Ferroglobe(GSM) - 2021 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2021, Ferroglobe reported sales of approximately $570 million, a 33% increase from $429 million in the previous quarter, and full-year sales reached nearly $1.8 billion, up 55% year-over-year [38] - Adjusted EBITDA for Q4 was $92.8 million, a 147% increase from Q3, with an adjusted EBITDA margin nearly doubling to 16% [43] - The company returned to positive free cash flow during Q4, generating $40 million, while for the full year, free cash flow was negative $25.2 million [15][50] Business Line Data and Key Metrics Changes - In the silicon metal segment, average selling prices increased by 19% to $2,944 per metric ton, with EBITDA improving over 200% to $32.5 million [20][22] - Silicon-based alloys saw a 39% increase in average selling price to $2,770 per ton, with sales volumes increasing by 8% to 61,000 metric tons [29][30] - Manganese-based alloys experienced a 9% increase in average selling price to $1,720 per ton, with shipments up 27% to 97,000 tons [32][33] Market Data and Key Metrics Changes - The index price for silicon metal in the U.S. increased by approximately 160%, ending the year just above $10,000 per ton, while European prices peaked at €8,100 [18] - The index price for ferrosilicon in the U.S. increased approximately 60%, and in Europe, it rose about 40% [28] - The company noted strong demand in the chemicals sector and signs of recovery in the solar sector, while caution was observed in the aluminum sector due to rising energy costs [25] Company Strategy and Development Direction - Ferroglobe's turnaround plan has been a critical driver of success, with the company exceeding its targets for cost savings and working capital improvements [36] - The company aims to build on momentum from Q4 and is focused on enhancing competitiveness and efficiency in 2022 [17] - Management emphasized the importance of addressing supply chain challenges and maintaining flexibility in operations amid geopolitical tensions [61] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's positioning for accelerated growth and improved margins in 2022, supported by a strong order book and a focus on index-based contracts [17] - The ongoing conflict in Ukraine was highlighted as a potential risk, impacting energy prices and raw material supply, particularly for electrodes and other critical inputs [60][61] - Management acknowledged the volatility in energy costs and the need for ongoing monitoring of the geopolitical landscape [57] Other Important Information - The company refinanced its debt and de-risked its balance sheet in 2021, extending maturities and raising capital to support its turnaround plan [12] - Ferroglobe's working capital increased by approximately $69 million during Q4, primarily due to higher accounts receivables [48] - The company announced a €34.5 million loan from the Spanish government to support operations, with funds expected to be used for working capital needs in Spain [51][86] Q&A Session Summary Question: Update on electricity costs in Spain and potential long-term PPA agreements - Management noted extreme volatility in energy costs in Spain, with prices fluctuating significantly, and mentioned ongoing efforts to explore PPA opportunities for 2022 and beyond [68][69] Question: Volume projections across business segments for 2022 - Management indicated that volume projections would be relatively flat across segments, with the exception of additional silicon-related volumes from the Selma facility [70][72] Question: Risks related to upstream input supply due to the Ukraine conflict - Management acknowledged the critical role of Russia in supplying raw materials and outlined mitigation plans to secure alternative sources and build stock [75][96] Question: Planned use of proceeds from the new Spanish loan - The funds from the SEPI loan are expected to be used to boost operations in Spain, primarily for working capital needs [86][87] Question: Outlook for CO2 credit costs - Management highlighted the volatility in CO2 credit prices and the expectation to cover more CO2 credits than the previous year, with current trading around €66 per ton [105]