Ferroglobe Q3 2026 Earnings Call Transcript

Ferroglobe (NASDAQ:GSM) reported third-quarter financial results on Wednesday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Ferroglobe’s Q3 2026 results were impacted by predatory import prices and high energy costs, resulting in a revenue decline of 2% to $370 million and a negative adjusted EBITDA of $2 million.

The company initiated a cost reduction program aimed at increasing annual EBITDA by approximately $100 million, which involves consolidating operations, closing five plants, reducing workforce by about 20%, and exploring monetization of non-strategic plants.

Ferroglobe is progressing with its critical materials platform, having begun commercial shipments of ferromolybdenum and planning additional shipments of ferrovanadium and ferrochromium, with ongoing discussions with the U.S. Department of Defense.

Efforts to restart operations in Venezuela are underway, pending a license from the Office of Foreign Assets Control, with an emphasis on securing reliable electricity supply for operations.

The company is benefiting from trade protection measures, with silicon metal prices increasing in response to European and U.S. actions against Chinese imports, and anticipates further market improvements in 2027.

Cash flow from operations was $26 million for the quarter, supported by a $32 million reduction in working capital, while maintaining a stable cash position of $93 million and slightly increased net debt of $42 million.

Full Transcript

OPERATOR

Good morning, ladies and gentlemen, and welcome to Ferroglobe’s third quarter 2026 earnings call. At this time, all participants are in a listen-only mode. Later, we will 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 call over to Alex Rotonen, Ferroglobe’s Vice President of Investor Relations. You may begin.

Alex Rotonen (Vice President, Investor Relations)

Good morning, everyone, and thank you for joining Ferroglobe’s third quarter 2026 conference call. Joining me today are Marco Levi, our Chief Executive Officer, and Beatriz Garcia-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 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 those 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. Reconciliations of non-IFRS measures may be found in our most recent SEC filings. We’ll be participating in the Stephens Annual Investment Conference in Nashville on November 17th. We hope to see you there. With that, I’ll turn the call over to Marco.

Marco Levi (Chief Executive Officer)

Thank you, Alex, and thank you all for joining us today. We appreciate your continued interest in Ferroglobe. Our third quarter results continued to reflect challenges in our silicon metal and silicon-based alloy segments as a result of predatory import prices and external factors affecting costs. Despite these adverse conditions, we generated positive free cash flow. Total shipments declined 3% quarter over quarter to 183,000 tonnes as silicon metal and silicon-based alloys volumes declined 6%, partially offset by a 1% increase in manganese-based alloys.

As a result, revenue declined 2% from the second quarter to $370 million. Adjusted EBITDA was negative $2 million compared with positive $13 million in the second quarter. The decline was due to extraordinary energy costs, mainly in Spain associated with the Middle East conflict, and to a lesser degree predatory pricing in the ferrosilicon segment. Excluding the $18.5 million impact from high energy prices, the adjusted EBITDA would have been approximately $16 million in the third quarter.

Beatriz will provide more detailed comments in our section. Next slide, please. Since the last call we have made tangible progress on the following strategic priorities: lowering and rightsizing our cost structure, expanding our critical materials platform, pursuing the restart of Venezuela, and strengthening our core business through trade protection. Let me start with rightsizing our footprint and cost structure. Last month we initiated an aggressive cost reduction program to increase our capacity utilization, enhance our operating efficiency, and strengthen our competitive position.

Once fully implemented, we expect the cost reduction program to enhance our annual EBITDA by approximately $100 million, plus or minus 15%. Our plans to tackle the difficult business environment and increase profitability include the following. First, we are consolidating our operations to our most cost-competitive plants, enabled by our flexible footprint. Our goal is to boost capacity utilization to 80%, up from less than 60% today. To accomplish this, we plan to close five plants around the globe with minimal impact on our sales volumes or our ability to expand into critical materials.

We will work through these changes together with our employee representatives as required. Some of these operations might be switched to critical materials. At the same time, we are restarting Selma to produce ferroalloys. As for the non-strategic plants, we are exploring the best way to monetize them, whether through outright divestitures or alternative use as data centers. Second, we plan to reduce our corporate overhead primarily through headcount reductions. Overall, we expect to reduce our corporate and operations workforce by approximately 20% once the process is complete, subject to consultation with employee representatives where required. These are difficult decisions but necessary steps to align our cost structure with the current market conditions and position the business for improved profitability.

These actions will lower Ferroglobe’s fixed cost per ton, target working capital reduction of $30–$40 million, and decrease future capex, creating a more streamlined organization positioned to generate strong cash flow and EBITDA. We have already begun this process by announcing the mothballing of our South African plants in eMalahleni and Polokwane due to lack of demand. The upfront cost of implementing this transformation plan is expected to be in the range of $40 to $60 million, net of targeted working capital reduction, over an 18-month period.

Moving to critical materials, our expansion is progressing ahead of schedule. During the third quarter we began shipment of ferromolybdenum to commercial customers well ahead of our original year-end target. This demonstrates our ability to produce critical ferroalloys in Monzón, Spain with minimal capital investment. We expect additional ferromolybdenum shipments in the fourth quarter, as well as our first commercial shipments of other critical ferroalloys such as ferrovanadium and ferrochromium.

As part of the critical materials expansion, we continue our discussion with the U.S. Department of Defense. These discussions to build a domestic supply of certain critical materials continue to progress on schedule. Our September 16th summary proposal included magnesium and manganese and seven additional critical materials, and we expect to present our final proposal this month in November. The negotiations should begin in early 2027 and conclude before the end of the first quarter.

As for Venezuela, we continue to pursue the license from the Office of Foreign Assets Control, or OFAC, required to finalize any agreement. Concurrently, we have begun initial discussions in Venezuela to prepare for an expedited restart of our operations. On our effort to protect the business, trade measures continue to gain momentum. On September 1, the European Commission initiated an interim anti-dumping review into imports of Chinese silicon metal, and on October 23rd the Commission announced the registration of all Chinese silicon metal imports. This simply means that each import will be recorded and monitored in detail for future review. This decision is important because it indicates how seriously the European Commission takes the matter and allows potential duties to be applied retroactively.

The market has already responded with the European silicon metal index rising 7% since the announcement of this review. In the United States, the ITC’s final determination in the silicon metal case against Australia and Norway was announced on August 3rd. Subsequently, the U.S. index rose 10% following the announcement. Finally, Corechel has made strong progress in the third quarter. They received a $50 million award from the U.S. Department of Energy to build the first U.S. gigafactory dedicated to 100% graphite-free silicon anode batteries. This award comes at a great moment in Corechel’s growth as they have now signed multiple military customers in the drone and autonomous vehicle space. Corechel continues to work with multiple OEMs to further validate the silicon nanotechnology on a greater scale.

Next slide, please. I’ll update on our segments starting with silicon metal on slide 5. We are seeing improvement in the silicon metal segment with index prices up 10% in the U.S. and 6% in Europe in the third quarter, reflecting a positive response to trade actions on both sides of the Atlantic. Our realized prices improved 3% over the second quarter. Our silicon metal volumes declined 6% to 38,000 tons with U.S. sales down 8% and EU sales down 3%.

The decline was driven mainly by seasonality, with volumes up 14% over Q3 2025. Importantly, we are seeing increased customer interest, an encouraging sign as we continue our 2027 contract negotiations. Next slide, please. Silicon-based alloy volumes remained significantly above last year’s level, although they declined 6% in the third quarter compared to the second quarter to 59,000 tonnes. Index prices were down 2% in Europe and 1% in the U.S., while our realized prices were essentially flat. Our European volumes declined substantially, reflecting our disciplined decision not to pursue incremental volumes at unprofitable prices. Excess inventory and elevated import volumes continue to weigh on price recovery, particularly in the European market where the ferrosilicon index is down 16% year to date.

The main culprits are Malaysia, Bhutan, Azerbaijan, India, and Angola. The European Commission’s annual review of the ferroalloy safeguards scheduled for later this month can potentially bring meaningful improvement to the alloys market in 2027. Next slide, please. Manganese-based alloys remain our most consistent segment. Volumes remain strong, increasing 1% to 86,000 tonnes. While index prices were down approximately 1% in the quarter, our realized prices increased 5%. The market outlook remains positive, supported by firm pricing and healthy volumes. Looking ahead, both the silicon-based alloys and manganese-based alloys segments are expected to benefit from improving steel demand. In its October short-range outlook, the World Steel Association forecast 2027 finished steel demand growth of 3% in Europe and 2% in North America.

Manufacturing activity supports this view with September PMI reaching 52.9 in the Eurozone, a 52-month high, and 55.9 in the U.S. Aluminum production is expected to grow by 2% in the U.S. and 3% in Europe. I would now like to turn the call over to Beatriz Garcia-Cos, our Chief Financial Officer, to review the financial results in more detail. Beatriz,

Beatriz García-Cos Muntañola (Chief Financial Officer)

Thank you, Marco. Please turn to slide 9 for a review of the third quarter income statement. Total third quarter sales declined 2% from the prior quarter to $370 million, driven by a 3% decline in total volumes. Lower volumes in silicon metal and silicon-based alloys were partially offset by higher realized prices in silicon metal and manganese-based alloys. Compared with the third quarter of 2025, sales increased 19%. Adjusted EBITDA was negative $2 million compared with a positive $13 million in the prior quarter. As a reminder, second quarter adjusted EBITDA includes a $5 million benefit from litigation in Spain. Higher energy costs reduced adjusted EBITDA by nearly $19 million in the quarter. Excluding these items, the adjusted EBITDA would have been $16 million. Adjusted EBITDA margin was negative 0.6% compared with a positive 3.5% in the second quarter.

Next slide, please. Silicon metal revenue was $102 million in the third quarter. A 6% decline in volume was partially offset by a 3% increase in average selling price to approximately $2,669 per tonne, up from $2,592 per tonne in the second quarter. Cost per ton increased by 3% due to higher energy and electrode prices in North America. Adjusted EBITDA was negative $2 million, a slight improvement compared with negative $3 million in the prior quarter.

Silicon-based alloys revenue declined to $117 million, driven by a 6% sequential decline in volumes to 59,000 tonnes. Realized prices were essentially flat at $1,973 per tonne. Adjusted EBITDA for the segment was negative $2 million, down from positive $15 million in the second quarter, which included the $5 million litigation benefit in Spain. Volume and price declines explain approximately $2 million of the decline, with the remaining EBITDA decline reflecting higher energy cost and lower fixed cost absorption in Europe.

Next slide, please. Manganese-based alloys revenue increased to $114 million as volume increased 1% to 86,000 tonnes, and average selling price improved 5% to $1,330 per tonne. Higher energy costs, primarily in Spain, were the main driver of increased cost per tonne. Overall, energy accounted for 85% of the cost increase. Adjusted EBITDA was $11 million compared with $13 million in the prior quarter. Next slide, please. For the third quarter, cash flow from operations was $26 million, driven by a $32 million release of working capital. This is well ahead of the approximately $50 million release we target for the second half of the year. On our last call, we don’t expect material changes in working capital in the fourth quarter. For those less familiar, the PPA mark-to-market of $77 million is related to our energy contracts, which are excluded from adjusted EBITDA due to their volatility and non-cash impact.

Capex was $20 million, up from $70 million in the second quarter. Due to the timing of the actual payments for our charcoal plant in Spain, we expect capex to decline significantly in the fourth quarter. Free cash flow was positive $6 million compared with $20 million in the prior quarter. Next slide, please. We paid our quarterly dividend of 1 cent per share on September 29th. Our next dividend of 1.5 cents per share is scheduled for December 30th, payable to shareholders of record as of December 22nd. We ended the quarter with approximately $93 million in cash, unchanged from the second quarter. Adjusted gross debt was $135 million and net debt increased slightly to $42 million. We continue to maintain a solid balance sheet which gives us the flexibility to execute the cost reduction program and support our critical materials expansion.

At this time, I’ll turn the call back to Marco.

Marco Levi (Chief Executive Officer)

Thank you, Beatriz. Before opening the call for Q&A, I’d like to share the key takeaways from today’s presentation on slide 15. While our third quarter earnings results are disappointing, we are taking decisive action to improve profitability. The cost reduction program will consolidate production at our most competitive plants, increase capacity utilization to approximately 80%, and streamline the organization. Once fully implemented, we expect to add $100 million to our annual EBITDA, plus or minus 15%.

While we expect the fourth quarter to remain challenging due to energy costs and a weak ferrosilicon market in Europe, these actions are within our control and can deliver long-term benefits regardless of market conditions. At the same time, the fundamentals of our core markets are improving. Steel demand is forecast to grow next year, which supports our ferro businesses. Trade protection is working. Silicon metal index prices rose 10% in the U.S. and 6% in Europe in the third quarter, and the European investigation into Chinese silicon metal is now underway.

Our strategic direction is very clear: build a leading Western critical materials platform. We completed our first shipments in the third quarter and additional shipments are expected in the fourth quarter. We have demonstrated that our existing furnaces can produce these critical materials quickly and with minimal capital investment. Our discussions on critical materials with the U.S. government continue to advance, and Corechel’s $50 million Department of Energy award gives us further confidence in our investment in silicon battery technology.

Operator, we are ready for questions.

OPERATOR

Thank you. To ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. We will now take our first question from the line of Nick Giles from B. Riley Securities. Please go ahead.

Henry Hurl (Analyst at B. Riley Securities)

Thank you, operator. This is Henry Hurl on for Nick. I first wanted to ask, are the five plant closures viewed that European demand does not fully recover, or are they more assumed that Venezuela backfills those tons?

Marco Levi (Chief Executive Officer)

Well, as you know, we have quite a broad asset footprint, and we are looking at different combinations to increase our asset utilization to 80% from an average of 60%. We forecast demand growing better at a higher rate in the U.S. in the next few years. As a consequence, we are talking about restarting Venezuela and restarting Selma in the United States. We have disclosed in my pitch the decision on South African plants. We are not going to disclose anything else about the additional assets, as we need to engage other stakeholders and employee representatives before disclosing our plan in a more transparent way.

Henry Hurl (Analyst at B. Riley Securities)

Got it. Understood, Marco. And then, also at this time, are you able to provide any more details of the status of the Venezuela permit?

Marco Levi (Chief Executive Officer)

Yes, we should get the license anytime soon. At the same time, we have started our discussions in Venezuela to restart the plant. The main topic is electricity supply and reliable electricity supply. As you know, we can easily ramp up and down our furnaces. We have this flexibility running electrical furnaces, but we need electricity reliability. The license is required to—sorry—to close any kind of negotiation.

Henry Hurl (Analyst at B. Riley Securities)

Understood. And then, looking at the critical materials business, how do you expect shipments to ramp from 3Q to 4Q? And how many other materials might be involved in those shipments?

Marco Levi (Chief Executive Officer)

Yes, well, in this quarter we are producing again ferromolybdenum. We will run productions of ferrovanadium and ferrochrome, low carbon. We seem to be able also to run trials on ferroboron. So for these four products we need the validation at industrial-scale production. Meaning we have produced ferromolybdenum industrially, but not the other three products that I mentioned. So it is rather premature to talk about volumes for the quarter and 2027.

Our objective is to validate our production capabilities this quarter, and then we will plan for market introduction.

Henry Hurl (Analyst at B. Riley Securities)

Got it. And then last one for me. It looks like the EU could possibly make the anti-dumping duties on China retroactive. Could you provide any more color on that or what you’re hearing?

Marco Levi (Chief Executive Officer)

Yeah, I mean we have put a lot of pressure because this has been a never-ending saga. I want to remind you that we asked for safeguards in silicon metal. The fact that safeguards were not applied to silicon metal has caused a disaster in terms of results of safeguards for ferrosilicon. Now we have changed our approach. We are going for an anti-dumping review against China. The interim review officially started on September 1st. And on October 23rd the EU announced monitoring of imports.

What it means is that the EU is going to monitor imports of silicon metal outside of China via all the 27 EU countries. And monitoring these imports has a couple of effects. One, you prevent stockpiling materials exported from China before the European Union decides on the new measures. And second, the registration basically allows the Commission to eventually decide to apply measures retroactively. So this is a good result. But again, we are not where we want to be.

Henry Hurl (Analyst at B. Riley Securities)

Understood. I’ll turn it over. Continue. Best of luck, guys.

OPERATOR

Thank you. Once again, to ask a question, please press star one one on your telephone. That’s star one one to ask a question. There are no further questions at this time. I would like to hand back over to Marco Levi for closing remarks.

Marco Levi (Chief Executive Officer)

Thank you, Sandra, and thank you all. In a nutshell, we are executing on what we can control, and we look forward to updating you on our progress during the next one. Thank you again for your participation, and have a great day.

OPERATOR

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

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.