Q4 2021 Ferroglobe PLC Earnings Call
Good morning, ladies and gentlemen, and welcome to federal Globe fourth quarter and full year 2021 earnings call. At this time all participants are in listen only mode. Later, we'll conduct a question and answer session and instructions will be given at that time as a reminder, remind that this conference call maybe recorded.
I would now like to turn the call or about to go off Massa. So it'll go transformation director and vice.
Vice President of corporate strategy technology, and Investor Relations you may begin.
Good morning, everyone and thank you for joining <unk> fourth quarter and full year 2021 conference call.
US today are Mark <unk>, our Chief Executive Officer, Beatrice Garcia Coast, our Chief Financial Officer, and Venmo, Olivier <unk>, our Chief operating officer and Deputy CEO .
Before we get started with some prepared remarks I'm going to read a brief statement. Please turn to slide two at this time stated.
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 those forward looking statements can be found in <unk>. Most recent SEC filings and the exhibits to those filings which are available on our webpage www dot com.
In addition, the discussion today includes references to EBITDA adjusted EBITDA adjusted gross debt net debt adjusted earnings diluted earnings per share, which are all non <unk> measures reconciliations of these non <unk> measures maybe found in our most recent SEC filings.
Slide please.
On today's call. We will first review the business highlights for the fourth quarter and full year. We will then also give you a perspective on our operating environment and provide an update on the status of our transformation plan Danville provide you an update on our financial performance and key drivers behind our results and finally, we're going to provide a trading update therefore open to.
Our lineup for some Q&A at this time I would like to turn the call over to Marco Levi our CEO .
Thank you, Rob and good morning, good afternoon, everyone.
I am really excited to present, our quarterly results, which demonstrate the acceleration in earnings potential that we have been anticipating.
And which capsule and important year for favorable.
Overall, yes.
So a variation in our performance in Q4 is supported by strong fundamentals across all three product categories.
Which would further fuel performance in 2022, Moreover, the tightness in the marketplace, resulting from robust demand copper.
With flat to declining supply as a resolve that in there.
Unprecedented increase in the index pricing for our products, primarily silicon and ferrosilicon.
During the quarter and the full year, we realized only a partial benefit from this run up in prices.
Equally in silicon metal due to the fixed price nature of most of these contracts.
However, with the adult contracts expiring at the end of 2021, we will have increased exposure towards index based contract, resulting in higher pricing driving an increase in margins and revenues.
In our silicon based alloys portfolio, we realize the benefits much quicker given the nature of these contracts and shorter legs.
And in manganese alloys. This friend is holding at very healthy levels, we support from the steel industry, which is still recovering to pre COVID-19 levels of production.
While the broader market provides an exciting back though we remain focused on the areas which are in our control.
This is primarily related to our value creation areas identified as part of our turnaround plan 2021 markets.
The first year of the execution phase of the plan.
We have surpassed our targets and have a great deal of momentum continuing into 2022.
In aggregate 2021 marked an important year for Fayetteville, we serve a critical accomplishment.
We refinanced our debt and they're used our balance sheet by extending maturities.
We successfully raised capital to navigate a turbulent time and to fund our turnaround plan.
Vision, we started addressing gaps in the business improved processes and drove cost reductions.
All of this was done with the goal of making the company more competitive with stronger results through the cycle.
During the quarter.
Our realized average selling prices were 19% a year.
Our core product categories, where the more our shipments increased 14% to just over 220000 tones across our three core product categories.
This resulted in top line growth of 33% to $570 million, which is our highest quarterly sales since 2019.
And we also had a record setting adjusted EBITDA of $92 $8 million, which is a 147% increase relative to quarter three.
Despite continued higher energy.
Energy costs in Spain, and inflationary impact on key raw materials, we improved the EBITDA margin from eight 8% in Q3 to 16, 3% in quarter four.
This was driven by a combination of topline growth coupled with improved utilization of our asset base.
Location of orders to optimize economics stronger operational performance at the fitness level.
And continued cost cutting efforts.
And finally, we returned to positive free cash flow during the quarter generating $40 million.
For the full year, our sales were just under $1 8 billion.
We've adjusted EBITDA $187 million.
While full year 2021 financials show a significant improvement over the prior year.
We expect to see continued acceleration and our contacts every set at the beginning of the year.
Lapping the benefit of higher pricing.
And Furthermore, we had a number of one off nonrecurring expenses, which had a considerable adverse impact on our cash.
With these factors behind US we look forward to building on the momentum from Q4.
Step by step we continue to strengthen the company at the core and improve our overall competitiveness to best service our customers.
The value of our unique product portfolio and platform is particularly exciting against the backdrop of emerging trends such as that focus on shorter supply chains and customer behaviors influenced by E. S. N G.
We are entering 2022, we have a strong order book and turnaround plan that is expected to drive further efficiency and cost improvements and an integrated approach to operate the business.
Overall, we are confident that Ferro globe is well positioned to drive accelerated growth and improved margins in 2022.
Moving ahead to slide six please.
Yeah.
During the quarter index price for silicon metal in the United States and Europe exhibited significant increases.
We've referenced prices in U S increasing by approximately 160% ending the year just above $10000 per store.
In Europe pricing peaked at 8100 euro intra quarter and ended the year close to 6100 yards.
Presenting at 53% increase over the quarter.
A combination of continued end market strength, particularly in chemicals, coupled with expectations of meaningful capacity curtailments in China. During the final months of the year served.
As a catalyst for the pricing tension.
Beyond the Capex there are other factors, such as financial and environmental reforms in.
Increasing raw material in adjuvant and as it goes.
Logistical issues and I am labor costs, which are feeding into higher production costs for Chinese silicone.
As the floor price within China increases it will have a position effect a positive effect on European and U S indexes.
Federal gloves realized average selling price for silicon metal increased by 19%.
$2944 per metric ton.
Excluding the volumes sold to the joint venture the average realized prices improved by 23% during the quarter.
To reiterate our weighting toward fixed price contracts limited the upside throughout 2021.
Although shipment volumes increased by 3% to approximately $63700 shipments during the quarter were constrained due to some operational issues and temporary production loss such as our Beverly, Ohio facility, where there was a crane collapse.
<unk> production of two furnaces for a few weeks.
As well as further curtailments in Spain, two otherwise rising energy costs.
At the end of November we announced the temporary idling of one furnace at our Savannah facility, which has a capacity of approximately 13500 milestone.
EBITDA from the silicon metal business improved over 200% to $32 5 million.
The ability to sell greater volumes at market prices and the greatest impact in the quarter over quarter improvement.
The total cost impact was negative $9 1 million during the quarter.
Increases in energy costs, and an adverse net impact of $9 9 million on the silicon business in Spain alone the impact was negative $7 7 million.
We have provided additional details around the cost drivers both positive and negative in our press release and presentation slides for everyone's reference.
Looking ahead in 2022, there is a lot to be excited about.
We recently restarted one of the two furnaces at our Selma facility in Alabama.
And then the temporary idled capacity in Spain, which can be restarted that rather quickly.
With strong end market support we believe prices will remain at a healthy level during 2022.
We see the chemical side of the business. So remaining strong as end markets, such as consumer goods and medical applications continue to drive demand.
There have been some signs of caution in the aluminum sector as a result of increasing operating costs due to energy pricing in Europe .
More.
The auto end market continues to be impacted by lingering shortage of semiconductor chips.
Which in turn impacts the demand for silicon containing aluminium alloys. This may reverse in the second half of the year.
And finally, we continue to see increasing signs of recovery in the select sector, which offers an attractive market for stronger growth specifically with the renewed focus on energy generation in the west.
At the moment.
<unk>, 70% of our forecasted non JV volumes have been contracted.
Of this portion approximately 85% of the volumes is subject to index based pricing.
The remaining 15% of the committed business is that fixed pricing.
Beyond the contracted volumes there is approximately 15% of our overall volumes, where we have commitments, but the pricing has not been set on all these volumes.
And finally, the remaining 15% is spot business.
As a reminder, our joint venture volumes are priced using a cost plus formula.
Overall customer seems to have procured their material needs for the better part of the first half of 2022.
We will soon enter into discussions for Q3 deliveries for the freely negotiated as part of our book.
Also worth noting is that we have entered into key multi year contracts, which provides the company protection and flexibility in the future.
Overall, we view this to be a very important favorable development for the company.
Turning to silicon based alloys.
<unk> seven.
The index price of a silo silicon at the strong run in Q4 as the market remains very tight driven by continued steel production recover in Europe , and North America, and low inventory levels throughout the value chain.
In the United States Index pricing for 75% silicone contained ferrosilicon increased approximately 60% while the price in Europe increased approximately 40%.
During the quarter the average selling price of our silicon based alloys portfolio, which consists of ferrous silicon foundry products and calcium silicon increased by 39% to $2770 per tonne.
On a relative basis, they'll realise increase for ferrosilicon was even out here. This is partially a 31st of all we're waiting of our higher margin specialty grades as well as a portion of our cortex being reset with one month lag.
During the quarter sales volumes increased by 8% sales volumes of Silicon based alloys were 61000 metric tons in Q4 about 4200 dose higher than the prior quarter.
We saw steady demand from our customers in the U S and Europe . Furthermore, our primary sales also improved slightly on the back of gradual recovery across the global automotive end market.
Our silicon based alloys business saw a significant jump in EBITDA during the quarter.
Those are typically impacted by prices and to a lesser extent volumes. Some details underlining the negative $2 five millions of net impact can be found in our release and accompanying slides.
When we discuss silicon based alloys from the perspective of expected volumes.
'twenty two.
Approximately 65% is ascribed to federal CD cost, 30% to fund the 5% to calcium silicon.
<unk> silicon.
<unk> monthly, 65% of our expected volumes for 2022.
Right now contracted.
Approximately 90% of these volumes are subject to index prices.
The remaining 10% at fixed prices.
The total expected volumes approximately 25% is being committed and the remaining 10% is subject to spot sales.
Once again with the visibility. We currently have we feel good about volumes and pricing through the first half of the year.
Next slide please.
Turning now to manganese based alloys.
During the quarter, the average selling price increased by 9% on a blended basis to $1720 per ton.
From $1574 per metric ton in the third quarter 2021.
The final manganese business.
6% increase in realized prices.
<unk> realized.
<unk> realized silicon manganese pricing was 13%.
Shipments during the fourth quarter were up 27% an increase of approximately 20500 tonnes over the prior year quarter.
Of the 97000 tons sold was an even split between ferro manganese and silica manganese as.
Do you recall the company was building inventory of manganese alloys in Q3 in anticipation for these demand pick up.
Steel producers delayed some shipments during the summer months.
During the quarter, we temporarily curtailed SaaS capacity in Spain, due to the high energy cost and reallocated those sales to our facilities in Norway and France.
The EBITDA contribution from our manganese based alloys segment was $28 6 million in Q4 versus positive $22 5 million in the third quarter.
Volumes and pricing positively impacted the quarterly results by $6 5 million and $12 7 million respectively.
On the cost side, there was an adverse net impact for the quarter of 30 meters although.
The manganese portfolio continues to benefit from favorable spreads and we expect this continue into the first half of 2020.
Approximately 60% of our expected 2022 volumes are contracted.
Next slide please.
The turnaround plan.
Has been a critical driver to our success in 2021.
It was the cornerstone of the refinancing process, we underwent in 2021 Mandy as engaged various stakeholders confidence in our ability to turn around the company.
Furthermore, the plan was designed to generate the cost savings, which gave us the means to navigate a difficult stretch and the financial targets are sized to there is this company through the cycle.
Our target for the first year of the execution of the plan was 55 millions of EMEA contribution from cost savings and commercial excellence and $49 million of working capital benefit.
We ended 2021, capturing $58 million EBITDA benefited from cost savings.
Commercial access and $70 million, so working capital improvement significantly outperforming our targets.
On a go forward basis, we look to build on this momentum and we'll continue to feed the pipeline with new initiatives.
Our goal is to have a run rate of $140 million by the end of 2022.
I'm really proud of our organization to drive change at all levels in reaching these targets.
We are knocking down walls and rebuilding the business from the ground up to the aim of optimizing to maximizing the platform.
There is a lot of work left to be done, but our first year results certainly motivates us to keep going.
I would now like to turn the call over to Beth <unk>, Our Chief Financial Officer to review the financial results in more detail.
Thank you Michael.
I will begin by reviewing make a mistake my name is slide 11.
K of approximately $70 million.
During Q4, when testing, 3% higher than the $479 million.
Underpinning requirement.
We ended 2021 with sales of approximately $1 8 billion.
Up 55% over the prior year.
Improvement in our top line was the result of finding peace tea, both our shipments and average realized price across the portfolio during.
During the quarter, our cost of sales as a person that's a C plus 65% down from 69%.
They pay us less and the lingering impact of higher energy costs, particularly in the spring and inflationary headwinds in our roadmap.
Would offset by a combination of top line growth.
And our cost cutting efforts at the facility and corporate levels for the full year.
Got that cost of say a sufficient that's what I'm, saying.
67%.
Fee income increased by 25, 36% during the quarter via.
The approximately $8 million increase in activities that people with them.
One for Mark to market assessment of the fair value of our <unk>.
The hand, offsetting VP of approximately $8 million.
I don't think the expense line.
Made it that way so the mark to market adjustment to the CEO to Kuwait.
Staff costs increased by 43% in Q4, please keep in mind that in Q T with a partial release of the accrual related to ongoing asset just took thing in Europe .
Q4 figure reflects the cooler and assessments of the bonus and then the long term incentive plan.
Operating profit in Q4 was 64 $64 $9 million.
446% from the 11.2 million Donuts realizing Casey.
In full year 2021, our operating profit was $44 million compared to an operating loss of $184 4 million, though less than the full year 2020.
The net financial expenses was $12 $4 million during the fourth quarter reverting back to more normalized levels. When you come to a quite bit of look what to keep in mind that the Q3 expense had the accounting impact of the equity financing, which yield a significantly higher number.
The net profit positive.
Positive $65 1 million in Q4 compare flooded loss of $97 $6 million on efficacy for the full year, we had a net loss of $103 million, which compares to a net loss of.
$250 million in 2019.
It makes it slightly.
Quarter over quarter, we've had a significant increase of 147% in our adjusted EBITDA.
$292 $8 million, yeah, definitely <unk> nearly doubling to 60%.
As Mark will discuss hand, it will have a positive contributions from both.
And realized pricing, which combined contribute 97 $7 million.
<unk> site entity and that has an adverse impact of $26 million the impact of <unk> stand alone was $25 9 million in Q4, partially offset by improvements in North America.
Hey, guys.
That's up to you to a cooler weather and all that $5 $5 million, the silicon metal and manganese loans, having an adverse impact which is partially offset by a positive impact from silicon based alloys.
Did it have any place handheld Buckingham had an impact of four for $4 1 million.
The unknown that council.
Pension planting Sun has had a positive contribution of $3 9 million.
Staff costs.
That was copper itself. He says increase by $10 5 million, though that approximately eight millions of these is that people that want to the staff cost increase.
Right.
On the cellular side sorry.
Additionally, approximately 2 million of I'll call. It for all these related costs.
Next is likely.
It's like the theme.
For the full year adjusted EBITDA improved from $72 $5 in 2020 to $186 6 million in 2021.
The most significant factor that it seems that the swing was 28, 8% increase in avid ascending flight of Kratos core presence.
What especially in fact like how you ended your pace of one type of $11 $2 million.
$96 million of which Ah Besides two inch screen. Additionally, higher prices in fact by $56 $8 million.
ISC East coast, embodied and logistics, which had an adverse impact of $19 9 million.
Higher costs due to increased production of light products and out of respect by the yen, resulting in a cost of $15.
We have an extremely focused on our corporate expenses.
Pushing on both discretionary and non discretionary spend approximately $8 million of the.
Besides to bonus accruals and implement then two medium six related to discourse.
In 2020, with a number of nonrecurring items, including debt leaves me, obviously with alcohol and provisions.
That's a year over year adjusted EPS by $21 million.
Next slide please.
Turning now on Slide 14, I will review our balance sheet in greater detail.
Total cash increased by approximately $21 million to $117 million as of December 31st 2021, our unrestricted cash balance was approximately 114.
Julien.
Some $89 million in the prior question.
With approximately $1 five millions.
Did it in 2021, which was $105 million higher value equipment, mainly because of our quarterly something.
Adjusted gross debt increased by genetics, we say year end balance of approximately $508 million, while our net debt decreased to $391 million.
Please note that these figures have yet in balance and do not include the recently announced this won't be known in the space.
Why our relative leverage ratios continue to improve we are focused on delivering I think deleveraging the balance sheet.
Generation from diseases speaking subsidiary.
Working capital increased by approximately $69 million.
The fourth quarter. This is primarily attributable to an increase in accounts receivables in line with our top line growth next is likely.
Why we have to provide on the quarterly detail for 2021 on this line and be firstly, Thank you Anthony.
So the Q4 2017 once again.
Our cash flow from operating activity returned to positive territory.
<unk> $71 $7 million.
So as the quarter, despite an increase in working capital cash flow from investing activities less negative $7 5 million Donuts, which is attributable to a planned increase in capex in Spain.
And lastly, cash flow from financing activities was positive $7 $4 million for the quarter. The increase in overall activity enabled us to send more invoices into the accounts receivable factoring facility in Europe free cash flow for the quarter was $14 $2 million.
For the full year 2021, our cash from operations was negative $1 $2 million, primarily due to the investment in working capital of $171 million.
The negative 74 million of cash flow from investing activities.
Capital expenditures incurred in our plants and finally cash flow from financing activities was $10 $5 million for the year.
The comprehensive financing completed in 2071 with cash and fled Netflix on the interest cost and fees associated with it and equity financing.
Free cash flow for the year was negative $25 two millions are that makes it life.
On February 16, we announced that the Spanish fund for supporting the strategy Company has had.
$74 5 million U S.
None of these.
These loans are part of the safety fun intended to provide assistance in all financial companies.
Initially I think equally important sectors, we can explain in the wake of the funding. The loans are funded using advanced tranches chips are not expected to be funded around the end of Q1.
17 $75 million at my views in 72075.
17 point to twenty-five matures in June 2035.
16.9 million unit or something known Covid FX interest rate of two 2% per annum.
On the remaining $17 6 million units is calculated as Ivo plus a spread of two 5%.
S T plus 5% in the second.
And third D S and 5% need before you definitely have beaten that 1% payable in the result before taxes or the benefit is positive.
At this time I'll turn the call I said that goes back to Michael.
You bet.
Referring now to the trading update on slide 18.
<unk> does not currently.
Currently provide quarterly or.
Guidance.
Nor does it plan on doing so in the future.
Given the unprecedented pricing environment, and particularly the reset of our silicon metal contracts there have been questions around the implication on our financials.
In order to provide some clarity given the unique circumstances, we want to take this opportunity to comment on a few dynamics. We are currently in countering and provide these one time flash number for January .
Our notice that adjusted EBITDA is estimated at approximately 74 million for the month of January 2022.
During January the top line benefits is largely attributable to the robust pricing environment across the product portfolio in Q4, which impacts all our index based contracts in Q1.
As a reminder, our index based silicon metal contracts salary set on a quarterly basis and are tied to the previous quarter's average index pricing.
For ferrosilicon, the lion's share of our analog ferrous silicon contracts.
Index base, while most of these are recalculated on a quarterly basis. Some every month lag.
And finally for our manganese alloys portfolio. The majority of business gets repriced on a quarterly basis.
Our top line, we will evolve with the market plus the American leg in our in this quarter.
And on the cost side, we continue to be challenged by higher energy costs and inflationary impact on select any boots.
Overall, we had margin expansion during the month of January .
Dave to Q4 levels.
Looking beyond January we continue to face pressures from manager and inflation.
Additionally, the nature of our business you know, Italy is poses us to new risks tied to geopolitical.
Battery and auto early events.
Deep heart breaking developments in Ukraine.
Over the past week.
Are being monitored very closely as Russia, Ukraine, and the broader region.
Important to this silicon alloys, and manganese alloys industry.
The country. It has already had an immediate impact in driving oil and global energy prices all year.
He says the important implications for our business and the continued exposure we have in Spain.
Beyond the energy.
There is a direct link to Russia, and Ukraine relating to specific inputs, we broke cure such as medical anthracite magnesium and electrodes.
Faro Global will continue to comply with all international sanctions against Russia, and Russia entities abroad.
<unk> ability to source materials from the region can have an impact on our ability to continue so that operations.
Russia and Ukraine.
<unk> several producers of our products and depend on the export market and so we are monitoring the implications on deliveries.
In the near term should be inherent obstacles posed by the COVID-19 the lead to difficulty by producers to meet their obligations.
Can expect some tightness in the market.
And lastly, we are monitoring the additional impact of this conflict upon the global supply chains, which were already under pressure.
Management continually tracks development in the nation calculated in Ukraine and is committed to actively managing our response to potential distributions to their business.
But can provide no assurance that the conflict in Ukraine or other ongoing headwinds will not have a material adverse impact on our business operations and financial results.
Broadly.
<unk> should also consider there is factors and other disclosures in our annual reports on form 20-F, and other filings with the U S Securities and Exchange Commission.
With that update I will turn the call over the operator and open the line for questions.
Thank you ladies and gentlemen, we will now begin the question and answer session.
If you wish to ask a question. Please press star and one on your telephone keypad and Mike for your name to be announced.
Once again, if you wish to ask a question Please press star and one.
The first question comes from the line of Martin and led from Seaport Research. Please ask your question.
Hi, good afternoon, everyone.
But in my opinion on this.
On the electricity cross costs across Europe can you provide an update regarding Spain.
And potential move to a longer term PPA agreement or do you feel that those prospects may be diminished given the ongoing conflict and maybe just a broader update across some of the other countries as well, France and Norway.
Yes.
Started providing some qualitative comments first.
Looking at Spain.
The cost of energy has been extremely volatile.
If you look at our.
The evolution.
In the market in the second half of last year with more from a from a level of 50 60 euros per megawatt touching their 400 euros per megawatt.
I got about the ballpark.
Danny you adjusted down due.
Due to the recent unfortunate.
Events.
The surprise bump up north of 340 euros four megabits.
In terms of market this has been.
We live in an extremely volatile market and we need to keep on addressing.
The issue on how to operate our plants.
Concerning ppas, we have been.
We have been active.
Looking at opportunities.
There are definitely.
Small opportunities available in 2022 for the second half, but they are small while there are broader opportunities.
For 2023.
So this is pretty much the situation looking at the other countries.
We are covered by contracts.
No.
For energy on all the other major geographies, where we operate.
Crowds of United States.
In South Africa. So this is why in my speech I am surprised that situation in France in Spain, sorry.
Okay. Thanks for that detail there.
Looking across silicon or silicon alloys and manganese.
There were some positive surprises in the fourth quarter volumes.
At least versus what I had modeled there, but taking into account you're all kind of regional capacity.
And 'twenty two how should we think about volumes across the business segments here.
Yeah, I think you should.
Well first of all the comment that I want to make is that in quarter four.
Excluding the incident in Beverly and the capacity.
Adjustments in Spain, our assets have been more reliable than in quarter three.
Overall looking at the volume projections for 2022.
Would be rather flat.
Because the value the various value centers.
The only exception is related to the additional volumes that we're going to produce in Selma, which are silicone related and.
Another observation that might be useful.
You'll notice the three my volumes versus the story of manganese alloys in quarter four at least.
<unk> been heavily impacted like I say it by more than 20000 tons of orders that that'd be shifted from quarter three to quarter four.
So the you can consider D D.
Quarterly quantities of manganese alloys, sorry volumes of manganese alloys around 75000 tonnes per quarter.
Thank you for that and more specifically maybe on silicon metal.
What's the puts and takes us some ramping capacity here.
And Soma and then the augmented capacity in Spain.
But on a forward basis that does that looks like something like 60 65000 per quarter as we move through 'twenty two.
Youre correct Youre right on this call.
Okay got it thank you for that.
Oh, one other one if I could given the situation in Ukraine, Russia can.
Can you talk a little bit more details about the puts and takes covering the upstream input supply some of the risks there.
Potential implications on the alloy prices I know you've covered some of this in the prepared remarks in early March.
Thanks for detail that you can provide is helpful. Thank you.
Yeah, well first of all.
Talking about the inputs.
Everybody knows that for us please.
Absolutely critical roles.
In the supply of gas to Europe . So.
And youre seeing the immediate reaction of the market.
The war.
Talking about the.
Talking about raw materials.
Russia is a big supplier to the industry.
Of electrodes.
Entre side.
Mexico.
And some.
Magnesium as well so some critical raw materials for four four other product portfolio for these products.
And so D D. B uncertainty is around the supply of these key raw materials.
Two hours to our industry.
In particular.
Uh huh.
Yes, they are.
Most of our plants in the United States.
Ron based on a cap on electrodes.
Imported from from Russia.
We have we have mitigation actions since day, one we everything to fight some mitigation initiatives.
As you know we are back integrated into we've.
Electrodes.
Produce in China.
So we are increasing our production of an internally in China.
To mitigate this.
Uh huh.
The specific issue of is it.
Gross.
Another plant, which is particularly Fox is on the short term is a content, France and moisture.
We are trying to address the issue of.
Of the electrodes bye.
Purchasing electrodes that funds and making all the possible creative solutions.
To get the materials that we have order it arriving on time in store.
Some of the other throats and moisture.
For all of the raw materials that I have mentioned before since day, one and before we have put in place mitigation plans to look at alternative supplies and also due to the improved cash situation of the company.
Dean.
Putting in place plans to buy.
Raw material volumes.
And deals.
Thanks for the detail there can you talk about.
Some of the working further downstream apparel silicon manganese alloys.
Some of those.
Regions there.
You know, Russia, Ukraine, I think theyre pretty dominant producers and.
In the region with ferrous silicon, maybe around 40, 50% of the regional capability manganese alloys in Ukraine, but I think it's over 40%.
Asia is also a key export of silicon into the U S market there.
How are you guys. When you weigh the puts and takes with the risks around the input materials and consumables.
But there.
Maybe some tightness I guess in the regional <unk> traded off selling prices for some of these alloys across two year segments right.
Yes.
Europe , so totally you're absolutely right.
Russia is a major producer of ferrosilicon.
Yes.
They produce also silicones well in Ukraine.
Two powerful center transaction O'farrell silicone then.
And manganese alloys.
Clearly like there is uncertainty.
The supply of raw materials.
And the growth.
By definition.
There is uncertainty on the overall supply, particularly out of Ukraine.
Of these products, but also out of Russia, depending on.
And what's going to happen.
With the with the overall banking system. So.
The situation is too fresh.
To make.
Okay.
Weighted assessment of the plus and minuses, but.
To cut it to the point.
Our impression is that how.
Sure.
We will have opportunities in the market.
Point is are we going to be able to to procure all the raw materials.
To be able to supply these quantities.
And let's not forget the evolution of the energy cost and what is going to be the sustainability of our end markets to absorb.
The cost of energy.
Yes.
Thanks for all your thoughts there on the incremental color congratulations on the record results in navigating the dynamic environment.
Thank you Martin.
Thank you Dear participants once again, if you wish to ask a question. Please press star and one on the telephone keypad.
The next question comes from the line of Phil Larson from Mill Street Capital. Please ask your question.
Hi, everyone. Congrats on a great quarter and appreciate all the color around kind of the the Russia, Ukraine situation I just had a quick question on the <unk>.
The new Spanish loan Thats $35 million can you share with us the planned use of proceeds for that.
Yeah.
Thank you for the question a J.
<unk> speaking.
So as I mentioned during the call in D. C. Some unknown that we get there from B is finding shake government from the fund that is finished goods at my niece, managing that is called HCP and <unk>.
It's still fun.
The company's for Spain, and <unk>, we expect to use the difference and it's been different in Spain.
To boost our operations team.
In the country.
Okay. I mean do you have any more detail you could share on that or using it to offset the energy costs or what specifically are you hoping to do with that money.
Well, yes of course as part of the end of the tunnel.
Tons that will be used to fund that one won't be capital Neekam in Spain.
That's not directly maybe make it to.
Yeah, if I can if I may say that.
Yes.
Okay. Thank you.
Youre welcome.
Thank you. The next question comes from the line of David Mcglade and from <unk> asset management. Please ask your question.
Okay. Thanks.
Nicole can I, just ask a little bit more on the Ukraine, Russia Amit.
You, obviously talked about how you're finding mitigates it buying raw materials bonds et cetera.
Should this attrition go on for a long time Java hanging your head is the highest long just to go on before it causes a real issue with lots of access to Russian supply of raw materials for your business on.
In terms of the mitigation plans that you've been placed so far have you got enough mitigate some place to be able to run the business as you would expect along the lines of the <unk>.
Business plan that you pay.
Recently.
Yeah, I mean the.
I ask a very difficult question.
Cause.
It's.
Nobody knows how this situation is going to involve hopefully I think everybody should go for it.
As quick as possible resolution of the current situation.
But but going a little bit.
Little bit more in detail.
Overall, we are talking about our sales.
No doubt right business in silicon metal.
Our ferrosilicon and manganese alloys.
These kind of.
All geographies, we have minor sales so foundry business only so on on the revenue side.
There is no.
Talking about raw materials that we buy from Russia.
We buy met Coke that TCE was mainly for the manganese production. So medco goes mainly to our facilities in Bangkok and more around that.
We buy FSA that society is used as well for the production of manganese for Monday nasal noise.
A large part of our Caribbean electrodes.
Comes from Russia, particularly like.
Like I mentioned before to supply the United States.
Magnesium when we buy approximately 25% of our needs from Russia.
We buy.
<unk> electrodes.
And some electrode paste.
As well.
Talking about the.
The assets there.
Favorable buses that are impacted by these sort of material.
When you talk about electrodes were talking mainly like I said the U S. So our plants in Illinois Beverly in Selma.
In France.
Mortgage shape when I talk about the manganese alloys Dunkirk is the main facility that could be impacted.
Micronesia, mainly the Iowa facility in Beverly.
Ohio.
The the.
The issue of La Cumbre the throat based.
It impacts.
Sport Bakken core and European plan.
So the Oh this is the situation now.
We have developed a contingency plan for each one.
All of these.
Plantains.
Trying to do.
The following things one.
Try to get.
The materials that we have order it as soon as possible with our plans to build some stock.
Second.
We have alternative suppliers. So we are of course.
Moving.
Volumes to alternative suppliers.
And these are the main two initiatives that we have all across.
All across these critical a critical raw material now.
Of course, we will.
Time in case the situation.
I've said for a long time, and we couldn't get supplied from.
From Russia.
Need to make sure that we are.
Implement as fast as possible our mitigating.
<unk> clients and we increase their supply from alternative geographies.
Thanks, that's useful.
It's from your alternative suppliers would you still be able to run the business.
Volume level that you run it in 2021.
Yes.
I do not have.
Our final assessment of the situation because.
This situation is somewhat 90 days old.
About but.
This is this is our objective.
No I'm sorry.
So tough situations, it's very difficult to parse of exactly how it might pan out and how long it might take unless you sold no. Thanks.
Just the only other.
I would ask you quickly on us.
Obviously, you've hodge.
Take some.
Credit cost C O two credit costs.
Hasn't been much you know do you have and I look for.
So on the business for the rest of this year.
Obviously this is based around a little bit but.
Yes.
Do you have a poor weather.
It can wait.
All of these type of topic.
Through the next year.
So you referred to a C O two credits.
My question is around that.
Yep.
Sure.
Sorry.
Yeah.
Okay.
So.
Sorry, I'm still two credits sorry.
Didn't.
Understood properly your question.
Just the outlook for the cost quite substantially for the business this year.
Yeah on potential pricing.
Exactly works.
In fact each segment.
We expect.
Two credits to all needs to cover more skewed to credits than last year.
This being said the.
Q2 value.
Is is also displaying a very very high.
Volatility is impacted also by the current run.
<unk> prices.
Yes.
Today to date is trading around 60 60 Aruba.
Oh, it's two to one.
One.
A few weeks ago.
Five.
Few months before we were 65, so there's a very very strong liquidity, which is which.
Make your question difficult to answer.
Yeah, no that makes sense.
It's a tricky environment.
To close.
Okay. Thanks, Thanks very much.
Thank you. Thank you.
No further questions I would like to hand, the conference over to your speaker.
For closing remarks. Please go ahead.
Thank you.
This concludes our fourth quarter and full year 2021 earnings call.
Wow.
Please come to our accomplishments and performance in 2021.
Given these companies coming from I recognize that there is tremendous more value to unlock.
We look to build on the current momentum and expect a significant improvement in the company's performance in 2022, as we continue to do it.
Our near term strategy and aim to create value for all our stakeholders.
Thanks again for your participation we look forward to hearing from you on the next call have a great day.
That does conclude our conference for today. Thank you for participating you may all disconnect have a nice day.
[music].
Yeah.
Yeah.
Yeah.
[music].
Yes.