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Ferroglobe Reports Second Quarter Results of 2019

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Ferroglobe Reports Second Quarter Results of 2019

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 (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, 2019 Ferroglobe 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