Ferroglobe Reports Strong Second Quarter 2023 Financial Results

LONDON, Aug. 14, 2023 (GLOBE NEWSWIRE) -- Ferroglobe PLC ( GSM) (“Ferroglobe”, the “Company”, or the “Parent”), a leading producer globally of silicon metal, silicon-based and manganese-based specialty alloys, today announced financial results for the second quarter 2023.

FINANCIAL HIGHLIGHTS

• Reported Q2-23 revenue of $456.4 million, up 14% over the prior quarter
• Q2-23 adjusted EBITDA of $105.7 million, up 136% over the prior quarter
• Improved Q2-23 adjusted EBITDA margin to 23.2% versus 11.2% in Q1-23
• Q2-23 Adjusted EPS was $0.30 versus $0.05 in Q1-23
• Gross debt was $400.1 million in Q2-23, flat versus the prior quarter and down $100 million from a year-ago quarter
• Net debt declined to $37 million, down from $55 million in Q1-23 and $194 million in Q2-22
• $100 million available from our ABL facility completely undrawn in Q2-23
• Total cash increased to $363 million, up from $344 million in Q1-23 and $307 million in Q2-22

BUSINESS HIGHLIGHTS

• Executed a partial redemption of the 2025 Senior Notes on July 31, redeeming $150 million of the 9 3/8% Senior Secured Notes due in 2025, reducing annual interest expense by $14 million
• Approaching net cash neutral - Lowest net debt in Company history
• Continued improvement to balance sheet with cash increasing to $363 million and net debt declining to $37 million
• The US recently added Silicon Metal as a critical material, highlighting its importance in the supply chain and reinforcing the onshoring opportunity for Ferroglobe
• Well-positioned to capitalize on strong long-term growth trends for high purity silicon metal used in the production of solar technology and batteries
• Finalized our first long-term power agreement in Spain, enabling a partial resumption of Spanish operations while increasing renewable energy sourcing

Dr. Marco Levi, Ferroglobe’s Chief Executive Officer, commented, “We are pleased to report strong second quarter sales growth and an EBITDA improvement of 136%, highlighting our resilience and ability to navigate effectively through this volatile pricing environment as our end markets remain under pressure. Equally importantly, our focus on strengthening our balance sheet has been effective as our cash and net debt positions reached their best levels in the Company’s history as of June 30. Subsequent to quarter-end, we continued our deleveraging efforts by redeeming $150 million of our Senior Secured Notes due in 2025.

“Recently, the US Department of Energy added Silicon Metal to its critical material list. This is a significant step, validating the onshoring trend and highlighting our opportunity in the US market.

“As expected, we finalized our first multi-year energy contract in Spain starting in 2024. This is an initial step in the process to sign additional contracts to further hedge our future energy needs. This contract provides us with access to 100% renewable energy at competitive rates and enables Ferroglobe to increase production in Spain.

“While end markets remain soft, our proactive energy strategy, combined with disciplined costs controls, is bolstering our performance in 2023. Hence, we are reiterating our guidance for the full year of adjusted EBITDA of $270 to $300 million,” concluded Dr. Levi.

Second Quarter 2023 Financial Highlights

(1) Free cash flow is calculated as operating cash flow plus investing cash flow
(2) Adjusted gross debt excludes bank borrowings on factoring program and impact of leasing standard IFRS16 at June 30, 2023 March 31, 2023 & June 30, 2022

Sales

Ferroglobe reported second quarter net sales of $456 million, an increase of 14% over the prior quarter and a decrease of 46% over Q2-22. The improvement over our prior quarter revenue is primarily attributable to higher volumes in our main products. The $56 million increase in sales over the prior quarter was primarily driven by silicon metal, which accounted for $35 million of the increase, and manganese-based alloys, which accounted for $16 million, partially offset by a decrease in silicon-based alloys, which accounted for $2 million.

Raw materials and energy consumption for production

Raw materials and energy consumption for production was $252 million in the second quarter of 2023 versus $232 million in the prior quarter, an increase of 9%. As a percentage of sales, raw materials and energy consumption for production was 55% in the second quarter of 2023 versus 58% in the prior quarter. Excluding the PPA impact, raw materials and energy consumption for production was 50% of revenue in the second quarter, an improvement from 64% in the first quarter.

Net Income (Loss) Attributable to the Parent

In the second quarter, net profit attributable to the parent was $32 million, or $0.17 per diluted share, compared to a net profit attributable to the parent of $21 million, or $0.11 per diluted share in the first quarter.

Adjusted EBITDA

Adjusted EBITDA in the second quarter was $106 million, an increase of 136% over first quarter adjusted EBITDA of $45 million. Adjusted EBITDA margins were 23% in the second quarter, up from 11% in the first quarter. The increase in second quarter adjusted EBITDA was driven by higher sales volumes and lower costs, which benefited from energy and CO2 compensation.

Total Cash

The total cash balance was $363 million as of June 30, 2023, up $19 million from $344 million as of March 31, 2023.

During the second quarter, we generated positive operating cash flow of $24 million, negative cash flow from investing activities of $23 million, and $19 million positive cash flow from financing activities.

Total Working Capital

Total working capital was $475 million at June 30, 2023, a decrease from $582 million at March 31, 2023. The $107 million decrease in working capital during the quarter was due to a decrease in trade and other receivables by $31 million, a decrease in inventories by $33 million, and an increase in trade and other payables by $44 million.

Beatriz García-Cos, Ferroglobe’s Chief Financial Officer, commented, “We continued to manage our working capital effectively during the quarter, reducing it by $107 million to $475 million with trade receivables, inventories and accounts payable all contributing. During the second quarter, we improved our net debt by $18 million to $37 million.

“In July, we further strengthened our balance sheet by redeeming $150 million of our 9 3/8% Senior Secured Notes, effectively reducing the outstanding note balance by half and lowering our annual interest expense by approximately $14 million. In less than 18 months, we have reduced gross debt by $270 million, from roughly $520 million to $250 million today, highlighting our strong cash flow generation.

“We are currently evaluating our next steps in managing our balance sheet as we contemplate optimal actions to maximize long-term shareholder value,” concluded Mrs. Garcia-Cos.

Product Category Highlights

Silicon Metal

Silicon metal revenue in the second quarter was $195 million, an increase of 21.5% over the prior quarter. The average realized price was down 11.4%, driven by lower market index pricing in the US and Europe. Total shipments increased due to the restart of our French operations as a result of our energy agreement. Adjusted EBITDA for silicon metal increased to $82 million during the second quarter, an increase of 164.8% compared with $31 million for the prior quarter. EBITDA margin in the quarter increased mainly driven by higher energy compensation and lower raw materials prices, primarily coal.

Silicon-Based Alloys