Q1 2020 Ferroglobe PLC Earnings Call
Dr question and answer session and instructions will be given at that time. A reminder, this conference call may be recorded I would now like to turn the call there to be at that he's got Seattle Federal jobs, Chief Financial Officer, you may begin.
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Good morning, everyone. Thank you for joining instead of note that's quite good I couldn't people at the conference calls.
Joining me today on Mako, maybe I'll, let you took 60 feel free to get up and make them NPV always try to see any that's good relations.
Okay Levine critical illness.
Before we get this topic, we told prepared remarks, I'm going to be WCS statement. Please go to decide what I'd be Stein.
Statements made by management. So these conference calls that that's where we're looking at base.
At this fixation.
These factors that could cause I could be shown to be says the TV, but these forward looking statements can be found instead of Lopes. Most recent if you see flying and big city to Bill's filings, which are available on our website.
Well you W. W Federal glow kone.
In addition, these this question it looks good as to maybe a deficit M.D. gross debt.
That's it and the deficit, but I do good and associates, which had known I used today.
Measures reconciliation of these non I used to make makers, maybe some eat our most recent FCC flagging mix is likely.
During todays call well was supposed to review the highlights for Q1 I was wondering how would be says and Oakley opinions I didnt.
Hi, Dan because I feel that because I'd be teams for them or sometimes have to full month and key drivers behind I wasn't sure.
I'd now like to kind of Cowen all but two Mako, maybe our chief Executive officer mix is likely.
Thank you Bathree, saying good morning, often Alan evening, everyone.
Before we get into sounds pretty soon speaks for the quarter I want to mention that priority. One is the health and safety of our employees and we have taken significant managers. During these unprecedented times to protect them and to ensure a secured work environment.
I am pleased Weve, our crisis management teams execution, given the challenges across our organization.
All the 19 pandemic.
And I am proud to report the quick decisions on the team have resolved could you know the work sites across the group and enabled us to won't married with minimal disruption.
After a challenging here in 2019, where our business was adversely affected by easily beer industry downturn.
2020 stopped in all honesty effectively the called me thinking, but they make which has negatively impacted many industries and economies around the war.
Despite the difficult environment, we have made significant progress in improving our business, both operationally and financially.
During the first quarter, we have responded margins improved working capital increased the cash balance and reduce our Matt.
Gross debt.
The financial and operational improvements in Q1, where the result of management's continuous focus on cost management and Rightsizing the company to navigate to succeed in the current goodbye.
They are still many uncertainties, you know or end markets and as a result of the Golden Monkey.
Our airports would be ongoing because of we seek to adapt to the lingering them certainties created budget, but they'd be nicole somewhere they do change.
Now I believe your girlfriend school.
We are highlighted our new strategic plan, which was and is being evaluated that design.
We do you have probably been consulting for we are undergoing the deep a broad devaluation of our business we've been finish line.
The goal of the project.
He used to conclude will be the plan, which not only are turns the company to profitability, but I'm analyze these various parts of the business to live on wake all we can fundamentally change our company makes you get stronger both operationally and financially.
The Q1 results illustrate the team's ability to swiftly implement changes the girls the various functions of the business.
Given the competitive environment, which we okay.
If there is much more we should be doing great value.
I wouldn't be touching on some specific value drivers we are exploring a few.
At this time I write you our business and current operating environment.
Moving ahead to slide five please.
First quarter sales were 310 $11 million down 17% from the people are your quarter and down 30% from date year ago period.
The decline from last quarter was primarily attributable to lower volumes.
Which declined 15.6%, partially offset by average selling prices.
Well I'll 0.8 per se.
Well. So there was the continued weak that I've seen that girls I wear business.
The dropping volumes during Q1 was largely attributable to be operational changes, we are looking going into the year.
As we decided to remain conservative on production in order to avoid any inventory build in the face of demand side I'm sick.
Trends and lower sales volumes I pray, mainly due to this significantly smaller operating footprint.
This was the first quarter, where we saw a sequential increase in a good good prices since the first quarter 2018.
The next the loss for the first quarter was $52 million compared to a net loss of $72 billion typically a quarter.
The decline in but not to loss in Q1 was primarily due to lower input cost and the successful implementation the will of course casting initiative.
And lastly, our adjusted EBITDA was negative $17.6 million into first quarter, which compares to negative $30.4 billion Super yours quarter [noise].
Once again this improvement was driven by lower input costs positive results from our key technical may take initiatives and other cost cutting initiatives and they've got good corporate office neighborhoods.
Overall Q1 was marked by stub realization of pricing continued volume declines offset by say significant export caustic.
As a result, we saw improvement in our bottom line results. Despite dorsey.
Further we.
We continue to de lever on improving our working capital position.
We ended Q1, we working capitano three other than $48 billion down from four out of that $74 million are working capital at the end of 2090.
Oh, they're 126 medians improvements in working capital $67 million was due to further reduction will be thing.
During the quarter.
We would use both our girls deck that meant that.
No that big line in Q1, two rather than $42 billion.
39, medians wonderfully you order.
Good day.
Dan was only abuse by $59 million, we've a bomb so why that $99 as of March 31st 2020.
In Q1, we also improved our cash balance ending the quarter. We went up about a $44 billion. So total cash up from 123 billions in the prior year quarter.
This includes our cash cash equivalents restricted cash and consolidation of the accounts receivable securitization program.
Next slide please.
Well no next Thursday nights, we will discuss pricing and volume trends earnings contributions and market observations for each of our key products.
Turning first to see Leeco me tell almost like snakes.
Oh Im sorry alive.
Selling price for city called me towards $2212 permit the dorms Hawk, 2.2% for all $2164 into two year quarter.
The index price anyways was up 2%, while the European index increased 13% during first quarter.
Despite the weaker overall demand due to U.S. and you're right.
I see is trending positively due to the action taken by the industry to coating capacity in an effort to bring supplying line we weakening demand.
Action by Sidra producers, particularly toward 2019 at year end in Europe.
It's also been steady pricing crazies during Q1.
The volume trends chart on the top right like six shows that decline agency become because she mens or 16% over the previous quarter.
The decline volume was the result of capacity could 10 minute across our production footprint as well as end market demand slowed down.
Aluminium or lack of demand, which is largely tied to outgrow seals had been weak. It both can do as said in Europe.
This has been partially offset by strengthening chemical sector demand.
Demand for Silicom going towards the photovoltaic market continues to suffer as there is off to lower solar production and good for total dike price commitments.
Silicon metal you'd be die improved from the loss of 2.6 million same quarter floor to positive 3.5 million since quarter, one there even primarily by cost improvements and Borneo somewhat offset by price the changing the project makes rose 2.1 billion positively Buck from volumes.
As we focus on chemicals.
The biggest contributor to our brutally cold make up the four months was the 6.3 million. They grew by 90 cost, which was driven by Katie I buy and let the related initiatives raw materials mix and lower input costs.
Is there any mind there they're either lug you know the disguising gets reflected in some of our gold.
I think crazy they index price is doing to what Q1 positively impacts a portion of our contracted volumes in Q2.
Next slide please.
Turning to Sealy could be the noise, most like saying during the quarter. The average selling price increase by 3.5% to 1004 I'm back up to 74 permit that on top.
From 1004 of the 24 per metric ton indefinitely or quarter.
The increase in our silicon based alloys business. He is primarily due to distracting from silicone pricing into U.S. and you.
Despite pressures from lower steel activity the industry benefited from positive supply demand pension during the quarter, which has always after the upward pricing trend seen across the board indexes on the top lifetime, Oh dislikes federal Grps average realized.
It's supposed to be companies anomalies benefited from our higher margin specialty ferroalloys products, which accounted for approximately 50% of the shipments during the first quarter.
Silicon based alloys volume declined 6% in Q1 to approximately 61000, making films a deceleration over the for your two quarters. The first quarter decline is that the button to weaker steel and foundry demand. You book, you had said new data primarily by weakness.
He's in the global automotive end market.
EBITDA from our Silicon based alloys segment improved from $600000 in quarter four to 2.3 million in Q1 do you have by volume calls and pricing improvement.
Cost improvements contributed $700000, which was the result of shifting production to our low cost plan.
We are utilized and 900000 improvement from volumes, we choose attributable to product mix improvement in Europe at the moment index pricing is down slightly in Q2 as a result of nowhere demand. However continued production cuts across the industry should there bumping sounds.
Stability.
Next slide please.
Turning now to manganese alloys.
During the first quarter of the average selling price decreased by approximately 8% to $973 can make a tone down from $1054 per metric ton into fourth quarter of 2019.
This decline our realized price for the quarter is the result of a lag relatively to the index and lower sales into North America, where prices have recently been here.
Volumes declined 22% into first quarter for approximately 74000 metric tones.
Due to capacity curtailment at yearend as well as lower sales seem to U.S.
My gut newspaper Lloyd EBITA was essentially flat to negative $2.5 billion in Q1.
Lower cost of manganese ore provided that benefits offset by pricing did costs.
The decline in London is over price is provided an 8 million benefit.
Partially offset by $2 million seen finished Google write downs.
Index pricing for manganese base I will always increased by approximately 15% into first quarter.
We should we expect to having a positive impact in Q2.
Next slide.
And finally, referring to slide nine elaborate on my earlier comments relating to a new strategic plan, which is currently being dealer.
Since joining the company has spent a lot of tied with management that very Atlanta.
Get the better feel for the organization and now we conduct business.
It's meeting so enforce my initial view there is a significant room for process improvement throughout the organization, which will drive efficiency and they announced the economics of the business from both revenue and cost.
The decision to work we went outside sure.
Well, it's based on the need to put a form of structure and timeframe around the process right that they're not actionable plan.
Illustration on slide nine highlights the key value creation neighbors were currently exploring just part of this project.
Starting on the left then they'll just like we are conducting a deep studies centered on commercial excellence and believe that several improvement that can be made to improve our top line.
This includes the way we go to market, how we manage and develop customer relationships and the pricing models employed by light if your specific areas.
The second burial soccer sentence, I don't know demonization of cost and capital management.
Oh Globe currently as a barrel physical asset footprint, which provides a number of competitive advantages, but also adds complexity in managing the business.
We have to take care to look at the competitive environment and assess potential base.
In order to identify where for the carried me most competitive.
Along these lines is that need to continue our initiatives centered on continuous gone live and improve.
The key technical matrix blogger nice produced positive results brands and we have Steve.
Change in productivity and cost improvement as Pacific.
As there is out of the program.
At the moment, we're doing a systematic analysis on the plant by plant basis to identify that next theories on such initiatives.
As Ginny and over its cost could be in an area of focus we have discussed on previous calls.
As we get deeper into this project, we have stronger conviction. There is further optimization yet to be implemented beyond cost cutting the corporate headquarters today, we're focused on homogenizing. The plans from a technical perspective are there appears to be able to standardize do again.
Position that the conflict.
Another area, where study is procurement by centralizing the purchasing.
We see an opportunity to cut costs improved logistics and have greater control and visibility on our sprint.
These impart ties in with our continued our effort on improving working capital.
We have made progress reducing working capital recently.
In addition that rule to announce that were working capital and cash conversion cycle.
As part of this level, we seek to introduce no process isn't that greater accountability.
To ensure it gets is being measure manage an optimized throughout the organization.
And lastly, we recognize that changing the way we conduct our business day to day needs to be well, so tout and managed that's why we have to study the existing organization from at that so now that process standpoint, and potentially recreate bites of the organizational structure to die.
Support defined set of initiatives from this project for me. This project is critical to the future system itself. So I hope it is something which I personally called for when joining the company and Theres being one of my top priorities since joining.
Clearly the financial results of the past few years had fallen short of our expectations and are far from their full potential of this business.
Taking the time to make the all become B B SEC.
And analyze our business.
We are learning a lot and realizing it's time to make some changes.
I look forward to reporting back to you in due course, we've our far enough conclusions and strategic action plan.
At this time I would turn call over two batteries to review the financial results in more detail.
Thank you Michael beginning with there is like 11.
Sales, so far 311 million dollar during Q1.
17% knowing that they take on the 77 million dollar.
Hey, when they have caught them basically insane was driven by 15.6% decline.
It takes volumes, partially offset by your point 18 teach percent, Indiana net selling prices.
Let me be cortical our cost of sales declined by 32%.
It's something you might go smiting, excluding DNA of 22%.
Yes, I mean, pokemon go quite well in person over the prior clinical when our comparable gross margin was 16%.
The cost of sales improvement in Q1 was primarily attributable to it took once you go much he gets to be a.
Lower input prices, including all my opinion.
Oh that operating expenses decreased approximately.
$19 million to $40 million in Q1, a decline of 52%.
The decline you know that operating expenses was driven by lower volumes in Q1, as well as a number of one off items, which impact Q4, so penalties relating no significant energy contacting funds.
We kept will then be shut down some client that.
In Q1 operating loss before I Kaufman.
$48.2 billion I need to.
78.1 million bonus in the client quiet.
He then by lower cost of saying you stop cost in other operating expenses, partially offset.
I know with operating income.
Adjusted EBITDA was negative 17.6 million done that I need to man made up 13.4 million done that in Q4, adjusted EBITDA margin improved by two.
20% to my most expenditure will look like swiftly.
The sequential improvement in adjusted ended the quarter over quarter. He said cheaper to want to a few key factors.
This concludes my contribute.
Tim Me Internet of B., Komen wireless TP gun and long lead items contributed 2.7 million done that.
Hello, My a positive contribution from volume 2.9 billion done.
Because people from eight that is primarily a TV it.
You have all my P.L. leaks Copeland, we've had decreasing pricing equally including entity.
The benefit of mineral Multiomics extinguishment of the ATM program and they technical adjustments, we have been making a bit furnace living which enabled us to you're speaking great well my opinion.
Without compromising the quality of the end.
It's 3.7 million on that E duct, so my P. because.
If you to the fact that we've got some expenses in Q4 relating to plant shutdowns intention valuations.
Actually upsetting beach in Mississippi movement in the continuation of standardized by products, including silica field and planes.
It's 2.9 million dollar of course, it seems like some volumes eases the reallocation of production away from higher cost that's anything.
The quoted.
He has some adverse impact for 8.3 million dollar.
Hi, This is primarily attributable to all manganese business, what the lag we shrunk in no way average realized prices during the quarter I suspect.
On top of now with.
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Turning now and is like 15, I wouldn't be view, our balance sheet in greater detail.
Well, we make improvements to our debt available gosh, the working capital.
Really tenanting marketing vitamin.
<unk> performance I pick on what our business.
Gosh unrestricted cash improved to 144.5 million dollar.
At the end of Q1 up so 153.2 million Dona if I have cook.
Gross debt decreased.
By approximately 38 million, but not in Q1.
To 443.
Mhm, while net debt decreased.
By 55 million dollar over the course.
Ending I haven't been 99 million Donna I sold my 50 fish.
Total losses.
Approximately.
1.5 billion dollar.
So 1.7 billion don't that interplay of course.
So I don't know folks working capital in two.
By 126 million dollar EBIT for school.
Hi money, that's had result of lower inventory and accounts receivable.
Next slide please.
We tend to date it.
Oh, it's Tom operating cash flow in Q1, two even by improvements in working capital.
Hi, My neat accounts receivable, and eventually which contribute I told him or 155 million going back to our cash flow getting that age and public work.
The cash flow from all thinking of P.T. Q1 was 18.6 million dollar an increase of 15 million Dona from 59.2 million Doe Nike Q4.
Gosh no from investing activities was 94.4 million dollar.
Every month for maintenance Capex, what contained at the moment or 4.6 million dormant.
Lastly, cash flow from financing activities with negative 64 million for the core.
He is primarily due to the net impact of loan prepayments.
35 million doing that in our semi annually coupon on the outstanding senior books.
Okay.
But I think as flow.
85 million the Q1.
Next slide please.
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Each reduction.
Try not to retrieve it.
I 67 million broke down in inventing and a decrease in accounts receivable of 91 million done that but he upset by a 32 million they're not the case, you know kind of taking one.
As Michael noted in his opening remarks, we'll have to seem to take a conservative openreach and that being the one think that's more or less operating platform. You know they to avoid I didn't mean bumpy even been lending uncertainty in our end market demand.
Approach has enabled us to continue I will walk down invented by exceeding our English attack.
Todd turning into big chunk of the light our cash balance at the end of Q1 was 144 million done that's okay.
Two I won't have they tend to see medium doing that and to try and quiet.
The Q1 violent.
Includes cash cash equivalents.
Welcome to 16.2 million.
Going back and Dunkelman restricted cash cash equivalents of 28.2 million done that.
Gosh in cash equivalents includes the cash balance of the accounts receivable securitization program.
Well 38.7 million done that mix is likely.
During the quarter.
Both our gross to net decreased it decreased email a gross Dick is attributable to about 20 million production you know what don't for making a b entitlement.
The elimination of the cross currency swap, reducing debt by 9.6 million Donna and they'd be clique Unico couponing.
Well from somebody if I want gross debt at March 31st please refer to slide into two independent.
Next is like piece.
Lastly, we've been certainty created by complete 19 pandemic base, a limited visibility as to its event could impact on our business.
We finished strong and put the company to explode on financing options to close there it's got sufficient for that.
We are looking I talk to you and penetrate governments around the world how beside the fact the schemes.
<unk> companies doing beef and Christian in time, we're currently exploring a few of these assumptions in the countries, where we operate in where we think basically 10 secured funding I thought I'd like to state and I'll say that Werent cousins.
Once we have farther along in sometimes make sense.
I'm happy to others.
Not in a position to comment on any specifics at this time.
Additionally, we had exploring more trendy can I mean are financing as we've highlighted in the past with Pepsi cute link capacity I'd now like shifting a definite tests and significant I said binding which remains an income as well.
Overall, we remain confident you know what ability to secure additional funding.
Which one.
Oh, My Gosh, which we expect the candidates from the business.
Well I days uncertainty in our business is steaming from complete 19, we continuously conducted tonight, you're testing and seen our current gosh should be sufficient to kind of yes to the recovery we anticipate.
We thought I would ask the operator lets open the line for questions.
Thank you NFL reminder, ladies and gentlemen, if you have a question you will need to press star one on your telephone to withdraw your question press the pound or hash King.
Please standby, we compile that Q and a roster.
Once again you have a question you will need to press star one on your telephone.
Okay, ladies and gentlemen, my pleasure to turn the call bought two Marco Levy for his final remarks.
Thank you Carmen.
This concludes our first quarter 2020, earning call.
As I mentioned at the beginning of the cold this quarter's performance, they certainly trending into right direction.
Hey, where we have much more work to do to return to profitability.
Hi, I'm confident that the actions. We are currently undertaking along with the new initiatives, which are being developed as part of our strategic plan.
Will help us get there and to ensure a stronger more competitive.
Okay.
The work, we're doing evaluating all parts of our organization. These interesting and available and we look forward to updating you on our new strategic plan. When we can put I wouldn't work. Thanks again for your participation.
We look forward to hearing from you on the next school and the good day.
And thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
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