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Globe's Bécancour producing during lockout

Keywords: Tags  Globe Specialty Metals, Alan Kestenbaum, Jeff Bradley, Malcolm Appelbaum, Becancour, Beverly, outage, lockout silicon

CHICAGO — Globe Specialty Metals Inc. has continued to operate one of three furnaces at its silicon metal facility in Bécancour, Quebec, following a lockout by using management employees.

"They have been doing an excellent job," said Jeff Bradley, chief executive officer and chief operating officer.

Globe initiated the lockout at Bécancour because it was unable to achieve the concessions from unionized workers necessary to bring costs at the facility in line with those at the company’s other plants, Bradley said during a conference call following the release of earnings data May 7 (, May 7),

The New York-based silicon producer is the majority stakeholder in the Bécancour facility, officially known as Quebec Silicon LP, which has an annual capacity of 47,000 tonnes of silicon metal. The labor contract at the plant expired in late April (, May 3).

Executive chairman Alan Kestenbaum said that pursuing a lockout was one of the "strong measures" Globe was taking to cut costs. "The decision was simple," he said. "There is no benefit in running a plant that is marginally profitable but a consumer of (capital expenditure) cash."

Even if the lockout were to continue for another quarter, it likely wouldn’t have a significant impact on Globe’s profitability, chief financial officer Malcolm Appelbaum suggested. The Bécancour facility added approximately $2 million to Globe’s earnings before interest, taxes and amortization (Ebitda) in the fiscal third quarter, and he estimated it would lead to an Ebitda decline of only about $1 million to $2 million even if the lockout were to continue throughout the fiscal fourth quarter.

But the action at Bécancour will affect Globe’s Alden Resources LLC, Corbin, Ky., which will see less demand from the plant, Bradley said.

Appelbaum said that Globe has three maintenance outages planned for its fiscal fourth quarter, including a 60-day outage at its silicon metal and specialty alloy facility in Beverly, Ohio.

Bradley described the Beverly outage as "large" but said it was coming as other company outages were "winding down." Work at Globe’s facilities in Argentina is "behind us," he said, although the company has not entirely finished overhauling its plant in Alloy, W.Va., home to the company’s largest furnace.

The outage in Alloy was different from routine maintenance downtime in that it is the kind taken only every 15 to 20 years, Bradley said. "We actually uncovered more issues with the furnace than we had anticipated and planned for."

But Globe executives stressed that they did not want a repeat of the cost overruns, lost production and slow restarts the company experienced during the most recent round of outages. "We have undertaken an analysis of the entire outage process, including engineering and execution aspects, to ensure that we don’t encounter the unplanned downtime and added expenses again," Bradley said.

Globe said that it shipped 69,382 tonnes of product in its fiscal third quarter ended March 30, up 14 percent from the same period last year. For calendar year 2013, the company expects to ship about 110,000 tonnes of silicon metal—not including material shipped to joint-venture partner Dow Corning Corp., Midland, Mich.—and 120,000 tonnes of silicon-based alloys, Appelbaum said.

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