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AMG Advanced Metallurgical Group N.V. Reports Second Quarter 2015 Results
05 August 2015

Key Highlights

  • EBITDA([1]) was $25.1 million in the second quarter 2015, a 23% increase from the same period in 2014
  • EPS, adjusted for the one-time cost of refinancing, on a fully diluted basis, was $0.33 in the second quarter 2015, a 22% increase from the same period in 2014
  • Annualized return on capital employed increased to 15.7% in the second quarter 2015, from 9.9% in the same period in 2014
  • As of June 30, 2015, net debt was $41.9 million, a reduction of $44.9 million in the second quarter of 2015

 

 

Amsterdam, 5 August 2015 (Regulated Information) --- AMG Advanced Metallurgical Group N.V. ("AMG", EURONEXT AMSTERDAM: "AMG") reported second quarter 2015 revenue of $257.4 million, an 8% decrease from $278.9 million in the second quarter 2014. Net income attributable to shareholders, adjusted for the one-time costs of refinancing, for the second quarter 2015 was $9.2 million, or $0.33 per fully diluted share, a 22% increase from $7.4 million, or $0.27 in the second quarter 2014. EBITDA increased 23% to $25.1 million in the second quarter 2015 from $20.4 million in the second quarter 2014.

 

Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, "AMG earnings and cash flow for the second quarter were strong despite an extremely weak metal price environment and the unfavorable translation impact of foreign currency on reported earnings.

 

AMG Engineering achieved EBITDA of $4.2 million during the quarter, the highest in eight quarters, making continuous progress towards our stated objective to reduce cost and return the Engineering business to historic levels of profitability in 2016. Order intake of $81.8 million, representing a 1.45x book to bill ratio, was the highest in thirteen quarters. The improvement was due to orders of heat treatment furnaces for the automotive market, plasma re-melting furnaces for the aerospace market and induction furnaces for powder metallurgy applications.

 

AMG Critical Materials continues to acquire market share in certain business units despite difficult trading conditions and double-digit market price declines in five of AMG's nine critical materials.

 

AMG reduced net debt by $45.9 million in the first half of 2015 to $41.9 million, a net debt to last twelve months EBITDA ratio of 0.46. AMG's strong balance sheet liquidity, as well as the Board's confidence in our long term ability to generate solid cash flow, has resulted in a change in dividend policy.  This change reflects our commitment to return value to shareholders."

 

 

Key Figures

 

In 000's US Dollar

 

 

 

 

 

 

Q2 '15

Q2 '14

Change

 

Revenue

$257,443

$278,941

(8%)

 

Gross profit

44,613

44,963

(1%)

 

Gross margin

17.3%

16.1%

 

 

 

 

 

 

 

Operating profit

12,122

11,124

9%

 

Operating margin

4.7%

4.0%

 

 

 

 

 

 

 

Net income attributable to shareholders

3,808

7,445

(49%)

 

Net income attributable to shareholders, adjusted for one-time refinancing costs

9,180

7,445

23%

 

 

 

 

 

 

EPS - Fully diluted

0.14

0.27

(48%)

 

EPS - Fully diluted, adjusted for one-time refinancing costs

0.33

0.27

22%

 

 

 

 

 

 

EBIT (1)

18,031

12,221

48%

 

EBITDA (2) 

25,142

20,392

23%

 

EBITDA margin

9.8%

7.3%

 

 

 

 

 

 

 

Cash flows from operating activities

11,264

19,129

(41%)

 

Note: 

1.      EBIT is defined as earnings before interest, tax and excludes non-recurring items

2.      EBITDA is defined as earnings before interest, tax, depreciation and amortization and excludes non-recurring items

 

 

Operational Review

 

AMG Critical Materials

 

Q2 '15

Q2 '14

Change

Revenue

$201,188

$229,265

(12%)

Gross profit

32,112

37,478

(14%)

Operating profit

12,272

14,884

(18%)

EBITDA

20,955

22,193

(6%)

 

 

 

 

 

AMG Critical Materials' second quarter 2015 revenue decreased $28.1 million, or 12%, to $201.2 million. The decline was primarily the result of unfavorable Euro to US Dollar currency translation effects, lower metal prices and product portfolio optimization.

 

The reduction in market prices of antimony metal and ferrovanadium of 10% and 28%, respectively, negatively affected revenue in the second quarter of 2015 compared to the second quarter of 2014.

 

Despite difficult trading conditions, sales volumes of ferrovanadium, antimony, chrome metal and silicon metal increased as the business units continue to increase market share. Titanium Alloys and Aluminum sales volumes reduced compared to the prior year due to the planned elimination of low margin titanium products, the previously announced aluminum capacity reductions and the sale of AMG Aluminum's Benda-Lutz-Alpoco operation.

 

Gross profit decreased $5.4 million, or 14%, to $32.1 million, primarily due to foreign currency translation effects and falling ferrovanadium prices. However, AMG Critical Materials' second quarter 2015 gross margin remained at 16% compared to the same period in 2014.

 

Second quarter 2015 EBITDA margin of 10% was in-line with the second quarter of 2014. SG&A reductions and a reversal of previously recorded environmental expense offset the impact of a reduction in gross profit in the quarter.

 

 

AMG Engineering

 

Q2 '15

Q2 '14

Change

Revenue

$56,255

$49,676

13%

Gross profit

12,501

7,485

67%

Operating loss

(150)

(3,760)

96%

EBITDA

4,187

(1,801)

N/A

 

 

 

 

 

AMG Engineering signed $81.8 million in new orders during the second quarter of 2015, representing a 1.45x book to bill ratio, the highest order intake in 13 quarters. Order backlog was $138.3 million as of June 30, 2015, an increase of 19% from March 31, 2015.

 

AMG Engineering's second quarter 2015 revenue increased $6.6 million, or 13%, to $56.3 million, due to the improved order intake in the second half of 2014. Revenue generated from turbine blade coating furnaces, heat treatment furnaces and induction furnaces increased in the second quarter of 2015 compared to the second quarter of 2014.

 

Second quarter 2015 gross margin increased to 22% from 15% in the second quarter of 2014 due to higher sales, product mix effects and improved project cost management.

 

EBITDA increased by $6.0 million, to $4.2 million, in the second quarter of 2015, the highest quarterly EBITDA in eight quarters, primarily as a result of higher gross profit.

 

 

Financial Review

 

 

Refinancing Costs

 

In the second quarter of 2015, AMG incurred $5.4 million related to the refinancing of the Company's credit facility.  As refinancing the credit facility is not ordinary course of business, these charges are considered non-recurring for the purposes of adjusted earnings per share. 

 

 

Tax

 

AMG recorded a tax expense of $9.6 million through the first six months of 2015 as compared to a tax expense of $1.8 million in the first half of 2014.  The largest driver of this variance relates to changes in the valuation of the Brazilian currency.  

 

Movements in the Brazilian Real exchange rate impact the valuation of the Company's net deferred tax assets. The devaluation of the Real during the first half of 2015 resulted in additional tax expense of $1.6 million. The appreciation of the Real in the first half of 2014 resulted in a $3.2 million tax benefit. The 2015 effective tax rate was also adversely impacted by the refinancing costs of $5.4 million, for which no tax benefit could be recognized. 

 

 

Liquidity

 

June 30, 2015

December 31, 2014

Change

Total debt

$179,026

$195,878

(9%)

Cash and cash equivalents

137,123

108,029

27%

Net debt

41,903

87,849

(52%)

 

AMG had a net debt position of $41.9 million as of June 30, 2015.  Net debt and gross debt decreased $45.9 million and $16.9 million, respectively, from December 31, 2014.

 

Cash flows from operating activities were $15.1 million in the first six months of 2015 compared to $24.8 million in the same period in 2014. Due to the refinancing of the credit facility, $3.0 million of cash was spent that will not reoccur.

 

Capital expenditures declined to $7.0 million in the first six months of 2015 compared to $10.5 million in the same period in 2014.  The $7.0 million of capital spending in the first six months of 2015 included $4.6 million of maintenance capital. The largest expansion capital project was for AMG's titanium aluminides business.

 

Including the $137.1 million of cash, AMG had $263.0 million of total liquidity as of June 30, 2015.

 

 

Currency Fluctuations

 

AMG's financial statements are prepared in US Dollars, so fluctuations in the exchange rate between the US Dollar and other currencies, primarily the Euro and Brazilian Real, have an effect on the results of operations and on the reported value of assets and liabilities as measured in US Dollars.

 

The appreciation of the US Dollar as of June 30, 2015 compared to December 31, 2014, resulted in a decrease of $48.7 and $37.0 million in assets and liabilities on the balance sheet, respectively. The appreciation of the US Dollar compared to the Euro in the second quarter of 2015 in relation to the second quarter of 2014, resulted in a reduction in revenue and EBITDA of $30.2 million and $2.9 million, respectively. 

 

 

Outlook & Dividend Policy

 

In this challenging environment, AMG will continue to reduce cost and maintain a conservative balance sheet.

 

AMG Critical Materials expects to continue to acquire market share in certain business units although currency translation effects and metal prices will continue to affect revenues in the division.

 

AMG Engineering expects to return to historic levels of profitability in 2016. The strong order intake in the second quarter of 2015 and successful launch of new product lines has positioned the division well at the midpoint of the current fiscal year.

 

Against weak industry trends, AMG expects to generate full year EBITDA in-line with prior year and improve its return on capital employed in 2015.

 

The change in AMG's dividend policy reflects a commitment to return value to shareholders and is a result of an improved balance sheet, ample liquidity and confidence in our ability to generate strong cash flows.

AMG Advanced Metallurgical Group N.V.

 

 

Condensed interim consolidated income statement

 

 

 

 

 

For the quarter ended June 30

 

 

In thousands of US Dollars

2015

2014

 

Unaudited

Unaudited

 

 

 

Revenue

257,443

278,941

Cost of sales

212,830

233,978

Gross profit

44,613

44,963

 

 

 

Selling, general and administrative expenses

32,863

34,098

Restructuring expense

1,965

1,034

Environmental

(2,286)

-

Other income, net

(51)

(1,293)

Operating profit

12,122

11,124

 

 

 

Finance income

(134)

(138)

Finance expense

5,324

5,752

Foreign exchange (gain) loss

(1,289)

199

Net finance costs

3,901

5,813

 

 

 

Share of profit of associates and joint ventures

122

678

Profit before income tax

8,343

5,989

 

 

 

Income tax expense (benefit)

4,091

(1,463)

Profit for the period

4,252

7,452

 

 

 

 

 

 

Attributable to:

 

 

Shareholders of the Company

3,808

7,445

Non-controlling interests

444

7

Profit for the period

4,252

7,452

 

 

 

Earnings per share

 

 

Basic earnings per share

0.14

0.27

Diluted earnings per share

0.14

0.27

 

 

AMG Advanced Metallurgical Group N.V.

 

 

Condensed interim consolidated income statement

 

 

 

 

 

For the six months ended June 30

 

 

In thousands of US Dollars

2015

2014

 

Unaudited

Unaudited

 

 

 

Revenue

514,434

553,793

Cost of sales

426,519

462,478

Gross profit

87,915

91,315

 

 

 

Selling, general and administrative expenses

63,006

69,134

Restructuring expense

3,659

1,792

Environmental

(2,286)

-

Other income, net

(139)

(1,546)

Operating profit

23,675

21,935

 

 

 

Finance income

(472)

(341)

Finance expense

8,996

10,427

Foreign exchange (gain) loss

(1,117)

14

Net finance costs

7,407

10,100

 

 

 

Share of profit of associates and joint ventures

197

783

Profit before income tax

16,465

12,618

 

 

 

Income tax expense

9,556

1,811

Profit for the period

6,909

10,807

 

 

 

 

 

 

Attributable to:

 

 

Shareholders of the Company

6,484

11,364

Non-controlling interests

425

(557)

Profit for the period

6,909

10,807

 

 

 

Earnings per share

 

 

Basic earnings per share

0.23

0.41

Diluted earnings per share

0.23

0.41

 

 

AMG Advanced Metallurgical Group N.V.

 

 

Condensed interim consolidated statement of financial position

 

 

 

 

 

June 30,

December 31,

In thousands of US Dollars 

2015

2014

 

Unaudited

 

Assets

 

 

Property, plant and equipment

217,618

237,418

Goodwill

18,996

20,618

Intangible assets

9,914

11,116

Investments in associates and joint ventures

1,795

1,450

Derivative financial instruments

14

-

Deferred tax assets

33,923

37,903

Restricted cash

6,946

7,582

Other assets

21,180

21,987

Total non-current assets

310,386

338,074

Inventories

143,214

145,418

Trade and other receivables

141,703

135,293

Derivative financial instruments

2,156

1,997

Other assets

37,261

47,055

Assets held for sale

476

2,553

Cash and cash equivalents

137,123

108,029

Total current assets

461,933

440,345

Total assets

772,319

778,419

 

 

AMG Advanced Metallurgical Group N.V.

 

 

Condensed interim consolidated statement of financial position

 

(continued)

 

 

 

 

 

 

June 30

December 31,

In thousands of US Dollars   

2015

2014

 

Unaudited

 

Equity

 

 

Issued capital

745

745

Share premium

382,978

382,978

Other reserves

(47,421)

(59,728)

Retained earnings (deficit)

(204,338)

(225,843)

Equity attributable to shareholders of the

131,964

98,152

Company

 

 

Non-controlling interests

25,051

2,825

Total equity

157,015

100,977

 

 

 

Liabilities

 

 

Loans and borrowings

152,400

167,990

Employee benefits

141,010

159,672

Provisions

29,433

37,056

Deferred revenue

6,689

8,950

Government grants

556

666

Other liabilities

7,733

8,885

Derivative financial instruments

577

5,056

Deferred tax liabilities

10,125

8,261

Total non-current liabilities

348,523

396,536

 

 

 

Loans and borrowings

3,272

6,562

Short term bank debt

23,354

21,326

Government grants

101

88

Liabilities associated with assets held for sale

1,834

248

Other liabilities

47,943

53,257

Trade and other payables

126,432

134,373

Derivative financial instruments

8,835

9,104

Advance payments

30,450

31,689

Deferred revenue

7,341

8,414

Current taxes payable

3,417

671

Provisions

13,802

15,174

Total current liabilities

266,781

280,906

Total liabilities

615,304

677,442

Total equity and liabilities

772,319

778,419

 

 

AMG Advanced Metallurgical Group N.V.

 

 

Condensed interim consolidated statement of cash flows

 

 

For the six months ended June 30

 

 

In thousands of US Dollars

2015

2014

 

Unaudited

Unaudited

Cash flows from operating activities

 

 

Profit for the period

6,909

10,807

Adjustments to reconcile net profit to net cash

 

 

flows:

 

 

Non-cash:

 

 

Income tax expense

9,556

1,811

Depreciation and amortization

14,292

16,320

Net finance costs

7,407

10,100

Share of gain of associates and joint ventures

(197)

(783)

(Gain) loss on sale or disposal of property, plant and equipment

(156)

134

Equity-settled share-based payment transactions

2,788

429

Movement in provisions, pensions and government grants

(896)

(5,240)

Working capital and deferred revenue adjustments

(15,524)

2,956

Cash flows from operating activities

24,179

36,534

Finance costs paid, net

(6,946)

(7,921)

Income tax paid, net

(2,172)

(3,825)

Net cash flows from operating activities

15,061

24,788

 

 

 

Cash flows used in investing activities

 

 

Proceeds from sale of property, plant and equipment

931

220

Proceeds from sale of subsidiaries (net of cash divested of $1,347)

(550)

-

Acquisition of property, plant and equipment and

(7,040)

(10,478)

Intangibles

 

 

Change in restricted cash

437

(1,220)

Other

26

(5)

Net cash flows used in investing activities

(6,196)

(11,483)

 

 

AMG Advanced Metallurgical Group N.V.

 

 

Condensed interim consolidated statement of cash flows

 

 

(continued)

 

 

For the six months ended June 30

 

 

In thousands of US Dollars

2015

2014

 

Unaudited

Unaudited

Cash flows from (used in) financing activities

 

 

Proceeds from issuance of debt

177,272

-

Payment of transaction costs related to debt issuance

(4,371)

-

Repayment of borrowings

(184,871)

(857)

Change in non-controlling interests

37,530

28

Other

(132)

-

Net cash flows from (used in) financing activities

25,428

(829)

 

 

 

Net increase in cash and cash

34,293

12,476

Equivalents

 

 

Cash and cash equivalents at January 1

108,029

103,067

Effect of exchange rate fluctuations on cash held

(5,199)

(603)

Cash and cash equivalents at June 30

137,123

114,940

 

 

 

About AMG

AMG is a global critical materials company at the forefront of CO2 reduction trends. AMG produces highly engineered specialty metals and mineral products and provides related vacuum furnace systems and services to the transportation, infrastructure, energy, and specialty metals & chemicals end markets.

AMG Critical Materials produces aluminum master alloys and powders, titanium alloys and coatings, ferrovanadium, natural graphite, chromium metal, antimony, tantalum, niobium and silicon metal. AMG Engineering designs, engineers, and produces advanced vacuum furnace systems and operates vacuum heat treatment facilities, primarily for the transportation and energy industries.

With approximately 3,000 employees, AMG operates globally with production facilities in Germany, the United Kingdom, France, Czech Republic, the United States, China, Mexico, Brazil and Sri Lanka, and has sales and customer service offices in Russia and Japan (www.amg-nv.com).  

For further information, please contact:

AMG Advanced Metallurgical Group N.V.         +1 610 293 5804

Steve Daniels

Vice President of Investor Relations

sdaniels(at)amg-nv.com

 

Disclaimer

 

Certain statements in this press release are not historical facts and are "forward looking."  Forward looking statements include statements concerning AMG's plans, expectations, projections, objectives, targets, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans and intentions relating to acquisitions, AMG's competitive strengths and weaknesses, plans or goals relating to forecasted production, reserves, financial position and future operations and development, AMG's business strategy and the trends AMG anticipates in the industries and the political and legal environment in which it operates and other information that is not historical information.  When used in this press release, the words "expects," "believes," "anticipates," "plans," "may," "will," "should," and similar expressions, and the negatives thereof, are intended to identify forward looking statements.  By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that the predictions, forecasts, projections and other forward-looking statements will not be achieved.  These forward-looking statements speak only as of the date of this press release.  AMG expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in AMG's expectations with regard thereto or any change in events, conditions, or circumstances on which any forward-looking statement is based.

 

 



1.      EBITDA is defined as earnings before interest, tax, depreciation and amortization and excludes non-recurring items

 

 

August 5 2015 Earnings