A member of AMG Advanced Metallurgical Group, N.V.

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AMG Reports Full Year and Fourth Quarter 2015 Results; Ends Year Net Debt Free -- Ready for Growth
11 March 2016

Key Highlights

  • AMG ended the year net debt free, reducing net debt by $88.9 million in 2015, or $3.22 per ordinary share
  • Fourth quarter 2015 cash flows from operating activities were $33.6 million, a 48% increase over the same period in 2014
  • EBITDA(3) was $75.6 million in 2015, $85.7 million when adjusted for foreign currency translation effects(4)
  • Full year profit before income tax increased by 38% to $28.6 million in 2015 from $20.7 million in 2014
  • Total 2015 dividend proposed of €0.21 per ordinary share, including the interim dividend of €0.10, paid on September 16, 2015
  • AMG provides strategy update, including growth plan to pursue organic and acquisition opportunities

 

Amsterdam, 11 March 2016 (Regulated Information) --- AMG Advanced Metallurgical Group N.V. ("AMG", EURONEXT AMSTERDAM: "AMG") reported a net debt reduction of $88.9 million in 2015, ending the year net debt free with net cash of $1.0 million. The EBITDA for 2015 amounted to $75.6 million, a 12% decrease from $85.7 million in 2014. Fourth quarter EBITDA decreased to $9.7 million from $21.9 million in 2014.

 

Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, "AMG cash flow for the fourth quarter was strong thanks to the pro-active steps taken by management to mitigate price risk and reduce cost. AMG ended the year free of net debt, exceeding management's deleveraging target by a considerable margin.

 

AMG Engineering achieved EBITDA of $2.6 million during the quarter, in line with 2014. Strong demand in the areas of heat treatment furnaces for the automotive market, plasma remelting furnaces for the aerospace market and induction furnaces for powder metallurgy applications resulted in an improvement in year ending order backlog of 10%, compared to December 31, 2014.

 

AMG Critical Materials profitability was adversely affected by non-cash expenses related to vanadium inventory adjustments of $4.4 million during the fourth quarter 2015. Despite double-digit declines in market pricing for all key products in 2015, AMG's continuing focus on operating performance resulted in solid financial results in all eight Critical Materials business units on a full year basis.

 

Despite the severe headwinds in the market, AMG generated free cash flow of $55.8 million during 2015, the second highest free cash flow in the company's history. We are pleased to be able to propose a full year dividend of €0.21 to our shareholders.

 

Growth strategy update

 

Following three years of intense focus on cash flow optimization and debt reduction, we now find ourselves with significant available capital and a unique opportunity to grow both organically as well as through select acquisitions.

 

AMG's organic growth strategy is focused on certain critical materials within our portfolio that are marked by strong demand growth or supply limitations. We have a number of projects which we have continued to develop during our austerity period which we are now beginning to progress.

 

Our acquisition strategy is very selective. We have developed a list of acquisition targets, each of which would be synergistic with our current businesses, and provide incremental technology or market share growth. AMG is the result of an acquisition strategy and we are fundamentally value buyers. We would expect every acquisition we undertake to be accretive to our earnings per share."

 

 

Key Figures

 

In 000's US Dollar

 

 

 

 

 

 

 

Q4 '15

Q4 '14

Change

FY '15

FY '14

Change

Revenue

$220,842

$260,378

(15%)

$977,143

$1,093,889

(11%)

Gross profit

32,385

44,918

(28%)

159,960

184,292

(13%)

Gross margin

14.7%

17.3%

 

16.4%

16.8%

 

 

 

 

 

 

 

 

Operating profit

4,191

3,698

13%

36,163

40,632

(11%)

Operating margin

1.9%

1.4%

 

3.7%

3.7%

 

 

 

 

 

 

 

 

Profit before income tax

2,275

(2,237)

N/A

28,568

20,676

38%

 

 

 

 

 

 

 

Net (loss) income attributable to shareholders

(337)

7,310

N/A

11,080

21,910

(49%)

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

(337)

7,310

N/A

16,452

21,910

(25%)

 

 

 

 

 

 

 

EPS - Fully diluted

(0.01)

0.26

N/A

0.40

0.79

(49%)

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

(0.01)

0.26

N/A

0.59

0.79

(25%)

 

 

 

 

 

 

 

EBIT (2)

2,043

13,813

(85%)

46,032

53,238

(14%)

EBITDA (3) 

9,676

21,858

(56%)

75,622

85,732

(12%)

EBITDA margin

4.4%

8.4%

 

7.7%

7.8%

 

 

 

 

 

 

 

 

Cash flows from operating activities

33,550

22,664

48%

76,308

95,114

(20%)

 

Notes: 

1.      Free cash flow is defined as cash flows from operating activities less cash flows used in investing activities.

2.      EBIT is defined as earnings before interest and income taxes. EBIT excludes restructuring and equity-settled share-based payments and includes foreign currency gains or losses.

3.      EBITDA is defined as EBIT adjusted for depreciation and amortization.

4.      EBITDA adjusted for foreign currency translation effects is explained under 'Currency Fluctuations'.

 

 

Operational Review

 

AMG Critical Materials

 

Q4 '15

Q4 '14

Change

FY '15

FY '14

Change

Revenue

$166,275

$199,501

(17%)

$757,492

873,439

(13%)

Gross profit

 * 20,733

33,846

(39%)

** 111,153

142,479

(22%)

Operating profit

2,559

10,840

(76%)

31,630

53,831

(41%)

EBITDA

7,039

19,169

(63%)

60,798

82,605

(26%)

 

* Includes $4.4 million non-cash expense related to vanadium, nickel and molybdenum inventory adjustments in the fourth quarter 2015

 

** Includes $6.5 million non-cash expense related to vanadium, nickel and molybdenum inventory adjustments in the full year 2015

 

AMG Critical Materials continues to be impacted by unfavorable Euro to US Dollar currency translation effects and lower metal prices, and as a result, fourth quarter 2015 revenue decreased by 17%, to $166.3 million.

 

The reduction in market prices of antimony, vanadium, molybdenum, nickel and aluminum of 38%, 47%, 48%, 40% and 24%, respectively, negatively affected revenue in the fourth quarter of 2015 compared to the fourth quarter of 2014.

 

Gross profit in the fourth quarter decreased $13.1 million, or 39%, to $20.7 million,  driven primarily by a non-cash inventory adjustment expense of $4.4 incurred due to rapidly falling vanadium, nickel and molybdenum prices, foreign currency translation effects and lower sales volumes.

 

Full year 2015 sales volumes were largely in line with 2014, with the exception of Aluminum, which decreased due to a planned reduction in capacity, and Titanium Master Alloys, which decreased due to product mix optimization.

 

 

AMG Engineering

 

Q4 '15

Q4 '14

Change

FY '15

FY '14

Change

Revenue

$54,567

$60,877

(10%)

$219,651

$220,450

-

Gross profit

11,652

11,072

5%

48,807

41,813

17%

Operating profit (loss)

1,632

(7,142)

N/A

4,533

(13,199)

N/A

EBITDA

2,637

2,689

(2%)

14,824

3,127

374%

 

AMG Engineering signed $48.0 million in new orders during the fourth quarter of 2015, representing a 0.88x book to bill ratio. Order backlog was $140.9 million as of December 31, 2015, a 10% increase from $128.3 million as of December 31, 2014.

 

AMG Engineering's fourth quarter 2015 revenue decreased $6.3 million, or 10%, to $54.6 million, as an increase in local currency revenues was more than offset by foreign currency translation effects. Revenue generated from heat treatment furnaces, remelting furnaces and heat treatment services increased in the fourth quarter of 2015 compared to the fourth quarter of 2014.

 

Fourth quarter 2015 gross margin increased to 21% from 18% in the fourth quarter of 2014 due to higher revenue in local currency, product mix effects and improved project cost management.

 

EBITDA of $2.6 million in the fourth quarter of 2015 was in line with the same period in 2014.

 

 

Financial Review

 

Tax

 

AMG recorded an income tax expense of $18.7 million in 2015 as compared to a tax benefit of $1.0 million in 2014. The largest driver of this variance relates to the one-time recognition of US tax benefits in 2014.

 

The effective tax rate of 65% in 2015 was negatively impacted by the currency effect of the Brazilian Real on deferred taxes and refinancing costs of $5.4 million in the second quarter of 2015, for which no tax benefit could be recognized.

 

AMG paid taxes of $5.7 million in 2015 as compared to tax payments of $6.3 million in 2014. AMG's effective cash tax rate was 20% in 2015, as compared to 30% in 2014.

 

SG&A

 

AMG's fourth quarter 2015 SG&A expenses were $30.4 million, down slightly from $31.2 million in the fourth quarter 2014. A reduction in professional fees of $2.0 million between the fourth quarter 2015 and the fourth quarter 2014 was partially offset by an increase in project related costs.

 

Full year 2015 SG&A expenses were $122.3 million, an 8% reduction from $133.5 million in 2014.

 

Non-Recurring Items

 

AMG's fourth quarter 2015 operating profit of $4.2 million includes non-recurring items, which are not included in the calculation of EBITDA.

 

A summary of non-recurring items in the fourth quarter 2015 and 2014 are below:

 

Non-recurring items included in operating profit

 

 

Q4 '15

Q4 '14

Change

 

Restructuring expense

($3,011)

$3,059

N/A

 

Asset impairment expense

-

1,867

N/A

 

Environmental

1,529

5,544

(72%)

 

Total non-recurring items included in operating profit

(1,482)

10,470

N/A

 

Net income in the fourth quarter 2015 was positively impacted by the revision of a restructuring plan related to cost reduction initiatives as well as the release of a value-added tax provision.

 

During the fourth quarter 2015, AMG recorded non-recurring environmental accrual of $1.5 million related to its Newfield, NJ site.

 

Liquidity

 

December 31, 2015

December 31, 2014

Change

Total debt

$126,743

$195,878

(35%)

Cash and cash equivalents

127,778

108,029

18%

Net (cash) debt

(1,035)

87,849

N/A

 

AMG had a net cash position of $1.0 million as of December 31, 2015.  Net debt and gross debt decreased $88.9 million and $69.1 million, respectively, from December 31, 2014.

 

Cash flows from operating activities were $76.3 million in 2015 compared to $95.1 million in 2014.

 

Capital expenditures decreased to $23.3 million in 2015 compared to $24.0 million in 2014. Capital spending in 2015 included $13.1 million of maintenance capital. The largest expansion capital project was for AMG's titanium aluminides business.

 

Including the $127.8 million of cash, AMG had $282.7 million of total liquidity as of December 31, 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 December 31, 2015 compared to December 31, 2014, resulted in a decrease of $47 million and $36 million in assets and liabilities on the balance sheet, respectively. The appreciation of the US Dollar compared to the Euro in the fourth quarter of 2015 in relation to the fourth quarter of 2014, resulted in a reduction in revenue and EBITDA of $24 million and $2 million, respectively. On a full year basis, the appreciation of the US Dollar compared to the Euro resulted in a reduction in revenue and EBITDA of $109 million and $10 million, respectively, compared to the prior year.

 

EBITDA adjusted for Euro foreign currency translation effects is therefore $85.7 million for full year 2015.

 

Divestment

 

On February 29, 2016, AMG sold its 100% ownership interest in Intellifast, GmbH to Aero Products Invest GmbH of Augsburg, Germany.

 

Final Dividend Proposed

 

AMG intends to declare a dividend of €0.21 per ordinary share over the financial year 2015. The interim dividend of €0.10, paid on September 16, 2015, will be deducted from the amount to be distributed to shareholders. The proposed final dividend per ordinary share therefore amounts to €0.11.

 

A proposal to resolve upon the final dividend distribution will be included on the agenda for the annual general meeting to be held on May 4, 2016.

 

Outlook

 

In this challenging market environment, AMG's management target is to continue to generate strong operating cash flow and maintain 2015 levels of profitability in 2016.

 

 

 

 

AMG Advanced Metallurgical Group N.V.

 

 

Consolidated Income Statement

 

 

 

 

 

For the quarter ended December 31

 

 

In thousands of US Dollars

2015

2014

 

Unaudited

Unaudited

Continuing operations

 

 

Revenue

220,842

260,378

Cost of sales

188,457

215,460

Gross profit

32,385

44,918

 

 

 

Selling, general and administrative expenses

30,400

31,241

Restructuring expense

(3,011)

3,059

Asset impairment expense

-

1,867

Environmental

1,529

5,544

Other income, net

(724)

(491)

Operating profit

4,191

3,698

 

 

 

Finance income

(786)

(386)

Finance expense

2,219

5,846

Foreign exchange gain

865

537

Net finance costs

2,298

5,997

 

 

 

Share of profit of associates and joint ventures

382

62

Profit (loss) before income tax

2,275

(2,237)

 

 

 

Income tax expense (benefit)

4,416

(9,884)

(Loss) profit for the period

(2,141)

7,647

 

 

 

 

 

 

Attributable to:

 

 

Shareholders of the Company

(337)

7,310

Non-controlling interests

(1,804)

337

(Loss) profit for the period

(2,141)

7,647

 

 

 

Earnings per share

 

 

Basic earnings per share

(0.01)

0.26

Diluted earnings per share

(0.01)

0.26

 

 

 

AMG Advanced Metallurgical Group N.V.

 

 

Consolidated Income Statement

 

 

 

 

 

For the year ended December 31

 

 

In thousands of US Dollars

2015

2014

 

Unaudited

 

Continuing operations

 

 

Revenue

977,143

1,093,889

Cost of sales

817,183

909,597

Gross profit

159,960

184,292

 

 

 

Selling, general and administrative expenses

122,331

133,500

Restructuring expense

3,103

4,870

Asset impairment expense

-

  1,867

Environmental

(757)

5,544

Other income, net

(880)

  (2,121)

Operating profit

36,163

40,632

 

 

 

Finance income

(1,328)

(924)

Finance expense

11,267

19,944

Foreign exchange (gain) loss

(1,712)

529

Net finance costs

8,227

19,549

 

 

 

Share of gain (loss) of associates and joint ventures

632

(407)

Profit before income tax

28,568

20,676

 

 

 

Income tax expense (benefit)

18,651

(972)

Profit for the year

9,917

21,648

 

 

 

 

 

 

Attributable to:

 

 

Shareholders of the Company

11,080

21,910

Non-controlling interests

(1,163)

(262)

Profit for the year

9,917

21,648

 

 

 

Earnings per share

 

 

Basic earnings per share

0.40

0.79

Diluted earnings per share

0.40

0.79

 

 

 

 

AMG Advanced Metallurgical Group N.V.

 

 

Consolidated Statement of Financial Position 

 

 

 

 

 

 As at December 31

 

 

In thousands of US Dollars   

2015

2014

 

Unaudited

 

Assets

 

 

Property, plant and equipment

215,833

237,418

Goodwill

18,676

20,618

Intangible assets

10,246

11,116

Investments in associates and joint ventures

2,230

1,450

Other investments

14,000

-

Deferred tax assets

31,551

37,903

Restricted cash

2,527

7,582

Other assets

19,883

21,987

Total non-current assets

314,946

338,074

Inventories

126,389

145,418

Trade and other receivables

124,270

135,293

Derivative financial instruments

978

1,997

Other assets

27,648

47,055

Assets held for sale

673

2,553

Cash and cash equivalents

127,778

108,029

Total current assets

407,736

440,345

Total assets

722,682

778,419

 

 

 

 

AMG Advanced Metallurgical Group N.V.

 

 

Consolidated Statement of Financial Position

 

 

(continued)

 

 

 

 

 

 As at December 31

 

 

In thousands of US Dollars 

2015

2014

 

Unaudited 

 

Equity

 

 

Issued capital

745

745

Share premium

382,978

382,978

Other reserves

(49,500)

(59,728)

Retained earnings (deficit)

(205,662)

(225,843)

Equity attributable to shareholders of the Company

128,561

98,152

 

 

 

Non-controlling interests

25,006

2,825

Total equity

153,567

100,977

 

 

 

Liabilities

 

 

Loans and borrowings

112,217

167,990

Employee benefits

137,853

159,672

Provisions

29,617

37,056

Deferred revenue

13,539

8,950

Government grants

536

666

Other liabilities

8,821

8,885

Derivative financial instruments

5,642

5,056

Deferred tax liabilities

11,691

8,261

Total non-current liabilities

319,916

396,536

 

 

 

Loans and borrowings

3,222

6,562

Short term bank debt

11,304

21,326

Government grants

99

88

Liabilities associated with assets held for sale

423

248

Other liabilities

42,872

53,257

Trade and other payables

108,019

134,373

Derivative financial instruments

8,379

9,104

Advance payments

44,184

31,689

Deferred revenue

16,124

8,414

Current taxes payable

3,093

671

Provisions

11,480

15,174

Total current liabilities

249,199

280,906

Total liabilities

569,115

677,442

Total equity and liabilities

722,682

778,419

 

 

AMG Advanced Metallurgical Group N.V.

 

 

Consolidated Statement of Cash Flows

 

 

 

For the year ended December 31

 

 

In thousands of US Dollars

2015

2014

 

Unaudited

 

Cash flows from operating activities

 

 

Profit for the year

9,917

21,648

Adjustments to reconcile net profit to net cash flows:

 

 

Non-cash:

 

 

Income tax expense

18,651

(972)

Depreciation and amortization

29,590

32,494

Asset impairment expense

-

1,867

Net finance costs

8,227

19,549

Share of (profit) loss of associates and joint ventures

(632)

407

Loss on sale or disposal of property, plant and equipment

2

297

Equity-settled share-based payment transactions

5,041

854

Movement in provisions, pensions and government grants

1,062

44

Working capital and deferred revenue adjustments

21,551

38,991

Cash flows from operating activities

93,409

115,179

Finance costs paid, net

(11,394)

(13,813)

Income tax paid, net

(5,707)

(6,252)

Net cash flows from operating activities

76,308

95,114

 

 

 

Cash flows used in investing activities

 

 

Proceeds from sale of property, plant and equipment

709

493

Proceeds from sale of subsidiaries (net of cash divested of $1,384 in 2015 (2014:nil))

(1,567)

354

Acquisition of property, plant and equipment and intangibles

(23,264)

(23,957)

Change in restricted cash

4,812

(105)

Acquisition of other non-current asset investments

(1,200)

-

Other

(16)

184

Net cash flows used in investing activities

(20,526)

(23,031)

 

 

 

AMG Advanced Metallurgical Group N.V.

 

 

Condensed interim consolidated statement of cash flows

 

 

(continued)

 

 

For the year ended December 31

 

 

In thousands of US Dollars

2015

2014

 

Unaudited

 

Cash flows used in financing activities

 

 

Proceeds from issuance of debt

188,890

2,691

Payment of transaction costs related to debt issuance

(5,081)

-

Repayment of borrowings

(248,490)

(60,649)

Change in non-controlling interests

38,740

28

Dividends paid

(3,134)

-

Other

(34)

5

Net cash flows used in financing activities

(29,109)

(57,925)

 

 

 

Net increase in cash and cash equivalents

26,673

14,158

 

 

 

Cash and cash equivalents at January 1

108,029

103,067

Effect of exchange rate fluctuations on cash held

(6,924)

(9,196)

Cash and cash equivalents at December 31

127,778

108,029

 

 

 

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

Senior Vice President

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.

 

March 11 2016