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Ferroglobe Reports First Quarter Results of 2019

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Sales of $456.8 million; Net Loss of $(28.6) million; Adjusted EBITDA of $11.8 million

  • Q1 sales of $456.8 million, compared to $603.5 million in Q4 2018 and $560.7 million in Q1 2018

  • Q1 net loss of $(28.6) million compared to a net loss of $(74.2) million in Q4 2018 and a net profit of $35.6 million in Q1 2018

  • Q1 adjusted net loss attributable to parent of $(22.3) million compared to a net profit of $4.9 million in Q4 2018 and a net profit of $33.3 million in Q1 2018

  • Q1 adjusted EBITDA of $11.8 million compared to $32.1 million in Q4 2018 and $89.6 million in Q1 2018

  • Net debt at $419.7 million as of March 31, 2019, compared to $428.7 million at the end of the prior quarter

  • Cash position stable at $216.6 million. Total liquidity of $285.2 million.

  • On June 2, 2019, Ferroglobe entered into a definitive agreement to sell the hydro-electric operations of its non-core energy segment in Spain, together with the associated Cee-Dumbría factory (which will be subject to a tolling agreement between Ferroglobe and the factory´s owner), for estimated gross cash proceeds of €170 million (approximately $190 million)

LONDON, June 03, 2019 (GLOBE NEWSWIRE) -- Ferroglobe PLC (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 first quarter of 2019.

“Our Q1 results reflect a significant market downturn continuing into 2019. We have reacted swiftly, maintaining our cash position at $217 million, reducing our net debt and reaching a final agreement to divest non-core assets for $190 million,” said Pedro Larrea, CEO of Ferroglobe. “We continue to focus on deleveraging the company, with a target of reaching a net debt level below $200 million, and we have made significant progress in replacing our current RCF with a structure that eliminates leverage-based financial covenants.”

Earnings Highlights

In Q1 2019, Ferroglobe posted a net loss of $(28.6) million, or $(0.16) per share on a fully diluted basis. On an adjusted basis, Q1 2019 net loss was $(22.3) million, or $(0.13) per share on a fully diluted basis.

Q1 2019 reported EBITDA was $11.8 million, up from $(33.6) million in the prior quarter. On an adjusted basis, Q1 2019 EBITDA was $11.8 million, down 63.2% from Q4 2018 adjusted EBITDA of $32.1 million. The Company reported an adjusted EBITDA margin of 2.6% for Q1 2019, compared to an adjusted EBITDA margin of 5.3% for Q4 2018.

Quarter Ended

Quarter Ended

Quarter Ended

Year Ended

$,000 (unaudited)

March 31, 2019

December 31, 2018

March 31, 2018

December 31, 2018

Revenue

$

456,790

$

603,519

$

560,704

$

2,274,038

Net (loss) profit

$

(28,554

)

$

(74,155

)

$

35,614

$

24,573

Diluted EPS

$

(0.16

)

$

(0.35

)

$

0.21

$

0.25

Adjusted net (loss) income attributable to the parent

$

(22,251

)

$

4,876

$

33,296

$

63,932

Adjusted diluted EPS

$

(0.13

)

$

0.02

$

0.19

$

0.36

Adjusted EBITDA

$

11,790

$

32,089

$

89,604

$

253,031

Adjusted EBITDA margin

2.6

%

5.3

%

16.0

%

11.1

%

“The challenging environment that began in the second half of last year continued into Q1, resulting in a decline in revenues and earnings. Our focus on cash generation and strengthening our balance sheet during this period has improved our ability to successfully manage through this cyclical industry downturn,” said Mr. Larrea.

“The impact of production cuts, announced by ourselves and other producers, has been offset by a significant decline in demand across most of our end markets,” Mr. Larrea added. “We are cautiously optimistic that the markets will begin to improve toward the end of the year as higher cost producers continue to take capacity off-line.”

Cash Flow and Balance Sheet

Cash provided by operations during Q1 2019 was $8.7 million, with working capital decreasing by $5.0 million. Net debt was $419.7 million as of March 31, 2019, down from $428.7 million as of December 31, 2018.

“The change in market sentiment highlights our priority of de-risking the balance sheet. Continuing in this effort, we are currently pursuing a refinancing of our revolving credit facility in order to remove leverage-based financial covenants, which in tandem with a quarter end cash balance of $216.6 million will provide the Company significant liquidity to endure this cyclical downturn,” commented Phil Murnane, CFO of Ferroglobe. “While our balance sheet is well positioned to see us through the downturn, we are evaluating further capacity curtailments, implementing a new cost cutting plan, and accelerating our cash generating initiatives.”

Sale of FerroAtlántica, S.A.U., with its ten hydroelectric facilities and associated ferroalloys plant

On June 2, 2019 Ferroglobe entered into a definitive agreement to sell the hydro-electric operations of its non-core energy segment in Spain, together with the Cee-Dumbría ferroalloys factory, for estimated gross cash proceeds of €170 million (approximately $190 million). 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, but the proposed structure would involve a first-lien senior secured term loan secured by U.S. PP&E of up to $125 million and an asset backed loan secured by North American accounts receivable and inventories of up to $140 million. There can be no assurance that any transaction will be consummated, but the Company expects such refinancing to close during the month of June.

“The announced divestiture and the anticipated refinancing of our credit facility will strengthen our balance sheet, resulting in a pro-forma net debt level of around $235 million and significantly improving the Company’s ability to manage through any cyclical downturn,” said Mr. Larrea. “Nevertheless, we continue to focus on deleveraging the company, with a goal of reaching a net debt level below $200 million.”

Discussion of First Quarter 2019 Results

Sales

Sales for Q1 2019 of $456.8 million were 18.5% lower when compared to sales of $560.7 million for Q1 2018. Total shipments were up 3.6% and the average selling price was down 21.9% versus Q1 2018. Sales for Q1 2019 of $456.8 million were down 24.3% when compared to $603.5 million for Q4 2018. For Q1 2019, total shipments were down 23.1% and the average selling price was down 2.0% compared with Q4 2018.

Quarter Ended

Quarter Ended

Quarter Ended

Year Ended

March 31, 2019

December 31, 2018

Change

March 31, 2018

Change

December 31, 2018

Shipments in metric tons:

Silicon Metal

62,269

93,364

-33.3

%

91,615

-32.0

%

352,578

Silicon-based Alloys

81,801

81,197

0.7

%

76,328

7.2

%

311,703

Manganese-based Alloys

103,669

147,445

-29.7

%

71,176

45.7

%

424,358

Total shipments*

247,739

322,006

-23.1

%

239,119

3.6

%

1,088,639

Average selling price ($/MT):

Silicon Metal

$

2,358

$

2,429

-2.9

%

$

2,762

-14.6

%

$

2,647

Silicon-based Alloys

$

1,669

$

1,719

-2.9

%

$

1,956

-14.7

%

$

1,845

Manganese-based Alloys

$

1,172

$

1,158

1.2

%

$

1,375

-14.8

%

$

1,244

Total*

$

1,634

$

1,668

-2.0

%

$

2,092

-21.9

%

$

1,870

Average selling price ($/lb.):

Silicon Metal

$

1.07

$

1.10

-2.9

%

$

1.25

-14.6

%

$

1.20

Silicon-based Alloys

$

0.76

$

0.78

-2.9

%

$

0.89

-14.7

%

$

0.84

Manganese-based Alloys

$

0.53

$

0.53

1.2

%

$

0.62

-14.8

%

$

0.56

Total*

$

0.74

$

0.76

-2.0

%

$

0.95

-21.9

%

$

0.85

* Excludes by-products and other

Sales Prices & Volumes By Product

During Q1 2019, average selling prices decreased by 2.0% for total products as compared to Q4 2018. Q1 average selling prices of silicon metal decreased 2.9%, silicon-based alloys decreased 2.9%, and manganese-based alloys increased 1.2%. During Q1 2019, sales volumes decreased by 23.1% as compared to Q4 2018. Q1 sales volumes of silicon metal decreased 33.3%, silicon-based alloys increased 0.7%, and manganese-based alloys decreased 29.7% as compared to Q4 2018.

Cost of Sales

Cost of sales was $329.5 million in Q1 2019, a decrease from $448.3 million in Q4 2018. Cost of sales as a percentage of sales decreased to 72.1% in Q1 2019 from 74.3% for Q4 2018.

Staff Costs

Staff costs was $74.8 million in Q1 2019, a decrease from $81.2 million in Q4 2018, primarily due to the reduction of wages as a result of the idling of Niagara Falls, New York and Selma, Alabama plants.

Operating Loss

Operating loss was $(20.3) million in Q1 2019 compared to an operating loss of $(63.6) million in Q4 2018. Q4 2018 operating loss included $58.9 million of impairment losses and a reduction of the bargain purchase gain relating to the acquisition of the manganese smelting assets at Dunkirk and Mo i Rana of $4.5 million.

Net Loss Attributable to the Parent

In Q1 2019, net loss attributable to the Parent was $(26.8) million, or $(0.16) per diluted share, compared to a net loss attributable to the Parent of $(59.2) million, or ($0.35) per diluted share in Q4 2018.

Adjusted EBITDA

In Q1 2019, adjusted EBITDA was $11.8 million, or 2.6% of sales, compared to adjusted EBITDA of $32.1 million, or 5.3% of sales in Q4 2018.

Conference Call

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

The dial-in number for participants in the United States is 877‑293‑5491 (conference ID 2180878). International callers should dial +1 914‑495‑8526 (conference ID 2180878). 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/3578ay6h.

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”, “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

Year Ended

March 31, 2019

December 31, 2018

March 31, 2018

December 31, 2018

Sales

$

456,790

$

603,519

$

560,704

$

2,274,038

Cost of sales

(329,492

)

(448,333

)

(320,678

)

(1,447,354

)

Other operating income

14,083

25,039

6,786

46,037

Staff costs

(74,757

)

(81,230

)

(82,423

)

(341,064

)

Other operating expense

(54,297

)

(73,160

)

(70,862

)

(283,930

)

Depreciation and amortization charges, operating allowances and write-downs

(32,077

)

(30,062

)

(28,016

)

(119,137

)

Bargain purchase gain

(4,491

)

40,142

Impairment losses

(140

)

(58,919

)

(58,919

)

Other (loss) gain

(397

)

4,005

(37

)

6,941

Operating (loss) profit

(20,287

)

(63,632

)

65,474

116,754

Net finance expense

(14,756

)

(15,128

)

(13,156

)

(56,648

)

Financial derivatives gain (loss)

1,264

1,383

(1,765

)

2,838

Exchange differences

(1,479

)

(3,086

)

729

(14,136

)

(Loss) profit before tax

(35,258

)

(80,463

)

51,282

48,808

Income tax benefit (expense)

6,704

6,308

(15,668

)

(24,235

)

(Loss) profit for the period

(28,554

)

(74,155

)

35,614

24,573

Loss attributable to non-controlling interest

1,724

14,943

1,066

19,088

(Loss) profit attributable to the parent

$

(26,830

)

$

(59,212

)

$

36,680

$

43,661

EBITDA

$

11,790

$

(33,570

)

$

93,490

$

235,891

Adjusted EBITDA

$

11,790

$

32,089

$

89,604

$

253,031

Weighted average shares outstanding

Basic

170,183

170,183

171,977

171,406

Diluted

170,183

170,183

172,215

171,530

(Loss) profit per ordinary share

Basic

$

(0.16

)

$

(0.35

)

$

0.21

$

0.25

Diluted

$

(0.16

)

$

(0.35

)

$

0.21

$

0.25

Ferroglobe PLC and Subsidiaries

Unaudited Condensed Consolidated Statement of Financial Position

(in thousands of U.S. dollars)

March 31,

December 31,

March 31,

2019

2018

2018

ASSETS

Non-current assets

Goodwill

$

203,472

$

202,848

$

204,537

Other intangible assets

69,399

51,822

61,774

Property, plant and equipment

890,436

888,862

980,101

Non-current financial assets

54,979

70,343

147,744

Deferred tax assets

7,135

14,589

6,581

Non-current receivables from related parties

2,247

2,288

2,464

Other non-current assets

10,435

10,486

32,125

Total non-current assets

1,238,103

1,241,238

1,435,326

Current assets

Inventories

451,753

456,970

493,108

Trade and other receivables

127,992

155,996

142,641

Current receivables from related parties

6,556

14,226

8,841

Current income tax assets

26,855

27,404

6,524

Current financial assets

2,191

2,523

897

Other current assets

13,721

8,813

16,095

Cash and cash equivalents

216,627

216,647

197,669

Total current assets

845,695

882,579

865,775

Total assets

$

2,083,798

$

2,123,817

$

2,301,101

EQUITY AND LIABILITIES

Equity

$

855,099

$

884,372

$

979,504

Non-current liabilities

Deferred income

11,676

1,434

7,321

Provisions

76,613

75,787

82,957

Bank borrowings

131,366

132,821

71,242

Lease liabilities

66,992

53,472

68,101

Debt instruments

342,222

341,657

341,036

Other financial liabilities

27,109

32,788

58,288

Other non-current liabilities

25,080

25,030

64,457

Deferred tax liabilities

61,887

77,379

64,733

Total non-current liabilities

742,945

740,368

758,135

Current liabilities

Provisions

47,619

40,570

30,162

Bank borrowings

19,100

8,191

850

Lease liabilities

20,616

12,999

13,478

Debt instruments

2,734

10,937

2,735

Other financial liabilities

51,618

52,524

91,243

Payables to related parties

12,199

11,128

10,671

Trade and other payables

228,649

256,823

298,438

Current income tax liabilities

4,369

2,335

5,889

Other current liabilities

98,850

103,570

109,996

Total current liabilities

485,754

499,077

563,462

Total equity and liabilities

$

2,083,798

$

2,123,817

$

2,301,101

Ferroglobe PLC and Subsidiaries

Unaudited Condensed Consolidated Statement of Cash Flows

(in thousands of U.S. dollars)

Quarter Ended

Quarter Ended

Quarter Ended

Year Ended

March 31, 2019

December 31, 2018

March 31, 2018

December 31, 2018

Cash flows from operating activities:

(Loss) profit for the period

$

(28,554

)

$

(74,155

)

$

35,614

$

24,573

Adjustments to reconcile net (loss) profit
to net cash used by operating activities:

Income tax (benefit) expense

(6,704

)

(6,308

)

15,668

24,235

Depreciation and amortization charges,
operating allowances and write-downs

32,077

30,062

28,016

119,137

Net finance expense

14,756

15,128

13,156

56,648

Financial derivatives (gain) loss

(1,264

)

(1,383

)

1,765

(2,838

)

Exchange differences

1,479

3,086

(729

)

14,136

Impairment losses

140

58,919

58,919

Bargain purchase gain

4,491

(40,142

)

Share-based compensation

1,332

1,016

699

2,798

Other adjustments

397

(4,005

)

37

(6,941

)

Changes in operating assets and liabilities

Decrease (increase) in inventories

35

91,173

(107,481

)

(101,024

)

Decrease (increase) in trade receivables

28,371

(12,261

)

(513

)

(25,807

)

(Decrease) increase in trade payables

(22,967

)

5,772

70,375

55,410

Other

9,787

6,509

(49,770

)

(25,901

)

Income taxes paid

(1,680

)

(6,983

)

(9,982

)

(36,408

)

Interest paid

(18,508

)

(4,360

)

(17,301

)

(43,018

)

Net cash provided (used) by operating activities

8,697

106,701

(20,446

)

73,777

Cash flows from investing activities:

Interest and finance income received

390

843

79

3,833

Payments due to investments:

Acquisition of subsidiary

(20,379

)

(20,379

)

Other intangible assets

(134

)

(240

)

(703

)

(3,313

)

Property, plant and equipment

(13,448

)

(28,131

)

(22,531

)

(106,136

)

Disposals:

Disposal of subsidiary

20,533

20,533

Other non-current assets

12,734

Other

1,759

4,010

6,853

Net cash used by investing activities

(11,433

)

(6,995

)

(39,524

)

(85,875

)

Cash flows from financing activities:

Dividends paid

(20,642

)

Payment for debt issuance costs

(705

)

(429

)

(4,476

)

(4,905

)

Repayment of other financial liabilities

(33,096

)

Increase/(decrease) in bank borrowings:

Borrowings

31,850

6,882

182,364

252,200

Payments

(20,811

)

(106,514

)

(106,514

)

Proceeds from stock option exercises

240

Other amounts paid due to financing activities

(5,708

)

(3,178

)

(2,987

)

(13,880

)

Payments to acquire or redeem own shares

(16,598

)

(20,100

)

Net cash provided (used) by financing activities

4,626

(13,323

)

68,387

53,303

Total net cash flows for the period

1,890

86,383

8,417

41,205

Beginning balance of cash and cash equivalents

216,647

131,671

184,472

184,472

Exchange differences on cash and
cash equivalents in foreign currencies

(1,910

)

(1,407

)

4,780

(9,030

)

Ending balance of cash and cash equivalents

$

216,627

$

216,647

$

197,669

$

216,647

Adjusted EBITDA ($,000):


Quarter Ended

Quarter Ended

Quarter Ended

Year Ended

March 31, 2019

December 31, 2018

March 31, 2018

December 31, 2018

(Loss) profit attributable to the parent

$

(26,830

)

$

(59,212

)

$

36,680

$

43,661

Loss attributable to non-controlling interest

(1,724

)

(14,943

)

(1,066

)

(19,088

)

Income tax (benefit) expense

(6,704

)

(6,308

)

15,668

24,235

Net finance expense

14,756

15,128

13,156

56,648

Financial derivatives (gain) loss

(1,264

)

(1,383

)

1,765

(2,838

)

Exchange differences

1,479

3,086

(729

)

14,136

Depreciation and amortization charges, operating allowances and write-downs

32,077

30,062

28,016

119,137

EBITDA

11,790

(33,570

)

93,490

235,891

Impairment

65,300

65,300

Revaluation of biological assets

7,615

7,615

Bargain purchase gain

4,491

(40,142

)

Gain on sale of hydro plant assets

(11,747

)

(11,747

)

Share-based compensation

(3,886

)

(3,886

)

Adjusted EBITDA

$

11,790

$

32,089

$

89,604

$

253,031

Adjusted profit attributable to Ferroglobe ($,000):

Quarter Ended

Quarter Ended

Quarter Ended

Year Ended

March 31, 2019

December 31, 2018

March 31, 2018

December 31, 2018

(Loss) profit attributable to the parent

$

(26,830

)

$

(59,212

)

$

36,680

$

43,661

Tax rate adjustment

4,579

19,440

(742

)

8,616

Impairment

44,404

44,404

Revaluation of biological assets

5,178

5,178

Bargain purchase gain

3,054

(27,297

)

Gain on sale of hydro plant assets

(7,988

)

(7,988

)

Share-based compensation

(2,642

)

(2,642

)

Adjusted (loss) profit attributable to the parent

$

(22,251

)

$

4,876

$

33,296

$

63,932

Adjusted diluted profit per share:

Quarter Ended

Quarter Ended

Quarter Ended

Year Ended

March 31, 2019

December 31, 2018

March 31, 2018

December 31, 2018

Diluted (loss) profit per ordinary share

$

(0.16

)

$

(0.35

)

$

0.21

$

0.25

Tax rate adjustment

0.03

0.11

0.05

Impairment

0.26

0.26

Revaluation of biological assets

0.03

0.03

Bargain purchase gain

0.02

(0.16

)

Gain on sale of hydro plant assets

(0.05

)

(0.05

)

Share-based compensation

(0.02

)

(0.02

)

Adjusted diluted (loss) profit per ordinary share

$

(0.13

)

$

0.02

$

0.19

$

0.36