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Ferroglobe Reports Results for Second Quarter of 2018

Sales of $583 Million; Net Profit of $66 Million, Adjusted EBITDA of $86 Million

  • Sales of $583.0 million, an increase of 4.0% from $560.7 million in Q1 2018
  • Net profit of $66.0 million, or $0.39 on a fully diluted per share basis, a 85.4% increase from a net profit of $35.6 million, or  $0.21 per share, in the prior quarter. Adjusted net profit of $25.7 million, or $0.14 on a fully diluted per share basis, a 22.9% decrease compared to adjusted net profit of $33.3 million, or $0.19 on a fully diluted per share basis, in the prior quarter
  • Reported EBITDA of $130.9 million, an increase of 40.0% compared to reported EBITDA of $93.5 million in Q1 2018
  • Adjusted EBITDA of $86.3 million, a decrease of 3.7% compared to $89.6 million adjusted EBITDA in Q1 2018.

LONDON, Aug. 21, 2018 (GLOBE NEWSWIRE) -- Ferroglobe PLC (NASDAQ:GSM) (“Ferroglobe” or the “Company”), the world’s leading producer of silicon metal, and a leading silicon-and manganese-based specialty alloys producer, today announced results for the second quarter of 2018.

In Q2 2018, Ferroglobe posted a net profit of $66.0 million, or $0.39 per share on a fully diluted basis. On an adjusted basis, Q2 2018 net profit was $25.7 million, or $0.14 per share on a fully diluted basis.

Q2 2018 reported EBITDA was $130.9 million, up from $93.5 million in the prior quarter. On an adjusted basis, Q2 2018 EBITDA was $86.3 million, down 3.7% from Q1 2018 adjusted EBITDA of $89.6 million. The Company reported adjusted EBITDA margin of 14.8% for Q2 2018, compared to adjusted EBITDA margin of 16.0% for Q1 2018. Year-to-date (H1 2018) adjusted EBITDA was $175.9 million, up 135% from the same period in 2017.

The differences between reported and adjusted figures derive from the bargain purchase gain that has been recorded as a result of the Company’s acquisition of manganese alloys plants at Mo I Rana, Norway and Dunkirk, France.

During the second quarter, cash flow used for operations was $4.6 million, with working capital increasing by $70.0 million during the period. As a consequence, net debt was $475.3 million as of June 30, 2018, up from $449.3 million as of March 31, 2018.

Sales in Q2 2018 totaled $583.0 million, up 4.0% from $560.7 million in Q1 2018. During Q2 2018, the average selling prices for:

  • Silicon metal increased by 0.4% to $2,773/MT in Q2 2018, as compared to $2,762/MT in Q1 2018;
  • Silicon-based alloys decreased by 2.4% to $1,908/MT in Q2 2018, as compared to $1,956/MT in Q1 2018; and
  • Manganese-based alloys decreased by 5.2% to $1,304/MT in Q2 2018, as compared to $1,375/MT in Q1 2018.

While sales volumes of:

  • Silicon metal experienced a 6.2% decrease quarter-over-quarter,
  • Silicon-based alloys experienced a 2.5% increase quarter-over-quarter, and
  • Manganese-based alloys experienced a 51.0% increase quarter-over-quarter.
                               
    Quarter Ended   Quarter Ended   Quarter Ended   Six Months Ended   Six Months Ended
    June 30, 2018   March 31, 2018   June 30, 2017   June 30, 2018   June 30, 2017
Shipments in metric tons:                              
Silicon Metal     85,913     91,615     82,881     177,528     158,634
Silicon-based Alloys     78,214     76,328     70,913     154,542     146,299
Manganese-based Alloys     107,457     71,176     64,403     178,633     128,103
Total shipments*     271,584     239,119     218,197     510,703     433,036
                               
    Quarter Ended   Quarter Ended   Quarter Ended   Six Months Ended   Six Months Ended
    June 30, 2018   March 31, 2018   June 30, 2017   June 30, 2018   June 30, 2017
Average selling price ($/MT):                              
Silicon Metal   $ 2,773   $ 2,762   $ 2,210   $ 2,767   $ 2,148
Silicon-based Alloys   $ 1,908   $ 1,956   $ 1,586   $ 1,932   $ 1,528
Manganese-based Alloys   $ 1,304   $ 1,375   $ 1,308   $ 1,332   $ 1,303
Total*   $ 1,943   $ 2,092   $ 1,741   $ 2,013   $ 1,688
                               
    Quarter Ended   Quarter Ended   Quarter Ended   Six Months Ended   Six Months Ended
    June 30, 2018   March 31, 2018   June 30, 2017   June 30, 2018   June 30, 2017
Average selling price ($/lb.):                              
Silicon Metal   $ 1.26   $ 1.25   $ 1.00   $ 1.26   $ 0.97
Silicon-based Alloys   $ 0.87   $ 0.89   $ 0.72   $ 0.88   $ 0.69
Manganese-based Alloys   $ 0.59   $ 0.62   $ 0.59   $ 0.60   $ 0.59
Total*   $ 0.88   $ 0.95   $ 0.79   $ 0.91   $ 0.77

* Excludes by-products and other

“This was a solid quarter for Ferroglobe, culminating a first half of the year which confirms the improved fundamentals of our business and validates the positive momentum in the markets we are serving,” said Pedro Larrea, CEO of Ferroglobe. “In the year to date we have significantly increased volumes and selling prices and our EBITDA has more than doubled compared with the same period last year. The steel industries in North America and Europe - the main end markets for most of our alloys - are experiencing strong demand and high capacity utilizations in the wake of recent trade protection measures. Prices  of our products have remained broadly stable overall, and current supply/demand dynamics in our industry should support continued healthy pricing.”

Cash flow generation impacted by acquisition related working capital

During the second quarter, cash flows used for operations was $4.6 million, the main driver being a working capital increase of $70.0 million during Q2 2018. Approximately half of that increase is from the recently acquired manganese-alloy plants that have built their operating working capital, with a further increase from seasonally high raw materials and finished products inventories in the rest of our operations.

Ferroglobe’s net debt was $475.3 million as of June 30, 2018, up from $449.3 million as of March 31, 2018. The increase in net debt is mainly due to the $70 million working capital increase noted above. Excluding the acquisition impact of the manganese-alloy plants, net debt has decreased by $1.6 million as compared with December 31, 2017. 

“We continue to be focused on cash generation and deleveraging the balance sheet,” said Phillip Murnane, Ferroglobe’s CFO. “Although the first half of the year has required meaningful cash investment in working capital for the new manganese assets, we have a rigorous cash generation initiative in place that will provide significant cash flow release in the second half of the year.”

The Company has declared an interim dividend

Ferroglobe’s Board of Directors has declared an interim dividend of $0.06 per share, further reflecting its confidence in the underlying strength of Ferroglobe’s business and long-term outlook.  The dividend will have a record date of September 5, 2018 and a payment date of September 20, 2018.

Adjusted EBITDA:

                               
    Quarter Ended   Quarter Ended   Quarter Ended   Six Months Ended   Six Months Ended
    June 30, 2018   March 31, 2018   June 30, 2017   June 30, 2018   June 30, 2017
Profit (loss) attributable to the parent   $  67,438     $  36,680     $  2,859     $  104,118     $  (3,695)  
Loss attributable to non-controlling interest     (1,408)       (1,066)       (1,859)       (2,474)       (3,420)  
Income tax expense (benefit)     14,302       15,668       (1,949)       29,970       (3,163)  
Net finance expense     14,412       13,156       14,547       27,568       27,517  
Financial derivatives (gain) loss     (2,832)       1,765       4,071       (1,067)       4,071  
Exchange differences     8,708       (729)       (7,263)       7,979       (7,243)  
Depreciation and amortization charges, operating allowances and write-downs     30,309       28,016       26,401       58,325       53,623  
EBITDA      130,929        93,490        36,807        224,419        67,690  
Non-controlling interest settlement                 1,751             1,751  
Power credit                 (3,696)             (3,696)  
Long lived asset charge due to reclassification of discontinued operations to continuing operations                 2,608             2,608  
Accrual of contingent liabilities                 6,400             6,400  
Bargain purchase gain     (44,633)                   (44,633)        
Share-based compensation           (3,886)             (3,886)        
Adjusted EBITDA   $  86,296     $  89,604     $  43,870     $  175,900     $  74,753  
                                         

Adjusted profit attributable to Ferroglobe:

                               
    Quarter Ended   Quarter Ended   Quarter Ended   Six Months Ended   Six Months Ended
    June 30, 2018   March 31, 2018   June 30, 2017   June 30, 2018   June 30, 2017
Profit (loss) attributable to the parent   $  67,438     $  36,680     $  2,859        104,118     $  (3,695)  
Tax rate adjustment     (11,404)       (742)       (1,645)       (12,146)       126  
Non-controlling interest settlement                 1,191             1,191  
Power credit                 (2,513)             (2,513)  
Long lived asset charge due to reclassification of discontinued operations to continuing operations                 1,773             1,773  
Accrual of contingent liabilities                 4,352             4,352  
Bargain purchase gain     (30,350)                   (30,350)        
Share-based compensation           (2,642)             (2,642)        
Adjusted profit attributable to the parent   $  25,684     $  33,296     $  6,017        58,980     $  1,234  
                                         

Adjusted diluted profit per share:

                               
    Quarter Ended   Quarter Ended   Quarter Ended   Six Months Ended   Six Months Ended
    June 30, 2018   March 31, 2018   June 30, 2017   June 30, 2018   June 30, 2017
Diluted profit (loss) per ordinary share   $  0.39     $  0.21     $  0.02     $  0.60     $  (0.02)  
Tax rate adjustment     (0.07)             (0.01)       (0.07)        
Non-controlling interest settlement                 0.01             0.01  
Power credit                 (0.01)             (0.01)  
Long lived asset charge due to reclassification of discontinued operations to continuing operations                 0.01             0.01  
Accrual of contingent liabilities                 0.03             0.03  
Bargain purchase gain     (0.18)                   (0.18)        
Share-based compensation           (0.02)             (0.02)        
Adjusted diluted profit per ordinary share   $  0.14     $  0.19     $  0.05     $  0.33     $  0.02  
                                         

Conference Call

Ferroglobe management will review the second quarter results of 2018 during a conference call at 9 a.m. Eastern Time on Wednesday, August 22, 2018.

The dial-in number for participants in the United States is 877‑293‑5491 (conference ID 6293829). International callers should dial +1 914‑495‑8526 (conference ID 6293829). 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 https://edge.media-server.com/m6/p/5bqj5wmw 

About Ferroglobe

Ferroglobe 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 U.S. securities laws. 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 often use forward-looking terminology, including words such as "anticipate", "believe", "could", "estimate", "expect", "forecast", "guidance", "intends", "likely", "may", "plan", "potential", "predicts", "seek", "will" and  words of similar meaning or the negative thereof.

Forward-looking statements contained in this press release are based on information currently available to the Company and assumptions that management 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.

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 referenced herein or any future periods.

All information in this press release is as of the date of its release. Ferroglobe does not undertake any obligation to update publicly any of the forward-looking statements contained herein to reflect new information, events or circumstances arising after the date of this press release. You should not place undue reliance on any forward-looking statements, which are made only as of the date of this press release.

Non-IFRS Measures

EBITDA, adjusted EBITDA, adjusted diluted profit (loss) per ordinary share and adjusted profit (loss) are non-IFRS financial metrics that, we believe, are pertinent measures of Ferroglobe’s 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 IFRS financial measures.

INVESTOR CONTACT:

Phillip Murnane: +44 (0) 203 129 2265
Chief Financial Officer
Email: phillip.murnane@ferroglobe.com

 
Ferroglobe PLC and Subsidiaries
Unaudited Condensed Consolidated Income Statement
(in thousands of U.S. dollars, except per share amounts)
                               
    Quarter Ended   Quarter Ended   Quarter Ended   Six Months Ended   Six Months Ended
    June 30, 2018   March 31, 2018   June 30, 2017   June 30, 2018   June 30, 2017
Sales   $  582,977     $  560,704     $  425,810     $  1,143,681     $  821,847  
Cost of sales      (343,817)        (320,678)        (250,279)        (664,495)        (491,417)  
Other operating income      8,511        6,786        4,008        15,297        5,637  
Staff costs      (88,743)        (82,423)        (74,168)        (171,166)        (140,653)  
Other operating expense      (75,384)        (70,862)        (65,009)        (146,246)        (125,133)  
Depreciation and amortization charges, operating allowances and write-downs      (30,309)        (28,016)        (26,401)        (58,325)        (53,623)  
Bargain purchase gain      44,633        —        —        44,633        —  
Other gain (loss)      2,752        (37)        (3,555)        2,715        (2,591)  
Operating profit      100,620        65,474        10,406        166,094        14,067  
Net finance expense      (14,412)        (13,156)        (14,547)        (27,568)        (27,517)  
Financial derivatives gain (loss)      2,832        (1,765)        (4,071)        1,067        (4,071)  
Exchange differences      (8,708)        729        7,263        (7,979)        7,243  
Profit (loss) before tax      80,332        51,282        (949)        131,614        (10,278)  
Income tax (expense) benefit      (14,302)        (15,668)        1,949        (29,970)        3,163  
Profit (loss) for the period      66,030        35,614        1,000        101,644        (7,115)  
Loss attributable to non-controlling interest      1,408        1,066        1,859        2,474        3,420  
Profit (loss) attributable to the parent   $  67,438     $  36,680     $  2,859     $  104,118     $  (3,695)  
                               
                               
EBITDA   $  130,929     $  93,490     $  36,807     $  224,419     $  67,690  
Adjusted EBITDA   $  86,296     $  89,604     $  43,870     $  175,900     $  74,753  
                               
Weighted average shares outstanding                              
Basic      171,987        171,977        171,947        171,982        171,947  
Diluted      172,127        172,215        172,047        172,144        171,947  
                               
Profit (loss) per ordinary share                              
Basic   $  0.39     $  0.21     $  0.02     $  0.61     $  (0.02)  
Diluted   $  0.39     $  0.21     $  0.02     $  0.60     $  (0.02)  

 

   
Ferroglobe PLC and Subsidiaries  
Unaudited Condensed Consolidated Statement of Financial Position  
(in thousands of U.S. dollars)  
                     
    June 30,   March 30,   December 31,  
    2018   2018   2017  
ASSETS  
Non-current assets                    
Goodwill   $ 203,717   $ 204,537   $ 205,287  
Other intangible assets     57,897     61,774     58,658  
Property, plant and equipment     947,229     980,101     917,974  
Non-current financial assets     116,974     147,744     89,315  
Deferred tax assets     3,972     6,581     5,273  
Non-current receivables from related parties     2,332     2,464     2,400  
Other non-current assets     18,887     32,125     30,059  
Total non-current assets       1,351,008       1,435,326       1,308,966  
Current assets                    
Inventories     532,574     493,108     361,231  
Trade and other receivables     151,062     142,641     111,463  
Current receivables from related parties     5,550     8,841     4,572  
Current income tax assets     10,405     6,524     17,158  
Current financial assets     854     897     2,469  
Other current assets     18,283     16,095     9,926  
Cash and cash equivalents     155,984     197,669     184,472  
Total current assets       874,712       865,775       691,291  
Total assets   $   2,225,720   $   2,301,101   $   2,000,257  
                     
EQUITY AND LIABILITIES  
Equity   $   1,004,125   $   979,504   $   937,758  
Non-current liabilities                    
Deferred income     5,387     7,321     3,172  
Provisions     78,767     82,957     82,397  
Bank borrowings     108,143     71,242     -  
Obligations under finance leases     61,078     68,101     69,713  
Debt instruments     340,564     341,036     339,332  
Other financial liabilities     42,138     58,288     49,011  
Other non-current liabilities     21,178     64,457     3,536  
Deferred tax liabilities     64,689     64,733     65,142  
Total non-current liabilities       721,944       758,135       612,303  
Current liabilities                    
Provisions     22,563     30,162     33,095  
Bank borrowings     1,241     850     1,003  
Obligations under finance leases     13,024     13,478     12,920  
Debt instruments     10,936     2,735     10,938  
Other financial liabilities     54,158     91,243     88,420  
Payables to related parties     17,599     10,671     12,973  
Trade and other payables     276,289     298,438     192,859  
Current income tax liabilities     4,210     5,889     7,419  
Other current liabilities     99,631     109,996     90,569  
Total current liabilities       499,651       563,462       450,196  
Total equity and liabilities   $   2,225,720   $   2,301,101   $   2,000,257  
                     

 

Ferroglobe PLC and Subsidiaries  
Unaudited Condensed Consolidated Statement of Cash Flows  
(in thousands of U.S. dollars)  
                                 
    Quarter Ended   Quarter Ended   Quarter Ended   Six Months Ended   Six Months Ended  
    June 30, 2018   March 31, 2018   June 30, 2017   June 30, 2018   June 30, 2017  
Cash flows from operating activities:                                
Profit (loss) for the period   $   66,030     $   35,614     $   1,000     $   101,644     $   (7,115)    
Adjustments to reconcile net profit (loss)
to net cash (used) provided by operating activities:
                               
Income tax expense (benefit)       14,302         15,668         (1,949)         29,970         (3,163)    
Depreciation and amortization charges,
operating allowances and write-downs
      30,309         28,016         26,401         58,325         53,623    
Net finance expense       14,412         13,156         14,547         27,568         27,517    
Financial derivatives (gain) loss       (2,832)         1,765         4,071         (1,067)         4,071    
Exchange differences       8,708         (729)         (7,263)         7,979         (7,243)    
Bargain purchase gain       (44,633)         —         —         (44,633)         —    
Share-based compensation       33         699         —         732         —    
Other adjustments       (2,752)         37         3,556         (2,715)         2,592    
Changes in operating assets and liabilities                                
(Increase) decrease in inventories       (59,050)         (107,481)         (11,943)         (166,531)         (4,835)    
(Increase) decrease in trade receivables       (19,257)         (513)         9,456         (19,770)         13,221    
Increase in trade payables       476         70,375         (8,943)         70,851         9,213    
Other       6,817         (49,770)         (506)         (42,953)         (35,051)    
Income taxes paid       (14,186)         (9,982)         (3,919)         (24,168)         (6,216)    
Interest paid       (2,957)         (17,301)         (4,378)         (20,258)         (14,107)    
Net cash (used) provided by operating activities       (4,580)         (20,446)         20,130         (25,026)         32,507    
Cash flows from investing activities:                                
Payments due to investments:                                
Other intangible assets       (2,221)         (703)         —         (2,924)         (410)    
Property, plant and equipment       (29,778)         (22,531)         (14,319)         (52,309)         (26,681)    
Other       (8)         —         —         (8)         (14)    
Disposals:                                
Other non-current assets       12,734                         12,734            
Other       1,904         4,010                 5,914            
Acquisition of subsidiary       —         (20,379)         —         (20,379)         —    
Interest and finance income received       2,273         79         211         2,352         564    
Net cash used by investing activities       (15,096)         (39,524)         (14,108)         (54,620)         (26,541)    
Cash flows from financing activities:                                
Dividends paid       (10,321)         —         —         (10,321)         —    
Payment for debt issuance costs       —         (4,476)         (3,078)         (4,476)         (13,555)    
Repayment of other financial liabilities       (33,096)         —         —         (33,096)         —    
Proceeds from debt issuance       —         —         —         —         350,000    
Increase/(decrease) in bank borrowings:                                
Borrowings       37,668         182,364         30         220,032         31,455    
Payments       —         (106,514)         (15,300)         (106,514)         (387,680)    
Proceeds from stock option exercises       240         —         —         240         —    
Other amounts paid due to financing activities       (4,648)         (2,987)         (10,694)         (7,635)         (17,905)    
Net cash (used) provided by financing activities       (10,157)         68,387         (29,042)         58,230         (37,685)    
Total net cash flows for the period       (29,833)         8,417         (23,020)         (21,416)         (31,719)    
Beginning balance of cash and cash equivalents       197,669         184,472         193,031         184,472         196,982    
Exchange differences on cash and
cash equivalents in foreign currencies
      (11,852)         4,780         13,550         (7,072)         18,298    
Ending balance of cash and cash equivalents   $   155,984     $   197,669     $   183,561     $   155,984     $   183,561    
                                 

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Source: Ferroglobe PLC

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