Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ferroglobe PLC (GSM, Financial) reported a 15% increase in total sales for Q2 2024, reaching $451 million.
- Adjusted EBITDA more than doubled to $58 million from $26 million in the prior quarter.
- The company achieved a significant victory with the US Department of Commerce imposing high anti-dumping and countervailing duties on Russian ferrosilicon imports.
- Ferroglobe PLC (GSM) is making significant progress in its partnership with Coreshell, achieving excellent results in testing silicon-rich materials for EV batteries.
- The company has enhanced its capital return program by approving a share repurchase program at the June AGM.
Negative Points
- Operating cash flow and free cash flow were weak, with free cash flow being negative $20 million due to inventory build-up.
- The company expects weak demand and easing supply constraints to result in softer prices in the third and fourth quarters.
- Ferroglobe PLC (GSM) anticipates the lowest adjusted EBITDA of the year in the fourth quarter due to weak market conditions and the idling of French operations.
- Silicon-based alloys revenue declined by 6% from the prior year quarter due to lower shipments.
- The company is cautious about the fourth quarter outlook, citing weak demand in several segments including aluminum and steel.
Q & A Highlights
Highlights from Ferroglobe PLC (GSM) Q2 2024 Earnings Call
Q: Marco, you mentioned the outlook for the second half of this year and called out Q4 as the weakest period. Could you elaborate on the factors driving this, especially in terms of pricing?
A: We have good visibility on Q3 due to our indexed pricing. However, Q4 is impacted by weak demand across most segments, including steel, aluminum, and solar. We have already seen indexes weakening during Q3, leading us to be cautious about Q4, expecting weaker volumes and prices.
Q: Could you elaborate on the positive results from the Coreshell investment and technology?
A: Coreshell has achieved almost 1,000 cycles of charging and discharging with an 80% retention of properties using 80% silicon metal. This is unprecedented for us and justifies moving towards producing pilot quantities of batteries for OEM testing. We are close to addressing the issue of silicon metal swelling in batteries.
Q: You stockpiled manganese ore due to supply disruptions. When do you expect these stockpiles to normalize, and any comments on the buyback authorization?
A: We expect the impact of lower manganese ore prices to be seen in Q3, with a release of working capital in Q4. Regarding the buyback, we are taking a conservative approach to preserve cash and liquidity given the market conditions.
Q: How much of the price weakness in silicon metal is associated with the weaker Asia market and more favorably priced products being exported from South Africa?
A: China has built overcapacity and is exporting significantly, impacting prices. Imports from China into Europe have increased, and prices are extremely low. Additionally, the US investigation into solar supply chain elements is slowing down exports to the US, affecting demand.
Q: Regarding the ferrosilicon trade case, are you expecting muted volumes in the US for the rest of the year but an uptick in 2025?
A: Yes, massive quantities of ferrosilicon have been delivered to the US recently, creating high inventory levels. We expect demand to increase in 2025 as the market normalizes and tariffs take effect.
Q: Are there alternative sources for US consumers if certain countries are blocked due to the trade case?
A: The US has significant local production capacity, and we can support demand from our assets in the US and South Africa. Additionally, Brazil and some Asian countries can supply more, so we don't foresee a lack of ferrosilicon in the US market.
Q: Can you provide more details on the financial performance and outlook for the second half of the year?
A: Sales increased by 15% to $451 million, and adjusted EBITDA more than doubled to $58 million. We are increasing our adjusted EBITDA guidance range to $150 million to $170 million. However, we remain cautious about Q4 due to weak demand and the idling of French operations.
Q: What are the key takeaways from the second quarter performance?
A: We had a strong second quarter with significant growth in sales and adjusted EBITDA. We achieved trade action against predatory Russian imports, creating opportunities to increase market share in 2025. Our relationship with Coreshell is progressing well, and we have enhanced our capital return program with a share repurchase program.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
