Good morning ladies and gentlemen and welcome to the Ferroglobe’s third quarter 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 Beatriz Garcia-Cos, Ferroglobe’s Chief Financial Officer. You may begin.

Good morning everyone and thank you for joining the Ferroglobe third quarter 2019 conference call. Before we get started with some prepared remarks, I am going to read a brief statement. Please turn to Slide 1 at this time. Statements made by management during this conference call that are forward looking are based on current expectations. Risk 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, www.ferrogloble.com. In addition, the discussion includes references to EBITDA, adjusted EBITDA, gross debt, net debt, and adjusted diluted earnings per share, which are non-IFRS measures. Reconciliations of these non-IFRS measures may be found in our most recent SEC filings. I would like now to turn the call over to Javier Lopez Madrid, Executive Chairman of Ferroglobe. Next slide, please.

Thank you Beatriz, and good morning to everyone. Today we have with us Pedro Larrea, Chief Executive Officer; Beatriz Garcia-Cos, Chief Financial Officer; Benoist Ollivier, Chief Operating Officer and Deputy CEO; and Gaurav Mehta, Executive Vice President, Strategy and Investor Relations. Before we get started today, I would like to take a moment to comment on a few executive management changes which were recently announced. In October, we appointed Benoist Ollivier as Deputy CEO and Chief Operating Officer. As part of his role, Benoist oversees a number of important initiatives focused on our ongoing efforts to right-size operations, generate cash, and drive cost reduction. Benoist has been with Ferroglobe and his predecessors for over 25 years and has a wealth of operational, technical, and managerial experience. His knowledge of the organization and our industry combined with his proven track record for delivering results supports the effective management and execution of our near-term plan to navigate the current downturn. Additionally, we are thrilled to welcome Beatriz Garcia-Cos to the executive management team of Ferroglobe. On October 29, Beatriz was appointed Chief Financial Officer. Beatriz has over two decades of experience as a senior finance professional in multi-national companies, including having spent the past seven years as CFO of public companies in the metal and mining sector. She will lead Ferroglobe’s finance strategy and oversee the company’s financial operations. With the creation of a new Deputy CEO and COO role and the appointment of a CFO, we have strengthened the management team to successfully and expeditiously execute our strategy. Our financial results clearly reflect a challenging operating environment; however, we have been doing what we need to do one step at a time to ensure we successfully navigate this downturn. The team has executed on a number of initiatives both on the…

Thank you Javier and good morning everyone. Q3 results are reflective of an overall industry slowdown with revenues, EBITDA, and net income at disappointing levels. One area where we have seen a positive trend is a drop in our input costs which partially offset the top line decline. As we review our financials, please note that our prior period financials have been restated to reflect the recent sale of FerroAtlantica and its associated Spanish hydro facilities. Overall volumes during the third quarter were down 3.8% relative to Q2. Our push to sell silicon metal and work down inventory during the quarter led to an increase in silicon shipments; however, silicon-based alloys and manganese-based alloy shipment volumes were down for the quarter. An important factor of the Q3 results was reduced pricing across most of our products. On a quarter over quarter basis, silicon metal prices dropped 6.3%, silicon-based alloys dropped 5.2%, and manganese alloys dropped 4%. Although this sales price decline is reflective of the overall market evolution, it includes selling prices in many of our markets that are above index but also some extra sales in less attractive markets at lower prices with a goal of inventory work-down. The overall weaker volumes and pricing during the quarter yielded a 6.8% decline in our top line revenue versus the prior quarter. Adjusted EBITDA in the quarter was negative $7.2 million compared to positive $5 million during the prior quarter. The adjustments include $174 million impairment charge during Q3, amongst other items. Our EBITDA margin of negative 1.9% is a decrease of 312 basis points from the prior quarter. Given these negative developments, we are actively making changes to our commercial, operational, and financial strategy, which we will discuss in a moment. Turning to Slide 6 please, I would like to…

Thank you Pedro. Now turning to Slide 12, working capital. Working capital increased some $410 million in Q2 to $579 million in Q3, primarily resulting from the revised accounting treatment of the account receivable securitization program. Excluding the impact of this, working capital declined $13.4 million to $397 million. A release of inventory in the plants contributed to working capital improvement by $25 million. A decline in trade payables negatively impacted working capital by $90 million. Now I will provide some comments on the securitization program. The recent downgrades in the company’s rating triggered an amendment to the securitization program. This change affects the risk profile of the program as a result of which it was classed as on-balance sheet for IFRS purposes at the end of the quarter. The impact of this on the balance sheet is an increase of $182 million in working capital. As we speak, we are working on replacing the current account receivable securitization facility with the aim to increase the size of the loan and to return to a better risk profile which will allow the company to take it off balance sheet again. The cash balance as of September 30, including restricted cash, remained flat at $188 million. Slide 13, please. To begin, let’s review the debt position. There was a decrease in our gross debt and net debt by $110 million compared to Q2. The main drivers for the debt reduction are as follows: $58 million for this pay down following the FerroAtlantica divestiture, $21 million of debt paid down in the form of a letter of credit, and the fair market adjustment of a swap financial instrument by $10 million. Moving now to the free cash flow evolution, the reported EBITDA for the quarter was negative $483.1 million. This includes our…

Thank you Beatriz. So we turn to Slide 17 now, please. To date, we are faced with an ongoing uncertain operating environment across our main products. While there are some early positive data points emerging across the various products, we are assuming a delayed recovery and are adapting our cost structure and our production portfolio on this basis. Over the past 12 months, we have introduced a number of initiatives impacting our operational, financial and corporate areas. On the operational side, there has been a significant push to right-size the production footprint to address a decline in demand. By curtailing or idling plants, we reap a number of direct and indirect benefits. Our goal is to adapt our production platform to the reality of decreased demand. Furthermore, by scaling back production we are able to drive plant-level cost savings as well as focus on working capital release, primarily through the reduction of inventories. On the financial side, we continue to evaluate opportunities to further improve our liquidity; however, this is always underpinned by the premise that any new capital needs to provide financial and operational flexibility. Finally, on the broader corporate side, our emphasis is continued cost reduction such as re-evaluating headcount and screening various corporate level expenses. Additionally, we continue to evaluate our portfolio of assets to determine ways to streamline and potentially monetize these businesses, as we did in the case of FerroAtlantica. We have considerable asset value across our [indiscernible] business and are constantly looking at opportunities to extract value and improve our capital structure. We will develop these points in the following pages, so next slide, please. Our operational action plan is focused on three primary areas: one, focus at plant-level economics; two, releasing working capital; and three, making adjustments to our production and operational profile.…

Thank you Pedro. The slower activity in many of our end markets in 2019 has certainly been the driver of this cyclical downturn in our financial results as the end customer demand has declined much faster than the industry originally anticipated. While each of our end markets are impacted by different factors, there are commonalities tied to fears of a global economic slowdown which has led many of our customers to cut back their production and hence purchase fewer of our products. The ongoing trade war developments have added another layer of uncertainty to the demand picture. Given the fact that the broader global economy remains relatively healthy, coupled with the de-stocking we believe to have taken place this year and the recent wave of capacity cutbacks, there is a possibility of market squeeze which could be favorable for our products, mainly silicon metal, but we are not conducting our operations under that assumption. The aluminum sector continues to be challenged by the trade war and demand for aluminum for the automotive industry has declined significantly this year. Offsetting this has been a slightly better demand dynamic for aluminum going into end markets such as packaging and transport. Overall, the global deficit in aluminum along with the long low inventory levels should provide some stability to end market demand as we enter 2020. The greatest drop in volume in the past few quarters has been in the chemical market at levels which far outpace GDP decline. While customers are cautiously purchasing going into 2020, we see tightness in this end market as de-stocking could have already taken place and the demand is predicted to remain at GDP-plus levels globally. Finally, the picture for the photovoltaic industry has not changed much; however, as new PV installations hit an all-time high in…

[Operator instructions] Our first question comes from Matt Farwell with Imperial Capital.

Hey, good morning. Thanks for taking my question. I was wondering if you could give a little bit more color on the potential to release cash from refinancing the AR facility that was mentioned in one of the slides. What amount of cash could be released in that to add to the balance sheet? That was my first question, thanks.

Thank you Matt, this is Pedro. If there is any comment that Beatriz would like to add, I’ll allow her, but we mentioned that during the last weeks of Q3, the changes in the AR securitization program we are under right now drove $22 million of invoices that were not translated into cash. It is approximately that amount, but we would be expecting to recover when we replace the AR securitization, the current facility with a new one.

Okay, great. One other question when you talked about $125 million of lean capacity, would you be able to clarify any plans to utilize that capacity in the short term? Is there--would you pursue some sort of exchange or refinancing?

The $125 million is a description of what the bond indenture allows us in terms of room for additional capacity, and we are confident that we have an asset base that allows us to raise additional capacity--or sorry, additional capital within that capacity. We are examining different options for that.

Okay. Final question for me, would you be able to just give us some more color from a macro perspective on capacity curtailments that you’re seeing from your competitors? We know that Ferroglobe has taken one for the team essentially by shutting down a significant amount of capacity. What else are you seeing out there, and what is the problem? I know one of your slides has indicated that take-or-pay contracts are perhaps sustaining capacity above economic levels, so could you just give us some more market color on that front, please?

First in terms of what we have observed, and I’ll focus specifically on the silicon metal market, public data shows that--and I think this is the main factor in the supply-demand dynamics in this market. It shows that Chinese exports for silicon metals this year on an annualized basis are somewhere around 120,000 tons below last year. That is the main factor in terms of the supply-demand dynamics. The second point is we also have some observation of reduced capacity utilization in Brazil in the past two or three months. We are not certain about what is the level of that reduced capacity utilization, but there is some capacity utilization. Third is there’s been public announcements of Rusal reducing silicon metal production, also Elkem reducing capacity utilization, and then some other minor players. We know that the Iceland plant, PCC is having difficulties in operating that we cannot confirm, but it looks like they are not hitting the market as they would have expected, and also Bosnia is showing production curtailments as well. The second part of the question, sorry, it slipped my mind.

That was it. I was just asking about market color and--oh yes, regarding the take-or-pay arrangements in Malaysia.

Oh yes, sorry about that. Yes, you’re right. We have made that point in the past in terms of the ability of certain of our competitors to cut back capacity right in the middle of the year because you would have some commitments in terms of take-or-pay, power, labor, etc. We think that the fact that we are now seeing some of our competitors are cutting back capacity, may be meaning that some of those restrictions have been lifted or they have reached the point in which they have the option either to renew those commitments or not renew, and they are now having more ability to cut back capacity.

Got it. Thanks for taking my questions.

Thank you.

[Operator Instructions]. Our next question comes from Brett Levy with AD Securities.

Hey guys. Under the new agreement, are you allowed to repurchase any of your bonds at discounted levels?

We are. In terms of the bonds, we are contemplating different options going forward. We still have more than 24 months until maturity. We will be looking at different options. We have made no decisions, but we are allowed.

Got it. Then in terms of your cost cutting plans, I know at one point you guys put out a target of $75 million and that sort of thing. Is there a dollar amount sort of from this point going forward that you have as a cost cutting target say between now and the end of 2020 given what you’ve achieved? Give me a year to date or period to date cost cutting effort update, and then how much is left to go on the target.

We announced a $75 million run rate savings. Run rate means that that is the savings that we would be having actually in 2020 compared to 2018. In 2019, we announced that we would be having savings of $40 million in the year as a whole compared to 2018, and so far--and this is all detailed on Slide 20, so far we have achieved $35 million year to date, which of course places us on track to achieve the $40 million for this year. So far, we have not announced any additional targets above those $75 million that you referred to, and that would be fully captured only in 2020.

All right, thanks. My other questions have been asked.

I’m not showing any further questions at this time. I’d like to turn the call back over to our hosts.

Okay, thank you. That concludes our third quarter earnings call. Thanks again for your participation and we look forward to hearing from you on our next call. Have a great day.

Ladies and gentlemen, this does conclude today’s presentation. You may now disconnect and have a wonderful day.