This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk10: Good morning, ladies and gentlemen, and welcome to Farrow Globe's second quarter 2022 earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will be given at that time. As a reminder, this conference call is being recorded. I would now like to turn the call over to Gaurav Mehta, Farrow Globe's President of North America and Executive Vice President of Corporate Strategies, Technology, and Investor Relations. You may begin.
spk06: Good morning, everyone, and thank you for joining Fairglobe's second quarter 2022 conference call. Joining me today are Marco Levy, our Chief Executive Officer, Beatriz Garcia-Cost, our Chief Financial Officer, and Benoit Olivier, our Chief Technology and Innovation Officer. 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, this discussion includes references to EBITDA, adjusted EBITDA, adjusted gross debt, net debt, and adjusted diluted earnings per share, which are non-IFRS measures. Reconciliation of these non-IFRS measures may be found in our most recent SEC filings. At this time, I would like to turn the call over to our CEO, Marco Levy. Slide four, please.
spk01: Good morning or good afternoon, everyone. Today, I'm really thrilled to present our second quarter results, which set a new company record in terms of our quarterly revenues, adjusted EBITDA, margins, profitability, and net debt level. In fact, the second quarter marks the sixth consecutive quarter dating back Q4 2020, where we have consistently improved our performance in areas such as sales and adjusted EBITDA. Please keep in mind that adjusted EBITDA was negative in 2019 when this management team took over. I am extremely proud that we have been able to deliver adjusted EBITDA improvement in nine out of the last 10 quarters, despite challenges posed by COVID, the energy crisis, and most recently the Russian-Ukraine conflict. These stellar quarterly results are a reflection of the strong performance across our portfolio of products, coupled with the ongoing focus on cost reduction, improved operational flexibility, and quicker response to capitalize on market opportunities. We have been pretty clear on our priorities, and I am pleased that we are delivering on all fronts. In fact, we are excited to be over-delivering in some areas. For example, we continue to uncover new pockets of value. During our investor day a few weeks back, we announced our revised target of $225 million of run rate EBITDA benefit from the various transformation areas. Specific to the second quarter, our revenues increased 18% to $841 million, and we achieved adjusted EBITDA of $303 million, an increase of 26% over the previous quarter. Our adjusted EBITDA margin further improved by 234 basis points to a 36%. And our earnings per share on a fully diluted basis was positive 98 cents, a 23% increase over 80 cents per diluted share we delivered last quarter. Moreover, we continued to improve our cash generation. As a result, our net debt at June 30 was 194 million, the lowest in the company history. With the acceleration in cash generation, we repurchased some of our senior nodes during the quarter and subsequently closed on the redemption of our 9% super senior nodes in July. Overall, our business continues to perform well across the portfolio. We are vigilant that the macro environment continues to remain uncertain with high inflation and the continued energy crisis posing inherent headwinds. We expect to generate solid cash flows into the second half of the year, despite this lingering headwinds. Before we move on, I want to highlight the positive development relating to our energy costs, specifically in France. While we have fixed energy prices in France this year, in May we received notification from our energy provider that the French government decided to increase the relative portion of RN, which lowers our realized cost of energy. Hence, we received a net benefit of approximately $31 million this quarter. Approximately 20 millions of this impact was realized in our P&L this quarter, with the remaining amount being capitalized as inventory, which will be realized later in the year. To be clear, this is not a one-off benefit. We anticipate a comparable adjustment to our energy cost in France for the second half of the year as well. Additionally, our fixed price contract in France provides some insulation from the current droughts and potentially other factors. In the event there is a shortage of power, We also benefit from our unique ability to quickly modulate production and redirect power back to the grid at an attractive rate, albeit reducing output. Moving to slide five, please. Let's talk about silicon. Our silicon metal business had another strong quarter on the back of solid supply demand fundamentals. The index pricing in the U.S. Europe dropped during the quarter, albeit by different levels. The U.S. index held rather flat through May before seeing a decline in June. Nonetheless, the U.S. ended Q2 with pricing above $8,700 per ton and has held flat since. In Europe, the index actually increased until early June, reaching 4,800 euros per ton before ending the quarter just over 4,000 euros per ton. Overall, we remain encouraged with the pricing environment and need to put these pricing levels into perspective relative to historical levels. After hitting unprecedented levels at the end of 2021, the pace of decline this year has been much slower than what was initially expected by CRU, which is positive for our results. Furthermore, given our exposure to index-based pricing, we are getting the benefit of higher realized prices. In other words, the higher pricing average in Q2 will positively impact us during the third quarter. Our shipments increased to approximately 63,000 tons during the quarter, This was in part attributable to strong demand, as well as the restart of the second furnace at the Selma facility during the quarter. In terms of end market demand, the chemical side continues to be the strongest across our core geographies. The aluminum sector continues to face headwinds from higher energy prices in Europe, as well as continued supply chain disruption, adversely impacting auto demand. Initially, we were hopeful for some recovery on the automotive side during the back half of the year. Given the continued uncertainty around the energy and the current macro picture riddled with higher interest rates, we are not factoring in any further recovery in the auto end market for this year. I will come back to some interesting developments on the photovoltaic later in today's presentation. we saw a significant improvement in the contribution from silicon metal. Silicon metal revenues increased 13.7%. We've adjusted EBITDA increase by 15.5%. Margins for this part of the business improved further, reaching 49.2% in Q2. On the cost side, we benefited from the decrease in energy costs in France as detailed on the slide. While our average realized cost of energy in Spain improve over quarter, the volatility continues. Just last week, the energy price were back above $300 per megawatt hour. We are seeing companies along the entire value chain approach the backup of the year with more caution. While there are pockets of demand correction, We are seeing the supply-demand tension holding, supporting favorable pricing levels. Once again, most of our sales for this part of the business are index-based and will benefit from the strong Q2 pricing level. Slide six, please. Let's talk about silicon-based alloys. The silicon-based alloys product category was the stronger performer during the quarter. Our sales grew 11.5%, while adjusted EBITDA for this product category grew 23.9% during the quarter, resulting in adjusted EBITDA margins of 41.1%. Sales volumes were flat quarter over quarter, but we did realize an 11.3% pricing improvement, which was primarily the result of the Russia-Ukraine conflict. Demand for our silicon-based alloys was strong across the U.S., Europe, and South Africa during the quarter. In fact, we could have probably sold higher volumes, but with Spain operating at minimal load, our total shipments were flat quarter over quarter. Looking into the back half of the year, we think our customers will be purchasing with greater caution as steel capacity, particularly in Europe, is being curtailed. Overall, we will continue to drive our strategy to orient this portfolio of products to our higher margin specialty products and toward higher priced foundry products. Moving to slide seven, please. Let's talk about manganese alloys now. This part of our portfolio has been impacted by the conflict as Ukraine is a major supplier of manganese alloys into Europe. As we entered the second quarter, we quickly picked up on the uncertainty that was present given the conflict, and we quickly ramped up production to capitalize on the situation. During the quarter, we had a 29% increase in shipments to approximately 97,000 tons. Likewise, we continued to get some pricing appreciation with the average realized price increasing 3.2% during Q2. Overall, our sales increased 33% while adjusted EBITDA grew 61.4% to $32.9 million. Margin expanded by 300 basis points to 17.1%. Looking ahead, we expect volumes to revert back towards recent historical levels. Many still customers certainly voiced caution during the recent quarterly calls. This sentiment, coupled with continued higher energy prices and other input costs, puts us in a more prudent state, and we will manage the asset portfolio responsibly. Overall, a strong performance by all three product categories. Now, I would like to turn the call to GravMeta due to connectivity issues with my CFO, Beatriz Costa.
spk06: Thank you, Marco, and good morning, good afternoon all.
spk02: I think I can talk. Can you hear me?
spk06: Yes, please go ahead, Beatriz.
spk02: Yeah, okay. Thank you very much. I sort out the connection. Thank you, Marco, and good morning or good afternoon all. Please turn to the income statement on slide nine. During the quarter, our top line grew by 80% to a record $841 million. driven by strong revenue across all our product categories. Silicon metal and manganese-based alloys experience volume growth over the first quarter, while a stronger pricing in silicon-based and manganese-based alloys contribute to higher revenues. Cost management has been a priority, and during the quarter, we continue to drive cost improvement despite high inflationary pressures and higher energy costs in Spain. As a result, our cost of sales improved to 44% from 48% in Q1. Operationally, the plans run well during the quarter with minimal disruptions. Keep in mind that we are constantly reprioritizing our capital expense this year, and so far this appears to be working quite well. After reporting record adjusted EBITDA margin of 33.7%, In Q1, our Q2 adjusted EBITDA margin improved further to 36.1%, up 234 basis points over the prior record quarter. Our diluted earnings per share increased to 0.98 in Q2, up 23% over the 0.80 reported in Q1. Next slide, please. Our adjusted EBITDA increased by $62 million during the quarter to $303 million. The largest driver of this was the growth in volumes, contributing approximately to $50 million, and to a lesser extent, the improvement in pricing in some product areas, which contribute $13.4 million. On the cost side, we faced inflationary pressures across a number of key inputs, such as electrodes, paste and coal that said we were able to offset more of the these increases with the positive energy adjustments in france which get back approximately 20 million dollars in q2 as mentioned earlier we will continue to benefit from this contract through the second half of 2022. during q2 the overall impact of energy prices in spain was positive 5.7 million quarter over quarter basis, as our average realized cost of energy in Spain improved by approximately 15%. We continue to face a lot of volatility in energy prices in Spain into the current quarter. Slide 11, please. Our strong performance in Q2 drove a significant increase in our cash balance to 307 million, up 131 million from the prior quarter. With improvement in our cash balance, our net debt was $194 million at quarter end, which implies a net leverage ratio of 0.16. Our gross debt balance was $500 million at quarter end, which remains relatively high compared to our $200 million target. Significantly, the leveraging of gross debt remains a top priority for us. The value of our assets total $1.9 million, out of which the book value of equity was $637 million. We have set a target for working capital as a percentage of sales at 21%. During the second quarter, we were slightly below this level at 20.4%. Slide 12, please. We ended Q2 with an all-time high cash balance of $307 million. If we layer in our new and drone ABL, the liquidity was over $400 million at quarter end. Our debt debt was also at the lowest point in company history at $194 million. The gross debt amount, $500 million, reflects the $90 million of open market repurchase of our 9.375 senior notes during the quarter, but does not reflect the successful redemption of the 60 million of 9% super senior notes, which occur only in July. Next slide, please. During Q2, we generated record operating cash flow of $165 million, a significant jump from 66 million in Q1. It's also the third consecutive quarter of positive operating cash flow. Our strong operating cash flow was driven by robust earnings, partially offset with a cash consumption for working capital of $91 million, which is meaningfully lower than the $168 million cash consumption for working capital in Q1. During the quarter, the actual cash impact of our capex spent was $13.7 million, up from $9.1 million in Q1. The actual CAPEX expense for the first half totaled approximately 31 million, with the cash impact being 23 million. We are maintaining our CAPEX target for the year at $75 million. Please keep in mind that the timing of the actual cash flow impact of the CAPEX expense may differ from the balance sheet impact. In the second quarter, our net cash flow was $136 million, and free cash flow total 151 million. Going forward, we are focused on keeping our working capital around the 21% of sales level. Slide 14, please. In addition to the record financial results, we successfully executed a number of initiatives aimed at strengthening our balance sheet. For some time, we discussed having back an asset-based revolver which was part of our capital structure prior to the 2021 refinancing. On June 30th, we announced a new $100 million facility, which bolsters our liquidity by leveraging our account receivables and inventory in North America. The new facility was drawn at closing and bears an attractive rate base on software plus a spread of 150-175 basis points. In addition to the leverage of debt, we also seek to lower our cost of capital, and this is an initial step. In terms of the leveraging, we repurchase approximately $90 million of face value of the 9.375 senior nodes in the open market during the month of June at an average price of 101. And subsequent to quarter end, we successfully redeemed the entire $60 million of our 9% super senior notes in July, further supporting our priorities in terms of gross debt reduction. As we generate strong cash flows and lower our quantum of debt and cost of capital, the credit profile of our company is improving. In fact, Moody's Credit Agency upgraded the corporate family rating to B3 in June. and upgraded the 9.375 senior notes due in 2025 to be three in August. This is a testament to the work we are doing and the execution of our plan. Overall, the momentum continues to build. We are proud of our achievements and feel the company is in a great position to thrive. At this time, I'll turn the call back over to Marco for a few updates on a few noteworthy corporate matters.
spk01: Thank you, Beatrice. Now turning to slide 16, please. As you have just heard, there is a lot to be excited about us. You see the trajectory of our financial performance. Beyond the record, the results, we have also made some tremendous advancements in other areas, some of which I would like to highlight. During our recent investor day, we stressed the significance of our transformation plan in terms of the value creation, but also with regards to the capabilities we are developing. As we have now passed the 18-month mark in the execution phase of this plan, we are advancing at a faster pace than anticipated. But more importantly, we are identifying new pockets of value throughout the organization. As a result, we revised our run rate target to $225 million, up from the initial target of $180 million by 2024. We have also discussed our inaugural ES&G report on recent calls, and I am proud to announce that report has been published last month. If you have not already seen it, please visit our corporate website and look under sustainability for the full report. Ferroglobe is 100% committed to ES&G, and this is an important milestone in the journey for our company. I would like to thank our organization for their dedication in this critical area and continued hard work as we transition from the planning to execution phase to reach our targets. On the product innovation side, We are moving forward each day recognizing the criticality of silicon metal for energy transition. We recently announced the milestone of industrial production of up to 99.995% purity silicon at our plant in Montrachet. The nominal capacity is 1,500 tons per year. This is based on a proprietary technology, which is very cost-effective. and environmentally friendly, as it doesn't use any chemical stream and has a very high processing yield. We also commissioned and started up the first micrometric milling facility in our Ferroglobe Innovation Center in Spain, in Sabón. Here, the nominal capacity is 300 tons per year, and we designed it to offer maximum flexibility while ensuring high purity levels in order to tailor solutions for our customers. These volumes are not big, but keep in mind that the economics on these volumes are much higher. More importantly, the momentum is building with more customers expressing interest, so we will continue to increase volumes steadily. Our goal is to continue to grow our capacity in agreement with our customers in all high-end markets. Furthermore, on the energy transition story. We are seeing that the energy crisis has a new focus on the photovoltaic industry, and we think these trends present a tremendous opportunity for Ferroglobe. Given the growing interest by governments to explore an end-to-end local solar value chain, we signed an MOU with a longstanding customer, RAC Silicon. Through the MOU, we are committing to our, sorry, we are committing our U.S. assets base to produce high-purity silicon metals where we see aimed at jointly establishing a low-carbon traceable U.S.-based solar supply chain. Now, we recognize that there are many factors at play here, especially as it relates to new government policies. But the fact that these types of topics are on top of government agendas is very promising for the future demand of our core products. Once again, a tremendous amount of things going on that causes us to get excited about the future. I have said from the beginning that this was going to be a slow and steady journey focused on transformation, value recovery, and value creation. Today, record earnings should be viewed as firm validation in our team and our plan. Our outperformance is not only due to market conditions, but the actions that we've been driving for nearly two years now. There is a lot more work to be done, and we remain committed to reaching our goals while navigating a period of uncertainty as micro picture evolves. At this time, I'll ask the operator to please open the line for questions.
spk10: Thank you. As a reminder, if you wish to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. Once again, if you would like to ask a question, you will need to press star 1 and 1 on your telephone keypad. Please stand by while we compile the Q&A roster. And we will now take our first question. Thank you. Please stand by. And your first question today comes from Martin Englert from Seaport Research Partners. Please go ahead. Your line is open.
spk05: Hello. Good afternoon, everyone. Hi, Martin. Hello. Can you provide any update regarding power contracts in Spain and then for France as well into next year? And will France continue to benefit from the government program in 2023 as it is in second half?
spk01: Okay. Let me start from France and then Our new CEO, Benjamin Crespi, probably can elaborate a little bit more. As you know, Martin, we have a contract in France on energy that runs through 2022. In this contract, there are two components. One is fixed, and the other one is a variable market component, right? And what happened is that at the end of May 2022, the French government decided to increase the fixed part called RN from 100 to 120 terawatt for 2022 in order to reduce the exposure to the spot market for residential and high energy intensive industry. And as a result, we have received 29.5 million benefits a million euros benefit in France, like mentioned in my report. Post-2022, we have entered in a new three-year contract with the local supplier based on the same two components. This contract will allow us to leverage our flexibility, minimize our exposure to spot market, and give some visibility on the evolving energy cost. I have to underline that today the relative weighting for 2020-2025 between fixed and variable has not been finalized yet. Benjamin, anything else you want to add on that?
spk00: I think you covered it pretty well, Marco.
spk01: Okay. Martin, are you satisfied about France?
spk05: Yeah, so it sounds like there is going to be a renewed contract in place post-2022. no visibility if the government is going to extend or how those relative weightings between fixed and variable will shake out just yet. Is that correct? Correct. Got it. And how are things progressing in Spain?
spk01: Yeah. In Spain, it's a little bit more complicated. Not that France is easy. Well, in Spain, first of all, I mentioned that we had a lower cost of energy in the second quarter. This is why we run our assets in Spain at a decent rate in the second quarter. Actually, we had a cost of $209 per megawatt hour versus $252 in the first quarter. What happened in the central quarter is also the Spanish government took some measures to cap the gas price between 40 and 50 level. But these measures have not been effective, meaning that they have slightly reduced our cost of energy. But the cost of energy yesterday was above 300 euros per megawatt in Spain. And this tells me that the measures that have been taken have not been effective. We are still working hard on having PPAs in places of January to 2023. We have term sheets on the table which are under negotiation, but we have not finalized any negotiation yet for PPA pain.
spk05: Okay. Thank you for all the detail on that. And maybe taking a step back and looking across the cost per ton on the segments here, just what are the expectations for sequential changes to the degree that you have visibility in 3Q versus 2Q?
spk01: Yeah. Yeah, you're right, to the degree of visibility. I would say alloys will stay flat quarter over quarter, both manganese and silicon-based alloys overall. While silicon, we will have a cost increase between 3% and 5%.
spk05: Thank you for that detail there. Given the spot prices have been declining somewhat across the metals basket, There is some partial delay given the lagging contracts, but any updated thoughts on the ASPs across the businesses, queue on queue here in the 3Q?
spk01: Yeah, of course. It is true that the pricing overall is coming down across the portfolio, but I have to say that the... is going down at a much lower pace than what we expected, I would say, all across our portfolio. Also because we were coming from extraordinary price levels at the end of 2021. Being specific by product, if you look at silicon metal products, The market today is very liquid, especially in North America. But the index is holding in the U.S. While in Europe, the prices have started eroding, but then I would say they have sort of stabilized. And in China, which is always a reference, Yesterday, we got the news that prices were going substantially up due to some lack of capacity in some of the Chinese regions. So I will say volatility is the rule of the game, but we are still counting on silicon prices which are profitable. Switching to ferro-silicon or silicon alloys, During the quarter, prices increased mainly due to the impact of Russian-Ukraine conflict. I must say that we didn't see too much of an effect in the U.S. We expected some lack of shortage of ferro-silicon in U.S. from Russia. That has not occurred in Q2. Price overall in Europe is under pressure, mainly due to increased Chinese exports. Due to the slowdown in China, we have seen all across the portfolio an increase of exported Chinese products. Concerning manganese alloys, There have been two key factors on pricing. One, of course, the war. We've reduced exports outside of Ukraine. But then the market has become very attractive during the quarter for the Indian producers who have penetrated the European market at a level that has never been seen before. we have a negative impact, a substantial negative impact on pricing. At the same time, the cost is going down because manganese ore is significantly going down.
spk05: Okay, so some modest headwinds, I think, that weren't wholly unexpected given how high some of the prices were, but there's still... still a substantial book of the business that was based on 2Q lagging index spot prices that'll kind of carry over into the 3Q order.
spk01: Yeah, I forgot to underline this, but this is well known that we have this index prices. So whatever you see for Q2 gets applied in Q3.
spk05: Okay, that's very helpful. Thank you. Maybe one last one, if I could. On working capital, which has been managed well within the targets, but looking at 3Q and just more broadly over the back half of the year, do you anticipate a release? What could you say about potential magnitude of capital release there?
spk01: Yeah, we expect a release of working capital in Q3, which is going to be a key contributor to our estimated positive cash flow in Q3.
spk05: Okay. Thank you for all that, and congratulations on navigating the environment, the good results, and the progress of de-risking the balance sheet. Thank you, Martin.
spk10: Thank you. We will now go to our next question.
spk09: Please stand by.
spk10: And your next question comes from the line of Brian DeRubio from Baird. Please go ahead. Your line is open.
spk07: Good afternoon, Marco and Beatrice.
spk01: Good afternoon, Brian.
spk07: Two questions for you. First, Beatrice, on the goal of reducing debt to $200 million gross, obviously the second lien notes are callable today but at a high price. So my question is, what is your – sense of timing on achieving that goal?
spk02: Yeah, I think this quarter we have been starting working towards this goal, Brian. So we did a couple of things. First, we reduced the reputations of the operating 90 million of the senior nodes. And on the other side, as a subsequent event, we repurchase or redeem the full super seniors, right? So you will see the impact. You have not been seeing the impact in Q2, but you will see the impact in Q3. It's true that redeem the full super senior, right? So you will see the impact. You have not been seen the impact in Q2, but you will see the impact in Q3. It's true that there is a journey to get there from the $500 million to the $200 million. And what we plan to do is to do two things. In one side, we're going to be continuously watching what we can do in terms of reputations, senior notes, the 9.375 in one side. We are allowed to do that. And on the other side, you saw that our credit rating has been upgraded lately in June and then in August for our senior notes. So we are exploring opportunities, what is the best moment for us to tap into the debt market. So it all depends on what could be the debt market opportunities. But it's a very, very important target for us, the reduction of the gross debt.
spk07: Understood. That's helpful. And then I don't think you've ever disclosed this, but given some of the concerns just regarding European manufacturing costs, and I understand you're getting some relief on the energy side. But can you either qualitatively or quantitatively split or provide a split between the profitability from North America versus Europe?
spk02: Yeah, you want to take that one, Marco? Well, we do not.
spk01: We do not look at the business in this way, and we do not report data split by geographies.
spk07: Understood. Appreciate the call. Thank you.
spk01: Thank you.
spk10: Thank you. Thank you. Once again, if you would like to ask a question, please press star 1 and 1 on your telephone keypad. We will now take your next question. And your next question comes from the line of Thomas Murphy, OGN Capital Group. Please go ahead. Your line is open.
spk03: Thank you. My question was asked by Brian and was answered. So it was around the timing of getting to that $200 million gross debt number. So... As I said, that's been answered, so thank you. Thank you anyway, Thomas. Thank you. Great quarter, by the way. Great quarter. Thank you.
spk10: Thank you. We will now take our next question. And the question comes from Gregory Bennett, apologies, from MS. If you just bear with me one second, your line will be open shortly.
spk08: Gregory, you are now open. Good afternoon. I'm new to your company, but I've listened to your investor presentation. The reserve life, you had exponential growth for the use of silicon. And I think that reflected in the United States and Spain. But how long of a reserve life do you have? Are you going to need to acquire additional reserves in the future?
spk01: This is an excellent question. You referred to quartz reserves. We have very good reserves in Spain. We have very healthy reserves in South Africa. We are looking for new reserves in North America.
spk08: Are there assets for sale or is this something that you would do like a greenfield site?
spk01: We are exploring both options.
spk08: Okay. You mentioned in your investor, Dan, I think the previous call about South Africa and about possibly bringing that online, but that you wanted long-term contracts or commitments. I don't think you said anything about it today. What's the status of that today?
spk01: Well, I would keep the surprise for the next quarter. No, the configuration is the following. The project is proceeding like we have to start up the plant. At this stage, we keep our commitment to go to the board at the end of September with our recommendation to restart the plant. in terms of timing and the amount of furnaces that we're going to start. Okay.
spk08: NOL, your Net-Loss Care Report, it says something in your slide that you are limited. Yeah. Is the NOL in Europe or is it in the United States or both? And how much of an NOL do you have to use going forward for building cash?
spk01: Yeah, I'll pass this question to Beatriz.
spk02: Yeah, thank you, Marco. No, it's true that we have a good stock of NOLs. The main ones are in France and in Spain, yeah. And we have an eligible amount to be used in the U.S., if this answers your question. Of course, there is certain limitations on the application of the NOLs in terms of timing. and quantum, but we feel confident that we can use most of them.
spk08: And you would use those, is that something that you project might be used over the next five years or ten years or?
spk02: Over the next two years.
spk08: Over the next two years you would exhaust all the NOL?
spk02: Right, and the bulk would be in 2022. Okay.
spk08: For your debt reduction, is it prohibited for you to call these in? I guess, or does it, what's the, what's the trigger for the board calling in the nine and three-eighths versus open, I don't, you can't do open market purchases because the market's rallied in the bonds?
spk02: It's very difficult to hear you, but I will try to answer. So we have a two tranches of bonds, the super senior that we just recently repurchased, right? And the reason why we did that is because we have the option to buy it at par before October 2022. The 9.375, that is the second, the other tranche of bonds, it goes with our call option. But we have the possibility to do open repurchase in the open market to a certain limit of the total quantum of debt. And this is what we have been doing. And we will continue to do and to watch, depending, of course, on the cash level and on the pricing, if this answers your question. Yes, thank you.
spk08: The legislation that President Biden is going to sign, I think, today, and there's parts in there, I think, when you mentioned your transaction in solar. Could you describe how that may benefit you, or does this benefit your end user to stimulate demand for more silicon in the United States?
spk06: Sorry, your question was around the new legislation. We certainly feel that it would be helpful. And I think just to echo some of what Marco was alluding to towards the end of the presentation, there's a number of different initiatives, I think, I guess, at various stages. And I think a lot of it does center around the megatrends that we've been highlighting around energy transition, which is obviously solar, a lot of the work that may help ultimately with EV mobility and flows back into the work we do in batteries. So in general, I think a lot of this legislation is promising for our customer base and end markets.
spk08: Okay. Thank you very much. Thank you for your patience taking my questions.
spk06: Thank you. In the interest of time, we'll take one more participant, please.
spk10: Thank you. We will now take our final question. Please stand by. And your final question comes from the line of Michael Lam from Demet Capital Management. Please go ahead. Your line is open.
spk04: Yes, good morning. There's a company that I've been following very recently called Inovec, which is developing very high percentage silicon content anodes for lithium-ion batteries. The company's generated a tremendous amount of excitement because they've launched initial commercial products, mostly on smartwatches. Is that a customer of yourself in terms of your technology, S-I-N-E products? And it relates to the second question is, I don't know of anybody else besides you your company, given that you are the largest by far outside of China, that's actually developing these types of technology SIMEs. So it's a two-part question. Are they a customer? And B, who else is doing what you're trying to do on the technology side?
spk01: Benoît, this is your territory. You want to take this one? Yes.
spk00: So yes, we know Enovix and Enovix is using a silicon rechannel but using crystallographically orientated silicon. So they are using single monocrystals of solar grade silicon. So we are not supplying them. Still we are in contact with them. This being said, the emergence of Enovix is just reflective of the increased importance of silicon into the anodic world of lithium ion batteries. And we see an emerging, an increasing trend in demands for silicon in the battery. So we're pretty confident that silicon will play a very, very important role as an anodic material in the battery world. To answer your second question, there's a lot of companies actually trying to put silicon units in either as a blend in the anode or even working on silicon-rich anodes. I could give a long list names we have we are supplying some of them and we are collaborating with others but clearly the the usage of silicon in the anode neither as silicon carbon composite or silicon channel is is boom and is due to so you know that in the sense the same question would be
spk04: Is there any other silicon metal materials companies like yourselves that are supplying this type of silicon? How is your competition in this kind of, you know, high technology area of silicon metal?
spk00: There's rather a limited number of companies able to deliver high purity micronic silicon like we're doing now. So what we see in this limited number will also be restricted by the trend we see in the market of the silicon supply in the big markets outside China, which are the U.S. and Europe. So our geographical footprint is clearly a massive advantage. Our low carbon footprint is also a massive advantage.
spk04: Thank you. Thanks for that.
spk10: Thank you. I will now hand the call back to Marco for final comments.
spk01: Thank you, Sharon. This concludes our second quarter earnings call. Once again, we're excited about the record quarterly results we have reported today. We have a company that is in its best condition since its formation. and with exciting prospects for the future. Our goal is to continue to build on this success. We remain focused on growing our profitability and generating cash to help meet our goals. Thanks again for your participation and support.
spk10: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.
spk02: The conference will begin shortly. To raise your hand during Q&A, you can dial star 11.
Disclaimer