Q3 2019 Earnings Call

No I turn the call over to be interest Garcia Costar group's Chief Financial Officer, you may begin.

Before we get to stop Edwards, hopefully better every month I'm going to VW for statement. Please.

At this time.

Statements made by management really be school by school the full one looking a base of good at this fictitious beef up those that good goes up but I suppose to be say my P.D. So these forward looking statements can be found be pedal globe. Most recent sightsee findings.

That seems to those findings, which had been the one that no one would be the use or would you sort of looked up.

In addition, this discussion it goes refers to every deal adjusted their media gross debt net debt and adapted dilute that that'd be a ship, which I know you put its measures reconciliation of these no not yet but as my children, maybe Bob you know what most recently it's 85.

Exactly.

Next we will update you on the corporate initiatives, we are undertaking and Luckily we would provide an update on the market outlook for the reminded over 2019.

Good like no no the turned the corner, but to have you end up in Madrid, except the children Accredible yield makes is likely.

Thank you Beatrice and good morning to everyone. Today, we have with AWS <unk> Chief Executive Officer, we have taken off the coast Chief Financial officer, but in one or do you view, Chief operating officer, and Deputy CEO , Rob <unk> Executive Vice President strategy any Investor Relations.

Before we get the started today I would like to take a moment to comment on a few executive management changes, which was recently announced.

You know October we appointed been already be as deputy CEO and Chief operating officer.

Oh bought up his old <unk> overseas, a number of important initiatives focused on all on all going to.

Two rightside operations.

Cash and drive cost reduction.

But not been what has been with vertebral produced just over 25 years, that's a well operational technical and my nephew an experience.

This knowledge the organization.

Combined with his proven track record for the Liberty result.

Supposed to be effective management and execute execution for New York Cote Blanche to navigate the current doctor.

Additionally, we're thrilled to welcome Bethree got yeah called.

The executive management team.

On October 29 between what's appointed Chief Financial Officer.

Moving how big is spent the past seven years, that's the CFO public companies, the metals and mining sector.

She will eat <unk> strategy and oversee the Companys financial operations.

With the creation of a new deputy Chief <unk>, CEO and she'll role and the appointment of CEO CFO , we have strengthening the management team to successfully.

That makes the de Italy execute our strategy.

Our financial results clearly, we flick a challenging operating environment. However, we have been doing what we need to do want to step one is that but the time to ensure we successfully navigate this doctor.

The team has executed on our number up initiatives both on the operational under financial front.

This includes the divestitures such as the sale of federal Luxottica with it our Spanish Hi, Josh.

We are replaced our <unk> with a new like North America A.B.L. facility and we have made production curtailments in parallel with cost cutting initiatives.

Well go there have been shown positive datapoints recently, we remain cautious and now continuing to adopt or multiple well drill down a stronger signs of improvement in Detroit bought.

Furthermore.

Following our lead we're now seeing a number of recent capacity good tailwinds by older producers.

Industry takes action necessary to support a recovery in prices.

The entire organization. These focus on completing the initiatives, we have announced as well as generating new ideas to optimize oh performance, what reducing cost.

On the financial side.

The repayment oral <unk> all see it was a critical step in Britain <unk>, removing financial constraints on folder alleviating pressure on our capital structure.

Notwithstanding our EPS is those far the board and management 40 understand there is much more.

We need to due to weak cobra value for our stakeholders and we're committed to the task.

Now I would like to Sancho customers and suppliers for their support during this period working with us to do better.

Mutually beneficial solution to what the Doctor.

Hi, I'm confident that the steps we're taking the team we have in place will enabled the company to drive improved resold beginning 2020 .

At this time I would like to draw on the call all but two petro to disclose our operating results in more detail as well as providing insight into our end markets.

Thank you for your and good morning, everyone.

Q3 results are reflective of an overall industry slowdown with revenues EBITDA and net income disappointing levels.

One area, where we have seen a positive trend is a broker.

Cost, which partially offset the topline decline.

As we review our financials. Please note that our prior period financials have been restate that reflects recent sale for about a month ago and its associated Spanish hydro facilities.

Overall volumes during the third quarter were down 3.8%.

You too.

Oh portion to sell silicon metal worked on inventory during the quarter led to an increase in silicon shipments. However.

Silicon based alloys that manganese base all the shipment volumes were down from four to work.

An important factor over Q3 results was reduced pricing across most of our products.

On a quarter over quarter basis, silicon metal prices dropped 6.3% silicon based all those <unk>, 5.2%.

I'm going is always broke 4%.

Although this sales price decline is reflective of the overall market evolution. It includes.

Selling prices in Virginia, where markets are up over index.

But also some some export sales in less affected markets at lower prices with the goal Fulton Bank reworked.

The overall weaker volumes and pricing during the border yielded a 6.8% decline in or topline revenue versus the prior.

Yeah Justin.

The border is negative $7.2 million.

Good to positive $5.5 million during the prior quarter.

[noise] government grew $174 million impairment charge in Q3 amongst other items.

Our EBITDA margin of negative 1.9% degrees of 312 basis points from the prior border.

[noise], even negative developers, we are actively making changes to our commercial operational and financial strategy, which we will discuss in a moment.

Turning to slide six fees.

I would like to highlight the numbers of these routes have the restatement to replace all the sale for a month ago.

Oh and other non core assets.

Our consolidated sales have decreased 6.8% in Q3 to $382 million down from $409 million in Q2 29.

Silicon metal revenues were higher during the quarter driven by increased volumes, while silicon based alloys and manganese based always had declines in sales during the quarter due to lower war volumes and lower pricing.

This revenue weakness was only partially offset cost improvements, resulting in negative adjusted EBITDA or $7.2 billion during the quarter.

And historical terms the softness in revenue remains accompanied by relatively high cost in some of our inputs.

Back to where such costs were only a couple of years ago.

We're not gonna Gore.

For components met on pet Coke as well as power are coming down but are still relatively high levels.

Furthermore, it is important to note there's a like for like two or four inputs such as much as or where prices have declined significantly during Q3, but we will only come through the full benefit in upcoming quarters.

Thanks.

[noise] I'm, just looking at least basis, what's good discontinued operations increased.

$7.2 million in Q3 versus positive 5 million in Q2.

The biggest contributor to the decline during the quarter is lower pricing across all three product categories, which had an adverse impact from $14.7 million.

It was a negative $1.7 million impactful the overall decline in volumes during the quarter.

Partially offsetting the price declines in the cost improvement.

Point $9 billion, which includes improve realized powered pricing.

Optional efficiency improvements.

We also realized the benefit of declining manganese ore prices, which yielded $5.5 million in cost savings quarter over quarter.

During the quarter, we took an inventory write down of $5.1 billion in order to Banyard finished goods at lower cost.

Net realizable value.

This is mostly relates to inventories of silicon metal monkeys, autos and was driven by reporting selling prices hold these products.

Finally mining rights and negatively impacted results by approximately $1.6 million.

Turning to slide eight.

On the next three slides, we will disclose pricing and volume trends.

Earnings contributions.

Marketable situation for regional Ricky products.

Turning first to silicon metal.

For broke so real leverage selling price for silicon metal declined by 6.3% to $2175 permit.

But I think it'd be nice in Europe faced a steady decline three.

The month side of the equation has eroded faster than supply side.

That's a result of industries with recent actions, we have seen price realization at the beginning of Q4, and some index price recovery in southern markets like China and Europe in the past few weeks.

Recently announced extended production curtailments at sites in Europe , Canada consulting and one rig capacity reduction from 6000 Todd.

Similarly, our producers up announced capacity curtailments as they respond to the declines in demand and prices up lossmaking levels.

We view this trend favorably and see this I need to.

Stabilizing and eventually improving surprising and power.

We continue.

For Q4 with fixed price contracts with floor limits and some of the index price.

This conference last realized average prices, but no probably as much as the underlying index.

The bar chart on the top right slide eight shows an increase in silicon metal volumes.

Despite continued demands rolled out across the aluminum trim chemical consumer end market for being realized higher sales volume.

Q3 networking working down finished good inventory.

Inline with our previous at all.

Some of these volumes were sold at prices, but <unk> wrote a rubber and realized price down during the quarter.

Helped our capital generation.

We saw a slight deterioration in our EPA from the silicon metal business partner over pork.

The net impact of lower realized right away.

Positive impact of lower cost improvements driven by technical performance. Additionally, we had a $2.3 million in inventory write down at the end of worker.

Lastly, it is worth noting that we announced information about domestic quite coalition in late October her we'll do a subsidiary silicon the two domestic merchant producers in the U.S. like where do you perform declination sled Red International trade regulatory issues related to one for import competition, which affects both companies.

It's like season.

Turning to silicon based alloys.

During the quarter of the average selling price increased by 5.2% to $1490 per metric ton.

From 1500, and having to $2 per metric ton into second quarter of 29.

In addition to the pre IDE pricing fine, we also realized lower sales volume during the quarter.

Thanks volumes were approximately 69000 metric tons in Q3 about 9000 tons lower than the prior border.

The decline is attributable to overall slowdown into steel segment, which impacted sales of both for silicon foundry, which is tied to the automotive end market as you can see that Ralph on the top left hand side of the slide.

The pricing has shown some recovery both geographies Oh are important.

The index pricing has shown some recovery.

In the current board.

We recently announced extended outages, which lowers run rate production by 104000 pounds.

Continue to monitor developments with the steel industry knowledge.

Reductions by steel producers.

EBITDA for our Silicon based alloys business was adversely impacted by lower prices and volumes as well as higher costs.

We also had zero point $5 million inventory write down during the quarter.

Collectively these factors resulted in a property EBITDA contribution for this product can take rate to $4.1 billion in Q3 down from 11.4 billion in the second quarter.

Next slide.

Turning now to might be based alloys.

Just a contribution from this business is down markedly at $1.7 million in Q3.

It's important to note that the Q3 results include an inventory write though of $2.4 million without this wrong right. Though this part of the business would have shown some early signs with margin recovery.

Well, we report a realized prices have correspondent corresponding indexed and U.S. dollar terms the European index in euros, rather flat during the quarter. Hence the decline you see in the top left hand corner of the slides primarily due to foreign exchange movements.

I realize stoneridge price increased by 4% Portland $1140 Todd.

We're now 5.6% during the quarter. That's a result of seasonality I was hoping ladies and shipments that were rent.

The recent trend line on the index pricing for manganese continues its positive Fred.

In the quarter, the Chinese index price for 44% rate or.

Decline from almost six or appeared DMT you at the end of Q2, two digital over $5 at the end of Q3.

Current prices are well below $4 already.

Slide 11 fees.

What I'm getting to spread the appointed the selling price manganese alloys, let the cost of manganese ore.

And then the chart on the left side, the slide thesis spreads being bullets on historic.

Over the past several quarters, we have seen a gradual improvement in this is spread.

Largely driven by Rob might be whole prices relative relative to the auto prices, which have declined modestly during this period.

It is important to note that the spread shown on this slide reluctant to.

Based on this pork prices for her manganese and see the companies on the spot pricing port or the more detail the companys specific spread but gives an indication of the trend lines evolution in displayed in the spread export prices.

Most noticeable because the significant acceleration in the recovery of business spread in recent weeks given the lack factor this dynamic should benefit us in future quarters.

I will now go over to our CFO Vincent.

He was on financial highlights in the border slide please.

Thank you Ben you know Tony do is like to it.

Working capital working capital increases.

$410 million in Q2 to 579 million so less in Q3.

Primarily resulting from did realize accounting treatment of the accounts receivable was typically decision broke them.

Excluding the bulk of these well keep it doesn't decline $30.4 million to take on the $97 million, a really something between the plan contribute the working capital improvement by 35, maybe address.

Declined intake payables negatively impacted book, a copy that by $90 million.

Now I would provide some come into basically Patricia program. The recent downgrades in the company's waiting till you get an amendment to the securitization program. They take effect at least for final get pilgrim.

I have a sort of which is what class that's on balance sheet sort I yesterdays propose at the end of the quarter.

Dave the based on the balance sheet is any piece of what could that $82 million. He working capital as we speak we're working on deflation because when I come to see what typically the central facility. We aim to increase the size of below attributed to a better risk the fine which will allow the company to take it off balance sheet again.

The cash balance actual fat September . So did include linguistic that gosh, it's remained flat at $188 million.

Slide 15 please.

To begin let's review the debt position.

Decreasing our gross.

Net debt by 110 110 million dollar compared to Q2, the main driver for the debt reduction at US follows $58 million from leased play Doh following the fit Atlantic I'd be vested.

$21 billion <unk> debt pay down into fall of let these little clarity and the fair market a death, none of us Watson I, telling someone by $10 million.

Moving now to the free cash flow evolution that we bought at every deal for the quarter was negative $183.1 million.

Our credit facility for goodwill impairment charge with $142 million I looked at the federal Blobs U.S. operations.

$30.8 million allocated to the Canadian operations when adjusting for discontinued operations I know that no such items because she'd be DSLAM operation was 93.9 million dollar.

The changes in operating assets and liabilities is really working capital embed studies and pay you want contributing $7.2 million.

They tend to have $66.2 million, India called us he will typically be central financial assets. He said he showed they'll see factors.

The rebalancing of the collateral, which specialty 35 million don't less of that reduction second the amendment of the typically decision programming to 10, but.

Excluded the eligibility of canadienne receivables.

Accounted for 12 million dollar set that now in the North America avian facility, which was closed on October 111.

Finally at the facility terms, what amended the cash convention from incremental accounts receivable during the quarter was adversely affected.

Accounted for $22 million, which we expect to recover once the facility is replaced including the impact of heaters and incomes ducks.

Net cash used by your basi activities totaled negative $82.2 million, excluding names that there would be a couple of people would typically decision.

Oh gosh used by your precious activity, but now that the 16.1 billion Capex. It's been doing the court this was $6.3 million.

Well the accounting for the $171 million from disposal of noncore assets the free cash flow during the quarter was 82.5 million does that.

[noise] flex within.

The ending cash balance.

At September 30 remained flat with the previous quarter at $188 million.

First I would like to highlight that cash provided by the core activities will fundable up was boosted by people $4 million with a negative contribution for Libya, but the positive impact some will keep up with that.

The sale of noncore assets generating net proceeds so what kind of $71 million.

The majority of this amount was used to repay that.

Including the already explained effects of the ACA receivable securitization.

During the quarter, we've had $81.2 billion a bit prepayment mainly related to hydro lease tied to the say no federal atlantica as well have some pay down of legislated.

Explained it.

For the players like there was a negative net impact of $66.2 million.

From the account receivable is typically these initial facility.

Next slide please.

Subsequent to be quite didn't feel that in Devon, we announced in refinancing of our revolving credit facility with the new North American asset based fees.

In the affecting these refinancings, we used cash from our balance sheet to be play a portion of the revolving credit facility as well that's up watch has paid down over the accounts receivable, particularly decision in the United States to free up the accounts receivable for the new baby Nick of these so sections Ghosh, who can drill by you.

Actually Mutli 97 million dollar, leaving the pro forma September said biggest balance at 91.3 million, though less.

Use of cost however is more than compensated by a reduction of the minimum cash requirements for 150 million build us in the old revolving credit facility to $22.5 million under the new ABS.

And we felt that this does that show the total gross debt balance decreased by $63.8 million to 492.5 million dollar well, that's a full by basis.

At September it's important to note that the refinancing Mark a very important attention for the company. The new Abiomed has no liberate space no financial base covenants and offers minimum liquidity requirements compared to the limitations imposed on the player people will be.

Ladies facility.

But there is more the yen is fully prepayable without any penalty or increments of course, which gave us the option of the optionality to refinance it does require yet.

So only known PC financing that's improved our available liquidity has eliminated the legal risk of financial covenants doing the current though.

At this time, a good led to fund the quarter over to federal to review the near term is to visit them.

Good luck to remind the audience that they've got some supplemental slides on our financial independence.

Thank you about Oh, we turned to us like 17 no. Please.

Today, we're faced with an ongoing on certain operating environment across our main products.

While there are some early positive data points emerging across the various products.

We are assuming a delayed recovery and there are adopting our course torture anoro production portfolio on this basis.

Over the past 12 months, we have introduced a number of initiatives impacting our operational financial and corporate areas.

On the operational side, there has been a significant push to rightsize the production footprint will address the decline in demand.

Mike Curtailing Izing bonds, we read a number of direct and indirect benefits.

Our goal.

Right.

To the reality of Green Bank.

Furthermore, by scaling back production, we are eight week plant level cost savings as well focus.

I am working capital release.

Primarily through the reduction of inventories.

On the financial side continue to evaluate opportunities to further group our liquidity.

However, it is always underpinned.

By the premise that any new.

Needs to provide financial and operational flexibility.

Finally on the broader corporate tried.

Hi, our emphasis is continued cost reduction such as revaluating headcount and screening various corporate level expenses.

Additionally, we continue to evaluate our portfolio of assets.

And ways to streamline potentially monetize these business.

Reviewed and occasional Portland.

We have superbowl asset value approach, but maybe business and are also be looking at opportunities quick truck value.

Our capital structure.

We'll develop these points in the pulling basis so slight.

Our operational actions.

Focused on three primary areas.

One.

Well good at level economics to reducing working capital on three making adjustments to our production and operational profile.

Over the past few quarters, we have repeatedly the Scott our key technical metrics or ATM program. The goal of the KPM initiative is to continuously monitor and benchmark key metrics across our facility to drive improved operational efficiency.

While decreasing cost and improve competitiveness.

The news Okay. Jim plan has yielded successful results, we're now lunching launching a second page.

With an operating culture centered on continues improvement it's facility practically in constant looks to improve its cost structure, we recognize that the competitive environment across all product integrate categories is dynamic and we have we evolved to remain competitive.

Shifting now to working capital relief as the demand for our products has declined we have made the necessary changes to ensure our working capital for loans. This crime.

No Wonder, we announced our decision to shut down.

We didn't help appetite in order to control inventories.

Reported our plans destock in the later part of the year.

After further review we have developed a comprehensive plan for each plant, which youve been very rough worked down.

This includes improvement.

Materials inspire apart management.

Asian, often is good folks.

At the moment, we're targeting inventory reductions hold at least $75 million over the next two quarters.

So it's a reminder.

We were able to raise it.

Those of cash from inventories released in Q4 28.

So we feel confident in our ability to reach our target.

Working down inventory levels is aided by our ability to adapt reduction to reduce demand from customers. The plan Tailwinds. We are making have been viewed as a necessary step by they'd discrete given current pricing levels.

And that led to other producers coupled with some interactions.

It's critical that the industry brings supply level down.

For the producers cost structures.

The recent activity of our peers is viewed positively by.

We certainly will continue to take action as necessary.

Our peers are up similar mindset.

So next slide on the topic of capacity curtailments.

Perhaps on this slide show the run rate production capacity evolution.

Our key product categories.

Recently, we announced a series of extended outages in silicon metal, we have not greenfields communicative 56000 tons in Canada Europe .

Expressed on a run rate basis.

Silicon based alloys, we reduced production, but by 88000.

In the U.S. in Europe .

I mean magnitude based although we are compelling production by 100.5 thousand tons at our when we run facility in Norway.

Downsizing our operational platform has a number of benefits of underpins our pockets forecast.

Broken, but we worked out.

So turning to slide 20.

I wanted an update on our cost savings achieved through the first half across the three cost cutting areas.

Well the year, we were expected to realize $10 million or saving reduction of corporate overhead costs.

During the first nine months over year, we have achieved $7.4 million this target.

The conference in overhead costs truck from early attributable or reduction in personnel costs reduced use of third party consultants and advisors more work has been handled in.

Particularly related to operational legal mark.

That's the general I'll move Brooklyn onto Madrid from resting on trade you most of the executive management team has now moved with the remaining few expected to be so over the next month.

We have also made Harz hires.

Four key roles, where the previous incumbent spoke moving 200.

In addition to the new hires there is a photo transition plan for each role which continues to be executed overall.

For example, and we're seeing the advantage of how big the majority of the management team under the same.

Through improved cost and efficiency enhanced communication on more jobs decision, making once again. This is important as we execute on our various initiatives.

The next month, the TTM initiatives. The key technical message program is focused on treatment performance improvements through increased productivity and efficiencies, including changes raw materials mix.

We go byproduct recycling engine technology to date, we have achieved $13.4 million over $15 billion target for the year.

Actually we have been focused on reducing fringe costs.

During the first nine months will be year, we achieved savings or 14.3 million, which compares to Mark will you target of 15 million.

Overall, we're on track with you before $2 million cost savings targets in Portland.

On a run rate basis or targets savings remains $75 billion.

Hi.

Given the continued negative results for the working assumption of a prolonged downturn has been critical for the company.

Liquidity position and its financial flexibility, we helped deliberate in a number of significance initiatives first the divestiture Oprah Atlantic I know goes.

Already extensively explaining the Q2 results presentation.

Also subsequent event after the closing of Q3 results on October 11th we announced a successful replacement existing out yet.

The loan backed by our North American inventories and accounts receivable.

And has already explained the details as advantages of open new facility. All in all this refinancing has improved our available liquidity and has eliminated the lingering risks.

Financial covenants during the current downturn.

We continue to evaluate the number of alternatives aimed at further strengthening our balance sheet that liquidity, we have unencumbered assets and incremental.

Incremental debt capacity, which can help facilitate goals.

Finally, with regards to our maturity ladder the company, but what happened in near term maturities.

With the largest single friends with that ultimately 2020 to note maturing in over 24 months.

What we prudently evaluate options to optimize body.

No formal decisions have been made a decision.

I would now like to turn it over to cover your who will review the near term out.

Thank you Pedro the slower activity in many of our end markets. In 2019 has certainly been the driver of this cyclical downturn in our financial result.

Customer demand has declined much faster than the industry originally anticipated.

Each of our end markets are impacted by different factors, there going altice tied to fears of a global economic slowdown, which has led many of our customers to cut back their production and has purchased pure our problems.

This.

The ongoing trade war developments have added another layer of uncertainty so the demand picture.

Given the fact that the broader global economic remains relatively healthy coupled with the stocking we believed to have taken place this year.

The recent wave of container capacity cutbacks, there was a possibility of market to squeeze which could favorable which could be favorable for our products, mainly silicon metal, but we are not conducting our operations on the data assumption.

Yeah, Let me new sector continues to be challenged by the trade award and demand for our minion for the outcome of the industry has declined significantly this year.

Offsetting this has been slightly better demand dynamics for other binyam going into that market such as.

Got it okay.

Overall, the global deficits in other many on along with the loan low inventory levels should provide some stability to end market demand as we enter 2020 .

The greatest dropping volume in the past few quarters has being the chemical markets at levels, which far outpace GDP declines.

Well customers cautiously purchasing going into Plenti 20, we see tightness in this end market as the stock it could have already taken place ended the month is predicted to remain at GDP plus level globally.

And finally, the picture for the Port top portable teich industry has not changed much however, as new PV installation hit an all time high in 29 pm.

We think there is probably at work down on solar so inventories, which will need to be with cash hence we're expecting some recovery in this end market you 2020 .

The still industry, which impacts our manganese based alloys and fertile silicon business has been under pressure in 2090, and we expect this headwinds to continue.

The U.S., we see some potential risk oversupply.

Pressuring prices, but the demand picture should be fairly stable.

It is true.

That's very strong risk of year over year is low down in the not what we have to remind ourselves that we are coming off.

Record setting years in Europe . The recent wave of capacity co pay by the base still producers have be more drastic and is largely driven by retrenchment in the auto industry.

Our sale into this market has been a stable in 2019 to date, we continue to monitor developments. The curtailments. We have made should certainly help us manage all sales book.

The venture levels low despite potential slowdown in steel demand.

Slide 24, as we continue to negotiate contract the silicon metal business for next year all the trends in fact, just discussed to date coming to play.

So what's the slow down to start to the contracting season due to the mine to the demand side slowdown what activity has picked up in recent weeks. It's a matter of fact, we have won some business in the U.S. Europe at levels, which reinforces some of the point just discourse around the tide that's tend to market.

We are not expecting a V shaped recovery, but the fundamental supply and demand dynamic did not make certainly support a gradual recovery selling prices in 2020 .

Our commercial and operational start to each will certainly support the shred it will be very careful.

In restarting capacity.

The decision to core tail silicon capacity was intentional given market uncertainties, we must emphasize the urgency of what industry wide returned to profitability.

In light of the risk office touch related market, our priority is to say a sustainable margins rather than to focus on volumes.

On the other had.

We will head into 2020 , we've had all the book, which is let committed over overall for years I see it would be no breast interest to sign deals with customers at the time with the market is showing signs of slowing improvements.

Shifting to silicon based alloys portion of our business the pace of contracting is consistent with prior years with some very significant orders already booked.

I'll focus on optimizing a speciality sales is bearing fruit.

I'm going east alloys, we stopped to benefit from the continued decline in oil prices for the more we expect Soma stability station in a lower prices as the stocking slows which helps our spread.

Once again with all curtailed volumes, we do not foresee any issues setting our alone.

May even we started one furnished depending on the evolution of the spread.

The key the key to all parts of the strategic 2020 east to sell less but to ensure a healthy margin.

Shrinking our footprint helps facilitate a number of key objectives and make the business more manageable in this operating environment.

Turning back turning to slide five in closing the third quarter highlights continued downturn business on disappointing financial result in 2019.

Let's buy some positive signs of recovery, we're operating under the assumption, but the headwinds challenging our business on the demand on punching side, we continue into the beginning of 2020 .

As such our strategy has centered on waste comp, but the cash losses in our business by driving initiatives geared at cash flow generation and financial flexibility.

The more drastic actions were taken to curtail capacity and timberland is shrinking our operational footprint will help us celebrate our efforts on increased a rate of success in hitting our targets.

This strategy my limits, our upside should their baby should therapy, a market to squeeze what we want to remain prudent to ensure that the business remain cash neutral during this a stretch.

We do not see 2020 shaping up to a better year that we expect it.

No sorry, we do see 2020 shaping up to a better year that we expect that just a few months ago, but they are recovering won't happen overnight.

While we welcome a faster recovery, we have developed and we are operating under a plan that prepares for a few more difficult quarters.

Recent history.

As highlighted the volatility in the business both on the downside as well on the upside.

Well more than a year now weeping phase, we downward pressures, which has materially impacted operations.

We have systematically Don what was needed to combat the boldly market involvement platinum continue to do show as necessary.

Updating our plan is only half of the story.

Older half execution.

I am confident that the management changes, we have made would it be effective and ensuring that we're putting our best foot forward to execute the new attempt strategy.

We have been in this position before I'm happy to able to navigate through this difficult times.

I don't see this time being any different.

Once again, thank you for your participation on today's call.

At this time I would ask the operator to open the line up for questions.

Ladies and gentlemen, if you have a question or comment at this time, please for more than the one key on your touched on telephone. If your question has been introducing yourself from the Q. Please press the pound Keith.

Our first question comes from met pharma with Imperial capital.

Hey, good morning, Thanks for taking my question.

I was wondering if you could give a little bit more color on the potential to Luis cash from refinancing. The our facility that was mentioned in one of the slides what what amount of cash could be released in that to add to the balance sheet and I've had my first question. Thanks.

Yes.

Thank you Matt. This is this is better on.

If there's any.

Comment that we would that would liked what I'll allow her but all we mentioned that.

During the last weeks or for Q3, the changes in the AR securitization program, we are under right no.

Drove $22 million all all invoices said, we're not.

Translated into cash.

It is approximately that amount that we would be expecting to recover when we replace all the AR securitization the current facility with the new one.

Okay, Great and then one other question when you talked about 125 million of.

Lean capacity.

Would you be able to clarify any.

Plans are to utilize that capacity in the short term is there, which you pursue some sort of exchange or or refinancing.

The 125 million is a description of what the bond indenture allows us into the group for all four additional capacity and so.

We are confident that we have an asset base that.

To raise additional capacity or sorry, additional capital within that capacity, we are examining the production but.

Okay, and then final question for me.

Would you be able to just give us some more color from a macro perspective on capacity curtailments that you're seeing from your competitors.

We know that that Ferroglobe has.

Picking one for the team essentially by shutting down a significant amount of capacity what else are you seeing out there and then.

And what is the problem our AR I know one of your slides has indicated that take or pay contracts are.

Perhaps sustaining capacity above economic levels. So could you just give us some some more market color close on that front.

So first in terms of what we have observed and on old all focused specifically on the cynical middle market.

Yeah.

Public data shows that I think this is the main factor into supply demand dynamics in this market shows that Chinese exports silicon metal. This year on an annualized basis are somewhere around 120000 tons below last year.

How does that the main.

Factor it so supply demand dynamics.

Second point is we also have.

Some observations or reduce capacity utilization in Brazil in the past two or three months.

We're not sort of did about what is the level that or reduce capacity utilization, but there is some capacity utilization.

Third is there's been public announcements.

Oh, Paul Roussel.

Or reducing.

Nickel metal.

Production.

Also outcome.

So reducing also capacity utilization than some other minor payers, we know that the Iceland uptime and PCC is having difficulties in operating that we cannot confirm but it looks like they are not hitting all the market as they would have expected and also Bosnia.

Showings.

Possibly.

Or sorry production.

Our curtailments as well.

The second part of the question sorry.

Slipped my mind.

That was that I wish I was just asking about.

About market color and Oh.

Oh, yeah about regarding the take or pay arrangements im sorry about that yes, you're right.

So that we have made but pointed in the positive low.

The ability of certain of our competitors to cut back capacity like in the middle of the year.

I would have all a some commitments in terms of take or pay power labor et cetera, We thing, but the fact that we were now seeing a somewhat for our competitors.

Cutting back, possibly may be meaning that some of those restrictions have been lifted or they have reached the point in which.

They have the option either to remove those commitments or not renewed and they are now having more ability to a cut by comparison.

Got it thanks for taking my question.

Thank you.

Again, ladies and gentlemen, if you have a question or comment at this time. Please press Star then the one key on your Touchtone telephone.

Our next question comes from Brett Levy with 80 Securities.

Hey, guys under the new agreements are you willing to repurchase any of your bonds at this kind of levels.

We are in terms of full.

The bond, we're contemplating different options going forward, we still have more than 24 months all until maturity. We will we will be looking at different options. We have made bold decisions.

We are a level, but we're on out.

Got it and then in terms of you know your cost cutting plans I know at one point you guys put out a targeted 75 million and that sort of thing is there a dollar amount you know sort of before from this point going forward that you have as a cost.

Cutting target say between now and the end of 2020, given what you've achieved kind of give give me a a year to date or period today plus studying.

Oh effort update and then how much is left to go on the sorry.

So we announced and $75 million.

Run rate all savings.

If I run rate means that that savings that we would be having actually 2020 compared to 2018. All in 2019, all we announced that we wouldn't be having savings over $40 million into your a whole compared to put the 18 and so far.

And that just all this is detailed on slide 20, so far we have achieved $35 million.

Year to date, which.

So of course places AWS and on track to achieve the 40 million for this year. So far we have not announced any.

Additional targets, both those $75 million good you referred to and that would be fully captured owning 2020 .

Hi, Thanks, My other questions have been asked.

And I'm not showing any further questions at this time, let's turn the call back over to our homes.

Okay. Thank you that concludes whole third quarter on his call. Thanks again for your participation and we'll look forward to hidden from view our next call have a great.

Ladies and gentlemen. This concludes todays presentation you may now disconnect whenever wonderful day.