Ferroglobe PLC

Good morning ladies and gentlemen and welcome to Ferraglobe's third 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 Anish Bharadwala, Ferraglobe's Vice President of investor relations and corporate strategy. You may begin.

Thank you. Good morning, everyone, and thank you for joining FederalGlobe's third quarter 2022 conference call. Joining me today here is Javier Lopez-Matriz, our executive chairman, Beatriz Garcia-Coss, our chief financial officer, Benjamin Crespi, our chief operating officer, Benoit Olivier, our Chief Technology and Innovation Officer and Deputy CEO, and Craig Arnold, our Chief Commercial Officer. Marco Levy, our Chief Executive Officer, is on the call but will not be speaking as he has laryngitis. 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 would cause actual results to differ materially from these forward-looking statements can be found in Ferroglobe's most recent SEC filings and the exhibits to those filings which are available on our webpage, ferroglobe.com. In addition, this discussion includes references to EBITDA, adjusted EBITDA, adjusted EBITDA margin, working capital, adjusted gross debt, net debt, adjusted net profit, 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 now like to turn the call over to Javier Lopez-Madrid, our Executive Chairman.

Good morning, or good afternoon, everyone. After a record second quarter, we reported solid results in Q3, despite a challenging market environment. During the third quarter, market prices for each of our product groups declined from record levels in the previous quarter. Higher and volatile energy costs in Europe continue to persist. During the third quarter, we actively managed our global asset footprint by reducing operations in higher cost regions like Spain and reallocating volumes to other geographies. Higher raw material costs negatively affected our margins too. Last month, in line with our new strategy, we announced the restart of our Polokwane plant in South Africa, which will start up in November and is ramping up according to plan and on budget. This facility will provide up to 50,000 tons of high-quality and cost-competitive silicon metal capacity on an annualized basis, out of which 35,000 tons will be produced in 2023 and give us the flexibility to supply it globally. During the third quarter, we continue to execute on our primary financial objective by delivering the balance sheet. During the quarter, we redeem our 60 million 9% super senior secure notes due 2025. We continue to progress on our transformation plan with our incremental EBITDA run rate objective of 225 million, which we expect to achieve by 2024, enabling us to be a stronger and more resilient company. Specific to the third quarter, our revenues declined 29% from record levels in Q2 to $593 million and our adjusted EBITDA declined by 39% to $185 million. Our adjusted EBITDA margin was 31% in Q3 compared to record margin of 36% in the prior quarter. Our adjusted EBITDA was the third highest in the company's history and our EBITDA margin was significantly higher than in any prior years. This is a direct result of successfully implementing our strategic plan over the last two years. Our earnings per share was $0.52 compared with $0.90 per share that we delivered last quarter. Our cash balance at the end of the third quarter was $237 million, down from $307 million last quarter. The decline in cash was primarily driven by the repayment of the referred $60 million. $60 million super senior notes. Our total cash balance combined with our own drone facilities provides total liquidity of $337 million, giving us ample flexibility to execute our business plan. Our net debt of $194 million was flat versus the prior quarter, which is the lowest level in the company's recent history. Overall, the third quarter highlights our ability to perform in a very volatile and challenging market environment. In addition, as part of our corporate update, we will provide details on specific actions being taken to actively manage our operational footprint. Moving ahead to slide five, please. Silicon Metro revenues was $264 million in Q3, down 26% from the prior quarter. Our silicon metal business was down as a result of challenging market environment, primarily impacting volume, which declined to 50,545 metric tons, down 20% from the prior quarter. This had a negative impact on our EBITDA of approximately 43 million. During the third quarter, we have seen European aluminum producers curtailing production by 50% due to unsustainable energy prices causing a decline in demand for silicon metal and negatively impacting our market price. The aluminum sector continues to be adversely impacted by weaker auto demand. In contrast, silicon specialty grades continue to be the strongest contributor to our portfolio. The average realized price of our silicon metal sale was down 7.6% over the prior quarter, resulting in a negative impact to EBITDA of 11.1 million. Excluding GB shipments, average prices were down 4.7%. It's important to note that we outperformed the market, where index prices in the US and Europe were down 18% and 22% respectively over the prior quarter. Index prices in Q3 in the EU have stabilized over 3,600 euros per metric ton, while US spot prices declined to 7,000 US dollars per metric ton. Since the end of Q3, U.S. index prices have pulled a decline to $6,700 per metric ton, while EU index have held at the referred 3,600 euros per metric ton. While adjusted EBITDA contribution for silicon metal of $130 million was down from last quarter record level, it remains strong compared to prior years. Adjusted EBITDA margins for this segment were robust at 43%. To put this in perspective, silicon metal adjusted EBITDA margins for 2019 and 2020, before we began to implement our plan, were in the single digits. Costs from silicon metal negatively impacted adjusted EBITDA by $8 million, driven by high Higher raw material costs, particularly coal and energy, which impacted costs by $6.4 and $1.4 million respectively. Slide 6, please. Silicon-based alloys revenue was $170 million in Q3, down 24% over the prior quarter. Adjusted EBITDA for Q3 was $60 million, down 39% from the second quarter. Sales volume declined 15% over the prior quarter, negatively impacted EBITDA by 10 million, while average realized pricing was down 11% over the same period, negatively impacting EBITDA by 26 million. Costs had a slight negative impact of 1.3 million, driven by higher coal price in Europe. Adjusted EBITDA margin for silicon-based alloys was 33% in Q3, while down From prior two quarters, Q3 was the third highest in the company history and significantly higher than 2021 level. Lower demand for silicon-based alloys was driven by the summer slowdown as well as weakness in end markets, particularly construction. In addition, as a result of higher energy prices in Europe, there were capacity closures among various steel producers, driving a decline in demand for silicon-based alloys. Benefiting our margin was our strategy to focus on higher margin specialty and foundry product, which has enabled us to improve margins compared to commodity silicon alloys. Low visibility of steel demand persists and is pushing customers toward depleting inventories. Moving to slide seven, please. On manganese alloys, manganese-based alloys revenues was $98 million in the third quarter, down 49% from the prior quarter. Sales volumes declined 37% over the prior quarter, negatively impacting adjusted EBITDA by $10 million, while average realized pricing was down 20% over the same period, negatively impacting EBITDA by $32 million. This volume decline in the third quarter was partly impacted by a normally high demand in the second quarter as customers focused on securing supply, which enabled us to sell at higher prices. Cost was favorable, primarily due to positive one-off mark-to-market adjustments related to the earn-out provision of $25 million. Late in the second quarter, we purchased manganese oil reacting to a shortage of supply in the market. In response to significant changes in market conditions, including shutdown of European steel producers, we slowed down our production and we expect to hold manganese ore longer and convert manganese-based alloys in line with demand. Overall, our sales for this segment declined 49% from the prior quarter while adjusted a bit declined by 55% and our adjusted dividend margin declined to 51% from 71%. Capacity closure among various steel producers in Europe and weakening end market have negatively impacted demand. We continue to actively monitor this market and manage our production accordingly. I would now like to turn the call over to Beatriz García Cos, our Chief Financial Officer, to review the financial results in more detail.