Q1 2025 Ferroglobe PLC Earnings Call
Martin Englert, John Rolfe, John Rolfe
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Speaker Change: Good morning, ladies and gentlemen, and welcome to the Ferroglobe First Quarter 2025 Earning School. At this time, all participants are in 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. Let's get started.
Speaker Change: I would now like to turn the call over to Alex Rotonen, Ferroglobe's President of Invest Relations. You may begin.
Speaker Change: Thanks Nadia, good morning everyone and thank you for joining Ferroglobe's first quarter 2025 conference call. Joining me today are Marco Levi, our Chief Executive Officer and Beatriz Garcia-Cost, our Chief Financial Officer.
Speaker Change: Before we get started with some prepared remarks, I'm going to read a brief statement. Please turn the slide to at this time.
Speaker Change: 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.
Speaker Change: in Ferroglobe's most recent SEC filings and exhibits to those filings which are available on our website at ferroglobe.com
Speaker Change: In addition, this discussion includes references to EBITOM, adjusted EBITOM, adjusted growth sets, adjusted net sets, and adjusted dialogs, earnings per share, among other IFRS measures.
Speaker Change: Reconciliation of non-IFRS measures may be found in our most recent SEC
Speaker Change: Before I turn the poll over to Marco, our chief executive officer, I want to announce that we'll be participating in the Be Riley Securities Conference in California on May 21 and 22nd.
Marco Levi: Thank you, Alex, and thank you all for joining us today. We really appreciate your continued interest in Ferroglobe.
Marco Levi: As we noted during our fourth quarter call, market conditions have remained challenging, significantly impacting our first quarter results. We saw continued declines in realized prices and weak demand across key segments.
Marco Levi: In particular, Silicon Maiden, our largest segment, experienced a 27% drop in volume.
Marco Levi: Additionally, the U.S. Silicon Metal Index pricing, as of March 31, was 9% quarter-over-quarter and 22% from the third quarter.
Marco Levi: This was the primary driver of our first-order negative adjusted video of 27 million dollars.
Marco Levi: Let's say we believe that we are at or near the bottom of the current cycle.
Marco Levi: Looking ahead, we anticipate the strong adjust the dividari cover in the second quarter.
Marco Levi: followed by continued momentum in Q3. We expect to deliver positive adjusted the bid in the second quarter. Accordingly, we are maintaining our full year 2025 guidance.
Marco Levi: Several regulatory trade measures are currently being introduced to curb the influx of low-priced imports that have been disrupting market dynamics and surprising prices, negatively impacting our volumes.
Marco Levi: We expect these developments to stabilize the market and create a more constructive environment in the quarters ahead.
Marco Levi: Let me walk you through some of the key trade measures.
Marco Levi: In the U.S., the Department of Commerce announced its final determination in the anti-dumping and countervading duty investigation of all ferocity coin imports from Russia, Malaysia, Jakadakistan in Brazil.
Marco Levi: Cheating on fair pricing practices and subsidies that have armed domestic producers.
The newly imposed final duties are substantial.
All effective as of March 28th.
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Marco Levi: These actions are expected to significantly improve the US ferocity-com market in both the near and long-term imports from these four countries accounted for approximately 140,000 tons in 2023 representing 71% of total US imports.
Marco Levi: While automatic producers will benefit from this shift, Ferroglobe is particularly well-positioned as the largest producer with operations that are nearly 100% backwards integrated.
Marco Levi: The SAID, we expect a short lag as existing channel inventories are drawn down before demand
Marco Levi: Initial Science confirms this trend with US-Fazy prices, firming since the beginning of April . We believe this will result in a healthier and more balanced market.
Marco Levi: in Europe , progress has been made to counteract the impact of subsidized imports.
Marco Levi: On December 19th, the European Commission launched a safeguard investigation into Silicon Metal, Silicon Baisaloise and Manganisaloise, which is expected to benefit all our pilot segments.
Marco Levi: The investigation is now completed, with European Commission working on its final recommendation.
Marco Levi: This will then be shared with the EU members requiring approvals from at least 15 of the 27 countries representing 65% of the population.
Marco Levi: We believe this is a strong case and we are optimistic that a favorable decision would be rendered. A provisional rolling is expected by the end of June , with any associated measures effective immediately.
Marco Levi: The trade actions and safeguards, both in the US and Europe , are expected to begin benefiting the industry by the third quarter and have a positive lasting impact on our business.
Marco Levi: In addition, the U.S. Silicon Meta producers fired a new petition on April 24th to stop unfairly price. Silicon imports from Angola, Australia, Laos, Norway, and Thailand.
Marco Levi: This petition is seeking significant anti-dumping duties of up to 337% and additional counter-vailing duties.
Marco Levi: The Commerce Department is scheduled to initiate an investigation by May 14 with a preliminary ITC determination expected by June 9 of this year.
Marco Levi: Ferroglobe, as the last largest producer in North America, would be a significant beneficiary of a positive rolling.
Marco Levi: As you know there is a lot of uncertainty in various markets around the world and different type policies are being contemplated.
Marco Levi: While this poses a significant burden on exporters and importers, Ferroglobe benefits from its globally distributed facilities, which allow us to supply products locally and in turn I avoid potential tariffs giving Ferroglobe a competitive advantage over an imported product.
Marco Levi: Besides the macro issues, we continue to focus on things that we can control.
Marco Levi: First.
Marco Levi: Sales in our parashah planning ethanol.
Marco Levi: S. One fairly our goal is to align our sale efforts with sno fee process to capitalize on market opportunity as they arrive.
Marco Levi: Finally, despite challenging market conditions in the first quarter with successfully generated positive free cash flow by efficiently managing our working capital highlighting the resilience of our operating model we use this free cash.
Marco Levi: Evident, which was increased by 8% and our repurchase shares which we believe remain significantly under valued next slide please.
Marco Levi: [noise] has communicated on our last call we expected the first quarter to be difficult, we weak demand and soft prices, resulting in a negative adjusted EBITDA lower overall shipments and prices drove a 60%.
Marco Levi: Avenue, the actual first quarter adjusted EBITDA of negative $27 million is in line with our budget. Despite the four performance, we were able to generate $5 million of three cash flow in the next.
Marco Levi: [noise] moving to our segment update I will start with Citicom Metaloan slide five as expected. The first quarter was weak we silicon metal shipments declining 27% due to weak demand I don't.
Marco Levi: And uncertainty related to trade measures and tariffs.
Marco Levi: Another factor impacting our volumes was a significant increase in imports into the U S and Europe imports from Brazil, Australia, Malaysia, Norway, Thailand, and Laos into the U S grew by 68 thousands in 2024.
Marco Levi: 33.
Marco Levi: We're up also experience the Serge of silicon imports caused by a collapsing policy.
Marco Levi: We expect this edwin until the Asian policy market recovers or safeguards become effective.
Marco Levi: Within the silicon segments. The chemical sector was also challenging as a result of increased low priced imports to Europe on the positive side, we are gain interaction in the aluminum market.
Marco Levi: We believe the first quarter Mark the traffic cycle and anticipate improved shipments in the second quarter with further volume pick up in the second half of the year increased imports also impacted pricing, which declined by 7%.
Marco Levi: This makes the proposed anti damping and countervailing duty measure in the U S against Thailand, and you save guards imperative for securing robust to make stick for.
Marco Levi: Please the city Lois market is exhibiting positive trends with first quarter volumes up 9% over the fourth quarter. This improvement was driven by an increase of 38% in North America and 3% in Europe.
Marco Levi: Both of these regions experienced and uptick in steep production in March.
Marco Levi: [noise] wide prices remain relatively flat during the first quarter, we see initial signs of the positive impact from the U S phase decision, our dedicated effort to acquire new customers and remain customer.
Marco Levi: Another positive sign is that index prices that improved by 17% since the beginning of April.
Marco Levi: These boats well with the coming quarter, we expect additional firming of prices and incremental volumes as the impact of the U S. Physic case becomes more pronounced the upcoming EU safeguard decision expected in June is.
Marco Levi: Are impacting Europe slight seven please [noise].
Marco Levi: Is a result of these delays we expect to make up for those low stones in the second quarter with a substantial volume improvement overall, the manganese demand environment is quite constructive and potentially even.
Marco Levi: J for the outcome of the U Safe Guard decision.
Speaker Change: Now I would like to turn the call over to Beatrice Garcia Kos, Our Chief Financial Officer to review the financial results in more detail Beatrice. Thank you.
Michael: Michael Please turn to it slide nine but I review of the income statement.
Michael: Sales decreased 60% sequentially in the first quarter to $307 million, while go material cost declined only 5%, resulting in robaterials as a percentage of sales increasing to 77.6%.
Michael: From 68.2% in the prior quarter more on that later the decline in sales was driven by a 35% decrease in silicon metal revenue and a 5% decrease in manganese baselows.
Michael: By a 7% increase in silicon base alloys, the decline in silicon metal sales with the result of weaken volume and lower prices Silicon base alloys, where a brighter spot with sales increasing 7%.
Michael: Declined by 5% due to lower prices average selling price with down across the boat with the biggest contributor coming from silicon metal, which was down 11% from the prior port.
Michael: Down, 4% and silicon Baseloy down, 2% Probaterial increases a percentage of sales from 68% to 78% driven by lower fixed cost of social and higher energy cost the company reported.
Michael: Evita margin of negative, 9% or $27 million, adjusted even loss, representing a $37 million decline versus previous quarter, primarily due to the following factors.
Michael: [noise] lower prices contribute $24 million to the decline while cost had a negative $15 million impact on adjusted EBITDA compared to the fourth quarter.
Michael: It is slight please.
Michael: [noise] Silicon metal Avenue declined by 35%, which was driven by a 27% drop in volumes and lower average selling prices, which decreased by 11%. This resulted in aja.
Michael: Of negative $50 million down from positive $17 million in the prior quarter or a b T margins of negative 15% versus positive 10% in the prior quarter.
Michael: The lower prices were the biggest factor in the P. N L decline with an impact of negative $18 million, followed by increased costs, which has a negative impact of $12 million.
Michael: Slight please.
Michael: [noise] Silicon Bay Salos revenue increased 7% in the first quarter driven by a 9% increase in volume, partially offset by a 2% decline in price the increase in volume positively impacted adjusted.
Michael: By $2 million offset by negative $3 million from lower prices, which was driven by an increase in sales mix of federal Silicon standard. This resulted in adjusted EBITDA declined from $3 million in the Pri.
Michael: [noise] manganese baysalois revenues with down 5% from the fourth quarter, driven by a 1% decline in volume and a 4% decline in average selling price lower volume negatively impacted adjusted EBITDA by $2 million.
Michael: S had a negative impact of $5 million. In addition, higher cost at a negative impact of $6 million, which was the result of higher energy cost and Ivy plans in France.
Michael: Next slide please.
Michael: Capex in the first quarter was $14 million down from $18 million in the prior quarter for upcoming cash O items, we expect to make the final sapie loan principal repayment of $18 million in the second quarter.
Michael: Next is like please.
Michael: During the first quarter, we maintain a strong balance sheet, while increasing our dividend and continue to buy back shares our dividend was increased to 1.4 cents per share for up 8% over the prior quarter.
Michael: 20 quarter with repurchase 720000 shares at an average price of three three point 75 for a total of $2.7 million.
Michael: Since the third quarter of 2024, when we initiated our share buybank through the first quarter of 2025, we have record Chase 1.3 million shares for approximately $5 million. In addition, we made two.
Michael: Pilot plan to schedule production, the second investment of $8 million relates to our commitment to production in Norway. We remain net cash positive at the end of the quarter with a balance of $19 million versus $39 million.
Michael: Adjusted.
Michael: Maintenance capex for the full year to be in the range of the 60 million dollar at this time I will turn the call back to Marco.
Marco Levi: Thank you Beatrice moving to the key takeaways on slide 16.
Marco Levi: We are maintaining our adjusted EBITDA guidance of 100 $170 million for the year with the first quarter in line with our budget, we expect meaningful improvement in the second quarter and further strengthening in the second half.
Marco Levi: [noise] with the U S. Federal Silicon case, now finalized and the usage guards decision hearing we are confident that the trade measures will positively impact our business going forward. The silicon metal case petition was just fired in the U S. So a T.
Marco Levi: Like how it plays out however, we are optimistic about that case as well given this development. We believe our performance would be much improved for the remainder of the year Importantly, we continue to maintain a strong.
Marco Levi: With a positive net cash position, demonstrating our resilience and allowing us to manage the business effectively in the current environment. Operator, we are ready for question.
Speaker Change: Thank you D. A participants as a reminder, if you wish to ask a question. Please press star one one on your telephone keypad and wait for a name to be announced to withdraw a question. Please press star one one again, please stampel will compile the Q in a rosales will take a few moments.
Speaker Change: Once again, if you would like to ask a question. Please press 211.
Speaker Change: Now we're gonna take a first question.
Speaker Change: And it comes from B R.
Speaker Change: Good morning at the writer and everyone Mark.
Speaker Change: Two you reiterated guidance, even though one Q sorry, just I should have mentioned this is feather shoveling on behalf of sneak childs Mark you reiterated guidance, even though one Q is negative so.
Speaker Change: Is of cadence of improvement in in a two Q free Q4 Q in 2025, if you could add some color on volumes and costs and the price as well, which would be helpful. Okay. Thank you for the question well the.
Speaker Change: First of all the negative results were expected by us and like I, we underlined they're in line with our budget.
Speaker Change: 46 years, we have kept our wide guidance, so 100, 100, and and and 70 millions dollar that basically where we try to account for various scenarios that might develop.
Speaker Change: The trade case will will bring a little bit more balance in the market and will favor a local producers like ferroglobe in the.
Speaker Change: Any in Europe.
Speaker Change: On top we have the evidence that when strong measures are applied like in the case of federal silicon in the U S.
Speaker Change: Five of the the rather weak demand, we see a positive reaction in both in terms of index pricing as mentioning and and.
Speaker Change: And volumes.
Speaker Change: And we're waiting of course for a confirmation of the safeguards in Europe, but they're nearing and we expect July also more clarity on out the new anti dumping and under Circum.
Speaker Change: The city from metal is gonna.
Speaker Change: And this is why we are decided to keep the same guidance.
Speaker Change: [noise], Thank you and if if I could expand on this one a little bit follow up.
Speaker Change: Wanna touch on that on end markets, where are you seeing the most trans and weakness Europe or U S and maybe Asia. So can we get an kind of update on the outlook for for the Asian market. If you can.
Speaker Change: Helpful. Thank you. Thank you for the question Yeah, Yeah, I can start from Asia I think the.
Speaker Change: Of course, there are these these measures on.
Speaker Change: Oh mean boys from South East.
Speaker Change: E I think they block due to their size they block the export from this country, but some other countries like Indonesia or or India are gonna see their business increase.
Speaker Change: Allowed to export sales and modules to the U S. All these.
Speaker Change: Changes are gonna play in terms of opportunities to supply.
Speaker Change: We will probably will have to be validated in the coming weeks decision is [noise], it's rather fresh.
Speaker Change: Concerning demand.
Speaker Change: In in.
Speaker Change: Which is another key indicator for us the indication from this year is that still is gonna be rather rather flat, we see clearly that India keeps on having a.
Speaker Change: Okay.
Speaker Change: A significant change in aluminum, we expect definitely improve in demand in the U S. Due to measures that are gonna incentivize the production of aluminum.
Speaker Change: Inuro aluminum price is going up and it is our understanding that the aluminum producers are looking for protection similar to our what we are asking for in terms of.
Speaker Change: Like to see how this D C situation.
Speaker Change: Developed overall to summarize we see a rather stable.
Speaker Change:
Speaker Change: Situation of demand for our alloys business, while we wait.
Speaker Change: Authorite measures before seeing improvement on on Citico metal demand.
Speaker Change: I appreciate all these color market and if you allow me to squeeze one more it's nice to see share repurchases, but my questions like what would you need to see to step up magnitude in in.
Speaker Change: I I, let me start with then I allow that benefits to like to elaborate but like we said we you know we're running the company under a very difficult and all style environment still.
Speaker Change: We expect to generate more cash in the coming quarters.
Speaker Change: And we expect to continue our opportunity.
Speaker Change: The repurchase policy and the amount of repurchase we really depend on on on the cash available as you know our priorities always to have enough cash around the company and we will run our assets in the coming quarters, we need to spend minimum level of cash.
Speaker Change: U I've indicated 50 millions for this year and then we will have your portunity to repurchase share during the rest of the year better. It's anything yeah, maybe data boy so far we have.
Speaker Change: S N L for a total of 5.1 million right and then your question is it would plan to ramp up the purchase and is our view that we will access our cash position together with the forecast.
Speaker Change: Market, that's Marco was described which equivalently Unfortunately mixed right and we believe our share prices are the value at the at the moment and our ultimate goal is to maximize the low term shareholder value for sure.
Speaker Change: Oh bears I do some time to achieve a slow balance sheet now that we have net cash positive we want to keep we do not like let me put it like that to lever at our balance sheet to execute the buyback and just finally, yes.
Speaker Change: And of course share buybacks hopefully please answer your question.
Speaker Change: It does unswear. Thank you very much mark.
Speaker Change: The trice and Alexa flux going forward. Thank you. Thank you. Thank you. Thank you.
Speaker Change: Yeah participants as a reminder, if you wish to ask the question. Please press star one one on your telephone keypad.
Speaker Change: D speakers around of the further questions at this time I would now like to handle conference over to the Speaker Malcolm Levy for any closing remarks. Thank you all again for your participation. We look forward to updating you on the next call in August have a great day.
Speaker Change: [noise]. This concludes today's conference call. Thank you for participating you may now disconnect have a nice day.