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Ferroglobe PLC (GSM)

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5.92-0.30 (-4.82%)
At close: 04:00PM EST
5.92 0.00 (0.00%)
After hours: 04:00PM EST
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  • P
    PriceCycles
    I see a smart, well respected analyst that used to cover GSM at Jefferies is hosting a non-deal road show with GSM tomorrow. Martin Englert is now at Seaport and I would take this to mean he will likely start coverage of GSM in the near future. IMO this is very much needed to highlight the opportunity here to the wider investment community.
  • R
    Robin
    Decided to buy just a little more with the decline back to $6.10 after what is an overreaction to the Spain curtailments, which I believe has no impact on its Q4 outlook as GSM was basically going to not sell anymore volumes above contracted levels because most of its customers refused to change pricing mechanism, which priced sales today on what the price was 3 months earlier. GSM successfully got one customer to change pricing so that any sales is profitable - why they restarted a furnace on its Q3 call. But after not convincing others to do the same they will shut-down some capacity as many contracted volumes now satisfied as going into year-end. Plus, it helps GSM's cash position to reduce sales as then lower accounts receivable and inventory balances. Cash management only needed until end of Q1 when very high profit margins kick in in Q1/2022 and then free cash flow flows strongly in Q2/2022. Nothing changed to the 2022 outlook for record profits that should be substantially higher than its previous best year ever.
  • R
    Robin
    I decided to buy a little more again. Yesterday, I bought a little more, sold it on up 10% and then bought it back. It makes no sense it is down on market rally - There has been no specific bad news in silicon markets or GSM. I sold a bit of something else I own to add to GSM (but will likely trade this piece out on move towards $7.00). Europe silicon metal prices still over $2.50/lb. GSM was smart to curtail sales in Spain for balance of Q4. Do not forget January spot price realizations will be very good because it will either be priced based on October prices (which are around current prices) or 1-month lag (which GSM may have changed for 2022 spot sales pricing due to mess-up in 2021 when prices/electricity surged in tandem. I actually do not mind Spain electricity staying high because silicon metal prices in Europe is highly influenced by production costs in Spain, yet GSM will highly benefit from production in North America, Norway and even South Africa (coal fired electricity, which normally have much higher prices than Europe, but now way below).
  • R
    Robin
    GSM shares down Friday mostly due to market sell-off, but also due to news of reduced capacity in Spain. But the news is neutral at worse. GSM already guided to loss in Q3 to small profit in Q4 in Spain. That likely meant profits from restructured contract at Sabon that reflects current high electricity prices offsetting losses on other sales in Spain. The recent actions taken would, if anything reduce losses on non committed business - or at worse add very small to losses due to low fixed cost absorption. However, by reducing supply that helps support higher overall prices. The net effect is at least no worse off. And by reducing sales of unprofitable business GSM gets working capital lower to which is great for cash management. GSM noted some customers refused to renegotiate sales terms to reflect high Spainish electricity prices. While GSM still has to satisfy contract volume they rightfully decided there is no point in selling more at a loss to ungrateful customers and do not fear long term customer relationships as the market has changed a lot where the producers of silicon metal now have the upper hand anyways.
  • H
    HotDog_Hans
    Good 3Q21 conference call. Contracting for FY22 is looking very good. GSM is basically moving away from fixed pricing to index pricing for SI metal in FY22 of which 70% will be index pricing based. Currently, it is around 25%. Second positive is addressing high energy prices in Spain through customer pass throughs, PPA agreements, and a new customer contract in 4Q21 to get Spain to be break-even.

    Lastly, according to management, they have no intention of using the $100MM shelf filing again. Future cash flows are expected to be supportive of additional w/c needs.
  • R
    Robin
    I am back in spades - bought loads of stock this morning. Not sure why it would have traded below $6.00. I thought there was a very good reason why GSM traded over $7.00 after the opening yesterday. I thought the CC was very constructive. but still felt stock may be choppy. But now low enough I am not bothering to wait for more. After all, I already sold so much much higher anyways - No need to further nickel and dime.
  • R
    Robin
    Watching the trading action the last 2 days it certainly looks like it is being driven by a large seller. Rubric Capital seemed annoyed with management on the ATM and said that if they needed $10 mm or so that they should have called them (whom bought the majority of the $40 mm equity placement). I do not think it is them selling, but looks like large seller. I listened to conference call again. It seemed very positive and more consistent as to why the shares surged to over $7.00 after the opening yesterday. CEO says Q4 will see a strong recovery in profits from Q3 due to both higher volumes and higher average prices with some contracts restructured to reflect current high electricity prices with customers in order to restart some furnaces. And GSM's selling prices still lag benchmarks and have most of their SiMe sold at fixed price of $1.00. Imagine how blow-out Q1/2022 is going to be? CEO confirmed spot prices are now more than 3X higher since the start of the year and GSM can get the full impact of these prices in Q1/2022 when it will only get a small fraction of the increase in Q4/2021 still.
  • J
    Joseph
    Seems like there would need to be a fairly important “scheduling conflict” to move the investor meeting?

    Ps, what’s up with Samsung investing $17B to build a semiconductor/chip manufacturing facility in Texas? I assume that would increase silicon demand in the US and provide more opportunities for Selma?
  • R
    Robin
    Close to what I was expecting. EBITDA flattish and I thought could be as low as $20 mm and as high as $45 mm. The negative cash flow (due to working capital) and increase in net debt look about right. I was correct in that they sold stock in ATM, but $14 mm is not bad. If I had to guess I would have thought they would have done $50 mm. 2022 should be a very big year, but question is "how big". Key is whether the company made any recent "mistakes" (i.e., like signing too many fixed-price contracts for SiMe at too low prices if done back in September).
  • H
    HotDog_Hans
    GSM has apparently applied for a EUR 33mn loan from the Spanish sovereign fund (SEPI) to help support its Spanish operations that are struggling from high energy prices. According to the article, GSM is expected to receive the new money before the end of this year. This would be a positive catalyst for the stock with no future reliance on the $100MM self filing.
  • J
    Joseph
    Lol. What is going on with these 10% swings 😆.
  • R
    Robin
    GSM about ready to take-off. I think in the past week after Q3 those that were disappointed or just unsure of GSM's outlook will have sold. The average sophistication of GSM holders should improve now. Case in point was why I had sold much of my position on the big run-up because I knew that despite Q3 would be a temporary blip that too many shareholders won't understand and would sell. I think my thesis has proven to now have been correct. Now going forward those shareholders are gone and the current ones are much more knowledgeable about how GSM's outlook works. And just think how big the first quarter of 2022 will be. GSM sold most of their silicon metal in 2021 at $1.00 per pound for crying out loud... All of this was basically sold at a loss given the surge in costs (electricity and coal and even limestone). Granted, maybe their N.A. silicon metal may have been more break-even, but even in electricity prices up in the U.S. Just the change in fixed-priced contracts starting Jan 1, 2022 will be HUGE!!!!!
  • R
    Robin
    Now that I am back to being fully loaded I will be more active again in posting (there is always a natural bias to work holdings harder when bigger). Going to start posting prices in China that lag 1-week (the only stat that everyone can get for free by searching the SMM website). Last Friday, the China SiMe price was US$1.63/lb. It would make sense that European prices will move towards US$2.00 /lb and U.S. prices to be around US$2.20/lb. Europe and U.S. prices tend to lag by 2-3 months (which reflects how long products move from China to ROW). I am not saying current prices will be the steady state - prices remain volatile, but these prices makes a lot of sense if they were steady state.

    Now before anyone gets disappointed that China SiMe climbed down from the >US$3.00/lb level we knew it was both berserk and unsustainable for China prices to have been above Europe/U.S. prices (especially when it was so far above). We want "rational markets" and "rational price movements" are better for GSM's outlook and stock. Even if prices go stupid high like it did back in October it is not necessarily good for GSM as it both can cause margins to be erratic (especially if electricity prices go up more) and then investors in GSM instead of focussing on very high prices suddenly get fixated on only thinking prices will go down later and thus want to sell GSM just because of an expected directional move.

    I was very pleased to hear CEO on CC specifically cite that European SiMe benchmark prices were US$8,100/tonne. While he also said that the company does not necessarily get as high as the benchmark prices it won't be very far off and I presume their prices will be well below benchmarks anyways. I believe GSM will have 2022 EBITDA of "at least" $600 mm in 2022 (roughly $150 mm/quarter) base on prices being 15% below benchmark (say my assumption is an SiMe realized price of around $1.75/lb for 2022), but assuming current high electricity prices. So the upside could be as much as $1 billion. Before anyone says I'm too "out there" just look at the steel prices and the massive margins/profits those guys are doing. GSM doing $600 mm indicates profits above historical norms that are WELL below what the steel guys are doing now.

    GSM should get to its 2018 high of $17 given 2022 EBITDA will be double what it was in 2018. I continue to believe GSM will actually initiate a dividend in Q3/2022 as its free cash flow should be gynormous in 1H/2022 that will drastically reduce debt and Group will want to get some dividends given their "not strong" finances. That way there will not be pressure for them to sell any stock (which I strongly believe they have zero intentions to sell unless they absolutely have to).
  • J
    Joseph
    Buy now because you are likely to be happy you did in 6 months. GSM is clearly making good progress. SI metal in FY22 70% will be index priced which includes quarterly contracts that will be extended and reset. A couple of minor points...Beatriz Garcia-Cos -- Chief Financial Officer said:
    Let me make a just a remark on the point regarding Spain. So we expect to get closer to breakeven in Q4 because of the new contract that Marco mentioned. But I don't want to give the impression that they had drastically changed overnight and returned to profitability in Spain regarding the electric -- the current electricity prices.
    Marco Levi -- Chief Executive Officer said "And talking about batteries, we are working hard on it -- on this project. I do not foresee significant sales before two years from now."
  • S
    StockGuru
    Ferroglobe working on batteries project. Revenue expected to grow in Q4. They are hosting an Investor Day in New York on November 30 to give the growing investment community and others a more comprehensive overview of the Company.
  • H
    HotDog_Hans
    Seeking Alpha: Ferroglobe: Thesis Intact Despite Sell Off. Next Year Is Going To Shine
    New piece out on GSM.

    Conclusion:
    "I continue to the think GSM can be a cash flow gusher that can materially deleverage over of the next year and begin returning significant free cash to shareholders. You don't have to use anywhere close to current spot prices for the products for this company to be incredibly profitable. The market remains skeptical. I continue to believe in this company's upside and at least a $10 base valuation."
  • g
    glengoolie
    i guess until Q4 ER, in march, where we will learn about new contracts and spot deals, this has no real catalyst.
  • J
    Jeffrey
    "Pricing environment remains strong across all products; 2022 order book well positioned to capitalize on upside"
    2022
    EBITDA 350,000,000
    Multiple 8
    EV 2,800,000,000
    Net Debt 200,000,000
    MC 2,600,000
    Shares 185,000,000
    Price $14
  • J
    Jose
    The silver lining out of Q3 is the low share sales from the ATM allotment. This demonstrates mgmnt is being disciplined with this tool. Grupo VM missed the boat when shares traded above $10 in early Sept. to unload part of their stake. I believe they will not miss the next one and there will be a next one likely end of Q1 timeframe. I think it's becoming clearer GSM is not going to hit the high teens and the low teens will be a short-lived gift to shareholders because Grupo VM and GSM mgmnt will be selling hard into it.
  • R
    Robin
    Erratic action. Down big then up big, but maybe flat is the right outcome. Let things calm down and let's share settle. I will wait a bit to add. But feel the 2022 outlook looks more solid now.