Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ferroglobe PLC (GSM, Financial) reported an adjusted EBITDA of $60 million for Q3 2024, up from $58 million in the previous quarter, driven by higher realized pricing and improved spreads in manganese alloys.
- The company expects to benefit from improved ferrosilicon volumes and prices in the US due to favorable trade cases, which imposed significant duties on imports from Russia, Kazakhstan, Malaysia, and Brazil.
- Ferroglobe PLC (GSM) is implementing a new sales and operation planning process to optimize demand planning, raw material purchases, production, logistics, and sales, aiming to enhance financial performance and cash flow.
- The company is moving forward with long-term expansion plans to increase silicon metal capacity in the US, anticipating higher demand from solar and battery markets.
- Ferroglobe PLC (GSM) has secured a significant contract to supply silicon metal to a new large customer in the Middle East for their renewable energy initiative, highlighting its strong market position.
Negative Points
- End market demand remains muted, and pricing continues to soften, which is expected to pressure fourth-quarter results.
- The company's third-quarter revenue was slightly lower than the second quarter due to lower volumes across all segments.
- Silicon-based alloys segment saw a decline in adjusted EBITDA from $10 million in Q2 to $2 million in Q3, primarily due to lower fixed cost absorption.
- Free cash flow was negative $10 million in the third quarter, impacted by a $21 million use of cash by working capital.
- The silicon metal outlook is mixed, with weak demand in the aluminum sector in both Europe and the US in the short term.
Q & A Highlights
Q: Can you provide more details on the US expansion, including costs, capacity, and timeline?
A: Marco Levi, CEO, explained that the expansion will be a brownfield project, estimated to be 30% to 50% cheaper than a greenfield. The CapEx is around $200 million, with a minimum capacity of 60,000 tons, potentially more depending on technology. The permit process takes about 18 months, followed by two years of construction, aiming for a startup by early 2028.
Q: What is the expected impact on free cash flow for Q4, considering market conditions and working capital?
A: Beatriz Garcia-Cos, CFO, stated they expect a $15 million release in working capital in Q4. The idling of French plants will lead to a $60 million benefit from the energy agreement, up from the initial $40 million estimate.
Q: Can you elaborate on the fixed cost absorption issue in the silicon-based alloy segment?
A: Marco Levi, CEO, noted that weak demand and increased imports in Europe have driven price erosion, leading to margin compression. Production has been reduced, increasing cost absorption. Beatriz Garcia-Cos added that energy benefits have not significantly impacted this segment, contributing to the fixed cost absorption issue.
Q: Are the US ferrosilicon import tariffs sufficient to protect the market, and what impact do you expect in 2025?
A: Marco Levi, CEO, confirmed that tariffs on Russian imports are unexpectedly high, effectively protecting the market. The final decisions on Kazakhstan, Malaysia, and Brazil are pending. These measures should reduce imports significantly, benefiting local producers. Ferroglobe has secured significant new contracts for 2025.
Q: Can you provide more details on the new silicon metal contract in the Middle East?
A: Marco Levi, CEO, mentioned that Ferroglobe will supply silicon metal to a new polysilicon production unit in the Middle East, with a capacity of 100,000 tons. This contract highlights Ferroglobe's strong market position and traceability in the solar supply chain.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
