Q3 2025 Ferroglobe PLC Earnings Call
Speaker #2: Good morning , ladies and gentlemen , and welcome to Ferroglobe PLC third quarter 2020 Earnings Call . At this time , all participants are in a listen only mode .
Speaker #2: 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 .
Speaker #2: I would now like to turn the call over to Alex Rotonen Ferroglobe PLC , Vice President of Investor Relations . You may begin .
Speaker #3: Good morning , everyone , and thank you for joining Ferroglobe PLC third quarter 2025 conference call . Joining me today are Marco Levi , our chief Executive Officer , and Beatrice Garcia , our chief financial officer .
Speaker #3: Before we get started with some prepared remarks , I'm going to read a brief statement . Please turn to slide two . At this time , statements made by management during this conference call that are forward looking are based on current expectations .
Speaker #3: Factors that could cause actual results to differ materially from those forward looking statements can be found in Ferroglobe PLC recent SEC filings and the exhibits to those filings , which are available on our website at Ferroglobe PLC .
Speaker #3: In addition , this discussion includes references to EBITDA , adjusted EBITDA , adjusted gross debt , adjusted net debt and adjusted diluted earnings per share .
Speaker #3: Among other non IFRS measures . Reconciliation of non IFRS measures may be found in our most recent SEC filings . Marco .
Speaker #4: Thank you Alex , and thank you for joining us today . We appreciate your continued interest in Ferroglobe PLC as we have discussed in previous quarters .
Speaker #4: 2025 has been marked by significant challenges stemming from unfair trade practices in both the US and the EU . After taking proactive measures to create a more level playing field , we are now beginning to see meaningful progress .
Speaker #4: Regulators are taking actions and we are confident these measures will improve the balance in our markets and position Ferroglobe PLC a much stronger performance in 2026 .
Speaker #4: Starting with the US on April 24th , we filed a trade case in the US regarding unfairly priced imports of silicone , metal against Angola , Australia , Laos , Norway and Thailand .
Speaker #4: On September 23rd , the US Department of Commerce issued a preliminary countervailing duties against , for or those countries that subsidize silicone , metal production with the following assessments Australia 41.3% , Laos 240% .
Speaker #4: Norway 16.9% and Thailand 31.3% . Furthermore , on September 26th , the US Department of Commerce issued preliminary anti-dumping duties on Angola and Laos of 68.5% and 94.4% , respectively .
Speaker #4: Additional preliminary anti-dumping determinations are expected by the end of the year for Australia and Norway . Initially , these anti-dumping measures were scheduled to be announced on November 21st , but due to the US government shutdown , they are likely to be delayed .
Speaker #4: In parallel with US action . The European Commission launched a safeguard investigation on December of last year , covering silicone metals , silicon based alloys and manganese alloys .
Speaker #4: The final decision is expected by November 18th. A favorable outcome would represent a significant step forward for the industry and for Ferroglobe PLC, and it would secure the EU's sustainable access to critical and strategic materials, which are required for infrastructure and defense industries.
Speaker #4: We remain optimistic about the results of this investigation from a process perspective . The final implementation of safeguards requires approval from at least 15 of the 27 EU member states and states , representing at least 65% of the population .
Speaker #4: It is important to note that it is unclear at this time which of our products would be included in the safeguards and how these will be implemented.
Speaker #4: Next , I will provide an update on our partnership with Coreshell . They continue to make great strides in the development of silicone nanotechnology for next generation batteries .
Speaker #4: For EVs and other applications . Recently , Coreshell began shipping commercial scale 60 ampere EV pilot batteries to leading automotive OEMs for testing .
Speaker #4: A major step towards commercialization . The production ramp remains on schedule , with consistently high yield and quality . Underscoring the scalability of their process .
Speaker #4: Another advantage is that Core shells , silicone rich anode . Technology removes the reliance on graphite , of which over 90% is produced in China , paving the way for a fully domestic supply chain for EV batteries .
Speaker #4: Core shell also expects to achieve commercial deployment of advanced battery systems used in robotics and defense applications . In early 2026 . A significant milestone that validates the potential of silicon anodes in high performance battery .
Speaker #4: I also want to congratulate Jonathan Tan and his team at Coreshell for winning the Startup World Cup in October , a global competition featuring over 100 regional events across more than 20 countries .
Speaker #4: This recognition highlights the impressive progress the company has made in advancing cutting edge battery materials . Finally , as we continue to expand our collaboration with Coreshell , we have a joint development agreement and expect to establish a long term supply agreement for high quality silicon metal in the near future .
Speaker #4: Positioning Ferroglobe PLC to play a key role in the growing market for advanced battery materials . As EV adoption accelerates on the operational side , I am pleased to announce that we recently signed a new multi-year energy agreement in France , effective January 1st , 2026 , guaranteeing us a very competitive energy price .
Speaker #4: In addition to low energy costs , the contract provides us with flexibility to operate our plants for up to 12 months a year .
Speaker #4: A significant benefit compared to our current agreement . This will simplify our snop process . Inventory management and improve working capital , as well as costs through our fixed cost assertion .
Speaker #4: Next slide please . A combination of soft demand and aggressive imports into the EU resulted in declining volumes and revenues in the third quarter .
Speaker #4: Overall volumes in our main segments were down 21% from the prior year quarter . However , despite a 19% decline in revenues , we generated $80 million in adjusted EBITDA , only slightly below the second quarter , and improved free cash flow .
Speaker #4: Next slide please . Moving to our segment update , I will start with silicon metal on slide five . The silicon metal market remains extremely challenging in Europe with significant predatory imports from China .
Speaker #4: Roughly doubling in the first eight months of this year . The EU should not allow imports of silicon metal designated as a critical and strategic material by due to have unfettered access to the European market .
Speaker #4: Because of this dynamics , we were forced to idle all our silicon metal plants in Europe starting at the end of September . As a result of these imports and weak demand , our third quarter shipments in EU declined by 51% compared to the second quarter .
Speaker #4: North American volumes remained stable despite soft demand within the silicon metal segment . The chemical sector continues to be negatively affected by the oversupply of imported siloxane from China into Europe and the US .
Speaker #4: Siloxane is used in the production of silicones index prices saw an uptick from the second quarter in both the US and the EU .
Speaker #4: However , the year to date index in Europe is down by 28% , while the US index is flat . Looking forward , we believe the US anti-dumping and countervailing duties are a positive indicator of what the final measures will resemble and are expected to markedly improve .
Speaker #4: The US market dynamics in 2026 . The chemical demand is still expected to remain challenging due to siloxane imports in EU and to the lesser extent in the US .
Speaker #4: Next slide please . After a strong second quarter , preliminary silicon based alloys volumes declined across all regions , with Europe decreasing by 15% , followed by the US being down 10% .
Speaker #4: Overall , the volumes decreased by 19% due to soft demand . This was particularly noticeable in Europe , where as lower start of post-holiday steel production resulted in a nearly 5% decline .
Speaker #4: In the third quarter compared to the same period of last year . The pricing environment deteriorated in the third quarter , with the US and European indexes declining by 5% and 6% , respectively , for the year to date period .
Speaker #4: The weakness in European steel production continued to wait on the index , which is down 10% . The US index is flat year to date .
Speaker #4: Steel production is forecasted to increase by 3.2% in 2026 . In Europe , combined with expected safeguards . This sets the stage for much stronger market conditions next year .
Speaker #4: We expect similar trends in North America based on conversations with our customers and a steady 2.2% projected growth in North American steel production .
Speaker #4: Overall , we are optimistic that 2026 will be a strong year for total silicon based alloys . Sales for Ferroglobe PLC . Next slide please .
Speaker #4: Moving to manganese based alloys . Following the multi-year ice shipments in the second quarter , our manganese segment remained solid in the third quarter despite the volume decline of 21% .
Speaker #4: This is more a result of an exceptional second quarter , which benefited from delayed shipments carried over from the first quarter . And our cost competitive position .
Speaker #4: Another factor continuing to constrain manganese segment is the increased shipments into Europe from India , Malaysia and Georgia . Manganese alloys Index prices softened in the second quarter by seven and 3% , respectively , for Ferromanganese and Silicomanganese .
Speaker #4: We anticipate manganese demand recovering in 2026 , with expected 3.2% steel production growth in Europe , and the announcement of safeguards later this month .
Speaker #4: I would now like to turn the call over to Beatrice , our CFO , to review the financial results in more detail . Beatrice .
Speaker #5: Thank you . Marco . Please turn to slide nine for a review of the income statement . Third quarter sales declined 19% sequentially to $312 million , while raw material costs declined 29% as a result , raw materials as a percentage of sales declined from 65% to 58% , mainly due to lower energy costs .
Speaker #5: In Europe . The quarter over quarter sales decline was driven by lower volumes across the three product categories , with silicone beetle , silicone based alloys , and manganese based alloys declining 25% , 19% , and 21% , respectively .
Speaker #5: Volume declines were partially offset by higher average selling prices , with increased by 1% , 2% , and 1% for silicone , metal , silicone based alloys , and manganese alloys , respectively .
Speaker #5: Adjusted EBITDA decreased 15% from the prior quarter to $18 million , versus $22 million in Q2 . Adjusted EBITDA margin improved slightly to 5.9% , driven by cost improvement in the silicone , metal , and silicone based alloy segments .
Speaker #5: This was partially offset by the manganese segment . Next slide please . Moving to product segment breaches silicone metal revenue declined 24% sequentially to $99 million in Q3 , driven by a 25% decrease in shipments to 34,000 tonnes , partially offset by a 1.2% increase in average selling prices to $2,950 .
Speaker #5: Volume decline was driven by weak demand and dumping of Chinese silicone , metal in the European region . As Marco mentioned earlier , silicone EBITDA increased 81% to $12 million compared to $7 million in Q2 , with margins increasing to 12% , up from 5% in the prior quarter .
Speaker #5: The margin improvement was driven primarily by lower energy costs in Spain and lower overall cost in North America . Next slide please . Silicone based revenue declined 17% to $92 million , driven by a 19% sequentially decrease in volumes to 43,000 tonnes , partially offset by a 2% increase in average selling prices to 2149 per ton .
Speaker #5: Adjusted EBITDA increased significantly to $12 million in the third quarter , up to 73% from $7 million in the second quarter . Margins expanded to 13% , compared to 6% in the prior quarter .
Speaker #5: The improvement in adjusted EBITDA , margins was a result of lower energy costs in Spain , and costs improvement in France . This was partially offset by higher production costs in the US and South Africa .
Speaker #5: Next slide please . Manganese basaloid revenue declined 21% to $84 million , versus $106 million in the prior quarter . The decline was primarily due to a 21% reduction in volumes to 70,000 tons .
Speaker #5: Partially offset by a 1% increase in average selling prices to 1214 . Adjusted EBITDA in the third quarter was $4 million versus $17 million in the prior quarter , a decrease of 74% .
Speaker #5: Adjusted EBITDA margins declined to 5% versus 16% in the prior quarter . This margin contraction was primarily driven by lower fixed costs . Absorption in Spain and higher raw material costs in France and Norway .
Speaker #5: Next slide please . During the third quarter , we generated $21 million in operating cash flow , a 33% increase over the prior quarter .
Speaker #5: The improvement reflected a $17 million reduction in working capital on a cash flow basis . Energy rebates improved to $16 million from $7 million in the second quarter , while the change in taxes and others was largely due to profit sharing agreements .
Speaker #5: Based on 2024 results , capital expenditures totaled $19 million versus $15 million in Q2 . Despite the challenging market conditions , we generated positive free cash flow in the third quarter .
Speaker #5: We expect a substantial release of working capital in the fourth quarter due to our focus on inventory and early idling of production in France .
Speaker #5: Next slide please . During the third quarter , we maintained a strong balance sheet while continuing our dividend program . We are declaring a fourth quarter dividend of 1.4 cents per share , in line with the previous quarter .
Speaker #5: It will be paid on December 29th to shareholders management of record on December 22nd . We end the quarter with a slight net debt position of $5 million , compared to a positive net cash position of $10 million in Q2 .
Speaker #5: Adjusted gross debt increased marginally from $125 million in the second quarter to $127 million in the third quarter, while total cash declined from $136 million in Q2 to $122 million in Q3.
Speaker #5: Our year to date CapEx was $48 million , at this time , I will turn the call back to Marco .
Speaker #4: Thank you . Beatrice , before opening the call to Q&A , I'd like to provide . Key takeaways from today's presentation . We expect trade measures in the US and the EU to improve the business environment significantly in 2026 .
Speaker #4: The US Ferrosilicon case , combined with tariffs and the silicone metal cases , preliminary determinations are encouraging , positioning US well in North America , the EU safeguards are expected to be announced later this month , and we are optimistic they will have a similar impact in Europe .
Speaker #4: Core shell is making significant advancements with its silicon anode battery technology and has begun shipments from the pilot battery plant and expects to begin commercial deliveries to robotics and defense related applications in early 2026 .
Speaker #4: The pilot plant battery production is progressing well , with high yields and consistent quality . We continue to focus on cash flow generation and maintaining a solid balance sheet .
Speaker #4: We expect to deliver meaningful working capital improvements in the fourth quarter as we continue to see benefits from our snop process . We signed a very competitive , multi-year energy agreement in France , which provides us the flexibility to produce throughout the year .
Speaker #4: Operator . We are ready for questions .
Speaker #2: Thank you . If you wish to ask a question , you will need to press star one one on your telephone and wait for your name to be announced .
Speaker #2: To withdraw your question , please press star one . One again . We will take our first question , and your first question comes from the line of Nick Giles from B Riley Securities .
Speaker #2: Please go ahead . Your line is open .
Speaker #6: Thank you . Operator . Good morning everyone . Guys , appreciate the update this morning . The market obviously remains challenging , but it seems like action to date is offering some support .
Speaker #6: And , you know , there could be more coming . Can you just speak to the demand signals you're seeing today and really how you're thinking about 2026 just from a volume perspective across each product category and region ?
Speaker #6: Would be great to get your thoughts .
Speaker #4: Yeah . Good morning Nick . Let me start talking . Talking about Europe . I think that the demand in Europe will be stimulated by protection of the supply chains that due has decided to protect the decisions have been made on steel very recently where they have further safeguarded European production and pending decisions .
Speaker #4: Of course are related to our products and to to aluminum . So for me , the secret of establishing demand in Europe is linked first to protection and clarity on all these points .
Speaker #4: But but we expect , like I mentioned in my speech , demand is still and still going up . And and this will drive , in our opinion , quite significant additional demand of manganese alloys and ferrosilicon talking about silicon metal in Europe , I think that the major news is related to the intention of Germany to apply as of January 1st , a new tariff on energy that is really going to boost the productivity of chemicals , steel and aluminium players .
Speaker #4: And this will drive some recovering in silicon metal on top of the other elements that I have mentioned . Talking about North America , we are on one side .
Speaker #4: Puzzled by by the fact that utilization rate of steel mills in US has gone up only 101% . Sorry . In spite of the measures the protective measures of Mr. Trump , the expectations from statistics is that demand for steel is going to go up next year , and we see that our order portfolio is getting much more robust in Ferrosilicon in 2026 .
Speaker #4: We already have this this evidence talking about silicon metal . I think that the decisions that have been made on on the case until now .
Speaker #4: Will help mainly some some price restoration volumes related to the five countries involved is about is less than 10% of the actual demand .
Speaker #4: The other key element that is going to drive demand of silicon metal in US is going to be related to whatever action the government is going to take on imports of Siloxane from China .
Speaker #4: So the overall Nick , the scenarios seems to be favorable , but there are a lot of decisions that can can influence either or demand for for next year .
Speaker #6: Mark , I really appreciate all that detail . My next question was just about operations and specifically costs . I think you've been really successful in past years of , you know , improving productivity and that flowing to the bottom line , it seems like there were some operational efficiencies targeted already .
Speaker #6: But I guess my question is how how much more could be made and what would be the impact to to EBITDA and cash flow ?
Speaker #7: Yeah .
Speaker #4: Of course , under the current conditions , since the beginning of the year , we have been focusing on on cash . As you know , last quarter of last year , we started implementing global .
Speaker #4: The target was improving in the first year , our working capital to operate the company . But at least $50 million . We have already reached 55 .
Speaker #4: And by the end of of the third quarter , and we expect to continue this effort to improve the way we operate our company on cash .
Speaker #4: As you heard from Beatrice , we are have reduced the amount of CapEx that we that we spend , we expect to be close to 60 million .
Speaker #4: This year versus the 80 , 85 million of the previous years . Of course , we never sacrifice on . But of course , we we need to watch and be selective on how we spend .
Speaker #4: We spend CapEx , especially considering that our plants are not operating at this stage on cost . There are two main initiatives . We have been implementing .
Speaker #4: We spend CapEx , especially considering that some of and the other . So every new hiring is approved by me . Either a secretary or an executive .
Speaker #4: So this is a fact . And the other fact is that we of course , we are on continuous control on on discretionary spending .
Speaker #4: And we these are the main the main areas where we are focused on .
Speaker #6: Got it . No thanks for that . Maybe , maybe just one more . If I could . You know , if we're to try and look further down the road when market conditions may have improved , you know , how are you thinking about capital allocation ?
Speaker #6: Could we see increased shareholder returns ? You've talked about growth in the past , but obviously there's been you know , we've been kind of in a cyclical trough for maybe longer than anticipated .
Speaker #6: So this would be great to get an updated view on on both of those fronts .
Speaker #5: Thank you . Nick . This is Abby speaking . I think the answer is is yes . We're going to be considering a share buybacks .
Speaker #5: I think we have been showing a prudent approach to to to to take a the we reiterate that it's not our intention at the moment to take debt to to do any shareholder buyback .
Speaker #5: But as we progress in our results , as you mentioned , when market conditions are different , of course we're going to be resuming our share buyback program and always focus on this opportunity approach .
Speaker #5: We continue to believe that our share price is a evaluated . So of course we want to be continue with our program at the right time .
Speaker #6: Got it . Very clear . Well , Beatriz Garca and the rest of the team , thanks for the update and continued . Best of luck .
Speaker #7: Thank you . Thanks , Nick .
Speaker #2: Thank you . Once again . If you wish to ask a question , please press star one one on your telephone . We will take our next question .
Speaker #2: Your next question comes from the line of Martin Englert from Seaport Research Partners . Please go ahead . Your line is open .
Speaker #8: Hello . Good day everyone .
Speaker #7: Hi . Hi . Thanks . Hey , Martin . Hey .
Speaker #8: Wanted to touch on the weakness in Chems , which was called out in the press release . And you discussed a bit on the call , but I'm curious for silicon metal volumes into the chems market .
Speaker #8: What did you see across the US and EU kind of year on year in three ? Q and what has that been trending like year to date ?
Speaker #7: I mean .
Speaker #4: One word of the question , silicon metal into .
Speaker #7: Chemical sector . Yeah .
Speaker #8: Yeah , silicon metal into the chemical sector . Yeah . What's been going on year on year and year to date within the US and the EU ?
Speaker #7: Yeah , yeah .
Speaker #4: If you talk about Europe , the the key thing is related to one , the decision of one of the major players to switch .
Speaker #7: From .
Speaker #4: Producing their own products from silicon metal in Europe to buy siloxane from China. And this is one of the major players.
Speaker #4: So silicon metal demand has gone down . The other key factor is is the impact of the polysilicon industry in Asia . And the collapse of the industry .
Speaker #4: There is caused a significant losses of volume of the European player who is supplying polysilicon to Asia . And as a consequence , lower volumes of purchased in Europe .
Speaker #4: The third element , of course , is is is demand that that is not is not improving . And the fourth element is the massive increase of imports of silicon metal in Europe coming from from China .
Speaker #4: And Angola on top of the robust imports from Norway . So this is a quick snapshot of of Europe talking about the United States , we understand that .
Speaker #4: Excluding Dow , most of the other clinical chemical players have suffered in terms of in terms of demand . And like I said , massive imports of of of Siloxane from , from China , the when you look at the volumes of silicon metal , you will see a significant increase of imports of silicon metal into the US from Brazil and and based on our understanding , these imports are mainly due to a significant improvement of the productivity of the assets of Dow Chemical .
Speaker #4: So Dow Chemical is increased . The the captive use of of silicon metal . So these are the main factors in the chemical business that I can report today .
Speaker #8: Okay . I appreciate the detailed update there . That's helpful . And I'm sorry if I missed this in the prior remarks . But are you anticipating trade actions within the US and or EU on Siloxane ?
Speaker #7: Well , of course not .
Speaker #4: Well , it's not up to me to decide . But I think there is a burning platform both in US and Europe to to consider taking some actions on sidewalks and the the problem is that as much as I know is that you have a a number of grades of siloxane and this doesn't make the anti-dumping initiative so easy .
Speaker #4: But but I cannot talk more as we are not talking about our products . Overall , for me , if you take the United States in make sense to block China on silicon metal , but then if you don't block them on on siloxane or silicones , well .
Speaker #4: The the overall measure on silicon metal doesn't make too much sense .
Speaker #8: Okay . All right . I appreciate the detail there . Thank you . And on the EU safeguards , if whatever the outcome is , if you feel if it's not sufficient to deal with the market dynamics and the lost market share with imports , I guess I'm curious , what are the next steps and is it something that could be what are your next steps as a company ?
Speaker #8: Then and then ? Is it something that can be revisited with the European Commission , and how would that timing look , if that's even a possibility ?
Speaker #7: Well .
Speaker #4: Everything can be revisited with the European Commission , but we don't have time for that . We don't have time for that . And and I am really confident that some decisions are going to be made by , by November 18th .
Speaker #4: Now , if your question is what if ? Measures are are not announced or they are not sufficient , I appreciate your language .
Speaker #4: The plan is we are ready to announce severe supported , strong anti-dumping agents , which in case would be specific on China for silicon metal on India on all the manganese product mix and Kazakhstan on Ferrosilicon , we have not launched this anti-dumping cases in in Europe because we have been dancing since May this year under the expectations that safeguards were going to announce in Europe .
Speaker #4: But the our reaction is going to be immediate . If we don't see measures , don't see measures announced , the and then it depends on what gets announced .
Speaker #4: And then we will we will have to consider what to do with our with our assets , with footprint . But this is this is the second step .
Speaker #8: Any in a scenario where the safeguards would not be sufficient for over the near term in additional action would be taken up to potentially temporarily idle assets ?
Speaker #8: I know there are many for silicon metal that are currently idled , but I guess cash costs potentially associated with that . And then anything think about like ongoing recurring .
Speaker #8: Just fixed costs that would continue on a quarterly basis .
Speaker #7: Yeah , yeah . I mean I .
Speaker #4: Before the question of Nick , at this stage , our cost actions are focused on on our freeze and discretionary spending . We have partial unemployment measures applied in France .
Speaker #4: As you know , as of the end of September , we are not producing silicon metal in , in , in France . So these are the measures of cost that we have implemented .
Speaker #4: We are implementing right now.
Speaker #8: Okay . I appreciate all the detail and considering the low volumes of costs , performance was actually rather good for the quarter . So congratulations on that front and good luck .
Speaker #4: Thank you , thank you Martin .
Speaker #7: Thank you Martin .
Speaker #2: Thank you . This concludes today's question and answer session . I'll now hand the call back to Marco Levi for closing remarks .
Speaker #7: Thank you .
Speaker #4: We we are optimistic that 2026 will bring a more robust market environment as the trade measures are implemented and trade on certainties diminish .
Speaker #4: Thank you again for your participation . We look forward to updating you on the next call in February . Have a great day .