Ferroglobe PLC: Q2 2021 Financial Summary
Business Context and Reporting Period
This Form 6-K, filed on August 23, 2021, reports the unaudited financial results for Ferroglobe PLC for the quarter ended June 30, 2021. Ferroglobe is a global producer of silicon metal, silicon-based, and manganese-based specialty alloys. The reporting period marks a significant turnaround for the company, returning to profitability following a net loss in the prior quarter.
Key Financial Metrics
| Metric | Q2 2021 | Q1 2021 | Q2 2020 |
|---|---|---|---|
| Sales | $418.5 million | $361.4 million | $250.0 million |
| Net Profit (Loss) | $0.7 million | ($68.5) million | ($14.0) million |
| Adjusted Net Income | $3.0 million | ($18.2) million | ($11.1) million |
| Adjusted EBITDA | $34.1 million | $22.1 million | $22.4 million |
| Adjusted EBITDA Margin | 8.1% | 6.1% | 9.0% |
| Operating Cash Flow | $37.8 million | $18.3 million | $38.1 million |
| Net Cash Flow | $21.6 million | ($47.1) million | $8.7 million |
| Net Debt | $358.1 million | $334.3 million | $298.1 million |
| Working Capital | $334.3 million | $333.7 million | $321.4 million |
Material Changes vs. Prior Periods
- Revenue Growth: Sales increased 15.8% sequentially and 67.4% year-over-year, driven by an 11.0% increase in average selling prices and a 2.8% increase in shipment volumes.
- Profitability: The company returned to positive net income ($0.7 million) compared to a significant loss in Q1 2021. Adjusted EBITDA rose 54.5% sequentially.
- Product Performance:
- Silicon Metal: Volumes up 9.9%; prices up 2.7%.
- Silicon-based Alloys: Volumes up 5.9%; prices up 9.9%.
- Manganese-based Alloys: Volumes down 5.9% due to shipping delays; prices up 20.5%.
- Cost Structure: Cost of sales as a percentage of sales improved to 64.0% from 69.2% in Q1, aided by higher sales volumes and reclassifications. However, operating expenses increased due to European free CO2 rights recognition and inflationary pressures on energy costs.
Guidance, Outlook, and Risks
Management Commentary: CEO Marco Levi highlighted the return to profitability as a key milestone, attributing success to strategic execution and robust market conditions. CFO Beatriz Garcia-Cos noted that while performance is improving, the company is not yet fully benefiting from current market prices due to fixed-price contracts rolling off in the second half of the year. Management expects acceleration in performance and cash generation in the remainder of 2021.
Financing Update: On July 30, 2021, the company completed a comprehensive financing transaction including:
- Extension of Senior Notes maturity from March 2022 to December 2025.
- Issuance of $60 million in new super senior secured notes ($40 million funded in Q2, $20 million in Q3).
- Issuance of $40 million in new equity.
Risks and Contingencies:
- Energy Costs: Inflationary pressures, particularly in Europe, continue to impact margins.
- COVID-19: Ongoing pandemic risks may negatively impact revenues and operations, though demand has recovered significantly compared to 2020.
- Contract Mix: Fixed-price contracts may limit immediate upside from rising commodity prices until they roll off.
Investor Verification Checklist
- Verify the sustainability of the return to profitability given the impact of one-off non-recurring expenses in Q1.
- Monitor the roll-off of fixed-price contracts in H2 2021 to assess potential margin expansion.
- Track energy cost inflation in European operations and its effect on future EBITDA margins.
- Confirm the utilization of the new $60 million super senior secured notes and $40 million equity raise for strategic initiatives.
- Review the progress of the "Footprint Optimization" restructuring, particularly the ongoing process in France.