Investor_Presentation_November_2011

Report
November 2011
Disclaimer
This presentation may contain statements that relate to future events and expectations and, as such,
constitute "forward-looking statements" within the meaning of the federal securities laws. These
statements can be identified by the use of words such as “believes,” “expects,” “may,” “will,” “intends,”
“plans,” “estimates” or “anticipates,” or other comparable terminology, or by discussions of strategy,
plans or intentions. These statements are based on management’s current expectations and assumptions
about the industries in which Globe operates. Globe disclaims any intention or obligation to update
publicly any forward-looking statements, whether in response to new information, future events or
otherwise, except as required by applicable law. Forward-looking statements are not guarantees of future
performance and are subject to significant risks and uncertainties that may cause actual results or
achievements to be materially different from the future results or achievements expressed or implied by the
forward-looking statements. These risks and uncertainties include, but are not limited to, those risks and
uncertainties described in Globe’s most recent Annual Report on Form 10-K, including under “Special Note
Regarding Forward-Looking Statements” and “Risk Factors” and Globe’s quarterly reports on Form 10-Q.
These reports can be accessed through the “Investors” section of Globe’s website at www.glbsm.com.
All references to “MT” or “tons” mean metric tons, each of which equals 2,204.6 pounds.
1
Presenting Management Team
Jeff Bradley, Chief Executive Officer

Over 27 years experience in the metals industry

Joined GSM in 2008

Prior roles include: CEO – Claymont Steel (former public company); Vice President and General Manager – Worthington Industries
Malcolm Appelbaum, Chief Financial Officer

Joined GSM in 2008

President of AppleTree Advisors, Inc. from 2000 until September 2008 – worked with various HIG Capital companies

Prior roles include: Interim-Chief Financial Officer for several underperforming companies; Principal – Wand Partners; Financial Analyst –
Goldman Sachs; and, Senior Consultant at Deloitte
2
GSM: The Leader in Silicon



One of the world’s largest and lowest cost silicon metal producers
−
One of the lowest cost producers in the world
−
Estimated ~62% and ~11% share of capacity in US and the world, respectively(1)
−
Estimated 100% and ~15% share of “merchant” capacity in US and the world, respectively(1)
−
Silicon is a critical input in a number of industrial materials and has no substitute
Leading global silicon-based alloy producer
−
Sole source relationships with many customers
−
50%+ share of capacity in certain key alloys
−
One of two U.S. producers of FeSi and ~50% of U.S. FeSi capacity
−
Important provider of silicon-based alloys to steel producers and foundries
Global reach with 9 facilities in 4 countries – U.S., Argentina, Poland and China
−

Significant raw materials ownership / proximity
Strong profitability through the cycle with substantial leverage to price
Current economic environment improves this position
(1)
Excludes 49% of Alloy, WV facility owned by Dow Corning
3
Global Production
Iceland (Expected 2013)
Silicon metal / 40,000 tons
Beverly, OH (CRU #3)
Niagara Falls, NY (CRU #5)
Silicon metal / 13,000 tons
Silicon-based alloys / 52,000 tons
Silicon metal / 27,000 tons
Shizuishan, Ningxia Hui,
China (“Yonvey”)
Carbon electrodes / 10,000 tons
Alloy, WV (CRU #2)
New York, NY
Police, Poland
Silicon metal / 68,000 tons - JV
Globe 51% or 34,700 tons
Dow Corning 49% or 33,300 tons
Headquarters
Cored wire / 8 million meters
Bridgeport, AL
Selma, AL (CRU #4)
Silicon-based alloys / 42,000 tons
Silicon metal / 25,000 tons
Alden Resources*
Specialty Grade Coal &
Preparation plant (2.5 million tons)
Mendoza, Argentina
Silicon-based alloys / 26,000 tons
Product
San Luis, Argentina
Cored wire / 24 million meters
Silicon metal
Silicon alloys
Cored wire
UMG
Electrodes
Coal & prep plant
Source: Company information, CRU, 2011.
Note:
Parenthetical figures reflect CRU, 2011 cost curve rankings.
*
Alden Resources acquired on July 28, 2011
4
Track Record of Growth Through Strategic,
Accretive Acquisitions
Today
1874
December 2002
December 2005
January 2007
August 2009
April 2010


GMI purchases largest
silicon metal plant in
the world (Alloy, West
Virginia) from Elkem




GMI raises capital
Alan Kestenbaum
purchases the debt of
Globe Metallurgical
(“GMI”)
2002
2004
2005
2006
2007
1874
June 2004
November 2006



Predecessor
company founded in
1874 in Ohio
Alan Kestenbaum
obtains control of GMI
and leads a
reorganization
GSM acquires
Camargo Correa
Metais S.A., a
major Brazilian
silicon metal
producer, renames
Globe Metais
2008
2009
January 2008
Completed
successful
IPO on
NASDAQ
2010

One of the largest
silicon metal &
silicon-based alloys
producers in the
Americas

One of the lowest
cost silicon metal
producer in the
world
Completed
acquisition of
Core Metals
Group - $52M
2011
November 2009
GMI merges into IME  Acquires 81% of Solsil,  Completed sale
of Brazil plant Inc., a producer of
and is renamed Globe
$75M
upgraded
metallurgical
Specialty Metals, Inc.
grade (“UMG”) silicon,
(“GSM”)
 JV with Dow
from a related party
Corning – Alloy,
 GSM acquires Stein
WV - $100M
Ferroaleaciones S.A., May 2008
an Argentine specialty
silicon alloys producer,  Acquires 70% of a
Chinese carbon
renames Globe
electrode manufacturer
Metales
(“Yonvey”)
Today
February 2011

Entered
agreements to
build world class,
low cost silicon
plant in Iceland
July 2011

Completed
acquisition of
Alden Resources
5
Well-Diversified Business Mix
Current Capacity Mix
Magnesium
Ferrosilicon (MgFeSi),
23%
End-markets
Steel
19%
Ferrosilicon (FeSi),
27%
Aluminum
20%
Other
12%
Calcium Silicon (CaSi),
7%
Chemicals &
Polysilicon
27%
Foundry Alloys
22%
Silicon (Si), 43%
Revenue by region
Customers
South America
3%
Europe
13%
7%
7%
Asia/Other
3%
7%
4%
4%
Other
58%
2%
5%
2%
2%
2%
North America
81%
Note: All data exclude the 49% of the joint venture owned by Dow Corning
6
Western World’s Lowest Cost Silicon Metal
Producer
2011 Western World Silicon Metal Cost Curve
$2,500
$2,337 $2,346
$2,300
Operating Cost (per metric ton)
$2,171
$2,100
$2,029 $2,030
$2,187
$2,209
$2,057
$1,992
$1,954
$1,900
$1,832 $1,848
$1,867 $1,873 $1,876 $1,879
$1,896
$1,917 $1,919
$1,675
$1,700
$1,613
$1,597 $1,601
$1,563
$1,500
$1,300
A
Alloy, Beverly,Selma,Niagara
WV (1) OH
AL Falls,
NY
B
C
D
E
F
G
H
I
J
K
L
M
N
Breu
O
Branco,
Brazil (1)
P
Q
R
S
Source: CRU, 2011.
Note: Red line denotes median operating cost per ton.
Argentina and Bridgeport facilities not currently researched by CRU.
Costs are Ex-works and exclude depreciation expense
(1) Breu Branco, Brazil was sold to Dow Corning Corporation in November, 2009; 49% of Alloy, WV capacity sold to Dow Corning Corporation
7
Strong Barriers to Entry with Consolidated
Supply Base
Strong Barriers to Entry


Consolidated Supply Base
Power (36%) – requires stable, long-term supply of low
cost electricity
Raw materials (40%)
− Proximity to high purity, low cost raw materials – GSM
owns quartz and wood chips supply
− Freight costs are significant – 6.6:1 ratio of inputs to
output
6.6 tons of
raw materials



$180 million for a two-furnace operation
−

GSM has 17 furnaces
Long lead time to build greenfield plant
−
Permitting is a long and complicated process
−

Globe
Specialty
Metals
15%
Elkem/Blue
Star
15%
1 ton
of
silicon
metal
Low ash, specialty coal – best carbon source
Electrodes – quality is critical – GSM owns supply - China
Capital cost of greenfield construction
−
Western World Silicon Metal “Merchant” Production
3–5 years from concept to commissioning
Silicon metal primarily produced in:
FerroAtlantica
23%
Other
40%
AMG
7%
Top 4 producers = 60%
Pro Forma for Iceland, GSM market share will
increase to 19%
−

North America, South Africa, Brazil, Western Europe,
Australia, China
Technology and operational capability
Source: CRU, 2011. Globe supply excludes 49% of the Alloy, WV facility owned by Dow Corning.
Merchant supply excludes Dow Corning and Wacker captive capacity of 207,000 and 55,000
metric tons, respectively.
Raw materials are emerging as the most significant barrier to entry
8
Prices Resilient /
Substantial Leverage to Price
Strong demand continues to drive silicon metal prices
Silicon Metal Price Movement ($/lb.)
GSM has Substantial Leverage to Price
$2.00

Costs are stable and facilities are some of the
most efficient in the world

Control of inputs through ownership or longterm contracts

Each 1¢/lb ($22/mt) increase in silicon & silicon
based alloy price leads to ~$4.6 million more in
EBITDA at full capacity
$1.80
$1.60
$1.58
$1.40
$1.20
$1.00
$0.80
$0.60
Silicon metal ($/lb.)
Source: Metal Bulletin.
Note:
EBITDA impact estimated based on assumed $0.01/lb increase on all 90,000 and 120,000
tons of silicon metal and silicon-based alloys capacity, respectively.
9
End Markets
Chemicals
Aluminum
(50% of market)
(40% of market)
Silicones
Oils


Cosmetics
Hydraulics

Coatings

Adhesives
Sealants


Textiles
 Polishes



Mechanical fluids
Resins
Auto /
Commercial
Coatings
Rubber
 Thermoplastics
Solar /
Electrical
(10% of market)
Other
Auto / commercial
vehicles
 Engine parts
Other

Machinery &
equipment
Wheels
 Transmission


Marine
Railway
Solar
Photovoltaic cells for
solar energy systems
providing clean power
to homes, buildings
and industry

Computers
Calculators
Video games
Televisions
Radios
 Auto electronics
Paints
Rubber

Medical electronics
Communications

Weapons


Automotive
 Insulators
Consumer items
Note:
Mobile telephones
DVD recorders


750,000 tons consumed by chemical
industry
 GDP + 4% growth


Insulators
 Waterproofing





Semiconductors for
integrated circuits
(chips) for:

Electrical
Fiberglass
Electronics

600,000 tons consumed by aluminum
industry
 Aluminum content in autos has
increased over the past 20 years

Driven by increasing demand from the
growing middle-class of BRIC
countries and from global demand for
renewable energy
% of sales figures represent industry estimates of western world consumption
10
Aluminum Production Trending Higher

Silicon metal is required in aluminum as a strengthener and alloying agent to improve castability and
minimize shrinking and cracking

Aluminum provides a lighter weight alternative to steel

Aluminum demand has increased at a 5%+ CAGR for the past 20 years
(000s tons)
North American light vehicle aluminum content as a percent of
curb weight
50,000
12.0%
Global primary aluminum demand
10.4%
45,000
9.6%
10.0%
40,000
8.8%
7.8%
35,000
8.0%
7.1%
30,000
6.9%
6.4%
25,000
6.0%
4.5%
77
pounds
20,000
326
pounds
3.9%
4.0%
15,000
2.0% 2.1%
10,000
2.0%
Approx. 10kg of silicon metal per car
5,000
0.0%
0
2003 2004 2005 2006 2007 2008 2009E 2010E 2011E 2012E 2013E
Source: Bloomberg, Brook Hunt and Street research.
1970
1975
1980
1985
1990
1995
2000
2005 2010E 2015E 2020E
Source: Ducker Worldwide.
Note: Based on 3,600 lbs of curb weight.
11
Solar Demand is New Large-Scale
Opportunity

Rapidly growing demand for polysilicon due to solar industry growth
−
Increased electricity consumption
−
Demand for alternative energy sources
−

Availability of government financing programs
1.4 tons of metallurgical grade silicon required for every 1 ton of polysilicon
22,000
300,000
20,000
250,000
18,000
16,000
200,000
12,000
150,000
10,000
8,000
Tons
MW
14,000
100,000
6,000
4,000
50,000
2,000
0
0
2008
2009
2010
Total Solar Poly Demand (tons)
2011E
2012E
Total Met. Grade Silicon Demand (tons)
2013E
2014E
Total Solar PV Demand (MW)
Source: EPIA May 2011 and management estimates.
12
Polysilicon Capacity & Pricing

Demand from the solar industry is driving an expansion of polysilicon production
capacity

Polysilicon pricing has dropped from a peak of $415/kg in mid 2008 to a current
range of $30-40/kg

Approximately 12,000 tons of silicon are required to produce 1GW of solar power.
EPIA estimates that approximately 15GW of solar power will be installed in 2012
350,000
Capacity (tonnes)
300,000
250,000
200,000
150,000
100,000
50,000
0
2008
2009
2010
Additional Polysilicon Capacity
Note: Total & Additional Polysilicon capacity excludes China
Source: Credit Suisse, CRU, Photon Consulting and management estimates.
2011E
2012E
2013E
2014E
Total Polysilicon Capacity
13
Silicon Alloys Are Key Ingredients in Steel
and Foundry Products
Steel
Foundry
Ferrosilicon
(FeSi)
Calcium Silicon
(CaSi)

1 of 2 U.S. producers


~50% U.S. capacity and
~40% North American
capacity
Only 6 producers in
Western World

~18% global market
share and ~50% U.S.
share
Magnesium Ferrosilicon
(MgFeSi)
Ductile Iron
Commodity


Used in
production of
carbon steels,
stainless steels
and other steel
alloys

Pipe
Specialty

High grade
specifications

Requires
technical knowhow
Competitive advantage in providing technical advice
and service by tailoring composition to customers’
requirements
Used in applications where
strength and formability are
required

Water transmission
− Automotive components

Often sole supplier

Short lead times and variety of
grades discourage imports

~50% share of the magnesium ferrosilicon market in the
Americas and 20% in the Western World
14
Supply / Demand Imbalance
Limited new supply

Little additional capacity is expected beyond GSM’s Iceland plant

Chinese government has been closing plants that are energy inefficient or do not
comply with environmental standards

Barriers to entry are high
Global demand continues to increase

Two new polysilicon plants will come online in the US, one in 2012 and another in
2013 with demand of 40,000MT of silicon metal

Growth in silicones market driven by an expanding middle class in developing
nations and novel applications of silicones across all industries
15
Iceland Plant Overview

Approximate 85% ownership interest, with 15% minority partner.

Capacity of approximately 40,000 MT of silicon metal annually.

Two 30 MW furnaces.

18 year long-term, competitively priced power agreement.

Total construction cost of approximately €115 million.

Financing of €79 million.

Expected to be operational in calendar 2014.

Local tax incentives, including low corporate tax rate, employee training
credits and accelerated depreciation.

Significant projected returns including accretive impact to earnings,
substantial cash-on-cash IRR and significant annual returns on cash
investment.
16
Alden Resources Acquisition
Acquisition overview:

The leading North American supplier of specialty metallurgical coal to the silicon and
silicon-based alloy industries with approximately 21 million tons of reserves and 15 million
tons of inferred resources

Allows Globe to secure a stable, long-term and low-cost supply of this key raw material to
support its continued growth worldwide

Owns and operates a newly upgrade coal preparation plant in eastern Kentucky that is
capable of processing over 2.5 million tons of coal per year.

Also supplies all North American and some international silicon and silcon-based alloy
producers

Globe is funding growth capex to expand and improve output
17
Alden Coal Advantage

Carbon sources:
1.
Central Appalachian Coal – Alden
2.
Colombian Coal (needs to be separated, washed in Europe and then shipped)
3.
Charcoal

Charcoal prices are now over $550/MT

Charcoal shortages is China

Tighter restrictions on Brazilian charcoal

Columbian coal is a mixture requiring segregation and significant transport expense
through Europe

Markets:
−
Low ash coal – key raw material in production of silicon metal and specialty ferrosilicon
−
Medium ash coal
−
Ferrosilicon – commodity grade
−
Pulverized coal injections (PCI) – 1 ton of PCI displaces 1.4 tons of coking coal
−
Water purification – carbon filters
−
Thermal coal – high BTU/ low sulfur
18
Financial Highlights

Production and input costs uncorrelated to silicon metal prices – yields substantial leverage to price

Highly variable cost structure and low overhead – raw materials and power accounts for 75% of
production costs

Control over inputs – lease and operate quartz mines and entered multi-year power contracts

Conservative capital structure with flexibility to pursue growth opportunities

Declared $0.20 annual dividend payable in October 2011

As of September 30, 2011: Cash balance of $152 million, total debt of $106 million, availability under
credit facilities of $48 million
19
Strong Financial Results Through
Challenging Times
Adjusted EBITDA(1)
Revenue
($ in millions)
($ in millions)
$800
$642
$699
$200
$170
$160
$600
$453
$128
$473
$426
$120
$400
$200
$40
$0
$73
$71
2008
2009
2010
$30
$0
2007
2008
2009
2010
2011
LQA
2007
2011
LQA
Adjusted EPS(2)
Capital expenditures
($ in millions)
($ per share)
$60
$1.50
$51
$1.25
$50
$35
$40
$30
$20
$78
$80
$222
$22
$1.12
$1.00
$0.81
$0.75
$23
$0.50
$9
$0.25
$10
$0.50
$0.49
$0.42
2008
2009
2010
$0.24
$0.00
$0
2007
2008
2009
Growth
2010
2011
2007
2011
LQA
Maintenance
Note: Historical data is not pro forma for the Dow Corning transactions.
(1)
Adjusted EBITDA for fiscal 2009 is EBITDA plus goodwill and asset impairment charges of $69.7 million, deferred offering costs of $2.5 million, restructuring costs of $1.7 million, prior period power penalty of
$1.0 million and inventory write-downs of $5.8 million. Adjusted EBITDA for fiscal 2010 is EBITDA plus, prior period power adjustment of ($0.5) million, fixed asset impairment of $0.7 million, transaction
expenses of $0.7 million and start-up costs of $10.0 million, less a gain on the sale of Globe Metais of $19.7 million. Adjusted EBITDA for fiscal 2011 is EBITDA plus, transaction expenses of $5.0 million,
start-up costs of $3.2 million, and gain on the sale of business of $4.2 million, less net settlements of $5.1 million. Adjusted EBITDA for LQA (the quarter ended Sept 30, 2011) is EBITDA plus transaction
expenses of $1.7 million and gain on the sale of business of $(0.4) million annualized.
(2)
Fiscal 2009 EPS adjusted for goodwill and asset impairment charges of $69.7 million, deferred offering costs of $2.5 million, restructuring costs of $1.7 million, prior period power penalty of $1.0 million and
inventory write-downs of $5.8 million. Fiscal 2010 EPS adjusted for prior period power adjustment of ($0.5) million, fixed asset impairment of $0.7 million, transaction expenses of $0.7 million and start-up
costs of $10.0 million, less a gain on the sale of Globe Metais of $19.7 million. EPS for fiscal 2011 is adjusted for, transaction expenses of $5.0 million, start-up costs of $3.2 million, and gain on the sale of
business of $4.2 million, less net settlements of $5.1 million. EPS for LQA (the quarter ended Sept 30, 2011) is adjusted for transaction expenses of $1.7 million and gain on the sale of business of $(0.4)
20
million annualized, annualized.
Conservative Capital Structure Positions the
Company for Growth
($ in millions)
09/30/11
Cash and Cash Equivalents
$152.3
$90mm GMI Revolving Credit Facility (L + 150 bps)
Alden Resources Financing
WVM Working Capital Facility
Other Debt
Total Debt
$40.0
50.0
15.0
1.1
$106.1
Noncontrolling Interest (9/30/11)
Total Stockholders' Equity (9/30/11)
Total Capitalization
Cash per Fully Diluted Share
Total Debt / LTM Adjusted EBITDA
Net Debt / LTM Adjusted EBITDA
Debt / Capitalization
Market Statistics:
Market Capitalization (11/11/2011)
Enterprise Value
Note:
38.5
$552.4
$658.5
$1.98
0.7x
(0.3x)
16.1%
$1,145.0
1,137.2
LTM adjusted EBITDA of $153.4 million.
Share information

75,035,177 basic shares outstanding

4,314,249 options outstanding
21
Summary Highlights

Leading global market share in silicon metal

One of the world’s lowest cost producer

High barriers to entry in an already consolidated industry

Large cash position and unlevered balance sheet – poised for accretive acquisitions

Improving trends in key end-markets and new growth markets

Substantial leverage to price

Experienced and cost conscious management team with unique operational skills and proven history of
growth by acquisition
Globe Specialty Metals is a business with strong fundamentals that presents a unique
opportunity for accretive growth
22
Appendix
Strong and Experienced Management Team
Alan Kestenbaum
Executive Chairman
Jeff Bradley
Chief Executive Officer
Founder / >20 years in industry
2008 / >25 years in industry
Malcolm Appelbaum
Chief Financial Officer
Stephen Lebowitz
Chief Legal Officer
2008 / >25 years of experience
2008 / 19 years of experience
24
Board of Directors
GSM’s Board of Directors is comprised of seasoned executives with strong management, metals,
finance and international experience

Alan Kestenbaum (Executive Chairman)

Stuart Eizenstat
− Partner, Covington & Burling LLP; Former Deputy Secretary of the United States Department of
the Treasury; International Advisory Board Member of Coca-Cola, Board Member of UPS

Franklin Lavin
− Chairman of the Public Affairs practice for Asia-Pacific at Edelman; Former Managing Director and
Chief Operating Officer of Cushman & Wakefield Investors Asia; Former Under Secretary for
International Trade at the United States Department of Commerce

Thomas Danjczek
− President of the Steel Manufacturers Association; former senior executive at Wheeling-Pittsburgh
Steel Corporation

Donald Barger, Jr.
− Former Chief Financial Officer at YRC Worldwide, Worthington Industries and Hillenbrand
Industries; Board Member and Audit Chair of Gardner Denver and Quanex
25
EBITDA Reconciliation
($ in millions)
Fiscal year ended June 30,
2007
Net income (loss)
2009
2010
2011
LQA
$11.8
$35.7
($45.4)
$34.3
$56.7
$84.3
Provision for income taxes
7.0
15.9
11.6
20.5
36.0
46.0
Net interest expense
0.1
7.0
6.2
4.1
3.0
5.5
10.6
19.3
19.8
20.7
25.1
29.2
$29.7
$78.0
($7.8)
$79.5
$120.8
$165.0
Goodwill and intangible asset impairment
–
–
69.7
–
–
–
Deferred offering costs
–
–
2.5
–
–
–
Transcation expenses
–
–
–
0.7
5.0
6.7
Restructuring costs
–
–
1.7
(0.1)
–
–
Gain on sale of business
–
–
–
(19.7)
4.2
Power adjustment
–
–
1.0
(0.5)
–
–
Selma & Niagara start-up expenses
–
–
–
10.0
3.2
–
Settlements, net
–
–
–
–
(5.1)
–
Inventory write-downs & fixed asset impairment
–
–
5.7
0.7
–
–
$29.7
$78.0
$73.0
$70.6
$128.1
$169.8
Depreciation and amortization
EBITDA(1)
Adjusted EBITDA (1)
(1)
2008
(1.9)
EBITDA and Adjusted EBITDA include non-cash share-based compensation expense of $5.1 million, $5.7 million, $6.4 million, $8.2 million and $0.5 million for the latest twelve months ended March
31, 2011, and the fiscal years ended June 30, 2010, June 30, 2009, June 30, 2008, and June 30, 2007, respectively.
Note: LQA represents the last quarter ended September 30, 2011, annualized
26

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