Ferroglobe Reports Results For Third Quarter 2016

  • Q3 2016 revenue of $365.0 million, down from $398.0 million in Q2 2016
  • Net loss of $(28.5) million, or $(0.17) on a fully diluted per share basis; Adjusted net loss of $(14.6) million, or $(0.09) on a fully diluted per share basis for the quarter
  • Reported EBITDA loss of $(3.2) million, which includes an impairment charge of $9.0 million for the company's mining operations in South Africa as well as an inventory impairment charge of $4.3 million; Adjusted EBITDA of $12.8 million for the quarter
  • Operating cash flow generation of $22.5 million and free cash flow generation of $11.7 million for Q3
  • Exceeded working capital synergies target of $100 million by reducing working capital by $136.5 million year-to-date
  • Increased synergies target to $85 million annualized, up from $65 million previously
  • Maintained dividend, reflecting confidence in underlying strength of the business

LONDON, Nov. 13, 2016 (GLOBE NEWSWIRE) -- Ferroglobe PLC (NASDAQ:GSM), the world's leading producer of silicon metal, and a leading silicon- and manganese-based specialty alloys producer, announced today results for the third quarter of 2016. 

In the third quarter of 2016, Ferroglobe posted a net loss of $(28.5) million, or $(0.17) per share on a fully diluted basis. Excluding an inventory impairment charge and an additional impairment charge for South Africa, the company posted an adjusted net loss of $(14.6) million, or $(0.09) per share on a fully diluted basis.     

Ferroglobe reported an EBITDA loss of $(3.2) million for the third quarter due to an inventory impairment charge of $4.3 million in Venezuela and China, and a further $9.0 million impairment charge of the company's mining assets in South Africa. Excluding these charges Q3 2016 adjusted EBITDA was $12.8 million.

Net sales in the third quarter totalled $365.0 million, down from $398.0 million sequentially. In the third quarter, Ferroglobe's average selling price for silicon metal declined by 6% from the previous quarter's average selling price, primarily due to pressure from low-priced imports. During this period, the average selling price for silicon-based alloys decreased 3% from the second quarter of 2016 and the average selling price for manganese alloys increased 11% from the second quarter of 2016.

In terms of sales volumes, silicon metal experienced a decline of 5% quarter over quarter, silicon alloys experienced a decline of 7% quarter over quarter, and manganese alloys experienced a decline of 16% quarter over quarter, reflecting some seasonality of demand in summer months.

          Nine Months Ended September 30, 2016   Quarter Ended September 30, 2016   Quarter Ended June 30, 2016
Shipments in metric tons:            
  Silicon Metal     259,016       81,091       85,242  
  Silicon Alloys     218,271       69,539       74,786  
  Manganese Alloys     193,985       59,368       70,756  
    Total shipments*     671,272       209,998       230,784  
                   
                   
          Nine Months Ended September 30, 2016   Quarter Ended September 30, 2016   Quarter Ended June 30, 2016
Average selling price ($/MT):                
  Silicon Metal   $ 2,240     $ 2,090     $ 2,230  
  Silicon Alloys   $ 1,421     $ 1,391     $ 1,430  
  Manganese Alloys   $ 801     $ 865     $ 777  
    Total*   $ 1,558     $ 1,512     $ 1,525  
                   
                   
          Nine Months Ended September 30, 2016   Quarter Ended September 30, 2016   Quarter Ended June 30, 2016
Average selling price ($/lb.):            
  Silicon Metal   $ 1.02     $ 0.95     $ 1.01  
  Silicon Alloys   $ 0.64     $ 0.63     $ 0.65  
  Manganese Alloys   $ 0.36     $ 0.39     $ 0.35  
    Total*   $ 0.71     $ 0.69     $ 0.69  
                   
* Excludes by-products and other        

"Despite the poor results this quarter, primarily as a result of this year's pricing pressures caused by low priced imports, we are now in the pricing season for 2017 and we are beginning to see some meaningful improvements. The market is adjusting to the realities of production costs, rebalanced inventories and idle capacity, with prices above the reported indexes. Additionally, we are changing our contract structures by removing all discounts to index for silicon metal, and will be utilizing those index providers who modify their reporting criteria to better reflect the overall market," said CEO Pedro Larrea. "In the meantime, we have adapted to circumstances by relentlessly pursuing increased efficiencies, driving higher-than-expected synergies from our merger, and positioning ourselves to benefit from the forthcoming improving pricing environment. To that end, we have taken proactive steps to optimize our asset portfolio and achieved a 13% reduction in our overall cost structure as compared to pro-forma 2015. Combined, these measures have driven positive free cash flow and positive EBITDA on an adjusted basis and our balance sheet remains strong. We are well-positioned to benefit once prices recover," concluded Larrea.

Financial discipline and cost management remain core priorities

Ferroglobe reported an EBITDA loss of $(3.2) million, primarily due to the impact of a continued challenging pricing environment as well as inventory impairment charges and an additional impairment charge of our South African mining assets.  

Excluding these charges, Q3 2016 adjusted EBITDA was $12.8 million. Overall the price decline adversely impacted EBITDA by $6.5 million quarter-over-quarter in addition to volume declines of $1.6 million which were partially offset by reductions in production costs.

Ferroglobe is increasing its expectations for synergy attainment to $85 million on a run rate basis, up from $65 million previously. Year-to-date, already $43 million in synergies have been captured, and a total of $60 million is expected to be achieved in full year 2016. All in all, production costs have been reduced by $13%year-to-date.

In addition to cost management, the company also takes a proactive approach to managing its asset portfolio. As part of this, the company is currently pursuing strategic options regarding its hydro-electric assets in Spain and France. These discussions are at a preliminary stage and the company will provide further detail as and when appropriate.

Ferroglobe generated operating cash flows of $22.5 million in Q3 2016, or $76.3 million year-to-date. A significant part of the operating cash flows comes from working capital improvements of $39.9 million during Q3 2016, bringing improvements year-to-date to $136.5 million. The company has generated $23.1 million of free cash flow year-to-date, of which $11.7 million was generated during Q3 2016. 1 Ferroglobe's net debt was $430 million at the end of Q3 2016, compared to $413 million at the end of Q2 2016.

The Board has decided to maintain the quarterly interim dividend of $0.08 per share, further reflecting the confidence in the underlying strength of the business and the company's long-term outlook. The dividend will have a record date of December 8, 2016 and a payment date of December 29, 2016.

1 Free cash-flow defined as "Net cash provided by operating activities" minus "Payments for property, plant and equipment.".

Adjusted EBITDA:
      Nine Months Ended   Quarter Ended   Quarter Ended
      September 30, 2016   September 30, 2016   June 30, 2016
Loss attributable to the parent   $   (96,460 )     (28,523 )     (42,238 )
Loss attributable to non-controlling interest     (15,836 )   (2,545 )   (7,080 )
Income tax benefit     (38,419 )   (10,158 )   (29,038 )
Net finance expense     21,216     6,693     6,908  
Exchange differences     2,880     876     276  
Depreciation and amortization charges, operating allowances and write-downs     97,972     30,440     24,534  
EBITDA       (28,647 )     (3,217 )     (46,638 )
Transaction and due diligence expenses     7,979     111     5,227  
Impairment loss     67,630     9,043     58,587  
Globe purchase price allocation adjustments     10,022     -     -  
Business interruption     2,532     2,532     -  
Inventory impairment     4,330     4,330     -  
Adjusted EBITDA, excluding above items   $   63,846       12,799       17,176  
               

Adjusted diluted loss per share: 
      Nine Months Ended September 30, 2016   Quarter Ended September 30, 2016   Quarter Ended June 30, 2016
Diluted loss per ordinary share   $   (0.56 )     (0.17 )     (0.25 )
Tax rate adjustment     0.06     0.01     (0.01 )
Transaction and due diligence expenses     0.03     -     0.02  
Impairment loss     0.27     0.04     0.23  
Globe purchase price allocation adjustments     0.04     -     -  
Business interruption     0.01     0.01     -  
Inventory impairment     0.02     0.02     -  
Adjuste d diluted loss per ordinary share     $   (0.13 )     (0.09 )     (0.01 )
               

Adjusted net loss attributable to Ferroglobe: 
      Nine Months Ended September 30, 2016   Quarter Ended September 30, 2016   Quarter Ended June 30, 2016
               
Loss attributable to the parent     $     (96,460 )     (28,523 )     (42,238 )
Tax rate adjustment     9,810     3,035     (3,964 )
Transaction and due diligence expenses     5,426     75     3,555  
Impairment loss     45,988     6,149     39,839  
Globe purchase price allocation adjustments     6,815     -     -  
Business interruption     1,722     1,722     -  
Inventory impairment     2,944     2,944     -  
Adjusted loss attributable to the parent     $     (23,755 )     (14,598 )     (2,808 )
               

Conference Call

Ferroglobe will review third quarter 2016 results during a conference call at 9:00 a.m. Eastern Time on November 14, 2016.  The dial-in number for the call for participants in the United States is 877-293-5491 (conference ID 16304340). International callers should dial +1 914-495-8526 (conference ID 16304340). 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   http://edge.media-server.com/m/p/p9w9vtyt.

About Ferroglobe

Ferroglobe PLC is one of the world's leading suppliers of silicon metal, silicon-based specialty alloys, and 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 Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States Securities Exchange Act of 1934, as amended.  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 generally can be identified by the use of forward-looking terminology, including, but not limited to, "may," "could," "seek," "guidance," "predicts," "potential," "likely," "believe," "will," "expect," "anticipate,: "estimate," "plan," "intends," "forecast" or variations of these terms and similar expressions, or the negative of these terms or similar expressions.

Forward-looking statements contained in this press release are based on information presently available to us and assumptions that we believe to be reasonable, but are inherently uncertain.  As a result, our 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 our control.

You are cautioned that all such statements involve risks and uncertainties, including without limitation, risks that the legacy businesses of Globe and FerroAtlántica will not be integrated successfully or that we will not realize estimated cost savings, value of certain tax assets, synergies and growth, or that such benefits may take longer to realize than expected.  Important factors that may cause actual results to differ include, but are limited to:  (i) risks relating to unanticipated costs of integration, including operating costs, customer loss and business disruption being greater than expected; (ii) our organizational and governance structure; (iii) the ability to hire and retain key personnel; (iv) regional, national or global political, economic, business, competitive, market and regulatory conditions including, among others, changes in metals prices; (v) increases in the cost of raw materials or energy; (vi) competition in the metals and foundry industries; (vii) environmental and regulatory risks; (viii) ability to identify liabilities associated with acquired properties prior to their acquisition; (ix) ability to manage price and operational risks including industrial accidents and natural disasters; (x) ability to manage foreign operations; (xi) changes in technology; (xii) ability to acquire or renew permits and approvals; (xiii) changes in legislation or governmental regulations affecting Ferroglobe; (xiv) conditions in the credit markets; (xv) risks associated with assumptions made in connection with critical accounting estimates and legal proceedings; (xvi) Ferroglobe's international operations, which are subject to the risks of currency fluctuations and foreign exchange controls; and (xvii) the potential of international unrest, economic downturn or effects of currencies, tax assessments, tax adjustments, anticipated tax rates, raw material costs or availability or other regulatory compliance costs.  The foregoing list is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties that affect our business, including those described in the "Risk Factors" section of our Annual Reports on Form 20-F, Current Reports on Form 6-K and other documents we file from time to time with the United States Securities and Exchange Commission. We do not give any assurance (1) that we will achieve our expectations or (2) concerning any result or the timing thereof, in each case, with respect to any regulatory action, administrative proceedings, government investigations, litigation, warning letters, consent decree, cost reductions, business strategies, earnings or revenue trends or future financial results. Forward-looking financial information and other metrics presented herein represent our key goals and are not intended as guidance or projections for the periods presented herein or any future periods.

All information in this press release is as of the date of its release. We do not undertake or assume any obligation to update publicly any of the forward-looking statements in this press release to reflect actual results, new information or future events, changes in assumptions or changes in other factors affecting forward-looking statements. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. We caution you not to place undue reliance on any forward-looking statements, which are made only as of the date of this press release.

Non-GAAP Measures

EBITDA, adjusted EBITDA, adjusted loss attributable to parent and adjusted diluted loss per ordinary share are non-GAAP measures.

We have included these measures to provide supplemental measures of our performance which we believe are important because they eliminate items that have less bearing on our current and future operating performance and so highlights trends in our core business that may not otherwise be apparent when relying solely on GAAP financial measures.  Reconciliations of these measures to the comparable GAAP financial measures are provided above and in the attached financial statements.
 
Ferroglobe PLC and Subsidiaries
Unaudited Condensed Consolidated Income Statement
(in thousands of U.S. dollars, except per share amounts)
                         
      Nine Months Ended September 30, 2016     Quarter Ended September 30, 2016     Quarter Ended June 30, 2016     Year Ended December 31, 2015 *
                         
Sales   $ 1,186,159     $ 364,727     $ 397,953     $ 2,039,608  
Cost of sales     (771,238 )     (236,631 )     (252,764 )     (1,225,313 )
Other operating income     11,013       4,963       3,717       20,455  
Staff costs     (206,819 )     (67,586 )     (72,050 )     (330,382 )
Other operating expense     (179,805 )     (60,490 )     (64,374 )     (351,929 )
Depreciation and amortization charges, operating allowances and write-downs     (97,972 )     (30,440 )     (24,534 )     (141,097 )
Impairment losses     (67,631 )     (9,044 )     (58,587 )     (52,042 )
Other (loss) gain     (326 )     844       (533 )     (3,473 )
Operating loss       (126,619 )       (33,657 )       (71,172 )       (44,173 )
Finance income     1,233       548       442       1,343  
Finance expense     (22,449 )     (7,241 )     (7,350 )     (34,521 )
Exchange differences     (2,880 )     (876 )     (276 )     29,993  
Loss before tax       (150,715 )       (41,226 )       (78,356 )       (47,358 )
Income tax benefit (expense)     38,419       10,158       29,038       (62,546 )
Loss for the period       (112,296 )       (31,068 )       (49,318 )       (109,904 )
Loss attributable to non-controlling interest     15,836       2,545       7,080       13,308  
Loss attributable to the parent   $   (96,460 )   $   (28,523 )   $   (42,238 )   $   (96,596 )
                         
                         
EBITDA     (28,647 )     (3,217 )     (46,638 )     96,924  
Adjusted EBITDA     63,846       12,799       17,176       294,799  
                         
Weighted average shares outstanding                        
Basic     171,838       171,838       171,838        
Diluted     171,838       171,838       171,838        
                         
Loss per ordinary share                        
Basic     (0.56 )     (0.17 )     (0.25 )      
Diluted     (0.56 )     (0.17 )     (0.25 )      
                         
                         
* - Represents combined Globe and FerroAtlantica results on a pro forma basis.
                         

 
Ferroglobe PLC and Subsidiaries
Unaudited Condensed Consolidated Statement of Financial Position
(in thousands of U.S. dollars)
               
      September 30,   June 30,   December 31,
      2016   2016   2015
ASSETS
Non-current assets              
Goodwill     $ 402,491   404,015   403,929
Other intangible assets     70,130   71,247   71,619
Property, plant and equipment     929,217   941,580   1,012,367
Non-current financial assets     10,541   10,091   9,672
Deferred tax assets     55,228   51,337   36,098
Non-current receivables from related parties     2,233   -   -
Other non-current assets     21,302   21,881   20,615
Total non-current assets       1,491,142     1,500,151     1,554,300
Current assets              
Inventories     369,996   374,795   425,372
Trade and other receivables     197,817   216,322   275,254
Current receivables from related parties     10,312   3,705   10,950
Current income tax assets     30,826   22,302   9,273
Current financial assets     14,204   18,005   4,112
Other current assets     13,236   12,299   10,134
Cash and cash equivalents     119,166   135,774   116,666
Total current assets       755,557     783,202     851,761
Total assets     $   2,246,699     2,283,353     2,406,061
EQUITY AND LIABILITIES
Equity     $   1,170,774     1,220,184     1,294,973
Non-current liabilities              
Deferred income     5,259   6,512   4,389
Provisions     85,846   82,250   81,853
Bank borrowings     96,870   231,202   223,676
Obligations under finance leases     79,780   84,059   89,768
Other financial liabilities     7,748   8,283   7,549
Other non-current liabilities     4,295   3,741   4,517
Deferred tax liabilities     178,577   183,878   206,648
Total non-current liabilities       458,375     599,925     618,400
Cur rent liabilities              
Provisions     17,688   13,867   9,010
Bank borrowings     357,004   219,922   182,554
Obligations under finance leases     15,118   13,841   13,429
Payables to related parties     6,220   2,353   7,827
Trade and other payables     150,733   134,122   147,073
Current income tax liabilities     4,987   2,139   10,887
Other current liabilities     65,800   77,000   121,908
Tota l current liabilities       617,550     463,244     492,688
Total equity and liabilities     $   2,246,699     2,283,353     2,406,061
               

 
Ferroglobe PLC and Subsidiaries
Unaudited Condensed Consolidated Statement of Cash Flows
(in thousands of U.S. dollars)
               
    Nine Months Ended September 30, 2016     Quarter Ended September 30, 2016   Quarter Ended June 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:              
Loss for the period $ (112,296 )   $ (31,068 ) $ (49,318 )
Adjustments to reconcile net loss to net cash provided by operating activities:              
Income tax benefit   (38,419 )     (10,158 )   (29,038 )
Depreciation and amortization charges, operating allowances and write-downs   97,972       30,440     24,534  
Finance income   (1,233 )     (548 )   (442 )
Finance expense   22,449       7,241     7,350  
Exchange differences   2,880       876     276  
Impairment losses   67,631       9,044     58,587  
Loss on disposals of non-current and financial assets   408       217     242  
Other adjustments   4,248       3,269     291  
Changes in operating assets and liabilities              
Decrease in inventories   59,831       2,135     14,347  
Decrease in trade receivables   71,783       17,547     28,439  
Increase in trade payables   1,093       9,834     (10,651 )
Other*   (59,504 )     (603 )   (16,050 )
Income taxes (paid) received   (20,188 )     (8,911 )   1,497  
Interest paid   (20,306 )     (6,837 )   (5,767 )
Net cash provided by operating activities   76,349       22,478     24,297  
CASH FLOWS FROM INVESTING ACTIVITIES:              
Payments due to investments:              
Other intangible assets   (2,543 )     (2,020 )   (87 )
Property, plant and equipment   (53,289 )     (10,805 )   (15,676 )
Non-current financial assets   (684 )     (411 )   (273 )
Current financial assets   (9,930 )     3,988     (13,865 )
Disposals:              
Intangible assets   -       -     (30 )
Property, plant and equipment   -       -     (104 )
Current financial assets   -       (99 )   99  
Interest received   2,037       1,328     466  
Net cash used by investing activities   (64,409 )     (8,019 )   (29,470 )
CASH FLOWS FROM FINANCING ACTIVITIES:              
Dividends paid   (41,243 )     (27,496 )   -  
Increase/(decrease) in bank borrowings:              
Borrowings   105,331       22,362     25,978  
Payments   (57,698 )     (19,623 )   11,623  
Other amounts paid due to financing activities   (8,313 )     (3,750 )   (3,851 )
Net cash (used) provided by financing activities   (1,923 )     (28,507 )   33,750  
TOTAL NET CASH FLOWS FOR THE PERIOD   10,017       (14,048 )   28,577  
Beginning balance of cash and cash equivalents   116,666       135,774     114,019  
Exchange differences on cash and cash equivalents in foreign currencies   (7,517 )     (2,560 )   (6,822 )
Ending balance of cash and cash equivalents $ 119,166     $ 119,166   $ 135,774  
               
               
* Includes the cash outflow impact of the $32.5M shareholder settlement during the quarter ended March 31, 2016.          
               
INVESTOR CONTACT: Ferroglobe PLCJoe Ragan, 786-509-6925Chief Financial OfficerEmail: jragan@ferroglobe.com

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