Good morning, ladies and gentlemen and welcome to Ferroglobe’s Second Quarter 2021 Earnings Call. [Operator Instructions] As a reminder, this conference call may be recorded. I would now like to turn the conference over to Beatriz García-Cos, Ferroglobe’s Chief Financial Officer. You may begin. Beatriz García-Cos: Good morning, everyone and thank you for joining Ferroglobe’s second quarter 2021 earnings conference call. Joining me today are Marco Levi, our Chief Executive Officer; Benoit Olivier, Ferroglobe’s Chief Operating Officer and Deputy Chief Executive Officer; Gaurav Mehta, our Transformation Director and EVP of Strategy and Investor Relations; and Jorge Lavin, Group Controller. Before we get started with some prepared remarks, I am going to read a brief statement. Please turn to Slide 2 at this time. The statements raised 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 exhibits to those filings, which are available on our webpage www.ferroglobe.com. In addition, this discussion includes reference to EBITDA, adjusted EBITDA, gross debt, net debt and adjusted diluted earnings per share, which are non-IFRS measures. Reconciliation of these non-IFRS measures maybe found in our most recent SEC filings. Next slide please. During today’s call, we will first review the highlights for the second quarter as well as our business and operating environment. Then I will provide some additional details on our financial performance and key drivers behind our results. And finally, we will provide an update on the execution of our strategic plan. At this time, I would now like to turn the call over to Marco Levi, our Chief Executive Officer. Next slide, please.

Thank you, Beatriz and welcome to our second quarter 2021 earnings call. We recognized that we are towards the end of summer and appreciate everyone carving out some time to participate on today’s call. This quarter marks an important inflection point for Ferroglobe and its turnaround. Since my joining of the company, one of the top priorities has been the return to profitability. I am pleased to report that we have delivered a positive net profit during the second quarter and our expectation is that we will continue to build on this momentum in the near future. Overall, we are beginning to see an acceleration of our financial performance. Our top line is benefiting from robust market conditions across all our key products, which are translating into higher demand and stronger pricing despite having the lingering impact of fixed priced contracts, which are significantly below current spot levels. The rolling off of a portion of these lower-priced contracts during the back half of the year further supports the acceleration in our performance. On the demand side, we now expect this momentum to continue for the remainder of the year. Customers across the chemical, aluminum and steel sectors are signaling strong demand into next year and we remain in active discussions to meet their needs for the remainder of 2021 and are even engaged in discussions for 2022 with some larger customers, well ahead of the typical negotiation season. The cost side of the equation continues to present an area of challenge. On the one hand, we are successfully executing numerous initiatives underlining the strategic plan, focused on driving down production and corporate overhead costs. On the other hand, we faced some cost pressures which are limiting our full potential. During the quarter, we were challenged by significantly higher energy costs…

Thank you, Beatriz. Now turning to Slide 17, in terms of our strategic plan, we remain on track to meeting our financial targets set this year. Underlying the various value creation areas are over 450 individual initiatives. As you can appreciate over the project of this size, there are areas where we are surpassing our target for the first half of the year and other areas that are lagging. Overall, on the EBITDA side, we have captured $16.5 million of benefit through the specific initiatives, representing 30% of our $55 million target savings for the year, as well as 99% of our $49 million working capital target. On the cost saving time, it is worth reiterating that the savings are not expected to phase in linearly throughout the year. In other words, the 30% of the target we have captured through the first half is right in line with our expectations as the benefit of many of some larger initiatives is weighted toward the back half of the year. In terms of some noteworthy milestones for the quarter, let’s start with footprint optimization. In Spain, the consultation period has successfully concluded with the agreement with the legal representation on the workers and communication around the collective dismissal to the label authority. At this stage, all employee business and letters have been issued and most of the employees affected have already left the company. In France, the process is longer, and we continue to have constructive discussions with the workers council. We are confident that we can conclude the negotiation process in Q4. On the centralized purchasing, we continue to find opportunities as the company adapts to the new way of operating. We started out as a focus primarily on consumables is also expanding in scope to include the potential purchasing…

Thank you. [Operator Instructions] And our first question comes with Patrick Chatkupt with Rubric Capital. Your line is open.

Thank you. In the second quarter, how much were the one-time CO2 costs embedded in adjusted EBITDA related to the repurchase of the 2020 credits you previously sold? And given you’ve completed the repurchase of the CO2 credits going forward, should we expect net CO2 cost to be a roughly zero impact to your adjusted EBITDA? Beatriz García-Cos: Thank you, Patrick. As we have been discussing, the accounting impact on our financial statements over the past few quarters, has reflect the unique situation relating to our prior sales of credit in 2020. And then the subsequent repurchase of those credits. So I certainly appreciate your question to clarify these points. First of all, let me begin by highlighting that our quarterly results during the first half of 2021 have been adversely impacted by these repurchases and the P&L results are certainly diluted due to these one-off charges, which are now behind of us. And to your first question very specifically, in Q2, we had an $8 million charge relating to the mark-to-market impact for CO2 units, which we have accrued for in Q1. So the mark-to-market impact is due to the fact that the market cost of the corresponding unit increase from the end of Q1 to the time of actual purchase in Q2. As you will recall, we have a similar charge of $8.8 million in Q1. With regards to the second part of your question, what could be the cost in our P&L going forward, I think we will not have any mark-to-market expenses relating to the CO2 going forward was significant as all the CO2 repurchases are completed in Q2, yes? So that’s the point number one. And let me just highlight a couple of other points on CO2, maybe although I already answered your two points, is that beyond the P&L, there was a catch-up impact of $41 million during Q2 as we purchased the remaining balance of the rights, right? So hopefully, this answers your question. I can elaborate more on CO2, but I think I reply to the point to your two comments, Patrick.

Great. And so to follow-up then. So to normalize your second quarter operating performance, we should add back the one-time CO2 cost of $8 million and France idle cost of $1.6 million, correct? Beatriz García-Cos: Right. That’s the right way. That’s the right way to read it.

Got it. And then could you give any more color on just the silicon metal market dynamics and pricing outlook into the second half and into next year?

Yes. Patrick, this is Marco speaking. I will address this question. The silicon market has been booming in terms of demand since quarter four last year, and demand has been robust all this year, and we see it in this way also for next year. And combined with strong demand, pricing has been extremely robust. If you go back to my comments on the index pricing, index pricing showed that pricing is very solid and is further developing as we speak. The point on – for us is that while last year, having about 70% of our business on fixed yearly price in silicon metal, we had the benefit because prices really went to record low levels below, let’s say, €1,500 per metric ton in Europe, while we had prices close to €2,000 this year. We had the opposite effect on this large portion of our silicon metal as we have about 25% of our volume, which is between spot and index. And this part of the business keeps on improving during the year in line with the index improvement.

Okay, great. Thanks.

Maybe an additional comment is that last year, we had the benefit. This year, we have penalized on fixed pricing. Next year, we will be rewarded because the current price level is much more attractive than the current contract price.

Thank you. And your next question comes from John Rolfe with Crescent Rock Capital. Your line is open.

Yes, my questions actually already been answered. Thank you.

Your next question comes from John Segrich with ClearSky. Your line is open.

Yes. Hi guys. Look, there has been a lot of discussion about the sourcing of silicon metal. In particular, the U.S. has banned imports from Hoshine. Most of the major polysilicon producers, Wacker and everyone all are buying from Hoshine. So, have you started to see much more interest in procuring silicon metal from yourselves, so that they can meet their requirements to be able to bring solar into the United States?

Well, at the moment, we are talking about only words about that. We don’t have official volume request. But there are strong indications that demand in U.S. will be up already next year due to solar demand. And we are – being one of the leaders in the Western world, we are in contact with all the customers that you have mentioned. And I want to underline that one key request of the main customers is secure volume for the foreseeable future, even on the long-term in particular in the U.S.

Thank you. Our next question comes from Brian DiRubbio with Baird. Your line is open.

Good morning Marco. Good morning Beatriz. A few questions for you, can you just remind us what your CapEx spend is going to be for 2021? And what are you still thinking for 2022?

Yes. Our CapEx plan – CapEx spending for this year is $40 million. And we are now running the budgeting exercise for 2022. But like we declared in the past, we are aiming in combination with the improvement of the results of the company to get to a level of $75 million per year.

Okay. And then as it relates to silicon metal, you mentioned that having fixed prices helped you in 2020, hurting you in 2021. Do you foresee your customers may be looking to index more going into 2022, given some of the volatility we have been seeing in raw material prices?

Well, we have started negotiations already for 2022. I want to emphasize that the focus is more on security of supply. And we are – with some customers, you are right. We are evaluating different kind of price mechanisms with maybe part of the volume on fixed and part of the volume on the index. And none of these new deals has been closed yet.

Okay. That’s great. How – I am trying to get a sense and I know you don’t want to negotiate or show your hand on pricing, but can you give us any sense of what percentage of your raw materials or your products represent as a percentage of your customers’ prices. Sir, is that a fair way to think about it? And if you look at steel, aluminum costs, prices, those have gone up pretty sharply this year. Do you generally see silicon metals sort of matching those price increases that they are seeing in their products, or do you see getting a little bit better pricing or a little bit worse versus what their end products have done? Can you help us with that correlation?

Well, we haven’t made this correlation. But when you look at our downstream businesses, all of them have dramatically improved in terms of results. When you look at the big chemical players with their silicon business or all the steel industry, all of them have improved significant results during the year. So pricing has been very, very robust.

Okay. That’s helpful. And I missed this when you were speaking about it before, but could you just repeat what the impact from the shipping delays you had on the manganese-based alloys, how much of that was in terms of volumes and possibly EBITDA?

Well, in terms of volumes, we reported in – let me go to the slide so that I don’t give you the wrong number. In manganese-based alloys, our volumes were down 5.9% versus the previous quarter. And this has been a combined effect of not restarting production in Mo I Rana in the second quarter in Norway and about managing our capacity in Spain, because of the high energy cost. At the same time, we had some hiccups in the supply of manganese ore, and as a consequence, our volumes down 5.9%.

Okay. And I guess, final question for me. You talk about potential new demand from the solar industry. Can you give us any sense if that does come to fruition, will that require the company to build new capacity, either in U.S. or in Europe?

Well, the – when I look at the current situation, the answer is, yes, this requires new capacity. I want to remind you that we have an asset idled in the United States in Selma, Alabama. The KPI is started. We have even more capacity at another idled asset, always talking about silicon metal, in Polokwane, South Africa. So, in case demand rises and new demand from solar comes, particularly in the United States, these are the options. Of course, there are also – we have some flexibility also related to the fact that some of our furnaces can be converted from ferrosilicon to silicon or vice versa. So, we have different options to address or this potential positive change in demand.

Great. And just last question for me. Beatriz, with the small remaining piece of the old notes, are you just going to wait for them to mature in March, or are you – does it just make sense just to call them and get them off the balance sheet now? Beatriz García-Cos: Well, that’s – thank you for the question. I think for the time being, it’s something that we are – is under discussion. So, I will be able to answer to your question on that front. So, I would say that at the latest would be about 2022, let me put it like this.

Very good. Thanks for the time.

Thank you. Beatriz García-Cos: Thank you.

Our next question comes from Brian Charles with R.W. Pressprich. Your line is open.

Good morning. Thanks for taking my question and congratulations on the quarter. I just have a couple of quick questions. One, just so I am characterizing the silicon metal contracts correctly, I think you said 65% of them are under contract now or 65% of your volume is contracted at the prices negotiated in 2020 that will roll off by year-end 2021. Does that mean these contracts roll off at the end of 2021, or will they be rolling off gradually over the second half of the year?

Thanks for the question. Probably I was not clear myself. The – we have 65% of the silicon metal that we trade under contract. And this is basically a fixed price for the year. So the – you will see a new price only as of January 1, 2022. On top of it, when you evaluate our silicon metal business, you have to consider that also our volume in joint venture is at fixed price for the year. Has it helped?

Okay.

You are right. We have about, like I said, 25% of the volume, which is either on quarterly index or on spot price and is 25% keeps on moving up as we speak.

Okay. Good enough. Thanks. And then secondly, just sort of housekeeping, I think in the cash flow summary, you had about $11 million of debt issuance costs. And I think in one of your recent filings, you estimated about $38 million of related cash and fees associated with the debt extension on the capital raised. Am I correct then in assuming that about $27 million will be booked in the third quarter or am I missing something that might have been booked in the second quarter? Beatriz García-Cos: No, you are right. So, we spent $11 million in Q2 and the remaining up to the $37.5 million that you – that we mentioned, will be incurred in Q3. Let me say that we as well incurred, but this is not material part of this cost in Q1 2021, and even a small part in Q4 2020.

Okay, good enough. Alright. That’s it for me. Thanks. I appreciate it.

Thank you. Beatriz García-Cos: Thank you.

Our next question comes from Michael Lam with Janice. Your line is open.

Yes. I wanted to go back to that contract question because in the press release, you say that “it’ll roll off in the back half of the year.” Doesn’t that read that some contracts roll off before year-end, because I was just trying to read what’s meant by rolling off during the back half of the year in terms of contracts?

Well, it is related to the fact that – maybe we have not been clear enough on this. You are right. But it is related to the fact that when we contracted volumes for 2020 customer expectations in terms of demand were much lower than what they are today. And in terms of consequence, we supply the contracted volume at the agreed fixed price, but the additional volumes come at market.

It’s a lower percentage because of the drain the volume. I see. That’s makes sense. Okay. Alright, that’s very clear. Second question is U.S. for silicon prices are now trading at or up to what I have recently read has been at a very high premium to Europe and to European prices. So, the question I have is how much of – did you also fore sell about 65% of ferrosilicon as well as silicon metal. And so it’s under the same kind of price dynamics for this year. And in terms of what I am reading about critical shortages of FeSi in the U.S., how are – have you had any issues in terms of shipping more FeSi from your other locations to the U.S., is there logistics issues that is causing the price premium to be so high and to what extent can capitalize on that?

Okay. I want to make sure I captured all your question. You want to know the – how we price ferrosilicon and then supply/demand in the U.S. These are your questions, correct?

Yes. Like, exactly how much of your ferrosilicon is contracted? And second question is, given the price premiums, how are you capitalizing on it?

Yes. So for ferrosilicon, we have about 50% of the volume, which is contracted on annual index, which means that we adjust the price either quarterly or monthly, and the rest is freely negotiated.

Okay.

Okay. So, we are normally a very small percentage, about 5% of the total volume that is on yearly price.

Okay.

In talking about the U.S. for ferrosilicon, we supply our ferrosilicon demand only from Bridgeport. As far as I know, since I have been in charge, we have not supplied the U.S. from our plants in Europe with ferrosilicon.

Okay. And if you may ask another question for the – two questions, please, is Niagara Falls permanently closed, but there is no chance of reactivating given these high prices? And the second question is more of a technical question. So, this is more of engineering question, if you don’t mind me asking. But in Metals Bulletin, I was reading about ferrosilicon demand has been strong because of increased use of steel scrap as a warming agent? Does that make any – I don’t understand what Metals Bulletin is talking about there, but could you – if you don’t mind asking an engineering question as well. Thank you.

No, we will try to answer the engineering question. But – sorry, I was distracted by the engineering question. Your first question was?

Niagara Falls, is it permanently closed?

Yes. It’s – Niagara Falls is shutdown forever. While the plant, as I mentioned before, in Selma, Alabama, is a plant that can be restarted.

Got it. Okay.

Do you want to take the engineering question, Benoit?

I haven’t understood fully the question. So you are asking…

Let me quote the line from Metals Bulletin. Metals Bulletin says ferrosilicon is used as warming agent for steel scrap versus iron ore. That’s what they were saying. And saying that part of the reason why ferrosilicon demand has been stronger, has been increased use of scrap steel. And I don’t understand why that would be. If you can ask an engineering question, but it seems we are esoteric, but I just found it interesting because I read that.

It’s because the silicon, which is presented as silicon metal in the ferrosilicon will get oxidized and free out some heat when reacting with the steel. So, the dissolution of the silicon units into the steel, free up energy in the steel and – so this is correct.

Okay. Thank you very much. That’s all the questions.

Thank you. And that’s all the questions in the queue. I would like to turn it back to Marco Levi for closing comments.

Thank you. That concludes our second quarter earnings call. As I mentioned at the beginning of the call, we entered the year with a clear plan. The financial trend line certainly highlights that things are moving in the right direction despite the one-time charges, which distorted our first half results. A normalization of our results, along with the strong operating backdrop, is expected to accelerate our performance in the back half of the year. Furthermore, we will continue to work with our customers to ensure strong partnerships and service for the remainder of the year, particularly as we get into the heart of the negotiation season. We remain excited about the future and look forward to speaking with you soon. Thanks again for your participation, have a great day.

This concludes today’s conference call. Thank you for participating. You may now disconnect.