Ferroglobe Q4 2024 Earnings Report

Ferroglobe EPS Results

• Actual EPS: $0.03
• Consensus EPS: -$0.01
• Beat/Miss: Beat by +$0.04
• One Year Ago EPS: N/A

Ferroglobe Revenue Results

• Actual Revenue: $367.51 million
• Expected Revenue: $393.00 million
• Beat/Miss: Missed by -$25.49 million
• YoY Revenue Growth: N/A

Ferroglobe Announcement Details

• Quarter: Q4 2024
• Date: 2/19/2025
• Time: After Market Closes
• Conference Call Date: Thursday, February 20, 2025
• Conference Call Time: 8:30AM ET

Ferroglobe (NASDAQ:GSM) (NASDAQ:GSM) is a global producer of silicon and specialty metals used in the manufacturing, automotive, chemical, construction, energy and technology industries. The company produces silicon metal, ferrosilicon, manganese alloys and other silicon-based alloys that help improve the strength, performance and durability of steel and aluminum products.

Its product portfolio also includes calcium silicon, inoculants and other specialty alloy products, as well as quartz and related raw materials used in silicon and alloy production. Ferroglobe operates an integrated business model that includes mining, raw-material processing, energy generation and the manufacture of metallurgical products.

The company was formed in 2015 through the merger of Globe Specialty Metals and Grupo FerroAtlántica. Ferroglobe serves customers internationally through production and operating assets in multiple regions, including North America, Europe, South America, Asia and Africa. Its products are sold to industrial customers and distributors in markets around the world.

Ferroglobe Q4 2024 Earnings Call Transcript

Key Takeaways

• Ferroglobe posted FY24 revenue of $1.6 billion, adjusted EBITDA of $154 million, and free cash flow of $164 million, becoming net cash positive for the first time and launching a capital return program with dividends and share buybacks.
• The company expects recent anti-dumping and countervailing duties in the U.S. and EU safeguard investigations to benefit its locally integrated North American and European operations, potentially boosting market share and pricing.
• Early signs of market stabilization include higher ferrosilicon and manganese alloy prices, improved European steel output and global PMI readings, although Q1 2025 is still expected to face low volumes and prices.
• 2025 guidance for adjusted EBITDA of $100–170 million reflects uncertainty around trade measures, demand recovery and geopolitical issues, with Q1 2025 anticipated to be negative due to idled French operations.
• Ferroglobe is advancing its strategy with a deeper investment in the Core Shell partnership for EV battery silicon and rolling out an S&OP process to reduce working capital and improve operational efficiency.

Presentation

[Operator]

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 Rotonen, Ferroglobe's Vice President of Investor Relations. You may begin.

[Alex Rotonen, VP of Investor Relations at Ferroglobe]

Thanks, Sonia. Good morning, everyone, and thank you for joining Ferroglobe's fourth quarter and full year 2024 conference call. Joining me today are Marco Levi, our Chief Executive Officer, and Beatriz García-Cos, 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 web page 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.

[Alex Rotonen, VP of Investor Relations at Ferroglobe]

Reconciliations of these non-IFRS measures may be found in our most recent SEC filings. Before I turn the call over to Marco Levi, our CEO, I want to announce that we'll be participating in the BMO Global Metals, Mining, and Critical Minerals Conference in Florida on February 24th and 25th. We hope to see you there. Marco.

[Marco Levi, CEO at Ferroglobe]

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 a 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 Ferroglobe's history and maintained 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 buybacks.

[Marco Levi, CEO at Ferroglobe]

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 implementing our discretionary repurchases with a 10b5-1 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.

[Marco Levi, CEO at Ferroglobe]

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 backward 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 markets in the coming quarters, providing a tailwind for our business and driving future growth.

[Marco Levi, CEO at Ferroglobe]

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 U.S. International Trade Commission determined that Russia, Malaysia, Kazakhstan, and Brazil unfairly priced ferrosilicon, 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 U.S. Department of Commerce on March 21st. Combined, these four countries in 2023 imported approximately 140,000 tons of ferrosilicon 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.

[Marco Levi, CEO at Ferroglobe]

While the potential magnitude of these measures is yet to be determined, we expect the provisional decision is in Q2, with a 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 pricing. 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 Ferroglobe 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.

[Marco Levi, CEO at Ferroglobe]

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 FeSi ferrosilicon 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 forecasts 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 EU 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 ramping demand for all our products. Another encouraging sign is the improved manufacturing PMIs.

[Marco Levi, CEO at Ferroglobe]

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 operations planning, or simply S&OP, as another tool to drive incremental improvement across all phases 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 operational efficiency with improved cash flow, lower working capital, and cost benefits. For a brief update on Coreshell, we continue to see promising test results from this partnership, and as a result, we recently increased our investment.

[Marco Levi, CEO at Ferroglobe]

We look forward to continued collaboration as we drive innovation with this exciting technology. We are bullish about silicon metal role 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. Next, I will provide a brief update on 2025 guidance. We are initiating Adjusted EBITDA guidance of $100-$170 million. The wider range of guidance is a result of uncertainty related to market conditions, timing of trade cases, potential tariffs, and geopolitical issues. Beatriz will walk you through our main assumptions related to guidance. Next slide, please. Our fourth quarter revenue declined compared to the third quarter due to lower volumes across all three segments.

[Marco Levi, CEO at Ferroglobe]

Adjusted EBITDA was $10 million, down from $60 million, impacted by lower prices, higher costs, and softer volumes. Operating cash flow improved by $21 million, reaching $32 million in the fourth quarter. Free cash flow increased to $14 million and improvement of $24 million over the previous quarter. Next slide, please. Let's talk about silicon metal. Silicon metal revenue declined 17% in Q4 to $161 million, down from $194 million in the third quarter. Adjusted EBITDA declined to $17 million in the fourth quarter due to higher costs, lower prices, and reduced volumes. Realized prices declined 5% over the previous quarter. During the fourth quarter, index prices decreased approximately 16% in the U.S., while the European index was unchanged. Overall, volumes were down 12%, with all regions reporting lower shipments. European and U.S. shipments declined 13% and 3%, respectively. The outlook for silicon metal continues to be soft.

[Marco Levi, CEO at Ferroglobe]

The aluminum sector in Europe and U.S. is expected to remain flat in the short term. A high level of imports is impacting the North American and European regions. In addition, uncertainties related to potential U.S. tariffs have resulted in some of our solid customers postponing purchasing decisions. Despite these short-term issues, we anticipate that the silicon market will improve once the stocking cycle is completed, which we expect to take a few months. As a result, we are optimistic that demand will pick up in the second half of 2025. Next slide, please. Our silicon-based alloys segment adjusted EBITDA improves slightly to $3 million in Q4, primarily driven by cost improvement. Average realized prices declined by 3% over the third quarter. Volumes were pressured by low demand and aggressively priced imports, especially in Europe, where shipments declined by 25% in the fourth quarter.

[Marco Levi, CEO at Ferroglobe]

The European FeSi Standard Index was down 7%, while the U.S. index was down 6%. Looking ahead, we are encouraged by the recent 5% increase in European index price since the end of 2024. Combined with the various trade measures and forecasted growth in steel production, we expect demand and prices to improve in both Europe and U.S. as the year progresses. Turning now to manganese alloys. Next slide, please. Revenue declined 13% to $78 million in Q4, driven by a 17% decrease in prices, partially offset by a 5% increase in shipments. Adjusted EBITDA decreased $9 million, primarily driven by tighter spreads and the impact of working through higher cost manganese ore inventory. The recent tightening of manganese ore supply is boosting prices, which have risen four-month high. We are optimistic about the manganese segment outlook for 2025, supported by improvements in pricing and higher spreads.

[Marco Levi, CEO at Ferroglobe]

The recent uptick in demand is encouraging, and we expect the trend to continue in the coming quarters. I would now like to turn the call over to Beatriz García-Cos, our CFO, to review the financial results and guidance in more detail. Beatriz.

[Beatriz García-Cos, CFO at Ferroglobe]

Thank you, Marco. Please turn to slide 10 for a review of the income statement. Sales decreased 18% sequentially in the fourth quarter to $368 million, driven by a 13% decrease in volumes for both silicon metal and silicon alloys, and lower prices in all segments, ranging from 4% for silicon alloys to 17% for manganese alloys. Manganese alloys volumes grew 5% quarter over quarter. For the full year, sales were flat versus 2023, with growth in the manganese alloy segment, offsetting declines in ferrosilicon sales. Silicon metal sales were up slightly for the full year.

[Beatriz García-Cos, CFO at Ferroglobe]

In the fourth quarter, raw material and energy consumption for production increased to 69% of sales versus 58% in the prior quarter, primarily driven by lower production, higher energy costs, and increased manganese ore prices. For the full year, raw material and energy increased 9 percentage points to 62% of sales due to lower prices and higher energy cost difference. Adjusted EBITDA in the fourth quarter was $10 million, down from $60 million in the prior quarter. The full year 2024 adjusted EBITDA was $154 million, compared to $315 million in 2023, attributable mainly to higher energy costs in France and lower realized prices. Next slide, please. Approximately 60% of the EBITDA decline is attributable to lower pricing, with realized prices down by 5%, 3%, and 17% in silicon metal, silicon-based alloys, and manganese alloys, respectively.

[Beatriz García-Cos, CFO at Ferroglobe]

Lower index prices in the third quarter adversely impact the fourth quarter sales prices due to a two to three-month lag between indexes and realized prices. Cost increases, primarily due to higher energy costs, idling in France, and elevated manganese ore costs reduced our EBITDA by approximately $11 million. Lower volumes impacted our adjusted EBITDA by $3 million, mainly due to soft demand across silicon metal and silicon-based alloys, which experienced volume declines of 12% and 13%, respectively. This was partially offset by a 5% increase in volumes in the manganese alloy segment. Head office and non-core business reduced adjusted EBITDA by 4%, $6 million. Slide 12, please. Adjusted EBITDA for the full year was $154 million versus $315 million in 2023, and EBITDA margin was 9%, down from 19% in 2023.

[Beatriz García-Cos, CFO at Ferroglobe]

While stronger volumes contributed $29 million to adjusted EBITDA, average selling prices had the biggest impact on our 2024 adjusted EBITDA, reducing it by approximately $128 million. Higher costs impacted EBITDA for the year by $83 million, mostly related to higher energy expenses in Europe. Head office and non-core business contributed to 2024 adjusted EBITDA driven by lower head office-related costs and improved mining operations. Next slide, please. During the fourth quarter, we recognized a $61 million non-cash impairment and goodwill write-off related to our operations. Our operating cash flow was $32 million, benefiting from a $23 million release of working capital. Our decision to idle our French operations earlier, combined with effective energy management, resulted in an energy rebate of $21 million in the fourth quarter. The remaining $34 million was collected in January 2025.

[Beatriz García-Cos, CFO at Ferroglobe]

CapEx in the fourth quarter was $18 million, down from $21 million in the third quarter. For the full year, we generated $243 million of operating cash flow and spent $79 million in CapEx, resulting in $164 million of free cash flow. We used $150 million of this cash flow to redeem the remaining senior secured notes. We paid $2.4 million, or 1.3 cents per share, dividend on December 27, and we are declaring the first quarter 2025 dividend of 1.4 cents per share, representing an 8% increase. The dividend will be paid on February 26 for shareholders on record on February 20. Next slide, please. We entered the fourth quarter with a cash balance of $133 million, up from $121 million at the end of the third quarter.

[Beatriz García-Cos, CFO at Ferroglobe]

Our positive net cash position improved to $39 million, sorry, up from $32 million in the prior quarter, while our adjusted gross debt increased slightly, ending the quarter at $94 million as of December 31. Before I turn the call over to Marco, I want to provide some more insights related to our 2025 outlook. We are targeting a working capital improvement of $50 million in 2025 as we continue the implementation of the S&OP process. We expect our 2025 CapEx to be in the range of $60-$65 million, and cash tax rate to be around 24%. Our standing Spanish loan, or SEPI loan, with a principal balance of $36 million is due in 2025. The first principal payment of $90 million is due in March, with the remaining $17 million due in June.

[Beatriz García-Cos, CFO at Ferroglobe]

As Marco mentioned earlier, we anticipate our 2025 adjusted EBITDA to range between $100 and $170 million. For the first quarter, we expect our adjusted EBITDA to be negative due to the impact of low prices, weak demand, and idling operations in France. This is consistent with our budget. Our 2025 outlook reflects a partial benefit from trade measures and unexpected improvement in market conditions during the second half of the year. Next slide, please. At this time, I will turn the call back to Marco.

[Marco Levi, CEO at Ferroglobe]

Thank you, Beatriz. Moving to the key takeaways on slide 16. Ferroglobe had a successful 2024. Despite unfavorable market conditions, we posted solid adjusted EBITDA, which strengthened our balance sheet significantly. Initiated quarterly dividends and a share buyback program while focusing on innovation in advanced silicon metal as critical material for the energy transition.

[Marco Levi, CEO at Ferroglobe]

As evidence of the changing global trade environment, the U.S. International Trade Commission and European Commission initiated broad trade measures to level the playing field against predatory trade practices. We expect to capitalize from these measures in the second half of this year. There are early signs that the demand environment might be bottoming. Manganese and FeSi price in Europe has ticked up in recent weeks. We foresee broader improvement in the second half of 2025. Ferroglobe has positioned the company for long-term success by making strides in developing advanced uses for silicon, including a partnership with Coreshell, and implementing S&OP tools to increase efficiency and lower working capital. Operator, we are ready for questions.

[Operator]

Thank you. To ask a question during the session, you will need to press star 11 on your telephone keypad. You will then hear an automated message advising your hand is raised.

[Operator]

Please wait for your name to be announced. To withdraw your question, please press star 11 again. We will now take our first question. Please stand by. And the first question comes from Nick Giles from B. Riley Securities. Please go ahead. Your line is now open.

[Nick Giles, Analyst at Riley Securities]

Thank you very much, Operator, and good morning or good afternoon, everyone. I wanted to start with your annual guidance. This is a wider range, so I was hoping you could give us a sense for what's baked into the lower end versus the higher end, specifically as it relates to pricing and volume, and then how much of the high end could be determined by implications of trade measures versus improved demand. Thanks very much.

[Marco Levi, CEO at Ferroglobe]

Yeah. Thank you, Nick. Let me start answering this question.

[Marco Levi, CEO at Ferroglobe]

By coincidence, we give the same guidance of last year, but the point is that we are facing an even more volatile environment, not only in terms of demand, but in terms of uncertainty on the trade measures that are going to be set by the authorities, both in the U.S. and in Europe. So let's say that first quarter, like Beatriz mentioned, is going to be particularly tough because we start from very low prices, extremely low volumes, and the usual opportunity issue of having our French plants down in the first quarter, right? And then as of the second quarter, we see the environment improvement with some decisions that should be taken in the U.S. And as the third quarter, I think both geographic areas are going to be impacted by these decisions.

[Marco Levi, CEO at Ferroglobe]

So if you look at the low side of the guidance, it's a sort of conservative forecast based on today's situation. The higher end is based on, like we say, on a partial success of the governments to impose duties. And we have estimated prices and volumes that drive toward the range that we have mentioned, $100-$170 million.

[Nick Giles, Analyst at Riley Securities]

Thank you very much, Marco. That's helpful. Maybe just to follow up on that, would there be any sort of sensitivity that you may be able to provide in terms of volumes or pricing and maybe anchoring near the midpoint?

[Beatriz García-Cos, CFO at Ferroglobe]

Yeah. Hi, Nick. This is Beatriz speaking. Maybe I'm going to be sharing a data point that I think you have already, but let me go through. So for every 1% of variance in pricing, more or less, this hits positively our EBITDA by $14 million.

[Beatriz García-Cos, CFO at Ferroglobe]

This is the number that you have to keep in your mind, if this makes sense.

[Nick Giles, Analyst at Riley Securities]

Got it. No, that's very helpful, Beatriz. I really appreciate that. Maybe my next question, Marco, I was wondering if you could speak to some of the key growth markets in silicon metal in the context of your desire for further expansion. Solar markets do appear somewhat softer, so curious if this changes your appetite for expansion or potential timing, and alongside this, if you'd have any updates as it relates to the brownfield expansion.

[Marco Levi, CEO at Ferroglobe]

Okay, so just to try to stay focused, we firmly believe in silicon penetrating much more substantially the battery business, and there are existing technologies, but also new technologies under development that move the graphite replacement from a 5% to even 100% graphite replacement to the anode, and we are working with several companies.

[Marco Levi, CEO at Ferroglobe]

Of course, we have announced our cooperation with Coreshell, but we work with a number of players, particularly in the U.S. And I think that the level of progress is amazing. The issue is that it takes time before a new technology is adopted in batteries. So we firmly believe in that, and we are totally committed to that. When you talk about the solar business, well, the current business, existing business, is mainly impacted by big structural overcapacity of polysilicon in China. And for our business, it is impacted by the current investigation on the imports on solar cells and modules in the U.S. that is expected to be concluded sometime in April this year, based on what we know. And this should reopen our sales opportunity in Asia.

[Marco Levi, CEO at Ferroglobe]

Talking in bigger terms, clearly, the overcapacity of polysilicon has caused a crash of the price of polysilicon. I think mostly below cost for most of the players. And this has been slowing down some of the polysilicon projects, new polysilicon projects outside of China. So there is a time factor. I think that at least Europe is still quite interested in setting a solar supply chain. The same for other countries in the Middle East. In the U.S., for sure, there is going to be more protection on cells and modules. So we expect the overall demand of silicon metal to benefit out of these trends. Talking about the U.S. expansion, we are working on the submission for the papers for the permit. And so it's a question of a few months.

[Marco Levi, CEO at Ferroglobe]

And then we expect to get the permit in a time frame of one year and a half since we started the process. And then it will take about a couple of years to build the new plant in the U.S. But the project is going on as aggressively as we can, and we're going to make it.

[Nick Giles, Analyst at Riley Securities]

Marco, I really appreciate all the color there. One more, if I could. It's good to see some initial share repurchases. Obviously, you're waiting for more certainty in the market, but how should we think about magnitude of potential buybacks if markets were to turn? Is there a minimum cash balance in mind that would imply potential cash that could be set aside for capital returns? I know, Beatriz, you mentioned a working capital release of $50 million, if I heard you correctly.

[Beatriz García-Cos, CFO at Ferroglobe]

Yeah. No, thank you for the question.

[Beatriz García-Cos, CFO at Ferroglobe]

Nick, this is Beatriz speaking. So just to recap, so we bought in 2024 almost 600,000 shares. And up to now, we have been continuing on Q1 to buy some shares, right? I think we plan to continue the opportunistic approach to the share buyback. And as we have been commenting on the previous quarter, Nick, we don't plan to take additional debt to support the share buyback program, right? And on the other side, you know more or less what is our liquidity needs for the company. So we will always go through an opportunistic approach to the share buyback. So hopefully, this year, as we release working capital, etc., as you said, we can do a little bit more.

[Nick Giles, Analyst at Riley Securities]

Beatriz, I really appreciate that. To you and the team, continue best of luck. Keep up the good work.

[Marco Levi, CEO at Ferroglobe]

Thank you.

[Beatriz García-Cos, CFO at Ferroglobe]

Thank you so much.

[Operator]

Thank you.

[Operator]

We will now go to our next question. Please stand by. The next question comes from Martin Englert from Seaport Research Partners. Please go ahead. Your line is now open. Hello.

[Martin Englert, Analyst at Seaport Research Partners]

Good day, everyone. Just circling back to the annual guidance, if spot prices for silicon and alloys remain unchanged from current levels, do you still achieve the $100 million low end of the guidance range?

[Marco Levi, CEO at Ferroglobe]

We do expect that because it's also the question, Martin, of mix, right? The first quarter is particularly impacted not only by demand and low pricing, but also by the fact that all our French plants are down. The other factor is that we expect to recover some business in the second half of the year, which is not there today, which is our business in Asia. So it's a question of mix.

[Marco Levi, CEO at Ferroglobe]

But anyway, even keeping the current conditions, we expect to achieve at least the bottom of the range that I have mentioned.

[Alex Rotonen, VP of Investor Relations at Ferroglobe]

And I would add that the volume is also a factor.

[Martin Englert, Analyst at Seaport Research Partners]

What is factored in as far as volumes or a range for the full year with $100 million-$170 million across your business units? Well, we are talking about volumes pretty much aligned to 2024. Can you walk me through the contribution of the quarterly French energy credit for 2024? Just going through one through 4Q, I believe you said earlier it was $21 million for 4Q and what's targeted for 2025?

[Beatriz García-Cos, CFO at Ferroglobe]

Yeah. Hi, Martin. This is Beatriz speaking. So as you know, from 2023 to 2024, the compensation has been a little bit lower. So total for the year is $60 million or $61 million. In the 4Q, the P&L impact is $24 million, right?

[Beatriz García-Cos, CFO at Ferroglobe]

From a cash perspective, we got already in 2024 $32 million out of the 60. The rest is in January 2025.

[Martin Englert, Analyst at Seaport Research Partners]

What are you factoring into the guidance for the credit for 2025?

[Beatriz García-Cos, CFO at Ferroglobe]

Well, this year is going to be lower than in 2024. I think the good news here is that we are negotiating already the contract for 2020, starting 1st of January 2026. And we expect to get a very good contract.

[Martin Englert, Analyst at Seaport Research Partners]

All right. Thank you very much. Good luck.

[Marco Levi, CEO at Ferroglobe]

Thank you, Martin.

[Operator]

Thank you. We will now go to our next question. Please stand by. The next question comes from Kyle Mowry from Grizzly Rock Capital. Please go ahead. Your line is now open.

[Operator]

Good day. Thank you for taking my question. So if the European quota system is finalized as proposed, your European production volume should increase.

[Kyle Mowry, Analyst at Grizzly Rock Capital]

The question is, as the utilization level increases, how would this impact cost per ton of your European production? You mean you ask for price per ton impact?

[Marco Levi, CEO at Ferroglobe]

Is this your question?

[Marco Levi, CEO at Ferroglobe]

The question is production cost per ton in Europe.

[Marco Levi, CEO at Ferroglobe]

Okay. Well, let me say that we don't know which measures the EU is going to adopt and if they get approved by the 27 countries, right? So we are in the process. We are still answering a lot of questions that come from suppliers, countries, states that have seen the document. We are in this phase, so I cannot anticipate what the EU is going to propose. But they mentioned safeguards in their announcement on December 19. And safeguards usually mean quotas for countries and specific producers in countries back to a certain year.

[Marco Levi, CEO at Ferroglobe]

As a consequence, part of the demand is going to be freed up for the European suppliers. I remind you that the EU has already decided that for critical and strategic raw materials like the ones that we have in our portfolio, they want to have a back integration of 40%. Today, the market share of the EU producers is far below this level. It's 14%, 15%, probably worse in first quarter. There is going to be a big impact on volume and capacity utilization. Now, factoring at this stage how fast this demand is going to come to us is very difficult. Also because in the meantime, it's not clear if there are going to be some retroactive measures imposed to the different importers outside of the EU.

[Marco Levi, CEO at Ferroglobe]

I'm sorry for not being precise, but you have to assume that our capacity utilization in the second half of the year in Europe will go up, and we'll go up favoring a much better cost absorption at all our plants.

[Kyle Mowry, Analyst at Grizzly Rock Capital]

Yep. That makes sense. Thank you for the response. In terms of the United States with the ferrosilicon rulings, have you started to see the reduced imports flowing through now? And then how should we think about the cadence of pricing through 2025?

[Marco Levi, CEO at Ferroglobe]

Yeah, well, first of all, if you look at the import statistics of 2024, there is the expected dramatic reduction of imports from Russia. On the other side, there was a lot of inventory in the U.S. of Russian material based on our knowledge and understanding, which has impacted the overall pricing of FeSi and the reduction of FeSi price.

[Marco Levi, CEO at Ferroglobe]

Decisions on Kazakhstan, Malaysia, and Brazil are pending with the National Department, and they're expected, like I said, on March 21st this year, and when you put the imports of these three countries together in 2023, they equalize to one-third of the market, so there is uncertainty on these volumes. What is clear, looking at the statistics, is that in September, the volumes of Kazakhstan, in particular, and Malaysia as well, have gone down almost to zero, so this is why we think that if you combine that with the weak steel production in the last months of the year in the U.S., we think that inventories are getting depleted pretty quickly. So we should see an impact on ferrosilicon demand. Our demand for ferrosilicon in the U.S., talking about Ferroglobe, is going up.

[Marco Levi, CEO at Ferroglobe]

We have signed two new contracts with customers who were not used to buy ferrosilicon from us. So this is another good sign.

[Kyle Mowry, Analyst at Grizzly Rock Capital]

Well, that's good to hear. Last question for me, just since it came up on the potential new United States facility. What sort of rate of return would you want to see to go forward with that investment? What sort of is it a per ton type of an approach on pricing? I know you had talked about longer-term volume contracts, but what sort of returns should shareholders expect should you choose to go forward with that investment?

[Marco Levi, CEO at Ferroglobe]

Yeah. We would expect a much higher return than any previous investment that we have made in silicon metal.

[Marco Levi, CEO at Ferroglobe]

And the reason is that we think that we have the capabilities to build the most powerful, in terms of performance, not in terms of energy consumption, the most powerful furnace that you can build in terms of output versus size versus energy consumption. But for sure, we are going to expect a return which is higher than our WACC.

[Kyle Mowry, Analyst at Grizzly Rock Capital]

Okay. Thank you very much.

[Operator]

Thank you. Due to time constraints, we will not be taking any further questions. And I would now like to hand back to Marco Levi for any closing remarks.

[Marco Levi, CEO at Ferroglobe]

Thank you. I want to emphasize Ferroglobe's resilience in being able to navigate successfully this uncertain market environment while at the same time strengthening our balance sheet and positioning the company for growth. Thank you for participation. We look forward to hearing from you on our next call.

[Operator]

Have a great day. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.

Participants

Executives

• Beatriz García-Cos, CFO
• Alex Rotonen, VP of Investor Relations
• Marco Levi, CEO

Analysts

• Martin Englert, Analyst at Seaport Research Partners
• Nick Giles, Analyst at Riley Securities
• Kyle Mowry, Analyst at Grizzly Rock Capital