Ferroglobe PLC Ordinary Shares 2026 Q2 Earnings Call

You may begin. Good morning, everyone, and thank you for joining Ferroglobe's second quarter 2026 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 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 exhibits to those filings, which are available at ferroglobe.com. In addition, this discussion includes references to EBITDA, adjusted EBITDA, adjusted gross debt, adjusted 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.

We'll be participating in the Seaport Annual Summer Conference on August 18th and 19th and the IDEAS Investor Conference in Chicago on August 26th. We hope to see you there. With that, I'll turn the call over to Marco.

Thank you, Alex, and thank you all for joining us today. We appreciate your continued interest in Ferroglobe. Our second quarter results reflect solid execution despite a challenging market environment. Our total shipments increased 7% quarter-over-quarter to 188,000 tons, mainly due to a 34% increase in silicon metal. This resulted in a 9% increase in quarterly revenue to $379 million. Our adjusted EBITDA increased $10 million to $13 million, and free cash flow improved by $37 million to $20 million. Beatriz will provide more detailed comments in her section. Next slide, please. Now, I would like to turn your attention to how we see Ferroglobe evolving and how we strive to create value for shareholders. As we look at Ferroglobe today, there are four key areas that we believe will drive shareholder value going forward. First, growing our critical materials platform.

Second, lowering the overall cost structure by optimizing our industrial footprint and implementing cost-cutting measures. Third, planning a restart of low-cost operations in Venezuela with advantage access to the U.S. market. Fourth, strengthening the core business through trade protection while leveraging the onshoring and supply chain realignment taking place across the U.S. and Europe. Few Western companies possess the combination of furnace infrastructure, metallurgical expertise, vertically integrated raw material sourcing, and strong customer relationships that Ferroglobe has built over many years. We believe those capabilities position us with a substantial competitive advantage as government, customers, and industries increasingly prioritize supply security and domestic processing capacity over simply sourcing the lowest cost material. As the leading Western producer of silicon and manganese alloys, Ferroglobe continues to build a Western critical materials platform.

We are actively exploring the expansion of our production capabilities across a broader portfolio of strategic critical materials, including magnesium, antimony, silver, gallium, and critical ferroalloys based on molybdenum, vanadium, and chromium. Importantly, this is not a collection of unrelated pilot projects. It is a coordinated expansion of our industrial platform around the assets and technology we already own and operate. Unlike many critical material initiatives that require large greenfield investments, most of our opportunities can be pursued using existing furnace infrastructure, leveraging decades of metallurgical processing expertise while minimizing capital investments and accelerating time to market. Since launching our expansion plan for critical materials, we have successfully completed industrial scale test production of ferromolybdenum in one of our existing furnaces, demonstrating the capability to produce this high-value alloy using our current infrastructure. We estimate annual North American demand of ferromolybdenum at approximately 8,000 tons.

At current market prices of approximately $42,000 per ton, this represents a market opportunity exceeding $300 million per annum. We have also successfully demonstrated our ability to produce magnesium at our existing facilities, marking an important milestone toward restoring our production capabilities. North American magnesium demand is approximately 60,000 tons annually. At current market price of $7,500 per ton, this represents a market opportunity of approximately $450 million per year. Magnesium is a strategically important critical material as Western markets remain heavily dependent on imports from China. U.S. magnesium production would require a new facility. We estimate the cost of a 20,000-ton facilities to be approximately between $180 million and $200 million before government subsidies. Given our expertise and the fact that this product is protected by the U.S. government, we expect favorable economics.

Beyond ferromolybdenum, we believe our existing furnaces can also produce other high-value critical materials, including ferrovanadium and ferrochromium, with minimal incremental capital investment. We will continue evaluating additional critical materials opportunities and expect to conduct industrial scale test production of other critical alloys later this year as we further expand our platform. Our view is simple. The West doesn't have a resource problem, it has a processing problem. While much of the world's critical mineral processing capacity resides in China, governments and industrial customers increasingly recognize the need for trusted Western supply chains. Ferroglobe's core competency has always been processing advanced materials at an industrial scale, which is why we believe our existing asset base provide a natural foundation for critical material expansion. We are actively engaged in discussions with governments and strategic stakeholders to accelerate domestic critical material capacity and strengthen resilient Western supply chains.

These discussions remain constructive and continue to advance. We are making steady progress and continue to target initial commercial activity before year-end. At the same time, we are taking decisive actions to improve our profitability through aggressive cost reduction initiatives and footprint optimization. Our goal is to improve fixed cost absorption through higher capacity utilization by concentrating production at our most competitive operating sites. In addition, we are evaluating opportunities that will maximize the value of other industrial assets within our portfolio. Our objective is to ensure that every asset contributes to stakeholder value, whether through core materials production or alternative industrial application that can leverage existing power infrastructure, land availability, and grid connectivity. The Venezuela opportunity enables us to optimize our footprint by allowing U.S. furnaces to produce higher value-added critical materials to meet domestic demand.

In late June, we applied for a U.S. permit to begin communication with the Venezuela government and anticipate a decision before the end of the third quarter. As a reminder, our four low-cost furnaces in Venezuela have a combined annual capacity of 120,000 tons. These furnaces have the flexibility to produce silicon metal, ferrosilicon, and manganese alloys. Protecting the core business is imperative in order to position the company for long-term growth. In recent years, our markets have been negatively impacted by unfair trade practices from China and other regions, which have distorted market pricing and placed significant pressure on Western producers. Our industry has worked constructively with policymakers in both Europe and the U.S. to establish a level playing field.

In addition to past successes against multiple countries, the most recent success is the ITC's final decision on August 3rd to impose combined antidumping and anti-circumvention duties of 38.7% and 19.7% on Australian and Norwegian imports into the U.S., respectively. To date, these trade actions on both sides of the Atlantic are aiming to restore rational market condition and support domestic production capacity. We are already seeing evidence that these measures are benefiting demand for Western producer materials. One remaining measure we expect to be initiated is an investigation into the dumping of silicon metal by China and Angola into the EU. The next step is the announcement of the European Commission investigation.

Ultimately, our strategy is straightforward: leverage our existing asset base to build one of the few scalable Western critical material platforms, preserve and strengthen our leadership position in silicon and ferroalloys, improve our profitability, and maintain valuable strategic optionality through assets such as Venezuela. We believe Ferroglobe is uniquely positioned at the intersection of critical materials, supply chain security, onshoring, and industrial policy, creating multiple avenues for shareholder value creation in the years ahead. Next slide, please. I will update on our segments, starting with silicon metal on slide five. The second quarter shipments of silicon metal grew to 41,000 tons as markets are beginning to show signs of stabilizing. Keep in mind that even the second quarter shipments are still below 2024 and earlier levels. Beginning in early 2025, the impact of predatory imports from China and Angola is evident.

Strong growth in silicon metal was driven by a 70% increase in Europe, an 80% increase in North America, resulting in a 34% or 10,000 tons overall increase in volume. The index prices improved in both U.S. and Europe in the second quarter. The U.S. was up 5% for the quarter, and European index was up 6% for the same period. Year to date, both indexes improved by 2%. We are turning cautiously optimistic about the silicon metal market. The increased European aluminum production is helping demand, as is the improving polysilicon market. At the same time, excess supply continues to affect prices. With the U.S. silicon case finalized, we expect to begin seeing improved prices and demand in the second half. The European Commission anti-dumping investigation against China and Angola timeline will likely dictate the supply environment in Europe. Next slide, please. Silicon ferroalloys volumes reached their highest level in five years, with total shipment increasing 4% to 63,000 tons, driven by 31% growth in the EU, partially offset by 11% volume decline in North America, which was driven by increased imports from Angola, Azerbaijan, and Bhutan.