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Ferroglobe Reports Results for Fourth Quarter and Full Year 2016

  • Q4 2016 revenue of $394.4 million, up from $364.7 million in Q3 2016; FY 2016 revenue of $1,580.5 million, down from $2,039.6 million in FY 2015
  • Q4 2016 net loss of $(44.4) million, or $(0.23) on a fully diluted per share basis; FY 2016 net loss of $(156.7) million, or $(0.79) on a fully diluted per share basis
  • Q4 2016 adjusted net loss of $(16.9) million, or $(0.09) on a fully diluted per share basis; FY 2016 adjusted net loss of $(40.6) million, or $(0.24) on a fully diluted per share basis
  • Q4 2016 reported EBITDA loss of $(23.3) million, which includes executive severance expense of $24.4 million and impairment losses of $7.9 million; FY 2016 reported EBITDA loss of $(51.9) million, which includes impairment losses of $79.9 million and executive severance expense of $24.4 million
  • Q4 2016 adjusted EBITDA of $9.1 million, down from $12.8 million in the previous quarter; FY 2016 adjusted EBITDA of $72.9 million, down from $294.8 million year-over-year
  • Q4 2016 operating cash flow generation of $38.1 million and free cash flow generation of $20.3 million; FY 2016 operating cash flow generation of $114.4 million and free cash flow generation of $75.9 million
  • Exceeded working capital synergies target of $100 million by reducing working capital by $192.0 million in FY 2016
  • Captured $57 million in synergies for FY 2016, and reached a level of $72 million in run-rate synergies in Q4 2016; on track to achieve $85 million of total annual synergies in 2017

LONDON, March 16, 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 fourth quarter and fiscal year of 2016.

In the fourth quarter of 2016, Ferroglobe posted a net loss of $(44.4) million, or $(0.23) per share on a fully diluted basis. In the fiscal year of 2016, Ferroglobe posted a net loss of $(156.7) million, or $(0.79) per share on a fully diluted basis. Excluding impairment losses, executive severance expense and other non-recurring items on an after tax basis, the company posted an adjusted net loss of $(16.9) million, or $(0.09) per share on a fully diluted basis for the quarter, and an adjusted net loss of $(40.6) million, of $(0.24) per share on a fully diluted basis for the year.

Ferroglobe reported an EBITDA loss of $(23.3) million for the fourth quarter of 2016 after charging executive severance expense of $24.4 million and impairment losses of $7.9 million. Excluding these charges, adjusted EBITDA for the fourth quarter of 2016 was $9.1 million. For full year of 2016, Ferroglobe reported an EBITDA loss of $(51.9) million due to impairment losses of $79.9 million and executive severance expense of $24.4 million. Excluding these charges, adjusted EBITDA for the full year of 2016 was $72.9 million.

Net sales in the fourth quarter of 2016 totaled $394.4 million, up from $364.7 million in the third quarter of 2016. Net sales in the full year of 2016 totaled $1,580.5 million, down from $2,039.6 million year-over-year. Over the course of the fourth quarter of 2016, spot prices for Ferroglobe’s key products in the United States and Europe increased substantially as compared to the third quarter of 2016. However, this increase has not been reflected in Ferroglobe´s selling prices due to time lags in certain contracts and the existence of fixed priced contracts:

  • In the fourth quarter of 2016, the average selling price for silicon metal was relatively flat from the previous quarter.
  • During the fourth quarter, the average selling price for silicon-based alloys decreased 3.2% from the third quarter of 2016 and the average selling price for manganese alloys increased 3.1% from the third quarter of 2016.
  • During the full year of 2016, the average selling price for silicon metal declined 18.9%, the average selling price for silicon-based alloys decreased 15.8% and the average selling price for manganese alloys decreased 15.6%, each as compared to the average selling price for the full year of 2015.

In terms of sales volumes, in the fourth quarter of 2016, silicon metal experienced a 3.53% increase quarter-over-quarter, silicon alloys experienced a 13.17% increase quarter-over-quarter, and manganese alloys experienced a 31.26% increase quarter-over-quarter, reflecting recovery in the market.

Year Ended
December 31, 2016
Quarter Ended
December 31, 2016
Quarter Ended
September 30, 2016
Pro forma for the
Year Ended
December 31,
2015 **
Shipments in metric tons:
Silicon Metal 342,966 83,950 81,091 373,355
Silicon Alloys 296,969 78,698 69,539 323,761
Manganese Alloys 271,912 77,927 59,368 264,022
Total shipments* 911,847 240,575 209,998 961,138
Year Ended
December 31, 2016
Quarter Ended
December 31, 2016
Quarter Ended
September 30, 2016
Pro forma for the
Year Ended
December 31,
2015 **
Average selling price ($/MT):
Silicon Metal $2,200 $2,075 $2,090 $2,713
Silicon Alloys $1,403 $1,340 $1,391 $1,668
Manganese Alloys $827 $892 $865 $986
Total* $1,531 $1,451 $1,512 $1,887
Year Ended
December 31, 2016
Quarter Ended
December 31, 2016
Quarter Ended
September 30, 2016
Pro forma for the
Year Ended
December 31,
2015 **
Average selling price ($/lb.):
Silicon Metal $1.00 $0.94 $0.95 $1.23
Silicon Alloys $0.64 $0.61 $0.63 $0.76
Manganese Alloys $0.38 $0.40 $0.39 $0.45
Total* $0.69 $0.66 $0.69 $0.86
* Excludes by-products and other.
**Represents combined Globe and FerroAtlantica results on a pro forma basis.


“Our fourth quarter earnings are in line with the guidance provided at our recent trading update. Stabilized pricing along with strong demand resulted in a more than 8% revenue increase from the prior quarter,” said CEO Pedro Larrea. “Overall, market trends continue to move in our favor with gradual price improvements in silicon metal and silicon alloys and a dramatic increase in manganese alloys margins. We continue to see strong demand in our end markets and have entered into sales contracts for 2017 that are 15-20% above fourth quarter spot prices, partially offset in the short term by the roll-off of high-priced legacy contracts. After one year as a combined company, we have successfully integrated the organization, captured enhanced synergies, strengthened our commercial strategy and restructured our balance sheet, setting us up for a healthy improvement of our financials in the wake of the market recovery.”

Mr. Larrea concluded, “We recently filed a petition with the U.S. Department of Commerce and the U.S. International Trade Commission, as well as a separate complaint with the Canada Border Services Agency, seeking relief from unfairly traded, low-priced imports in North America. Favorable decisions in these proceedings will positively impact our profitability.”

Recent developments

On February 1, 2017, Ferroglobe announced the pricing of $350,000,000 aggregate principal amount of Senior Notes due 2022. The Notes, co-issued with Globe and guaranteed by certain of Ferroglobe’s other subsidiaries, bear interest at an annual rate of 9.375% and were issued at 100% of their nominal value. The proceeds from the offering of the Notes were used primarily to repay certain existing indebtedness.

On February 1, 2017, Ferroglobe announced that it has entered into a definitive agreement to sell the hydro-electric operations of its non-core Energy segment in Spain for estimated gross cash proceeds of €255 million (approximately $270 million). The company continues to work with the relevant governmental authorities in order to obtain the necessary regulatory approvals.

On February 20, 2017, the Canada Border Services Agency announced that is launching an investigation into whether or not certain silicon metal originating in or exported from Brazil, Kazakhstan, Malaysia, Norway and Thailand is being sold at unfair prices in Canada. It will also investigate whether or not subsidies are being applied to certain silicon metal originating in or exported from these five countries.

On March 8, 2017, Globe Specialty Metals, Inc. (”Globe”) a subsidiary of Ferroglobe, filed a petition with the U.S. Department of Commerce and the U.S. International Trade Commission to stop and provide relief from unfairly traded silicon metal imports from Brazil, Kazakhstan, Norway and Australia. Globe’s petitions outlined deliberate practices by producers from these four countries to sell silicon metal at artificially low prices in the U.S.

In another development, Ferroglobe’s Executive Chairman Javier López Madrid has advised the company that a ruling was issued by the Spanish High Court (Audiencia Nacional) on February 23, 2017, pursuant to which he has been convicted, together with 64 other former directors or executives of Bankia, S.A. and/or Caja Madrid, of certain charges as an accessory (not as an author) in connection with the alleged misuse of corporate credit cards for €34,807.81 in expenditures between 2010 and 2012 while he was a non-executive director of Bankia, S.A. and Caja Madrid (this proceeding has previously been disclosed by Ferroglobe in its regulatory filings). The directors and executives of the bank over a period of 25 years were granted corporate credit cards as part of their remuneration, an arrangement that has been deemed unlawful pursuant to the ruling. All these events took place prior to Mr. López Madrid joining Ferroglobe. Mr. López Madrid has advised the company that he has filed an appeal with the Spanish Supreme Court (Tribunal Supremo) in response to the ruling and will continue to defend himself vigorously in this matter. The Ferroglobe Board of Directors has reviewed the developments in this legal proceeding, agreed that Mr. López Madrid remain as a director and continues to support him in his role as Executive Chairman.

Focus on cost management, cash-flow generation and synergy attainment

Ferroglobe reported an EBITDA loss of $(23.3) million for the fourth quarter of 2016. Excluding charges related to asset and inventory impairments, and executive severance expense, adjusted EBITDA for the fourth quarter of 2016 was $9.1 million.

Ferroglobe maintains its expectations for synergy attainment to $85 million on an annual basis, up from $65 million previously. The company has achieved a total of $57 million of savings from synergies for the full year of 2016, implying a run-rate of $72 million in the fourth quarter of 2016. Production costs were reduced by 13% for the full year of 2016.

Ferroglobe generated operating cash flows of $38.1 million in the fourth quarter of 2016, and $114.4 million for the full year of 2016. Part of the operating cash flows comes from working capital improvements of $54.7 million during the fourth quarter of 2016, bringing improvements for the full year of 2016 to $191.2 million. The company generated $75.9 million of free cash flow in the fiscal year of 2016, of which $20.3 million was generated during the fourth quarter of 2016.1 Ferroglobe’s net debt was $404.6 million at the end of the fourth quarter of 2016, compared to $430 million at the end of third quarter of 2016.

1 Free cash-flow defined as “Net cash provided by operating activities” minus “Payments for property, plant and equipment.”

Adjusted EBITDA:

Year Ended Quarter Ended Quarter Ended
December 31, 2016 December 31, 2016 September 30, 2016
Loss attributable to the parent$ (136,552) (40,092) (28,523)
Loss attributable to non-controlling interest (20,186) (4,350) (2,545)
Income tax benefit (57,556) (19,137) (10,158)
Net finance expense 28,715 7,499 6,693
Exchange differences 3,507 627 876
Depreciation and amortization charges, operating allowances and write-downs 130,172 32,200 30,440
EBITDA (51,900) (23,253) (3,217)
Transaction and due diligence expenses 7,979 - 111
Impairment loss 74,465 6,834 9,043
Globe purchase price allocation adjustments 10,022 - -
Business interruption 2,532 - 2,532
Inventory impairment 5,410 1,080 4,330
Executive severance 24,430 24,430 -
Adjusted EBITDA, excluding above items$ 72,938 9,091 12,799

Adjusted diluted loss per share:

Year Ended
December 31,
2016
Quarter Ended
December 31,
2016
Quarter Ended
September 30,
2016
Diluted loss per ordinary share (0.79) (0.23) (0.17)
Tax rate adjustment 0.06 0.01 0.01
Transaction and due diligence expenses 0.03 - -
Impairment loss 0.29 0.03 0.04
Globe purchase price allocation adjustments 0.04 - -
Business interruption 0.01 - 0.01
Inventory impairment 0.02 - 0.02
Executive severance 0.10 0.10 -
Adjusted diluted loss per ordinary share (0.24) (0.09) (0.09)

Adjusted net loss attributable to Ferroglobe:

Year Ended
December 31,
2016
Quarter Ended
December 31,
2016
Quarter Ended
September 30,
2016
Loss attributable to the parent $ (136,552) (40,092) (28,523)
Tax rate adjustment 11,018 1,208 3,035
Transaction and due diligence expenses 5,426 - 75
Impairment loss 50,636 4,648 6,149
Globe purchase price allocation adjustments 6,815 - -
Business interruption 1,722 - 1,722
Inventory impairment 3,679 735
2,944
Executive severance 16,612 16,612 -
Adjusted loss attributable to the parent $ (40,644) (16,889) (14,598)

Conference Call

Ferroglobe will review the results for the fourth quarter of 2016 results during a conference call at 9:00 a.m. Eastern Time on March 17, 2017. The dial-in number for the call for participants in the United States is 877-293-5491 (conference ID 88145142). International callers should dial +1 914-495-8526 (conference ID 88145142). 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/qfukfe99.

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 us and assumptions that we believe to be reasonable, but are inherently uncertain. As a result, our 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 our 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) our 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. We do not give any assurance (1) that we will achieve our 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 our key 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. We do 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 we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. We caution 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 parent 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)
Year Ended
December 31, 2016
Quarter Ended
December 31, 2016
Quarter Ended
September 30, 2016
Year Ended December
31, 2015 *
Sales $1,580,524 $394,365 $364,727 $2,039,608
Cost of sales (1,049,994) (278,756) (236,631) (1,225,313)
Other operating income 29,339 18,326 4,963 20,455
Staff costs (294,629) (87,810) (67,586) (330,382)
Other operating expense (243,594) (63,789) (60,490) (351,929)
Depreciation and amortization charges, operating allowances and write-downs (130,172) (32,200) (30,440) (141,097)
Impairment losses (75,089) (7,458) (9,044) (52,042)
Other gain (loss) 1,543 1,869 844 (3,473)
Operating loss (182,072) (55,453) (33,657) (44,173)
Finance income 1,554 321 548 1,343
Finance expense (30,269) (7,820) (7,241) (34,521)
Exchange differences (3,507) (627) (876) 29,993
Loss before tax (214,294) (63,579) (41,226) (47,358)
Income tax benefit (expense) 57,556 19,137 10,158 (62,546)
Loss for the period (156,738) (44,442) (31,068) (109,904)
Loss attributable to non-controlling interest 20,186 4,350 2,545 13,308
Loss attributable to the parent $ (136,552) $ (40,092) $ (28,523) $ (96,596)
EBITDA (51,900) (23,253) (3,217) 96,924
Adjusted EBITDA 72,938 9,091 12,799 294,799
Weighted average shares outstanding
Basic 171,838 171,838 171,838
Diluted 171,838 171,838 171,838
Loss per ordinary share
Basic (0.79) (0.23) (0.17)
Diluted (0.79) (0.23) (0.17)
* - Represents combined Globe and FerroAtlantica results on a pro forma basis.

Ferroglobe PLC and Subsidiaries
Unaudited Condensed Consolidated Statement of Financial Position
(in thousands of U.S. dollars)
December 31, September 30, December 31,
2016 2016 2015
ASSETS
Non-current assets
Goodwill $ 402,491 402,491 403,929
Other intangible assets 62,838 70,130 71,619
Property, plant and equipment 900,199 929,217 1,012,367
Non-current financial assets 15,668 10,541 9,672
Deferred tax assets 49,242 55,228 36,098
Non-current receivables from related parties 2,108 2,233 -
Other non-current assets 20,828 21,302 20,615
Total non-current assets 1,453,374 1,491,142 1,554,300
Current assets
Inventories 312,800 369,996 425,372
Trade and other receivables 213,427 197,817 275,254
Current receivables from related parties 14,763 10,312 10,950
Current income tax assets 43,264 30,826 9,273
Current financial assets 4,049 14,204 4,112
Other current assets 24,521 13,236 10,134
Cash and cash equivalents 196,982 119,166 116,666
Total current assets 809,806 755,557 851,761
Total assets $ 2,263,180 2,246,699 2,406,061
EQUITY AND LIABILITIES
Equity $ 1,093,353 1,170,774 1,294,973
Non-current liabilities
Deferred income 3,949 5,259 4,389
Provisions 81,836 85,846 81,853
Bank borrowings 179,879 96,870 223,676
Obligations under finance leases 74,261 79,780 89,768
Other financial liabilities 92,043 7,748 7,549
Other non-current liabilities 5,737 4,295 4,517
Deferred tax liabilities 159,142 178,577 206,648
Total non-current liabilities 596,847 458,375 618,400
Current liabilities
Provisions 16,868 17,688 9,010
Bank borrowings 241,412 357,004 182,554
Obligations under finance leases 12,359 15,118 13,429
Other financial liabilities 1,592 - -
Payables to related parties 8,320 6,220 7,827
Trade and other payables 163,832 150,733 147,073
Current income tax liabilities 5,300 4,987 10,887
Other current liabilities 123,297 65,800 121,908
Total current liabilities 572,980 617,550 492,688
Total equity and liabilities $ 2,263,180 2,246,699 2,406,061

Ferroglobe PLC and Subsidiaries
Unaudited Condensed Consolidated Statement of Cash Flows
(in thousands of U.S. dollars)
Year Ended
December 31, 2016
Quarter Ended
December 31, 2016
Quarter Ended
September 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss for the period $(156,738) $(44,442)$(31,068)
Adjustments to reconcile net loss to net cash provided by operating activities:
Income tax benefit (57,556) (19,137) (10,158)
Depreciation and amortization charges, operating allowances and write-downs 130,172 32,200 30,440
Finance income (1,554) (321) (548)
Finance expense 30,269 7,820 7,241
Exchange differences 3,507 627 876
Impairment losses 75,089 7,458 9,044
Loss on disposals of non-current and financial assets 308 (100) 217
Other adjustments (1,851) (6,099) 3,269
Changes in operating assets and liabilities
Decrease in inventories 103,243 43,412 2,135
Decrease in trade receivables 36,888 (34,895) 17,547
Increase in trade payables 30,662 29,569 9,834
Other* (27,651) 31,853 (603)
Income taxes (paid) received (23,437) (3,249) (8,911)
Interest paid (26,925) (6,619) (6,837)
Net cash provided by operating activities 114,426 38,077 22,478
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments due to investments:
Other intangible assets (4,184) (1,641) (2,020)
Property, plant and equipment (71,037) (17,748) (10,805)
Non-current financial assets (7,659) (6,975) (411)
Current financial assets (6) 9,924 3,988
Disposals:
Intangible assets - - -
Property, plant and equipment - - -
Current financial assets - - (99)
Interest received 1,825 (212) 1,328
Net cash used by investing activities (81,061) (16,652) (8,019)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (54,988) (13,745) (27,496)
Increase/(decrease) in bank borrowings:
Borrowings 200,182 94,851 22,362
Payments (81,237) (23,539) (19,623)
Other amounts paid due to financing activities (14,040) (5,727) (3,750)
Net cash provided (used) by financing activities 49,917 51,840 (28,507)
TOTAL NET CASH FLOWS FOR THE PERIOD 83,282 73,265 (14,048)
Beginning balance of cash and cash equivalents 116,666 119,166 135,774
Exchange differences on cash and cash equivalents in foreign currencies (2,966) 4,551 (2,560)
Ending balance of cash and cash equivalents $196,982 $196,982 $119,166
* 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: 001-786-509-6925, UK: +44 (0) 7827 227 688 Chief Financial Officer Email: jragan@ferroglobe.com

Source:Ferroglobe PLC