Ferroglobe PLC

Good morning, ladies and gentlemen, and welcome to Ferraglobe's fourth quarter and full year 2023 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 may be recorded. I would now like to turn the call over to Alex Rotanen, Ferraglobe's Vice President of Investor Relations. You may begin.

Thank you, Heidi. Good morning, everyone, and thank you for joining Ferroglobe's fourth quarter and full year 2023 conference call. Joining me today are Marco Levy, our Chief Executive Officer, and Beatriz Garcia-Coss, our Chief Financial Officer. Before we get started with our 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. Factors that could cause actual results to differ materially from these forward-looking statements can be found in Ferroglobe's most recent SEC filings and exhibits to those filings, which are available on our webpage at ferroglobe.com. In addition, this discussion includes reference to EBITDA, adjusted EBITDA, adjusted gross debt, net debt, and adjusted diluted earnings per share, among other non-IFRS measures. Reconciliation of non-IFRS measures may be found in our most recent SEC filings. At this time, I would like to turn the call over to Marco Levy, our Chief Executive Officer.

Thank you, Alex, and good morning, good day, and good evening to everyone. Thanks for joining us on the call today. We appreciate your interest in Ferroglobe. We are very pleased with our strong execution in 2023, where we improved our operations, strengthened our balance sheet, and posted solid financial results of $315 million of adjusted EBITDA. While our end markets were extremely challenging in 2023, we focused on things that were within our control to position the company for the long-term success. I'll discuss a couple of the highlights of our execution and strategy. Then Beatriz will discuss the great strides we have made in improving our balance sheet a little later. Overall, operations performed at a high level in 2023. Our European plans set a new historical record for opening efficiency as measured by kilowatt hours per ton, improving by more than 3%. In the third quarter, we completed a strategic acquisition of a high-quality quartz mine located in South Carolina. which will ensure access to quartz needed to produce high-quality silicon metal in our US-based silicon metal production plants. Aligned with our strategy to grow our advanced silicon metal business, we signed a term sheet for a global joint venture with a leading battery material company in Europe to develop advanced EV battery materials using silicon in the anode. We also signed an MOU with a US-based advanced battery solutions company to pursue the next generation of silicon-rich battery technology. As part of this venture, we are currently testing a promising nano-layer coating technology, which not only increases the performance and range of DV battery, but also lowers the cost of battery manufacturing. The silicon-based EV battery market is expected to grow to 150,000 tons globally by 2030. We provide additional updates in the near term. In 2023, we also took action to protect our market. Working with US legislators, we have to introduce a bipartisan bill in Congress that assesses a 35% tariff on ferro-silicon imports from Russia and Belarus. If passed, this legislation is expected to have a positive impact on pricing as Russia is the larger importer of ferro-silicon to the US. We signed our first PPA in Spain during the year and have since added additional PPAs, which now comprise roughly 20% of our needs for 2024 and beyond, to enhance our ability to increase production in Spain, which has suffered from uncompetitive energy prices over the past couple of years, increasing resilience and flexibility of our global footprint. In response to the spike in energy prices in 2022, we executed a multi-year energy agreement with a French energy company that enabled us to generate an incremental $186 million in EBITDA in 2023. This rebate was in exchange for optimizing our production in France to minimize our power consumption during the winter months. While the market in 2023 was very challenging, we are seeing subtle signs that provide us optimism for 2024. There is still a lot of uncertainty in the market, but we are seeing some improvements in pricing. U.S. silicon metal prices appear to have bottomed in December and have actually increased in late January. U.S. silicon metal price index increased from its recent low in early December of $140 per pound to $149 in early February, or up approximately 6%. European price movements were even more pronounced, increasing from the low $2,049 per ton in late September to approximately $2,360 per ton in November, to 2,909 in early February, an increase of 23% in three months. We believe that the European prices increased in part due to supply constraints as a result of a fire at a major silicon plant in Norway and shipping disruptions in the Red Sea. Looking at market pricing and associated production costs during those trough periods, It appears that the industry was operating at breakeven at best, which is unsustainable. We believe marginal producers were operating at a loss, leading them to reduce capacity, thus improving the supply-demand dynamics, ultimately driving higher prices. There are signs of a cycle trough. As it relates to solar, we continue to position the company to take advantage of ensuring trends that are becoming a bigger focus of governments in the US and Europe. Ferroglobe, as leading worldwide producer of silicon metal, is set up to be a significant beneficiary of these trends. As an example of our market leadership, we recently signed a long-term supply agreement with Longey, the world leader in the solar value chain, to supply them with traceable silicon metal that can be sold in the U.S. to its growing solar market within the confines of the Uyghur Forest Labor Prevention Act that affects Chinese assets to the U.S. The main region of silicon metal and polysilicon production in China is Xinjiang, where many Uyghur people reside. According to CRU estimates, The Xinjiang area accounts for approximately 40% of Chinese silicon metal production. Our significant advantage is that we can provide tracer bubble, non-Xinjiang silicon metal, to China and Asia, which can then be imported in TDUS as a verified product under the UFLPA. While we are cautious about 2024, we are very bullish about 2025 and beyond due to secular trends in the solar and EV battery markets where we believe we have significant long-term growth opportunities. To give you a sense of the scale of these growth markets, according to CRU, the worldwide demand for silicon matter for the solar and electronic segment is forecast to grow by approximately 70% to 3 million tons between 2023 and 2028. Within our primary markets, the US and Europe, the demand for silicon metal is expected to grow by roughly 40% to 947,000 tons during the same period, representing a huge upside for us as the larger Western producer of silicon metal. We are introducing 2024 guidance recognizing the exceptionally uncertain and volatile times in our end markets, elevated geopolitical risks, wide-ranging elections around the globe, and elevated interest rates, among other factors. Given the unpredictable environment, we are initiating our 2024 guidance with a range of $100 million to $170 million of EBITDA. The decline in our 2024 guidance relative to 2023 results is primarily driven by our French energy agreement, which we expect to decrease materially in 2024. The 2024 guidance is also impacted by substantial price declines over the past several quarters. Indexes for most of our products declined by a 30 to a half from December 2022 to December 2023, with demand continuing to be soft in the early part of 2024. It is important to note how sensitive our results are to price fluctuations. For example, A 5% change in annual price for silicon metal has a $35 million impact on expected EBITDA, all else being equal. We expect the weak pricing to be partially offset by strong volume growth, particularly in Asia. To counteract the weak demand and lackluster pricing, we remain vigilant in managing costs and looking for incremental productivity gains across all areas of the company. As discussed previously, we are introducing our capital return program with an initial quarterly dividend of 1.3 cents per share and plan to request our board of directors and shareholders, as required, to approve a share-by-back program to be executed at the discretion of the management team. The capital return program is part of our overall capital allocation strategy. Our priority is ensuring that our plans are well capitalized to run optimally as we seek to maximize our return on invested capital. Beatriz will provide more details on that. Next slide, please. Silicon metal revenue in Q4 was $168 million, a decrease of 16% from the third quarter. Adjusted EBITDA was $22 million, a decline of 73% over the previous quarter. Our average realized price for silicon metal decreased by 3% in Europe and 6% in the Americas compared to the previous quarter. Index prices increased 26% in Europe and decreased 8% in U.S. during the fourth quarter. There is typically a lag with realized prices trailing indexes by approximately three months for the portion of our contract that is pegged to an index. Silicon metal prices have shown strength since year end, with prices increasing 13% in Europe and 6% in the Americas. As for silicon metal outlook, it appears that the market is showing incremental improvement, with U.S. prices bottoming in December and increasing since mid-January. European prices, after a strong increase in the fourth quarter, continued their strength in 2024, an up 38% increase from their bottom at the end of Q3. The improvement in prices benefited from supply disruptions, production curtailments by some of our competitors, and restocking. While we remain cautious about the demand environment, these improvements provide some optimism for 2024. Next slide, please. Adjusted EBITDA for Q4 for silicon-based alloys was $35 million, up 38% over the per-year quarter. Relative to the third quarter, overall average realized pricing was down 7%, with prices in Europe declining 10% and America declining 2%. The silicon alloy segment was adversely affected by weak demand, primarily in construction and automotive. While the environment continues to be challenging, we expect improvement in the second half of this year. Regarding the outlook for silicon-based alloys, prices have strengthened since year end, with index prices increasing 7% in Europe and the Americas. While demand remains laggish, we are encouraged by the recent price improvements, but there remains a lot of uncertainty in the market. Moving to slide seven, please. Turning now to manganese-based alloys. Manganese-based alloys revenues was $60 million in Q4, up 3% over the previous quarter. In Europe, index price appeared to have bottomed in late September and have increased approximately 13% since year end, adding to the 6% gain in the fourth quarter. The end market primarily still remain under pressure. We expect an incremental improvement throughout 2024. 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. Beatriz.