Q2 2024 Ferroglobe PLC Earnings Call
Okay.
Good morning, good afternoon.
Speaker Change: They come to several clubs second half 'twenty to 'twenty four earnings call. At this time, all participants are in listen only mode.
Operator: Later we'll conduct the question analysis session, and instructions will be given at that time. As a reminder, this conference call may be recorded.
Speaker Change: Later, we will conduct a question and answer session and instructions will be given at that time.
Operator: Later, we'll 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 Alex Rotonen, Ferroglobe's Vice President of Investor Relations. You may begin. Thanks, Rob.
Alex Rotonen: I would now like to turn the conference over to Alex Rotonen, Ferroglobe's Vice President of Investor Relations. You may begin.
Alex Rotonen: Thanks, Ross.
Alex Rotonen: Good morning, everyone. And thank you for joining the, excuse me, Ferroglobe second quarter 2024 conference call. Joining me today are Marco Levi, our Chief Executive Officer, and Beatriz Garcia-Cas, our Chief Financial Officer. Before we get started with some prepared remarks, I'm going to read a brief statement. Please turn to slide two at the, Statements made by management during this conference call that are forward-looking are based on current expectations. Factors that could cause actual results to differ materially from these forward-looking statements can be found in Ferroglobe's most recent SEC filing and the exhibit to those filings, which are available on our web page, at ferroglobe.com.
Alex Rotonen: Good morning, everyone, and thank you for joining, and excuse me, Ferroglobe's second quarter 2024 conference call. Joining me today are Marco Levi, our chief executive officer, and Beatriz Garca, our chief financial officer. Before we get started with some prepared remarks, I'm going to read a brief statement. Please turn this slide to at this time. Statements made by management during this conference call that our forward looking are based on current expectations. Factors that we cause actual results to differ materially from these forward-looking statements can be found in Ferroglobe's most recent SEC filings and the exhibit to those filings.
Alex Rotonen: In addition, this discussion includes references to EBITDA, Adjusted EBITDA, Adjusted Gross Debt, Net Debt, and Adjusted Diluted Earnings per Share, among other non-IFRS measures. Reconciliations of Non-IFRS Measures may be found in our most recent SEC filing.
Alex Rotonen: Which are available on our webpage at Ferroglobe.com. In addition, this discussion includes references to evidum, adjusted evidum, adjusted growth steps, metet, and adjusted the diluted earnings per share, and among other non-IFRS measures. Reconciliation of non-IFRS measures may be found in our most recent SEC filings.
Alex Rotonen: Before I turn the call over to Marco Levi, our Chief Executive Officer, I want to announce that we'll be participating in C-Port Research Partners. Annual summer investor conference on August 20th and 21st. We hope to see you there, Marco.
Alex Rotonen: Before I turn the call over to Marco Levi, our Chief Executive Officer, I want to announce that we'll be participating in Seaport Research Partners' Annual Summer Investor Conference on August 20th and 21st. We hope to see you there, Marco.
Marco Levi: Thank you, Alex, and good morning, good day, and good evening to everyone. Thanks for joining us on the call today. We appreciate your interest in Ferroglobe. Before I begin with our quarterly earnings update, I want to inform you with deep regret that Juan Miguel Villarmil, founder and former chairman of Ferro Atlantica, our legacy company, passed away last month. I would like to express our deepest condolences to his family.
Marco Levi: Thank you, Alex, and good morning, good day, and good evening to everyone. Thanks for joining us on the call today. We appreciate your interest in Ferroglobe.
Marco Levi: Before we begin with our quarterly earnings update, I want to inform you, with deep regret, that who won the bill earlier, founder and former chairman of Ferroglobe, our legacy company, passed away last month. I would like to express our deepest condolences to his family. In Q2, we continue to execute well, driving strong financial performance with increased volumes, revenues, and adjusted evidum. As we discussed in our first quarter call, in May of this year, the U.S. International Trade Commission recognized the importance of Ferroglobe from Russia, the lucky Malaysia and Brazil, which represented approximately 70% of all imports in 2023, are injuring our U.S.
Marco Levi: In Q2, we continue to execute well, driving strong financial performance with increased volumes, revenues, and adjusted EBIT, as we discussed in our first quarter call. In May of this year, the U.S. International Trade Commission recognized that imports of ferrosilicone from Russia, Kazakhstan, Malaysia, and Brazil, which represented approximately 70% of all imports in 2023, are injuring our U.S. operation. The substantial government subsidies received in this country and the low selling prices of these imports have adversely impacted the US pharmaceutical market, hurting local producers and their ability to compete with the IPC's final decision will be made in October, on June 24.
Marco Levi: operation. The substantial government subsidies are received in these countries, and the low selling prices of these imports. has adversely impacted U.S. pharmaceutical markets, hurting local producers and their ability to compete. The ITC's final decision will be made in October. On June 24, the U.S. Department of Commerce announced preliminary anti-dumping and countervailing duties of 283%. And 748% respectively, on all Russian imports of pharmaceuticals. As a result, importers of Russian pharmaceuticals are required to post-cash deposits or loans to cover their duties. Russia represents approximately 35% of all pharmaceutical imports into the U.S. in 2023. This is a significant victory for our industry, allowing us to compete on a level playing field.
Speaker Change: Affected U S silicon market.
Speaker Change: Acting local producers and their ability to compete.
Speaker Change: The Itc's final decision will be made in October.
Speaker Change: On June 24th.
Marco Levi: The U.S. Department of Commerce announced preliminary anti-dumping and countervailing duties of 283% and 748%, respectively, on all Russian imports of ferrosilicates. As a result, all importers of Russian ferrosilicon are required to post cash deposits or boons to cover this deal.
Speaker Change: In the U S Department of Commerce announced preliminary antidumping and countervailing duties.
Speaker Change: Two other than the 18th press Sam and.
Speaker Change: 748% respectively.
Speaker Change: All of the Russian import O'farrell silicon.
Speaker Change: As a result, an important some Russian ferrosilicon are required to post cash deposits or bonds to cover these duties.
Marco Levi: Russia represents approximately 35% of all ferrosilicon imports into the U.S. in 2020. This is a significant victory for our industry, allowing us to compete on a level playing field. Investigations of the remaining three countries, Kazakhstan, Malaysia, and Brazil, are still underway.
Speaker Change: Russia.
Speaker Change: Approximately 35% of warfare silicon imports into the U S in 2023.
Speaker Change: This is a significant victory for our industry, allowing us to compete on a level playing field.
Marco Levi: The investigations of the remaining three countries, the Lachistan Nation, Brazil, and Spiro-Alauri. The International Trade Commission will announce preliminary determinations for countervailing duties, expected in August, and anti-dumping duties in October. We believe these decisions will have a positive impact on our business in 2025, as inventory in the channel is depleted.
Speaker Change: Investigations of the remaining three trains because that gets the Malaysia regime of C&I Woody.
Marco Levi: The International Trade Commission will announce preliminary determinations for countervailing duties expected in August and anti-dumping duties in. We believe these decisions will have a positive impact on our business in 2025 as inventory in the channel is. As you recall, during the first quarter, we signed an MOU with Corsha to further develop batteries for EVs using silicon recharge. We are very excited about this relationship, as it enables us to take part in the evolution of EV biology.
Speaker Change: The International Trade Commission will announce by eliminating terminations for countervailing duties.
Speaker Change: And in August and antidumping duties in October.
Speaker Change: We believe these decisions will have a positive impact on our business in 2025.
Speaker Change: Inventory in the channel is depleted.
Marco Levi: As you recall, during the first quarter, we signed an MOU with Corsial to further develop batteries for EBS using silicon-rich channels. We are very excited about this relationship, as it enables us to take part in the evolution of EV batteries. In testing, Corsial has achieved a high-cycle lifetime using an 80% furglow silicon content handled in a Corsial battery. This improvement in battery performance is an important milestone. The benefit to consumers is that the silicon-rich channel significantly reduces the cost of batteries, speeds up the charging time to just 10 minutes, and increases the range up to 40%.
Marco Levi: In testing, Coreshell has achieved a high cycle lifetime using an 80% Ferroglobe silicone content anode. During, This improvement in battery performance is an important milestone. The benefit to consumers is that the silicon rechannel significantly reduces the cost of batteries, speeds up the charging time to just 10 minutes, and increases the range up to 40%. The next step is to produce a commercial-sized battery that OEMs can begin testing. Courchelle has closed its financial round targeting the development of a pilot plan that will produce larger 60-ampere cells for the OEM test.
Marco Levi: The next step is to produce a commercial-sized battery that OEMs have been testing, begin testing, sorry. Corsial has closed its financial round targeting the development of a pilot's plan that will produce larger, 60-ampere cells for OEM testing. This project is on track with commissioning shadows to begin in Q4 of this year, and testing at OEMs, respectively, in early 2025. I will keep you informed as we continue to achieve new milestones. In addition to developing silicon rich channels with Corsial, we are working approximately with 70 ED battery companies. such as Silicon carbon composites and Silicon monoxides are not for batteries.
Marco Levi: This project is on track, with commissioning scheduled to begin in Q4 of this year, and testing at OEMs expected in early 2025. We will keep you informed as we continue to achieve new milestones. In addition to developing silicon ray channels with Kersham, we are working with approximately 70 EV battery companies to also develop other silicon-based materials, such as silicon carbon composites and silicon monoxide anodes for man.
Marco Levi: These technologies, while less efficient than silver batteries, are either in use or expected to enter the market in 2020. When the web prices in general have been strong during the first half of the year, they've been very, they're even more by supply constraints than a fundamental improvement in the market. Strong index prices in the second quarter should rise solid results in Q3. However, we're still cautious about the fourth quarter, given the uncertainty in the market, especially as it relates to the aluminum, foundry, and steel sectors. We continue to announce our capital return policy. In addition to paying a quarterly dividend of 1.3% per share, our Share-by-Deck program was approved in June.
Marco Levi: These technologies, while less efficient than synchronous batteries, are either in use or expected to enter the market in 2020. What prices, in general, have been strong during the first half of the year? They've been very driven, driven more by supply constraints than a fundamental improvement. However, strong index prices in the second quarter should drive solid results in Q2. However, we are still cautious about the fourth quarter, given the uncertainty in the market, especially as it relates to the aluminum foundry and steel. We continue to announce our capital return policy. In addition to paying a quarterly dividend of 1.3 cents per share, our Share by Debt program was approved in June.
Marco Levi: We are narrowing the adjusted EBDA guidance range from 130 to 170 million dollars to 150 to 170 million dollars. The strong second quarter combined with higher index prices should positively impact the third quarter, which gives us more confidence for the second half of the year. However, given the weak demand, we're still cautious about the fourth quarter. And combined with the island of French operations, we anticipate having the lowest adjusted EBDA of the year in the fourth quarter. Next slide, please. Our second quarter performance was strong, with total sales increasing by 15% from the prior quarter to $451 million.
Marco Levi: We are narrowing the adjusted EBITDA guidance range from $130 to $170 million to $150 to $170 million. The strong second quarter, combined with higher index prices, should positively impact the third quarter, which gives us more confidence for the second half of the year. However, given the weak demand, we are still cautious about the fourth quarter, and combined with the idling of French operations, we anticipate having the lowest adjusted EBITDA of the year in the forecast. Next slide, please.
Marco Levi: Our second quarter performance was strong, with total sales increasing by 15% from the prior quarter to $451 million, and adjusted EBITDA reaching $58 million, up from $26 million, driven by strong pricing and sales. Operating cash flow and free cash flow where $2 million and negative $20 million dollars are expected due to inventory build as we restarted France and made a calculated decision to purchase incremental tons of manganese ore in anticipation of prices. Beatriz will discuss this in more detail as she reviews the financial report. Next slide, please.
Marco Levi: And adjusted EBDA reaching $58 million, up from $26 million. They're even by strong pricing and sales margins. Operating cash flow and freight cash flow were $2 million and negative $20 million, respectively, due to inventory bill as we started France and made a calculated decision to purchase incremental tones of bank and issuer in anticipation of price increases.
Speaker Change: So manganese ore in anticipation of price increases.
Marco Levi: The EBDA is with discussed this in more details as she reveals the financial results. Next slide, please. Difficult metal revenue in the second quarter was $204 million, up 22% from the prior quarter. This increase was a result of higher prices and higher volumes. EBDA's realized prices increased 2.8% to a shipment, increased 18.2% to almost 63,000 tons. They're even primarily by strong sales to the chemical sector in Europe. The volume shift in the second quarter was the highest revenue in the past two years. in the prices in Europe, which were down slightly in the second quarter, were negatively impacted by lower-price Chinese exports, and we can the market, particularly the aluminum sector, which was affected by high-energy prices in Europe.
Speaker Change: Beth will discuss this in more details.
Beth: <unk> financial results.
Beth: Next slide please.
Marco Levi: Typical metal revenue in the second quarter was $204 million dollars, up 22% from the previous quarter. This increase was a result of higher prices and higher average realized prices. Average realized prices increased 2.8% while shipments increased 18.2% to almost 63,000 tons, driven primarily by strong sales to the chemical sector in Europe. The volume shift in the second quarter was the highest level in the past two years. Index prices in Europe, which were down slightly in the second quarter, were negatively impacted by lower-priced Chinese exports and weakened the market, particularly the aluminum sector, which was affected by high energy prices.
Beth: If you could make a revenue.
Speaker Change: In the second quarter was $204 million.
Beth: 22% from the prior year quarter.
Beth: This increase was a result of avaya prices and higher volumes.
Beth: Everyone into realized prices increased two 8% while shipments increased 18, 2% to almost 63000 tones.
Beth: Primarily by strong sales to the chemical sector in Europe.
Beth: Volume shipped in the second quarter was the highest level in the past 12 years.
Beth: Index prices in Europe, which were down slightly in the second quarter were negatively impacted by lower priced Chinese exports and we can the markets.
Beth: Equally the aluminium sector, which was affected by energy prices in Europe.
Marco Levi: The prices in North America were strong in the second quarter, as they benefited from supply cost trains, such as the Baltimore Bridge. In addition, high-tires make Chinese silicon metal imports, and non-factor in the US market. The silicon metal adjusted with that was $35 million, and increased at 115% over the four-year quarter, even by strong volumes, higher prices and lower cost. Even with demand in end markets and easing supply constraints, we expect in the prices to soften into the third and fourth quarters. With a typical three-month lag in pricing, we expect the third quarter is up to be relatively stable, but we're here in the fourth quarter.
Marco Levi: Prices in North America were strong in the second quarter as they benefited from supply constraints such as the Baltimore Bridge accident. In addition, high tariffs make Chinese silicon metal imports a known factor in the U.S. Silicon Bank dollar just divvied up $35 million, an increase of 115% over the three-year quarter, driven by strong volumes, higher prices, and lower. Given weak demand in end markets and easing supply constraints, we expect the index prices to soften into the third and fourth quarters. With a typical three-month lag in pricing, we expect the Typical basal noise Given the current economic uncertainty, we expect European annual demand to remain soft for the second half of the year.
Beth: Prices in North America were strong in the second quarter.
Beth: They benefited from supply constraints, such as the Baltimore Bridge.
Marco Levi: In addition, we expect France to be idle toward the end of the year, which will also impact fourth quarter zones. Next slide, please. A typical base of noise. The revenue in the second quarter was $1.5 million, down 6% from the peer quarter. This revenue decline was a result of lower payments, which were down 8% from the player quarter, partially offset by a 2.4% increase in prices. In the prices in North America, we're up versus the first quarter, while Europe was relatively flat during the second quarter. Just a dividend was $10 million in the second quarter, down 29% from the first quarter.
Marco Levi: This decrease was the result of the higher cost due to the islanding of French operation in the first quarter, and lower absorption cost in the US. With shipments, we're primarily driven by a 19% decline in North America, which has negatively impacted by high inventories to Russia selling subsidized low-priced cheesy production in the US. Excessive Russian shipments have led to a high level of inventories in the channel, which we expect would be depleted over the next couple of quarters. This will negatively impact the month until inventory levels normalize. However, as a result of the tariff recently imposed on US imports of FASI, we anticipated increasing demands beginning in the first quarter of 2025, as imports from the affected countries will be reduced.
Marco Levi: This is expected to give Far or Long an opportunity to expand its market share in the region. Given the current economic uncertainty, we expect a European annual demand to remain soft for the second half of the year.
Marco Levi: to the next slide, please. Turning now to Manganese Basil Woods. Manganese Basil revenue in the second quarter was 98 million dollars, half 48% from the player quarter. This revenue increase was a result of Irish immense of 81,000 tons, half 31% from the player quarter. I realized that it's increased to 10%. We cut it alive on sound 32, I grade Manganese ore, my shutdown, which was damaged by cyclone median late March, by building higher inventory levels of Manganese ore before the resulting shortage drove market prices higher. This enabled us to ship the highest volume of Manganese Lois in the past eight quarters.
Marco Levi: Manganese Lois index price increased during the second quarter, driven by a shortage of I grade Manganese ore caused by this shutdown. Adjust the dividend was 14 million dollars, up from 6 million dollars in the first quarter. This represents an increase of over 150% price, and to less extent, volume drove the increase in EBITDA, partially offset by higher costs. European and market markets continue to be weak, and we expect our volume to normalize in the second half. It is important to note that nearly all our end market for Manganese Lois is in Europe.
Beatriz Garca: Now I would like to turn the call over to Beatrice Garcia-Cost, our Chief Financial Officer, to review the financial results in more detail. Thank you, Marco. Please turn to slide 10th for a review of the income statement. Sales increased 50% in the second quarter to $451 million from $392 million in the prior quarter. During the second quarter, we saw increased volumes in Silicon Metal and Manganese Lois and highest selling prices across all three segments. Raw material and energy consumption for production remained relatively flat and decreased as a percentage of sales from 66% to 59% in the second quarter.
Beatriz Garcia-Cas: Thank you, Marco. Please turn to slide 10 for a review of the income statement. During the second quarter, we saw increased volumes in silicon metal and manganese alloys and higher selling prices across all three segments. Next slide, please.
Beatriz Garca: Primarily due to effective cost management and higher fixed cost absorption as a result of increased volumes. Also operating expenses for the quarter increased by 64% to $86 million. Partially driven by a $19 million increase due to the fair value adjustment of the three carbon credits. This is fully upset by an increase in other income. Staff cost decreased by $3 million in the second quarter to $67 million due to the profit of the trading arrangement in Europe during the first quarter. Adjust the tariff in the second quarter, more than the one to prepare million dollars. From $26 million in the prior quarter.
Beatriz Garca: In the quarter, we earned approximately $8 million from our 2024 French Energy Agreement in line with the first quarter. As a reminder, cash from these benefits is expected in early 2025. Global, we expect these experiences to normalize below these levels.
Speaker Change: Question, two $5 million due to the full redemption of the senior secured notes in February.
Speaker Change: Going forward, we expect interest expenses to normalize below these levels.
Beatriz Garca: This is life, please. Our accessibility emerging increase from 7% in the first quarter to 13% in the second quarter, primarily due to increased pricing and volumes, which impact a bit down by $80 million and $11 million, respectively. Relatively to the first quarter. The higher cost was driven by the market and our provision in the magazine business, partially upset by higher fixed cost absorption in France and Spain. Overall, average selling prices increased by 2.5%, positively impacting adjusted dividends by $80 million, $10 million of which was from many space laws. Total volume increased by 50% with an $11 million positive impact on adjusted dividends compared to the prior quarter.
Speaker Change: This is likely.
Speaker Change: Our adjusted EBITDA margin increased from 7% in the first quarter to 13% in the second quarter, primarily due to increased pricing and volumes, which impacted EBITDA by $80 million.
Speaker Change: Millions on that respectively.
I think to the first quarter.
Speaker Change: The higher costs were driven by the mark to market and a provision in the manganese business, partially offset by higher fixed cost absorption in France and Spain.
Beatriz Garcia-Cas: Overall, average selling prices increased by 2.5%, positively impacting adjustability by $80 million, $10 million of which was from manganese-based alloys. In addition, after the South 32 mine disruption, we purchased incremental inventories of manganese. CapEx outflows in the first quarter were $22 million versus $18 million in the prior quarter. In addition, we paid cash taxes, totaling $9 million, related to 2023. CapEx and estimated tax payments for 2023. In an effort to continue enhancing our capital allocation policy, we have finalized the shared buyback program, which was approved at the June AGM.
Speaker Change: Overall average selling prices increased by two 5% positively impacting adjusted EBITDA by $80 million $10 million of which was from Melanie space alloys.
Speaker Change: Total volume increased by 50% with an $11 million positive impact on adjusted EBITDA compared to the prior year quarter.
Beatriz Garca: Thanks to the increase in little sales to the chemical sector in Europe. Head office and low core business contribute approximately $5 million to increase EBITDA driven by lower GRI course.
Speaker Change: Increased silicon metal face to the chemical sector in Europe.
Beatriz Garca: Slide 12, please. So in the second quarter, we consume free cash flow of $30 million, primarily due to the need to build up inventories from the end of Q1, during which the French plants were idle and higher-magnetial prices following how $32.5. Working capital was a use of $30 million, sorry, driven by a $37 million inventory built as we restart operations in France. In addition, after the self-32-mind disruption, we put chase incremental inventories of magnesium.
Beatriz Garca: This inventory increased by 1.5% by 3.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6. by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by 6.5% by In the next course to continue enhancing our capital allocation policy, we have finalized the share buyback program, which was approved as the June AGM.
Beatriz Garcia-Cas: We have authorization to repurchase up to 37.8 million shares over a five-year period through both discretionary and non-discretionary purchases. Next slide, please. We end the second quarter with a cash balance of $144 million, down from $160 million in the first quarter. Our goal is to create flats at 81 million dollars. We remain committed to maintaining a conservative balance.
Beatriz Garca: We have authorization to repurchase up to 37.8 million shares for a five-year period through both discretionary and non-expressionary purchases.
Beatriz Garca: Next slide, please. We have the second quarter with a cash balance of $144 million, down to $160 million in the first quarter. This reduction in cash is driven by the inventory built up, as I have just discussed. We continue to run the business on a net cash positive basis for the second quarter in the world. Our girls take free a flat at $81 million. We remain committed to maintain a conservative balance sheet. However, we continuously explore opportunities to properly add additional liquidity to enhance our financial flexibility.
Marco Levi: At this time, I will go back over to Marco.
Marco Levi: Next slide, please. Thank you, Beatriz. Moving to the key takeaway of slide 15, we have the strong second quarter, growing sales by 15% versus the first quarter. And I just had EBDA going $124 million, and we have adjusted EBDA margin as funding by 600. It is going to 13%.
Beatriz Garcia-Cas: We had a strong second quarter growing sales by 15% versus the first quarter and adjusted EBITDA going 124%. We've adjusted EBITDA margin expanded by 600 basis points to 13%. We continue to make significant progress with our core-shareholder relationship, achieving excellent results in testing, validating their technology, and the use of silicon-rich materials.
Marco Levi: Even the strong performance, we are increasing our adjusted EBDA guidance range to $150 to $170 million.
Marco Levi: We were successful in our efforts to level the playing field in U.S. Aerocelicon market, resulting in trade action against predatory financial importance. As a result, we have a significant opportunity to increase our market share study in early 2025. We continue to make significant progress with our core share relationship, achieving excellent results in testing, validating their technologies and the use of silicon-rich materials in EBDA.
Marco Levi: As mentioned before, we have enhanced our capital return program by having the share purchase program approved by the Julia.
Marco Levi: We are ready for questions. Thank you. Thank you so.
Operator: As a reminder to ask a question, please press towel 1 and 1 on your telephone and wait for your name to be announced. Do we throw your question? Please press towel 1 and 1 again. Once again, please press towel 1 and 1 on your telephone and wait for your name to be announced. Do we throw your question? Please press towel 1 and 1 again. Thank you.
Lucas Pipes: We are now going to proceed with our first question. The questions come from the Land of Lucaspites from B. Wiley Securities.
Marco Levi: Please ask your question. Thank you very much, Operator. Good morning. Good afternoon, everyone. Good to see the solid results and the bump in guidance. Mark, you mentioned in your prepared remarks the outlook for the second half of this year. You called out Q4 as the weakest period. If I heard you write, you cited pricing as one of the drivers for that. I wondered if you could elaborate on that. Given how index pricing has moved. of the last nine months, ten months, or so. I would have thought we would have passed the valley, so to speak, in pricing, but would appreciate your thoughts on that and how lags, mixes, etc.
Operator: Thank you very much, Operator. Good morning. Good afternoon, everyone.
Unknown Analyst: Good to see the solid results and the bump in guidance. Marco, you mentioned in your prepared remarks the outlook for the second half of this year. And you called out Q4 as the weakest period. And if I heard you right, you cited pricing as one of the drivers for that. And I wondered if you could maybe elaborate on that, kind of given how index pricing has moved in the last nine months, 10 months or so. I would have thought we would have passed the valley, so to speak, in pricing, but would appreciate your thoughts on that and how lags, mix, etc. might impact pricing. Thank you very much.
Marco Levi: might impact pricing. Thank you very much. Thank you. Well, we have a good visibility on third quarter, of course, as much as a bunch of our business is content related with index pricing. This is why we have a good reading of the Q3, and this to at least confirm their love of Q2 again. Q4 is impacted by what we see in the market. Demandis is weak in most of the segments. Still curing India, still production in the world is down. Their subsistimates when it's not in negative territories in certain geographies like US, for example. Aluminum is pretty stable in the US, but weak, extremely weak in Europe.
Marco Levi: Demand is weak in most of the segments, in certain geographies, like the US, for example. Aluminum is pretty stable in the U.S., but we..., in Europe. Chemicals are around our table.
Speaker Change: <unk> is currently being India steel production and the royalties is down we're still to estimate when he is not in.
Speaker Change: In negative territories.
Speaker Change: In certain geographies.
Speaker Change: <unk> for example.
Speaker Change: Aluminum.
Speaker Change: Yes.
Speaker Change: Pretty stable.
Speaker Change: In U S, but weak in.
Speaker Change: Extremely weak in Europe.
Marco Levi: Chemicals are rather stable. Solar is a significant lowdown in Asia, mainly driven by the dramatic drop of policy comprised, but also by the new investigation of US authorities, which are definitely slowing down the export of solar supply chain elements to US. So having this picture, we have already seen index is weakening during the third quarter. And as a consequence, we are extremely cautious on our outlook on Q4. So we can volume, we can price in Q4. That is helpful. Thank you, Marco. And you cited the excellent results in the course shell investment and technology. Could you elaborate on those results?
Speaker Change: So I would ask table.
Speaker Change: Solar is.
Speaker Change: A significant number of low down.
Marco Levi: Solar is in Asia, mainly driven by the dramatic drop in policy comprise, but also by the new investigation of US authorities, which are definitely slowing down the export of solar supply chain elements to the US. So having this picture, we have already seen indexes weakening during the third quarter. And as a consequence, we are extremely cautious on our outlook for Q4. So weaker volume, and weaker pricing in Q4.
Speaker Change: In Asia, mainly driven by.
Speaker Change: The dramatic drop policies comprised but also by the new investigation of U S authorities, which are there.
Speaker Change: Italy slowing down yes.
Speaker Change: For 12 months.
Speaker Change: Our supply chain elements to U S.
Speaker Change: So.
Speaker Change: In this picture we have already seen the index is weakening.
Speaker Change: During the third quarter.
Speaker Change: And as a consequence, we are extremely close shows on our outlook.
Unknown Analyst: That is, that is very helpful. Thank you, Marco.
Marco Levi: And you cited the excellent results of the Coreshell investment and technology. Could you elaborate on those results, what exactly was so positive? Was this a surprise, either in terms of the results or the timing? We would appreciate your thoughts on that. Thank you so much.
Marco Levi: What exactly was so positive? If was this a surprise, either in terms of the results or the timing, what would appreciate your thoughts on that? Thank you so much.
Marco Levi: Well, I would be... very even more positive when our batteries start getting tested. I'm a buddy, oh yeah.
Marco Levi: Well, I would be very even more positive when our batteries will start getting tested by the OEMs. But in the meantime, samples we can say 80% of our silicone metal have achieved almost 1000 cycles of charging and discharging with very tension of 80%. of their properties. These are, in our case, unprecedented results that are justifying the move of courthouse toward producing pilot quantities of batteries and these 16-per-batteries that will be tested by the OEMs. So, of course, we need more and more testing; we need the real testing by the OEMs, but it looks like we are close to solve the old problem of being able to address the swelling of silicone metal in the battery.
Marco Levi: But in the meantime, samples, we can say 80% of our silicone metal, have achieved almost 1000 cycles of charging and discharging with a retention of 80% of their property. These are, in our case, unprecedented results that are justifying the move of Corshael toward producing pilot quantities of batteries, these 60 ampere batteries that will be tested by the OEMs. So, Of course, we need more and more testing. We need real testing by the OEMs, but it looks like we are close to solving the old problem of being able to address this welling of silicon metal in the battery.
Marco Levi: That is really good to hear, Marco. I really appreciate those comments.
Unknown Analyst: Really quickly, maybe for Beatriz as well.
Beatriz Garca: Really quickly, maybe for Beatriz as well. You stockpile some manganese ore on the back of the supply disruption. When would you expect your stockpile there to normalize, and as it relates to kind of cash flow and working capital release, any comments as it relates to taking advantage of that buyback authorization? Thank you both. Yes, thank you, Lucas. As I was mentioning in the course, we have been taking advantage in Q2, so we have been seeing already the impact of lower manganese ore prices and higher prices in Q2. And as you said, we both chose manganese ore in Q2, and we expect to see the release of this. And of course, we expect prices to hold in Q3, and therefore going to be a positive impact in working capital in Q3, but could be upset maybe with all the pieces.
Beatriz Garcia-Cas: Yes, thank you, Lucas. Now, as I was mentioning in the course, we have been taking advantage of Q2. So we have already seen the impact of lower manganese ore pricing, higher prices in Q2. And as you said, we bought some, we purchased manganese ore in Q2. And we expect to see the release of this. And, of course, we expect prices to hold in Q3. And therefore, there is going to be a positive impact on working capital in Q3, but it could be offset maybe with all the business. We expect a release of working capital overall could be more in Q4.
Beatriz Garca: Will we expect a release of working capital overall with the money in Q4 and Lucas? Any thoughts on the buyback authorization? Well, very, what we said on the call first, the AGM approved the share buyback program at the end of June, so we did not have a lot of time to react on that because the closing period came just after. I think what is more relevant for us is when you hear Mark talking about the outlook on the second part of the end and the market conditions. We want to take a conservative approach and preserve our cash and our liquidity, so for the time and for the timing, we want to be proven in the use of our cash and liquidity.
Beatriz Garcia-Cas: Any thoughts on the buyback authorization?
Beatriz Garcia-Cas: Well, maybe what we said on the call, first, the AGM approved the share buyback program at the end of June. So we didn't have a lot of time to react to that, right, because the closing period came just after. And I think what is more relevant for us is when you hear Marco talking about the outlook for the second part of the year and the market conditions, we want to take a conservative approach and preserve our cash and our liquidity. So for the time being, we're going to be, we want to be prudent in the use of our cash and liquidity.
Lucas Pipes: I appreciate that. Thank you so much for all of your comments, and can you best of luck keep up to good work. Thank you. As a reminder to ask a question, please press tell one and one on your telephone and wait for your name to be announced. To withdraw your question, please press tell one and one again. Once again, it's style one and one on your telephone and wait for your name to be announced. Thank you. We are now going to proceed. We are now going to proceed with our next question.
Unknown Analyst: I appreciate that. Thank you so much for all of your comments and continue. Best of luck. Keep up the good work. Thank you.
Operator: Thank you. As a reminder, to ask a question, please press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Once again, it's star 1 and 1 on your telephone and wait for your name to be announced. Thank you. We are now going to proceed. We are now going to proceed with our next question. The questions come from the line of Martin Englert from Seaport Research Partners. Please ask your question.
Martin Englert: Hello, good afternoon, everyone. So going back on silicon metal and price weakness, how much of the 4Q price weakness is associated with the weaker Asian market and maybe more favorably priced product being exported there from South Africa? So more of a negative makeshift affecting prices at the segment level.
unknown: How much of the working price weakness is associated with the weaker Asia market and maybe more favorably priced product being exported there from South Africa. So more of a negative shift implicating prices at the segment level.
Marco Levi: Martin, let me talk about facts. I'm liking most of the businesses China has built over capacity, and with the current crisis that they are going through, they are exporting everything that they can. We see that in silicon metal imports from China into Europe in the second quarter, which are significantly increased; prices are extremely low. And this has an impact on the overall index. It is true that, due to the quality that they export, they tend to supply mainly metallurgical silicon for aluminum. But they are definitely moving their product outside of China. And I have seen, we have seen the same: something that we need to test with imports in the US from Angola, where Chinese have relocated apparently some of their old furnaces, and silicon metal is exported out of Angola to the US.
Marco Levi: Martin, let me talk about France. Now, like most businesses, China has built over capacity, and with the current crisis that they're going through, they are asking for everything that they can. We see that in silicon metal imports from China into Europe in the second quarter, which I significantly increased. Here, prices are extremely low, and these have an impact on the overall, on the overall link there.
Marco Levi: It is true that due to the quality that they export, they tend to supply mainly metallurgical silicon for aluminum, uh, but but they are definitely uh, you know, moving their product outside of China, and I have seen something that we need to test with imports into the US from Angola, where China has relocated apparently some of their old furnaces, and Silicon Metal is exported out of Angola to the U.S. The other part of your question is around solar demand, and the power sales of silicon metal to Asia for solar have been rather stable in the second quarter.
Speaker Change: Taking their product outside of China.
Speaker Change:
Speaker Change: And I have seen that we have seen the same.
Speaker Change: So I'm thinking that we need to China's coal imports in the U S from Angola.
Speaker Change: Where.
Speaker Change: Chinese relocated apparently some of their old furnaces.
Speaker Change: Silicon metal lasers parked in the October call out to U S.
Marco Levi: The other part of your question is around solar demand. How are sales of silicon metal to Asia for solar and beam rather stable in second quarter. We foresee as low down in the second half of the year, which is related to this US investigation that basically blocks the export of solar supply China elements to the US. So even the major players are concerned about being forced to pay duties in case they continue to do business. Honestly, we believe that this situation is not sustainable for the US. and I can add other comments, but at the moment, the off-take of silicone metal in Asia for solar has gone down.
Speaker Change: The other part of your question is.
Speaker Change: Is around that.
Speaker Change: Solid demand.
Speaker Change: Our sales of silicon metal.
Speaker Change: To Asia for solar and beaten rather stable.
Speaker Change: The second quarter.
Marco Levi: We foresee a slowdown in the second half of the year, which is related to this U.S. investigation that basically blocks the export of solar supply chain elements to the U.S. So even the major players are concerned about being forced to pay duties in case they continue to do business. Honestly, we believe that this situation is not sustainable for the U.S., and I can add other comments,
Speaker Change: We for a see a slow down in the second half of the year, we cheese.
Speaker Change: Related to these U S investigation.
Speaker Change: Basically.
Speaker Change:
Speaker Change: Blocks.
Speaker Change: The export of the solar supply chain elements to the U S.
Speaker Change: So even the major players are concerned about being forced to pay.
Speaker Change: Duties in case, they continue to do business.
Speaker Change: Hmm.
Speaker Change: Honestly, we believe that this situation is not sustainable for the U S.
Speaker Change: I can add other comments, but at the moment.
Speaker Change: The offtake of Silicon metal in Asia for solar has gone down.
unknown: Thank you for all the details there. That's helpful.
Martin Englert: Thank you for all the detail there. That's helpful.
Speaker Change: Thank you for all the detail there that's helpful.
Marco Levi: I wanted a circle back on the ferro-silicon trace case, and it seems like there was maybe some pre-bying out of that and elevated channel inventories, so you're expecting muted or depressed volumes in US ferro-silicon throughout the balance of the year, but then you expect an uptick into 2025. Is that correct? Yeah, well I think I've also made this comment in the previous quarter. Last is quantities of ferro-silicon and being delivered to US in the last few months from Russia. And we estimate an amount of 120,000 tons of ferro-silicon that corresponds to one year's supply of Russian ferro-silicon to the US.
Marco Levi: I wanted to circle back on the ferrosilicon trade case, and it seems like there was maybe some pre-buying ahead of that and elevated channel inventories. So you're expecting muted or depressed volumes in US ferrosilicon throughout the balance of the year, but then you expect an uptick into 2025. Is that correct?
Speaker Change: I wanted to circle back on the Ferro Silicon trade case.
Speaker Change: It seems like there was.
Speaker Change: Maybe some pre buying.
Speaker Change: Now an elevated channel inventories, so you're expecting muted or depressed volumes in U S. Ferrous silicon throughout the balance of the year, but then you expect an uptick into 2025 is that correct.
Marco Levi: Yeah, well, I think I also made this comment in the previous quarter, massive quantities of ferrosilicon I've been delivered to the U.S. in the last few months from Russia.
Speaker Change: Yeah, well I think we're also maintains camera comment in the previous quarter.
Speaker Change: Massive quantities of silicon.
Speaker Change: Bin.
Speaker Change: The Levered to U S.
Speaker Change: In the last few months from Russia.
Speaker Change: And and.
Marco Levi: We estimate an amount of 120,000 tons, and Ferrosilicon. That corresponds to... one year's supply of Russian silicon to the US. On top of it, we have seen, like everywhere else, massive increases in export outside of additional capacity of ferrosilicon out of Kazakhstan. And to combine this situation in the US, we have seen increased export out of Brazil, some minor suppliers of benzoyl of ferroxylin plus Malaysia, so the situation combined with the, We estimate the estimated drop in production of steel in the US about 3.3% below last year, a year to date.
Speaker Change: We estimate an amount of 120000 tons of <unk> com.
Speaker Change: That corresponds to.
Speaker Change: One year supply of Russian.
Speaker Change: Silicon to the U S.
Marco Levi: On top of it, we have seen, like everywhere else, must have increases of export outside of additional capacity of ferro-silicon out of Kazakhstan and to combine this situation in US where we are seeing increased export out of Brazil, some minor suppliers of Brazil of ferro-silicon plus Malaysia. So the situation combined with the estimated drop of production of steel in US about 3.3% below last year, a year to late, a stressed environment. So pricing has gone out based on the announcement of the authorities, but we don't need too much liquidity yet. I can share with you a general comment that we perceive the need of securing supply of ferro-silicon next year in the American market because we are getting contacted by several teams of ferro-silicon to secure volumes for next year.
Speaker Change: On top of a couple of you have seen like everywhere else massive increases of export outside of additional capacity of ferrous silicon outcome Kentucky's them.
Speaker Change: And to combine these.
Speaker Change: Situation in new ways. So we have seen increased exports out of Brazil.
Speaker Change: Some minor supplier so Brazil.
Speaker Change: Ferrosilicon as Malaysian us so.
Speaker Change: S situation.
Speaker Change: Combined with the <unk>.
Speaker Change: We estimate the estimated there I'll call production of steel in the U S about 3.3% below last year year to date.
Marco Levi: Asteroids for the Environment. So pricing has gone out, based on the announcement of the authorities, but we don't see too much liquidity yet. I can share with you a general comment that we perceive the need for securing the supply of ferrosilicon next year in the American market because we are getting contacted by several steel manufacturers who want to secure volumes for next year.
Speaker Change: S trade.
Speaker Change: So pricing has gone out and done.
Speaker Change: The announcement of the authorities, but you don't speak too much liquidity, yes.
Speaker Change: I can I can share with you a general comment that.
Speaker Change: We.
Speaker Change: We perceive the need of securing supply for our silicon next year in the American market.
Speaker Change: Because we are getting contacted by several steel.
Speaker Change: Turning to some of them to secure volumes for next year.
Speaker Change: Sure.
Marco Levi: Are you aware of any alternative key sources that, if these countries are bought out of the US market due to the trade case, that consumers in the US may source from alternatively to kind of fill the holes, or are they going to be largely fully reliant on US production? No, no, no. First of all, there is a quite significant free capacity now in the US. We are two local players, and we have capacity. Of course we can support demand also outside of our most competitive assets in U.S. and South Africa if needed. We can supply more, and some of the agents can supply more.
Speaker Change: Are you aware of.
Speaker Change: Any alternative key sources there.
Marco Levi: Are you aware of any alternative key sources that if these countries are blocked out of the US market due to the trade case there, consumers in the US may source from alternatively, to kind of fill the holes? Or are they going to be largely fully reliant on US production? No, no, no. The first of all,
Speaker Change: These countries are blocked out of the U S market.
Speaker Change: Due to the trade case there.
Speaker Change: Consumers in the U S Mi source from alternatively to kind of fill the holes or are they going to be largely fully reliant on U S production.
Marco Levi: No, no, no. The first of all, there is quite significant free capacity now in the US. We are two local, local players, and we have we have capacity. Of course, we can support demand also outside of our most competitive assets, in the US and South Africa, if needed. For sure, then you have Brazil, some Brazilians who can supply more, and some Asians who can supply more.
Speaker Change: The first of all there is a quite significant free capacity that was in the U S.
Speaker Change: We are two local local players.
Speaker Change: No.
Marco Levi: So I don't think the U.S. is going to suffer lack of ferro-phyrocelic.
Marco Levi: So I don't think the U.S. is going to suffer a lack of ferrosilicon. Remember also that our plant in Selma is down as we speak, and we could devote Selva to ferrosilicon production in a quarter.
Marco Levi: Remember also that our client in Selma is down as we speak, and we could devote to Selma to ferro-phyrocelic on production in a quarter.
Martin Englert: Okay, I appreciate all the detail and congratulations on the results. Thank you. Thank you, Martin.
unknown: Appreciate all the detail, and congratulations on results. Thank you. Thank you, Martin. Thank you.
Operator: Thank you. Thank you, Michael.
Marco Levi: We have no further questions of this summer when I hand back to Marco Levi for closing remarks. Thank you, and thank you again for your participation. We look forward to hearing from you on the next call in November.
Marco Levi: We have no further questions at this time. I will now hand the floor back to Marco Levi for closing remarks.
Operator: Thank you. And thank you again for your participation. We look forward to hearing from you on the next call in November. Have a great day.
unknown: Have a great day.
Operator: This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you, and have a great day.