Good morning ladies and gentlemen and welcome to Ferroglobe's Fourth Quarter and Full Year 2023 Earnings Call. At this time [Operator Instructions] I would now like to turn the call over to Alex Rotonen, Ferroglobe's Vice President of Investor Relations. You may begin.

Thank you, Heidi. Good morning, everyone and thank you for joining Ferroglobe's fourth quarter and full year 2023 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 2 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 exhibits to those filings which are available on our web page at ferroglobe.com. In addition, this discussion includes reference to EBITDA, adjusted EBITDA, adjusted gross debt, net debt and adjusted diluted earnings per share, among other non-IFRS measures. Reconciliation of non-IFRS measures may be found in our most recent SEC filings. At this time, I would like to turn the call over to Marco Levi, our Chief Executive Officer.

Thank you, Alex and good morning, good day and good evening to everyone. Thanks for joining us on the call today. We appreciate your interest in Ferroglobe. We are very pleased with our strong execution in 2023, where we improved our operations, strengthened our balance sheet and posted solid financial results of $315 million of adjusted EBITDA. While our end markets were extremely challenging in 2023, we focused on things that were within our control to position the company for the long-term success. I'll discuss a couple of the highlights of our execution and strategy. Then Beatriz will discuss the great strides we have made in improving our balance sheet a little later. Overall, operations performed at a high level in 2023. Our European plants set a new historical record for opening efficiency as measured by kilowatt hours per ton improving by more than 3%. In the third quarter, we completed a strategic acquisition of a high-quality quartz mine located in South Carolina which will ensure access to quartz needed to produce high-quality silicon metal in our U.S.-based silicon metal production plants. Aligned with our strategy to grow our advanced silicon metal business, we signed a term sheet for a global joint venture with a leading battery material company in Europe to develop advanced EV battery materials using silicon in the anode. We also signed an MOU with a U.S.-based advanced battery solutions company to pursue the next generation of silicon-rich battery technology. As part of this venture we are currently testing a promising nano-layer coating technology which not only increases the performance and the range of EV battery but also lowers the cost of battery manufacturing. The silicon-based EV battery market is expected to go to 150,000 tons globally by 2030. We provide additional updates in the near term.…

Thank you, Beatriz. It's moving to the corporate update on Slide 15. We made great strides in 2023 and as promised, have initiated a new capital allocation policy that we return capital to our shareholders. We initiated a quarterly dividend of $1.3 cents and are currently working to implement a share repurchase program. Given the current uncertainty in the market, we are starting with a conservative dividend with the intention of increasing it as the environment improves. We ended the year with the strongest balance sheet in the history of Ferroglobe and achieved a net positive cash position in January. This is a dramatic improvement over the highly-levered balance sheet we had just a year ago. The partnerships we discussed earlier are an excellent way for us to take advantage of the tremendous opportunities in the advanced silicon EV battery market which is expected to grow to 150,000 tons by 2030. This, combined with the second secular trends in the solar market that we are now serving globally is expected to drive long-term growth for Ferroglobe.

Operator, we're ready for questions.

[Operator Instructions] We will take our first question. Your first question comes from the line of Lucas Pipes from B. Riley.

Thank you very much, operator. Good morning, everyone. Marco and team, great to see that unlevered balance sheet and the commencement of a dividend. My first question is on the 2024 guidance for EBITDA, $100 million to $170 million. And Marco, if I heard you right, a 5% change in pricing is about $35 million EBITDA sensitivity, so should we kind of think of the guidance as in the current price environment? You had $135 and then you maybe put like a 5% sensitivity to the upside and to the downside to articulate that range or are there more dynamics at work would appreciate how you think about that?

Thank you, Lucas and thank you for the question. I think it's probably the most important question of today. First of all, the 5%, $35 million is related to silicon metal, you have different sensitivities for the rest of the product mix but I think it's a good indicator, the 5%. We have decided on this guidance coming out of fourth quarter, where demand was extremely low and we only started seeing somewhere some price recovery. So when we decided about the guidance was pretty much coming from our bottom-up result of our budget. Since then, prices have shown some substantial improvement, they will materialize with the usual lag 2 months for alloys, in particular, manganese alloys and 3 months for silicon. Sustainability of this price level is a question because on one side, we don't see any structure of change in terms of demand, on the other side, like I mentioned in my pitch, a lot of capacities are being curtailed. There are difficulties in the supply chain and at the end, customers need to start filling their inventories. So we feel slightly optimistic, more optimistic than a couple of months ago. I think the guidance is still valid. I would say that based on the recent price moves, I would be optimistic on the high side of this guidance. The other comment that I can add on that, I mentioned that we drastically improved the performance of our operations by 3% in Europe this year and we started a new program to make sure that we were going to add additional EBITDA out of new initiatives that we plan to implement as we speak at operational level initiatives that are going to be totally under our control.

That's very helpful, Marco. And just to make sure that I got this right. So you have a bottom-up budget. You did that some time ago and that determined the range of $100 million to $170 million. And since then, the market improved and that's not really -- so that's not really reflected yet in that range. Is that right?

Correct.

Okay, that's very helpful. And then you mentioned in the release that you expect to be free cash flow positive. The way I read that comment, it sounded to me like at any point in your range, that statement would be true. But I wondered if you could maybe elaborate on that, if that's the right conclusion and what sort of cash items we should be mindful of from sustaining capital to working capital, taxes, et cetera? I would appreciate the additional color. Beatriz García-Cos: This is Beatriz speaking. So in terms of cash flow for 2024, a couple of elements to mention. The first -- sorry, Lucas, the first element is the release of working capital that we're going to be having in 2024. Second element to bear in mind is the gross debt is below $100 billion, right? So that's the second element. And the element is in Q1, we are already proforma net cash positive $91 million, as you see on the slide. So we expect a very strong year from a net cash flow perspective. I know that there is from an EBITDA is what Marco has been explaining but on the other side from a cash perspective, I'm going to be, I think, a very, very significant year. The other element that you need to factor here is the $32 million of interest that we are saving, that's a very significant item for us. And then in terms of CapEx, of course, we plan to continue to take care of the health of our operations in terms of CapEx and we expect more or less to invest on a like-to-like basis versus 2024. I think at the end we decided as well to go ahead with this capital allocation policy that includes a dividend payment. We confirm 1.3% -- $1.3 cents per share. So this is going to be a modest dividend, it will not have an impact and it shows how the company has been performed on the last year. So for us, how it crystallized on the payment of this modest dividend that we want to increase as we go. And then on the share buyback program, we plan to use or play this share buyback program in an opportunistic basis. But to do that, we need to get the approval of our shareholders on the AGM in June because we are a British company listed in NASDAQ.

Thank you. And Beatriz I heard it right, that approval would come at the earliest in June? Beatriz García-Cos: Right.

So the Board could make an approval sometime before then but then it still takes the shareholder meeting in June to kind of get treat? Beatriz García-Cos: Of course. Yes.

And in terms of -- you just mentioned now on the buyback that you would be opportunistic, I appreciate that. In high level -- in the high level, what do you think would be the allocation towards buybacks versus a dividend? Is that the way you think about it at this time? Some other companies in the industry, they have a certain percentage that would go towards buybacks. Curious how -- that's how you think about it or if it's maybe too early to comment on that. Beatriz García-Cos: Yes. I think, Lucas, this is the first year since 2018 that sort of lobbies paying dividends. So our intention is to return capital to the shareholders through the payment of dividends. When it comes to the share buyback, as I mentioned, we feel that our share is completely undervaluated after the repayment of the senior notes, et cetera. So if the share price continues to be undervaluated, we're going to be taking the opportunity for sure to do solid share buyback.

Look, we want to maintain a certain flexibility. Overall, we have started a discussion with our Board, we hope to conclude the discussion in June. But like I said in my pitch, we want to make sure that we keep on also financing our operations and keep our assets running at the proper rate.

That's all very helpful. And I'll try to squeeze one quick one in. On the EV battery side, you mentioned a term sheet and another initiative, what is your contribution high level to these ventures?

Thank you, Lucas. Well, we mentioned these 2 agreements because they are exactly aligned to our strategy of attacking the opportunity in the growth of silicon metal for batteries in 2 ways. The joint venture that I mentioned is about silicon modified products that will partially replace graphite in the anode. We are targeting 30%. Today, it's around 10%, 12% with other products but this is the market that we are targeting. The second alliance and partnership with an American company is related to our ambition to supply silicon metal for a full silicon made anode. And these -- so these 2 kind of alliances really confirm the validity of our strategy.

Marco, thank you very much for all the color and to you and the team, best of luck.

[Operator Instructions] Question comes from the line of Martin Englert from Seaport Research Partners.

Just to pivot back to the guidance and follow up on some of Lucas' questions in the context. It seemed like at the time you budgeted for the guide, the market was comparatively worse, namely price demand. Since then there's been price improvement. And your comment about kind of taking into account market prices today would be -- imply something towards the upper end of the EBITDA guidance range. So maybe if I look at spot market prices for silicon metal and alloys today and flatline that for the rest of the year, would you anticipate approximating the $170 million in EBITDA?

Or even better, Martin, or even better, Martin. I mean, we have -- the question and I mentioned it when I answered to Lucas is are the -- these increases are related mainly to restocking and some production curtailment and in the case of Europe, the crisis in the Red Sea, we have to see if this level of price will be maintained to be seen. This is my first comment. The other comment that I made is that in parallel to pricing recovery we have made a decision -- taken the decision to go very aggressively to further improve the cost of our operations already this year. And so I am -- today, I can say I'm rather optimistic that we need to reach or maybe even do better than the top level of the guidance.

Okay. Would you -- last year, I don't believe there was any revisions to EBITDA guide but the way things played out it was progressively deteriorating from a fundamental perspective and you still exceed the top end of the guidance for the full year. But if we're -- presumably if we would be against a backdrop of fundamental improvement with price and/or demand that could potentially prompt upward revisions as the year progresses, assuming that it's a spot price where it is today or better?

Well, to be in line with what I mentioned after third quarter, in 2024, we had a big favorable impact from the energy pricing front. And like I explained, this impact was related mainly to the difference between the energy market price in France and the price that we have negotiated. This year, this difference is much lower, much lower and this is why Beatriz during our pitch has mentioned, the $186 million benefit on our EBITDA of $315 million that basically brings the performance of 2023 to $129 million, as mentioned by Beatriz. So this $129 million of EBITDA really reflects the market net of the favorable energy impact in France in 2023. Now this is -- starting from there we have created a guidance of $100 million, $170 million. Now in 2024, we are not going to have the same impact from energy in France. We are still going to be very competitive with our energy cost in France but a few things have to fall into place, recovery of demand, more sustainable pricing and our aggressive operational cost reduction program.

Within the -- maybe the lower bound and upper bound of the annual EBITDA guidance range for this year, what is the assumption on the contribution from energy credits -- I'd like to get a sense of that.

Yes. I mean when we look at the estimated energy price in France during this year at market and the way we plan to run our assets in France we expect to get a benefit which is going to be lower than $40 million versus the $186 million that we had in 2023.

What is the spot French electricity price that's baked into that assumption d9ollars per megawatt hour?

Sorry, can you repeat your question?

Sure. I understand that the credits to work essentially when spot prices for energy in France are at a higher level based on the mechanism versus your contracted rate, you'll get a bigger energy credit, that's what led to the $186 million for last year. This year you're expecting $40 million and my question is embedded in that $40 million, what is the dollars per megawatt hour in France.

Yes, you have to look at the -- it keeps on changing every week. You have to look at the published energy market price in France and this is one reference point and it keeps on changing for this year, every week but you are approximately between $70 and $80 per megawatt. And then you have to consider the way we are going to run our operations and our total consumption of energy in France. These are the two elements that, both variable -- that can give you the final estimate. This is why I cannot give you a full number but I tell you that it's going to be lower than $40 million compared to the $186 million in 2023.

Yes. So it's up to $40 million.

It's up to $40 million.

Okay, upto $40 million. And is there a sensitivity that you can provide on that? I mean I see year-to-date, it's like right in that range, it's like $76 a megawatt hour in the spot.

Yes, like I said, between $70 and $80 Yes. Well, it's very difficult because like we explained in previous calls there are other factors that influence the final price, like interruptibility, like which times slots of the day we use to run our assets. So it it's something where it's very difficult to give you further guidance.

Okay. And when you say up to a $40 million credit, would that be based on that $70 to $80 range or not necessarily?

Yes.

Okay, good. Question on cost savings that were previously undertaken. I think there was an initial program of targeting $180 million EBITDA improvement and stepped up, I think, on your Investor Day to $225 million or maybe just before that, if you can remind me of the base year for that and then you spoke about seeking out some incremental improvements and I just wanted to try to square that away with the EBITDA guide for this year as well.

Yes. I mean, with the value creation program we mentioned that we approximately achieved $225 million. But there are many moving pieces as they -- we are a very different organization versus 2020. What makes their reconciliation very hard is that there have been a tremendous change in certain critical inputs. For example and I mentioned just a couple of things coal input cost has increased more than 100% between 2019 and 2023 because it has increased to $472 per ton. And we used approximately 0.5 million tons of coal, this number is for 2023. In the past, we even used 600,000 tons of coal per year. And the rough increase of $240 per ton in coal means a negative impact to our bottom line of $150 million in terms of incremental cost. If you make the same comparison on energy, if you exclude France and you consider our energy cost for the rest of our asset footprint when you compare 2019 to today, we have more or less -- more than $35 million incremental costs. So when you just look at these 2 categories, these 2 categories impact negatively the bottom line by $150 million and the price of coal or the price of energy are things that are not under our control. Now this is just to give you the feeling of how difficult it is to reconcile our performance versus expectations. But like in every industrial company, there is always room for improvement and the room for improvement in our case is in the area of integrated supply chain and this is where we are focused this year to reduce our overall operating cost.

Sorry, go ahead. Beatriz García-Cos: No, Martin, just one additional point to building up on what Marco mentioned. We also produced roughly 1/3 less in number of tons, so this means an impact as well in less cost absorption -- fixed cost absorption. So this has been an element that plays against this value creation plan as well.

Of the 500,000 tons in 2023, that was your external purchases or consumption?

Correct. External purchases of coal. The rate of our integrated coal from Alden.

Okay. Would you be able to provide any framework for not metallurgical silicon market prices but your ASP and silicon metal kind of continues to outperform? And I'm curious for -- I understand the selling into chemicals and battery applications probably doesn't occur a heck a lot and the spot market price but are you able to provide a range in recent history where you've seen spot market prices for this higher-value silicon metal that goes into [indiscernible] applications for batteries on a price per ton?

Well, first of all, if you talk about silicon for batteries, we are still relatively small volumes in our product mix but we are talking depending on the customers between $10 and $15 per kilo, so a completely different price range. And in premium applications, the price of silicon metal is decoupled -- decoupled from the index. So today, we have volumes in silicon metal that are sold at between $4,000 and $4,500 per metric ton decoupled from the current market price.

Okay. Excellent. I appreciate all the detail, very helpful.

Thank you, Martin.

[Operator Instructions] There seems to be no further questions. I would like to hand back for closing remarks.

Thank you, Heidi. Despite the near-term headwinds, Ferroglobe is well positioned for the economic upturn and the long-term outlook remains intact, proving our resilience. We started 2024 as a more robust company as we are setting ourselves up towards our long-term goal. That concludes our fourth quarter and full year 2023 earnings call. Thank you again for your participation. We look forward to hearing from you on the next call. Have a great day.

That does conclude our conference for today. Thank you for participating. You may now disconnect.