Very good morning, everyone, and thank you for attending OM Holdings' webinar this morning. My name is Jenny from the IR Department of OM Holdings. Together with me is Richie, and we will be hosting this webinar. OM Holdings is a manganese and silicon smelting company with vertical exposure in mining and trading, and has just released its FY24 financial results last Friday. I'm delighted to have OM's Managing Director, Adrian Low, with me today. He will run through the key points, followed by a Q&A session. If we are unable to answer your question, we will attempt to address the query post-webinar. Without any further ado, I'm pleased to hand over to Adrian. Adrian, please.
Thank you, Jenny. Thanks, everyone, for dialing in to our presentation today. You know, I'm very pleased to be presenting our FY 2024 results to investors, shareholders, and analysts today. Without further ado, I think we can just jump straight into the highlights. I trust that, you know, most people on the call have seen our key numbers. You know, last year in 2024, I think in the last quarterly webinar, you know, we spoke about the production numbers of 2024, and, you know, we achieved production numbers of over 500,000 tonnes of ferroalloys. You know, I think that's the first time we're doing that in a very, very long time.
I think off the back of that, you know, even with sort of price compression coming in in the second half of 2024, you know, we saw that, you know, revenue grew just over 10%, around 11%, from 2023 to FY 2024. We closed the year with a revenue of AUD 654.3 million. From that, you know, we generated an EBITDA of AUD 76 million. I think in the last couple of years, and this is something that I've touched on a couple of times, we have historically seen very close links between cash flow from operations and our EBITDA numbers. You know, I'm very pleased that last year, I think, you know, we just saw this cycle normalize itself. From that, we generated, you can see, AUD 83.3 million, sorry, excuse me, of cash from operations.
Most of the cash that we generated last year, you know, went into loan repayment. I think this is really just a feature of how the project finance works. You know, I'll touch on that. If there are questions about this, you know, we can take them at the end. The long and short of it is that most of the cash generated from operations went into loan repayment, so AUD 6.1 million. You know, we are in the last two years of that facility, so that will continue until, you know, a balloon repayment in 2026, sometime towards the end of the year. From the earnings, that represents AUD 1.22 of profit per share. As we have announced, you know, we're very pleased to, for the first time in a couple of years, you know, announce a dividend for shareholders. Next slide.
I think a better way to understand, you know, the earnings and EBITDA is to look at the price chart. I have talked about this in the last webinar we had at the quarterly. I think, you know, it sort of bears mentioning now how things sort of played out in FY 2024, right? Ferrosilicon, as you can see in the chart, is incredibly flat. The blue line, you know, has almost no discernible features when you look at it from this vantage point from 2017 till today. There has been a gradual decrease in price in the first half of the year before it, you know, picked up a bit. I think ferrosilicon is at an interesting point today because when you look at coal prices in China, coal prices in China, those are still coming down.
When we look at the procurement costs of things we have purchased in Q1, you know, compared to budget, we are looking at numbers AUD 50-AUD 100 per metric tonne lower. I think there's room to go. That is why we expect, you know, continued near-term pressure for ferrosilicon. Now it's no longer about the sort of supply-side story, but really costs are coming down. We will see this obviously reflected in our costs as well, right, with a lag because, you know, by the time the raw material arrives, it takes two or three months before you recognize it into the cost of goods sold. I think that's actually a good thing for us. As I've said, you know, over the last couple of years, when base prices are low, it doesn't necessarily imply that profitability is low.
You really have to see, you know, what is the recent price history of raw material prices look like. For the manganese alloys, you know, last year was segmented quite distinctly into two halves. In the first half, we saw a force majeure event from South32 that led to really a lot of near-term increase in prices, both on the ore and the alloy side. You know, I think the company very rightly capitalized on sort of selling its products as much as we could at that point in time to sort of capture that bull market. At the same time, we had also, you know, hedged to a large degree our costs. You know, you see that profitability in the first half of 2024 was a fair bit higher than the profitability in the second half of 2024.
I'll talk more about that when we get to the next couple of slides. In terms of where things stand today, I think really we are, you know, normalization is a word that I've used, you know, I think it's the second webinar. I really do think that, you know, that's where we're heading. You know, at some point in time this year, we expect our supply from Australia to normalize. We expect manganese ore prices to normalize. You know, when we say normal manganese ore prices, what we really mean is, you know, they should be firmly between 4-6 and really more or less at the midpoint. You know, look at historical sort of silico manganese, manganese alloy prices. That generally corresponds to prices above $950 . That's, you know, where we see things moving today.
Those are all sort of, you know, healthy signs for the market and for earnings. In terms of ferrosilicon, you know, really, I think we have to see where coal prices go, where sort of reduction prices go before we see what those sort of bottom-of-market prices look like. From there, you know, expect an uplift. In terms of, you know, the charts, guidance for the year, we've done that in the webinar, the quarterly webinar, excuse me. I won't go through them again. We are looking at a smidge lower in terms of production numbers compared to FY 2024 off the back of, you know, maintenance, you know, not on our side, but really in terms of power supply. Both silicon metal furnaces have also been switched to producing ferrosilicon, and they are currently run on ferrosilicon.
I think when we look at the silicon metal market today, in terms of really sort of commodity-grade products, it's still under a lot of pressure. We will continue to monitor, obviously, both ends and evaluate the profitability of both product lines. In FY 2024, you know, I think we closed the year with, you know, GP margin 17.3%. You know, for people who are, you know, looking at this on a sort of half-yearly basis, and, you know, we've got this question from analysts as well. Back to what I was saying earlier about, you know, the manganese prices being quite distinctly different in the halves. I think we saw, you know, GP margins in the first half of 2024 really reaching close to 20%.
That was actually a very, very sharp increase from FY 2023, where, you know, the second half was much poorer than the first. For two years now, right, we've seen this pattern where, you know, the first half, you know, we see a very high level of profitability before it declines due to price cycles. It just happened that, you know, it was sort of the shorter cycles were in sort of six-month intervals. Before sort of declining in the second half of 2024 to a level close to 15%. That makes a full year of 17.3%. I think if you look at the EBITDA of AUD 76 million for the year, you know, so first of all, I think maybe close to 60% of that was made in the first half, and the remainder made in the second half.
I think more interestingly, when you look at the composition of earnings, you know, the contribution from smelting, from trading has become a lot more stable. The structure, I think, is becoming apparent. I think, you know, that is a sign of stability. That's also a sign that, you know, the way the business has been designed to function, you know, it's sort of functioning in the right way. Unfortunately, mining remained under care and maintenance last year. It recorded a negative contribution very marginally. That is something that, you know, the company is looking to turn around and restart in FY 2025. To conclude, in terms of what that means for cash, gearing ratios have come down. I think it's been on a continuous downtrend, which is only to be expected.
That has been the company's focus, you know, over the last six to seven years. And that's something that we've repeated. We are at a point today where, you know, in the last 12 months, we've repaid AUD 66.1 million, largely comprising of Sarawak's project finance loan. That's where most of the cash was spent. We closed the year with more or less the same level of cash that we started the year with. We are also at a point today, I think, that I've highlighted in the past, really looking at what the optimal capital structure ought to look like. How should we be treating our debts? Because the chunk of the debt that we are sitting on today ostensibly was taken on for the purpose of the construction of Sarawak. We celebrated our 10th year anniversary last year.
That in one shape or some shape or form has to continue. You know, obviously, we have to be, you know, we look at a sort of optimized capital structure, sort of erring on the side of caution and prudence. But still, you know, debt has a part in this. What should that look like? What sort of maturities should we be targeting? I think that's something that, you know, the company is exploring and looking at. I think with that, we will go into the summary slide. You know, again, this is a snapshot that we like to do so everyone has a good sense of what the total picture looks like. I won't talk too much about the slide, but I think we do have a long list of questions. Let's leave more time for the Q&A.
Great. Thank you very much, Adrian, for the presentation. We will now move on to the Q&A session. The first question relates to tax. It seems rather high for the company to record an income tax of AUD 8.2 million against a PBT of AUD 17 million. Would you be able to explain on this?
Sure. Yeah. I mean, you know, really at face value, you should not be taking that number, dividing it by, you know, profit after tax, because there are sort of deferred tax expense components, sort of non-cash components to it. Really, I think if you look at the notes to the FS, that's all explained and set out. What I would suggest is, you know, if you look at those notes and look at the cash portion that's actually going to be paid as taxes, divide that by, you know, income, then you will arrive at a number that's much closer to the tax rates that, you know, that's levied on us. You know, in Singapore, you know, that would be 17%. In Malaysia, it's 24%.
Great. Thank you, Adrian. Now, the second question is on inventories. I think we have received a fairly, quite a fair bit of questions on inventories. They all revolved around the similar nature. I think investors really want to know, like, what are the breakdowns for inventories? Because it seems a bit high on our balance sheet, would you be able to give some insights into the inventories levels as of 31st December 2024?
Yeah. Sure. I think inventories consist of raw materials, finished products, and power, right? You know, we have shared the power component of inventories in the past. It's not the vast majority of that inventory figure. We can't share too much about that because of the confidential nature of our agreement with Sarawak Energy. I think if you just look at inventories as a broad category, you know, that probably went up by like AUD 20 million from where we started the year in 2024 to the end of the year. A vast majority of that can be, of that increase, to be precise, can be explained by higher raw material inventories. That's because at the end of last year, you know, the company took the decision to buy a bit more manganese ore.
On account of really just lower ore prices at that point in time and deferring certain sales from December into January and February because of where market prices were. You know, we're not in a position, we're not in the business of speculating on the market. You know, if we have the opportunity to, you know, buy one more month of ore, delay one more month of sale, we will occasionally make those decisions technically. I think that that's really paid out, right? I think if you look at the ore prices, at the end of last year, it was probably something like AUD 4. You know, today, just, you know, in March, I think it's increased by more than 15%. That's a 15% saving in the cost of inputs for production.
Likewise, you know, you will see that reflected in the sales and the selling prices as well. In terms of finished products, I do not believe that that increase in inventory value is significant. Obviously, it might play a part in that AUD 20 million increase year- on- year.
Thanks, Adrian. Now, the next question, I think you have briefly touched on during the presentation. This question is on the company's debt. This question is on whether, you know, do you have any general thoughts on financing, for example, long-term versus short-term debt, and when to refinance the project debt?
Yeah. Obviously, I think this is top of mind. Like I said earlier, we, you know, we have passed our 10-year anniversary, but the project finance in its original state, you know, obviously extended a couple of times for the various expansion projects that we have done.
You know, just very, very briefly, we count, you know, in 2016 - 2017, we converted six furnaces from ferrosilicon to manganese alloys, right? Very, very successfully so. You know, we caught the market at the right time. In 2017 and 2018, for shareholders who were around then, those were really, really good years. Post that, we then did another round of sort of furnace upgrades, furnace conversions, two furnaces to silicon metal, and then two more furnaces to ferrosilicon. Obviously, in between, you know, major maintenance, although that's not really an item that you would typically consider to be funded by long-term debt. What I'm trying to get at is, you know, through this long period, we've actually used a single debt instrument, the project finance, as a financing, as a funding tool to fund all of these things, right?
I think at the group level, if you look at sort of debt that does not sit at the Sarawak asset level, if you look at debt that is, you know, sort of at the holding sort of operating, intermediary operating company levels, then those debts were also taken on as sort of short-term debts by really financing things like the need to have more inventory, right? Also, the need to have sort of not the entire portion, but part of the portion that went towards the acquisition of 25% stake in OM Sarawak a couple of years back.
I think what the company, as the company matures from really a greenfield project into a steady state, really, I think at this point in time, you know, a top 10 world producer of these products, if not top five, we really need to look at sort of making sure that, you know, long-term debt is financing sort of, you know, long-term assets. You know, short-term debt is financing, you know, short-term working capital needs, inventory turnaround, like last year when we had sort of two-month requirements, three-month requirements for manganese ore, you know, all these things have to be sort of lined up. I think perhaps it's something that we tried to do, unfortunately, just prior to COVID. That set plans back a bit. You know, here we are five years on.
I think that's something that we really need to examine and restructure because the current state of the project finance obviously places a lot of restrictions in terms of how you can deploy working capital, how those lines are made available to you, and what things, you know, what can or cannot be done at the assets. I think that's something that, you know, again, is a focus of the company, is a focus of the company this year. You know, I've mentioned this at the quarterly webinar. Sort of unpacking that from the current financing structure will also be a key priority for 2025.
Great. Thank you, Adrian. I think we have reached the very last question. This is more on a macroeconomic side of things. What are the impact of U.S. tariffs for OM Holdings on the business?
Yeah, sure. I mean, this is a very straightforward question. You know, we've received this question several times in the last couple of weeks. The long story short is that the immediate and near-term impact is positive because our customers are steelmakers in the U.S.. You know, they are enjoying a period of strength, really, at this point in time. You know, we have been supplying them since we pivoted into the U.S. with about 10% of our sales, really, not the bulk of our production. You know, we are seeing, you know, the fruits from that move. I think in the last couple of weeks as well, some customers have reached out to really just top up their purchases and, you know, commit towards purchasing larger volumes in the year.
I think, you know, if you look at the price differential in the U.S. and Asia, you know, because of the way we are shipping, because of the way we are able to load three products, I do not think there is a single producer in the world that is loading three different alloys to the U.S. today. Because of the way we are able to organize those logistics, the scale at which we are operating, you know, the amount that we are selling into the U.S. is not small, but it is only 10% of our output. You know, those returns, I think, at any given point in time in the last two months or so would be between AUD 50-AUD 100 higher than the general return in Asia.
Obviously, you know, this is not any specific customer, any specific product, but really just, you know, you cannot win all of them. You win some and you lose them. If you look at it on an aggregate basis, that is the returns. You know, those are the returns, sorry, that we're looking at. For now, it's positive. Obviously, you know, we are also at the same time, it's not all sun and roses. We're also awaiting the results of the anti-dumping investigation of ferrosilicon to the U.S.. You know, we've put up a credible defense. We've submitted the final sort of rebuttals and sort of counterpoints. Yeah, we look forward to hearing and seeing the results of those as well.
All right. Thanks, Adrian. That appears to cover the majority of the questions from our audience today. If you do have any further questions, please forward them to investor.relations@omholdings.com. We will make a recording of this webinar available via OM Holdings LinkedIn in the coming days.
This concludes our webinar for today. Thank you, everyone, for attending. Thank you, Adrian, for the comprehensive update. Thank you.
Thanks, everyone, for dialing in. Thanks, Jenny.