Sales of $409.5 million; Net Loss of $(43.7) million; Adjusted EBITDA of $5.0 million

• Q2 sales of $409.5 million, compared to $447.4 million in Q1 2019 and $577.9 million in Q2 2018
• Q2 net loss of $(43.7) million compared to a net loss of $(28.6) million in Q1 2019 and a net profit of $66.0 million in Q2 2018
• Q2 adjusted net loss attributable to parent of $(22.2) million compared to a net loss of $(21.9) million in Q1 2019 and a net profit of $25.6 million in Q2 2018
• Q2 adjusted EBITDA of $5.0 million compared to $3.3 million in Q1 2019 and $83.0 million in Q2 2018
• Successful closing of the divestiture of FerroAtlántica, S.A.U. on August 30, 2019, resulting in gross proceeds of €156.4 million
• Suspension of 39,000 tons of annual silicon metal production capacity
• Progress ongoing in the refinancing of the existing Revolving Credit Facility, targeting closing around the end of Q3 2019

LONDON, Sept. 03, 2019 (GLOBE NEWSWIRE) -- Ferroglobe PLC (NASDAQ: GSM) (“Ferroglobe”, the “Company”, or the “Parent”), 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 2019.

Earnings Highlights

In Q2 2019, Ferroglobe posted a net loss of $(43.7) million, or $(0.24) per share on a fully diluted basis. On an adjusted basis, Q2 2019 net loss was $(22.2) million, or $(0.13) per share on a fully diluted basis.

Q2 2019 reported EBITDA was $(7.1) million, down from $3.3 million in the prior quarter. On an adjusted basis, Q2 2019 EBITDA was $5.0 million, up from Q1 2019 adjusted EBITDA of $3.3 million. The Company reported an adjusted EBITDA margin of 1.2% for Q2 2019, compared to an adjusted EBITDA margin of 0.7% for Q1 2019.

		Quarter Ended				Quarter Ended				Quarter Ended				Six Months Ended				Six Months Ended
$,000 (unaudited)		June 30, 2019				March 31, 2019				June 30, 2018				June 30, 2019				June 30, 2018
Sales		$	409,479			$	447,391			$	577,881			$	856,870			$	1,126,543
Net (loss) profit		$	(43,658	)		$	(28,554	)		$	66,030			$	(72,212	)		$	101,644
Diluted EPS		$	(0.24	)		$	(0.16	)		$	0.39			$	(0.40	)		$	0.60
Adjusted net (loss) income attributable to the parent		$	(22,221	)		$	(21,894	)		$	25,648			$	(44,115	)		$	59,323
Adjusted diluted EPS		$	(0.13	)		$	(0.13	)		$	0.14			$	(0.26	)		$	0.33
Adjusted EBITDA		$	5,035			$	3,327			$	83,000			$	8,362			$	163,003
Adjusted EBITDA margin			1.2	%			0.7	%			14.4	%			1.0	%			14.5	%

* The amounts for prior periods have been restated to reflect the impact of the profit / (loss) from discontinued operations associated with the sale of our Spanish hydroelectric plants.

Cash Flow and Balance Sheet

Cash used in operations during Q2 2019 was $(37.4) million, with working capital increasing by $59.3 million. Net debt was $478.3 million as of June 30, 2019, up from $419.7 million as of March 31, 2019.

Pedro Larrea, Ferroglobe’s Chief Executive Officer commented, “The decline in end market demand continues to put pressure on our sales prices resulting in disappointing results for the quarter.  We expect these headwinds to linger in the second half of the year.  Accordingly, we are focused on operational adjustments and cash generating initiatives, designed to reduce the Company’s risk profile and provide adequate resources to weather this cyclical downturn.”  Mr. Larrea continued, “We are also cutting silicon production and monitoring other parts of the business for further cost reductions and operating efficiencies. The inherent flexibility in the Company’s operating platform and product base is key to positioning the Company for recovery.”

Successful closing of the divestiture of FerroAtlántica, S.A.U.

On August 30, 2019Ferroglobe successfully completed and closed the previously-announced sale of its 100% interest in subsidiary FerroAtlántica, S.A.U. (“FerroAtlántica”) to investment vehicles affiliates with TPG Sixth Street Partners.  The transaction, valued at €170 million, provides the Company with gross proceeds of €156.4 million, after closing adjustments.  Further details on this transaction appear in a separate press release issued concurrently herewith.

Other recent developments

Ferroglobe is making progress in pursuing financing alternatives and other opportunities to improve its capital structure. The terms, timing and structure of such transaction(s) will depend on market conditions and ongoing discussions in the coming weeks. The Company is targeting closing this refinancing around the end of Q3 2019.

To reduce corporate overhead costs and optimize operations, the Company is moving its headquarters from London (U.K.) to Madrid (Spain).  This move – expected to conclude in Q4 2019 - will consolidate key corporate functions in a single location, enhancing efficiency and management effectiveness in a lower cost environment.

To improve its production platform and release working capital, the Company has idled its silicon metal production facility at Polokwane (South Africa) and restarted one furnace at Sabon (Spain), reducing annual production capacity by 39,000 tons.

Discussion of Second Quarter 2019 Results

Sales

Sales for Q2 2019 were $409.5 million, down 8.5% compared to $447.4 million in Q1 2019. For Q2 2019, total shipments were down 6.0% and the average selling price was down 3.2% compared with Q1 2019.

		Quarter Ended			Quarter Ended						Quarter Ended						Six Months Ended			Six Months Ended
		June 30, 2019			March 31, 2019			Change			June 30, 2018			Change			June 30, 2019			June 30, 2018			Change
Shipments in metric tons:
Silicon Metal			54,084			62,269		-13.1	%			85,913		-37.0	%			116,353			177,528		-34.5	%
Silicon-based Alloys			79,264			81,801		-3.1	%			78,214		1.3	%			161,065			154,542		4.2	%
Manganese-based Alloys			99,555			103,669		-4.0	%			107,457		-7.4	%			203,224			178,633		13.8	%
Total shipments*			232,903			247,739		-6.0	%			271,584		-14.2	%			480,642			510,703		-5.9	%
Average selling price ($/MT):
Silicon Metal		$	2,320		$	2,358		-1.6	%		$	2,773		-16.3	%		$	2,340		$	2,767		-15.4	%
Silicon-based Alloys		$	1,572		$	1,669		-5.8	%		$	1,908		-17.6	%		$	1,621		$	1,932		-16.1	%
Manganese-based Alloys		$	1,188		$	1,172		1.4	%		$	1,304		-8.9	%		$	1,180		$	1,332		-11.4	%
Total*		$	1,582		$	1,634		-3.2	%		$	1,943		-18.6	%		$	1,609		$	2,013		-20.1	%
Average selling price ($/lb.):
Silicon Metal		$	1.05		$	1.07		-1.6	%		$	1.26		-16.3	%		$	1.06		$	1.26		-15.4	%
Silicon-based Alloys		$	0.71		$	0.76		-5.8	%		$	0.87		-17.6	%		$	0.74		$	0.88		-16.1	%
Manganese-based Alloys		$	0.54		$	0.53		1.4	%		$	0.59		-8.9	%		$	0.54		$	0.60		-11.4	%
Total*		$	0.72		$	0.74		-3.2	%		$	0.88		-18.6	%		$	0.73		$	0.91		-20.1	%
* Excludes by-products and other

Sales Prices & Volumes By Product

During Q2 2019, total product average selling prices decreased by 3.2% versus Q1 2019.  Q2 average selling prices of silicon metal decreased 1.6%, silicon-based alloys decreased 5.8%, and manganese-based alloys increased 1.4%. During Q2 2019, sales volumes decreased by 6.0% versus Q1 2019.  Q2 sales volumes of silicon metal decreased 13.1%, silicon-based alloys decreased 3.1%, and manganese-based alloys decreased 4.0% versus Q1 2019.

Cost of Sales

Cost of sales was $292.4 million in Q2 2019, a decrease from $329.4 million from Q1 2019.  Cost of sales as a percentage of sales decreased to 71.4% in Q2 2019 from 73.6% for Q1 2019.

Other Operating Expenses

Other operating expenses was $62.9 million in Q2 2019, an increase from $53.9 million from Q1 2019, which is primarily due to contract termination costs. 

Net Loss Attributable to the Parent

In Q2 2019, net loss attributable to the Parent was $(40.8) million, or $(0.24) per diluted share, compared to a net loss attributable to the Parent of $(26.8) million, or $(0.16) per diluted share in Q1 2019.

Adjusted EBITDA

In Q2 2019, adjusted EBITDA was $5.0 million, or 1.2% of sales, compared to adjusted EBITDA of $3.3 million, or 0.7% of sales in Q1 2019.

Conference Call

Ferroglobe management will review the second quarter results of 2019 during a conference call at 9:00 a.m. Eastern Time on September 4, 2019.

The dial-in number for participants in the United States is 877‑293‑5491 (conference ID 8287856). International callers should dial +1 914‑495‑8526 (conference ID 8287856). 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/mmc/p/9678r4sf.

About Ferroglobe

Ferroglobe is one of the world’s leading suppliers of silicon metal, silicon-based and manganese-based specialty alloys and other 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”, “target”, “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 profit per ordinary share, and adjusted profit 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:
Gaurav Mehta
EVP – Investor Relations 
Email:   investor.relations@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, 2019				March 31, 2019*				June 30, 2018*				June 30, 2019				June 30, 2018*
Sales		$	409,479			$	447,391			$	577,881			$	856,870			$	1,126,543
Cost of sales			(292,432	)			(329,368	)			(343,753	)			(621,800	)			(664,289	)
Other operating income			14,530				14,021				8,512				28,551				15,295
Staff costs			(74,852	)			(74,263	)			(88,180	)			(149,115	)			(170,072	)
Other operating expense			(62,924	)			(53,917	)			(74,212	)			(116,841	)			(143,303	)
Depreciation and amortization charges, operating allowances and write-downs			(30,204	)			(30,370	)			(29,118	)			(60,574	)			(55,905	)
Bargain purchase gain			—				—				44,633				—				44,633
Impairment losses			(1,195	)			(140	)			—				(1,335	)			—
Other gain (loss)			275				(397	)			2,752				(122	)			2,715
Operating (loss) profit			(37,323	)			(27,043	)			98,515				(64,366	)			155,617
Net finance expense			(15,047	)			(13,823	)			(13,233	)			(28,870	)			(25,300	)
Financial derivatives (loss) gain			(295	)			1,264				2,832				969				1,067
Exchange differences			5,080				(1,479	)			(8,708	)			3,601				(7,979	)
(Loss) profit before tax			(47,585	)			(41,081	)			79,406				(88,666	)			123,405
Income tax benefit (expense)			4,890				8,210				(13,970	)			13,100				(27,687	)
(Loss) profit for the period from continuing operations			(42,695	)			(32,871	)			65,436				(75,566	)			95,718
(Loss) profit for the period from discontinued operations			(963	)			4,317				594				3,354				5,926
(Loss) profit for the period			(43,658	)			(28,554	)			66,030				(72,212	)			101,644
Loss attributable to non-controlling interest			2,835				1,724				1,408				4,559				2,474
(Loss) profit attributable to the parent		$	(40,823	)		$	(26,830	)		$	67,438			$	(67,653	)		$	104,118
EBITDA		$	(7,119	)		$	3,327			$	127,633			$	(3,792	)		$	211,522
Adjusted EBITDA		$	5,035			$	3,327			$	83,000			$	8,362			$	163,003
Weighted average shares outstanding
Basic			169,123				169,123				171,987				169,123				171,982
Diluted			169,123				169,123				172,127				169,123				172,144
(Loss) profit per ordinary share
Basic		$	(0.24	)		$	(0.16	)		$	0.39			$	(0.40	)		$	0.61
Diluted		$	(0.24	)		$	(0.16	)		$	0.39			$	(0.40	)		$	0.60

* The amounts for prior periods have been restated to reflect the impact of the profit / (loss) from discontinued operations associated with the sale of our Spanish hydroelectric plants.

 

Ferroglobe PLC and Subsidiaries
Unaudited Condensed Consolidated Statement of Financial Position
(in thousands of U.S. dollars)
		June 30,				March 31,				December 31,
		2019				2019				2018
ASSETS
Non-current assets
Goodwill		$	204,089			$	203,472			$	202,848
Other intangible assets			62,778				69,399				51,822
Property, plant and equipment			784,272				890,436				888,862
Other non-current financial assets			20,042				54,979				70,343
Deferred tax assets			22,915				7,135				14,589
Non-current receivables from related parties			2,276				2,247				2,288
Other non-current assets			9,746				10,435				10,486
Total non-current assets			1,106,118				1,238,103				1,241,238
Current assets
Inventories			504,527				451,753				456,970
Trade and other receivables			158,252				127,992				155,996
Current receivables from related parties			3,000				6,556				14,226
Current income tax assets			31,610				26,855				27,404
Other current financial assets			7,840				2,191				2,523
Other current assets			12,289				13,721				8,813
Cash and cash equivalents			187,673				216,627				216,647
Assets and disposal groups classified as held for sale			97,862				—				—
Total current assets			1,003,053				845,695				882,579
Total assets		$	2,109,171			$	2,083,798			$	2,123,817
EQUITY AND LIABILITIES
Equity		$	816,080			$	855,099			$	884,372
Non-current liabilities
Deferred income			8,108				11,676				1,434
Provisions			80,218				76,613				75,787
Bank borrowings			—				131,366				132,821
Lease liabilities			18,629				66,992				53,472
Debt instruments			342,806				342,222				341,657
Other financial liabilities			24,585				27,109				32,788
Other non-current liabilities			25,246				25,080				25,030
Deferred tax liabilities			64,520				61,887				77,379
Total non-current liabilities			564,112				742,945				740,368
Current liabilities
Provisions			44,007				47,619				40,570
Bank borrowings			172,890				19,100				8,191
Lease liabilities			8,692				20,616				12,999
Debt instruments			10,938				2,734				10,937
Other financial liabilities			52,594				51,618				52,524
Payables to related parties			9,884				12,199				11,128
Trade and other payables			252,372				228,649				256,823
Current income tax liabilities			1,766				4,369				2,335
Other current liabilities			95,150				98,850				103,570
Liabilities associated with assets classified as held for sale			80,686				—				—
Total current liabilities			728,979				485,754				499,077
Total equity and liabilities		$	2,109,171			$	2,083,798			$	2,123,817

 

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, 2019				March 31, 2019				June 30, 2018				June 30, 2019				June 30, 2018
Cash flows from operating activities:
(Loss) profit for the period		$	(43,658	)		$	(28,554	)		$	66,030			$	(72,212	)		$	101,644
Adjustments to reconcile net (loss) profit to net cash used by operating activities:
Income tax (benefit) expense			(5,215	)			(6,704	)			14,302				(11,919	)			29,970
Depreciation and amortization charges, operating allowances and write-downs			31,327				32,077				30,309				63,404				58,325
Net finance expense			16,145				14,756				14,412				30,901				27,568
Financial derivatives loss (gain)			295				(1,264	)			(2,832	)			(969	)			(1,067	)
Exchange differences			(5,080	)			1,479				8,708				(3,601	)			7,979
Impairment losses			1,195				140				—				1,335				—
Bargain purchase gain			—				—				(44,633	)			—				(44,633	)
Share-based compensation			933				1,332				33				2,265				732
Other adjustments			(275	)			397				(2,752	)			122				(2,715	)
Changes in operating assets and liabilities
(Increase) decrease  in inventories			(46,950	)			35				(59,050	)			(46,915	)			(166,531	)
(Increase) decrease in trade receivables			(32,316	)			28,371				(19,257	)			(3,945	)			(19,770	)
Increase (decrease) in trade payables			21,625				(22,967	)			476				(1,342	)			70,851
Other			28,472				9,787				6,817				38,259				(42,953	)
Income taxes paid			(540	)			(1,680	)			(14,186	)			(2,220	)			(24,168	)
Interest paid			(3,341	)			(18,508	)			(2,957	)			(21,849	)			(20,258	)
Net cash (used) provided by operating activities			(37,383	)			8,697				(4,580	)			(28,686	)			(25,026	)
Cash flows from investing activities:
Interest and finance income received			486				390				2,273				876				2,352
Payments due to investments:
Acquisition of subsidiary			—				—				—				—				(20,379	)
Other intangible assets			(50	)			(134	)			(2,221	)			(184	)			(2,924	)
Property, plant and equipment			(7,128	)			(13,448	)			(29,786	)			(20,576	)			(52,317	)
Other			(627	)			—				—				(627	)			—
Disposals:
Other non-current assets			—				—				12,734				—				12,734
Other			1,638				1,759				1,904				3,397				5,914
Net cash used by investing activities			(5,681	)			(11,433	)			(15,096	)			(17,114	)			(54,620	)
Cash flows from financing activities:
Dividends paid			—				—				(10,321	)			—				(10,321	)
Payment for debt issuance costs			—				(705	)			—				(705	)			(4,476	)
Repayment of other financial liabilities			—				—				(33,096	)			—				(33,096	)
Increase/(decrease) in bank borrowings:
Borrowings			39,649				31,850				37,668				71,499				220,032
Payments			(18,252	)			(20,811	)			—				(39,063	)			(106,514	)
Proceeds from stock option exercises			—				—				240				—				240
Other amounts paid due to financing activities			(7,236	)			(5,708	)			(4,648	)			(12,944	)			(7,635	)
Net cash provided (used) by financing activities			14,161				4,626				(10,157	)			18,787				58,230
Total net cash flows for the period			(28,903	)			1,890				(29,833	)			(27,013	)			(21,416	)
Beginning balance of cash and cash equivalents			216,627				216,647				197,669				216,647				184,472
Exchange differences on cash and cash equivalents in foreign currencies			321				(1,910	)			(11,852	)			(1,589	)			(7,072	)
Ending balance of cash and cash equivalents		$	188,045			$	216,627			$	155,984			$	188,045			$	155,984
Ending balance of cash and cash equivalents from statement of financial position			187,673				216,627				155,984				187,673				155,984
Ending balance of cash and cash equivalents included within assets and disposal groups classified as held for sale			372				—				—				372				—

Adjusted EBITDA ($, 000):  

		Quarter Ended				Quarter Ended				Quarter Ended				Six Months Ended				Six Months Ended
		June 30, 2019				March 31, 2019				June 30, 2018				June 30, 2019				June 30, 2018
(Loss) profit attributable to the parent		$	(40,823	)		$	(26,830	)		$	67,438			$	(67,653	)		$	104,118
Loss (profit) for the period from discontinued operations			963				(4,317	)			(594	)			(3,354	)			(5,926	)
Loss attributable to non-controlling interest			(2,835	)			(1,724	)			(1,408	)			(4,559	)			(2,474	)
Income tax (benefit) expense			(4,890	)			(8,210	)			13,970				(13,100	)			27,687
Net finance expense			15,047				13,823				13,233				28,870				25,300
Financial derivatives loss (gain)			295				(1,264	)			(2,832	)			(969	)			(1,067	)
Exchange differences			(5,080	)			1,479				8,708				(3,601	)			7,979
Depreciation and amortization charges, operating allowances and write-downs			30,204				30,370				29,118				60,574				55,905
EBITDA			(7,119	)			3,327				127,633				(3,792	)			211,522
Contract termination costs			9,260				—				—				9,260				—
Restructuring and termination costs			2,894				—				—				2,894				—
Bargain purchase gain			—				—				(44,633	)			—				(44,633	)
Share-based compensation			—				—				—				—				(3,886	)
Adjusted EBITDA		$	5,035			$	3,327			$	83,000			$	8,362			$	163,003

Adjusted profit attributable to Ferroglobe ($, 000):   

		Quarter Ended				Quarter Ended				Quarter Ended				Six Months Ended				Six Months Ended
		June 30, 2019				March 31, 2019				June 30, 2018				June 30, 2019				June 30, 2018
(Loss) profit attributable to the parent		$	(40,823	)		$	(26,830	)		$	67,438			$	(67,653	)		$	104,118
Tax rate adjustment			10,337				4,936				(11,440	)			15,273				(11,803	)
Contract termination costs			6,297				—				—				6,297				—
Restructuring and termination costs			1,968				—				—				1,968				—
Bargain purchase gain			—				—				(30,350	)			—				(30,350	)
Share-based compensation			—				—				—				—				(2,642	)
Adjusted (loss) profit attributable to the parent		$	(22,221	)		$	(21,894	)		$	25,648			$	(44,115	)		$	59,323

Adjusted diluted profit per share:   

		Quarter Ended				Quarter Ended				Quarter Ended				Six Months Ended				Six Months Ended
		June 30, 2019				March 31, 2019				June 30, 2018				June 30, 2019				June 30, 2018
Diluted (loss) profit per ordinary share		$	(0.24	)		$	(0.16	)		$	0.39			$	(0.40	)		$	0.60
Tax rate adjustment			0.06				0.03				(0.07	)			0.09				(0.07	)
Contract termination costs			0.04				—				—				0.04				—
Restructuring and termination costs			0.01				—				—				0.01				—
Bargain purchase gain			—				—				(0.18	)			—				(0.18	)
Share-based compensation			—				—				—				—				(0.02	)
Adjusted diluted (loss) profit per ordinary share		$	(0.13	)		$	(0.13	)		$	0.14			$	(0.26	)		$	0.33

 

Source: Ferroglobe PLC