash Flows      
(in thousands of U.S. dollars)      
                           
        Quarter Ended
March 31, 2017
    Quarter Ended
December 31, 2016
    Quarter Ended
March 31, 2016
    Year Ended
December 31, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:                      
Loss for the period $ (8,115)     $ (246,314)   $   (31,910)       (358,613)  
Adjustments to reconcile net loss to net cash provided by operating activities:                      
  Income tax benefit     (1,214)       (8,276)       777       (46,695)  
  Depreciation and amortization charges, operating allowances and write-downs     27,222       27,705       42,998       125,677  
  Finance income     (795)       (321)       (243)       (1,554)  
  Finance expense     13,765       7,820       7,858       30,269  
  Exchange differences     20       633       1,728       3,513  
  Impairment losses     -        200,458       -       268,089  
  Loss on disposals of non-current and financial assets     (558)       (748)       (51)       (340)  
  Other adjustments     (406)       (6,099)       688       (1,851)  
Changes in operating assets and liabilities                      
  Decrease in inventories     7,108       48,376       43,349       108,207  
  Decrease (increase) in trade receivables     3,765       (15,486)       25,797       56,297  
  Increase in trade payables     17,085       27,479       1,910       28,572  
  Other*    (38,213)       9,500       (42,851)       (50,001)  
Income taxes (paid) received     (1,825)       9,255       (12,774)       (10,933)  
Interest paid     (16,651)       (9,162)       (7,702)       (29,468)  
Net cash provided by operating activities   1,188       44,820       29,574       121,169  
CASH FLOWS FROM INVESTING ACTIVITIES:                      
Payments due to investments:                      
  Other intangible assets   (410)       (2,371)       (436)       (4,914)  
  Property, plant and equipment   (12,362)       (17,830)       (26,808)       (71,119)  
  Non-current financial assets   (14)       (9,123)       -       (9,807)  
  Current financial assets   -       9,825       (53)       (105)  
Disposals:                      
  Intangible assets   -       -       30       -  
  Property, plant and equipment   -       -       104       -  
  Non-current financial assets    -        -        -       11  
  Current financial assets   -       99       -       99  
Interest received   1,005       (483)       243       1,554  
Net cash used by investing activities   (11,781)       (19,883)       (26,920)       (84,281)  
CASH FLOWS FROM FINANCING ACTIVITIES:                      
Dividends paid   -       (13,745)       (13,747)       (54,988)  
Increase/(decrease) in bank borrowings:                      
  Borrowings   31,425       19,053       56,991       124,384  
  Payments   (172,380)       (23,539)       (49,698)       (81,237)  
Other amounts paid due to financing activities   144,111       70,071       (712)       61,758  
Net cash provided (used) by financing activities   3,156       51,840       (7,166)       49,917  
TOTAL NET CASH FLOWS FOR THE PERIOD   (7,437)       76,777       (4,512)       86,805  
Beginning balance of cash and cash equivalents   196,982       119,166       116,666       116,666  
Exchange differences on cash and cash equivalents in foreign currencies   3,486       1,039       1,865       (6,489)  
Ending balance of cash and cash equivalents $ 193,031     $ 196,982   $   114,019       196,982  
                           
                           
* Includes the cash outflow impact of the $32.5M shareholder settlement during the quarter ended March 31, 2016 . 
                           
INVESTOR CONTACT:

Ferroglobe PLC

Joe Ragan, US: +1 917 2098581, UK: +44 (0) 7827 227 688

Chief Financial Officer

Email: jragan@ferroglobe.com

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