Earnings Call: H1 2025

Sep 2, 2025

Good morning, everyone, and thank you for attending OM Holdings' webinar this morning. My name is Jenny Voon from the Investor Relations Department of OM Holdings, together with Ms. Ritchie, and we will be hosting the webinar for today. OM Holdings is an international manganese silicon smelting group and has just released its first half 2025 results last Thursday. I am delighted to have our Group Financial Controller, Eugene Tan, with me today. He will run through the key points following the release of the first half financial results, followed by a Q&A session. If you would like to submit a question during the webinar, please use the Q&A function at the bottom of your screen. If you are unable to present your question to Eugene, we'll attempt to address the query post the webinar. Without any further ado, I'm pleased to hand over to Eugene for the presentation. Eugene, over to you. Thanks, Jenny. Thank you very much. Very good morning to everyone, and thank you for dialing in to our presentation following the release of OM Holdings' first half 2025 financial results last week. Just to recap and for the benefit of new investors joining the webinar, OM Holdings is a magnesium and silicon company with over 30 years of experience in the industry. Our flagship smelter plant in Sarawak is anchored by competitive 350 megawatts sustainable hydropower with prices that are locked in for 10 years until 2033. OMH is dual listed on the ASX and Bursa Malaysia, a unique exposure to both equity markets, and is the lowest cost quartile smelter complex in Sarawak, which is the largest of its kind in Asia outside of China. We've continued to put our focus on the niche product portfolio that we have. These products are all critical alloying elements in the steel production process. On the manganese ore front, although our Bootu Creek manganese mine, which is located in Australia, has ceased production in December 2021, and the mine has been under care and maintenance since January 2022, manganese ore remains a core product of the group where we procure for internal consumption and also for sales to outside third parties, exporting mainly to China. Manganese ore is the main raw material that is used to produce manganese alloys. For manganese alloys and silicon alloys, these are the two products that are used in steelmaking, both of which are produced in our Sarawak plant. Essentially, they are used as an additive in steelmaking to strengthen the steel. These alloys are not replaceable, and they have been part of the steelmaking process since long ago, since the olden days, basically. If you take a look at the slides on the last column on the extreme right of the slide, that is silicon metal, which is essentially a 99% pure version of ferrosilicon. Silicon metal furnaces are basically modular, and they can be repurposed to produce ferrosilicon, which is what we're currently doing in the interim, given that there is this prolonged decline in market prices for silicon metal. I think for the next slide, basically we're looking at the first half 2025 financial highlights. For this first half of 2025, we've demonstrated yet another resilient performance despite market challenges, especially on the ferrosilicon front. Revenue was generally driven by two product types, basically ores and alloys. During the first half of 2025, ore traded volumes were higher, with higher average selling prices realized. However, this was offset by lower alloy volumes traded and weaker prices realized mainly from ferrosilicon. As you can see from the slides, while top line growth was modest, the loss after tax reflects industry-wide compression of margins as ferrosilicon prices fell to levels that we believe are not sustainable relative to long-run fundamentals. On the back of similar reasons, EBITDA was also at $19.1 million for the first half of 2025 against $46.6 million for the first half of 2024. For 2025, we recorded a loss per share of $0.0125. For the market update, we're going to be touching on the ferrosilicon and non-silico manganese. If you look at the top right-hand corner where that chart is, that graph is, if you look at the blue line, which is for ferrosilicon, generally, ferrosilicon prices have been on a downward trend since December 2024, and this sentiment has carried forward all the way through the first half of 2025. Apart from weaker downstream demand, we believe ferrosilicon prices are under pressure with increased competition from Russian-origin materials, increasing the ferrosilicon supply into the market. According to PLETS, on a year-on-year comparison, ferrosilicon prices have decreased by approximately 10.4% compared to the prices in the first half of 2024. We expect prices to stabilize in the near term as we believe the current prices that we see right now are unsustainably low. If we move on to silicon manganese, which is the brown line, that represents the price trend for silicon manganese. Silicon manganese prices have remained pretty stable, signaling relatively strong support on the back of stable manganese ore prices. If we look ahead, we expect manganese alloy prices to remain firm throughout the rest of this year and into the early part of 2026, into the early part of next year as well. We do not expect major disruptions to the supply and demand, which is, we don't expect any major disruptions to the supply and demand anticipated in the near term. For our operations in Australia, the Bootu Creek manganese mine continues to be in care and maintenance. What we're doing right now is mainly rehabilitation. The rehabilitation program is continuing, and the focus is mainly on the repair of the damaged landforms that are on the mine site itself. For our operations in Sarawak, they remain strong. As of today, two ferrosilicon furnaces have completed their major maintenance, which is a scheduled major maintenance, and we expect production volumes to be on track, which is well within our production guideline for the rest of this year. If you take a look at the revenue front, as explained briefly in the earlier slides, although there was a modest growth led by higher manganese ore volumes that were traded, our gross profit margin, on the other hand, was impacted considerably by weaker ferrosilicon prices. Gross profit margins, although compressed by ferrosilicon considerably, were cushioned by the group's ability to realize higher average selling prices for manganese alloys, with opportunistic sales to the U.S. and our unique market position in Korea. This supports basically the higher margins on our manganese alloy sales. These external factors eventually led to an EBITDA of about $19.9 million for the first half of 2025, as compared to about $46.6 million in the same corresponding period in 2024. The group continues to put our focus on cost and cash management, levers that are within our control. Our gearing ratio continues to decline, which is generally in line with the group's strategy to continuously lower our debt profile. If everyone remembers, in March 2025, we successfully refinanced the OM Sarawak project finance loans and also a revolving credit facility. This was also released as an announcement during that period. I think it was in March 2025. These were replaced with new syndicated facilities and bilateral arranged working capital lines. These, together with lower utilization of trade financing and revolving credit facilities for the period, basically helped us to lower our total debt in the first half of 2025. I think operationally, our business is still on a solid footing with stable cash flows, reflecting our ability to be sustainable during periods of cyclical lows. Looking at the strategic initiatives towards sustainability, I think this is also something that's a very hot topic at this point in time. On our sustainability journey, we continue to work on our initiatives, which included repurposing our by-products in an effort to support a circular economy. Yeah, today, I think we have repurposed almost twice the amount of silicon manganese slag that has been generated. Silicon manganese slag is actually a by-product that is generated from the production of silicon manganese, right? What happens is this silicon manganese slag, we have actually used it for road pavements and ground leveling work within our smelter complex in Sarawak itself. In addition to that, I think we continue to maintain the ISO certifications that we have obtained and aim to achieve ISO 50001 certification, which is for energy management, and also ISO 17025 accreditation, which is for testing and calibration laboratories. This would be useful to ensure that we maintain the highest operating standards. I think it's a pretty short and sweet, basically, presentation and webinar for this time around. Before I end the presentation, I think there are some key takeaways for today's presentation. OM Holdings, being one of the largest manganese and silicon alloy producers in the region, outside of China, of course, our operations actually sit firmly in the lowest cost quartile. This gives the group a strong competitive edge. Over the years, we have built long and stable relationships with top-tier customers across the region, and these customers continue to place their trust in us. One of our key advantages is the access to affordable renewable energy, you know, the hydropower that we use. This positions us as a prime beneficiary in the transition to renewables amidst the rising value of power. Our operations are highly flexible. We continuously assess returns on an M plus one and M plus two basis, giving us the agility to adjust production in order to respond to changes in demand and raw material supply within the market. At the same time, our scale allows us to purchase ores in bulk and to secure supply well in advance, while many other producers in Asia may face challenges doing such sourcing. Together, these strengths underpin our resilience and ability to deliver value regardless of market cycles. I think in short, scale, cost, leadership, strong customers, renewable energy, and flexibility. These are the strengths that set us apart. I think with that, I will end my presentation for today. Maybe we shall now move on to the Q&A session, Jenny. All right. Thank you very much, Eugene, for the presentation. We will now move on to the Q&A session. I think we received a couple of questions here. The first question is on carbon levy. It says that Malaysia will implement a carbon tax on high-emission sectors, including steel. This means that the production cost of steel producers will increase in Malaysia. Will this then impact the ferroalloy sector? Thanks, Jenny, for the question. I think we've been receiving a lot of queries and questions on this topic as well. In short, as we understand it at this point in time, the carbon tax will be introduced on the iron and steel and the energy industries by 2026. The Sarawak State Government is also currently finalizing the carbon tax levy framework as we speak right now. Our operations in Sarawak fall under the industrial process and product use, what they call the IPPU companies, the industrial process and product use companies. As such, OM Sarawak will likely be scoped in for the carbon levy. As it stands right now, we are still awaiting further details, and we will not be able to advise much at this point in time until further information and clarifications are obtained from the Sarawak authorities. I think we are following up on this constantly and trying to get as much updates as we can. As it stands right now, we need to get more information on that before we can comment further on this topic. Right. Thank you, Eugene, for that. Now, the second question is on tariffs. This question is saying that, do you know what are the respective tariffs on export of ferrosilicon and manganese alloys to the U.S. from India, Brazil, and Malaysia? Does Malaysia enjoy any competitive advantage from this? Another very popular question that has been asked quite a lot in the last couple of months as well. Okay, so basically, in terms of tariffs-wise, the U.S. does not apply reciprocal tariffs on manganese alloys, okay? They are specifically excluded under the U.S. trade policy. However, unlike manganese alloys, ferrosilicon, unfortunately, is subject to U.S. reciprocal tariffs. From what we understand right now, the tariff rates relating to the, I think, in the countries that you mentioned, U.S., India, Brazil, and Malaysia, right? The tariffs right now, as we understand it, for Brazil, I think it's 50%, 5.0%. Same for India, also 50%, 5.0%. For Malaysia, as it stands right now, it's 19%, 1.9%. I think on top of the reciprocal tariffs from the U.S., the U.S. also applies what they call anti-dumping duties and countervailing duties on certain countries as well, right? I think for Brazil, if I recall, it's roughly around 18.6% or 18.7%, thereabouts, okay? For OM Holdings, our rate, as we've been informed, our rate is actually at 7.91%. For the last country, India, India does not have any anti-dumping duties or countervailing duties imposed on ferrosilicon at this point in time. I think based on those numbers, in short, we do have some advantage over other countries, but I think we will still need to further do additional market studies and assessments to see how things play out, and we can then plan strategically around these tariffs. Right. Thank you, Eugene, for that answer. Now, moving on to the next question. Given the market volatility, has OMH actually implemented any hedging policy on the ferroalloy prices? Okay. Thanks, Jenny. I think we do not have any hedging policies on ferroalloy prices at this point in time, right? Generally, I think there are currently no international futures markets for ferroalloys. The futures market, I think the one, there's one in China, right? The futures market in China is not directly relevant due to the taxes that are imposed for both imports and exports. Although within China itself, I think they are commonly used domestically. Within China itself, it is used, but yeah, not internationally from that perspective. All right. Thanks, Eugene. That's clear. Onto the last question. Given that we are selling off the OMH Mauritius, and that's the shipping assets, how much actually does the manganese supply from Shippee and Braia contribute to? Okay. Yeah, so I think everyone has also seen the announcement that was made on the transaction on the effective 13% in Shippee mine. Shippee's manganese ore supply is primarily traded and exported to China, right, for which OM earns a fixed commission. I think in terms of the Shippee ore, it is occasionally shipped to Sarawak for our own production consumption, but I think it is not significant in terms of the total volume in the grand scheme of things, as I think in general, it is not logistically efficient to do so. I think the annual traded volume of Shippee ore is around between maybe 420,000 to 460,000 tons per annum. The other one you're referring to is Braia, right? Yes, that's right, Braia. Braia is still under exploration. Actually, for Braia, there is currently no production, no manganese production out of Braia at this point in time. Okay. Thank you very much, Eugene. That appears to cover the majority of the questions for us today. If you do have any further questions, we do welcome you to send it to investor.relations@ommaterials.com. We will be making 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, and thank you, Eugene, for the comprehensive update. Thank you, everyone. Thanks, Jenny. Thank you very much. Have a great day.