Ferroglobe PLC

Good morning, everyone, and thank you for joining Fairglobe's fourth quarter and full year 2021 conference call. Joining us today are Marco Levy, our Chief Executive Officer, Beatrice Garcia-Cost, our Chief Financial Officer, and Benoit Olivier, our Chief Operating Officer and Deputy CEO. Before we get started with some prepared remarks, I'm going to read a brief statement. Please turn to slide two at this time. Statements made by management during this conference call that are forward-looking are based on current expectations. Risk factors that could cause actual results to differ materially from those forward-looking statements can be found in Fairglobe's most recent SEC filings and the exhibits to those filings, which are available on our webpage, www.fairglobe.com. In addition, the discussion today includes references to EBITDA, adjusted EBITDA, adjusted gross debt, net debt, diluted earnings per share, which are all non-IFRS measures. Reconciliations of these non-IFRS measures may be found in our most recent SEC filings. Next slide, please. On today's call, we will first review the business highlights for the fourth quarter and full year. We will then also give you a perspective on our operating environment and provide an update on the status of our transformation plan. Then we'll provide you an update on our financial performance and key drivers behind our results. And finally, we're going to provide a trading update before opening the lineup for some Q&A. At this time, I would like to turn the call over to Marco Levy, our CEO.

Thank you, Gurav, and good morning, good afternoon, everyone. I am really excited to present our quarterly results, which demonstrate the acceleration in earnings potential that we have been anticipating and which caps off an important year for Ferroglobe. Overall, The acceleration in our performance in Q4 is supported by strong fundamentals across all three product categories, which will further fuel performance in 2022. Moreover, the tightness in the marketplace resulting from robust demand coupled with flat to declining supply has resulted in an unprecedented increase in the index pricing for our products. primarily silicon and ferro-silicon. During the quarter and the full year, we realized only a partial benefit from this run-up in prices, particularly in silicon metal, due to the fixed price nature of most of these contracts. However, with the contracts expiring at the end of 2021, we will have increased exposure towards index-based contracts, resulting in higher pricing, driving an increase in margins and revenues. In our silicon-based alloys portfolio, we realized the benefit much quicker, given the nature of these contracts and shorter lags. And in manganese alloys, the spread is holding at very healthy levels, with support from the steel industry, which is still recovering to pre-COVID levels of production. While the broader market provides an exciting backdrop, we remain focused on the areas which are in our control. This is primarily related to our value creation areas identified as part of our turnaround plan. 2021 market marked the first year of the execution phase of the plan. We have surpassed our targets and have a great deal of momentum continuing in 2022. In aggregate, 2021 marked an important year for Ferroglobe with several critical accomplishments. We refinanced our debt and raised our balance sheet by extending maturities. We successfully raised capital to navigate a turbulent time and to fund our turnaround plan. In addition, we started addressing gaps in the business, improved processes, and drove cost reductions. All of this was done with the goal of making the company more competitive with stronger results through the cycle. During the quarter, our realized average selling prices were 19% higher in our core product categories. Furthermore, our shipments increased 14% to just over 220,000 tons across our three core product categories. This resulted in top line growth of 33% to $570 million, which is our highest quarterly sales since 2018. And we also had a record setting adjusted EBITDA of $92.8 million, which is a 147% increase relative to Q3. Despite continued high energy costs in Spain and inflationary impact on kerosene materials, we improved EBITDA margins from 8.8% in Q3 to 16.3% in Q4. This was driven by a combination of top-line growth coupled with improved utilization of our asset base, reallocation of orders to optimize economics, stronger operational performance at the firmness level, and continued cost-cutting efforts. And finally, we returned to positive free cash flow during the quarter, generating $40 million. For the full year, our sales were just under $1.8 billion, we've adjusted EBITDA of $187 million. While full-year 2021 financials show a significant improvement over the previous year, we expect to see continued acceleration as our contracts average set at the beginning of the year, reflecting the benefit of higher pricing. And furthermore, we had a number of one-off non-recurring expenses which had a considerable adverse impact on our cash flow. With these factors behind us, we look forward to building on the momentum from Q4. Step by step, we continue to strengthen the company at the core and improve our overall competitiveness to best service our customers. The value of our unique product portfolio and platform is particularly exciting against the backdrop of emerging trends, such as the focus on shorter supply chains and customer behaviors influenced by ES&J. We are entering 2022 with a strong order book, a turnaround plan that is expected to drive further efficiency and cost improvements, and an integrated approach to operate the business. Overall, we are confident the Ferroglobe is well positioned to drive accelerated growth and improve margins in 2022. Moving ahead to slide six, please. During the quarter, index price for silicon metal in the United States and Europe exhibited significant increases. with reference prices in the U.S. increasing by approximately 160%, ending the year just above $10,000 per ton. And in Europe, pricing peaked at 8,100 euro into a quarter and ended the year close to 6,100 euros, representing a 53% increase over the quarter. A combination of continued and market strength particularly in chemicals, coupled with expectations of meaningful capacity curtailments in China during the final months of the year, served as a catalyst for the price intention. Beyond the cutbacks, there are other factors, such as financial and environmental reforms, increasing raw material and energy costs, logistical issues, and higher labor costs, which are feeding into higher production costs for Chinese silicon. As the floor price within China increases, it will have a positive effect on European and U.S. indexes. Ferroglobes realize average selling price for silicon metal increased by 19%, to $2,944 per metric ton. Excluding the volumes sold to the joint venture, the average realized price has improved by 23% during the quarter. To reiterate, our high weighting toward fixed price contracts limited the upside throughout 2021. Overall shipment volumes increased by 3% to approximately 63,700 tons. Shipments during the quarter were constrained due to some operational issues and temporary production loss, such as our Beverly, Ohio facility, where there was a crane that collapsed, stopping production at two furnaces for a few weeks, as well as further containment in Spain to address rising energy costs. At the end of November, we announced the temporary idling of one furnace at our Sabon facility which has annual capacity of approximately 13,500 tons. EBITDA from the silicon metal business improved over 200% to 32.5 million. The ability to sell greater volumes at market prices had the greatest impact in the quarter over quarter improvement. The total cost impact was negative 9.1 million during the quarter. Increases in energy costs had an adverse net impact of $9.9 million on the silicon business. In Spain alone, the impact was negative $7.7 million. We have provided additional details around the cost drivers, both positive and negative, in our press release and presentation slides for everyone's reference. Looking ahead in 2022, there is a lot to be excited about. We recently restarted one of the two furnaces at our Selma facility in Alabama and have the temporary idle capacity in Spain, which can be restarted rather quickly. With strong end market support, we believe prices will remain at a healthy level through 2022. We see the chemical side of the business remaining strong, as end markets such as consumer goods and medical applications continue to drive demand. There have been some signs of caution in the aluminum sector as a result of increasing operating costs due to energy pricing in Europe. Furthermore, the auto end market continues to be impacted by lingering shortage of semiconductor chips, which in turn impacts the demand for silicon-containing aluminum alloys. This may reverse in the second half of the year. And finally, we continue to see increasing signs of recovery in the solar sector, which offers an attractive market for stronger growth, specifically with the renewed focus on energy generation in the Western world. At the moment, approximately 70% of our forecasted non-JV volumes have been contracted. Of this portion, approximately 85% of the volume is subject to index-based pricing. The remaining 15% of the committed business is at fixed pricing. Beyond the contracted volumes, there is approximately 15% of our overall volumes where we have commitment, but the pricing has not been set on all these volumes. And finally, the remaining 15% is spot business. As a reminder, our joint venture volumes are priced using a cost-plus formula. Overall, customers seem to have procured their material needs for the better part of the first half of 2022. And we will soon enter into discussions for Q3 deliveries for the freely negotiated part of our book. Also worth noting, is that we have entered into key multi-year contracts, which provide the company protection and flexibility in the future. Overall, we view this to be a very important and favorable development for the company. Turning to silicon-based alloys on slide seven. The index price of ferro-silicon had a strong run in Q4, as the market remained very tight. driven by continued steel production recovery in Europe and North America and low inventory levels throughout the value chain. In the United States, index pricing for 75% silicon contained ferro-silicon increased approximately 60%, while the price in Europe increased approximately 40%. During the quarter, the average selling price of our silicon-based alloys portfolio, which consists of ferro-silicon, foundry products, and calcium silicon, increased by 39% to $2,770 per ton. On a relative basis, the realized increase for ferro-silicon was even higher. This is partially attributable to a weighting of our iron margin specialty grade, as well as a portion of our content being reset with one month lag. During the quarter, sales volumes increased by 8%. Sales volumes of silicon-based alloys were 61,000 metric tons in Q4, about 4,200 tons higher than the prior quarter. We saw steady demand from our customers in the US and Europe. Furthermore, Our foundry sales also improved slightly on the back of gradual recovery across the global automotive and market. Our silicon-based alloys business saw a significant jump in EBITDA during the quarter, positively impacted by prices and, to a lesser extent, volumes. Some details underlining the negative 2.5 millions of net impact can be found in our release and accompanying slides. When we discuss silicon basaloids from the perspective of expected volumes for 2022, approximately 65% is ascribed to ferro-silicon, 30% to foundry, and 5% to calcium silicon. For ferro-silicon, approximately 65% of our expected volumes for 2022 are now contracted. Approximately 90% of these volumes are subject to index prices, with the remaining 10% at fixed prices. On the total expected volumes, approximately 25% has been committed, and the remaining 10% is subject to spot sales. Once again, with the visibility we currently have, we feel good about volumes and pricing through the first half of the year. Next slide, please. Turning now to manganese-based alloys. During the quarter, the average selling price increased by 9% on a blended basis to $1,720 per ton, up from $1,574 per metric ton in the third quarter of 2021. The ferromanganese business had a 6% increase in realized prices, which realized while realized silicon manganese pricing was 13% higher. Shipments during the fourth quarter were up 27%, an increase of approximately 20,500 tons over the previous quarter. Of the 97,000 tons sold, there was an even split between ferromanganese and silicon manganese. As you recall, the company was building inventory of manganese alloys in Q3 in anticipation for this demand pickup, as steel producers delayed some shipments during the summer months. During the quarter, we temporarily curtailed some capacity in Spain due to the high energy costs and reallocated those sales to our facilities in Norway and France. The EBITDA contribution from our manganese-based alloys segment was 28.6 million in Q4 versus positive 22.5 million in the third quarter. Volumes and pricing positively impacted the quarterly results by 6.5 million and 12.7 million, respectively. On the cost side, there was an adverse net impact for the quarter of 13 million. The manganese portfolio continues to benefit from favorable spread, and we expect this continue into the first half of 2022. Approximately 60% of our expected 2022 volumes are contracted. Next slide, please. The turnaround plan has been a critical driver to our success in 2021. It was the cornerstone of the refinancing process we underwent in 2021, and it has engaged various stakeholders' confidence in our ability to turn around the company. Furthermore, the plan was designed to generate the cost savings which gave us the means to navigate a difficult stretch, and the financial targets are sized to derive this company through the cycle. Our target for the first year of the execution of the plan was $55 million of in-year contribution from cost savings and commercial excellence and $49 million of working capital benefit. We ended 2021 capturing $58 million EBITDA, benefit from cost savings and commercial excellence, and $70 million of working capital improvement, significantly outperforming our target. On a go-forward basis, we look to build on this momentum and will continue to feed the pipeline with new initiatives. Our goal is to have a run rate of $140 million by the end of 2022. I am really proud of our organization to drive change at all levels in reaching these targets. We are knocking down walls and rebuilding the business from the ground up to the aim of optimizing to maximizing the platform. There is a lot of work left to be done, but our first year results certainly motivates us to keep going. I would now like to turn the call over to Beatriz Garcia Cos, our Chief Financial Officer, to review the financial results in more detail.

Thank you, Marco. I will begin by reviewing the income statement in slide 11. Sales of approximately $570 million during Q4 were 33% higher than the $429 million of sales on the prior quarter. We ended 2021 with sales of approximately $1.8 billion, up 55% over the prior year. The improvement in our top line was the result of an increase in both our shipments and average realized across the portfolio. During the quarter, our cost of sales as a percentage of sales was 65% down from 69% the prior quarter. The lingering impact of higher energy costs, particularly in Spain, and inflationary headwinds in our raw materials were offset by a combination of top-line growth and our cost-cutting efforts at the facility and corporate levels. For the full year, we had a cost of sales as a percentage of sales of 67%. Operating income increased by 26% during the quarter. The approximately $8 million increase is attributable to a mark-to-market adjustment of the fair value of our CO2 credits. There is an offsetting decrease of approximately $8 million in our operating expense line related as well to the back-to-market adjustment to the CO2 accrual. Staff costs increased by 43% in Q4. Please keep in mind that in Q3 we had a partial release of the accrual related to ongoing asset restructuring in Europe. The Q4 figure reflects the accrual and adjustment of the bonus and then the long-term incentive plan. Operating profit in Q4 was $64.9 million, up 446% from the $11.3 million realized in Q3. During the full year 2021, our operating profit was $40.4 million compared to an operating loss of $184.4 million during the full year 2020. The net financial expenses was $12.4 million during the fourth quarter, reverting back to more normalized levels. When you compare it quarter over quarter, keep in mind that the Q3 expense had the accounting impact of the refinancing, which yield a significantly higher number. The net profit was positive $65.1 million in Q4 compared to a net loss of $97.6 million in Q3. For the full year, we had a net loss of $103 million, which compares to a net loss of $250 million in 2020. Next slide, please. Quarter over quarter, we had a significant increase of 147% in our adjusted EBITDA to $92.8 million. with the adjusted EBITDA margin nearly doubling to 16%. As Marco discussed earlier, we had positive contributions from both shipment and realized pricing, which combined contributed $97.7 million. On the cost side, energy had an adverse impact of $26 million. The impact of energy in Spain alone was $25.9 million in Q4. partially offset by improvements in North America and South Africa. The impact of CO2 accrual was another $5.5 million, with silicon metal and manganese alloys having an adverse impact, which is partially offset by a positive impact from silicon-based alloys. General increase in raw material had an impact of $4.1 million, while the annual accounting impact from pension plans in France has a positive contribution of $3.9 million. Staff costs at our corporate offices increased by $10.5 million. Approximately $8 million of this is attributable to the staff cost increase described on the prior slide. Additionally, there is approximately $2 million of accrual for OBIT-related costs. Next slide, please. Slide 13. For the full year, adjusted EBITDA improved from $32.5 million in 2020 to $186.6 million in 2021. The most significant factor that impact this swing was the 28.8% increase in average selling price across core products. were adversely impacted by higher energy prices of $111.2 million, $19.6 million of which is tied to Spain. Additionally, higher raw material prices impacted by $53.3 million, higher fixed costs in materials and logistics, which had an adverse impact of $19.9 million, and higher costs due to increased production of byproducts and out-of-spec materials. resulting in a cost of $15.3 million. We have an extremely focused on our corporate expenses, focusing on both discretionary and non-discretionary spend. Approximately $8 million of these is tied to bonus, accruals, and incremental $2 million is related to audit costs. During 2020, we had a number of non-recurring items, including the release of several accruals and provisions. Collectively, this impacts the year-over-year adjusted dividend by $21 million. Next slide, please. Turning now on slide 14, I will review our balance sheet in greater detail. Total cash increased by approximately $21 million to $117 million as of December 31, 2021. Our unrestricted cash balance was approximately $114 million, up from $89 million in the prior quarter. Total assets were approximately $1.5 million at the end of 2021, which was $105 million higher than the prior quarter, mainly because of our quarterly profit. Adjusted gross debt increased marginally, with a year-end balance of approximately $508 million, while our net debt balance decreased to $391 million. Please note that these figures are year-end balance and do not include the recently announced SEPI loan in Spain. While our relative leverage ratios continue to improve, we are focused on deliberating the balance sheet as cash generation from the business begins to accelerate. Ferroblox working capital increased by approximately $69 million during the fourth quarter. This is primarily attributable to an increase in account receivables in line with our top line growth. Next slide, please. While we have provided all the quarterly details for 2021 on this slide, let me first bring your attention to the Q4 2021 figures. Our cash flow from operating activities returned to positive territory, contributing $21.7 million. So in the quarter, despite an increase in working capital. Cash flow from investing activities was negative $7.5 million, which is attributable to a planned increase in capex expense. And lastly, cash flow from financing activities was positive $7.4 million for the quarter. The increase in overall activity enabled us to send more invoices into the account receivable factory facility in Europe. Free cash flow for the quarter was $14.2 million. For the full year 2021, our cash from operations was negative $1.3 million, primarily due to the investment in working capital of $171 million. The negative $24 million of cash flow from investing activities relates to capital expenditures incurred in our plans. And finally, cash flow from financing activities was $10.5 million for the year. Despite the comprehensive financing completed in 2021, the cash impact reflects on the interest costs and fees associated with the debt and equity financing. Free cash flow for the year was negative $25.2 million. Next slide. On February 16th, we announced that the Spanish Fund for Supporting Strategic Companies has approved a 34.5 million euros loan. These loans are part of the SEPI fund intended to provide assistance to non-financial companies operating in strategically important sectors within Spain in the wake of the pandemic. The loans are funded using a dual-transit structure and are expected to be funded around the end of Q1. 17.25 million matures in February 2025 and 17.25 matures in June 2025. 16.9 million euros of the loan covers a fixed interest rate of 2% per annum. Interest on the remaining 17.6 million euros is calculated as IVOR plus a spread of 2.5% the first year, 3.5% in the second and third years, and 5% in the fourth year, plus an additional 1% payable if the result before taxes of the beneficiaries is positive. At this time, I turn the call back to Marco.

Thank you, Beatriz. Referring now to the trading update on slide 18. Ferroglobe does not regularly provide quarterly or annual guidance, nor does it plan on doing so in the future. Given the unprecedented pricing environment and particularly the reset of our silicon metal contract, there have been questions around the implication on our financials. In order to provide some clarity given the unique circumstances, we want to take this opportunity to comment on a few dynamics we are currently encountering and provide this one-time flash number for January. Our unaudited adjusted EBITDA is estimated at approximately 74 million for the month of January 2022. During January, the top line benefit is largely attributable to the robust pricing environment across the product portfolio in Q4, which impacts all our index-based contracts in Q1. As a reminder, Our index-based silicon metal contracts are reset on a quarterly basis and are tied to the per year quarters average index pricing. For ferro-silicon, the lion's share of our annual ferro-silicon contracts are index-based. While most of these are recalculated on a quarterly basis, some have a month lag. For our manganese-alloys portfolio, the majority of business gets repriced on a quarterly basis, and our top line will evolve with the market, plus the inerrant lag in our industry contracts. And on the cost side, we continue to be challenged by higher energy costs and inflationary impact on selected inputs. Overall, we had margin expansion during the month of January, relative to Q4 levels. Looking beyond January, we continue to face pressures from energy and inflation. Additionally, the nature of our business inherently exposes us to new risks tied to geopolitical, regulatory, and natural events. The heartbreaking developments in Ukraine over the past week are being monitored very closely as Russia, Ukraine and the broader CIS region are important to the silicon, ferroalloys and manganese alloys industry. The conflict has already had an immediate impact in driving oil and global energy prices higher. This has important implications for our business and the continued exposure we have in Spain. Beyond energy, There is a direct link to Russia and Ukraine relating to specific inputs we procure, such as metcock, anthracite, magnesium, and electrodes. Ferroglobe will continue to comply with all international sanctions against Russia and Russian entities abroad. The inability to source materials from the region can have an impact on our ability to continue certain operations. Russia and Ukraine are sizable producers of our products and depend on the export market, hence we are monitoring the implications on deliveries. In the near term, should the inherent obstacles posed by the conflict lead to difficulty by producers to meet their obligations, we can expect some tightness in the market. And lastly, we are monitoring the additional impact of this conflict on the global supply chains, which were already under pressure. Management continually tracks development in the nation's conflict in Ukraine and is committed to actively managing our response to potential distributions to the business, but can provide no assurance that the conflict in Ukraine or other ongoing headwinds will not have and material adverse impact on our business, operations, and financial results. Broadly, investors should also consider the risk factors and other disclosures in our annual reports on Form 20F and other filings with the U.S. Securities and Exchange Commission. With that update, I will turn the call over to the operator and open the line for questions.

Thank you, ladies and gentlemen. We will now begin the question and answer session. As a reminder, if you wish to ask a question, please press star and one on your telephone keypad and wait for a name to be announced. Once again, if you wish to ask a question, please press star and one. The first question comes from Martin Englert from Seaport Research. Please ask your question.

Hi. Good afternoon, everyone.

Hi, Martin.

On the electricity costs across Europe, can you provide an update regarding Spain and potential move to a longer-term PPA agreement, or do you feel that those prospects maybe have diminished given the ongoing conflict? And maybe just a broader update across some of the other countries as well, France and Norway.

We'll start providing some qualitative comments first. Looking at Spain, the cost of energy has been extremely volatile. If you look at the evolution in the market in the second half of last year, it moved from a level of 50, 60 euros per megawatt, touching the 400 euros per megawatt ballpark. Then it readjusted down, and due to the recent unfortunate events, the price bumped up north of €340 for megawatts. In terms of market, we live in an extremely volatile market, and we need to keep on addressing the issue on how to operate our plants. Concerning PPAs, we have been active looking at opportunities. There are definitely small opportunities available in 2022 for the second half, but they are small, while there are broader opportunities for 2023 on. So this is pretty much the situation. Looking at the other countries, we are covered by contact for energy on all the other major geographies where we operate, like France, United States, and South Africa. So this is why my speech I have stressed the situation in France, in Spain, sorry.

Okay, thank you for that detail there. Looking across silicon metals, silicon alloys, and manganese, there were some positive surprises in the fourth quarter volumes, at least versus what I had modeled there. But taking into account your augmented regional capacity in 2022, how should we think about volumes across the business segments here?

Yeah, I think you should, well, first of all, the comment that I want to make is that in quarter four, including the incident in Beverly and the capacity adjustments in Spain, our assets have been more reliable than in quarter three. Overall, looking at the volume projections for 2022, be rather flat across the various value centers. The only exception is related to the additional volumes that we're going to produce in Selma, which are silicon-related. Another observation that might be useful, you notice the stream I volumes, that's the history of manganese alloys in quarter four. This has been heavily impacted, like I said, by more than 20,000 tons of orders that have been shifted from quarter three to quarter four. So you can consider the quarterly quantities of manganese alloys, sorry, volumes of manganese alloys around 75,000 tons per quarter.

Thank you for that. And more specifically, maybe on silicon metal with the puts and takes with some ramping capacity here in Selma and then the augmented capacity in Spain. But on a forward basis, net-net, does that look like something like $60,000, $65,000 per quarter as we move through 2022?

You are correct. You're right on this talk.

Okay, got it. Thank you for that. One other one, if I could. Given the situation in Ukraine, Russia, can you talk in a little bit more details about the puts and takes covering the upstream input supply, some of the risks there, and the potential implications on the alloy prices? I know you've covered some of this in the prepared remarks and release, but any more detail that you can provide is helpful. Thank you.

Yeah, well, first of all, talking about the input, everybody knows that Russia plays an absolutely critical role in the supply of gas to Europe. And you're seeing the immediate reaction of the market to the war. Talking about raw materials, Russia is a big supplier to the industry of electrodes, anthracite, matte coke, and magnesium as well. So some critical raw materials for these products. And so be the The uncertainty is around the supply of these key raw materials to our industry. In particular, most of our plants in the United States run based on carbon electrodes imported from Russia. But we have mitigations action since day one. We have identified some mitigations initiatives. As you know, we are back integrated with electrodes produced in China. So we are increasing our production of electrodes in China to mitigate this this specific issue of electrodes. Another plant which is particularly impacted on the short term is a plant in France, in Morichet, and we are trying to address the issue of the electrodes by purchasing electrodes in advance and making all the possible creative solutions to get the materials that we have ordered arriving on time and store some of the electrodes in Mauritius. For all the raw materials that I have mentioned before, since day one and before, we have put in place a mitigation plan to look at alternative supplies. And also, due to the improved cash situation of the company, we have been putting in place plans to buy raw materials in advance and build some stock.

Thanks for the detail there. Can you talk about some of the looking further downstream at ferro-silicon, manganese alloys, and some of the regions there, Russia, Ukraine, I think they're pretty dominant producers in the region with ferro-silicon. Maybe you're of the regional capability. Manganese alloys in Ukraine, I think it's over 40%. And Russia is also a key exporter of ferro-silicon into the U.S. market there. I guess when you weigh the puts and takes with the risks around the input materials and consumables, but they're maybe some tightness, I guess, in the regional and or traded selling prices for some of these alloys across two-year segments, right?

Yes, you're absolutely right. Russia is a major producer of ferro-silicon. they produce also silicon, while in Ukraine you have quite a powerful center of production of ferro-silicon and manganese alloys. Clearly, there is uncertainty on the supply of raw materials and electrodes. By definition, there is uncertainty on the overall supply, particularly out of Ukraine. of these products, but also out of Russia, depending on what's going to happen with the overall banking system. So the situation is too fresh to make a weighted assessment of the plus and the minuses, but to cut it to the point Our impression is that we will have opportunities in the market. The point is, are we going to be able to procure all the raw materials to be able to supply these quantities? And let's not forget the evolution of the energy cost and what is going to be the sustainability of our end markets to absorb the cost of energy.

Thanks for all your thoughts there on the incremental color. Congratulations on the record results in navigating the dynamic environment.

Thank you, Martin.

Thank you. Dear participants, once again, if you wish to ask a question, please press star and one on your telephone keypad. The next question comes from Phil Larson from Mill Street Capital. Please ask your question.

Hi, everyone. Congrats on a great quarter and appreciate all the color around kind of the Russia-Ukraine situation. I just had a quick question on the new Spanish loan that's $35 million. Could you share with us the planned use of proceeds for that?

Yeah, thank you for the question, Beatriz speaking. So as I mentioned during the call, this is a loan that we get from the Spanish government, from a fund that the Spanish government is managing that is called CEPI, and tries to fund strategic companies for Spain. And as such, we expect to use the funds and spend the funds in Spain. to boost our operations in the country.

Okay. I mean, do you have any more detail you could share on that? Are you using it to offset the energy costs? Or, you know, what specifically are you hoping to do with that money?

Well, yeah, of course, part of the would be used to fund our working capital needs in Spain. but not directly maybe linked to the electricity if I may say that.

Okay. Thank you.

You're welcome.

Thank you. The next question comes from line of David McFadden from Eigen Assets Management. Please ask your question. Hey.

Thanks for the call. Can I just ask a little bit more on the Ukraine-Russia dynamics You obviously talked about how you're trying to mitigate it, you know, buying raw materials in advance, etc. But should the situation go on for a long time? Do you have a time in your head as to how long this could go on before it causes a real issue with lack of access to Russian supply of raw materials for your business? In terms of the mitigation plans that you've put in place so far, have you got enough mitigates in place to be able to run the business as you'd expect along the lines of the business plan that you put out recently?

Yeah, I mean, you ask a very difficult question because it's... Nobody knows how the situation is going to evolve. Hopefully, I think everybody should hope for as quick as possible resolution of the current situation. But going a little bit more in detail, overall, we have, talking about our sales, we have no direct business in silicon metal or ferro-silicon or manganese alloys to this kind of geographies. We have minor sales of fine business only. So on the revenue side, there is no big impact. Talking about raw materials that we buy from Russia, We buy medcock that is used mainly for the manganese production. So medcock goes mainly to our facilities in Dunkirk and Moerana. We buy anthracite. Anthracite is used as well for the production of manganese, for manganese alloys. A large part of our carbon electrodes comes from Russia, particularly, like I mentioned before, to supply the United States. Magnesium, we buy approximately 25% of our needs from Russia. We buy graphite electrodes and some electrode paste as well. Talking about The ferroglobe assets that are impacted by these raw materials, when you talk about electrodes, we're talking mainly, like I said, US. So our plants in alloy, Beverly and Selma in France, Montrachet. When I talk about manganese alloys, Dunkirk is the main facility that could be impacted. Magnesium is mainly our facility in Beverly, Ohio. The issue of lack of electrode paste impacts Bridgeport, Becancourt, and European plants. So this is the situation. Now, we have developed a contingency plan for each one of these plants, trying to do the following things. One, try to get the materials that we have ordered as soon as possible at our plants to build some stock. Second, we have alternative suppliers, so we are, of course, moving volumes to alternative suppliers and and these are the main two initiatives that we have all across all across these critical critical raw materials now of course with with time in case the situation lasted for a long time and we couldn't get supplied from from Russia we need to make sure that we implement as fast as possible our mitigation plans and we increase the supply from alternative geographies.

Thanks. That's useful. From your alternative suppliers, would you still be able to run the business at a volume level that you ran it in 2021?

Yeah, I do not have a final assessment of this situation because this situation is, what, nine days old? But this is our objective.

No, I understand. It's a tough situation. It's very difficult for everyone to parse out exactly how it might pan out and how long it might take. That's useful. No, thanks. I just, the only other thing I would ask you quickly on is, obviously, you've had, you know, put some takes from, you know, urban credit costs, CO2 credit costs. How much, you know, do you have an outlook for that impact on the business for the rest of this year? Obviously, the index has moved around a little bit, but, you know, Do you have an outlook for whether, you know, those prices are going to continue to renovate at the time of coming back to business through the next year?

So you refer to CO2 credits, right? Yes. Your question is around that.

Yep.

Sorry, on CO2 credits, sorry, I didn't understand properly your question.

Just the outlook for the costs of CO2 credits potentially for the business this year, view on potential pricing and how that exactly works on how it impacts each segment.

We expect our CO2 credits to, or need to cover more CO2 credits than last year. Then, this being said, the CO2 value is also displaying a very, very high volatility and is impacted also by the current prices. And today it's trading around 66 euro per ton of CO2. One month ago, or a few weeks ago, we were at 95. A few months before, we were at 65. So there's a very, very strong volatility, which makes your question fairly difficult to answer.

Yeah, no, that makes sense.

It's a tricky environment, all these costs. OK, fine. Thanks.

Thanks very much.

Thank you. There are no further questions. I would like to hand the conference over to your speaker, Marco Levi, for closing remarks. Please go ahead.

Thank you. This concludes our fourth quarter and full year 2021 earnings call. While I am pleased with our accomplishments and performance in 2021, particularly given where this company is coming from, I recognize that there is tremendous more value to unlock. We look to build on the current momentum and expect a significant improvement in the company's performance in 2022 as we continue to execute on our near-term strategy and aim to create value for all our stakeholders. Thanks again for your participation. We look forward to hearing from you on the next call. Have a great day.