Ferroglobe PLC (GSM) Earnings Call Transcript & Summary

Good morning, and good afternoon, everyone, and thank you for joining Ferroglobe's Investor Day 2022. My name is Gaurav Mehta, and I'm the President of North America and EVP of Investor Relations and Corporate Strategy. Glancing at the list of participation this morning, I'm pleased that we have a strong balance between our existing equity and bondholders who have supported us, and I see a lot of new names as well who were interested in our story. It is certainly an exciting time for the company as we keep advancing on key initiatives and as we continue to change the trajectory of the business. We feel that our company offers a unique investment opportunity within the metals and the broader industrial sector. And hopefully, you'll walk away today sharing the same excitement around our prospects and value-creation opportunity. Go to Slide 2, please. Before we get started, I'll just read a brief statement. Statements made by management during this event that are forward-looking are based on current expectations. Risk 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 exhibits to those filings, which are available on our web page, www.ferroglobe.com. In addition, this discussion includes references to EBITDA, adjusted EBITDA, gross debt, net debt and adjusted diluted earnings per share, which are all non-IFRS measures. Reconciliations of these non-IFRS measures may be found in our most recent SEC filings. Next slide, please. At this time, I'd like to take the opportunity to introduce the management team that will be presenting. Joining me today are Javier López Madrid, Executive Chairman; Marco Levi, Chief Executive Officer; Beatriz García-Cos, Chief Financial Officer; Benjamin Crespy, recently appointed Chief Operating Officer; Benoist Ollivier, Chief Technology and Innovation Officer and Deputy CEO; and Craig Arnold, our Chief Commercial Officer. Next slide, please. In terms of the agenda today, we really selected a few different -- we selected the agenda with a few goals in mind. On the one hand, we wanted to provide a detailed and comprehensive orientation to the company. It is not only meant for the investors who may be hearing our story for the first time, but I often find in talking to our regular investors that there's an under-appreciation or misunderstanding of exactly where we fit in, in the value chain; where the products go in terms of end markets; some of the changes that we're undertaking and the prospects ahead. On the other hand, we also wanted to take today's time to go through our story in a bit more detail around some of the growth prospects and other areas that we're focused on, which we generally don't have a time to get into. I will sort of remind everyone that there is a Q&A session. We actually have 2 sessions today, one after Benoist's section and one at the very end. You have the ability to submit questions through the platform, so please utilize that feature. And also just a reminder that we have quarter end at this point, and so that we -- there may be some level of detail and disclosure that we may not be able to cover. We've already gotten a great interest in terms of the Q&A over the past few days and this morning, so I'll try my best to filter through those as we get to the Q&A session and get to as many as we can on today's call, which we expect to last at least 3 hours. At this time, I'd like to turn the call over to Javier López Madrid.

Thank you, Gaurav, and thank you, everyone, who is joining us via this webcast around the world today. We appreciate this opportunity to share our story. While we provide regular updates during our quarterly calls, our aim is to use today's session to dig deeper on specific topics that we believe will be valuable for each one, specifically, what we have done, what we intend to do and why we are fundamentally a different company today than we were in the past. Back in 2015, when we created Ferroglobe, the industrial and strategic logic was clear. We set out to create a global company that can uniquely service our global clients with a broad product offering, unrivaled technical expertise, consistency and reliability of product and a deep customer penetration, all attributes which were necessary for the way the industry was evolving. And it's ironically, 6 years later, following a global pandemic and in the midst of other disruptions such as the war in Europe and the energy crisis that we're seeing the true benefit of this unique platform. And it is now that the value-creation opportunities being validated as evidenced in our recent financial performance. While the story was sound from day 1, not everything has worked out as initially intended. So what went wrong and what we're now correcting? We failed to recognize and act upon [ stock ] difference relating to operational philosophy, different commercial strategy, lack of systems integration and, of course, inherent cultural differences. The volatility we experienced in the operating environment during those years often led us to a reactive mode that resulted in inability to address capability gap and to shorten reaction time. The lessons during this period into late 2019 were painful and expensive, and we certainly appreciate the support of our workforce, customers, suppliers and the investment community supporting through those darkest hours. It also because of them and their continued support that we can recognize the potential of this company and the ability to recover significant value in a rather short period of time. And from this point onwards, we generally believe that the steps that the company has taken since 2020, coupled with changes in the operating environment, provides a significant opportunity for our company. Since 2020, Ferroglobe has embarked in a radical transformation to establish a truly integrated company that is much stronger, more financial stable, more disciplined and certainly one that has the flexibility to be much more proactive in changing with the market. Above anything else, our goal has been and continue to be to create a far more resilient Ferroglobe that we can ensure positive results and cash flows through the cycle. As a part of our transformation, we have addressed our global asset platform, shedding capacity, which we deem to be noncompetitive, and addressing rigidities and other weakness embedded in our assets. We have reshaped our go-to-market approach completely, beginning with the initial interaction with our customers. Today, we're focusing on margins for each sale. With the flexibility we have created with the assets, we no longer need to change volume. In essence, we're tearing down each part of this business and reconstructing it to make it a more profitable and resilient one. As we execute the plan, we're also discovering more cost-saving opportunities. We're buying -- we're going back to our roots and focusing on our technical expertise. This company has a long story -- history of innovation, and we're positioning ourselves to be in the middle of megatrends, which are going to drive the demand for our products. The energy crisis is reinforcing the need for renewables. The world is clearly developing the infrastructure to support a green mobility. Ferroglobe produces critical products, which are crucial for these movements in solar and batteries, amongst others. We're also leveraging our technical expertise to execute our ESG goals required by our customers, the market and society in general. With sharp improvement in our financial performance, revised target and return to profitability, we're reducing both our gross and net debt, together with lowering the cost of debt, and we will continue to do so as a nonnegotiable top priority for the company. And of course, we need to think of ways to returning value to shareholders through various means. As I said, the recent experience we have -- the recent experience has been painful and expensive for all of us. And we're taking steps to avoid being in this vulnerable position again. What you are about to listen is a detailed conceptual and numerical analysis of this process. This summary would not be properly balanced without a reference to the global market we operate in and the economic situation going forward. On one hand, there's a structural change in the way we operate the business, which we're driving and is fully in our control. On the other hand, there is a structural change in the broader operating environment. While this change is not entirely in our control, there are significant benefits for us on a number of fronts. Virtually overnight, the global supply chains issues and growing focus on ESG have led our customers to rethink their procurement strategy. In a world where reshoring and security of supply are top priority, Ferroglobe is becoming a strategic supplier. Furthermore, the role in China and the reform within China are changing the supply and demand dynamics considerably. Last year, we witnessed an unprecedented run-off in prices. And while we don't expect the pricing to hold out at these unprecedented peak levels, we do feel that the structural change in the industry will result in a new floor pricing considerably higher than historical averages. We have seen this phenomena playing out in other sectors, and now it's starting to occur in silicon metal as well. There is no question about it that the economic growth is slowing down, the intensity and duration of which is uncertain as the world we live in. We, like everybody else, are closely monitoring various economic indicators to stay ahead of the curve and proactively manage potential changes in demand. The changes to our platform and the capabilities that we have developed better position us in this type of situations than ever before. Whether it has been the pandemic, the energy crisis or the impact of the Russian-Ukraine conflict, this new management team is navigating the business successfully. And I am confident that we'll continue to push forward on our goals and deliver strong results in the future. I remind everyone that our products have 4 primary segments, but the end markets are quite diversified and provide a level of resilience. On top of that, we have customers who are also decreasing their exposure to historical suppliers and rethinking their performance strategies with a focus on local supply. So while periods of economic slowdowns will impact companies to various degrees, there are some good mitigation factors, which should help us ensure positive cash flow and continue execution of our broader plan aimed at value creation for all stakeholders. As Executive Chairman of Ferroglobe, I am proud of this management team in turning around the business during very difficult times. And as a representative of the largest shareholder, I'm fully supported of this management team and the plan we're executing. Ferroglobe is strengthening its core, its strength in its balance sheet, and we're well positioned to capitalize on a number of exciting trends. All in all, we think there is a significant opportunity for value creation for all stakeholders. Thanks again for your participation and interest in our company. And at this time, I would like to turn the call to Marco Levi, our CEO, who will further elaborate on Ferroglobe and the transformation being undertaken. Thank you.

My name is Marco Levi. I am the CEO of Ferroglobe since January 2020. For the people who don't know me yet, I spent most of my career at the Dow Chemical Company 22 years in different roles, in different countries. When Dow divested the styrenics and the rubber business and emulsion polymer business to Bain Capital, I moved with it in a company, which is called today Trinseo. And after that, I became CEO of Alhstrom, a global specialty paper company that I have turned around. After that, I have been working for a family private equity office in Zurich and then decided to take a bigger turnaround challenge joining Ferroglobe, like I said, in January 2020. Today, my part is to give you a broad introduction to Ferroglobe and then describe in detail our turnaround strategy. Let's move to the next slide, please. Like most of you know, Ferroglobe is a leading global player for advanced materials. Not only we are a leader in the products that we make, but we are leaders across a number of industries to create advanced materials, which are critical for continued development in society. We are leaders, not only in size, but also know-how, as we have been in this industry with hundreds of [ year ]. Within our industry, we are also unique as we have a truly global operational footprint, which provides a competitive advantage in today's market environment focused on local sourcing and supply security. On top of our geographic diversification, we have end-market diversification. We sell our products in 3 main segments: steel; aluminum; and chemicals sector, but the end applications are even more diverse. We have a strong record for innovation, and this is really a point of distinguishment in our industry and important when we look at the way in which the demand for new materials is emerging. This company has a tremendous potential as the demand for its core products accelerates. Given the tremendous effort of our 3,500 employees around the world in turning around the company in the past 2 years leaves us excited to win given the prospects ahead. Next slide, please. When you look at the picture on the left side of this slide, the 3 products don't appear very different from one another. However, each of these is critical and nonreplaceable input going to hundreds of everyday industrial and consumer products. So when you think about the time when there is a lingering uncertainty, keep in mind that our products are feeding into essential end markets. They have no substitute. Our industry has high barriers to entry. It is a capital-intensive industry requiring technical know-how, and you need to have the proper logistics to account for all inbound of critical materials and outbound to reach your customers. Most recent greenfields have failed because they have some of these elements, but you need all of them to survive through the cycles. And the capital required to build one of these facilities can easily be hundreds of millions, depending on the size and will take minimum 3, 4 years. And lastly, we have longstanding and deep relationships with blue-chip customers across a diversified set of end markets. Many of our customers are global, and we are uniquely positioned in this industry to service them locally through our global [ clients ]. Next slide, please. Just to give you an orientation of where we fit in the supply chain, Ferroglobe is at the forefront of a deep value chain with chains of thousands of industrial and consumer goods. One of our competitive advantages is our vertical integration into critical and, often scarce, raw materials and inputs. On the mining side, we have high-quality coal and quartz mines in various regions and long reserve life. We also own a carbon electrode facility in China. This has been critical in mitigating against our exposure to Russian supply. Having the right quality of raw materials and having favorable logistics of these key inputs to our plants is what gives us the competitive edge. Next slide, please. While our customers are primarily aluminum, chemical and steel customers, the end markets and applications, our products are quite diverse. Many of these have steady GDP-plus type growth. But given some emerging trends, the demand of some of our end markets are actually growing at a much faster rate. For example, our silicon metal is critical to the energy transition and green mobility trends, where it be solar cell production or the inclusion of silicon-rich anodic material for lithium batteries, which are forecasted to grow at double-digit rates over the next decade. So in an environment where there is lingering uncertainty around pockets of recession, our product portfolio provides an attractive basket of exposure to everyday consumer and industrial goods. Next slide, please. Let's talk about silicon. Our silicon metal portfolio goes to 3 main segments, like I said, but ultimately goes into much wider array of end markets. In aluminum, we sell both to primary and secondary producers who need silicon with certain requirements to produce aluminum alloys. Aluminum is heavily exposed to the transportation end market, then automotive, aircraft parts, beverage containers and a lot of other products. Silicon metal goes also to major silicon chemical producers. Silicon chemicals are used for a broad range of application, including personal care items, construction-related products, health care and electronics. In addition, silicon metal is the core material needed to produce [ the silicon ], which is widely used to manufacture solar cells in semiconductors. So let me be clear. You cannot make a solar cell without silicon metal. Likewise, our silicon products can be found in the blade of windmills. Overall, the silicon metal part of our portfolio is the most diverse in terms of end markets and also the fastest growing given the exposure to the energy transition and green mobility trends. You see silica fume at the end of this page. This is a byproduct of our electrometallurgical process in silicon and ferrosilicon. This dust-like material collected through our factory's air filtration systems is mainly used in the production of high-performance concrete and mortar. So the ability to capture and resell this byproduct is important, not only as an additional revenue source, but [ tells ] with our broader environmental priorities. Next slide, please. Here we go to silicon alloys. Particularly, ferrosilicon is an alloy of iron and silicon used to produce stainless steel, carbon steel and various other alloys and to manufacture electrodes. The main advantage of ferrosilicon is its deoxidizing effect, but it also helps to prevent the loss of carbon from the molten steel. Our company also produce various different silicon-based alloys, including calcium silicon and foundry products. Foundry tends to be more of a niche market for specialized products, and Ferroglobe produces more than 20 key specialized varieties of foundry products, several of which are custom made. As I said, we also have a production of carbon electrodes in China, which has been extremely helpful in the recent months. Moving to the next slide. Manganese alloys consist of ferromanganese and silicomanganese and are used in steelmaking activities. Both of these alloys are used mainly to counteract the bad effect of sulfur and acts as a deoxidizer. Essentially, they are critical to the steelmaking process as they are strengthening agent to create toughness and hardness in steel. Once again, the part that is most compelling for us is that within steel, there are numerous end markets. In today's market environment, when steel production may be flat to slightly down, there are end markets like oil and gas and construction, which are still exhibiting strong growth. Next slide, please. In the recent history, there were key macro trends centered around population growth, urbanization, globalization, industrialization that have been driving our demand. Now the trends, which are accelerating the growth of our products, are largely tied to energy transition and the fourth industrial revolution. Talking about energy transition, here, we talk about infrastructure. When we talk about infrastructure, we talk about solar panels, we talk about the blades of wind turbines. While when we talk about energy transition, we talk about the transition to electrical vehicles. We believe that silicon will provide a solution that is a game changer for the industry as silicon will replace graphite in the anodes of the batteries. More broadly, the demand for our alloys is growing, as the broader global population continues to adopt technology into every aspect of their life. Not only are the number of devices increases, but the frequency at which they are being replaced is also increasing as new models or smaller devices are introduced. We have a subset of end markets, which are growing at GDP-plus type levels, but others which are growing exponentially. Next slide, please. In the industries in which we participate, Ferroglobe is unique in terms of asset footprint. We currently have 25 operating smelters. We have 52 furnaces and 7 mining operations across 5 continents. Customers are beginning to shift towards supply security and shorter value chain, like Javier said. And we are uniquely positioned to serve the global needs of our customers locally. On top, our assets have acquired a lot of flexibility in terms of products that can produce, switching from silicon to ferrosilicon or switching manganese alloys productions out of Spain to France and Norway, which are examples. It is also worth noting, we are vertically integrated a lot of several critical inputs, like I said. So while some greenfields get built on the basis of cheap power or access to one key raw material, the inbound logistics and the outbound logistics of finished goods all weighs into the cost of product. Hence, most of the greenfields have struggled. Next slide, please. Ferroglobe itself, like Javier said, was formed in 2015. We have a long history. We are quite expert of this industry. The DNA of this company has been around selective and strategic acquisition with an eye towards consolidation. The formation of Ferroglobe is something unique in the industry. However, the full potential of the platform has been far from being realized since the time of the merger. Next slide, please. When I look at the composition of our assets, our core competencies and evolving market backdrop, it actually reinforces the business and strategic case for Ferroglobe. The operating environment around us continues to evolve, whether it is changes in our customer needs and preferences coming out of the pandemic, of our need to quickly find suppliers in the wake of the terrible Russia-Ukraine war, we are going through a very unique period. Ironically enough, it is in the midst of all these drastic changes and uncertainties that Ferroglobe is capitalizing on the full potential of this unique global asset footprint more than ever before. Our ability to serve our global customers locally has proven to be a great competitive advantage, particularly as customers put a premium on security of supply and seek short-term supply chain. This only become more valuable over the coming years as suppliers and customers think strategies with their own ES&G targets in mind. In the face of an energy crisis, particularly in Europe, we have been able to leverage our operational flexibility, scaling back production in Spain and servicing customers from facilities in Norway and France. Our diverse geographic footprint sets us up apart from our competitors, and it is proving to be extremely valuable as we look at what's happening around us from economic, environmental and geopolitical standpoint. Next slide, please. Despite the opportunity ahead of us, the historical performance of the company prior to this new management team coming together in 2020 clearly illustrates the need for a change. Our top line was downward trending, even during rather strong periods. Our EBITDA margins were quite volatile, even with negative margins in 2019. The goal for me was clear. We needed to quickly integrate the business in a way that had not been done in the past, and we needed to develop processes and capabilities to cut cost and operate much more efficiently. This is the only way we are going to deliver stronger results through the cycle and ensure a baseline of cash generation. Next slide, please. A quick summary of the first months of my tenure. When I took over in early 2020, I knew about a huge challenge. But for sure, I didn't anticipate a pandemic. So the key steps that I took were reform the management team. I hired new people in critical position of the management team coming from larger companies, broad experience, multicultural, coming from different countries. We decided to hire an outside consulting company to help us in setting up the priorities of the turnaround plan. And by the way, we needed to get our employees on board. This is why we worked on communication, and we started working on people and cultural aspects to drive the feeling of the employees to belong to one Ferroglobe. So in a nutshell, this is our company. We are extremely unique, diversified in our products and exposure to a broad set of end markets. We are experts in what we do because of our longer rich history, as we are very well situated to win and succeed going forward given the structural change. This is the structural change within the company we are driving, as well the structural change that is occurring in the broader operating environment, particularly in silicon metal. With some context around the company and performance leading up to this new chapter commencing in 2020, I would like to devote the next session to elaborating on what changes we are driving within the company and why they are critical for our success in the future. Let's move to driving change, please. Next slide, please. You will see some faces today. This is the management team where you see the pluses. You see the changes in the last 2 years. So we added communication. We recently appointed a new COO. We appointed a new CFO. We appointed a new Chief Commercial Officer. We appointed a new Chief Legal Officer and Secretary of the Board. We appointed a new Chief People and Culture Officer. But we also kept some of the key people of the previous Ferroglobe in our management team. So at the end, we have a diverse team coming from different countries. I'm Italian, full Italian; Americans; Spanish; French; South African. And I think I have covered -- I don't go to the differences in Spain, but we have people from different states in Spain. Pretty strong team committed to success, not political, focused on turning around the company. And as I said, moving to the next slide, we couldn't change anything without combining and reinforcing communication, mainly internally to get people on board; and focusing more on people; developing a human resources roadmap; and on culture, setting some values and behaviors under which we wanted to operate the company. We did all of that in parallel to the turnaround exercise. Next slide, please. This slide really summarize what I talked to my investors 2 years ago when we finalized our turnaround strategy. The initial targets were based on delivering a buffer of EBITDA, $180 million by 2024, and operate our business with lower working capital by $70 million. We also emphasized our growth engines based on focusing on Americas and Europe in terms of geographies; focusing on our key customers with whom we had history; aligning strategies with these customers, increasing our market share with these customers; increasing our market share in niche customers with profitable products; and exit businesses which were unprofitable. Actually, this is one of the first steps that we took. Next slide. This slide summarizes our turnaround plan, which is based on 6 levers from a business point of view, sales point of view, commercial point of view, commercial excellence, on the cost point of view, focus on footprint and product optimization, operational improvement, centralized procurement, working capital, and then we worked on our operating model and redesign. I'm going to go in details on each one of these legs, and I will tell you what we are delivering on each one of these legs. Next slide, please. Let me start from my favorite because of my experience, commercial excellence. The first changes that we have started implementing in this company are related to this leg. And today, I can say that, while at the beginning, we were targeting an EBITDA impact of $40 million, today, we target an impact of $50 million by 2023 coming from commercial excellence. In simple words, this is all about getting your sales force acting like business managers, meaning focusing on margins rather than just moving products. And it is related in deepening our cooperation with key customers at different levels, from the CEO to the customer service representative. And moving to the next slide, I want to go deeper in our transformation in commercial excellence. We have redesigned the sales organization focusing the right level of resources based on the effort that we wanted to spend with key customers. We have rebuilt a new customer service organization. We have educated our best salespeople on account management in order to put them in the position to align our strategy to the strategy of our key customers. I have been exposed, the CEO has been exposed, the Chief Innovation and Technology Officer has been exposed, the CFO has been exposed with these customers. And we have been aligning our strategies to these key players. On top, we have equipped our sales force with a new forecasting model, cost information, profitability thresholds, and now we are moving towards digitalizing all of that. So as you see at the bottom of the slide, we are digitalizing market intelligence. We are digitalizing contract negotiation. We are making sure that each sales guy has a digitalized form of his performance dashboard. These are just a few examples that give you an idea of the transformation that we have gone through in commercial. Moving to the second leg in the next slide, footprint. We have reduced overcapacities by basically stopping production or shutting down assets that were not competitive on the long term. On top of it, we have kept a strong eye on making sure that we add our flexibility in our footprint, with the obvious intention to reduce our cost position. And today, I can say that while we had a target of about $40 million cost reduction, we are confident in getting $45 million cost reduction by 2023. What does it mean? You see in the next slide. We have shut down our operation in Niagara Falls. We have shut down 2 of our 4 furnaces in Monzón. We have stopped production in Château-Feuillet, and we are divesting Siltech. The asset in Les Clavaux that was originally target to be shut down, we have decided to keep it open and running because we have renegotiated the terms to one of our key global customers. And today, Les Clavaux is running at full capacity. Moving to the next slide. This is our third lever, we call it key technical metrics. It Is about implementing technologies that this company had on the shelf for 100 years, technologies that have never been properly implemented, giving priority at manufacturing level. So we are leveraging our technical expertise, and we have established, by a continuous drumbeat, a continuous improvement culture to continuously improve our operation performance. Benjamin will comment around that. And now we are combining data to make sure that we start applying advanced analytical technologies to the way we operate assets. It's a big change for Ferroglobe. It's not the Ferroglobe that you could have seen 2.5 years ago. And out of these improvements, we expect to deliver $70 million EBITDA to the bottom line by 2023 versus the $55 million that we have targeted at the beginning of the implementation of the strategy. Just to talk about what I mean, next slide. Like I said, we have 25 smelting facilities, plus 18 smelting facilities and 7 mines, 52 operating furnaces in 9 countries. What this technology aim for is to reduce the amount of energy that we need to produce each ton of product, to reduce the amount of stoppages that we have when we operate our furnaces and improve our quality and reduce our off-grades. Again, Benjamin and Benoist will come back in detail to deliver to this kind of technologies. Moving to the next slide. This is another big change, a structural change in our company. We have a new operating model for purchasing. We are globally centralized now. We have developed strategic planning for each category, raw materials, energy, machinery. We have harmonized purchasing policies and procedures, and we have done it in cooperation with manufacturing and finance and sales. This initiative that was expected to deliver $15 million, now we expect it's going to deliver $30 million by 2024. So what it means, in the next slide, you see that we have approximately a basket of $1 billion, probably higher this year between general, consumables, corporate service and overhead raw materials and energy. And on the right side of the slide, you see the dramatic change that we have already implemented by now. Today, 100% of logistics are negotiated centrally. 75% of the raw materials, 75% of the energy are negotiated centrally. And consumables and subcontracting are already at 50%, and we plan to continue on this process of centralization when and where it makes sense. Moving to the next slide. Key lever, working capital, big success history. We expect to deliver $70 million by the end of the period. Actually, we delivered $70 million reduction in working capital already in year 1 in 2021. This is why we expect to deliver $90 million by 2023. We have been focusing on the verticals of working capital, inventories, every kind of inventory, account receivable and account payable, better executing based on data, pretty much based on data, and setting up a strong collaboration between finance, purchasing, supply chain, operations and sales. In the next slide, you see the result. When I joined, we were operating a 30% rate of working capital versus sales. To date, it has been for a few quarters that we operate at 21% working capital. Moving to the next slide. To summarize, the initial turnaround plan was aimed at delivering $180 million. Today, we believe we are going to deliver $225 million buffer by 2023, and we plan to further reduce the operating working capital to move -- to operate our business and our company. Moving to the next slide. I want to tell you that we have been able to achieve all these results in a very challenging environment, right? When we had, mainly 2020, COVID, there was a 30%, 40% drop in demand of our products, price drops. We had to manage cash in a very cautious way every day. We had lack of visibility in 2021. Then we went out of this crisis with demand coming up. Then we had an energy crisis where we have been particularly hit in Spain, and we have been able to react by operating the Spanish plants when the conditions of energy price were allowing it and also reallocating production in Norway and France for manganese alloys. And then at the beginning of this year, unfortunately, there is -- there was this drama of the invasion of Russia into Ukraine. And I can tell you that in one day, we were able to put together a contingency plan by plant in order to make sure that we were able to purchase raw materials and electrodes somewhere else. And since then, we had 0 days of production interruption due to lack of raw materials and electrodes. And as of July this year, if we want it, we don't need to buy anything from Russia. And I tell you, we were buying a lot. We were buying carbon electrodes, magnesium, met coke, pet coke, anthracite paste, big quantities. We have been able to find alternative supplies. So what I want to underline is the capability of this management team to anticipate issue and to react properly to issues. And this is what has made the company much stronger. And in the next slide, you see the results. The results under my tenure in the first year, year of COVID, 30%, 40% lower sales. At least, we started delivering positive EBITDA. Last year, we delivered a 10% EBITDA. And fourth quarter of this year, also due to extremely favorable market conditions, we have delivered a 34% EBITDA out of this business. So a continuous improvement of the performance of this company. Moving ahead, and this is where our focus is, is not only on continuing and terminating our job on turnaround, but securing that our performance is sustainable. So in order to do that, we are reinforcing our people and culture, processes and policies. We are reinforcing our capabilities inside the organizations. And we are adding new tools to support decision-making in the organization. So this concludes my part, and now I hand over the presentation to our newly appointed COO, Benjamin Crespy. Thank you.

Thank you, Marco. So good morning, good afternoon, everyone. My name is Benjamin Crespy, and I'm the Chief Operating Officer of Ferroglobe. I have now been with the company since 2003 and have spent time in France, China and, most recently, in Canada. Coming from the operational side of the business, I wanted to give you today our perspective on our smelting assets and why this unique platform we have created is so well situated to win in today's market environment. As you hear today's presentation, I also hope our audience can appreciate the complexity of the business and the critical factors for being successful. Next slide, please. We, as a team, have a firm commitment to health and safety. Even though health and safety has always been a priority for Ferroglobe, and it is deeply anchored in our people's heart, the effort spent in previous years did not really translate into concrete results. Now to bring our health and safety performance to another level, we need to transform our approach, like we are doing on other parts of our business. Ferroglobe has the objective of zero time -- zero lost time injury frequency rate by 2026. To achieve this goal, our plan is based on 3 main pillars. The first one is the implementation of management system across all our sites in the world. This will support a systematic approach of safety in the organization as a fundamental base of our strategy. The second of our pillar is the reinforcement of the health and safety culture across the organization by developing corporate standards and guidelines to promote best practices. This is key to [indiscernible] on each progress made every day. And finally, safety is all about managing risk. By standardizing our risk analysis processes, sharing experiences across sites and learning from incidents, we will be having action designed to improve risk control in our operation. To be successful in this project, Ferroglobe can capitalize on the deep engagement of our people, like they have been in the transformation plan. Every leader is already deeply involved with actions on the ground, especially designed to draw engagement of our entire workforce. Our employees are our key asset, and we will ensure that they are all safe and healthy returning to their family every day. Next slide, please. Ferroglobe, and Marco mentioned, it has a unique operational footprint. The heart of this company are our assets and our people. With a rich history dating back over 100 years at some location, Ferroglobe today is a symbol of excellence within the industry. What we have created is indeed unique and will prove to be truly valuable under this management team. When you look at this map, the orange circle represent our 25 operating sites across the world. And we have a few green dots for the currently idled facilities. Now if you think about who our largest customers are, they are large multinational customers that have assets spread out across the world. Hence, we are uniquely positioned in the industry to service our global customers locally. And in today's world, when customers are valuing security of supply and ES&G standards, it becomes extremely important to have those basic assets. What we have also highlighted on this slide are the location of our captive source of critical, top high-quality raw materials and inputs. As you will see in a few slides, our industry is raw material and energy-intensive, so having access to quality raw material is not enough. To really have competitive advantage, these inputs need to be at close proximity to the plants to simplify the logistics. And this is precisely what we have created in the North America, Europe and South Africa. Coming back to the operation themselves, it is important to highlight the optionality that is embedded within our network of assets. When you have multiple plants that can be qualified by a customer, it enables us to have optionality that is critical to optimize our overall economics. For example, we have seen cost evolving differently even, amongst neighboring countries, like in Spain, with the run-up in energy cost. In this instance, we were able to minimize production in Spain and leverage our facilities in Norway and France to service our Spanish contracts. This type of optionality is also critical during times of planned and unexpected downtimes at facility, and that distinguishes us in terms of reliability. Operational agility refers to the ability to ratchet production up or down, but, in some cases, to vary the production mix. Many of our plants, such as Beverly in the U.S., Laudun in France, eMalahleni in South Africa have the ability to swing silicon furnaces to ferrosilicon furnaces and vice versa. Those swingable capacities have proven valuable during past cycles and help supporting our broader strategy in many ways. The modularity refers to how independent and flexible the assets are within the platform. In the past, we had some rigidities related to power contracts, our labor contracts, which made it difficult to take action where we should have done in down cycles. Hence, we were left shutting down furnaces or plants, which did not always make the most economical sense, but where we could move quickly. Over the past 18 months, the company has done a lot to increase the overall modularity of its asset. This allows us to quickly take action where we want, in line with market changes. Overall, our assets and raw material footprint provides quite an advantage in today's market environment. We are already seeing the shift in customer behavior as onshoring and local supply chains begin to take focus. And lastly, the global asset base provides a nice diversification in terms of exchange rate, not only in terms of revenue and cost, but from a risk mitigation standpoint as well. Next slide, please. On this slide, we are illustrating our market position where, from product segment to another, we are from first to second. The history of this company has been defined by merger and acquisition and consolidation, particularly in selected geographies. So in other words, in those regions where we produce and compete, we have a strong foothold. The reason we are able to position ourselves as a market leader in this various product is a combination of size, but also technical know-how and our ability to service customers. In terms of capacity, which is currently operating or temporarily idle, our combined total is just under 1.2 million tons across our product category. Looking at silicon metal, if we exclude the JV interest, approximately -- we approximate 280,000 tons of capacity per year, with silicon-based alloys 300,000 ton per year, and our manganese alloys are 560,000 ton per year. Once again, these figures represent both operating and currently idled capacity. For example, if we look at the manganese-based alloy business, we currently have significant amount of volume temporarily idle given the unprecedented level of energy costs in Spain. On another note, our 50,000-ton silicon plant in Polokwane, South Africa is not reflected in these numbers as it has been idle for several years now. Next slide, please. Rightsizing the footprint, that has been key in our transformation. While overall size and distribution of our capacity is one Ferroglobe's key asset, very little was done following the creation of Ferroglobe to optimize the overall portfolio. Through this transformation journey the past 18 months, the need for footprint optimization has been our priority. The 3 main pillars of this initiative are the one in front of us and are mainly tied to what we discussed a few slides ago and based on our key advantages. Looking at cost competitiveness, with the permanent shutdown of selected furnaces within the facility or the shutdown of the full facility, which were higher cost and uncompetitive through the cycle, we have shifted our overall position on the cost curve to the left. The second objective was to increase modularity and flexibility to navigate proactively and efficiently the cycles. This means exiting location, which has stringent contracts or other rigidities, which made it costly to shut down when required. This hurt us quite a bit in 2018 and 2019 period, and we needed to create a level of resilience. So the next time we face a downturn, a combination of the flexibility developed, coupled with our new efforts to bolster market intelligence, will enable us to be more proactive in making timely adjustments. And finally, point number three, we designed the platform that gives us the option to restore capacity as the market demand grows. For example, this is exactly what has occurred with our Selma facility in the U.S. in 2022. As we saw continued strength in demand in the U.S., it presented us to tap into idled capacity and restart Selma quickly and cost effectively. Presently, we are doing a similar survey of our Polokwane facility in South Africa. And in the case of manganese alloys, as mentioned previously, we actually curtailed some production capacity to bolster our overall cost structure and competitiveness in this product category. Finally, it's not only about capacity, but it's really the ability to reset the mix of capacity, capitalizing on swingable capacity when required, like for silicon to ferrosilicon, as we have done in the past. Next slide, please. If you look at the recent footprint optimization, if we dig into numbers a little bit in more details, at the time the turnaround plan was designed in 2020, a number of consideration impacted our decision to permanently shutdown specific furnaces or facility altogether, and Marco has already touch base on that. In case of Les Clavaux, we ultimately decided to keep the facility given a change in customer contract and other market factors. All other initiatives have been executed at this time, and some new choices have been made such as the restart of Selma. Overall, we have already realized the benefit of these changes to improve our competitiveness. All else being equal, the actions improved our overall cost by 7% in silicon metal and 4% in manganese alloys. And more importantly, the capacity which we have now is 46% more flexible than the one that we had before. This is just the beginning. We continue to drive down cost and improve our competitiveness every day. I will elaborate more on that later on. Next slide, please. That's a key point, and that's a key asset of Ferroglobe, it's our integrated -- vertical integrated supply chain. While rightsizing the footprint is important on several fronts, one key competitive advantage of ours is our vertical integration. Generally speaking, 70% of our global quartz needs, 35% of our coal needs, 15% of our electrode needs are sourced internally. While quartz and coal may appear to be readily available, the specific qualities we require for our metals and ferroalloys is quite limited. Hence, having the captive supply close to the plant ensures quality, consistency and reliability of supply. This has been essential during a period of logistical bottlenecks and high commodity costs. We are proud that the operations didn't face disruption due to a lack of raw materials through the pandemic and, more recently, as a consequence of the Russia-Ukraine conflict. This is a testament of our own local supply and the network of suppliers we have established strong relationships with. The other point I want to reiterate is that in products such as silicon metal, it takes 6 tons of raw material to produce 1 ton of silicon metal. This is where the overall logistics need to work in order to get a real advantage. We feel Ferroglobe certainly has that advantage given the proximity of our inputs. Even in the case of Yonvey, our facility in China, our production of carbon electrode has proven to be invaluable following the recent sanction on Russian producers. Yonvey is presently supplying 50% of our electrode needs. Next slide, please. Looking at energy. The production process for our product is energy intensive. It varies depending on the product, with silicon metal being the most intensive, then ferrosilicon and manganese-based alloys being the least intensive on a relative basis. For the sake of clarity, the numbers at the bottom of the page are illustrative averages and do not reflect our own performance. When we look at the global energy picture, we continue to feel that the countries where we operate will be competitive in the near future. Over the past 12 months, most production countries have faced an intense period of cost run-up. That said, in the mid- and long run, we think our production area will remain cost competitive, as well as from an ES&G standpoint, given the significant investment in renewables in these countries. These countries have developed energy infrastructure, and they have strong policies in place with a clear view towards supporting industry like ours through competitive means. Beyond the price and availability of energy, there's also other mechanisms which benefit Ferroglobe. Many of our energy contract includes interruptibility clauses. This allows to reduce our energy cost. We take advantage of curtailing production during peak hours when energy prices shoot up, and the utility want to ensure there is sufficient power to supply the grid. Given our technical expertise and infrastructure, we are literally able to stop production at certain plants within minutes in a cost-effective manner. And in this regard, our smelting operations are quite different in terms of aluminum producers who have significant reheating costs. We mentioned as well that we own hydro assets in France and have minority interest in hydro assets in Argentina. And through our ongoing focus on operational excellence, our expertise in operating furnaces enable us to minimize furnace energy consumption, and that's mainly linked to the KTM program we are carrying on. Next slide, please. In this slide, we want to highlight that our global weighted average cost of energy, if we exclude Spain, has been fairly stable in the last years, and that we have been able to maintain extremely competitive energy cost, despite the crisis that we all know about in 2022. Considering Spain, as explained before, we have taken actions. We have pushed the optionality of the platform at its maximum to actually reduce operation to their minimum in Spain and maximizing the return in other countries. The energy deployment policy planned in Spain, highly focused on renewable, make us comfortable that prices in Spain will come down in the future and serve well our ES&G goals. Next slide, please. Looking at quartz and manganese ore, we have discussed in previous slide of Ferroglobe's strategic position related to vertical integration and the value it represents when we talk about security of supply. Here, we want to emphasize on our ideal captive quartz platform. We own amongst the highest purity quartz reserve across the globe in Canada, U.S.A., Spain and South Africa. Those top quality quartz reserve under Ferroglobe to produce the silicon for the most demanding application, including presently developed advanced material application, like silicon for battery. Our mines are all ideally located to our facility with -- close to our facility with favorable logistics. Their proximity to port, besides lowering the cost, generate optionality of supply for several of our sites. Globally, this helps in reducing the carbon footprint of our operation. By controlling those ever-more critical quartz assets, we are able to generate cost advantage of 30% to 50% versus market supply. When it comes to manganese ore, the proximity of our plant to ports provides Ferroglobe a logistic advantage, together with optionality among sources. Combining that with the expertise that Ferroglobe has developed in using variety of ore, it creates an optimized mix for our manganese operations. Staying in manganese segment, I would like to highlight the circular recycling process that Ferroglobe has developed within its operation and byproduct. By doing that, we are able to take the best value out of each type of the process. When byproducts are becoming a key entrants of your raw material mix to improve efficiency of the process, it transforms into a virtuous circle. Next slide, please. Carbon sources are key to our reduction process. Reductant in our process are mainly coal and charcoal. Present dynamic on those markets illustrates how key it is to control the supply of those raw materials. There are 2 qualified sources of metallurgical coal in the Western world, and Ferroglobe owns 1 of them, the Blue Gem coal. Blue Gem coal is operated by Alden Resources, which own 100% -- which is owned 100% by Ferroglobe. Alden is presently supplying this coal to our sites in the U.S.A. and Canada. This provides Ferroglobe a unique leverage when it comes to securing outsourced coal for other location. And again, it brings optionality. Presently, we are considering Blue Gem coal to supply our sites across the Atlantic Ocean in Europe. When it comes to charcoal, here, I want to highlight that Ferroglobe has always been a producer of charcoal, with significant volumes in South Africa, for example. But more than that, Ferroglobe has been operating and upgrading charcoal production facility using best-in-class production process. Therefore, it provides us an advantage in minimizing its cost and help in countering the market cost of charcoal. You will see later in the presentation that we are well armed to capitalize on this know-how to support our ES&G strategy and achieve our carbon emission reduction goals. Next slide, please. Looking at electrodes, electrodes are key components in our furnaces because they are the element that brings the power in the furnace and that allows the reduction of [ mine roads ]. Ferroglobe has several competitive advantages in electrodes. Ferroglobe has developed its own electrode technology and upgraded it along the years. This technology called composite electrodes offers several advantages. The driver of this concept was cost reduction. Instead of purchasing prebaked electrode, it consists of purchasing raw paste, combining it with a graphite core to constitute the electrode in the silicon furnace, and this is 30% cheaper than other electrodes. This method, which has proven its efficiency, actually brought other advantages. The resistance of those electrode to thermal shock allowed to stop and go with very limited impact on production. This has been key to develop hyperflexibility and maximize benefits of interruptible energy program in various areas where we operate. On prebaked electrode, as discussed before, our vertical integration with the Yonvey unit in China has proven to be extremely valuable in 2022 to counter the supply from Russia. The Yonvey plant has been able to fast increase and tune its production for us to phase out of Russian supplies. Yonvey has been supplying 50% of prebaked electrode needs in 2022. Söderberg paste is a key input for composite electrodes and Söderberg electrodes that are used to produce ferrosilicon and manganese. We produce Söderberg electrode paste in South Africa, eMalahleni plant and under agreement in Spain. Next slide, please. In the prior section, you heard Marco commenting on continuous plant improvement being one of the key pillars of the transformation plan. My colleague, Benoist, will elaborate on this further, but it has been an important driver in mitigating against the inflationary impact of rising input and energy costs. Overall, this is a tremendous amount we are doing at the moment in order to drive productivity and reduce cost at the point of production. A lot of it centers on data and looking at KPIs across the platform and comparing furnace performance. In other case, we are emphasizing a new way of operating. With regards to raw materials, we have been testing new sources of raw materials to broaden our supply base and to further drive efficiency at the furnace. On the energy optimization side, we have a number of initiatives centered on sharing of best practices, which are materializing through our KTM program, and Benoist Ollivier will elaborate further on that. We are as well keenly focused on stoppage rate reduction to drive productivity, and debottlenecking of furnaces is a driver of volume increase at minimal CapEx cost. The aim of this initiative is to bring our existing furnaces and facility at their maximum capacity. Finally, the reduction of upgrades to drive higher yields and quality consistency will generate benefits as well. On the near-term horizon, we have a lot of exciting initiatives, which are being studied and prepared for pilot trials at select location. The Industrial 4.0 revolution is positively impacting our business, and we are seeing significant opportunity to increase -- to incorporate and leverage technologies throughout the organization. Given the vast data; point being measured each moment at the furnace level, there is no doubt that with the augmented reliance on data analytics, we will be able to run our operations a lot more efficiently. It will also provide great insight across our platform from which we can draw valuable conclusion in terms of optimal raw material recipe, optimal performance metrics and early detection of potential failures. When you further augment the data analytics with artificial intelligence, our due diligence is showing that this opportunity set goes far beyond the furnace. This is a tremendous amount of value to be extracted across all functions. I would like to thank you again for your time and participation today. Before I hand it over to my colleague, Benoist Ollivier, I would like the audience to reflect on these few slides and appreciate the complexity of the business, which may not be so transparent when you look at pictures of what we produce. We are extremely proud of our workforce, who believe are true experts in it -- when it comes to the production of silicon metals and ferroalloys. There's 3 reason why greenfield have struggled and often fail in our business. It's truly difficult to replicate what we have, monetary resources aside. The value is in the people, the know-how and the access to key input, and we have that unique combination. Thanks again. I hand over to Benoist.

Hello. Good morning, good afternoon to everybody. My name is Benoist Ollivier. I'm the Chief Technology and Innovation Officer and Deputy CEO of Ferroglobe. I used, until very recently, to be the COO. I've got more than 25 years of experience in Ferroglobe, and I've come from a technical background. Next slide. Benjamin just went through our unique platform and the reason why -- what makes it so special. I would like to take you through what we do to bolster our competitiveness. We've got 3 main drivers on this. The first driver we'll go into is the -- what we call the key technical metrics program, also known as KTM. This is our continuous improvement program, and I will deep dive in the first part of my presentation. Then I will focus on the innovation and all the actions we're taking on innovation and why we see innovation as a business growing portion within Ferroglobe, especially focusing on the silicon for battery applications. Then last but not least, I will talk in detail the development and the execution of our environmental, social governance roadmap, ES&G road map. Next slide, please. Going in details into our KTM program, this is what you have here, a schematic -- a scheme of what we achieve -- what we try to achieve. And we aim at improving the efficiencies, increase production and reduce our environmental impact. And this by basically -- this is something which has been going on for quite some time now. And what has changed recently is what we have -- the way we have done it and the results we have achieved. We are fostering today on new cultures. We are breaking boundaries. We do analyze, extract, share best practices and implement them in a very organized and structured approach, this knowledge coming from more than 50 furnace history in our company. We have very high transparency between teams, operational teams, and adaptation regarding new method, new ideas. We also have put in place a dedicated central team to basically ensure the pace of implementation and provide the drumbeat. And obviously, all this is supported by technology with a very, very strong focus on data. Let me give you a bit more details on the next slide, please. So we start with a very broad asset footprint. As mentioned by Marco and Benjamin earlier on, we've got 18 smelting sites, 7 operations, mines and carbon electrode operation, and we've got more than 50 furnaces operating. So this represents, together with the people, the know-how and the accumulated knowledge, a huge pool of data and know-how. What the KTM program has been doing or is doing is basically, we rank the -- each furnace some key performance indicator, and I will focus on the main one, which is kilowatt hours per ton, which is the amount of energy, electrical energy, we consume to produce 1 ton of product. So ranking the furnaces from the most performing to the lower performing, we have had some structured methodology to analyze differences and basically try and understand what made the low performers bad performers and what was the gap and what made the very strong furnaces the best-performing finances. And then what we -- so we look typically at recipes. We standardized the calculations of furnace set points using the same raw material, same sizing, going through the same operational procedures, et cetera, developing standardizing instrumentations and tools. And the typical -- what we have achieved, we were basically -- our initial goal was to bring the lowest, weakest performance furnaces to a better level. And actually, what has happened is that not only the low-performing furnace is significantly improved. But also within this virtuous circle, even the best performing furnaces also improved further. Just to give a range, a 4% improvement in the energy consumption of our furnaces for the fourth quartile represents $14 million. Let's move to next slide, and that -- the next slide shows actual figures. The -- and this, again, relates to the kilowatt hours per tonnage impact on our variable cost. Here, you can see between 2019 to 2022 year-to-date, the energy efficiencies of our furnaces in the 3 North American silicon-producing assets, alloy, Beverly and Bécancour. And what you -- what we have experienced and what we have achieved, which is a big feat, is to gain 1 megawatt hour per ton average over the 3 -- the all furnaces from the 3 plants. This represents a 10% improvement in energy efficiency over 3 years, which is 2% to 3%. When we look at the impact of this 2% to 3% improvement in KTM, while we see only variable cost in Silicon North America starting from 2020 that the raw material cost increase between 0% and 1% in average, depending on the plant, depending on the raw materials, and this increase in cost was low because we have -- thanks to a high level of integration in the U.S. But the cost -- the raw material cost increase has been totally offset by our KTM, and our 2021 cost of production in North America were basically lower than in 2020. And in 2022, we have better cost than in 2019. That is the great value of this continuous program KTM that we applied. Moving to next slide, please. And so we have the KTM program what -- that we internally refer to Wave 1, which is focused on the optimization, as I mentioned, of variable costs. And we are -- this program is going on, will keep going on, and we'll find new pockets applying the same methodology on finding new pockets of savings. And we have launched the KTM Wave 2 program, which aims at optimizing the volume output. And basically, using the successful methodology of KTM Wave 1, we will focus on stoppage reduction, debottlenecking of furnaces, like Benjamin mentioned, [ outage ] reduction and so forth in order to boost volume from our existing furnaces using a minimum level of CapEx. So this will be based on advanced furnace analytical tools. It will be based on new instrumentation, new product standardizing, further instrumentation to acquire more data and get more knowledge from this data. This Wave 2 KTM wave will provide 30,000 to 40,000 tons additional per annum. This means that it's basically the equivalent of a greenfield plant with 2 furnaces in silicon, for instance, and for basically a negligible amount of CapEx. Typically, a greenfield of 30,000 tons per annum is anything between $150 million to $200 million, with a lot of risk associated to it. Moving to next slide. This last slide was concluding my description of the KTM drive and efforts we're adding and also success. Now I would like to spend a bit of time on innovation. Ferroglobe is known for its operational excellence. And we have, as a company, a long history in innovating and, more importantly, in industrializing innovation and making it real and successful. So we've done it in -- on 3 main buckets and goals, the first one being to improve our efficiencies and reduce our cost. This, as mentioned earlier by Benjamin, has been recently the case with the successful development of a high-efficiency charcoal production unit. We also do it to accompany and match the -- all the never-ending evolving quality of our products and also to match all the customers' specification evolutions. And we've done this with typically the flow casters, the granulation process, which is the only one working beyond this granulation process were -- operated on silicon. And then what we do apply also research and developments and a lot of know-how when it comes to high-quality product and bespoke product. This is true for the high-performance foundry product. We have learned a lot from our solar drain metallurgical applications, which will actually help us into moving into the high-value, high-purity products. Moving to next slide, please. So the Our innovation, the way we see it is to basically close the gap and even make it disappear, close the gap between all labs and all plants in order to ensure a successful seamless ramp-up. What the pictures you can see is one from the lab, which is in our Sabón facility next -- sitting next to the silicon furnaces. So the advantage of basically closing the gap between R&D and the plants is it allows us to match very quickly the evolving product specification. It's also -- it will be a very strong advantage when it comes to the emerging trends that we see coming. Typically, energy transition, EV mobility, decarbonization, it's not a matter of how or when. It's a matter of how fast, how fast can you ramp up. And we'll see, and I will touch on the example of silicon for batteries. So this is why we've got a very strong integration and -- of R&D people into our plants, this for customer solutioning, for the quality improvement, for continuous plant improvement, for our transition to decarbonation. This is the charcoal project I will speak a bit later of, and into the silicon for battery and the new markets. Moving to next slide, please. So one example of innovation we can capitalize upon, we have successfully technically developed a metallurgical solar-grade process. which is proprietary, which has achieved a [ 6-9 ] purity solar grade silicon process. This process is made up of several stages. It's a low carbon process, and it's a clean process. This process today is parked on the side because of the solar market situation still. When we look at green mobility and what is required to succeed in developing new products in the green mobility emerging market, we can see and we have extracted, adapted, we have modified the process to basically match what is required into green mobility. We also have all the capabilities that we have developed in our solar project to move into green mobility. And the -- what we have been -- what we see as critical success for the green mobility is the high purity, the repeatability, and this is where we are extremely strong. This is part of our DNA, and it's our low-carbon footprint processes and clean processes that will ensure that we are successful into this application. Moving to next slide. I would like -- and one of this application is silicon for the lithium-ion batteries. The lithium-ion batteries are basically limited by 2 factors in their development: the cost and also the range anxiety from potential customers. The cost problem can actually be solved by using silicon instead of graphite into the anode. This is thanks to 2 factors. Silicon has tenfold the theoretical capacity of lithium absorption, which means that, theoretically, for the same output, silicon can -- 1/10 of silicon can substitute the anode. And something which is not very well known is that silicon has the unique capability of allowing fast charging. This is on the anode. And this is a key characteristic of silicon. Not only does it increase the anode capacity, but it allows fast charging. And as a backdrop, fast charging can act -- once you have a fast-charging anode, battery manufacturers may have other consideration to lower the overall cost of the battery. So silicon is increasingly accepted as the growing new material for anode in the lithium-ion battery. Moving on to next slide. Today, on the left-hand side, you've got the silicon content and the way we see silicon content in the battery anode. Today, in what is called the Generation 2, the batteries are using some silicon material, either under the form of SIO as an additive, and in proportion, mixed with graphite below 15%. What is clear is that the next generation of battery, Generation 3, will use silicon composite, and the silicon will represent up to 25%. What we perceive, and this perception is being reinforced every day or every week going on, is that the next generation, Generation 4, will be made of silicon-rich anodes up to 70%, 80% of silicon. The demand -- this evolution will increase demand of silicon for batteries. You can see on the right-hand side, the chart, which dates from April 2022. It's a forecast of silicon for battery demand in 1,000 tons per annum. And what you can see is there will be a strong pickup from the Generation 3 composite in starting 2023, 2024, and then silicon rechannel will start emerging from 2026. What is interesting to note as well is that when it comes to silicon for lithium-ion batteries, the prices are not of the same range than the typical metallurgical silicon. It's a completely different ballgame. And last but not least, the silicon for battery demand on this chart is only for Europe and U.S. combined. Moving to next slide. So we are a market leader, and all our goal and our strategy for innovation is basically to focus on the production of precision advanced silicon. This precision advanced silicon is an added value product. It currently generates income on some advanced applications, which are listed here. And it will start feeding the present and the growing opportunities. So it will be -- this is our seal for battery mark. And it will be a feedstock to silicon [ buried ] anodic material typically for the Gen 3 batteries and the silicon carbon batteries, but we are also working on research on more advanced formulation to basically sell silicon as an anodic material within the -- to battery supplies. And that slide concludes the innovation part. I would like to finish on the next slide on to the, last but not least, topic of my presentation, which is ES&G. ES&G stands for environment, social and governance. We will, in the coming days, very shortly publish our 2021 ES&G report. This is our very first humble step in our ES&G way forward, and this report will basically describe our action plan and our commitments into the ES&G commitments we are taking. Out of the 40 actions that were described in this ES&G report, 13 are dedicated to governance. We will also describe what we do on people -- stakeholders and people and culture. This will be the second part. Benjamin has touched on what we're doing on safety and the new approach we take on safety. We will have some commitments also with all our different stakeholders. We will -- on the environmental side, we will look -- we will work on the supply chain, including sensitizing and improving the supply chain downstream and also upstream on ES&G topic and decarbonization. Last not least, in the environmental part, which basically mostly consists of decarbonization, implementing -- defining and implementing a decarbonization plan and also improving our recycling capabilities. Moving to next slide, please. Today, Ferroglobe emits the CO2 emissions. And these emissions are classified as Scope 1 for direct emissions, directly related from emissions from our operations and assets. The Scope 2 emissions are the ones that are caused by the generation of the electricity we're using on our assets. So the Scope 2 are indirect emissions, and Scope 3 are linked to the indirect emission from our suppliers and products shipped to customers. As I mentioned, our high level of integration will help us in being extremely efficient on Scope 3 emission. Today, we only report and compensate CO2 emissions according to the European Emission Trading System rules. And starting in 2026, the -- every industrial company will have to declare the total emissions, Scope 1 plus Scope 2 plus Scope 3. So we are today defining a comprehensive action plan regarding our CO2 footprint reduction roadmap. You can find the main levers. So the technical roadmap is already defined. We need to now look at the financial feasibility, and this will be finalized very soon. And moving to Slide 67, just to touch on what the technical roadmap is regarding the lowering of CO2 emissions. So we will basically focus on 4 main levers. The first one is to confirm and to keep working on the key technical metrics. The key technical metrics are by increasing yields and lowering the electricity. It basically helps in reducing the CO2 impact, both direct and indirect. And the interesting factor is that it's going on. It has been going on for 2 years, very -- even a bit more, but very efficiently for the last 2 years, and this is happening. On CO2 and on PPA, this will be the second lever, and it will take place fairly soon. The strategy here is to address our indirect emissions by going and contracting PPAs, power purchase agreements, externally to go for and to seek further wind or nuclear PPAs to basically substitute for higher carbon electricity supplies. Then the big item will be, for us, charcoal consumption. And in charcoal consumption, what we -- our strategy and tactics will be to capitalize on our experience. As Benjamin pointed out, we used and to -- we asked supervisor 200,000 tons charcoal production in Southern Africa. And having been exposed to charcoal production and charcoal consumption, I can ensure you that the successful application of charcoal, it's all in the details. And the interface between charcoal production and furnace is capital and critical, and we've got this knowledge. We have the knowledge of operating a new generation high-yield charcoal plant, and we will capitalize on this knowledge to ensure charcoal production developments and charcoal increased consumption in silicon and ferrosilicon units. Last, we will -- we have a comprehensive plan on each recovery. The plan on each recovery is to basically develop each recovery units using organic ranking cycles electricity units, and we have a 2-phased approach. First, develop the technology, learn very quickly the technology in our European assets and then implement those into high carbon footprint in direct emission countries, typically South Africa. So this concludes my presentation on ES&G. And at this time, moving to next slide, I would like to open it up for some questions.

Thank you, Benoist, and thanks to the others presenting this morning. I know we've covered a lot of ground in the first few hours here. And hopefully, as I said in the opening remarks, the intent here is in part to give everyone a deeper appreciation for the business and some of the intricacies that really distinguish the Ferroglobe platform and give you some flavor of both challenges and opportunities and how we're positioned to deal with those.

At this time, I'm going to ask my colleagues to join on screen here to do a few Q&As. I've been scanning through the portal through the past 2 hours and seen a number of questions come in. We have attempted to lump some of these together in categories. So the intent here is to go through a few now and then get people a breather. And then we'll continue with the rest of the session before we have another Q&A at the end. So I'll just start by reading off some of the questions that have come in here. Your strategic plan was designed in 2020, and you've been at it for 18 months now. In fact, you've revised some of your targets this morning. What are the main risks you're seeing at this stage in reaching your target? Maybe, Marco, I'll ask that you please kick these off and then maybe defer to the appropriate members on the management team to elaborate.

Yes, on this question, we are pretty bullish about really crushing our target -- initial target and, like I mentioned, $225 million by 2023. And even a better way to support our sales, we've reduced working capital of $90 million. Honestly, I don't see any risk in the implementation of these levers, as most of them are under our full control because our cost initiatives, while commercial excellence has been already clearly over delivering versus the initial objective. I have to admit that at the beginning, like I said, the challenge was to get people on board. I mean, our consultant gave us a tool to -- that we have used to monitor more than 500 projects inside the company where specific resources were allocated to deliver specific results on each initiative. So the main challenge has been to get people on board, to get people working on -- based on delivering on the initiatives rather than just trying to execute something, but being measured has been the major challenge.

Yes. And one point I wanted to just clarify for everyone is as we were going through the revised figures, the run rate of $225 million is actually our estimate by the end of 2024. This was just a clarity there.

And another sort of theme that's emerged here is that you mentioned, and you did a good job sort of going through all the end applications and really highlighting the depth of the different applications for the products that we produce, what type of growth rates are you now expecting for these types of end markets?

Well, Craig will go to this kind of -- to provide this kind of information during his presentation based -- focused on markets and customers. But just staying at a high level, if you look at silicon, like I said, the silicon has a clear growth. We estimated that in the next few years, the growth in U.S. between 4% and 6% and 2% and 4% in Europe, considering the areas where we play today. While for alloys, we expect a rather flat growth. So our overall strategy is to run silicon metal for growth and run for value, cash the remaining part of the business. I have to say that the conflict between Russia and Ukraine brings a lot of question marks to the alloys business. So time and whatever is going to be the solution of this criminal event will have -- make a big impact on the alloys market, particularly in Europe.

Energy certainly being a big theme these days, there's a question around our Spanish operations. Obviously, it's an area where we've curtailed capacity quite a bit over the past 12 months. And the question is around where we are in terms of our PPAs and our near-term expectations of restarting potentially any of that idled capacity.

Thank you, Gaurav. Here, if you don't mind, I pass the microphone to Benjamin, our COO.

Thank you, Marco, and thank you for the question. So I think, generally speaking, Spain continued to be highly volatile. And unfortunately, the recent gas gap hasn't provided the expected results, right, in terms of energy price. We were expecting a more stable H2, which is not materializing now. So what we are doing on our side is we continue to leverage our footprint basically by modulating production and using the optionality of the platform to basically leverage our plants in Norway and France to service our customers. I think that's one sign of the answer, right? After, when we look at potential PPAs, I think the gas gaps procedure has broaden the market kind of, and the energy producers were not motivated to move quickly regarding that. So we are expecting to be more positioned in 2023, even with partial PPA coverage. But long term, we are still supportive of Spain as an important production hub for the company. I think the country is far advanced in executing the plans centered on renewables. And I think beyond the cost, the source of the power for our ES&G strategy is also very important. And I just want to reinforce again that PPA is not the only option. I think the modularity of the platform with possible conversion is our advantage in this situation.

And then similarly, there was a question around France. I think we've publicly highlighted that our power contracts, our power rate for the year is locked in. But the question is center around what happens next year and beyond.

Benjamin, you can continue to elaborate on energy.

Okay. Thank you, Marco. So I think we -- before talking specifically about France, I would like to look at, maybe on a broader picture, I think I've highlighted during the presentation that we've been able to manage our cost in 2022. And in Spain, we've taken action regarding what's the situation. I think that's one angle of the answer because we've seen that we've been able to maintain flat rate along 2022 in all the area we produce and expect from Spain. So specifically, in France, we are covered with a contract in 2022 with a mechanism that provides competitive rates, right? So the question is more going into 2023, and we are presently in discussion for -- with different suppliers to look for agreements post 2023. Generally speaking, I think what we can say is that ferroalloys industry remains very important in France, and they are looking to support the industry. And the recent nationalization of EDF deemed to be a positive for our industry. So we are confident that we can land at a place which is competitive in the future.

Thanks. A few investors have been asking about a strategy beyond, I think, the plan that we've been discussing thus far, saying you're well advanced on this journey, things are moving around. What comes next? Is there a new broader strategy for the company?

Yes, Gaurav. I think we have currently the right to do that. And while we are still focused on delivering what we said on the turnaround plan, about 6 months ago, we started the process to look at what to do with this company longer term. It is still a bit premature to share details, but I expect that we are going to be able to share our medium long-term view by the end of the year. I have also to reiterate that there are a lot of things that have to be done in the area of the way we operate. We started looking at integrated supply chain. We started looking at the application of artificial intelligence manufacturing 4.0. We are having deep drills on our employees' capabilities. So there is a lot of work which is going on, and the future strategy will be a result of an integrated approach between the strategy for the value, value centers and these new elements: ES&G, digitalization, increased capabilities. And again, I expect to be ready with that by the end of the year.

Some of these, I think, we will hold off on because as you hear, the next few speakers will be covering the markets and the cap structure in a bit of details. Maybe Benoist, this one is a good one for you. How do we think about the impact of silicon powders business going forward? And when will the real shift in the battery anode business take place to move the needle with regards to your P&L?

As we -- as I've exposed earlier on, the impact for Generation 3 is expected to be quickly within the 100,000 tons for both Europe and North America, with a clear tendency of battery manufacturers to onshore their raw materials. The Generation 3 silicon carbon composite will be basically within -- it's going to be -- it's going to impact within 2, 3 years. Today, we are already having some cells in the battery world with Generation 2 batteries at a rate of -- estimated volume of between 1% to 2%. Craig will touch on that. And as for Generation 4, which is the silicon-rich, we see this within 5, 6 years from now.

Thank you. Just glancing through these questions again. Once again, a lot of interest around what's happening in the market, where pricing is going, et cetera, as well as what we're doing with the cap structure. So perhaps, to keep on course here, we continue with the presentation.

At this time, I'll introduce Craig Arnold to please come and present on his insights on the market as well as our value proposition for customers.

Yes. Thanks, Gaurav. Good morning, good afternoon and good evening to all those that are joining from different parts of the world. My name is Craig Arnold. I'm the Chief Commercial Officer for Ferroglobe, and I joined Ferroglobe in the middle of 2020 after a number of years, in fact, decades with the Dow Chemical Company in a variety of business, geographic and corporate leadership roles. But that said, I joined Ferroglobe because of the excitement and the opportunity and the interest in silicon metal and the elements thereof. So during the course of these slides, it will be my pleasure to share with you our view on the market, where we sell our products and the areas where Ferroglobe is valued most by our important stakeholders, namely our customers. Moving to the next slide. Over the years, we have grown and established leading market positions in all core geographies where we are the natural local supply of choice and can back up suppliers from several of our assets to the key industry captains and several assets mentioned by Benjamin a little bit earlier. Today, we hold #1 positions for silicon metal in Europe and North America and for ferrosilicon in North America and foundry products in North America and equally have #2 positions for ferrosilicon and manganese alloys in Europe and foundry in Europe. It is primarily because of our proximity to the market, allowing flexibility and localization of the critical value chains, our portfolio of assets with product cross capabilities providing security of supply, our technical expertise to support customer requests for developments and tighter specifications, equally our long-dated history with customers as an established player. We also have sales coverage directly in all the core markets and remain committed to consistent improvements in ES&G, in particular, in the area of decarbonization. Our recognized strengths are therefore underlined by providing local sourcing, security of supply and technical excellence. Let's move to the next slide. As you will notice, over the next coming slides, I will also deeper drill into the respective product families. So without further ado, let's drill deeper into silicon metal. Next slide, please. Today, our silicon metal is by far our largest portfolio, representing just under 50% of our total sales today. As you will be aware, silicon metal landscape is fairly consolidated, especially outside of China. However, this is quite different for our other product categories. We are currently the #1 merchant producer in the Western world and demonstrated significant financial improvements since 2020 shaped by several commercial excellence initiatives, which are identified through portfolio plays, changes in contract and respective exposures. Without a doubt, silicon metal is critical across hundreds of consumer and industrial needs. It is this exposure and balance to the end markets, with some growing GDP, as Marco mentioned a little bit earlier. However, there are many of our direct end-use markets that are growing substantially higher than GDP. So let's drive a little bit deeper into these market sectors in the next slide. When discussing silicon metal, we often comment on the 3 market segments, namely polysilicon, aluminum and silicons. But what really drives the demand for our products is the next layer down, the end markets for silicon metal, which is not only diverse, but also benefiting from these exciting macro and short-term trends. As you have just heard from Benoist, the foundational piece to growth in solar and the EV mobilization is instrumental in our future growth, and it will eventually be the material of choice finally in the anode of the battery. Whilst growth will be covered in the following slides, we expect a cumulative annual growth rate over the next 5 years of 2% to 3% for polysilicon, 3% to 5% for silicons and 4% for aluminum, which are an already sizable base. Let's move to the next slide. Through our asset base, we can service virtually any market competitively. You'll notice that some of our assets have swing capabilities or this flexibility, which Benjamin referred to a little bit earlier, and can accommodate demand surges across the silicon metal and ferrosilicon sectors, which you'll hear a little bit more later on how we manage these balances across their respective geographies. A few months ago, the Selma asset in the U.S. restarted successfully and was already serving additional demand in the U.S. And as you've heard in other discussions, we're already reviewing the Polokwane facility in South Africa, which is well situated to service both the U.S., Europe and the Middle East and Southeast Asia competitively. Its potential start-up is still currently under detailed review, but it is through extreme interest from the customers and markets that we are putting this into an accelerated review process. While a greenfield would realistically take plus 3 years to construct, with hundreds of millions of dollars allocated, we can start this asset, a 50,000-ton asset, within 2 months for roughly $10 million. The decision to evaluate a potential restart of Polokwane is due to the numerous calls from customers and engagements that we've had thus far, as they pursue opportunities to reduce their exposure to China. It goes without saying, we'll only restart this asset if there is a proportion of the volume already backed up and locked up in multiyear contracts. This is something we will still continue to pursue over the next couple of months. Moving to the next slide. Since our customers are extremely demanding, we are proactive in providing them a broad product offering, whether it comes down to grade, sizing, specifications and purities across all ranges of applications. It is not only our capability to produce, but also the location of our asset base across multiple neighboring countries from this diverse asset portfolio and strong value chain integration and the in-region production, underpinned by the proximity to customers that is highly valued. We have a trusted expertise, capability and consistent product quality. Through our decades of longstanding relationships and partnerships, we're able to grow in line with our leading customers. And of course, we have a continued commitment towards constant improvements in sustainability, in particular, decarbonization, which is at the forefront of how we operate. Moving to the next slide. Continued growth is supported by strong demand fundamentals and strategic value chains. Today, we are ready to address the progressive growth rates expected from the 3 major consuming sectors namely silicon, silicons aluminum and the emerging anode space. Accordingly, we are best positioned to offer short-term additional silicon supply through respective conversions, restarts of idled capacities and debottlenecking. This naturally reduces the dependency or exposure to imports and, respectively, supply chain complexities. Already this year, we are starting to see the benefits of the start-up of Selma in the U.S. Moving to the next slide. While the global market seems to be balanced, it is also expected to be impacted by diminishing exports from China in the years to come. China has been and will continue to be an important part of the global silicon metal story line. The gap in exports started narrowing initially in 2021 as Chinese curtailed capacity in the wake of reform driven from financial and environmental considerations. So whilst many of the older capacities has being permanently shuttered, China is also building new capacity. Overall, we expect the Chinese capacity to increase but at a slower pace than the pipeline of new downstream capacity in siloxane and polysilicon specifically. This impact on the Western world is significant. By 2026, Chinese exports are forecasted to decrease around 200,000 tons to only 550,000 tons in pure exports. In an environment where demand is expected to remain strong, we see fewer exports from China supporting some of the market tightness for the foreseeable future. Moving to the next slide. Historically, the 3 regional indices have been correlated, and this current distortion that we're currently seeing is due to the different supply-demand tensions in each of the regions. This slide, as well as the other slides for the respective product families, highlights 3 specific areas: the historical pricing, which we've seen in the previous years; peak pricing, which we've been accustomed to in the last couple of quarters; and where we finally see the range will be settling at going forward, up until 2026. At some point, we do expect that these 3 indices to be correlated, but by this time, at a much higher price higher than the historical levels. The new Chinese floor will be set by higher input costs, logistical bottlenecks and the true cost of labor, which is beginning to be an emerging trend. Gradually, we see a strong demand fundamentals worldwide; increased cost volatility in key inputs and limited capacity caught online; reduction of Chinese exports on the back of strong domestic demand in China; growing emphasis on decarbonization; and further scrutiny across the supply chain. Moving to the next slide. Now we'll take a deeper drill into our silicon base at alloys portfolio. Moving to the next slide. The silicon-based alloys industry is much more fragmented than what we see in silicon metal. However, we have a meaningful position where we compete and run this business for a value by optimizing its share size. You'll notice, and later here, that we operate a balanced portfolio within this product category. We place greater emphasis on weighting our sales on specialty products and higher-margin products, i.e., specialty grades such as high purity, low aluminum or low carbon grades, and in the foundry sector, the nodulizers, inoculants and products sold into the multi-powder market. Moving to the next slide. Silicon and calcium silicon businesses are primarily sold into the steel industry focused on construction and other core markets covering automotive, mechanical engineering, tubes and metal goods, where our foundry business typically focuses on cast iron foundry industries, targeting the automotive construction, oil and gas, agriculture, machinery and other valuable sectors. This is very, very typical for most alloy sales and where the final end markets for steel outlet goes and the regional differences that we see, both in Europe and U.S. are fairly consistent for a mature geography. Moving to the next slide. Similar to silicon metal, much of our portfolio, our silicon-based alloys draws from our in-region production sites and close proximity to key customers. In select locations, like the swing needs covered in silicon metal, we also have the ability to address medium-term demand needs for ferrosilicon, depending on the overall return to unit silicon and confirmed in our customer contracts, underpinning their need for supply security. Today, the current pricing trends support the production of silicon metal versus commodity ferrosilicon or what we would call ferrosilicon standard. Moving to the next slide. And really speaking, the steel typically operates with very low -- the steel industry typically operates with very low stock levels of raw materials and value suppliers that can deliver at such short notice and have a reliable quality base in close proximity. Our geographic footprint, therefore, holds an advantage to address this need from our customers. In addition, our customers value our tailored offering and with track record for innovation and multiple product ranges, our supply security through a portfolio of assets with an ability to pivot production. The commitment to consistent improvements in decarbonization, in addition to responsible sourcing is a key attribute. Our proactive evolution to support green steel as well as our longstanding relationships and partnerships are underpinned by the years of dedication and partnership with our customers. And simply, our customers in the steel sector value the one-stop approach to be served, both by the silicon and the manganese alloy product lines, namely silicomanganese, ferromanganese and ferrosilicon. Moving to the next slide. Over recent years, we have shifted our portfolio to be more specialty based focusing on margin, as Marco highlighted a little bit earlier, with high purities and qualities to support the growing demand needs primarily into electrical steel. Similarly, versus 2019, our overall portfolio for our tailored foundry products has shifted to 80% FeSiMg or manganese ferrosilicon nodulizers and 20% inoculants. The difference in inoculants between Europe and U.S., Europe, we focus primarily on the barium, bismuth, strontium, magnesium barium, magnesium zirconia, whilst in the U.S. primarily being manganese, barium, high aluminum, rare earth zirconium and much of our foundry ferrosilicon grades. But this is an important shift focusing on for higher-value outlets for commodity products. Moving to the next slide. Today, the U.S. market is dominated primarily by imports from Russia and other locations. And our assets are mainly located to foundry and selective silicon metal production. That said, similarly for silicon metal, we do have the flexibility option to pivot production levels according to the increased production of FeSi, if needed. The same goes for Europe. However, in addition, we allocate more production to support suppliers to the European steel industry, together with other product lines such as [ KeSi ] and the manganese alloys. All swings are strategically considered based on the return to unit of silicon. And today, this favors marginally silicon metal over ferrosilicon. Moving to the next slide. Whilst additional tailored foundry products can be considered, we remain balanced on production options in both the U.S. and for Europe. The outlook for tailored foundry products remains generally flat in the outward years given the expected shift in electrification of the automotive industry and the impacts on the general foundry industry. Moving to the next slide. The outlook on pricing remains lower than recent peaks, but higher than the historical past for ferrosilicon, with the ranges widening depending on energy and other input costs, together with policies and stability in key producing regions. Generally, we see the downstream infrastructural investments driving future steel demand; Chinese reforms resulting in fewer steel exports and the positive impact that it will have on the rest of world; Chinese export tax on ferrosilicon, which will dampen export activity from the region; and the near- and longer-term impact of the Russia-Ukraine conflict in the future supply of ferrosilicon; growing awareness around supply footprint, in particular for decarbonization; and the general reduction in import dependency for Scope 3 emissions are general areas of focus from and requests from our customers. Increased demand shifts towards specialty grades will be one of our key areas as we support the development and the expansion of electrical steel demand. Moving to the next slide. Let's take a deeper drill into the manganese alloy sector. Moving to the next slide. Our manganese portfolio, around 20% of our total sales as both a European-centric production as well as a European customer base predominantly. Why? Because Europe is a key leader in setting the environmental standards, providing opportunities in green steel and manganese into batteries, namely the cathode end of the battery. Our asset footprint is in close proximity to our core customer base consisting of global leaders in steels or first movers on the forefront of driving change and reform. Moving to the next slide. [indiscernible] manganese alloys. Our portfolio is predominantly focused on the steel sector. Demand is expected -- demand for flat and long steel products remain balanced into specialty steel products, namely construction and automotive. Moving to the next slide. As stated earlier, our production footprint is concentrated in Europe with operations in Norway, France and Spain. Notably, our asset in Venezuela is currently idled and will remain idle. Production and its sales is mainly targeted towards European customers in close proximity of our customer base. Moving to the next slide. Our customers' experience is highlighted by the demands for, again, security of supplied technical expertise and a consistent -- commitment to consistent improvements in the decarbonization requirements. In addition, we're also working quite closely with our partners across the value chain as they consider and accelerate their steel -- the green steel developments, of course, a one-stop shop for all steel players with the ability to service a variety of alloys, namely from silicon metal and manganese. Moving to the next slide. Going forward, we expect the demand for manganese-based alloys to grow marginally. And due to the price sensitivity of imports and prevailing energy prices in Europe, we have elected a more balanced production levels, as covered from Benjamin's slide earlier. But at any stage, we have the ability to ramp up production in order to bridge a potential gap in imports and/or to support domestic demand surges for steel products. Moving to the next slide. A general prognosis for our pricing outlook is forecasted that spreads essentially is -- the spreads are essentially alloy price over manganese ore. We expect this to normalize due to the following reasons. Demand in steel is at a near time or if not a historical high; Chinese reforms resulting in fewer steel exports and the positive impact on the rest of world; near-term and potential longer-term impact of Russia-Ukraine conflict affecting the consistent supply of silicon manganese primarily as well as ferromanganese from the region; European markets leading awareness and footprint supply impact on green steel; and our view on the manganese ore pricing outlook should be stable with a slight downward trend given the planned additional capacity additions. In the next slide, I'd like to elevate a little bit out and conclude the final part of my section. In conclusion, Ferroglobe has an excellent strategic position for the future. This is due to our large portfolio and leadership position in each of the major geographies. Our actions reinforce the company's ability to grow and succeed going forward in a context where supply from traditional sources, namely Russia, Ukraine, China, are all at risk. Several megatrends underlying the need for our products across strategic supply chains from silicon metal, which enables the energy transition, highlighted by Benoist, to ferrosilicon, manganese and foundry products which are very much needed for machinery, infrastructure and construction industries. Other global dynamics reinforce our competitive position, which is the global dynamics, which is addressing reshoring or the dynamics that are moving towards more reshoring, favoring supply chain over flexibility as well as security of supply. The rightful push to sustainability and its responsible sourcing and supply chain traceability is at Ferroglobe's advantage. We have embarked on a disciplined program for commercial excellence, as highlighted by Marco, focusing our portfolio on value-added products and maintaining discipline in the key markets, developments and opportunities we pursue. Now I'd like to hand over to Beatriz García-Cos, who will elaborate on Ferroglobe's financial performance and priorities.

Thank you. Thank you, Craig. I'm going to be -- good morning, good afternoon to all of you. My name is Beatriz García-Cos. I'm the Chief Financial Officer of Ferroglobe since November 2019. Prior to Ferroglobe, I held senior CFO positions within the metals and mining industry, most recently with Bekaert and Trafigura. And prior to that, with Vestas and PPG. During today's presentation, you have heard a lot about the change. So now we have made and continue to drive a lot of changes throughout the organization with the goal of becoming more nimble, resilient and profitable across the cycle. I will spend a few minutes now walking you through the changes we have been driving and how this has been impacting our financials. I also want to cover our near-term priorities, more specifically with regards to balance sheet and how we plan to deploy our cash. Next slide, please. When I joined the company, as I mentioned, back in November '19, the case of change was evident in how we conduct our day-to-day business, but was also apparent through the historical financial performance of Ferroglobe. And when if it is true, there was some level of cyclicality that is going to be inherent to our industry. What we were challenged in the past is the drastic changes in our performance and volatility. We've had volatility in volumes, volatility in pricing and volatility in cost. In other words, we had significant changes in performance from one year to the next, particularly in terms of cash flow generation and the sustainability of our cash flow generation. And with this type of performance, it's really difficult to plan a near -- a strategy and execute any type of strategy for the company. And while there was not any specific reason for this, one issue that I noticed when I joined is that the company was slow to react and was producing to stocks, with an expectation that the market will always bounce back, instead of adjusting production in line with the market evolution and demand. And then we enter into a vicious cycle of over production, flushing out inventories at year-end at any price. And when you enter into these kind of situations, you lose leverage with your customers and pricing, and then you lose control of your margins, right? Then this has to stop very quickly, and the way of running this business had to change from an operational and a financial perspective. Next slide, please. With the new management coming together in 2020, the situation and financial picture have evolved and progressively improved. Keep in mind that we have been doing all this transformation and change in the midst of a number of challenges, including the pandemic. Despite a 30% drop in volumes overnight, in 2020, the business actually produced stronger results versus 2019. Our difficult situation in 2020 forced us to take quick actions. And fortunately, we start to change the way decisions was making or happening. Overall, we end up not only with a positive adjusted EBITDA, but as well with our net cash flow on positive terms. But at the end of 2020, we have still very little visibility in 2021, as the pandemic was still in a very bad stage. We had to take a conservative stance going in 2021 since we were still in the middle of the negotiation with the Ad Hoc Group of Noteholders. Since we couldn't afford to take a chance with the market prices, we decided to lock in prices for the majority of our silicon metal sales. Hence, in 2021, we did not get the full benefit of the significant run-up in silicon metal prices. Despite this gap, we ended up the year with a significant jump in overall financial performance and a successful refinancing of our debt. 2021 was the first year in which we started to notice something meaningful changes within the company and, particularly, the way we operate. Next slide, please. Despite a much stronger 2021, our cash position remained constrained in 2021. It took us a bit longer for the financial to close and for us to realize that the benefit of the access we were talking internally to improve results given the construct of our contracts. In our opinion, the ultimate financing we closed in 2021 was a great outcome for all the stakeholders, particularly in the context of the health of the company at that moment, at that very specific moment, and the lingering uncertainty created by the pandemic. That said, as the credit profile of our business continues to improve with each passing day, we see a great opportunity to reduce the quantum of debt and reduce the cost of this debt. I will touch on this point in a few minutes. During this difficult period for the company, we had to survive, and we used various means to finance the company, including the sale of a significant amount of CO2 credits, which we later repurchased for a much higher price. The overall leakage from a cash perspective was immense and approximately $140 million. And clearly, this was an anomaly for the company, right, these levels. Next slide, please. In 2022, the financial picture have completely changed. The structural change in our business and in some of the products that we produce is finally coming through in our financials, and this is making a step change in our performance and ability to generate cash in a sustainable manner. In Q1, we had a significant jump across the board, most noticeable in adjusted EBITDA and the corresponding margin, around 34%. Our adjusted EBITDA was the highest in the company's history. In fact, the second quarter was higher than the full year EBITDA for any year in Ferroglobe. And while the pricing environment is robust at the moment, we also have an unprecedented situation with energy in Spain. So overall, I think it's important to highlight the earnings potential of this platform. As Javier mentioned at the beginning of the presentation today, I think this is exactly what our stakeholders have seen all along. So definitely, we appreciate the patience and trust in the company. Next slide, please. The goal since 2020 has been clear. We are looking to create a company that is more stable and stronger by focusing on volumes, on margins and in cost. On the volume side, the rightsizing of our footprint is important. In the past, the focus was on size and how much we were producing, but reality was required is being a slightly smaller company that remove the rigidities and constraints in our platform and allow us to shed the higher cost in a competitive capacity. Now we have not only moved to the portfolio of our assets to the left of our cost curve, but we have created more operational flexibility and no longer need to chase volumes. The avoidance of chasing volumes, together with the discipline we are bringing in through commercial excellence, is reorientating our approach to focus on margins. Previously, we were focused more on price. The way we are doing this is through new processes and disciplines introduced internally to [ vet ] opportunities in the wake of a dynamic pricing and cost environment. And with regards to cost, the key for us is to drive efficiency and productivity. We are inevitably going to be hit with inflation, for sure. But the actions we are driving helps offset and mitigate these cost pressures. Moreover, once things normalize on inflationary and energy sides, we will start to see the full benefit of what we are driving. Please turn to the next slide, where I will elaborate on the cost. Cost reduction to me has been front and center since I joined. The first wave of cost cutting centered on corporate cost reduction in late 2019, where we achieved more or less 30% of reduction of our overheads, and it continues at the beginning of 2020. And now through the transformational plan, we are addressing a number of areas aimed at improving both fixed and variable costs. This slide provides an indication of our fixed variable split per family and/or product category. We continue to make significant progress in improving our overall cost structure on the fixed cost side. The shutdown of certain furnaces or facilities altogether has helped increase utilization throughout the operating platform. We are seeing improved fixed cost absorption, which we believe we can maintain across the cycle. On the variable cost side, our efforts are a bit covered due to the high inflation we are experiencing at the moment. Our continuous focus on the KTM program has a pipeline of initiatives aimed at driving efficiency and productivity. Embedded in this process is the introduction of new raw material and other measures, which optimize our raw material mix and reduce our power consumption. So from a unit cost perspective and a unit consumption perspective, we are seeing improvements, which will allow us to improve even on the variable cost side. Overall, we feel there is much more we can do on the cost side to avoid value leakage, which we estimate at the moment can easily be north of $50 million. For example, we do not have an integrated supply chain, no logistics today for the complexity of the global footprint in which we operate, there is a tremendous value embedded in further improving our processes and planning and we are commencing that work now as we speak. Similarly, we have identified a number of areas for further improvement. Next slide, please. So I think now the question is, what does all this mean for our ability to generate cash going forward in a sustainable manner. And as I mentioned, 2021 was faced with a number of one-offs, which constrained our ability to generate cash. In Q1 of this year, we improved massively [indiscernible] anomalies tied to a dollar coupon payment, working capital build-up and some other expenses. Overall, we expect the company to continue generating strong and sustainable cash flows as growing in our top line outpace the inflationary pressures. With this cash in our near-term priorities are crystal clear. We are committed to strengthen our balance sheet, both in terms of cost of capital, but as well as the quantum of the gross debt. We are also going to increase the CapEx spend to $75 million per annum, and this follows several years of scaled back expenses, but it's time to catch up, especially to drive the productivity gains under the KTM program. On the next slide, please. I'm going to be elaborating on the pillars of Ferroglobe financial policy. First one in the past, we have put out a number of $90 million to $110 million of the liquidity needed to comfortably run the business. Given the restart of capacity and the current inflationary environment, we currently think that this range is more around $130 million, $150 million is the right level. In terms of gross debt, our target is to be around the $200 million level. During this difficult stretch for the company, the gross debt has actually increased. So bring back this down, the level of debt is critical for us. This idea behind the target also ties back to the [indiscernible] we are creating and the goal of ensuring that the business generates cash across the cycle. Decreasing in our fixed charge is critical for this. And finally, with improvement in performance and [indiscernible] cash generation, we recognize that our shareholders are impatiently waiting for some return [indiscernible]. On the next slide, I'm going to be elaborating on the capital structure and near-term cash priorities. Our gross debt as March 31, 2022, was $518 million. We just recently bolstered our liquidity with a new ABL, asset-based loan in North America. And at the moment, we have $100 million of liquidity available to us [indiscernible] with zero drawn at the moment. Prior to the 2021 without an ABL and I think is a relatively cheap way of funding our day-to-day operations, should we need an incremental capital. At the moment, we don't have any intention to draw on this line. With cash increasing and incremental liquidity increasing as well, the focus shifts for us clearly to a debt reduction. Just yesterday, for instance, we announced the notice of redemption of the 9% super-senior notes, which we will be able to redeem at par. Our intention is to use cash on hand to repurchase these notes. This transaction is starting to foreclose in July 21. The other trend are our senior notes, 9.375 and during early June, we repurchased already 90 million of these bonds in the open market. Significant debt reductions is our priority with a target of $200 million. Beyond the ABN and bonds, we have some government loans that we are going to be describing now in a minute. So we have $61 million balance for REINDUS Loan in Spain. This is a lower cost financing, which was initially raised for our solar project in Puertollano, Spain. At the moment, this plan is being reproposed for our batteries work. Also, early this year, we received from the Spanish government assistance in the form of what is called a SEPI loan. This note was granted to Ferroglobe [indiscernible] to be strategic or critical company business in Spain. This loan has a nominal value of approximately $34 million, and is as well at a lower cost financing. On the next slide, I'm going to be describing the financial targets to ensure that we got a strong financial profile through the cycle. So in order to further detail our priorities and goals, we have set some financial targets to ensure a baseline of performance through the cycle. On the right-hand side, we are targeting a cycle [indiscernible] margin of 20%, which will be supported by the work we are doing in the areas of commercial and financial. As you can see, over the first 6 years of the company, the range has been negative 15% to positive 9%. On the working capital side, we confirm our target of 21% of our net working capital as a percentage of our annualized sales. Our goal is to maintain this level going forward. In our working capital, as you have been seeing, has been recently as high as 30%. So already a significant improvement from where we have been. And lastly, but not least, we will work on lowering our gross debt to $200 million, as I described before. Now I will turn it over to Marco for closing remarks.

Thank you, Beatriz, and thank you all for staying with us going through our materials. I will quickly close with a quick summary. Next slide, please. Well, let's talk first what we went through. We insisted a lot on the structural change in how Ferroglobe is operating and why is a different company. Our products are essential, we have a balanced portfolio. These products for where they go, basically, they have no substitutes. We are creating a stronger company with a stronger culture and with stronger people committed to deliver our transformation. We have a strong history with strong -- and stronger relationship with our key customers. We insisted a lot on the uniqueness of our asset footprint and our capability to provide our quality products. We insisted not only on our history of innovation, but also on what we plan to deliver in the coming years. In the various presentations, going to the next slide, we have insisted on few structural changes that we see in our operating landscape. Several changes in China, mainly related to Silicon Metal. We analyze supply chain, supply-demand balances, giving you an idea of what we expect in terms of pricing and lower pricing for our key products in the coming years. Our opinion is that due to [indiscernible], we are in a very good position, having brownfield assets ready to be switched on versus starting new greenfield assets. We insisted on the fact that customers, the way they buy is changing, making sure that supply security is taken into account and ES&G questioners are coming, but ES&G deliverables are going to be amassed pretty soon. We underline the fact that we have a strength in our ability to supply our customers locally. And going forward, in the next slide, you see that we stated that we have changed this company. I think we have been solidifying our core performance. We are over-delivering on our turnaround plan. We want to generate cash flow through the cycle, also supported by expected higher margins. And overall, we have quite exciting prospects ahead. Thank you very much for your attention. And now I switch on for final Q&A. Gaurav, you're on mute.

Thank you, Marco, and I'll ask Alex to join as well here for the final Q&A session. I think a lot of the questions that have come in around cap structure, priority of cash, what we're doing with our notes, Beatriz, I think, has covered. But I'll scan through a few other questions that I have been jotting down. One is maybe for Craig. I mean just -- it's more how the mechanisms work, but can you please walk us through how contracting works across the various products and provide some details on how much of your silicon metal volume is under multiyear contract?

Sorry. Hopefully, this works better. Thanks for that question, Gaurav. I think -- well, it's not exclusively only to silicon metal, but certainly, I can refer to how we go. I mean basically, before we go to market on a lot of our customer contracts, we're looking at our asset configuration and what our planned production rates as well as we're matching it with the market needs, basically dynamics in the respective geographies. When we go to -- when we have different contracts, it's on purpose that we have a whole spectrum of types of contracts, whether it be a multiyear or just simply a 1-year or a multi-quarter or just a single quarter or monthly or just pure spot. And these, of course, are all negotiated in advance. In terms of multiyear contracts specifically, we've concluded all of our multiyear contracts at the end of 2021, and we don't have any multiyear contracts coming up at exploration or renewal at the end of 2022. So for multiyear contracts, that is pretty much covered. We've got a fair proportion on Silicon Metal, approximately 40% is covered through multiyear deals and roughly around about 25% on both ferromanganese and the manganese side. Contracts are either done on a fixed pricing or a variation of a fixed pricing or on a market-related pricing, which typically refers to an index. On the market-related pricing, Silicon Metal typically goes in quarter movements. So there's a 1 lag quarter change on Silicon Metal. And because of the commodity nature of the ferrosilicon and the manganese alloys that typically moves at a monthly lag. So you use the prior month in those market references when using indexes. So yes, hopefully, that covers that question, Gaurav. Or if you would like me to?

And then maybe, Craig, while you're on, just can you maybe hit the highlights around what is the sentiment out there across the different product categories for the back half of the year?

Yes, sure. Well, it's actually, to be honest, very, very mixed. So we're seeing some customers that are seeing a massive demand correction. And this is a demand correction after a -- and I'll take you back to 20 -- fourth quarter 2020, where we're just at post-pandemic recovery, then we started to have the supply chain fill and interruption of that fill during the quarter 2, quarter 3 of 2021. Then we started to have Chinese curtailments because of their deal control policies, which eventually failed to deliver. And then in the third and fourth quarter last year, the emergence of an EU energy crisis and now quarter 1 on this side, we're having a Russia-Ukraine challenge on the supply chain. The reason why I mentioned that is because a lot of the customers were defaulting to supply security, making sure that they were protecting their operations and their own customer commitments. Where we see right now is across the value chain, there's also been a lot of postponement on capacity outages, too. And so everybody was maximizing the most out of their units, trying to chase down every bit of demand. So there is generally an inhalation or a pause that is taking place, and that's happening now in summer. Now the sentiments, as I was referring to a bit earlier, is quite mixed. And I'm just putting energy aside, I mean, demand into steel, particularly around long products, focusing on construction rebar, that has relaxed a little bit. And that is reflected in the available liquidity in the third quarter, but it's also supported by a couple of the customers just taking some extended maintenance shutdowns. Demand for flat products seems to be still holding at a relatively flat rate. So we haven't seen a flat rate. We haven't seen a correction come there. There's even some upsides indicating that there's some additional demand in the auto sector or the white goods sector. And then, of course, electrical steel continues to be quite robust. Another interesting view that we're starting to see emerge in the third quarter, particularly around the energy concerns in probably Central Europe, and I'm talking about the German, Austria, Switzerland, that part of Europe, is there's preemptive inventory building as a precautionary measure relating to the future availability or the future cost of energy in that particular -- that area. There have been some ebbs and flows or producer replacements. We've seen some outages come in Eastern Europe, again, approaching outages from our competitive base coming out in Poland because of the energy situation. People picking up the lack of supply coming out of Russia-Ukraine, also low-cost imports or very fungible markets around imports coming out of India, China. And so people are -- in the entire value chain right now is chasing after the available liquidity whilst the market outlook remains quite weak for third quarter. Fourth quarter, we're seeing the refilling of the supply chain outlook on 2023 right now from a -- from how robust is that demand, it's still too early to call. And so when we were out there talking around customer contracts or going for that last incremental volume for 2023, customers are postponing these discussions until end of summer, early fourth quarter to talk about 2023. And that's -- and to be honest, it sounds quite dramatic, but that is quite consistent with prior years. We had the same period of negotiations and discussions around contracts in prior years too at this moment.

Thank you, Craig. The next question is probably a good one for Beatriz. You just mentioned this $200 million gross debt target. What type of capital structure are you envisioning for the future?

Yes. Thank you, Gaurav. Maybe let me start reminding that when we decide this transformational program and all these changes, we target [indiscernible] of $180 million. Now we are driving $225 million, right? So the goal today is to generate cash in a sustainable manner, no matter where we are across the cycle. So when you put this in the context of the gross debt reduction and the $200 million that I mentioned, probably at the moment, we already with ourselves out of any -- another [indiscernible]. So maybe bank debt seems more logical at the moment and we are exploring some options on this direction. But broadly speaking, I want to repeat what is the targets of our new capital structure is very simple. First is to reduce the quantity of debt. We already have been doing that. We repurchased $90 million of the senior notes, and we plan to redeem the super-senior notes on the 21st of July. #2, we want to reduce the cost of our debt and increase the liquidity. We have been doing that with the new ABL that we announced a few days ago. And third, we want to maintain proper flexibility on the way that we run our -- whatever it is our debt structure without covenants to navigate across the cycle.

Thank you. A few questions on ESG, I'm just reading this here. When will customers really start making procurement decisions based on ESG? And do you feel you're currently advantaged or disadvantaged relative to your competitors?

I will take this one, Gaurav. First of all, I have to state that our products can get greener, but they cannot get green because you need [indiscernible] molecule as a reductant. Then, of course, the footprint can be much better if you use charcoal, like Benoist mentioned or biomass. But overall, the equation is these products are needed and not replaceable and can be made greener, but not absolute green. The largest customers with a global footprint, like I said before, they have started focusing also on Scope 3, then they started focusing on their suppliers. We [indiscernible]. And I think that -- these requirements are going to become quite important to decide among the various suppliers, I would say, in the next 2, 3 years. In the meantime, like in every other industry, we have gone out asking for potential premium to pay for greener products and the answers have not been very encouraging on this side. Still, it is our responsibility to get greener, we have no way out. And I think Benoist has been stressing this point. When you look at the competitive picture on a global basis, our main competitors are in China, Ukraine, Malaysia. And I will say that the suppliers are behind us. This is why I insisted on getting an assessment of Ferroglobe capabilities in ES&G and [indiscernible] our first ES&G report in the next few days, which is going to be our starting point where we commit on improving on the 3 legs of ES&G. So we are not first, but we are not last due to our competitive -- due to our competitors.

Thank you. There's a question around CO2. How should we think about CO2 needs going forward? And can you please explain the mechanisms for allocation?

Yes, Benoist, you want to take this one?

Yes, Marco. Thank you for the question. So we -- on the CO2 trade mechanism works for our European assets. So all the direct emissions, which we emit, are partially compensated by CO2 credits, the amount of CO2 credits are basically calculated from the baseline. And this baseline is moderated with the previous -- last years of activity. So last year, we were slightly negative in terms of CO2. This year, we're going to be in the very -- in the same position, given the fact that the rules are exactly the same. And we anticipate to be neutral as we reduce progressively our CO2 footprint.

Thank you, Benoist. I think the question around Polokwane was addressed that maybe there's 2 questions that have come through on just where we are with regards to evaluating Polokwane. And 1 of them is with this backdrop of uncertainty, would you consider delaying your valuation?

I will start answering this question, but Craig, I think, address Polokwane. First of all, these 2 assets are among the most competitive assets that we have. And the fact that the production has been stopped there was stopped there, I think, was related to the fact that to say it in a blunt way, it's much easier to stop production in U.S. or in South Africa rather than stopping it in other countries. So these greenfield assets are a tremendous opportunity for us. [indiscernible] is up and running with 2 furnaces to supply additional demand in the United States. Polokwane, again, is a competitive asset. But what Craig said was that we were going to restart it only if we have customer commitments to restart at the right level of capacity. Basically, at least to start 2 of the 3 furnaces. Maybe either Craig or Benjamin can add a little bit more color on Polokwane. Craig?

I can add it from a -- there's been a very, very strong customer interest in Polokwane, particularly those customers that have previously sourced from Polokwane, and appreciate the quality that come from there. The interest, quite frankly, Marco, has been global. So it's from Asia, Middle East, U.S. and Europe. We've had an oversubscription of that interest in that volume. And it's exactly what we had described earlier, the longer-term demand trends from customers. People are looking for supply security and the diversification from Chinese suppliers. We will continue these discussions, and we will not proceed with the start-up of Polokwane unless we have that confirmed commitment from this interest level. So I'll pause it there then.

Anything to add Benjamin on your side?

No, nothing to add. I think everything has been said.

On the role of China, what is your confidence level that they won't be reentering the markets that you service aggressively and that the internal demand is growing at the pace you anticipate?

Well, the level of confidence is reasonably high. I mean, you always need to distinguish the short term, some short-term actions, like the actions that are happening in these days versus the long-term picture that we have validated from different sources. So the -- in China, there is the effort of shutting down the same amount of capacity that is restarting in the next few years. So the overall capacity in China will be rather flat where demand is going to go up. So we feel pretty confident in what Craig has presented in the current deck.

Thank you. There's a few questions just from investors around balance sheet at the moment, our cash position at the moment. And I just remind everyone that we're not going to be in a position to provide any updates or flash numbers as the quarter has closed. We aim to have our Q2 earnings in the middle of August, so we'll put that data out shortly. So the information that we've really through Beatriz's section as far as we'll be disclosing today. I think that pretty much does it. We've covered most of the themes once again, in trying to keep this under 3 hours. We certainly appreciate everyone's participation today. At a minimum, I think it's fair to say that everyone has heard a lot of different accents on the call. Beyond that, we also hope that you've heard a lot of interesting soundbites around the company, the prospects and where we're going. We're certainly excited as an organization given the recent history we've had. And so thanks, once again, for your participation. And if there's any questions we missed, please feel free to reach out.

Thank you all.