Q3 2023 Ferroglobe PLC Earnings Call
[music].
Okay.
Good morning, ladies and gentlemen, and welcome to Faro Globe's third quarter Twenty-twenty suite 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 call over to Alex Hockman. Several clubs Vice President of Investor Relations you may begin.
Thanks.
Good morning, everyone and thank you for joining <unk> third quarter 2023 conference call.
And me today are Marco Levi, our Chief Executive Officer, and Beatrice cars to your cause our Chief Financial Officer.
Before we get started with some prepared remarks I'm going to read a brief statement. Please.
Please turn to slide number two at this time.
Statements made by management. During this conference call that are forward looking are based on current expectations factor.
Factors that could cause actual results to differ materially from these forward looking statements.
Tara Globe's most recent SEC filings.
And the exhibits to those filings which are available on our website at Marigold Dot com.
In addition, this discussion includes references to EBIT.
Adjusted EBIT.
Adjusted gross debt net debt.
Adjusted diluted earnings per share among other non <unk> measures reconciliation of non <unk> measures may be found in our most recent SEC filings.
At this time I would like to turn the call over to Michael Levy.
Our Chief Executive Officer.
Next slide please.
Thank you Alex and good morning, Good day, and good evening to everyone. Thanks for joining us on the call today.
Do you have any interest in travel.
John Charlie.
Almost four years ago.
We have focused on revamping it.
Operations.
And the cost structure.
Proving the balance sheet and positioning the company for growth.
During this time, we increased adjusted EBITDA of $33 million in 2000 $20 million to $860 million.
2022.
And we are on track to meet our 2020 guidance.
$17 million.
In a period of extremely weak demand.
Declining market pricing for five quarters.
Paul.
Precedented.
Macro uncertainty.
In addition, we have views.
The debt from $475 million.
At the end of 2000.
And later Paul Flanders.
Yes.
Significantly strengthening our balance sheet and approaching the target.
He indicated more than a year ago.
The dramatic improvement in performance.
Turns out of our.
Cost cutting efforts and various initiatives focused on improving efficiencies and driving sales productivity such as focusing on higher margin specialty products.
Luckily made us more competitive in the marketplace.
Yeah.
Although we continue emphasizing continuous improvement and further cost reductions.
The initial optimization phase of our plan is essentially complete.
And our leverage objective has been reached.
We are now focused on positioning the company to lead the silicon metal industry.
In addressing the solar.
Going back to any market.
We believe represents an enormous opportunity.
Okay.
Legislation in the U S and Europe.
Provided incentives to increase on shoring.
Which would further Brian if it's favorable.
<unk> strong presence in these regions and the worldwide production capabilities.
Same time.
Okay.
Maximize the value of our manganese.
Silicon base.
Yes.
On primary requirement to produce advanced silicon metal.
That gives me that support these end market applications. These access to high quality quarter.
20, <unk> access to reliable supply.
We recently completed the acquisition of high quality quartz mine located in South Carolina.
This quarter.
Supply will support our silicon metal production plants in the U S. As we position the company to benefit from the secular growth installer and EV batteries.
The South Carolina mine.
Production capacity of roughly 300000 tonnes.
We expect that is there.
Life of at least 10 years.
Our current courts, Miami la by a mile.
On a capacity of about.
200000 with approximately.
Yes.
Mine life remaining.
We expect it to be.
And the new mining in the second half of 2024.
Not only will this increase our south Carolina and some courts.
Our current needs.
But also for the coming years.
Demand in the U S is expected to grow significantly.
In fact, we believe that North America, we leveraged structuring on sharpie silicon metal in the next two to three years.
Our total investment is expected to be around $50 million, including $11 million for the property.
That's an additional $4 million.
Infrastructure, mainly rail access.
Processing facility.
Howard.
We anticipate the cost structures to be favorable approximately about 10, 15% lower than the current cost in our under Diamondback.
<unk> to our operations secures the long term competitiveness of our U S footprint.
One.
Key Differentiators is our backward integration.
Well, we have access to critical materials needed for the production of our folks.
In addition to.
I think what's mine just purchasing in South Carolina. We also have other mines that are supporting our production facilities around the world.
Ensuring that we have access to high quality parts in Europe.
Terrible quartz mining, Spain, which supplies primarily to Spain and trends.
We have rights to operate these mines in 2013.
And in South Africa, we have several airports mine supplying our operations there over in all our main supply over 70%.
Okay.
<unk> competitive advantage in managing our costs and assuring reliable about the ability of the scheme.
Having a stable supply of high quality parts is essentially not asking to solar.
And EV battery market, which we expect to be.
And if you kind of long term opportunity for the company.
In batteries.
<unk> provides significant advantages over.
In battery anodes.
Such as increasing battery capacity and reducing charging time.
As a percentage of silicon content in the next generation batteries continues to increase we expect to see myopic increase in demand for high quality CECO.
In line with our focus on solar and EV battery, we continue to actively develop.
Partnerships.
Our licensees.
To position the asset to maximize our participation in these growth opportunities.
These prospective partnerships high aligned with our strategic regions and seek to enhance our capabilities within our core.
He is expecting.
Our focus with these partnerships.
Barry.
Our position in developing high purity silicone Mcdonald's that is used in advanced battery markets include.
Including vertical integration and further advancing the technologies or using different technologies in our production processes that improve our de carbonization initiatives.
Our objective.
Securing these partnerships is to enhance our market leadership indicate you added silicone makeup.
One recent development toward paying attention to relates to China.
The largest classified test for tenet, which recently announced that its Claire bean exports of certain graphite materials used in batteries.
14, Gulfport pressure on graphite panel prices.
We believe these threats.
<unk> by China real accelerate the shift towards increased use of CD coming in Hollywood's, especially in light of.
So Peter yes.
Yes.
In solar.
We are positioning <unk> to be the leading provider of silicon using solar panels.
The worldwide effort to transition to getting the LNG.
We expect significant demand.
Solar for years to come.
Do you have anything.
Slide by increasing concerning trends in North America, and Europe westbound don't cut supply of critical materials.
Okay.
Asia <unk>.
Including the inflation reduction act, the cheap Sac and the European Green initiatives.
Significant demand in these markets.
Fair of <unk> market leadership and worldwide distribution I'm, just trying to ask to benefit from these trends.
Our ongoing efforts to access a stable supply of power in Spain.
We saw an indemnity shall PPA that <unk> seen an increased portion of our energy for the coming years.
This agreement has a tam of three in a few years and became effective on November 1st.
EBITDA combined with to be signed last quarter I expect it to allow us to produce higher volume of same Spain to serve our customers.
During the winter months, when our facilities in France alright.
Yeah.
Our facilities in North America continued to benefit from favorable U S policies instead.
In September at Barclays that was introduced in the U S Senate to enact a 35% tariff on imports of Russian bureaus.
Speaking on it.
We believe this is a very positive.
Triangle for the American industry and employees showing the U S commitment to increase rely on some friendly supply chain.
D C band.
While we are excited about.
GAAP outlook near term visibility remains opaque.
Ics for our products continued to be weak and demand remained subdued.
Recently, there has been commentary from various market participants cheating weakness in the solar and UV.
End market.
Interest rates have negatively impacted demand for electric vehicles and recent commentary from other manufacturers to indicate a very competitive market, we've increased pricing pressure.
While there is currently we can invest in these markets. We are focused on the significant long term opportunity.
EV market battery market story is expected to be driven more by the increasing content of silicon Indiana.
By short term supply demand even biopsies.
The solar opportunity is expected to be driven by increased government incentives and the focus on onshore hang the supply of silicon metal at critical material from solar cell production.
Our integrated asset footprint combined with favorable long term market trends and support the U S and European could you slight reductions paints a bright future for Fayetteville future in the coming years.
I am very pleased with our operations.
How our.
Our operations have been performing in the third quarter.
We are executing at a high level in nearly all our locations as evidenced by the fact that our clients efficiency.
Hi, Pedro in 30 years.
The efficiency of our certainly see things very strong and we are navigating with the energy landscape exceptionally well in all agents.
With the exception of Spain, as we modulate production based on advance channels.
Jones energy prices.
This was made possible by the efficient management of our capital expenditures over the past couple of years.
I'll start an extensive evaluation.
We have made the decision to implement the capital allocation policy.
And plan to announce the details of our capital return in the first quarter of 2024.
At the same time.
We are reiterating our 2023 guidance of $270 million to $200 million, we're not immune to the current soft market conditions.
Dissipate in the fourth quarter adjusted EBITDA to come in below the first quarter results.
Next slide please.
Silicon metal revenue was $199 million in Q3.
From $195 million in Q2.
So 2% adjusted EBITDA for this segment are remaining strong down only 2% from the prior year quarter.
Volumes increased 13% over the prior quarter to approximately 57000 tons.
Driven by strong shipments in North America.
Our average realized price of silicon metal sales decreased by 10% compared to the previous quarter.
Driven by lower index pricing anyway.
This price decline negatively impacted adjusted EBITDA by $19 million.
We continue to benefit from our energy agreement being trials, I mean, direct cotwo, which together contributed roughly half of the cost benefits.
With lower raw material costs being the next largest contributing factor primarily coal.
As for Silicon metal outlook.
The market continues to show muted demand and the lack of liquidity due to macroeconomic uncertainty affecting both the chemical in the aluminum sector.
While we are positive about long term opportunities for silicon metal, we expect demand to remain weak in the near term, particularly in western markets.
This weakness.
This past Saturday of offset.
By our expansion into new markets such as Asia.
Well, we have started actively participating in their solar value chain.
Next slide please.
Maybe carbon based alloys, the revenue was $150 million in Q3 down.
The one for $150 million, a decrease of 14% primarily driven by weaker prices.
Adjusted EBITDA for Q3 was $25 million down 20% from the prior year quarter.
Sales volumes.
Declined by six basis points.
Second quarter to 46000 films.
Average realized pricing was down 8% over the same period.
Negative impacting EBITDA by $10 million.
When you look at the previous quarter Silicon alloys, benefiting from lower raw material costs, which was the largest contributor to cost improvement.
The silicon alloy segment was adversely affected by the weak steel sector in Western Europe.
Partially offset by the strong specialty pharmaceutical sales being to the electrical steel market.
In addition, our sales team to diverse segments, such as foundries have been more resilient.
Next slide please.
Turning now to manganese based alloys and manganese based alloys revenue was $59 million in Q3.
45% over the prior year quarter.
Adjusted EBITDA for Q3 was $11 million up to $1 million in the prior year quarter.
Sales volumes were down 10% over the previous quarter negatively impacting adjusted EBITDA by $43 million.
Average realized pricing was down 16% the same period.
Which negatively impacted EBITDA by $11 million.
This was offset by NRG.
NRG in Seo to compensation in France, lower manganese ore prices.
Dan market, primarily steel remain under pressure with a lack of visibility in 2024.
We deal with the construction segment, we expect incremental improvement in the first half of next year.
Okay.
Uptick in demand.
Now I would like to turn the call over to Beth <unk> our CFO.
The financial results in more detail.
Yeah.
Thank you Michael.
Please turn to slide nine for a review of the income statement.
Sure.
Sales in the third quarter declined approximately 9% from $456 million the prior quarter to look at it 17 million Ghana.
The decline was primarily due to typhoon <unk>.
And our silicon alloys, and manganese alloys segment.
I think.
At higher volumes in silicon metal.
Silicon metal volumes was up 13% over the prior quarter.
The increase in volumes in Q3 was primarily due to its tilda shipments in North America.
While the clients and silicon alloys, and manganese alloys with a result of weak end markets, particularly.
Realized prices no.
Sure across alternative categories. As a result of continued price decline in big sizes. So.
<unk> and energy consumption costs in Brazil.
During the third quarter to work on the $96 million down from $229 million in the prior year quarter, 447% of sales versus 50% perspective.
This improvement was driven primarily by our MTF agreement in France.
The energy agreements provide a benefit of approximately $56 million.
In the third quarter.
We expect an additional benefit in the fourth quarter.
In addition, roadmap pvs, primarily cost benefits from lower prices.
Quarter.
Staff cost in the third quarter increased to 84 million donuts up some sort of decline.
In the second quarter.
Operating profit in the third quarter was 75 million donuts versus $63 million in the second quarter.
Operating margin was 18% in Q3.
So 14% in the prior quarter.
Net finance expenses in the third quarter were $9 million.
So $1 million in the prior quarters.
Increase over the prior quarter was a result of the call premium related to the $150 million five.
By Sunday veteran of senior notes and the accounting impact.
In addition in the second quarter.
At this time to walk into.
And that is one of our government loans, we expect net financial expenses to decrease going forward consistent with the significant reduction so far was just that.
It is likely.
Our adjusted EBITDA in the third quarter was $104 million versus $106 million in the second quarter.
Adjusted EBITDA margin increased to 25%.
Quarter.
So 23% in the second quarter.
Don.
Williams provides a benefit.
But let me driven by higher volumes in silicon metal.
Please.
The same over the prior quarter.
Suddenly upset by volumes.
Okay.
Manganese alloys, let's.
Which declined by six and 10% respectively.
Prices in the third quarter were weak across the board with yogurt or not that actually a nice price declining 11%.
We can market with pricing pressure across our three segments.
So in a negative impact of $37 million on that or not.
Yeah.
Cost.
A positive impact on adjusted EBITDA in the third quarter versus the second quarter.
Primarily driven.
By our MEP as a money fund.
<unk> has no little button of course, primarily corn.
Next slide please.
We ended the third quarter with a cash balance of $166 million.
Down from $662 million in the second quarter.
This decline reflects the redemption of the $150 million over the $9 to 75% senior secured notes.
During the third quarter.
This redemption will save the company approximately 14 million Donuts, Iran wants to keep its course.
As a result of that making sure that the adjusted Thursday decline to $257 million.
Down from $400 million in the second quarter.
And he says record snow for setup.
Net debt increased to $71 million up from $37 million, primarily to increase working capital.
Makes it slightly.
I think the first quarter.
Is that your operations less $9 million.
$24 million of cash generated in Q2 the.
The primary factors impacting our cash flow include a 51 million documents that working capital and noncash items of $44 million.
These non cash items.
And if you have any unexpected boost our cash position in the first quarter 2024.
Capex in the third quarter was $19 million.
$22 million in the prior quarter.
Lastly, cash flow from financing activities in the third quarter.
<unk> got the $171 million versus positive $19.
In the second quarter.
The negative cash flow from financing activities, but the result of the bunch redemption and associated premium court.
Makes it lumpy.
At this time I will turn the call.
Back over to Michael Thank you Beth I, just moving to the corporate updates on slide 14. Please.
As we already discussed during the call the strategic acquisition of high quality mines ensures that we remain self sufficient in North America, enabling us to take advantage of the significant solar and EV battery growth in the coming years.
We completed an additional long term PPA in Spain to enable us to reduce cost.
<unk> increased production in Spain, we are actively looking to add more ppas.
We are pleased to receive continued government and legacy let people supporting the U S.
<unk> by the recent introduction survey USA deal to enact a 35% tariff on imported currency to confirm Russia and Belarus.
Also the inclusion of silicon as a critical materials as discussed last quarter.
Got to benefit us going forward.
Has it been carriages, what kind of supply chain development.
In January of this year.
An agreement to divest the <unk> property in France to Swiss deal group.
We can October 31st the transaction was officially completed.
Or do you see as the final step.
In the original footprint optimization process that we started three years signal.
Through our innovation and technological advancement, we're able to produce high quality silicon.
Which has enabled us to expand our market opportunity into the advanced technological portion of the silicon metal business.
In line with this strategy, we are simply the new large global customer increasing our presence in Asia.
Finally, we will provide more details about our capital allocation policy on our first quarter earnings call in February.
Okay.
Yeah.
Yeah.
We will now.
Start the question and answer session.
As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced.
To withdraw your question. Please press star one on one again.
Yes.
We will now take the first question.
From the line of Lucas pipes from B Riley Securities. Please go ahead.
Thank you so much operator, good morning, everyone and congratulations on good results and what I understand is a tough.
Tough environment.
Marco Villa treats my first question is on the capital allocation point.
Mark if I heard you right just there at the end.
You expect to provide details.
On the fourth quarter results update call in February.
And I wondered could you maybe share at this time.
What are some of the key key items youre still looking to address or determined.
I assume with the board to between now and then thank you very much.
Well.
So we believe that <unk> is the right time.
We implemented prudent.
Capital allocation policy.
Our balance sheet these mass mass.
Much stronger than it was in the past.
Our gross debt is pretty close to the.
Two the 200.
Million dollars pick we mentioned several times.
We are in there can be difficult.
During the difficult market conditions.
But we are extremely confident on our medium.
In a long time.
The two entities.
So.
We really think is there.
The right time.
To implement.
These policy.
This implies of course.
Two scenarios, either we paid down the.
Renaming.
Dawn.
Or are.
Are we we got an agreement.
With the current bondholders, but we're going to do one of the two.
And we are gonna finalize our policy by February I think is February 22nd Yeah. The date.
When we are going to disclose our quality C, which is going to be in place I expect starting second quarter of <unk>.
A year.
That's that's helpful and and so.
In terms of paying down.
Down the bonds is part of the dynamic here that you had some working capital.
It uses during Q3 and maybe cash flow is going to improve between now and then that you have more flexibility to just pay those bonds down as it is an alternative to an agreement.
But part of it.
Let me tell you and then I will allow <unk> to elaborate on that.
In a nutshell we.
We aren't going to be we are in a healthy.
The position that we're gonna be in it.
Their position.
In the first quarter.
And we think that.
When you consider that the violence of that.
Cash that we have available cash that we generate.
Releasing working capital we're going to be.
In a good position.
You got to be completely down the bonds or prepaid most of these part.
And still have.
Right the level of cash to run throughout the company.
Yeah, maybe gaslog partners to add on new.
On that point.
I think the deal at all that we do what we plan to do in February.
Our thinking.
Let me dial a dividend and maybe an opportunistic way.
The buyback by.
But that's macro shape really provide any more detail on our policy in February.
Overtime have been repeatedly saying, we expect share buybacks to be larger they that'd be we then see if our shares continue to be.
And evaluated.
Good day.
It is helpful.
Thank you very much because both of you for those for those details I wanted to touch on another theme.
And that is.
Market environment and your your contract.
Process so.
If I understand correctly, you're in the market with your customers you negotiate.
Offtake.
Commitments it.
It might be ceiling, so it might be floors, I understand they're kind of they're always slag to spot prices, but in the current environment.
How how are those conversations going what would you what visibility do you have.
On the volume side on the price side for 2024 at this stage. Thank you very much.
Yeah.
It's a broad question.
Look at.
Let me say that clearly.
We've gone from five quarters to where in the market we have seen.
Index deterioration in.
And for most of the province.
Weakening.
Weakening demand.
Maybe with the exception of silicon metal that I think it was.
Particularly low in the first quarter on D C.
What we could see.
We don't see that.
Current market conditions, improving the short term.
Yeah.
The coming couple of quarters.
But we expect some improvement.
On demand.
So pricing in.
In the second half.
Of the year.
We are.
Fully involved.
In the comparison negotiations.
For next year.
Our overall AR balance between.
Contacted for us.
Spot volumes in small changes are more or less 50, 50, 50% contracted 50%.
In the open market.
In Silicon when you exclude the joint venture volumes the contracts go over 51%.
The quarterly commentary to Ipass sans the.
Six months ago, 24%. So there is.
Very little left for the for the spot business, which tells you that the liquidity is not there.
Liquidity index were asking with the west things mainly aluminum.
In the in furrow silicone.
63% is contracted likely manganese alloys at the end most of the volume.
It goes to.
Goes to steel 24, 26% goes to the core.
Orderly contracts Mbas.
The spot business.
So this is the current curve.
Current picture it customers are clearly extremely.
Co shows.
In in committing volumes, but we have already closed.
The contracts with most of our large accounts.
Thank you very much for that and just to follow up in terms of us.
Price is it.
Is it right to <unk>.
I think that.
It is floating with various lags.
But you're not locked in to lower prices.
For next year.
Due to the fact that prices are lower today, when when when do you.
[noise] close some of these negotiations.
Your line Lucas.
Zero and political Mitel aware steel.
The contracts are based on normal.
Thanks.
Adjusted quarterly so.
This is why I mentioned that the.
We would expect last quarter being weaker than.
During Q3.
Same for eight four.
For ferrosilicon and manganese alloys.
Pricing.
And that pressure, but.
Phebe when you look at the.
And a different value centers.
When you look at the cost of materials.
Energy coals and the transformation calls.
Overall in the industry prices reflect.
Great to have greater close to the cost position most of the players.
So I.
I don't think the pressure on coal is still there the pressure where managers field here in the local countries or so.
Hi.
I expect that sooner or later.
Prices are going to improve during 2024.
Mark I really appreciate your comments I have more questions, but I'll jump back in queue.
In the meantime continued best of luck. Thank you.
Lucas Thank you.
Thank you as a reminder, it is star one on one if you wish to ask a question.
We will now take the next question.
From the line of Martin <unk> from Seaport Research partners. Please go ahead.
Hello, Good afternoon, everyone.
Tom I can see muscles.
Thanks for a moment for our questions here I wanted to discuss silicon metal.
Asps.
It did remains strong relative to the market index prices.
Can you discuss the coupon.
So this is there a bit more of a premium mix or something more favorable about the south Africa volume contribution or something else going on here.
Yes, Mark.
Yeah.
As you know.
Most of the price.
Is linked to our contracts in most of our contracts.
In the chemical sector now.
Solar.
Sector.
So that price.
Dynamic.
Dictated mainly by.
These components.
While.
We are less present being less present opinion.
Stock.
On the business.
We are less exposed to the more commoditized business, which is aluminum related so.
We south we're like everybody else the health of the price pressure.
The <unk> index.
Index.
Effect allows us to.
Great Joy and available.
Surprise than.
And others.
Okay. Thank you for that.
Coming back to order books, and what Youre seeing volumes and expectations around.
Seasonality, one thinking about fourth quarter across the business segments can you discuss what youre seeing theyre unexpected.
In terms of trying to see a similar trend to Q4 of last year in Q1 of this year.
We've.
We by slowing down some of their production.
In.
In Western Europe.
During this quarter.
Shutting down production trends.
In the first quarter.
All of next year.
In terms of D C as in peso for patients in terms of.
On demand.
We don't see short term.
Any areas of action of demand, except for a couple of times that we need to watch.
Her later.
Yeah.
Paul.
Partially driving perspective.
Our construction business it has been.
Down in Florida.
A long time.
We need to watch and what that present screen.
In China.
In both dimensions.
King.
Great.
The economy so.
These two things like that.
The TV, but don't know rental demand to be seen.
This page.
Very conservative on the on our.
Volume estimates so.
Highest.
Our planning for volumes.
Volume levels.
We have seen in various quarters.
Thank you for that.
Could you review your comment on year to date EBITDA.
Specific on fourth quarter.
Relative to first quarter EBITDA.
Did you catch that earlier.
Well deep.
Let me make sure I heard I'm not sure I have most of your question.
We closed the first half of the year at 155.
Actually be there.
We are the one four.
In Q3, so we are at two <unk>.
So we.
We feel pretty comfortable to close the year on the <unk> side.
Our guidance.
Hi.
This is this is what I can say.
Your your question Congress I think you asked also about first quarter to cover before we are in the middle of a of.
The advisor training process of course, we are not give very good yes, we are facing a lot of.
Our challenge is right because.
Pricing.
There has been going down so.
We need to make color assumptions for next year.
And B.
We already said in the previous call.
Steve.
Very favorable impact.
Paul the energy contracting trends this year.
We will not be.
So big next year due to the fact that market price.
<unk> is lower compared to the beginning.
Of this year so.
Pricing we are at the bottom.
What I am less.
Still a very competitive position in trials, but less advantaged <unk>.
The other side.
We are looking with a lot of walking me as my follow up.
Increased sales position in Asia for Silicon metal.
These are the main factors.
Key.
Positive that I want to mention is that the.
And I already mentioned during my presentation.
We have spent the capex very well in the last two years.
In the last two years, we spent $75 million to $80 million.
Capex, we have since 30 35.
In the previous couple of years.
Well, our cloud festival ran much better shape.
In my presentation, so deep.
<unk> unity to count more viable.
And this is going to give us much more flexibility in purchase volume allocation.
Okay.
I appreciate the Optionality on the production footprint there. Thanks for highlighting that again, one last one if I could.
You did provide annual EBITDA guidance for this year.
That's something that you've determined internally that youll provide again is for the upcoming year or was that a one off.
What we would provide guidance, we haven't decided yet.
<unk> guidance, because we were working like I say, but all devices revising our business plans and we.
We will need to discuss with.
But I think once you have started giving guidance you have to continue to the EBIT guidance.
We will do that.
Okay I appreciate it congratulations navigating the market and our results.
Thank you Markus Thank you Michael.
Yes.
Thank you.
We will now take the next question.
From the line of Lucas pipes from B Riley Securities. Please go ahead.
Thank you very much for taking my follow up question.
It's on the courts investment if I heard you right there in the prepared remarks.
It's going to be a total of $50 million.
And you mentioned Marco.
15% cost reductions associated with that and.
There are some other strategic benefits.
But but just in terms of the numbers in terms of the expected rate of return.
Is there a range you could maybe provide for the market would be would be really helpful to.
To get a feel for that thank you very much.
Again.
When you mentioned 50 million here, if you were stuck so I want to make sure that I understood. Your question correctly.
Hey, Lucas.
It's Alex what are you asking if the investment of 15 million, it's one five to about $11 million.
Yes, maybe I didn't hear that right.
Yes.
The question is really first and foremost about the expected rate of return.
From the mine on the mine.
Yes.
That's correct, yes, I think we need to to weekends EBIT back when things are back on this number but.
The key the key point about this mine.
Yes.
Security of supply.
Of course.
There is quality.
Courts.
$11 million investment last for.
The mines and kind of expected.
Cost.
Sure Ben.
Integration.
He is going to be.
10, 15% lower than our current.
Facility.
So the.
There is an enormous advantage in terms of proximity.
To our clients.
Alex you want to add something.
Yeah.
Yes, the IRR is clearly, it's it's meaningfully above our cost of capital.
And I don't know if we ever kind of said what our hurdle rates are so maybe we will decide on that.
But I don't think we want to disclose publicly at this time.
I I I appreciate that.
I'll try to find out what costs are and then apply that 15% savings.
I appreciate it.
I appreciate the color and then they're done.
More than two hours.
Okay.
Perfect Okay.
The IRS.
I have been personally focus.
That is that is that that is helpful. Thank you. Thank you Marco.
Final question.
For me for today.
Right.
Thank you.
You said Mark go on your prepared remarks, Q4 is going to be above.
Sorry, it's going to be below our first quarter results.
There is still a bit of a range in terms of high high end low end of EBITDA and I Wonder if you could point us to the remaining risk factors between kind of now at year end, we're almost halfway through the fourth quarter.
That could push us towards the lower or the higher end of that.
The implied fourth quarter.
EBIT that range. Thank you. Thank you very much.
Well.
We are we are.
Crazy to say that we are at $259 million EBITDA.
Year to date.
Gave a guidance of 270 300.
In the in the <unk>.
First quarter.
<unk>.
We're going to operate some of our plans.
Lower rate to control inventory.
This is not gonna be decade for silicon metal in Europe in view of our shutdown are you trying to see in the first quarter.
D D advantage on the energy contacting front, who is going to be lower in the fourth quarter versus Q2 and Q3.
And.
I wouldn't classify like Aries, but these affected.
Quarter four is always there's more work with her to do so.
December month so.
This is where we are and of course, we have an impact on related to the <unk>.
We care index prices.
Across our portfolio in Q3 that are going to die. So you can contract pricing in Q4. These are.
The main thing that I see.
No.
You'll see it mid singles.
Nothing to add to that the Lucas.
Yeah.
Marco Beatrice Alex really appreciate all the color.
Keep up the good work thank you.
Thank you Lucas.
Thank you.
Yeah.
We will now take the next question.
From the line of Greg Bennett shareholder. Please go ahead.
Good morning, or good afternoon, and thank you for the great results.
The quartz mine that you bought South Carolina I'm, just curious how much competition is there for assets like this.
That.
Yes.
Or are these very difficult to find high quality quartz mine in America.
Well, we'd be lucky enough to find it.
And.
Probably you referred to.
Two a blog that I am aware about.
There are some controversial.
Opinions about the opportunity to vote.
We are experts in this field.
We know what we are doing.
When you.
When you acquire a mine.
You need to make sure that.
Hi.
Hello.
Yeah.
Just one moment, please your conference with risk.
Okay.
Hello.
Yes, one moment. Please please Brian technical problems conference will resume shortly.
Just one moment please.
Okay.
Right.
Yes.
Yeah.
Yeah.
Please standby your conference later pursue them shortly.
Okay.
Okay.
Please continue just by your conference will resume shortly.
One moment. Please your conference will resume shortly.
We ended up making us one of those.
Great.
Marcelo.
Hello.
Yes, sorry, we had.
Yes, actually I'll, just take Andrew sorry can Mako difficulty here I don't know at which point of my answer was interrupted but.
What what I say.
The quality of the mine in South Carolina.
Based on the analysis that we have.
He is far better than the current quality that we have in Alabama.
In terms of impurities.
And as a consequence, we plan to use the court out of these mines, starting second half of last year to supply our silicon production and he was Alabama to produce ferrosilicon.
Yes.
Are you facing competition in this market.
Yeah.
So are you referring competition in in courts for quartz mines are.
Yes.
For Silicon I would think that.
With what's going on in the inflation reduction act that sort of thing that I would invite.
A lot of competition, but.
I guess I wanted to know how strong your.
The franchise maybe on Mako.
Yes.
Experts.
In court.
Hey.
Well this is why we moved pretty fast.
Few months ago because.
We expect significant growth in demand of silicon metal in the United States.
And we assess our reserves in Alabama were not enough.
And we were looking for.
Courts.
Second quality that we have found in South Carolina.
We have been I don't know any faster or whatever then competition, but we have secured.
So if this mine on this Mike.
Yes of course it.
He is very calm on but.
Okay.
The point is that these through that what you said before.
Of course, its very common but there.
Quality over quantity is not necessarily so common everywhere, particularly in the U S.
Okay.
And then your comments about you closed on a French.
Facility.
That bringing capital or is that future cost savings I think it was at the end of your presentation. Yes. This is.
We.
Couple of years ago, we decided to stop production.
At one of our plants in France.
It was producing ferrosilicon and.
Silicon metal for fairness in shipping for a year.
This process team tracks is always long and one of the requirements.
The operating trends that you stopped production at one side.
There is a low low flow runge.
Imposes.
The company does the company was stopped.
Auction, perhaps to look for a buyer.
And.
We had a long process, where we have.
Hundreds of interested buyers, but at the end.
<unk>.
And this process has been finalized on October 31st we've.
Divestiture.
Phenomenal value I would say with the divestiture of the planned two suites deal.
So are there cost savings going forward or it's.
Cost savings going forward, because we have not we are not operating this plant anymore and we have reallocated productions at the other side.
Okay.
On your capital allocation that you're going to tell us on.
February.
For whatever it's worth.
Off all the debt.
Fewer base dividend and.
Have your cash flow of 50%.
Two cash dividend, 50% to.
Our buyback 50% two do you have other projects that you want to do with it yes.
No.
We will announce the official plan.
With details in February so we are obviously havent finalized that if we had we would we would have announced it today on exact form of that return.
So we'll discuss it more.
In February with details.
Okay. Thanks for the great work I appreciate it.
Thank you. Thank you. Thank you good to meet you.
Thank you I would now like to turn the conference back to Mark <unk> for closing remarks.
Thank you.
Thank you for the Q&A that concludes our third quarter 2023 earnings call. Thank you again for your participation.
We look forward to hearing from you on the Mexico have a great day.
Okay.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
Okay.
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Hum.
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