Ferroglobe PLC (GSM) Q4 2020 Earnings Report, Transcript and Summary

Thank you, Beatriz and good morning or good afternoon to everyone. 2020 was a defining year for Ferroglobe and an extraordinary one in many ways. On the one end, the world fighting for the challenges resulting from the global pandemic. This required our relatively new Senior Management team to make drastic decisions and change internal processes to support swift decision making. It changed the way we operated our assets. And it forced us to expand and accelerate our efforts on the cost cutting side. On the other end, we have the clear and critical initiative, which was to design a strategy for turning around the company and to push forward with this agenda while navigating an unprecedented operating environment. In many ways, the challenges we were encountering, particularly during the early days of the pandemic highlighted gaps in our business and the opportunities to align the team to drive change. All in all, our financial performance was not what we would have liked to deliver. But we do view 2020 as a success in many areas. We make changes in management at various levels, and started redesigning parts of the organization to drive results and emphasize accountability. Despite the 30% decline in sales versus 2019, we returned to positive adjusted EBITDA in 2020. This is a testament of our ability to operate this business and reinforces the potential of the asset base. Furthermore, we continued operating the business while managing our cash. This has been a focus area for the company. And we've made significant strides to operate without any disruptions during a turbulent period. We successfully refinanced our per year account or assumable securitization program, which are at least some previously trapped cash, but also lowered our financing costs. And lastly, we now have a robust multi-year strategy and well defined roadmap for turning around this company. We have discussed our turnaround plan on recent calls and have recently published projections we provide further details or now we are going to create value. As we look ahead, 2021 will be the pivotal year not only as the operating environment improved steadily over the past few months. But we are also making substantial progress on critical priorities. So we are certainly starting the New Year on a positive note. A few weeks back we informed the market on our progress are relating to a proposed financing, which addresses the maturity of our senior unsecured notes and addresses the injection of new capital into the company. In reaching this milestone in the financing process, we are taking steps toward ensuring that we have the resources to execute our turnaround plan. Furthermore, it is validation then the strategy underlying our business plan illustrates a clear path towards value recovery that is recognized by financing partners. On the turnaround plan itself, we completed most of the preparation work in 2020. At this time, we are in the execution phase across all the new creation areas. I will get more into this later in today's presentation. Moving ahead to Slide 6 please. For the full year, sales were $1.14 billion, which is 30% lower than $1.62 billion of sales generated in 2019. This is primarily attributable to an unforeseen impact of COVID-19 on volumes and pricing across all our products. The net loss for full year 2020 is $194 million, including an impairment charge of $36.8 million related to the Niagara plant compared to net loss of $296 million during the full year 2019 which includes a goodwill impairment charge of $134 million. And lastly, we return to a positive adjusted EBITDA. For the year, we had $32.7 million of adjusted EBITDA, which compares to negative $29.2 million of adjusted EBITDA during 2019. Once again, this variance highlight the drastic changes we have made [indiscernible] costs. Likewise, for the full year 2020, we returned to positive operating cash flow generated $154 million throughout the year. During the fourth quarter, the company generated sales of $322 million, an increase of 22% compared to $263 million of sales during the third quarter. The net loss for the [third] quarter was $84.1 million, which compares to a net loss of $46.8 million during the prior quarter. Adjusted EBITDA for fourth quarter was positive $5.7 million, a decrease of $22.2 million reported for the third quarter. Overall Q4 marked by higher sales volumes and slightly higher prices coupled with significantly higher costs some of which are not recurring resulting in margin erosion during the quarter. The higher shift volume levels for the fourth quarter reflecting proving and market demand, particularly in the later part of the quarter. We also continued our effort to reducing debt at levels. The gross debt increased by $31 million during the quarter primarily due to the bond coupon accrual. We ended the year with gross debt of $473 million and net debt of $341 million. The cash balance was $132 million at year end. With the refinancing of our prior securitization program, there was a cash release when the previously trapped cash in the SPV structure. So while the total cash balance is down quarter-over-quarter, the unrestricted cash available actually increased following their financing, improving from $78 million in Q3 to $130 million at year end. Next slide please. On the next three slides, we will discuss pricing and volume trends, earning contributions and market observations for each of our key products. Turning first to silicon metal on Slide 7, Ferroglobe realized average selling price for the silicon metal was $2,260 per metric tons in Q4 relatively flat from $2,248 per ton the previous quarter. The index pricing in the U.S. gradually increased by approximately 2.6% during the quarter, while the European index increased 7.5% during the same period. Much of the pricing recoveries was seen late in the quarter as low inventories all along the value chain coupled with strong demand in both the U.S. and Europe supported pricing with some upward pressure. The volume trend chart on the top of Slide 7 shows that 7% increase in silicon metal shipments over the previous quarter to approximately 55,000 tons. We saw deterioration in our EBITDA from the silicon metal business quarter-over-quarter, which was driven primarily by an increase in costs. Our silicon metal production was adversely impacted by higher winter electricity unit cost in France, as well as greater specific consumption of energy at few locations. Additionally, the planned production curtailments drove lower fixed costs absorption. And finally, we had some one-off our related penalties, resulting from a reduction in production due to COVID-19 relative to our energy commitments that anticipated a healthier production profile. Overall the market [tension] at the end of 2020 has carried over into the beginning of 2021 with the U.S. and European indices showing steady improvement. After a rather weak demand picture for most of 2020 driven by COVID, there has been a pickup in activity across the industrial sector. And we're seeing that trend in our sales into the chemical and aluminum end markets in both U.S. and Europe. This demand improvement comes at a time when inventory levels are low throughout the value chain and logistical barriers and increased domestic consumption and limited Asian inputs into our markets. As a reminder, there is a lag from the moment in the index when we realized that benefit. Overall the momentum at the beginning of the year is favorable to our business. We will get to our ongoing silicon trade case on February 23. The U.S. Department of Commerce imposed final duties of up to 160% on all silicon metal imports from Bosnia, Iceland and Kazakhstan. Next, the International Trade Commission will vote whether to affirm the preliminary decision that these inputs are [indiscernible] to USA industry. The ITC vote is scheduled on March 24. Regarding Malaysia, the investigation is proceeding to-date commerce has imposed preliminary duties of 7.21% at the end of January. This rate may increase in a final determination, which is scheduled for announcement on June 17. Next slide please. Turning to silicon based alloys on Slide 8. During the quarter, the average selling price decreased marginally by 0.4% to $1,528 per metric ton, down from $1,534 per metric ton in the third quarter of 2020. Despite the decline Ferroglobe’s realized price for silicon based alloys are above the U.S. and European indexes. This is due to the weighting of our higher margin specialty ferroalloys products, which accounted for approximately half of the shipments during the fourth quarter. During the quarter, we realized that 35% increase in sales volumes. Sales volumes of silicon based alloys were approximately $57,000 tons in Q4, about $15,000 higher than the previous quarter. This improvement is primarily attributable to sales of ferrosilicon, which has benefited from the start of steel capacity, especially blast furnaces in Europe. Furthermore, our foundry sales also improved on the back of gradual recovery across the global automotive end market. EBITDA for our silicon-based alloys business was positively impacted by prices, volumes and cost during the quarter. We realized that cost improvement of $8 million due to the improved fixed cost absorption. This benefit was realized both in France and Spain, which previously suffered from lower production following the slowdown of steel demand in Europe in the second and third quarters of 2020. Collectively, these factors resulted in an improvement in EBITDA contribution from this segment to $7.1 million in Q4 up from negative $1.9 million in the third quarter. As you can see, in the pricing trend graphs, pricing in the U.S. and Europe steadily rebounded in the second half of 2020. Overall ferrosilicon pricing is benefiting from rebuild of inventory along the value chain, as well as recovering steel demand. Next slide please. Turning now to manganese-based alloys. During the quarter, the average selling price increased by 2.2% to $1,031 per metric ton, up from $1,009 per metric ton in the third quarter of 2020. During the quarter, the ferromanganese business had a 4.4% increase in realized prices. While realized silicon manganese pricing was 1.7% higher. Shipments during in the fourth quarter were up 58% an increase of approximately 24,600 tons over the previous quarter. As with some of the other products, the value chain for manganese alloy is also reflected low levels of inventory at a time when demand was picking up. EBITDA contribution of this business was negative [$0.1] million per metric ton in Q4 versus positive $13.1 million in the third quarter. Volumes and pricing positively impacted the quarterly results by $3.1 million and $1.5 million respectively. On the cost side, there was an adverse net impact for the quarter of $17.8 million. On this amount approximately $12 million is attributable to the potential earn-out payment relating to our manganese alloy plants in Norway in France. Additionally, we face adversely impacted by lower plant efficiency and higher fixed cost consumption costs. I would now like to turn the call over to Beatriz to review the financial results in more details. Beatriz García-Cos: Thank you, Marco. Beginning with a Slide 11, sales of $321 million during Q4 were 22% higher than the $2,063 million of sales in the prior quarter. This increase in sales was driven by a 29% increase in shipments, which more than offset the 3.5 decrease in average realized selling price across our portfolio. During the quarter, our cost of sales increased by 36%. This is primarily attributable to the variable costs directly related to the increase in shipments during the quarter. Additionally, it also includes the dollar $12 million charge for the mark-to-market of the end of liability for the manganese assets. The increase in other operating expenses of approximately 75% or approximately $20 million, this can be explained by three key factors. In Q3, we realized $5 million benefit resulting from an R&D project in France. That impact was one-time so we are not getting the same benefit this quarter. Additionally, we had $6 million accrual for the potential purchase of CO2 emissions rights based on current pricing. Finally, the remaining balance is mainly attributable to higher transportation and logistics costs resulting from higher volume activity, but also higher freight rates as a broader industrial activity has picked up. The net impact of higher sales was partially offset by higher costs, which led to an improvement in our operating loss for the quarter before adjustments to negative $26.2 million compared to negative $38.8 million during the prior quarter. Adjusted EBITDA was positive $5.7 million declined from $22.2 million in the third quarter. It should be noted that the results presented are un-audited. On November 16, 2020, the Tribunal Superior de Justicia of Galicia dismissed FerroAtlántica’s claim of petition to separate the metallurgical plants of Cee and Dumbria from the related hydroelectric power plants. The accounting impact of this decision has been considered in the Q4 results. This accounting impact is at the discussion with our external auditors and could change. Next slide, please. Quarter-over-quarter, [indiscernible] decline in our adjusted EBITDA from $22.2 million in Q3 to $5.7 million in Q4. There are a few key elements behind this and I will specifically stress a few items which are non-recurring in nature and should be considered when you look at our normalized EBITDA thresholds. During the quarter, we benefit from some volume pickup late in the year, and we also benefit from improved pricing across the portfolio. Furthermore, there was an adverse impact of $9.4 million also attributable to energy costs. This specifically relates to a $5.8 million penalty incurred in France, we will consume less energy than contracted due to the unplanned production curtailments in Europe. On the other hand, we benefit from a $3 million compensation on energy last quarter, as a result of energy providers being unable to secure minimum energy levels off-ticks. As per the previous quarter, we had a significant mark-to-market adjustments relating to a potential earn-out liability tied to some manganese assets. The P&L impact was positive $7.5 million in Q3 and negative [$2.2] million in Q4, hence, implied a quarter-over-quarter variance of approximately dollar $10 million. Given the fluidity of the underlying market for manganese alloys, this liability could move back on fourth quarter-to-quarter and that create some noise. Hence, one must factor this into their assessment when evaluating the quarterly performance. Similarly, we had a $5 million benefit from the elimination of a liability, tied to an R&D project in France. In the bridge we have a negative impact of these one-off benefits realized last quarter. And lastly, we continue to make progress on head office cost reduction. During the quarter, which contributes $5 million. Slide 13 please. For the full year, adjusted EBITDA improved from negative $29.2 million in 2019 to positive $32.7 million in 2020. The most significant factor impacting the [string] West Cost resulting from improved production costs. First and foremost, we continue to drive initiatives aimed at obtaining the raw material mix to generate savings without compromising the end quality of our finished goods. Furthermore, by curtailing capacity and running our most competitive assets, at a higher utilization, we gain some further benefits in our overall production costs. And lastly, due to the slower industrial activity, we benefit from lower pricing for raw materials and other critical inputs. Significant pricing declines across all our core products adversely impact us year-over-year. And as mentioned on the prior slide, we have been extremely focused on our corporate expenses focusing on both discretionary and non-discretionary spend. The net result was a benefit of $13.5 million in 2020. Next slide, please. Turning now to Slide 14, I will review our balance sheet in greater detail, where we have made improvements to our total available cash and working capital. With a challenging market environment this improvement is critical for our business. Cash and restricted cash totaled approximately $132 million at the end of 2020 compared to $147 million the prior quarter while there is a decrease in the total cash amount, what is critical to the company is the available cash balance which can be accessed without any restrictions. During the quarter our available unrestricted cash increased by $25 million from $77 million at the end of the third quarter to $103 million at the end of 2020. In refinancing the prior account receivable securitization facility in Europe, the special purpose vehicle instructor supporting the financial fell away once the facility was refinanced. This release some -- of some previously restricted cash. Gross debt increased by approximately $31 million over the quarter, which is primarily related to the accrual for the semi-annual bond coupon payments. Net debt increase by $46 million over the same period, this increase is driven by a lower accounting cash as the SPV trapped cash is no longer consolidated. As mentioned earlier. Total assets were approximately $1.4 billion at year-end 2020, a slight decrease of $34 million over the prior balance at the end of Q3. Ferroglobe’s working capital improved by $15.3 million in the fourth quarter, primarily as a result of our emphasis or lowering raw materials and finished-goods inventory across the portfolio. Next slide please. Well, we have provide all the quarterly details for 2020 on this slide, let me first begin -- bring your attention to the Q4 2020 figures. The cash flow from operating activities during the quarter was $3.5 million, the negative $0.6 million of reported EBITDA was offset by our working capital inflows, which yield net cash inflows of $13.5 million. With cash released from inventory being the biggest contributor. Cash flow from investing activities was negative $14.2 million as we had a pickup in capital expenditure during the winter months during some planned outages, mainly in Europe. And lastly, cash flow from financing activities was negative $4.7 million for the quarter. During the quarter, we refinance our prior account receivable securitization facility and replace it with a new factoring facility in Europe. This year, approximately $19.7 million of cash released at closing. Additionally, are the cash movements relating with refinancing are being considered as bank borrowings and payments in the cash flow summary. In aggregate, we had free cash flow of negative $10.7 million during Q4. For the full year, our cash from operations was positive $8.9 million and free cash flow was positive $122 million. Next slide, please. Now turning to Slide 16. We reduced working capital by [$1.50 million] during the fourth quarter. This reduction was driven by $65 million was down in inventory and an increase in accounts receivable of $63 million and is offset by a $30 million increase in accounts payable. The positive impact from inventory was partially offset by the effect of a strengthening euro relative to the U.S. dollar. Turning to the chart on the right and as I mentioned, our cash balance at year-end was $132 million compared to $147 million in the prior quarter. Slide 17 please. During the quarter, both our gross debt and net debt interest. The gross debt increase is attributed to the accrual of the semi-annual coupon payments under the existing senior notes. Likewise, the decline in total cost adversely impacted by the quarter-over-quarter movement in net debt. Next slide please. In regard to our prior account receivable securitization program in Europe, we close on a new facility on October 1. The new facility is slightly different than the prior securitization program, and it is structured as a factoring facility. This helps with improve advance rates and eliminates the SPV structure we previously had. As a result, we were able to release $19.7 million of cash at closing which was previously restricted within the SPV structure. Finally, the proposed financing discussions we refer to in our previous announcement on February 1, are continuing and we hope to be able to make a further announcement about those soon. At this time, I would like to turn the call over to Marco Levi, who will provide an update of the strategic plan.

Thank you, Beatriz. Now turning to slide 20. At this time, I would like to take a few minutes to provide an update on our strategic plan. At this stage, we have formally transitioned from the planning and preparation phase of the strategic plan into the execution phase across all value creation areas. The bottom-up analysis we conducted during the preparation phase was critical in validating our assumptions and financial targets. As we get deeper into the execution phase, we're also going deeper into organization. Not only we are involving more of our workforce throughout the organization. We're also training and empowering them to drive the change required to make improvements in their respective areas. Equally, the company is undertaking detrimental effort to address gaps in the business, such as internal communication. The centers of engagement with our workforce to ensure that the full organization as a sound understanding of what we're aiming to achieve for the turnaround plan and how it impacts that. Now, I will quickly update on where we are across the various value creation areas. On footprint optimization, our goal is to make adjustments to our installed capacity across the world by eliminating excess and uncompetitive capacity. Today, we have completed the restructuring of our Mo I Rana facility in Norway, and Niagara facility in the United States. Mo I Rana specifically our decision has been to either one of the two furnaces. By doing so we have taken action to correct the cost structure, particularly the fixed costs, so that we can effectively consider this is a smaller facility in the near-term, while preserving the optionality to restart the second furnace. Our Niagara facility has been idled since the end of 2018. Given our broader focus on shedding installed capacity and focusing on the most competitive plans, we have decided to permanently close this site. Several options for what we do with the property are currently under review. For 2021, we have some further actions to take. And we will provide updates as we begin execution in other areas. The continuous plant efficiency value creation area is an extension of our key technical metrics program. As part of the strategic plan, we have a long backlog of specific initiatives focusing on raw materials, general efficiency improvement and reduction in energy consumption. Some combination of these initiatives will be implemented at our facilities globally this year. Most recently, we completed our first pilot project and the [indiscernible] facility in France. This was a successful two week on-site pilot to test and learn ahead of a global rollout. What makes the program different from the way we have done KTM in the past is the preparation and planning leading up to the [indiscernible]. Furthermore, we have launched a process aimed at employee training and engagement to create a culture centered on operational excellence and having a workforce that constantly seeks ways to move forward to remain competitive. While this level of engagement is being rolled-out in all areas of this strategic plan. It has been quite noticeable in plant efficiency, particularly since it involves direct participation of our workers and their facilities and collaboration between teams from different plants around the world. The SG&A cost reduction plan is essentially an extension of our corporate overhead the reduction initiatives beyond head offices. Today, we have good success in setting up the internal infrastructure and processes to set specific targets and track progress. Improvement in discretionary spending is one specific area where we are realizing the benefits of our efforts and are taking measures to ensure there is a cost creep over time. In creating, a centralized procurement group, we have disrupted the historical approach of operating and decision making with the aim of driving cost savings and increased efficiencies. At this point, the new centralized procurement organization is fully up and running, and most [indiscernible].We recognized that this is a very different way of working and aiming at the time and resources in training our people to work under this new structure. Given the vast opportunities to capture cost savings across those as of raw materials, consumables, and logistics, expenses we incur, we have to be systematic and methodical in our approach to identify the key areas of focus and offset priorities for the current year. We are already seeing this new organization in some positive results following the first round of tenders launched in the area of freight and logistics. We feel confident that this organization will drive significant value going forward, and we will seek to potentially expand the roll-over time. And finally, we are working on achieving commercial excellence through a number of initiatives across the portfolio aiming that improving our strategic alignment to our key customers while maximizing the potential of our commercial effort. This will be done by improving our planning between commercial and production leveraging data analytics and bolstering our market intelligence capabilities to capitalize on market movements. At the moment, we are in the process of revamping existing processes and developing new processes to support this initiative. In a market environment like the one we are experiencing now, with growing demand, being more systematic and organized on this side of the business is critical to maximizing our potential. Beyond the EBITDA drivers, we have a separate work stream dedicated to [capture leads] through working capital improvement. To-date, we have created three distinct themes focusing on inventory management, account receivable, and accounts payable. As Beatriz highlighted, we are seeing some of the benefit coming through on the inventory side. Overall, I am proud of our organization effort and the all levels. We embarked on this journey last year, in the midst of the global pandemic and against a very challenging backdrop. While we have good momentum launching initiative in these intuition fees we realized it is very early in the year and that’s have some very difficult tasks ahead. We are proud of our achievements for 2020 to advance the company operationally, strategically and financially. And we are excited to execute on the new target for this year. I certainly look forward to keeping our stakeholders updated on this journey over the coming quarters. At this time, I will ask the operator to please open the line for questions.

Thank you. [Operator Instructions] And your first question today comes from line of Nick Jarmoszuk of Stifel. Please ask your question.

Hi, good morning. Thanks for taking the questions. First one is that with the recent price strengthen in silicon metal and ferrosilicon. How can we think about when that improve pricing is going to flow through the income statement?

Thank you for the question, Marco Levi speaking. The -- when you consider silicone metal, where we have price agreements which are indexed, there is a quarter lag also through that large part of our business is on fixed yearly pricing. So the net effect of an index price rise doesn't cover all our silicone sales. Our alloys business is still far more indexed. And the lag is between two three months.

Okay. With the silicon metal, what's the mix between the index and the annual contract?

Well, approximately 70% is annual contract, but then not all the 70% is fixed price for the year.

Yes. And then can you talk about how the contracting environment was on a year-over-year basis where your -- was your pricing up or down was it flat still environment is obviously very different in this time of the year, that it was a year ago. So if you can just talk about how that environment is?

Yes, well, I have -- as you know, I have a short tenure with a company about one year and but in this year, I have seen quite a lot of volatility on pricing. Maybe we, let me start from silicon as a reference. Silicon price last year started at good levels. And then due to the lack of demand of second and third quarter the index price has gone down to extremely low level. We have seen market prices even below the €1,500 per metric ton in Europe just to give you clarify. And of course, this has impacted all the negotiations for the New Year, because the price started from a level of €2,000 went down to €1,500 at least in -- for the indexes and then didn't recover in Q3 and recovery -- within recovery only in the Q4. So the point has been either negotiate contracts with lower volumes, committed volumes for 2021 at prices that were equal or lower than 2020 or allocate more business to metallurgical silicon, which is by nature a spot business. So the dynamics have been, trying to negotiate the best possible price for the year and eventually not to commit for the full volume.

Okay. And question for you on the European CO2 credits, what portion of your 2021 projected CO2 emissions do you have covered? And then what dollar amount of credits are you going to have to expand, so that you're covered on your CO2 emissions for 2021? Beatriz García-Cos: Yes, thank you, Nick, for the question. This is Beatriz speaking. As of today, we have a part of the CO2 allocations that we need already in our balance sheet. If this answered your question, is that we need to put a certain amount of CO2 rise as of today. And what we are trying to -- what we are planning to do to try to offset as much as we can the new allocation with the new purchases that we need to accomplish. Time wise, this looks a challenging at the moment, but this is what we're planning was driving for.

So of your 2021 emissions, how much do you have credits for? And then how much are you going to have to spend so that you can get all the European production done? Beatriz García-Cos: Yes, so as I mentioned, we have part of a [dem] already in our balance sheet in percentage basis, that's maybe something that I can disclose not in dollar value. And again, the issue is about the timing because we're going to be getting the new allocation in June 2021. If we need to [indiscernible] the CO2 by April -- by the end of April, right. So more or less I can say that as of today, we have found part of it already in our balance sheet. But it's true that we need to [indiscernible] an additional amount.

How about that -- in terms of the $30 million that you monetized, I believe is at the end of the second quarter beginning of the third. What percentage of your 2021 emissions to that account for? Beatriz García-Cos: Well, it's two -- they said relation between the two processes, but let me put it like this. So the ones that we sell in 2020, right, it was part -- it was related to the consumptions in 2020, right. The one that we were going be allocated in 2021 would be based on the future allocation on the future of realization of our brands. So I don't think you can connect this to 2020, we say 2021, if I'm answering to your question.

Okay, but there's a disclosure that you accounted for a CO2 accrual of $6 million. So the accrual is $6 million for the fact that they're more expensive now. However, you're going to be spending $6 million more than you would have, in addition to some additional amounts. So you could be spending, if you sold $10 million last year now, is that value of the CO2 credit now is $16 million? Is that how we should think about it? Beatriz García-Cos: Well, you need to see -- I think the best way to answer your question is to look to the evolution of the CO2 prices on the last 12 months. So it's true that the prices has been increasing from I would say €27 and has been going up to -- even up to €40. As of today, we are at €36 per EUA, right. But this is a volatile market. And what happened in the last two months there has been a lot of appetite of investors into this market and that's why the prices it has been increased. Now, it looks that had been softening back. So we are in a lower the price levels. So we are monitoring and planning our strategy to repurchase the remaining ones watching carefully the evolution of the market.

If I am allowed to add, the amount that we need to repurchase this year depends also on our operating footprint and the new location for credits of 2021. So these are two moving parts, right?

Yes. And then the question on the asset closures when you're exiting the Niagara facility, are there any environmental remediation liabilities that are triggered and then given any sense what the cash exit costs are going to be?

Yes, the -- in case we had to shutdown Niagara, we have already estimates of a couple of million dollars nothing more. But we do not -- at this stage we do not expect to completely shutdown the facility. We have some alternative options that we are considering.

Okay. And then a final question on production costs. Are you seeing any inflationary cost pressures across the manganese, silicon metal and ferrosilicon side? And if you talk about the early passes where?

Well, the -- for sure we can see some of the raw materials moving up manganese or is move -- has moved up a little bit market wise between Q1 and Q4 of last year. Coal is moving up slightly up versus Quarter 4 last year. These are the two main ones at the top of my mind. Beatriz. Beatriz García-Cos: Yes, I agree with nothing to add.

Okay. That’s all I had. Thank you.

Thank you. Beatriz García-Cos: Thank you.

Thank you. Your next question today comes from line of [Brian De Rubio] of Baird. Please ask your question. Your line is now open Brian.

Good afternoon. Maybe just starting with capital expenditures, how much do you intend to spend in 2021? Beatriz García-Cos: In -- Hi, good morning. In 2021, our CapEx level will go up in compare with 2020. But we don't provide the figures, but I can tell you that we're going to be increasing our CapEx expenditures as our business expands in 2021. In 2020, we have been spending $30 million of CapEx and we're going to be going above this year in 2000 -- I would say well above this in year 2021.

Okay, thank you Beatriz. Maybe just another way, how much is $30 million your maintenance level of capital expenditures or did do under spend on that, I'm just trying to gauge what the magnitude would be?

Now, for two years in a row, we have spent around $33 million, $34 million of CapEx and the -- this number is the number that allows us to operate our current asset footprint in a safe way. In this CapEx there is almost nothing related to growth or nothing to process improvement. While related to the KTM initiative that I mentioned during my speech, we will need to spend some CapEx to implement the new technologies specific assets.

That's helpful. Then on inflation or just cost inflation, can you give us a sense of what headwinds you're seeing on freight? And actually not even on shipping, but shipping availability? I'm hearing there's some large [gems] with logistics?

Yes. Well, as you know, we have limited business in Asia. And yes, we see some inflation due to some ancillary raw materials that we need to buy mainly for our foundry business that we buy from Asia. This is the main inflationary cost that we see. So we -- I refer this to be smooth and to magnesium purchase, but this is not something really massive at this stage or really significant.

Okay. And then with the centralized procurement group that you created, when should we start seeing the real benefits from those -- this year?

Yes. Yes, I have -- it is going to be as lower impact because most of the supply agreements were negotiated in Q3, Q4 last year for this year. But we -- so we focus first on centralized in the organization, but now we are working on capturing some values for example, on the purchase of certain services or the purchase of spare parts for the plants. So we would start seeing benefits this year, but I expect significant impact in 2022.

Okay, and then final for me, just as we think about, I think you said prices are moving up on the indexes and there's going to be a little bit of a lag, when should we start seeing a more meaningful rebound in volumes will that start occurring in the first quarter or is that maybe -- ?

You have seen rebounding volume already in Quarter 4, right. If you look at the volumes our commercial part in Q4, the volumes were substantially higher than in Q3 for all the three major value centers and we have not been out destocking we have kept the price at the same level or pretty close to the same level. So and this trend is confirmed in Q1. The expectations, the point is that we are running our operation at a certain rate. And we have been poked by surprise in Quarter 4. So the demand has went up and but our inventory went down substantially. So we started the year with extremely low inventories. And now that the demand keeps on being robust, we struggled to keep up demand, because we started with low inventories.

That's helpful. Thank you so much.

Thank you. Beatriz García-Cos: Thank you.

Thank you. There no further questions at this time. Please continue.

Yes. So if there are no other questions, Martin that concludes our fourth quarter and full year 2020 earnings call. As I mentioned, at the beginning of the call, we see some positive developments and meaningful market trends to monitor. This past year results have not what we set out to achieve but despite the unforeseen impact of the pandemic. We made significant progress in returning back to a positive EBITDA and beginning to address a number of critical gaps to turn this company around and return us to profitability. Thanks again for your participation. We look forward to hearing from you on the next call. Have a great day.