Ferroglobe PLC Q3 FY2024 earnings call

• Q3 adjusted EBITDA was $60 million, up from $58 million in prior quarter, driven by higher realized pricing, improved spreads in manganese alloys, and lower energy costs.
• Reaffirmed 2024 guidance of $150 million to $170 million.
• US ferrosilicon trade cases led to duties on imports from Russia, Kazakhstan, Malaysia, and Brazil, benefiting local producers like Ferroglobe.
• Implemented new sales and operation planning (S&OP) process to improve integration, lower costs, and working capital.
• Long-term brownfield expansion plans for silicon metal in US to capture demand from solar and EV batteries.
• Agreed to supply silicon metal to a new large customer in the Middle East for renewable energy initiative.
• Paid quarterly dividend of $0.013 per share and executed stock buyback program. ESG report highlights decarbonization plan and shift to clean bio-carbon at Sabón silicon plant.

Silicon Metal

• Revenue in Q3: $196 million, down 5% from $204 million in Q2.
• Adjusted EBITDA increased 17% due to 5% improvement in realized pricing. Average price for silicon metal increased 3% in Europe and 7% in the Americas compared to Q2. Shipped volumes down 9% with all regions showing lower shipments.

Silicon-based Alloys

• Adjusted EBITDA in Q3: $2 million, down from $10 million in Q2. Decline primarily due to lower fixed cost absorption. Average realized prices flat in Europe and North America. European FeSi, Ferrosilicon Standard Index at four-year low due to lackluster demand and increased imports.

Manganese Alloys

• Revenue in Q3: $90 million, down 9% due to 24% decrease in European shipments. Adjusted EBITDA $28 million, up 100% over prior quarter due to 16% price increase in Q3. Manganese ore prices dropped ~60% after South32 GEMCO mine shutdown, but spread expected to remain positive.

• Reaffirmed 2024 adjusted EBITDA guidance of $150 million to $170 million.
• US FeSi market expected to improve in early 2025 as channel inventory clears and new orders are placed due to trade cases.
• Anticipate end markets improving in second half of 2025, with global steel demand forecast to rebound >3% in 2025 (excluding China) and global aluminum demand expected to increase 3.3% in 2025.

• Muted end market demand and softening pricing putting pressure on fourth quarter results.
• Import competition affecting silicon-based alloys segment, with European FeSi market facing low prices due to increased imports from Central Asia.
• Fluctuating manganese ore prices, with prices dropping ~60% after South32 GEMCO mine shutdown.

Q: Could you provide more color on the US expansion, including cost, timeline, and capacity?

A: Expansion is brownfield, CapEx between 30%-50% lower than greenfield. Permit application takes ~18 months, construction ~2 years. Minimum 60,000 tons capacity, capital cost ~$200 million.

Q: What's the near-term outlook for Q4 free cash flow?

A: Expect release of working capital around $15 million, with idling of plants in France in Q4.

Q: Can you provide more detail on silicon-based alloys segment, volumes, and market dynamics?

A: Margin compression in silicon-based alloys due to flat demand, increased imports, and lack of fixed cost absorption. Volumes flattish in EU and US, with Europe facing low FeSi prices and US having inventories preventing price recovery.

Q: How do the US ferrosilicon import tariffs impact the market and future volumes?

A: Tariffs on Russia, Kazakhstan, Malaysia, and Brazil will reduce imports, benefiting local producers. Final decisions on Kazakhstan, Malaysia, and Brazil awaited; two new ferrosilicon contracts in US for 2025 but volumes depend on final duties.

Q: Can you provide details on the Middle Eastern silicon contract?

A: Agreed to supply silicon metal to a Middle Eastern customer for their renewable energy initiative, related to polysilicon production (100,000 tons capacity ramping up in 2025).