Good morning, good afternoon. Welcome to Ferroglobe's Second Quarter 2024 Earnings Call. At this time, all participants are in listen-only mode. Later we'll 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 conference over to Alex Rotonen, Ferroglobe's Vice President of Investor Relations. You may begin.

Thanks, Ros. Good morning, everyone, and thank you for joining Ferroglobe's second quarter 2024 conference call. Joining me today are Marco Levi, our Chief Executive Officer; and Beatriz Garcia-Cas, our Chief Financial Officer. Before we get started with some 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 exhibit to those filings, which are available on our webpage at ferroglobe.com. In addition, this discussion includes references to EBITDA, adjusted EBITDA, adjusted gross debt, net debt, and adjusted diluted earnings per share, and among other non-IFRS measures. Reconciliations of non-IFRS measures may be found in our most recent SEC filings. Before I turn the call over to Marco Levi, our Chief Executive Officer, I want to announce that we'll be participating in Seaport Research Partners' Annual Summer Investor Conference on August 20th and 21st. We hope to see you there. Marco?

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. Before I begin with our quarterly earnings update, I want to inform you with deep regret that Juan-Miguel Villar Mir, Founder and Former Chairman of Ferro Atlantica, our legacy company, passed away last month. I would like to express our deepest condolences to his family. In Q2, we continue to execute well, driving strong financial performance with increased volumes, revenues, and adjusted EBITDA. As we discussed in our first quarter call, in May of this year, the U.S. International Trade Commission recognized that the imports of ferrosilicon from Russia, Kazakhstan, Malaysia, and Brazil, which represented approximately 70% of all imports in 2023, are injuring our U.S. operation. The substantial government subsidies are received in these countries, and the low-selling prices of these imports have adversely impacted the U.S. ferrosilicon market, hurting local producers and their ability to compete. The ITC's final decision will be made in October. On June 24th, the U.S. Department of Commerce announced preliminary anti-dumping and countervailing duties of 283%, and 748% respectively, on all Russian imports of ferrosilicon. As a result, all importers of Russian ferrosilicon are required to post cash deposits or bonds to cover these duties. Russia represents approximately 35% of all ferrosilicon imports into the U.S. in 2023. This is a significant victory for our industry, allowing us to compete on a level playing field. The investigations of the remaining three countries, Kazakhstan, Malaysia, and Brazil, are still underway. The International Trade Commission will announce preliminary determinations for countervailing duties expected in August and anti-dumping duties in October. We believe these decisions will have a positive impact on our business in 2025, as inventory in the…

Thank you, Marco. Please turn to Slide 10 for a review of the income statement. Sales increased 50% in the second quarter to $451 million, up from $392 million in the prior quarter. During the second quarter we saw increased volumes in silicon metal and manganese alloys and higher selling prices across all three segments. Raw material and energy consumption for production remained broadly flat and decreased as a percentage of sales from 66% to 59% in the second quarter, primarily due to effective cost management and higher fixed cost absorption as a result of increased volumes. Other operating expenses for the quarter increased by 64% to $86 million, partially driven by a $19-dollar increase due to the fair value adjustment of the free carbon credit. This is fully offset by an increase in other income. Staff cost decreased by $3 million in the second quarter to $67 million due to the profit sharing arrangement in Europe during the first quarter. Adjusted EBITDA in the second quarter more than doubled to $58 million, from $26 million in the prior quarter. During the quarter, we earned approximately $8 dollars from our 2024 French Energy agreement in line with the first quarter. As a reminder, cash from these benefits is expected in early 2025. Net financial expenses for the quarter declined 31% to $5 million dollars due to the full redemption of the senior secured notes in February. Going forward, we expect interest expenses to normalize below this level. Next slide, please. Our adjusted EBITDA margin increased from 7% in the first quarter to 13% in the second quarter, primarily due to increased pricing and volumes, which impact EBITDA by $80 million and $11 million, respectively, relative to the first quarter. The higher cost was driven by the mark-to-market earn-out provision in…

Thank you, Beatriz. Moving to the key takeaways on Slide 15. We had a strong second quarter, growing sales by 15% versus the first quarter, and adjusted EBITDA growing 124%, with adjusted EBITDA margin expanding by 600 basis points to 13%. Given the strong performance, we're increasing our adjusted EBITDA guidance range to $150 million to $170 million. We were successful in our effort to level the playing field in the U.S. ferrosilicon market, resulting in trade action against predatory Russian imports. As a result, we had a significant opportunity to increase our market share starting in early 2025. We continue to make significant progress with our Coreshell relationship, achieving excellent results in testing, validating their technology, and the use of silicon-rich materials in EV batteries. As mentioned before, we have enhanced our capital return program by having the share repurchase program approved by the June AGM. Operator, we are ready for questions. Thank you.

[Operator Instructions] We are now going to proceed with our first question. The questions come from the line of Lucas Pipes from B. Riley Securities. Please ask your question.

Thank you very much, operator. Good morning. Good afternoon, everyone. Good to see those solid results and the bump in guidance. Marco, you mentioned in your prepared remarks the outlook for the second half of this year, and you called out Q4 as the weakest period. If I heard you right, you cited pricing as one of the drivers for that. And I wondered if you could maybe elaborate on that, given how index pricing has moved over the last nine months, 10 months or so. I would have thought we would have passed the valley, so to speak, in pricing, but I would appreciate your thoughts on that and how lags, mix, et cetera, might impact pricing? Thank you very much.

Thank you. Well, we have a good visibility on third quarter, of course, as a large bunch of our business is contrarily related with index pricing. This is why we have a good reading of Q3 and Q4. At least compared with that result of Q2 with Q3. Q4 is impacted by what we see in the market. Demand is weak in most of other segment. Steel, excluding India, steel production in the world is down versus estimate when it's not in negative territories in certain geographies, like U.S., for example. Aluminum is pretty stable in the U.S., but weak, extremely weak in Europe. Chemicals are rather stable. Solar has a significant slowdown in Asia, mainly driven by the dramatic drop of policy comprised, but also by the new investigation of U.S. authorities, which are definitely slowing down the export of solar supply chain elements to U.S. So, having this picture, we have already seen indexes weakening during the third quarter, and as a consequence, we are extremely cautious on our outlook on quarter four. So, weaker volume, weaker pricing in Q4.

That is helpful. Thank you, Marco. You cited the excellent results in the Coreshell investment and technology. Could you elaborate on those results? What exactly was so positive? Was this a surprise, either in terms of the results or the timing? We would appreciate your thoughts on that. Thank you so much.

Well, I would be even more positive when our batteries will start getting tested by the OEM. But in the meantime, samples we contain 80% of our silicon metal have achieved almost 1,000 cycles of charging and discharging with a retention of 80% of their properties. These are, in our case, unprecedented results that are justifying the move of Coreshell toward producing pilot quantities of batteries, these 60 ampere batteries that will be tested by the OEMs. So, of course, we need more and more testing. We need the real testing by the OEMs. But it looks like we are close to solve the old problem of being able to address the swelling of silicon metal in the battery.

That is really good to hear, Marco. I really appreciate those comments. Really quickly, maybe for Beatriz as well, you stockpiled some manganese ore on the back of the supply disruption. When would you expect your stockpiles there to normalize? And as it relates to cash flow and working capital release, any comments as it relates to taking advantage of that buyback authorization? Thank you both.

Yes, thank you, Lucas. As I was mentioning in the call, we have been taking advantage in Q2. So we have been seeing already the impact of lower manganese ore prices, higher prices in Q2. And as you said, we bought some, we purchased manganese ore in Q2. And we expect to see the release of these. And of course, we expect prices to hold in Q3 and therefore going to be a positive impact in working capital in Q3, but could be offset maybe with other pieces. Where we expect a release of working capital overall could be more in Q4, Lucas.

Any thoughts on the buyback authorization?

Well, maybe what we said on the call. First, the AGM approved the share buyback program at the end of June. So we didn't have a lot of time to react on that, right? Because the closing period came just after. And I think what is more relevant for us is when you hear Marco talking about the outlook for the second part of the year and the market conditions, we want to take a conservative approach and preserve our cash and our liquidity. So for the time being, we want to be prudent in the use of our cash and liquidity.

I appreciate that. Thank you so much for all of your comments and continue best of luck. Keep up the good work.

[Operator Instructions] We are now going to proceed with our next question. The question come from the line of Martin Englert from Seaport Research Partners. Please ask your question.

Well, good afternoon, everyone. So going back on silicon metal and price weakness, much of the price weakness is associated with the weaker Asia market and maybe more favorably priced product being exported there from South Africa, so more of a negative mix shift implicating prices at the segment level?

Let me talk about facts. Like in most of the businesses, China has built over capacity and with the current crisis that they are going through, they are exporting everything that they can. We see that in silicon metal imports from China into Europe in the second quarter, which has significantly increased, prices are extremely low, and this has an impact on the overall index. It is true that due to the quality that they export, they tend to supply mainly metallurgical silicon for aluminum, but they are definitely moving their product outside of China. And we have seen the same, something that we need to test with imports in U.S. from Angola, where Chinese have relocated apparently some of their old furnaces, and silicon metal is exported out of Angola to U.S. The other part of your question is around solar demand. Our sales of silicon metal to Asia for solar have been rather stable in the second quarter. We foresee a slowdown in the second half of the year, which is related to this U.S. investigation that basically blocks the export of solar supply chain elements to the U.S. So even the major players are concerned about being forced to pay duties in case they continue to do business. Honestly, we believe that this situation is not sustainable for the U.S., and I can add other comments, but at the moment, the offtake of silicon metal in Asia for solar has gone down.

Thank you for all the detail there. That's helpful. I wanted to circle back on the ferrosilicon trade case, and it seems like there was maybe some pre-buying ahead of that in elevated channel inventories, so you're expecting muted or depressed volumes in U.S. ferrosilicon throughout the balance of the year, but then you expect an uptick into 2025. Is that correct?

Yes. Well, I think I also made this comment in the previous quarter. Massive quantities of ferrosilicon have been delivered to U.S. in the last few months from Russia, and we estimate an amount of 120,000 tons of ferrosilicon. That corresponds to one year's supply of Russian ferrosilicon to the U.S. On top of it, we have seen, like everywhere else, massive increases of export outside of additional capacity of ferrosilicon out of Kazakhstan, and to combine this situation in U.S. we have seen increased export out of Brazil, some minor suppliers of Brazil of ferrosilicon, plus Malaysia. So the situation combined with the estimated drop of production of steel in U.S., about 3.3% below last year, year-to-date, has stressed the environment. So pricing has gone up based on the announcement of the authorities, but we don't see too much liquidity yet. I can share with you a general comment that we perceive the need of securing supply of ferrosilicon next year in the American market because we are getting contacted by several steel manufacturers who want to secure volumes for next year.

Are you aware of any alternative key sources that if these countries are blocked out of the U.S. market due to the trade case that consumers in the U.S. may source from alternatively to kind of fill the holes, or are they going to be largely fully reliant on U.S. production?

No, no, no. First of all, there is quite significant free capacity now in the U.S. We are two local players, and we have capacity. Of course, we can support demand also outside of our most competitive assets in U.S. and South Africa if needed. For sure, then you have some of the Brazilians who can supply more, and some of the Asians who can supply more. I don't think the U.S. is going to suffer a lack of ferrosilicon. Remember also that our plant in Selma is down as we speak, and we could devote Selma to ferrosilicon production in a quarter.

I appreciate all the detail, and congratulations on the results.

Thank you. Thank you, Martin.

Thank you. We have no further questions at this time, I will now hand back to Marco Levi for closing remarks.

Thank you, and thank you again for your participation. We look forward to hearing from you on the next call in November. Have a great day.

This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you, and have a great day.