Ferroglobe PLC

Good morning, ladies and gentlemen, and welcome to the FerroGlobe's fourth quarter and full year 2024 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 Rotunen, FerroGlobe's Vice President of Investor Relations. You may begin.

Thanks, Sonia. Good morning, everyone, and thank you for joining Ferraglobe's fourth quarter and full year 2024 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 the exhibits to those filings, which are available on our webpage at ferroglobe.com. In addition, this discussion includes references to EBITDA, adjusted EBITDA, adjusted gross debt, adjusted net debt, and adjusted diluted earnings per share, among other non-IFRS measures. Reconciliations of these non-IFRS measures may be found in our most recent SEC filings. Before I turn the call over to Marco Levy, our CEO, I want to announce that we'll be participating in the BMO Global Market Metals, Mining, and Critical Minerals Conference in Florida on February 24th and 25th. We hope to see you there. Marco?

Thank you, Alex. Thanks for joining us on the call today. We appreciate your interest in Ferroglobe. Before I provide a recap of our 2024 accomplishments, I want to thank all Ferroglobe employees for a successful year. We posted the revenue of $1.6 billion and adjusted EBITDA of $154 million and free cash flow of $164 million. We used our strong cash flow generation to repay the remaining senior secured notes. Eliminating these notes saves us $32 million in annual interest. And in the first quarter of 2024, we became net cash positive for the first time in Federal Group's history and maintain our strong balance sheet throughout the year. The strong balance sheet enables us to initiate a capital return program consisting of quarterly dividends and share by BEX. We paid our initial dividend in the first quarter of 2024 and are increasing it by approximately 8% in the first quarter of 2025. In addition, we began our share repurchase program in the third quarter, which we will continue to execute selectively in 2025. We also intend to continue complementing our discretionary repurchases with a 10B51 plan. While our share buybacks have been modest, we intend to get more aggressive as we gain visibility and see improvement in our end markets. Maintaining a strong balance sheet to ensure that we have the ability to navigate any downturn is our top priority. One of the most important developments taking place is changing global trade, including potential anti-dumping and countervailing duties, tariffs and safeguards. This creates uncertainty until they become better defined. It is clear that governments are taking these measures seriously. and this heightened focus is likely to make tariffs and safeguards more prevalent going forward. Some actions have already taken place and some are under consideration. These trade measures enacted by governments are expected to benefit domestic producers as the trade flows are altered across the globe. As the largest Western producer with significant local operations, which are back integrated in North America and Europe, we have historically been significantly impacted by an uneven playing field. Equally importantly, we serve customers who buy mostly local. With the recent government announcements in North America and in Europe, within the European community, We are optimistic that these actions will positively impact our market in the coming quarters, providing a tailwind for our business and driving future growth. While the trade uncertainty is difficult to handicap, we believe these trade measures are imperative and will transform our industry for the better. In the U.S., The International Trade Commission determined that Russia, Malaysia, Kazakhstan, and Brazil unfairly priced ferro-silicon, adversely impacting local producers. As a result, combined anti-dumping and countervailing duties of more than 1,000% were placed on Russia. Final anti-dumping and countervailing duties against Malaysia, Kazakhstan, and Brazil will be announced by the Department of Commerce on March 21st. Combined, these four countries in 2023 imported approximately 140,000 tons of ferro-silicon into the U.S., accounting for approximately 65% of the market share. Overall, these measures are expected to benefit us significantly going forward. The European market has also been damaged by low-priced imports, particularly from eastern countries. In December 2024, the European Commission initiated a safeguard investigation into silicon metal, silicon-based alloys, and manganese alloy imports. While the potential magnitude of these measures is yet to be determined, we expect the provisional decision is in Q2 with the final determination anticipated in Q4. To put things into perspective, EU's total consumption of silicon metal, silicon alloys, and manganese alloys declined approximately 12% or 300,000 tons between 2019 and 2024. Combined with an estimated 7% point increase in the market share of imports from Eastern countries, this has had a material impact on European markets, which has reflected in prices. Total imports have increased by 70,000 tons since 2019, accounting for 40% market share. As the largest domestic European producer, these measures, if enacted, are expected to positively impact the quality of the business and provide FerroGlobal with a great opportunity to increase our market share. Moving to current market conditions, it has been a challenging environment in Europe and North America in the recent months. While we expect market conditions to persist to the first half of 2025, we are beginning to see signs of market bottom as indexes have stabilized and prices for phase III ferro-silicon in Europe and manganese alloys are trending higher. One key factor contributing to our more optimistic outlook is the consistent growth of European steel production over the past several months. The World Steel Association Forex has continued growth of 3.5% in 2025, with North American steel production expected to grow at a rate of 1.6% in 2025. In addition, The steel safeguard measure of 2019 is currently under review, and the aluminum industry has requested a safeguard investigation into imports. A positive decision would encourage more steel and aluminum production in the EU, further helping demand for all our products. Another encouraging sign is improved manufacturing PMIs. In January, global PMI posted its highest level in seven months, with the U.S. increasing to 51.2, representing solid growth, boosted by a 34-month high in the expected production outlook. In addition, Europe's current contraction is expected to show improvement in the coming months. Next, I will discuss the outlook for 2025. On our last call, I mentioned sales and operation planning, or simply SNOP, as another tool to drive incremental improvement across all facets of Ferroglobe. We are in the early innings of its implementation, but I've already seen benefits with reduced working capital in the fourth quarter. Once implemented across all our businesses, We expect to see material operation efficiency with improved cash flow, lower working capital and cost benefits. For a brief update on Core Shell, we continue to see promising test results from this partnership, and as a result, we recently increased our investment. We look forward to continued collaboration as we drive innovation with this exciting technology. We are bullish about silicon metal as a disruptive breakthrough in EV batteries. And as a leader in silicon metal, we are well-positioned to capitalize on industry shift from graphite to silicon-rich anodes in EV batteries. This will significantly enhance the performance of EVs, including lower cost, longer ranges, and shorter charging times.