Q2 2021 Ferroglobe PLC Earnings Call

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Today's conference is scheduled to begin shortly please continue to standby and thank you for your patience.

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Good morning, ladies and gentlemen, and welcome to Faro Globe second quarter 2021 earnings call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will be given at that time.

As a reminder, this conference call may be recorded I would now like to turn the conference over to Beatrice Garcia call Fair Globe, Chief Financial Officer, you may begin.

Good morning, everyone and thank you for joining federal books second quarter 2021 earnings Conference call.

Joining me today are Michael maybe I'll like to accept the default. He said they do I'll give you sort of looked tasteful banking offices and deputy Chief Executive Officer.

Later I'll, let tough so it makes you a director and EVP of strategy and Investor Relations.

The lobby group controllers it before.

Before we get this target with some prepared remarks I'm going to read that particular statement. Please turn to slide two at this time.

Statements made by management. During this conference call that are forward looking a base rent a fictitious.

Risk factors that could cause actual results to differ materially from these forward looking statements can be found in federal groups. Most recent S. T SEC filings.

He used to those filings we kept available on that work was picked.

We'll do that when you built set of globe built cool.

In addition, this discussion includes reference to EBITDA adjusted EBITDA gross debt net debt and adjusted diluted that an explicit we Chad and Don I guess at it measures reconciliation of these low not yesterday measures maybe found in our most recent SEC filings.

Next slide please.

During today's call. We will first review the highlights for the second quarter as well as our business and operating invite him it.

Then I will provide some additional detail on our financial performance and key drivers behind that was these folks.

And finally, we will provide an update on the execution of our basic plan.

This time I would now like to turn the call over to Marco Levi, our chief Exec with equal preset next slide please.

Okay.

Thank you Brad.

Welcome to our second quarter, Belgium, with you on that.

Cool.

We recognize that we are towards the end of summer and I appreciate everyone carving out some time.

Participating on today's call.

This quarter marks an important inflection point for sure.

L J.

Since my joining the company.

The Doctor I always use is being turned to profit.

I am pleased to report that we have to be really positive net profit during the second quarter.

Now our expectation is that we.

We will continue to build on this momentum.

Future.

Well the one we are beginning to see enough separation of our financial performance.

Top line is benefiting from robust market conditions across all our key products.

Which are currently doing in July at the bump and stronger pricing.

By debit beleaguering get booked with fixed price contracts, which are significantly below book.

Okay.

There are only golf portion of these lower priced contracts during the back half of the year.

The board yesterday donation.

Sure.

On the demand side, we now expect this momentum to continue for the remainder of the year.

Gosh domestic clubs at Cameco aluminum that's good sectors are signaling strong demand into next year and we remain in active discussions to meet their needs.

Remainder of 2021.

And even engaged in discussions for 2022 with some larger customers well.

The typical negotiation season.

The cost assigned BELBUCA question continues to present an area of challenge.

On the one hand, we're successfully executing no. My hope is that you should these underlining the strategic plan focuses on driving down production and corporate overhead costs.

Yeah, Ryan we face some cost pressures, which are limiting our food potential.

During the quarter, we were challenged by significant.

Energy costs in Spain, inflationary pressures that the whole materials and idling costs in France.

Sure bore.

The cash guidance.

We had some one time nonrecurring the outflows there too.

The virtues and field right previously sold in 2020.

And financing related costs.

We remain extremely focused on cost management and seek to drive margin expansion as we stabilize the cost side of the equation and put the nonrecurring items behind us.

We are against the financing I need to acknowledge the hard work and contributions of our employees.

Board.

And our advisers.

He said, it's been a long journey and the aligning of the values born in something financing will certainly not fifth easy task.

The successful closing golf, they find out see coupled with a strong market.

Sets the stage for an exciting SEC counsel.

Sure.

We have several important initiatives tied to the strategic plan to complete and.

The financing provides the resources and the flexibility to execute these initiatives.

At the midpoint of the year I'm pleased that we remain on course to deliver than Manhattan.

We are systematically reconfiguring, how we operate this business to ensure long term competitiveness across the cycle.

And the Congress in value creation.

This quarter's financial results further validate the plan and overall length of fusion.

And we remain confident in the ability to accelerate that.

Four months into say come out of this year.

Moving ahead to slide six please.

Second quarter sales.

We have $418.5 million up 15% from before you report it.

Adult meaningfully driven by higher average realized selling prices.

During the quarter, our total volumes across all products were up 2%.

We have realized the benefit from the gradual ramp up and see become NATO and CB completes a noise while manganese alloys.

Definitely impacted by higher production cost in Spain, where we have to manage our production levels.

As well as being faced with some constraints and confusion manganese.

We had strong improvement in our adjusted EBITDA. During Q2, our adjusted EBITDA will start to $4.1 million, which is an improvement of 54, 5% from Victoria.

During the quarter, we returned to profitability.

Net profit for the quarter was $7 million compared to a loss of $68.5 billion industry.

In the quarter.

All our operating cash flow increase won't other than 7% from $18.3 million donors in Q1 to $37.8 million in Q2.

And despite some significant one time cash payments, we returned to positive net cash flow of 21 point since we didn't do the court.

Overall Q2 was by a buyer who might be in our top line, coupled with improved fixed cost absorption. It goes down we wont do anything footprint.

During the quarter, we aspira and some increase in the coastal scheme.

However, the largest single zone President energy prices in Europe.

Colombia, and Spain, where the market price of energy has increased from approximately 50 euros from Taiwan.

In Q1 to approximately 80 euros per megawatt.

You too.

For clarity these are references to the spot prices.

Despite the increase in our top line and then you start to have some previously noted capacity our working capital marginally increased by zero point $6 million quarter over quarter.

The continued emphasis on operational efficiency and financial discipline.

Eastern waiting into improvement of working capital even as the business.

The net debt increased by $23.7 million.

During the quarter as there is out of the first tranche of the new senior secured debt financing being from that in Q2.

We ended the quarter with net debt of $358 million.

Please note that these are our quarter end figures and do not reflect the pro forma income.

That $20 million of the senior secured financing trench, which closed in July.

And finally, our cash balance increased by $22.1 million ending the quarter at one of them, but that $6 million.

We are proud of these results, but feel there is significant room for improvement due to the added benefit of our previously announced capacity restarts and the gradual price increases we anticipate.

Picked up more we have now passed the point of incurring significant one off expenses tied to specific transactions.

All in all these factors should contribute to an acceleration of our financial results and a return to stronger margins.

Next slide please.

Turning first to silicon metal on slide seven.

Third gloves are realized.

Average selling price for silicon metal.

Was $2347 per metric ton in Q2, an improvement of two 7% of vessels that we report.

The index core spot pricing evolution.

<unk> increased by approximately 19% during the quarter, while the European spot index increased by 9% during the same period.

At the end of Q2, we have approximately 65% of our silicon metal business contracted.

Excluding the JV volumes.

Please keep in mind that many of these contracted volumes were at fixed prices, which were negotiated at the end of 2020, when the pricing environment was drastically different.

And our average realized prices will not reflect the same pace of momentum reflected in the VIX until these contracts are long at the end of the.

The volumes trend chart on the top right slide seven shows that 99 increase in silicon metal shipments over the previous quarter and approximately 67300 thoughts.

This is certainly attributable to some incremental volume following the restart the one for let's say, there's a bomb Spain facility and the one firm message Malawi shape trends during the quarter.

EBITDA from our silicon business improved from $14.8 million in Q1 to $17.8 million in Q2.

Rising volumes contributed favorably while significantly higher energy costs in Spain.

[noise] inputs in U S more than offset the improvement in our fixed cost absorption.

Overall, the supply demand picture for Silicon metal continues to be the best we have seen in years.

On the chemical side, our customers continue to see strong demand for everyday consumer goods as well as the benefit of new residential and nonresidential construction supporting the demand for silicones.

The demand has been surpassed our test the message or earlier expectations for the year and that's created a good tension in the marketplace going into next year.

On the aluminum side the pickup in activity is largely driven by the recovery in there a feeling of the automotive supply chain in both North America and Europe.

However.

The recovery now to manufacturing is negatively impacted by the semiconductor chip shortage, we expect that the bundle of the aluminum side will continue to grow as the industry seeks to meet the backlog of demand.

Sales into the photovoltaic market, which was predominantly not lead North America is also showing some positive signs for the first time in years.

With the emphasis on renewable energy and the need to secure value chain domestically.

New administration is focused on ensuring the viability of this sector sector domestically.

We will continue to monitor developments, but are all full of a recovering sales going into this end market in the coming years we.

Which would further extend the demand surge.

In addition to strong demand bottlenecks in raw material sourcing and logistics.

The addition of about a years globally.

Meeting supply and further supporting the idea of price environment.

Given this backdrop, we feel good about the overall supply demand trends for the remainder of the year.

As previously noted we have started for assets for bothering you want and then other assurant nursing moms.

At the moment, we have not made any firm plans for additional capacity restarts and continue to assess the situation.

In combination of our index based contracts, which gets reset quarterly as well the free negotiated bodies, particularly with the capacity starts provide an attractive opportunity to capitalize on the growth trends.

And lastly.

An update on our trade case.

At this time, the silicon metal trade cases against both now have there just a.

Golfing, Iceland, Malaysia, because that just kind of core concluded.

Although within their final determinations via successful outcomes to ensure an even playing field.

Most of the U S Department of Commerce, and International Trade Commission sites, we achieved pretty much the bed 30 sevens recruit.

Even in the case of Malaysia wildly with that like I find out of margin.

Either paying a significant decrease from the preliminary rate to define it.

While trade cases are not a core pillar of our competitive strategy. The results from these trade action reinforced the importance of taking action to ensure the total global market participants compete on EBIT guidance.

Which is critical to protect our workforce and assets.

Next slide please.

Turning to silicon based alloys on slide eight.

During the quarter and do you ever selling price increased by nine 9% to $1830 per metric tonnes.

Up from $16.65, Brent because Don in the first quarter.

During the quarter, we realized a five 9% increase in sales volumes.

Sales volumes of Silicon based alloys.

Approximately 65000 metric tons in Q2 about 4000 adult side, particularly.

Our silicon based alloys are going into steel market, which has shown strong demand in the first half of the year.

We will start it off as a recovery.

Demand to pre Covid levels were still there.

Now accelerated due to the various infrastructure programs in construction with globally supporting continued strength in this end market.

Most of the quarterly improvement in this part of our profit portfolio is driven by the ferrosilicon business, which had a strong pickup in volume as well as pricing during the quarter.

Foundry is also benefiting from the strength of the market.

EBITDA for our Silicon based alloys business was positively impacted by prices and volumes.

And by higher costs.

And adjusted EBITDA of $12 eight millions in Q2.

Up from $10.1 million in Q1.

During the quarter, there was the adverse impact of our processes, but at least $7 million from higher energy costs in Spain, as well as some material inflation.

Additionally, with the idling of some capacity trends in line with our ongoing restructuring and things we have to lower fixed cost absorption, which negatively impacted sales by one $6 million.

Next slide please.

Turning now to manganese based alloys during the quarter the average selling price increased by 25%.

<unk> $1414 per metric ton.

However.

The quarter was that the rest of the back then by lower shipments, which were down five 9% relatively to the previous quarter.

The decrease in volumes during the quarter was primarily due to management of our operating times of the Spanish plans, even the energy costs for their more.

Our previously stated plans to start right now.

Also delayed with production commencing only in July.

Despite these challenges EBITDA from this business was up over 50% contributing to $15 seven maintenance in Q2.

<unk> in the first quarter.

Kris and pricing more than offset the cost pressure from an SG&A or cost.

The spread remains above historical high.

I would now like to turn the call too badly to review the financial results in more detail.

Yeah.

Thank you Michael.

Beginning with slide 11, I will touch on a few specific line items.

You can kind of statement.

Thanks for that.

$18 million, the real kicker was $16, 8% higher 361 million Donuts.

In the tire market.

This increase in sales was driven by an 11% increase in average realized prices and two 8% increase in shipments across all our portfolio during.

During the quarter, our gross margin improved to 46%.

31% the prior quarter. This is due to top line growth as well as continued cost efficiency efforts.

You know that operating income by approximately $55 million is due to the accounting treatment relating to the fear to unleash mantra.

This represents a great deal of the 2021 SEC allocated on the lids of tier two five figure it out.

This is partially offset in other operating expenses, resulting in a minimal impact on our P&L.

With regards to staff cost to capital to load up on ancillary as we had several one off provisions related to fitness took pretty geared up.

Operating expenses totaling <unk> $2 million was higher than the previous quarter, mainly because of the recognition of the 2020 ones here too.

<unk>.

The increase in activity.

Suffocation to confirm group presentation.

Who would have reported <unk> of one.

1.1 million DAU Lucky too.

Significantly Kaufman vessels.

$18.9 million DAU left in Q1.

When accounting for the one time cost related to the implementation of the statistic on the desktop Nvidia was positive.

Before we get to the left.

And lastly, it is worth reiterating our return to positive net profit or the cedar points have been making very good.

Looking slightly.

Quarter over quarter greatly suffer 555% increase in Alberta gas stability.

From $22.1 million messages to $34.1 million until the last week or two.

The improvement in our realized.

The ally selling price.

Some doctors to impact contributing $36.4 million or less.

Recently, it's still a good man this shortly will crush volumes, which contribute an additional two $7 million.

Partially offsetting these factors like the adverse impact of cost by 27.2 medium Douglas approximately half of that piece of paper to walk through the Hyatt entities, rotini screen, which impact the quarter by $14 million.

Additionally, we have been impacted by the roadmap and a flash of inflation.

Selecting for its the biggest contributors manganese ore and Coke, Italy, Spain, France, and Norway, which accounts for $7.1 million in Ghana.

As well as lower fixed cost GAAP search I think Franks, which impact the resource by one six liter and done that.

We also have a different mix of products and silica fume and Viper looks like.

Presenting a decrease of approximately 2 million goodness, when comparing to the previous quarter and the impact of a chronic pain with <unk>.

In fact, the quarter by approximately $1 million.

Slide 15 please.

Turning now to slide 15, I will review our balance sheet in greater detail.

At the end of the quarter, our cash and restricted cash balance was $106 million.

From 84 million to a loss in Q1.

Total available cash increased from $78 million to one to 100 million less in Q2.

Total assets were approximately $1.4 billion at the end of Q2, an increase of $107 million over the prior balance I did it did.

Due to the allowance of <unk>, two five and the capital allocation of deferred financing piece.

Because that of course.

Westbrook under 64 million left on that.

From $418 million.

During the quarter, we raised $40 million of debt.

60 million.

Super Senior secured financing.

Additionally, we had the impact of the Internet is that correct.

The prior senior notes.

Please note that the additional financing which closed in July.

Not reflected in these tier two balances.

Net debt increased to 658 million upfront 334 million total tier one.

Despite an increase in our overall activity.

Working capital remained flat core Kid of a court.

Overall, we continue to monitor working capital as part of the Bill that is set to kick that we're having to deal you were talking to was funny battery so problematic.

With the goal of optimizing this London.

Through the cycle.

We are defining key Mexican kinetics.

The working capital on the basis of tracking eat, especially that's what I'm, saying.

Next slide please.

During the second quarter without a significant increase in our operating cash flow, which improved from $18.3 million tons, I think Q1 to $47.8 million.

The prior year quarter the increase in operating cash flow is primarily treated like until then every quarter, we got the deal.

While the cost impact from working capital pretty low relatively flat.

Cash flow from investing activities was negative $46.5 million.

Primarily attributable to the C O two.

And finally cash from financing activities contribute $27 million why we raise 40 begin there was $11 million in that interim cost and two point million Donuts ascribe for the income statement relating to the Rangers known.

Overall this quarter marked a return to positive growth.

So totaling $21.6 million Donuts mixes light.

Yeah.

On July 30, we announced the occurrence of the transaction effective date under the lockup agreement dated March 37, which marks the completion of the financing cost.

Part of the transaction 98, 588% of the Playa, 998% senior notes holders.

It is a new line, let's say eight senior secured notes the immuno push out the maturity from 2050 to.

If I may.

The risk of any about TD on.

Activities.

So it's a great team that's capable of 100% participation.

They sell smallest top amount of approximately 5 million to a lot of the notes, which originally to be paid in March 2032.

Additionally, we've received $40 million in aggregate proceeds from the issuance of ordinary shares following the equity issue.

Our share count is now approximately 187 million shares.

Finally, we close and fund the remaining $20 million of the $60 million of Super Senior notes overdone.

We feel this is a good outcome for the company the ongoing supported by existing investors as well as Florida is.

Certainly reinforces the grow their confidence in our plan and execution.

With the new financing that Wednesday would have the resources to complete a few critical initiatives of the plan, that's what to maintain flexibility to fund our operations. Once again, we thank all the parties involved for their hard work and got to aviation.

Les a complex task.

At this time I would like to turn the call back over to Michael who will provide an update on the U S that they took them.

Thank you Bethany now turning to slide 17.

In terms of our strategic plan, we remain on track to meeting our financial targets set this year.

Underlying the various video creation areas are over 450 individual initiatives.

As you can appreciate there was a project of this size there are areas, where we are surpassing our targets for the first half of the year and.

And the other areas that unlike.

Overall on the beta side, we have captured a $16.5 million benefit for the specific initiatives, representing 30% of our $55 million target savings for the year.

As well as 99% of our $49 million working capital target.

On the cost saving.

Time, It is war right, there or anything that the savings are not expected to phasing linearly throughout the year.

Other awards to 30% of the targets we have captured for the first half is right in line with our expectations.

The benefit of many of some larger initiatives is weighted toward the back half of the year.

In terms of some noteworthy milestones for the quarter, let's start with footprint optimization.

In Spain. The consultation period has successfully concluded with the agreement with the legal representation of their workers and communication around the collective dismissal.

The label out of it.

At this stage all employees gives me send letters that have been issued and most of the employees affected they've already left the company.

In France, the process is longer and we continue to have constructive discussions with the workers Council.

We are confident that we can conclude the negotiation process in Q4.

On the centralized purchasing.

We continue to find opportunities as the company adopt to the new way of operating.

We will start it out as a focused primarily on consumables is also expanding its scope to include the potential purchasing raw materials and evaluation of energy contracts in a more efficient and impactful button there.

And our historical practice.

Overall, we saw some positive results from new tenders the allowance during the quarter and conducted new product specific studies, which gave us confidence that we will continue to drive cost savings in this area well beyond our initial estimates.

Commercial excellence, there's also been a strong contributor this year a.

The combination of improved market analytics customer relationship building improved customer service and more disciplined decision, making are all translating into strong contribution in this area.

The strongest validation of the changes we are driving in this area as the positive feedback from customers, who are actively engaging with us.

That guidance two strategic collaborations.

As we go back to basics and continue to develop best practices, we will not only see adult piece of the impact on the top line, but tremendous improvement in our ability to make operational decisions optimization of our supply chain and working capital.

On the other side, we faced some delays in monetizing new operational excellence initiatives given few operational disruptions at specific facilities.

For example, at our Bridgeport facility in U S. We had the electrode issues, which resulted in a deterioration in our technical performance during the quarter.

Since the key technical metrics plan is tied directly to the operations and the disruption that the facility has been up.

We're seeing both on the technical performance and cost savings captured from this work stream.

In fact, the way we measure of success is cumulative so some savings captured in Q1 were reversed in Q2.

At the moment, our plan is to fully Reinitiate, the deep technical maintenance program in Q3.

And lastly on working capital the tremendous effort on establishing metrics and processes to manage our inventories coupled with strong market demand for the first half of the year myself and nearly 49 million sort of improvement on the rolling 12 months basis on top of our goal for the year.

In general with track working capital as a percentage of sales.

Lucky me improvement as the business ramps up.

Overall, we are pleased with the transformation of the company. However, the financial results only tell that portion of the story.

We have discussed the need to drive our new culture centered on one for Mike.

Mindset to driving excellence in all areas of the company.

While this certainly doesn't at all.

That night.

The progress, we're making each day to drive change throughout the organization.

I remain confident in our team's ability to deliver on the various targets. We have set for the year and look forward to updating you on our Germany for this forum and others.

This time I will ask the operator to please open the line for questions.

Thank you as a reminder to ask a question you'll need to press star one.

On your telephone to withdraw your question press the pound key again, if you would like to ask a question press. The Star then the one key on your Touchtone telephone.

These standby, while we compile the Q&A roster.

And our first question comes with Patrick Checkup with.

Rubin capital your line is open.

Thank you in the second quarter, how much were the one time C O two costs embedded in adjusted EBITDA related to the repurchase of the 2020 credits you previously salt.

And given you've completed the repurchase of the C. O. Two credits going forward should we expect net C O two costs to be roughly zero impact to your adjusted EBITDA.

Thank you Patrick.

As we have been discussing.

The accounting impact on our financial statements over the past few quarters as reflect the unique situation related to our prior C upgrade it into 'twenty and then subsequent to that per case of those crazy. So I certainly appreciate your question to clarify this spring.

First of all let me begin.

By highlighting that our quarterly results during the first call for 2021.

Been adversely impacted by being separate cases, and the P&L results I certainly diluted due to these one off charges.

With that now behind us.

Your first question very specifically in Q2, we thought that made me no charge relating to the mark to market that foresee or to a yearly which we thought that CRU four in tier one.

So the mark to market that that is due to the fact that the market cost of the corresponding journey.

Great for the end of Q1 to the time of Aspen protesting too as it was of course, we'll have to see.

$8.8 million in Q.

Uh huh.

With regard to the second part of your question what could be the cost in our P&L going forward.

I think we will look at it.

We will not do a mark to market expenses relating to this year or two going for western Musica.

Or the senior to reputation are completed and circle, yeah. So that they can bring them in line.

Let me just highlight a couple of other points on Arps theater, maybe although I already answered a year or two points is that the older P. M. N. There was a catch up payment that they'll say 41 million during Q2 actually pertains the remaining balance of the of the rights right.

Sure.

Hopefully these answer your question I can elaborate board or Seattle, but I think Gaye I think led to the breakthrough to your two comments Patrick.

And so to follow up then so to normalize your second quarter operating performance.

We should add back the one time C O two cost of $8 million and France idle costs of $1.6 million correct.

Right, that's the right way and that's the right way to read it.

Got it.

And then could you give any more color on just the silicon metal market dynamics, and maybe pricing outlook into the second half and into next year.

Yes, Patrick this is Marco speaking.

We'll address this question.

Hum.

The silicon market being.

Booming in terms of demand since quarter four last year.

And demand has been robust all D C here and we see it in this way also for for next year.

And combined with strong demand pricing.

It's been extremely robust.

You'll go back to my comments on the index pricing.

Index pricing showed that pricing is very solid.

<unk> is developing.

Speak.

The point on for Us is that.

Well last year.

<unk>.

70% of our business on fixed yearly price in silicon metal, we had the benefit because.

This is really win.

To record low levels below let's say 50 number of euros per metric ton in Europe, while we had prices close to 2000. This year, we have the opposite effect on these large portion of our silicon metal.

We have about.

25% of our volumes and we choose between spot and index and this part of the business keeps on improving during the year in line with the index improvement.

Okay, great. Thanks.

Maybe an additional comment is that.

You know last year, we had the benefit this year, we are penalized on fixed pricing next year will it be rewarded because the current price level is a much more attractive than the current contract price.

Thank you and our next question comes from John Rolfe with Cresset Roth Capital. Your line is open.

Yes, my questions actually already been answered thank you.

Our next question comes from John Secrets with clear Skies. Your line is open.

Yes, hi, guys.

There's been a lot of discussion about the sourcing of silicon metal in particular, the U S has banned imports from whole shine.

Most of the major polysilicon producers soccer and everyone. All are buying from Osha and so have you started to see much more interest in procuring silicon metal from yourselves, so that they can meet their.

Requirements to be able to bring solar into the United States.

Well at the moment, we're talking about only once about debt.

We don't have a.

Hum.

Official volume a request but.

There are strong indications that demand anyways.

We'd be operating next year due to due to solar due to solar demand.

We are.

Being one of the leaders in the western warrant wearing contact with all the customers that you have mentioned.

And I want to underline that.

One key request for the main customer sees secure volume.

Hum.

For seeable future even on the long term.

In particular.

In the U S.

Thank you. Our next question comes from Brian <unk>.

The rubia with Baird. Your line is open.

Good morning, Mark Oakmont Beatrice.

A few questions for you could you just remind us what your capex spend is going to be for 2021.

What are you still thinking for 2022.

Yeah, our Capex plan planned Capex spending for this series 40 millions.

And we are.

We are now running the budgeting exercise for 2022.

We declared in the past.

We are aiming and combination with improvement of the results of the company.

To get to.

To a level of $75 million per year.

Okay.

And then as it relates to silicon metal.

You mentioned you know there have been fixed prices.

Do you in 2020 hurting you in 2021 do you foresee your customers may be looking to index more going into 2022, given some of the volatility we've been seeing in war material prices.

Well, we have started negotiations already for 2022.

I want to emphasize that the fee.

Focus is more on security of supply.

And we are under with some customers who you are right.

We are evaluating different kind of price mechanisms.

Uh huh.

Maybe part of the volume on fixed in.

Total volume on or not.

Index.

None of these deals has been closed.

Okay.

Okay, that's great.

I'm trying to get a sense and I didn't know you don't want to negotiate or show your hand on pricing, but can you give us any sense of what percentage.

Your war materials or your products represent as a percentage of your customers prices or is that a fair way to think about it.

And if you look at steel aluminum costs, you know prices those have gone up pretty sharply this year.

Do you generally see.

You know silicon metals sort of matching those price increases that they're seeing in their products, where do you see getting a little bit better pricing or a little bit worse versus what their end products have done can you help us with that correlation.

Well we.

We haven't made this.

This correlation.

But when you look at that.

How our downstream businesses.

All of them.

Myopically.

Improved in <unk>.

So for example, when you look at it.

<unk>.

Okay makeup players with their silicone business or all the steel industry all of them have improved significantly during.

During the year.

So pricing has been very very robust.

Okay. That's helpful.

And I missed this when you were speaking about it before but could you just.

Repeat what the impact from the shipping delays you had on the manganese based alloys, how much that was in terms of volumes and possibly EBITDA.

Why is the in terms of volumes so we reported.

Yeah, Let me go to the slide so with it.

I don't give you.

The wrong number.

Manganese based alloys.

Our volumes were down five 9% versus the previous quarter.

This has been.

In effect of Natera restarting production and more on that in the second quarter in Norway.

And.

About managing our capacity in Spain.

Because of the energy cost.

At the same time, we have.

Cups in the supply of manganese ore mined.

One is over.

As a consequence, our volumes, though type one 9%.

Okay.

And I guess final question for me.

You're talking about.

Potential new demand.

From the solar industry.

Can you give us any sense if that does come to fruition will that require the company to build new capacity either U S or in Europe.

Well the when I look at the current situation again answer is yes.

Yes. These are required capacity.

I want to remind you that that we have.

The old and new.

No not at this stage in Selma.

Mhm.

We have even more capacity at that neither idled.

We're always talking about silicon metal in polokwane.

South Africa.

So the U.

In case in case.

Demand rises in new demand from solar comes particularly in the United States.

These aren't the auctions of course there are also we have some flexibility also related to the fact that.

Some of our furnaces can be converted from ferrosilicon to silicon or vice versa. So.

We have different <unk>.

Actions to address them.

This potential positive change in the month.

Yeah.

Great and just last question for me the interest with the small remaining piece of the old 93 its notes.

We're just going to wait for them to mature and in.

In March or are you does it just makes sense just to call them and get them off the balance sheet now.

Well that's oh. Thank you. Thank you for the question I don't think for the time being is something that's under discussion so I would love to be able to throw us into them.

Yeah.

Well industrial and so I would say that at the latest could be by 2022, let me put it like this.

Very good.

Thanks for the time.

Thank you. Thank you.

Our next question comes from Brian Charles with RW precedents. Your line is open.

Hi, Good morning, Thanks for taking my question and congratulations on the quarter I just have a couple of quick questions. One just saw I'm characterizing the silicon Contra silicon metal contracts correctly, I think you said, 65% of them are under contract or 65% of your volume is contracted.

The prices negotiated in 2020.

That will roll off by year end 2021 does that mean these contracts roll off at the end of 2021 or will there be rolling off gradually over the second half of the year.

Thanks for the question, Yeah, Yeah, probably I was not clear myself.

The we have 65%.

The silicon metal that we trade.

On the contract.

And in D. C is.

Basically at fixed price for the year facility.

C a new price only join Harvey first.

'twenty two.

On top of it to win when you evaluate our silicon metal business you have to consider that.

Our volume in joint venture.

Is it fixed price for the year.

Yes.

Okay.

Whereas we have about that like I say, 25% of the volume.

Which is either one quarterly.

Index or on a spot price.

He is 25%.

It keeps on moving up as we speak.

Okay. Good enough. Thanks, and then secondly, just sort of housekeeping I think and the cash flow somebody you had about $11 million of debt issuance costs and I think in one of your recent filings you estimated about $30.38 million related cashing fees.

Associated with the debt extension and the capital raise am I. Correct. Then then in assuming about $27 million will be booked in the third quarter or am I missing something that might have been booked in the second quarter.

No.

Right, So we expensed $11 million in Q.

You too.

And the remaining up to $57.5 million.

Like we mentioned would it be.

Okay. Okay.

Let me say that we as learning curve, but this is not my TV copper BC coastal.

Q1 2000.

The one and even a small platform.

Four.

Thank you.

Okay. Okay. Good enough alright, that's it for me. Thanks I appreciate it.

Thank you.

Our next question comes from Michael Lam with <unk>. Your line is open.

Yes.

I wanted to go back to the car type question because in the press release, you say that.

Hum.

It quote unquote, it'll roll off in the back half of the year.

Does it.

It doesn't I read that some contracts roll off before year end, because I'm just trying to read what was meant by.

Roll rolling off during the back half of the year in terms of contracts.

It is related to the fact.

Uh huh.

Maybe we have not been clear enough on this you're right but.

Yeah.

Yeah.

When we contracted volumes.

2020.

Customer expectations.

Terms of demand where much.

Slower than what they are today.

As a consequence, we supply the contracted volume it'd be agreed.

Thanks.

But do you think the addition on volumes comment at market.

Oh I see.

Lower a lower percentage because the green bar volumes, Okay that makes sense, okay alright.

Very clear.

Second question is.

U S.

Ferrous silicon prices.

<unk> are now trading at or up to do what I recently that has been at a very high premium.

To Europe and into European prices. So a question I have is.

How much of it.

Did you also forward sale of about 65% of ferrous silicon as well as silicon metal and so it's under the same kind of price dynamics for this year.

And in terms of.

What I'm reading about critical shortages of after you outside of the U S.

How are you having any issues in terms of shipping more S. ESI from your other locations to use as their logistics issues are causing.

The price premium to be so high.

To what extent can capitalize on that.

Okay, I want to make sure I captured them.

All your question you want to know.

The Oh, we priced ferrosilicon and then.

Supply supply demand in the U S. These are your questions Greg.

Exactly how much of your fair. So Congress is contracted and second question is given the price premiums how are you capitalizing on it.

Yeah.

For federal Silicon and we have about.

50% of the volume we cheese.

Contracted.

Which is contracted on annual index, which means that we.

We adjust the price.

Quarterly or monthly.

And there as these are freely negotiated.

Okay.

Okay. So we have normally.

A very small percentage about 5% of the total volume that is on yearly price.

Sure.

In.

Talking about the U S.

For Ferrosilicon, we we supply our ferrous silicon demand only from breach board.

As far as I know since I have been in charge or we have not supply the U S from our plan.

In Europe, we thought it was trading.

Okay. Okay.

And as you May ask you one more question for taking it.

Two questions. Please.

Medical falls permanently closed tomorrow, there's no chance of.

We reactivated given these high prices.

And the second question is more of a technical question. This is more of a engineer.

Engineering question, if you don't mind me asking but in metals Bolton I was reading about fairless.

<unk> silicon demand has been strong.

Because of increased use of steel scrap as a warming Egypt does that make any I don't understand what metals Bulletin was talking about there but could.

Even though mind me asking an engineering question as well thank you.

No it would try to answer the engineering question.

Sorry, I was distracted by the engineering question. Your first question was.

Niagara Falls is it.

No.

Yeah Yeah.

Yeah.

And they're Gonna falls is shut down.

Okay.

Forever one.

As I mentioned before it's out of my Alabama.

As a part of plan that can be restarted.

Okay.

Yeah.

Do you want to take the engineering pressure I didn't I haven't I haven't understood fully the question. So you okay.

Well, let me let me let me quote the line from metals Bolton Meadows bonuses sterile silicon is used as warming Egypt for steel scrap versus iron ore.

That's what the that's what they're saying and saying that part of the reason why ferrous silicon demand has been stronger has been increased use of scrap steel.

I don't understand why that would be if you. If you if I could ask an engineering question, but it seems youre esoteric, but I just found it interesting because I read that.

It's because the silicon which is present.

Silicon metal in the ferrous silicon will get oxidized.

Out some heat when when reacting with the with the steel.

So they are the dissolution of the citizen units.

Into the the steel free up.

Script energy in this deal and.

So this is correct.

Okay. Okay. All right. Thank you very much that's all the questions.

Yeah.

Thank you and that's all the questions in the queue I'd like to turn it back to Marco Levi for closing comments.

Thank you.

This concludes our second quarter earnings call.

As I mentioned at the beginning of the Covid, we entered the year with a clear plan.

The financial trend line, certainly I realize that things are moving in the right direction.

Despite the one time charges, which this tour.

Our first half results.

And no monetization of our results along with the strong operating backdrop is expected to accelerate our performance in the back half of the year.

Furthermore.

We will continue to work with our customers to ensure strong partnerships and service for the remainder of the year, particularly as we get into the heart of the negotiation season.

We remain excited about the future and look forward to speaking with you soon thanks again for your participation and have a great day.

This concludes today's conference call. Thank you for participating you may now disconnect.

Yeah.

Okay.

[music].

[music].

[music].

[music].

Good morning, everyone and thank you for joining set of lips second quarter 2021 earnings conference call.

Joining me today are Michael Levy, our cheeks, except the default he said been wrought with uba set of gloves to celebrating officer and Deputy Chief Executive Officer.

I've met all our transformation director and EVP of strategy and Investor Relations.

Lobbying group controller.

Before we get started with some prepared remarks I'm going to read a brief statement. Please turn to slide two at this time.

The statements made by management. During this conference call that are forward looking are based on current expectations risk factors that could cause actual results to differ materially from these forward looking statements can be found in federal groups. Most recent S T SEC filings and activities to those.

Filings, which are available on our web page.

You don't you don't settle globe Dot com.

In addition, this discussion includes reference to EBITDA adjusted EBITDA gross debt net debt and adjusted diluted earnings per share, which had no idea for this measure.

Installation of these known Ikea furnished measures maybe found in our most recent SEC filings next slide please.

During today's call. We will first review the highlights for the second quarter as well as our business and operating environment then.

Then I will provide some additional detail on our financial performance and key drivers behind our results.

And finally, we will provide an update on the execution of our strategic plan.

This time I would now like to turn the call over to Marco Levi Our Chief Executive Officer next slide please.

Yeah.

Thank you Brad.

Welcome to our second quarter Sterling when doing nursing school.

We recognize that we are towards the end of summer and I. Appreciate again, everyone carving out some time.

Participating on today's call.

This quarter marks an important inflection point for sure.

It's been around.

Since my joining the company one of the top priorities has been they turned to profit.

Perfect.

I am pleased to report that we have delivered positive net profit during the second quarter.

Now our expectation is that we.

We have continued to build on this momentum.

Future.

Although we are beginning to see an acceleration of our financial performance.

Top line is benefiting from robust market conditions across all our key products.

Which are fascinating and client demand and stronger pricing.

By debit the lingering impact of fixed priced contracts, which are significantly below current spot levels.

They are rolling off of a portion of these lower priced contracts during the back half of the year or does the board yesterday moderation in our personal lines.

On the demand side, we now expect this momentum to continue for the remainder of the year.

Domestic cross at Cameco aluminum and steel sectors.

Signaling strong demand into next year, and we remain in active discussions to meet their needs.

<unk> 2021.

And even engaged in discussions for 2022 with some larger customers well.

The typical negotiation season.

The cost side of the equation continues to present an area of challenge.

On the one hand, we are successfully executing no miles that you showed this underlining the strategic plan.

Driving down production and corporate overhead costs.

On the other end, we face some cost pressures, which are limiting our full potential.

During the quarter, we were challenged by significantly higher energy costs in Spain, inflationary pressures and set the whole materials and idling costs in France.

Short term more from it.

Cash perspective, we had some onetime and nonrecurring outflows related to.

To the virtues of Seo derived previously sold in 2020 and.

Financing related costs.

We remain extremely focused on cost management and seek to drive margin expansion as we stabilize the cost side of the equation and put the nonrecurring items behind us.

With regards to the financing.

To our knowledge the hard work and contributions of our employees our board our investors and our advisers.

It has been a long journey and the aligning of the various components of the financing was certainly not an easy task.

The successful closing of the financing coupled with a strong market backdrop.

Sets the stage for an exciting back half of the.

We have several important initiatives tied to the strategic plan to complete.

The financing provides the resources and the flexibility to execute these initiatives.

At the midpoint of the year I am pleased that we remain on course to deliver it to turn around.

We are systematically reconfiguring, how we operate this business to ensure long term competitiveness across the cycle.

And the Calgary in value creation.

This quarter's financial results further validate the plan and overall execution.

And we remain confident in the ability to accelerate our performance in the cycling out of this year.

Moving ahead to slide six please.

Second quarter sales.

$418.5 million top 15, 8% from before your quarter.

Dominantly driven by higher average realized selling prices.

During the quarter, our total volumes across all products were up two 8%.

We realized the benefit from the groundwater pumping silicon metal and silicon based on noise, while manganese alloys volumes.

Definitely impacted by higher production goes to Spain, where we have to manage our production levels as.

As well as being faced with some constraints in procuring manganese.

We had strong improvement in our adjusted EBITDA. During Q2, our adjusted EBITDA will start to $4.1 million, which is an improvement of 54, 5% from the court.

During the quarter, we returned to profitability.

Net profit for the quarter was $7 million.

<unk> to a loss of $68.5 billion industry every quarter.

Our operating cash flow increase went up 7% from $18.3 million in Q1 to $37.8 million in Q2.

And despite some significant one time cash payments, we returned to positive net cash flow of 21 point since we didn't do the court.

Overall Q2 was by by improvement in our top line, coupled with improved fixed cost absorption across our operating footprint.

During the quarter, we aspirant some increase in the cost of key inputs.

However, the largest single jump has been energy prices in Europe.

You could have in Spain, where the market price of energy has increased from approximately 50 euros from megawatt hour.

In Q1 to approximately 80 euros per megawatt hour in Q2.

Think of clarity these are references to the spot prices.

Despite the increase in our top line and the restart of some previously noted capacity.

Our working capital marginally increased by zero point $6 million quarter over quarter.

The continued emphasis on operational efficiency and financial discipline.

He is translating into improvement of working capital, even as the business ramps up.

The net debt increased by $23 seven maintenance during the quarter.

As a result of the first tranche of the new senior secured debt financing being from that in Q2.

We ended the quarter with net debt of $358 million.

Please note that these are our quarter end figures and do not reflect the pro forma impact of incremental $20 million of the senior secured financing trench, which closed in July.

And finally, our cash balance increased by $22.1 million.

Ending the quarter at $106 million.

We are proud of these results, but feel there is significant room for improvement due to the added benefit of our previously announced capacity restarts and the gradual price increases we are anticipating.

Furthermore, we have now passed the point of incurring significant one off expenses tied to specific transactions.

All in all these factors should contribute to an acceleration of our financial results and a return to stronger margins.

Slide please.

Turning first to silicon metal on slide seven.

Third gloves are realized.

Average selling price for silicon metal.

<unk> $2347 per metric ton in Q2, an improvement of two 7% versus the prior year quarter.

The index core spot pricing evolution.

<unk> increased by approximately 19% during the quarter.

While the European spot index increased by 9% during the same period.

At the end of Q2, we have approximately 65% of our silicon metal business contracted.

Excluding the JV volumes.

Please keep in mind that many of these contracted volumes, whereas fixed prices, which were negotiated at the end of 2020, when the pricing environment was drastically different.

And our average realized prices will not reflect the same pace of momentum.

Selected in the index until these contracts are a loss at the end of the year.

The volumes trend chart on the top right slide seven shows at $9 nine increase in silicon metal shipments over the previous quarter and approximately 67300 tons.

This is part certainly attributable to some incremental volume following the restart the one currently I said, there's a bond, Spain facility and the one firm message more shape trends during the quarter.

EBITDA from our silicon business improved from $14.8 million in Q1 to $17.8 million in Q2.

Rising volumes contributed favorably while significantly.

Energy costs in Spain.

They're important in U S more than offset the improvement in our fixed cost absorption.

Overall, the supply demand picture for Silicon metal continues to be the best we have seen in years.

On the chemical side, our customers continue to see strong demand for everyday consumer goods as well as the benefit of new residential and nonresidential construction supporting the demand for silicones.

The demand has been surpassed our customers or earlier expectations for the year and that's created a good tension in the marketplace going into next year.

On the aluminum side the pickup in activity is largely driven by the recovery in the feeling of the automotive supply chain in both North America and Europe.

However.

The recovery now to manufacturing is negatively impacted by the semiconductor chip shortage, we expect the demand on the aluminum side will continue to grow as the industry seeks to meet the backlog of demand.

Sales into the photovoltaic market, which was predominantly not lead North America is also showing some positive signs for the first time in years.

With the emphasis on our end.

And the need to secure a body of chain domestically.

New administration is focused on ensuring the viability of this sector sector domestically.

We will continue to monitor developments, but are awful already covering sales going into this end market in the coming years.

Which would further extend their demand search.

In addition to strong demand bottlenecks and raw material sourcing and logistics.

The additional body areas globally, limiting supply and further supporting the higher price environment.

Given this backdrop.

We feel good about the overall supply demand trends for the remainder of the year.

As previously noted we have started firmness thats a bond in July and another for MSA Marsha and me.

At the moment, we have not made any firm plans for additional capacity restarts and continue to assess the situation.

A combination of our index based contracts, which gets reset quarterly as well the free negotiated volumes, particularly with the capacity starts provide an attractive opportunity to capitalize on the broader trends.

And lastly, an update on our trade case at this time, the silicon metal trade cases against most out there to the golfing, Iceland, Malaysia, because that gets done.

<unk>.

Overall within their final determinations via successful outcomes to ensure an even playing field.

Out of the U S Department of Commerce, and International Trade Commission signs, we achieved pretty much the best zones recruit.

Even in the case of Malaysia wildly budev like find a margin with either paying a significant increase from the preliminary rate to define.

While trade cases are not a core pillar of our competitive strategy. The results from these trade action.

The importance of taking action to ensure the total global market participants compete on EBIT.

Which is critical to protect our workforce and assets.

Next slide please.

Turning to silicon based alloys on slide eight during the quarter the average selling price increased by nine 9% to $1830 per metric tonnes.

From $16.65 per metric ton in the first quarter.

During the quarter, we realized a five 9% increase in sales volumes.

Sales volumes of Silicon based alloys.

Approximately 65200 metric tons in Q2 about 4002 other thoughts.

Good quarter.

Our silicon based alloys are going into steel market, which has shown strong demand in the first half of the year.

Well started off as a recovery.

Demand to pre Covid levels were still has now accelerated due to the various infrastructure programs and construction globally supporting continued strength in this end market.

Most of the quarterly improvement in this part of our profit portfolio is driven by the ferrosilicon business.

Which had a strong pickup in volumes as well as pricing during the quarter.

Foundry is also benefiting from the strength of the auto market.

EBITDA for our Silicon based alloys business was positively impacted by prices and volumes.

Net by higher costs.

<unk> adjusted EBITDA of $12.8 million in Q2.

Up from $10.1 million in Q1.

During the quarter, there was an adverse impact of a proxy come by at least $7 million from higher energy costs in Spain, as well as some material inflation.

Additionally, with the idling of some capacity trends in line with our ongoing restructuring and things.

We have the lower fixed cost absorption with negatively impacted the results by $1.6 million.

Next slide please.

Turning now to manganese based alloys during the quarter the average selling price increased by 25%.

Two one.

The $14 per metric ton.

However.

The quarter was absolutely packed and by lower shipments, which were down five 9% relatively to the previous quarter.

The decrease in volumes during the quarter was primarily due to management of our operating times of the Spanish plans, even the energy costs. Furthermore.

Our previously stated plans to restart more right now.

Also delayed with production commencing only in July.

Despite these challenges EBITDA from this business was up over 50% contributing to a $15 seven maintenance in Q2.

<unk> in the first quarter.

Kris and pricing more than offset the cost pressure from an SG&A or cost.

The spread remains above historical high.

I would now like to turn the call to vantage to review the financial results in more detail.

Yeah.

Thank you Michael.

Beginning with slide 11, I will touch on a few specific line items on our income statement.

Sales of $418 million barrel kicker when 58% higher competency of 161 million Donuts.

In the prior quarter.

Recently in face was driven by an 11% increase in average realized prices and two 8% increase equipment across our portfolio during.

During the quarter, our gross margin improved to 36% op profit.

31% the prior quarter. This is due to top line growth as well as continued cost efficiency efforts.

The increase in other operating income by approximately $35 million.

Due to the accounting treatment relating to this here to unleash our drugs.

Since our current view of the 2021 SEC allocated a lot of theaters I take it up.

Partially offset in other operating expenses.

Total in a minimal impact on our P&L.

With regards to the staff cost Q2 marks a return to more normalized levels.

We had several one off provisions related to the mis took getting geared up.

Operating expenses for timing Rocky point $2 million was higher than the previous quarter revenue because of the recognition of the 2020 once here too right.

Increase in activity that reclassification to confirm group presentation.

We have reported equity out of the $1.1 million Donuts are key to a significant improvement versus the negative $18.9 million Donuts in Q1.

What's accounting for the one time cost related to the implementation of these statistics the desktop Nvidia was positive $34.1 million or less.

And lastly, it is worth reiterating our return to positive net profit.

Your point $7 million during the quarter.

Most likely.

Quarter over quarter greatly itself of 555% increase in Alberta gas facility.

From $22.1 million domestic tier one to $34.1 million go lives in Q2.

The improvement in our average realized selling price had the fill.

Doctor feedback contributing $36.4 million or less.

Additionally, some demand this working interest volumes, which contribute an additional $2 million.

Partially offsetting these factors likely adverse impact of course.

7.2 weekends on us.

Luckily half of this impact is attributable to the higher energy rates for the screen, which impact the quarter by $14 million.

Additionally, with Apple bucket.

Wrote monthly on inflation inflation also looking for it's the biggest contributors and manganese.

Sure and Coke Eurosport.

And knowing which accounts for $7.1 million as well as lower fixed cost absorption in France.

The impact the results by $1.6 million Donuts.

Those are the things we also have a different mix of products silica fume and buy pellets.

The net decrease of approximately $2 million when compared to the previous quarter and the impact of an accrual of pace, which adversely impact the quarter by approximately $1 million.

Slide 15 please.

Turning now to slide 15, I will review our balance sheet in greater detail at.

At the end of the quarter, our cash and restricted cash balance was $106 million.

Up from $84 million in Q1.

Total available cash increased from $78 million in Q1 to $100 million circle.

Total assets were approximately $1.4 billion at the end of Q2, an increase of $107 million over the prior balance I did it.

Due to the allowance of <unk>, two five and the capitalization of deferred financing piece.

Because of course.

464 million on that.

From $418 million.

During the quarter, we raised $40 million of debt.

60 million.

Super Senior secured financing. Additionally, we had the impact of the Internet sucker Rod under GAAP.

The prior senior notes.

Please note that the additional financing which closed in July.

Not reflected in this Q2 balances.

Net debt increased to 658 million upfront $334 million or tier one.

Despite an increase in our own overall activity.

Working capital remained flat quarter over court.

Overall, we continue to monitor our working capital as part of the bill that aesthetic that with having two deals you're tracking towards funding battery. So problematic scripts with the goal of optimizing this level.

Through the cycle.

But we are defining key metrics key metrics related to working capital on the basis of tracking it as a person that's what I'm, saying.

Next slide please.

During the second quarter without a significant increase in our operating cash flow Richard.

From $80 million in Q1 to $47.8 million.

Unlike the prior year quarter the increase in operating cash flow is primarily treated I think children and reported record deal while the cash impact from working capital pretty low relatively flat.

Cash flow from investing activities was negative $46.5 million is primarily attributable to the C O two.

And finally cash from financing activities contributed $27 million, while we raised 40 billion there was $11 million in debt issuance cost and $2 million ascribed for the income statement relating to the Rangers loan.

Overall this quarter.

What's the return.

Thus it is cash flow.

Put the $1.6 million.

Next slide.

On July 30th.

The occurrence of the transaction effective date under the Lockup agreement dated March 37, which marks the completion of the financing cost as part of the transaction 98, 588% of the Plier line, Nancy 8% senior notes funded exposure.

Into the new mine lets say eight senior secured notes.

Push out the maturity from 2015 to 2035.

Mitigating the risk of revenue that TD out near term maturities.

So if we did not take 100% participation.

It's a smallest up amount of approximately $5 million of the notes, which originally to be repaid in late 2052. Additionally.

Additionally, we've received 40 million donuts in aggregate proceeds from the issuance of ordinary shares following the equity issue.

Our share count is now approximately 187 million shares.

Finally, we close upfront the remaining $20 million of the $60 million of Nu.

The senior notes.

At all.

We feel this is a good outcome for the company.

Ongoing support by existing investors as well as Lou is ourselves certainly reinforces the broader coffee and tea now what's happening is on plan and execution.

With the new financing now in place we have the resources to complete a few critical initiatives.

The plan as well as maintain flexibility to fund our operations. Once again, we thank all the parties involved for their hard work and contribution.

What was a complex transaction.

This time I would like to turn the call back over to Michael who will provide an update on the strategic plan.

Thank you Bethany now turning to slide 17.

In terms of our strategic plan and we remain on track to meeting our financial targets set this year.

Underlying the various video creation areas are over 450 individual initiatives.

As you can appreciate there was a project of this size there are areas, where we are surpassing our targets for the first half of the year and the other areas that are like.

Overall on the beta side, we have captured a 16 point for a major benefit for the specific initiatives, representing 30% of our $55 million target savings for the year.

As well as 99% of our $49 million working capital target.

On the cost saving.

Time, it is worth reiterating that the savings are not expected to phasing linearly throughout the year.

In other words, the 30% of the target we have captured for the first half is right in line with our expectations as the benefit of many of some larger initiatives is weighted toward the back half of the year.

In terms of some noteworthy milestones for the quarter, let's start with footprint optimization.

In Spain. The consultation period has successfully concluded with the agreement with the legal representation of the workers and communication around the collective dismissal with a label out Dorothy.

At this stage all employees gives me sort of letters that have been issued and most of the employees affected they've already left the company.

In France, the process is longer and we continue to have constructive discussions with the workers Council.

We are confident that we can conclude the negotiation process in Q4.

On the centralized purchasing.

We continue to find opportunities as the company adopt to the new way of operating.

We will start it out as a focus primarily on consumables is also expanding in scope to include the potential purchasing of raw materials and evaluation of energy contracts in a more efficient manner than our historical practice.

Overall, we saw some positive results from new tenders allowance during the quarter and conducted new product specific studies, which gave us confidence that we will continue to drive cost savings in this area well beyond our initial estimates.

Commercial excellence, there's also been a strong contributor this year in copper.

The nation of improved market analytics customer relationship building improved customer service and more disciplined decision, making are all translating into strong contribution in this area.

The strongest validation of the changes we are driving in this area as the positive feedback from customers, who are actively engaging with us.

Two strategic collaborations.

As we go back to basics and continue to develop best practices, we will not only see a noticeable impact on the topline, but tremendous improvement in our ability to make operational decisions optimization of our supply chain and working capital.

On the other side, we faced some delays in monetizing new operational excellence initiatives given fewer operational disruptions at specific facilities. For example at our Bridgeport facility in the U S. We had the electrode issues, which resulted in a.

Ration in our technical performance during the quarter.

Since the key technical metrics plan is tied directly to the operations any disruption that the facility has been up.

We're seeing both on the technical performance and cost savings captured from this work stream.

In fact, the way we measure of success is cumulative.

So some savings captured in Q1 were reversed in Q2.

At the moment, our plan is to fully or initiate the deep technical methods program in Q3.

And lastly on working capital the tremendous effort on establishing metrics and processes to manage our inventories coupled with strong market demand for the first half of the year results in nearly $49 million of improvement on the rolling 12 months basis on top of our growth for the year.

In general we track working capital as a percentage of sales.

Lucky me improvement as the business ramps up.

Overall, we are pleased with the transformation of the company. However, the financial results only tell a portion of the story.

We have discussed the need to drive our new culture centered on one for Mike.

Mindset to driving excellence in all areas of the company.

Certainly it doesn't happen overnight.

The progress, we're making each day to drive change throughout the organization.

I remain confident in our team's ability to deliver on the various targets. We have set for the year and look forward to updating you on our journey for this forum and others. At this time I will ask the operator to please open the line for questions.

Okay.

As a reminder to ask a question you will need to press star one.

On your telephone to withdraw your question press the pound key again, if you would like to ask a question press. The Star then the one key on your Touchtone telephone. Please standby, while we compile the Q&A roster.

And our first question comes with Patrick Checkup with.

<unk> capital your line is open.

Thank you.

In the second quarter, how much were the one time C O two costs embedded in adjusted EBITDA related to the repurchase of the 2020 credits you previously sold.

And given you've completed the repurchase of the C. O. Two credits going forward should we expect net C O two cost to be roughly zero impact to your adjusted EBITDA.

Thank you Patrick.

As we have been discussing.

The accounting impact on our financial statements over the past few quarters as reflect the unique situations relating to our prior C. Upgraded in 2020 and then the subsequent to that per case of those credits. So I certainly appreciate your question to clarify this spring.

First of all let me begin.

By highlighting that our quarterly results during the first copper.

2021.

Been adversely impacted by these separate cases and the P&L results I certainly diluted due to these one off charges.

With that now behind us.

Your first question very specifically in Q2 without the 8 million charge relating to the mark to market impact.

Year to year knee, which we thought that CRU four in tier one.

So the mark to market and that is due to the fact that the market cost of the corresponding journey.

Great for the end of Q1 to the time of Aspen protesting too.

It was a car without the civil laptops.

$8.8 million.

Or what.

With regard to the second part of your question what would be the cost in our P&L going forward.

I think we will look at.

We will not comparable a mark to market expenses relating to this year or two going for western Musica.

Or the theater reputations are completed in circle, yeah, so that they bring them in line.

Let me just highlight a couple of other points on theater, maybe although I already answered a year or two points is.

Is that the older P. M N. There was a catch up impact of 41 million during Q2.

That's really pertains the remaining balance of the of the lights right.

So.

Hopefully this answer your question I can elaborate board or Seattle, but I think Gaye I replied to the breakthrough to your two comments Patrick great and so to follow up then so to normalize your second quarter operating performance, we should add back the one time C O two cost of $8 million and France.

Idle costs of $1.6 million correct.

Right, that's the right way and that's the right way to read it.

Got it.

And then could you give any more color on just the silicon metal market dynamics, and maybe pricing outlook into the second half and into next year.

Yes, Patrick this is Marco speaking.

I'll address this question.

Hum.

The silicon market is being.

Booming in terms of demand since quarter four last year.

Demand has been.

Robust all D C here and we see it in this way also for for next year.

And combined with strong demand pricing.

It's been extremely robust if you'll.

You'll go back to my comments on the index pricing.

Index pricing showed that pricing is very solid.

And is further developing as we speak.

The.

The point on for US is that right.

Last year, having about 70% of our business on fixed yearly pricing comment, though we had the benefit because.

Prices really went to record low levels below let's say 50 number of euros per metric ton in Europe, while we had prices close to 2000 this year.

We have the opposite effect on these large portion of our silicon metal as we have about.

25% of our volumes, which is between spot and index and this part of the business keeps on.

Proving during the year in line with the index.

Okay.

Okay, great. Thanks.

Maybe an additional comment is that.

You know last year, we had the benefit this year were penalized on fixed pricing next year will it be rewarded because the current price level is a much more attractive than the current contract price.

Thank you and our next question comes from John Rolfe with Crescent Rock capital. Your line is open.

Yes, my questions actually already been answered thank you.

Our next question comes from John Secrets with clear Skies. Your line is open.

Yes, Hi, guys look theres been a lot of discussion about the sourcing of silicon metal in particular, the U S is banned imports from whole shine.

Most of the major polysilicon producers soccer and everyone. All are buying from Osha and so have you started to see much more interest in procuring silicon metal from yourselves, so that they can meet there.

Requirements to be able to bring solar into the United States.

Well at the moment, we're talking about only works about debt.

We don't have a.

Hum.

Official volume a request but.

There are strong indications that demand anyways.

We'd be operating next year due to due to solar due to solar demand.

We are.

Being one of the leaders in the Western World. We're in contact with all the customers that you have mentioned.

And I want to underline that.

One key request or the main customer sees secure volume.

Hum.

Foreseeable future even on the long term.

<unk> in particular.

In the U S.

Thank you. Our next question comes from Brian <unk>.

The Ruby <unk> with Baird. Your line is open.

Good morning, Mark Oakmont Beatrice.

A few questions for you could you just remind us what your capex spend is going to be for 2021.

What are you still thinking for 2022.

Yeah, our Capex plan planned Capex spending for this series 40 millions.

And we are.

Are now running the budgeting exercise for 2022.

We declared in the past.

We are aiming in combination with improvement of theirs.

Company.

To get to.

To a level of $75 million per year.

Okay.

And then as it relates to silicon metal.

You mentioned, having fixed prices that helped you in 2020.

Hurting you in 2021 do you foresee your customers maybe looking at the index more going into 2022, given some of the volatility we've been seeing in raw material prices.

Well, we have started negotiations already for 2022.

I want to emphasize that the focus is more on security of supply.

And we are under with some customers who you are right we are evaluating different kind of price mechanisms.

We have maybe part of the volume on fixed and backed out the volume on that.

On the index.

And none of these new deals being closed.

Okay.

Okay, that's great.

How.

I'm trying to get a sense and I didn't know you don't want to negotiate or show your hand on pricing.

Can you give us any sense of what percentage.

Your war materials or your products represent.

As a percentage is that your customers' prices or is that a fair way to think about it.

And if you look at steel aluminum costs, you know prices those have gone up pretty sharply this year.

Do you generally see you know silicon metals sort of matching those price increases they're seeing in their products or do you see getting a little bit better pricing or a little bit worse versus what their end products have done can you help us with that correlation.

Wow.

We haven't made this.

This correlation.

But when you look at that.

How our downstream businesses.

All of them.

<unk>.

Improved in terms of results when you look at it.

The big.

Okay makeup players so with their silicon business or all the steel industry all of them have improve significantly their itself during the year.

Pricing has been very very robust.

Okay. That's helpful.

And I missed this when you were speaking about it before but could you just.

Repeat what the impact from the shipping delays you had on the manganese based alloys, how much that was in terms of volumes and possibly EBITDA.

Why into in terms of volumes, so we reported.

Let me go to the slide so that.

I don't give you.

The wrong number.

Manganese based alloys.

Our volumes were down five 9% versus the previous quarter.

This has been a combined effect of Natera restarting production, even more on that in the second quarter in Norway.

And.

About managing our capacity in Spain.

Because of the.

Energy cost.

At the same time, we had some hiccups in the supply of manganese ore manganese ore.

As a consequence, our volumes, though pipe one 9%.

Okay.

And I guess final question for me.

If you're talking about.

You know potential new demand.

From the solar industry.

Can you give us any sense if that does come to fruition will that require the company to build new capacity either U S or in Europe.

Well the when I look at the current situation and the answer is yes, they still require new capacity.

I want to remind you that we have.

That's it.

The United States in Selma.

Alabama Mhm.

Uh-huh can't be respected.

We have even more capacity at that neither high dog food.

We're always talking about silicon metal in polokwane.

South Africa.

So in.

In case in case of.

Demand rises in new demand from solar comes particularly in the United States.

These aren't the auctions of course there are also we have some flexibility also related to the fact that.

Some of our furnaces can be converted from ferrosilicon to silicon or vice versa. So.

We have different <unk>.

Actions to address them.

Our chair this potential positive change in the month.

Great and just last question for me the interest with the small remaining piece of the old 93. Its notes are you just going to wait for them to mature and.

In March or are you does it just makes sense just to call them and get them off the balance sheet now.

What does it that's oh. Thank you. Thank you for the question.

Thanks for the time being is something that's under discussion so I will not be able to throw us into them.

Question one.

Industrial so I would say that at the latest would be invited to pocket that they do let me put it like this.

Very good thanks.

Thanks for the time.

Thank you. Thank you.

Our next question comes from Brian Charles with RW precedents. Your line is open.

Hello. Good morning, Thanks for taking my question and congratulations on the quarter I just have a couple of quick questions. One just saw him characterizing the silicon contrast, silicon metal contracts correctly. I think you said, 65% of them are under contract now or 65% of your volume is contracted.

Prices negotiated in 2020.

That will roll off by year end 2021 does that mean these contracts roll off at the end of 2021 or will there be rolling off gradually over the second half of the year.

Thanks for the question, Yeah, Yeah, probably I was not clear myself.

The we have 65%.

The silicon metal that we trade.

Under contract.

And in D. C is.

Basically at fixed price for the year so be it.

C a new price only join our reefers.

'twenty two.

On top of it to win when you evaluate our silicon metal business here to close.

Either the.

Also.

Our volume in joint venture.

He is a fixed price for the year.

Yeah.

Okay.

Okay.

We have about that like I say, 25% of the volume.

<unk>.

Is either one quarterly index.

Index or on a spot price and is 25%.

Keeps on moving up as we speak.

Okay. Good enough. Thanks, and then secondly, just sort of housekeeping I think and the cash flow summary, you had about $11 million of debt issuance costs and I think in one of your recent filings you estimated at around $30.38 million related cash and fees.

Associated with the debt extension and the capital raise am I correct and then in assuming about 27 million will be booked in the third quarter or am I missing something that might have been booked in the second quarter.

No.

Right. So we spent $11 million in there too.

Cool.

And the remaining.

Up to the $37.5 million and up here that we mentioned when they occur.

Casey, let me say that we as learning curve that is asymptomatic.

Copper visa costs.

Q1 2021.

And even if the loan pipeline.

Q4 2000.

Thank you.

Okay. Okay. Good enough alright, that's it for me. Thanks I appreciate it.

Thank you.

Yeah.

Our next question comes from Michael Lam with <unk>. Your line is open.

Yes.

I wanted to go back to the car T question because in the press release, you say that whereas it quote unquote it'll roll off in the back half of the year.

Does that doesn't that read that some contracts roll off before year end, because I'm just trying to read what was meant by.

Roll rolling off during the back half of the year in terms of contracts.

It is related to the fact that.

Maybe we have not been clear enough on this youre right, but.

It does affect it.

When we contracted volumes.

2020.

Customer expectations in terms of demand where much.

Lower than what they are today.

As a consequence, we supply the contracted volumes would be agreed.

Right.

The addition of volumes comment at market.

Oh I see.

A lower percentage because the green bar volumes.

Yeah, Okay alright.

Very clear.

The second question is.

U S sales.

Charles Silicon prices.

Are now trading at or up to do what our recently that has been at a very high premium.

To Europe and into European prices. So a question I have is.

How much of it.

Did you also forward sale about 65% of sterile silicon as well as silicon metal and so it's under the same kind of price dynamics of this year.

And in terms of.

What I'm reading about critical shortages are actually outside of the U S.

How are you having any issues in terms of shifting more S. ESI from your other locations to us as their logistics issues are causing.

The price premium to be so high in <unk>.

To what extent can capitalize on that.

Okay, I want to make sure I captured.

All your question you want to know.

The Oh, we priced ferrosilicon and then supply.

<unk> demand in the U S. These are your question correct, Yeah, yeah exactly how much of your fair. So Congress is contracted and second question is given the price premiums how are you capitalizing on it.

Yeah, so for federal Silicon we have about.

50% of the volume we cheese.

Contracted.

Which is contracted on annual index, which means that we will.

We adjust the price.

Either quarterly or monthly.

And there is these are freely negotiated.

Okay.

Okay. So we have only.

Very small percentage about 5% of the total volumes that these on yearly price.

Okay.

In.

Talking about the U S.

Silicon, we we supply our ferrosilicon demand only from Bridgeport.

As far as I know since I've been in charge or we have not supply the U S from our plan.

In Europe, we signed with Citi.

Okay. Okay.

And if you mind me asking one more question for taking two questions. Please.

Is that Erika falls permanently closed tomorrow, there's no chance of.

We are reactivating given these high prices.

And the second question is more of a technical question there was more of a.

Engineering question, if you don't mind me asking but in metals Bolton I was reading about fairless.

<unk> silicon demand has been strong.

Because of increased use of steel scrap as a warming agent does that make any I don't understand what metals Bolton talking about there but.

Even though mining asking an engineering question as well thank you.

No we would try to answer the engineering question, but.

Oh, sorry, I was distracted by the engineering question. Your first question was.

Niagara Falls is it.

No.

Yeah, Yeah, it's a.

They're gonna falls it shut down.

Okay.

Forever.

Lantus inflation.

And shouldn't before inside of a mile Obama is a part of a plan that can be restarted.

Okay. Okay.

Do you want to take the engineering.

And just I haven't understood fully the question. So you okay.

Well, let me let me let me let me quote the line from metals Bolton metals bonuses sterile silicon is used as warming Egypt for skills scrap versus iron ore.

That's what the that's what they're saying and.

Saying that part of the reason why ferrous silicon demand has been stronger husband increased use of scrap steel.

And I don't understand why that would be if you. If you if I could ask an engineering question, but it seems very esoteric, but I just found it interesting because I read that.

It's because the silicon, which is presented as silicon metal in the ferrous silicon will get oxidized and free out some heat when when we're reacting with the with the steel.

So the dissolution of the silicon units.

Into the the steel free up.

Script energy in this deal and one 1 million.

So this is correct.

Okay. Okay. Thank you very much that's all the questions.

Okay.

Thank you and that's all the questions in the queue I'd like to turn it back to Marco Levi for closing comments.

Thank you.

That concludes our second quarter earnings call.

As I mentioned at the beginning of the Covid, we entered the year with a clear plan.

Financial Trendline, certainly I realize that things are moving in the right direction.

Despite the one time charges, which the store our first half results.

And normalization of our results along with our strong operating backdrop is expected to accelerate our performance in the back half of the year.

Furthermore.

We will continue to work with our customers to ensure strong partnerships and service for the remainder of the year, particularly as we get into the heart of the negotiation season.

We remain excited about the future and look forward to speaking with you soon thanks again for your participation and have a great day.