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Ferroglobe Reports Results for Third Quarter 2017

  • Q3 2017 revenue of $451.6 million, up 6% from $425.8 million in Q2 2017
  • Q3 2017 net loss of $(5.0) million and a diluted loss per share of $(0.02), down from a net profit of $1.0 million and diluted earnings per share of $0.02 in the prior quarter, driven by tax adjustments/valuation allowances
  • Q3 2017 adjusted net profit of $9.2 million, or $0.05 on a fully diluted per share basis, compared to a net profit of $6.0 million, or $0.05 on a fully diluted per share basis in the prior quarter
  • Q3 2017 reported EBITDA of $54.3 million, an increase of 48% compared to reported EBITDA of $36.8 million in Q2 2017
  • Q3 2017 adjusted EBITDA of $56.1 million, an increase of 28% compared to $43.9 million adjusted EBITDA in the prior quarter
  • Maintained strong balance sheet with Q3 2017 net debt of $394.3 million1 compared to $434.6 million in Q2 2017
  • Results exceeded expectations with strong performance driven by price recovery and volume improvements in both silicon metal and manganese based alloys

LONDON, Nov. 27, 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, today announced results for the third quarter of 2017.

In Q3 2017, Ferroglobe posted a net loss of $(5.0) million, or $(0.02) per share on a fully diluted basis. On an adjusted basis, Q3 2017 net profit was $9.2 million, or $0.05 per share on a fully diluted basis.

Q3 2017 reported EBITDA was $54.3 million, up from $36.8 million in the prior quarter. On an adjusted basis, Q3 2017 EBITDA was $56.1 million, up 27.9% from Q2 2017 adjusted EBITDA of $43.9 million. The company reported adjusted EBITDA margins of 12.4% for Q3 2017, compared to adjusted EBITDA margins of 10.3% for Q2 2017.

Net sales in Q3 2017 totaled $451.6 million, up 6.1% from $425.8 million in Q2 2017. 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 silicon metal increased by 5.4% from $2,210/MT in Q2 2017 to $2,330/MT in Q3 2017, a significant improvement driven mainly by the market impact of the ongoing trade cases in the United States;
  • The average selling price for silicon-based alloys increased 3.7% to $1,645/MT in the quarter from $1,586/MT in the prior quarter;
  • The average selling price for manganese alloys increased 3.1% to $1,349/MT in Q3 as compared to $1,308/MT in the prior quarter; and,
  • In addition to these pricing trends, Ferroglobe continued to realize average sales prices in excess of the index.

In addition to improved pricing, the company also saw stabilization of demand and volumes across its key products. In terms of sales volumes, silicon metal experienced a 0.7% increase quarter-over-quarter, manganese alloys experienced a 14.3% increase quarter-over-quarter and silicon alloys experienced a 5.7% decrease quarter-over-quarter.

____________________________

1 As of September 30, 2017, the balance sheet includes the securitized accounts receivables under the Company’s new global accounts receivables securitization program which began in July 2017. As such, $120.1M is included in debt and accounts receivables in the balance sheet as of September 30, 2017, which reflects the receivables sold into the program. However, the impact of the securitization is included in the calculation of certain key metrics, such as net debt, working capital, cash flows from operations and free cash flow in order make such metrics comparable.


Quarter Ended
September 30, 2017
Quarter Ended
June 30, 2017
Quarter Ended
September 30, 2016
Nine Months Ended
September 30, 2017
Nine Months Ended
September 30, 2016
Shipments in metric tons:
Silicon Metal 83,465 82,881 81,091 242,099 259,016
Silicon-based Alloys 66,873 70,913 69,539 212,622 218,271
Manganese-based Alloys 73,642 64,403 59,368 201,745 193,985
Total shipments* 223,980 218,197 209,998 656,466 671,272
Quarter Ended
September 30, 2017
Quarter Ended
June 30, 2017
Quarter Ended
September 30, 2016
Nine Months Ended
September 30, 2017
Nine Months Ended
September 30, 2016
Average selling price ($/MT):
Silicon Metal $2,330 $2,210 $2,090 $2,211 $2,240
Silicon-based Alloys $1,645 $1,586 $1,391 $1,564 $1,421
Manganese-based Alloys $1,349 $1,308 $865 $1,320 $801
Total* $1,803 $1,741 $1,512 $1,727 $1,558
Quarter Ended
September 30, 2017
Quarter Ended
June 30, 2017
Quarter Ended
September 30, 2016
Nine Months Ended
September 30, 2017
Nine Months Ended
September 30, 2016
Average selling price ($/lb.):
Silicon Metal $1.06 $1.00 $0.95 $1.00 $1.02
Silicon-based Alloys $0.75 $0.72 $0.63 $0.71 $0.64
Manganese-based Alloys $0.61 $0.59 $0.39 $0.60 $0.36
Total* $0.82 $0.79 $0.69 $0.78 $0.71
* Excludes by-products and other

“Ferroglobe delivered strong performance with quarter-over-quarter earnings growth and improved profitability. The ongoing trade cases in the United States resulted in continued pricing improvement for silicon metal in that market and sustained strong end-market demand continued to drive the stabilization of shipment volumes,” said CEO Pedro Larrea. “The business continues to perform through the recovery, and we are focused on carefully managing our costs to fully capture the benefits of the new market environment. At the same time, as the recently announced deal with Glencore proves, we are increasing our presence in the core businesses. We expect prices to continue to improve through the year and we remain focused on sustained performance across all business segments as we move into the final quarter of 2017 and beyond.”

Strong cash flow generation continues to support liquidity

Working capital decreased by $11.6 million1 during the quarter, primarily a result of the increased securitization of receivables. Year-to-date the company has increased total working capital by $8.6 million1 due to the recovery cycle. Ferroglobe continued to generate positive cash flows. During the third quarter, the company generated operating cash flows of $67.4 million1, free cash flow of $52.7 million1, with total free cash flow of $58.5 million1 year to date.

Ferroglobe’s net debt was $394.3 million1 at the end of Q3 2017, down compared to $434.6 million at the end of Q2 2017.

Adjusted EBITDA:

Quarter Ended
September 30, 2017
Quarter Ended
June 30, 2017
Quarter Ended
September 30, 2016
Nine Months Ended
September 30, 2017
Nine Months Ended
September 30, 2016
(Loss) profit attributable to the parent$ (3,347) 2,859 (28,523) (7,042) (96,460)
Loss attributable to non-controlling interest (1,640) (1,859) (2,545) (5,060) (15,836)
Income tax expense (benefit) 14,364 (1,949) (10,158) 11,201 (38,419)
Net finance expense 14,528 14,547 6,693 42,045 21,216
Financial derivatives loss 1,823 4,071 - 5,894 -
Exchange differences 1,529 (7,263) 876 (5,714) 2,880
Depreciation and amortization charges, operating allowances and write-downs 27,076 26,401 30,440 80,699 97,972
EBITDA 54,333 36,807 (3,217) 122,023 (28,647)
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 related to commercial disputes - 6,400 - 6,400 -
Impairment loss - - 9,043 - 67,630
Transaction and due diligence expenses - - 111 - 7,979
Business interruption (1,980) - 2,532 (1,980) 2,532
Inventory impairment - - 4,330 - 4,330
Step-up valuation adjustment 3,757 - - 3,757 -
Globe purchase price allocation adjustments - - - - 10,022
Adjusted EBITDA$ 56,110 43,870 12,799 130,863 63,846

Adjusted net profit (loss) attributable to Ferroglobe:

Quarter Ended
September 30, 2017
Quarter Ended
June 30, 2017
Quarter Ended
September 30, 2016
Nine Months Ended
September 30, 2017
Nine Months Ended
September 30, 2016
(Loss) profit attributable to the parent $ (3,347) 2,859 (28,523) (7,042) (96,460)
Tax rate adjustment 11,363 (1,645) 3,035 11,489 9,810
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 related to commercial disputes - 4,352 - 4,352 -
Impairment loss - - 6,149 - 45,988
Transaction and due diligence expenses - - 75 - 5,426
Business interruption (1,346) - 1,722 (1,346) 1,722
Inventory impairment - - 2,944 - 2,944
Step-up valuation adjustment 2,555 - - 2,555 -
Globe purchase price allocation adjustments - - - - 6,815
Adjusted profit (loss) attributable to the parent $ 9,225 6,017 (14,598) 10,459 (23,755)

Adjusted diluted profit (loss) per share:

Quarter Ended
September 30, 2017
Quarter Ended
June 30, 2017
Quarter Ended
September 30, 2016
Nine Months Ended
September 30, 2017
Nine Months Ended
September 30, 2016
Diluted profit (loss) per ordinary share (0.02) 0.02 (0.17) (0.04) (0.56)
Tax rate adjustment 0.07 (0.01) 0.01 0.07 0.06
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 related to commercial disputes - 0.03 - 0.03 -
Impairment loss - - 0.04 - 0.27
Transaction and due diligence expenses - - - - 0.03
Business interruption (0.01) - 0.01 (0.01) 0.01
Inventory impairment - - 0.02 - 0.02
Executive severance - - - - -
Step-up valuation adjustment 0.01 - - 0.01 -
Globe purchase price allocation adjustments - - - - 0.04
Adjusted diluted profit (loss) per ordinary share 0.05 0.05 (0.09) 0.07 (0.13)

Recent developments

The trade cases in the United States and the favorable demand environment have allowed Ferroglobe to return to close to full capacity utilization. The Selma facility (Alabama, US) has restarted operations, and the remainder of Ferroglobe’s European and North American plants are running at full capacity. Facilities in Argentina and South Africa are at 50% and 65% utilization, respectively, as a result of unfavorable local conditions, but are planning to restart full operations in the near future. Ferroglobe’s plant in Venezuela has halted operations since May, as the company awaits further developments in the country.

In the ongoing trade cases that Ferroglobe filed in the U.S., the Department of Commerce (“DOC”) issued preliminary determinations on August 7, 2017 imposing countervailing duties on silicon metal imports from Australia, Brazil and Kazakhstan. The duties imposed ranged from 3.69% to 120%. The DOC made preliminary determinations on October 5, 2017 in the antidumping cases against Australia, Brazil and Norway. The antidumping duties imposed ranged from 3.74% to 134.92%. Now more than 63% of silicon metal imports into the U.S. are subject to cash deposit requirements.

On November 2, 2017, the Canadian International Trade Tribunal (“CITT”) determined that dumped silicon metal imports from Laos and Thailand, subsidized imports from Norway, and dumped and subsidized imports from Brazil, Kazakhstan and Malaysia had not caused injury and were not threatening to cause injury to the sole Canadian producer, Quebec Silicon Limited Partnership and QSIP Canada ULC (“Quebec Silicon”).

The CITT issued its reasons for decision on November 17, 2017. We believe the CITT made several critical errors regarding, among others, the impact and relevance of global price declines on Canadian market pricing and the basis on which silicon metal is negotiated and sold to customers in Canada. Ferroglobe intends to appeal the CITT’s decision to the Federal Court of Appeal.

We note this decision has no relevance for or impact on the ongoing antidumping and countervailing duty cases in the United States against silicon metal imports from Australia, Brazil, Kazakhstan and Norway because these are different proceedings in different jurisdictions, based on different facts and different legal standards.

On November 21, Ferroglobe announced that it has entered into an agreement for the acquisition of a 100% interest in Glencore’s manganese alloys plants in Dunkirk (France) and Mo I Rana (Norway). The parties expect the transaction to close in the first quarter of 2018, subject to obtaining certain regulatory approvals in France, Germany and Poland and other customary conditions.

Conference Call

Ferroglobe will review the results for the third quarter of 2017 during a conference call at 9:00 a.m. Eastern Time on Tuesday, November 28, 2017.

The dial-in number for the call for participants in the United States is +1 877-293-5491 (conference ID 4495559). International callers should dial +1 914-495-8526 (conference ID 4495559). 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/zre43hs5

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 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 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.

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 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) attributable to the parent are, we believe, pertinent non-IFRS 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 IFRS financial measures

INVESTOR CONTACT:

Ferroglobe PLC
Joe Ragan, US: +1 786 509 6925, UK: +44 (0) 7827 227 688
Chief Financial Officer
Email: jragan@ferroglobe.com


Ferroglobe PLC and Subsidiaries
Unaudited Condensed Consolidated Income Statement
(in thousands of U.S. dollars, except per share amounts)
Quarter Ended
September 30, 2017
Quarter Ended
June 30, 2017
Quarter Ended
September 30, 2016
Nine Months Ended
September 30, 2017
Nine Months Ended
September 30, 2016
Sales $451,628 425,810 364,727 1,273,475 1,186,159
Cost of sales (267,364) (250,279) (236,631) (758,781) (771,238)
Other operating income 7,404 4,008 4,963 13,041 11,013
Staff costs (74,183) (74,168) (67,586) (214,836) (206,819)
Other operating expense (59,741) (65,009) (60,490) (184,874) (179,805)
Depreciation and amortization charges, operating allowances and write-downs (27,076) (26,401) (30,440) (80,699) (97,972)
Impairment losses (98) - (9,044) (98) (67,631)
Other gain (loss) (3,313) (3,555) 844 (5,904) (326)
Operating profit (loss) 27,257 10,406 (33,657) 41,324 (126,619)
Finance income 258 162 548 1,215 1,233
Finance expense (14,786) (14,709) (7,241) (43,260) (22,449)
Financial derivatives loss (1,823) (4,071) - (5,894) -
Exchange differences (1,529) 7,263 (876) 5,714 (2,880)
Profit (loss) before tax 9,377 (949) (41,226) (901) (150,715)
Income tax (expense) benefit (14,364) 1,949 10,158 (11,201) 38,419
(Loss) profit for the period (4,987) 1,000 (31,068) (12,102) (112,296)
Loss attributable to non-controlling interest 1,640 1,859 2,545 5,060 15,836
(Loss) profit attributable to the parent $ (3,347) 2,859 (28,523) (7,042) (96,460)
EBITDA 54,333 36,807 (3,217) 122,023 (28,647)
Adjusted EBITDA 56,110 43,870 12,799 130,863 63,846
Weighted average shares outstanding
Basic 171,947 171,947 171,838 171,947 171,838
Diluted 171,947 172,047 171,838 171,947 171,838
(Loss) profit per ordinary share
Basic (0.02) 0.02 (0.17) (0.04) (0.56)
Diluted (0.02) 0.02 (0.17) (0.04) (0.56)

Ferroglobe PLC and Subsidiaries
Unaudited Condensed Consolidated Statement of Financial Position
(in thousands of U.S. dollars)
September 30, June 30, December 31,
2017 2017 2016
ASSETS
Non-current assets
Goodwill $ 234,613 232,250 230,210
Other intangible assets 59,120 60,282 62,839
Property, plant and equipment 890,084 888,844 781,606
Non-current financial assets 6,372 6,198 5,823
Non-current financial assets from related parties - - 9,845
Deferred tax assets 49,463 52,214 44,950
Non-current receivables from related parties 2,363 2,282 2,108
Other non-current assets 21,971 22,337 20,245
Total non-current assets 1,263,986 1,264,407 1,157,626
Current assets
Inventories 353,296 337,555 316,702
Trade and other receivables 328,056 229,703 209,406
Current receivables from related parties 3,351 3,684 11,971
Current income tax assets 7,896 11,272 19,869
Current financial assets 3,681 3,661 4,049
Other current assets 12,834 12,568 9,810
Cash and cash equivalents 189,763 183,561 196,931
Assets and disposal groups classified as held for sale - - 92,937
Total current assets 898,877 782,004 861,675
Total assets $ 2,162,863 2,046,411 2,019,301
EQUITY AND LIABILITIES
Equity $ 915,837 906,518 892,042
Non-current liabilities
Deferred income 5,077 5,960 3,949
Provisions 87,490 85,029 81,957
Bank borrowings - 62,776 179,473
Obligations under finance leases 71,894 72,647 3,385
Debt instruments 338,772 338,202 -
Other financial liabilities 97,560 116,492 86,467
Other non-current liabilities 2,385 2,449 5,737
Deferred tax liabilities 143,789 144,345 139,535
Total non-current liabilities 746,967 827,900 500,503
Current liabilities
Provisions 23,736 22,091 19,627
Bank borrowings * 146,221 1,021 241,818
Obligations under finance leases 12,572 12,030 1,852
Debt instruments 2,738 12,537 -
Other financial liabilities 34,375 2,460 1,592
Payables to related parties 10,466 8,813 30,738
Trade and other payables 184,244 178,602 157,706
Current income tax liabilities 8,350 4,673 961
Other current liabilities 77,357 69,766 64,780
Liabilities associated with assets classified as held for sale - - 107,682
Total current liabilities 500,059 311,993 626,756
Total equity and liabilities $ 2,162,863 2,046,411 2,019,301
* As of September 30, 2017, includes financing of $120,091 related to the Company's accounts receivable securitization program.

Ferroglobe PLC and Subsidiaries
Unaudited Condensed Consolidated Statement of Cash Flows
(in thousands of U.S. dollars)
Quarter Ended
September 30, 2017
Quarter Ended
June 30, 2017
Quarter Ended
September 30, 2016
Nine Months Ended
September 30, 2017
Nine Months Ended
September 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
(Loss) profit for the period$(4,987) 1,000 (31,068) (12,102) (112,296)
Adjustments to reconcile net loss to net cash provided by operating activities:
Income tax expense (benefit) 14,364 (1,949) (10,158) 11,201 (38,419)
Depreciation and amortization charges, operating allowances and write-downs 27,076 26,401 30,440 80,699 97,972
Finance income (258) (162) (548) (1,215) (1,233)
Finance expense 14,786 14,709 7,241 43,260 22,449
Financial derivatives loss 1,823 4,071 - 5,894 -
Exchange differences 1,529 (7,263) 876 (5,714) 2,880
Impairment losses 98 - 9,044 98 67,631
(Gain) loss on disposals of non-current and financial assets 3,711 1,348 217 4,501 408
Other adjustments (364) 2,208 3,269 1,438 4,248
Changes in operating assets and liabilities
(Increase) decrease in inventories (4,372) (11,943) 2,135 (9,207) 59,831
(Increase) decrease in trade receivables (90,108) 9,456 17,547 (76,887) 71,783
Increase (Decrease) increase in trade payables 3,370 (8,943) 9,834 12,583 1,093
Other* 6,631 (506) (603) (28,420) (59,504)
Income taxes paid (3,768) (3,919) (8,911) (9,984) (20,188)
Interest paid (22,249) (4,378) (6,837) (36,356) (20,306)
Net cash (used) provided by operating activities (52,718) 20,130 22,478 (20,211) 76,349
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments due to investments:
Other intangible assets (88) - (2,020) (498) (2,543)
Property, plant and equipment (14,692) (14,319) (10,805) (41,373) (53,289)
Non-current financial assets - - (411) (14) (684)
Current financial assets - - 3,988 - (9,930)
Disposals:
Current financial assets - - (99) - -
Interest received 54 211 1,328 618 2,037
Net cash used by investing activities (14,726) (14,108) (8,019) (41,267) (64,409)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid - - (27,496) - (41,243)
Payment for debt issuance costs (3,210) (3,078) - (16,765) -
Proceeds from debt issuance - - - 350,000 -
Increase/(decrease) in bank borrowings:
Borrowings 118,468 30 22,362 149,923 105,331
Payments (38,296) (15,300) (19,623) (425,976) (57,698)
Other amounts paid due to financing activities (990) (10,694) (3,750) (18,895) (8,313)
Net cash provided (used) by financing activities 75,972 (29,042) (28,507) 38,287 (1,923)
TOTAL NET CASH FLOWS FOR THE PERIOD 8,528 (23,020) (14,048) (23,191) 10,017
Beginning balance of cash and cash equivalents 183,561 193,031 135,774 196,982 116,666
Exchange differences on cash and cash equivalents in foreign currencies (2,326) 13,550 (2,560) 15,972 (7,517)
Ending balance of cash and cash equivalents$189,763 183,561 119,166 189,763 119,166
* Includes the cash outflow impact of the $32.5M shareholder settlement during the quarter ended March 31, 2016.


Source:Ferroglobe PLC