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

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AMG Advanced Metallurgical Group N.V. Reports Third Quarter 2017 Results
02 November 2017

Key Highlights

  • Revenue increased by 5% to $258.9 million in the third quarter 2017 from $247.5 million in the third quarter 2016
  • EBITDA(2) was $27.6 million in the third quarter 2017, an increase of $4.2 million, or 18%, over the same period in 2016
  • Operating profit increased by 10% to $17.8 million in the third quarter 2017 from $16.1 million in the third quarter 2016
  • Net income attributable to shareholders increased by 169% to $14.0 million in the third quarter 2017 from $5.2 million in the third quarter 2016
  • EPS, on a fully diluted basis, was $0.44 in the third quarter 2017, an increase of $0.26, or 144%, over the same period in 2016
  • Cash from operating activities on a year to date basis was $45.3 million, an increase of $4.6 million, or 11%, over the same period in 2016
  • Annualized return on capital employed increased to 21.5% in the third quarter 2017, as compared to 18.0% in the third quarter 2016
  • AMG has mandated Outotec OYJ, Finland, to complete engineering work for a second lithium concentrate plant at the Mibra mine in Brazil

 

Amsterdam, 2 November 2017 (Regulated Information) --- AMG Advanced Metallurgical Group N.V. ("AMG", EURONEXT AMSTERDAM: "AMG") reported third quarter 2017 EBITDA of $27.6 million, an 18% increase from $23.4 million in the third quarter 2016. Revenue increased to $258.9 million in the third quarter 2017, an increase of $11.4 million, or 5%, from the third quarter 2016. Net income attributable to shareholders for the third quarter 2017 was $14.0 million, a 169% increase from $5.2 million in the third quarter 2016.

 

Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, "AMG's third quarter 2017 performance was once again strong across all of our key financial and operational metrics, driven primarily by improved pricing and volume in our Critical Materials business. On a year to date basis, net income attributable to shareholders has increased by $12.0 million, or 39%, to $42.6 million, resulting in a 29% year to date improvement in EPS, on a fully diluted basis.

 

I am pleased to announce that during the quarter, we further advanced our work on the first lithium concentrate plant at the Mibra mine in Brazil, in accordance with our EPC contract development schedule with Outotec OYJ, Finland. Furthermore, as announced today, we have signed a contract with Outotec to complete engineering work for a second lithium concentrate plant at the Mibra mine in Brazil. The annual design capacity of the second lithium concentrate plant will be 90,000 tons, leading to a combined annual production capacity of 180,000 tons. We expect to make a final investment decision for the second plant in December 2017 and reach full operating capacity by the end of 2019.

 

AMG Critical Materials generated EBITDA of $23.5 million during the third quarter 2017, thanks to strong financial performance in vanadium and titanium alloys, and the recognition of $4.6 million in business interruption insurance, following the fire at the Mibra mine in Brazil.

 

AMG Engineering's EBITDA of $4.1 million in the third quarter 2017 was down compared to the third quarter 2016, mainly due to the $4.3 million gain on the sale of an unused production facility recognized in the prior year.

 

In the third quarter of 2017, AMG generated cash from operating activities of $16.8 million, a decrease of $3.9 million, or 19%, over the same period in 2016. On a year to date basis, AMG generated cash from operating activities of $45.3 million in 2017, an increase of $4.6 million, or 11%, compared to the same period in 2016."

 

Key Figures

 

In 000's US Dollar

 

 

 

 

Q3 '17

Q3 '16

Change

Revenue

$258,941

$247,526

5%

Gross profit

51,273

46,298

11%

Gross margin

19.8%

18.7%

 

 

 

 

 

Operating profit

17,756

16,110

10%

Operating margin

6.9%

6.5%

 

 

 

 

 

Net income attributable to shareholders

13,953

5,181

169%

 

 

 

 

EPS - Fully diluted

0.44

0.18

144%

 

 

 

 

EBIT (1)

19,879

16,231

22%

EBITDA (2) 

27,638

23,403

18%

EBITDA margin

10.7%

9.5%

 

 

 

 

 

Cash from operating activities 

16,790

20,677

(19%)

Note: 

1.       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.

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

 

 

Operational Review

 

AMG Critical Materials

 

Q3 '17

Q3 '16

Change

Revenue

$203,352

$177,490

15%

Gross profit

 36,695

 31,931

15%

Operating profit

15,752

9,106

73%

EBITDA

23,509

14,467

63%

 

 

 

 

 

AMG Critical Materials' revenue in the third quarter increased by $25.9 million, or 15%, to $203.4 million, driven by improved vanadium, aluminum, titanium, antimony, chrome and graphite prices, and higher sales volumes of vanadium, chrome, antimony, and titanium products.

 

Gross profit in the third quarter increased by $4.8 million, or 15%, to $36.7 million. Strong financial performance in vanadium and titanium alloys in the quarter was partially offset by lower gross profit in tantalum, aluminum and antimony. The reduction in tantalum gross profit was driven by lower sales volumes due to the fire damage sustained at the Mibra mine in Brazil in the first quarter of 2017, and lower sales prices.

 

AMG is insured for the interruption to the tantalum business and has recorded insurance proceeds of $4.6 million during the third quarter 2017, which is included within gross profit and EBITDA.

 

Additional insurance proceeds, in respect of both business interruption and property damage, are expected to be recorded in the fourth quarter 2017. In accordance with IFRS, AMG is recognizing the insurance proceeds as recovery amounts are finalized.

 

SG&A expenses in the third quarter 2017 decreased by $1.8 million, or 8%, compared to the same period in the prior year, primarily due to a reduction in share-based compensation expenses.

 

Third quarter 2017 EBITDA margin increased to 12%, compared to 8% in the third quarter 2016.

 

AMG Engineering

 

Q3 '17

Q3 '16

Change

Revenue

$55,589

$70,036

(21%)

Gross profit

14,578

14,367

1%

Operating profit

2,004

7,004

(71%)

EBITDA

4,129

8,936

(54%)

 

 

 

 

 

AMG Engineering signed $40.5 million in new orders during the third quarter 2017, representing a 0.73x book to bill ratio. Order backlog was $175.9 million as of September 30, 2017, an increase of $40.4 million, or 30%, from December 31, 2016. Order intake in the third quarter was adversely impacted by the timing of a number of large orders which are expected to be finalized in the near term.

 

AMG Engineering's third quarter 2017 revenue decreased $14.4 million, or 21%, to $55.6 million. Revenue in the quarter was adversely impacted due to a high proportion of early stage, large contracts in the engineering division which increase quarterly volatility. We do not expect any significant impact on revenue or earnings on an annualized basis as a result of the higher proportion of large contracts within the order backlog.

 

Third quarter 2017 gross profit increased slightly by $0.2 million, or 1%, to $14.6 million, and gross margin increased to 26% from 21%, due to a greater proportion of revenue being generated from high margin, aerospace market facing products in the quarter.

 

SG&A expenses increased by $0.9 million, or 8%, compared to the third quarter 2016, primarily due to higher employee related expenses and research & development costs, offset by lower share-based compensation expenses.

 

EBITDA decreased by $4.8 million to $4.1 million in the third quarter 2017. The year over year reduction was primarily due to the recognition of a $4.3 million gain on the sale of an unused production facility in Berlin in the third quarter of 2016.

 

Financial Review

 

Tax

 

AMG recorded an income tax expense of $1.7 million in the third quarter 2017 as compared to a tax expense of $4.1 million in the same period in 2016. The lower tax expense in the third quarter 2017 was primarily due to a drop in the Brazilian Real, which reduced income tax expense.

 

Due to the volatile nature of the Company's deferred tax balances caused by items such as the Brazil currency fluctuations, AMG focuses on cash tax payments.  AMG paid taxes of $3.2 million in the third quarter 2017 as compared to tax payments of $1.1 million in the same period in 2016. For the third quarter 2017, AMG's effective cash tax rate was 21%, compared to 12% in the same period in 2016. The increase is due to higher profitability in countries where the Company does not have tax losses carried forward to reduce tax liabilities.

 

Non-Recurring Items

 

AMG's third quarter 2017 gross profit of $51.3 million includes non-recurring items, which are not included in the calculation of EBITDA.

 

A summary of non-recurring items included in gross profit in the third quarters of 2017 and 2016 are below:

 

Non-recurring items included in gross profit

 

 

Q3 '17

Q3 '16

Change

Gross profit

$51,273

$46,298

11%

Restructuring expense

353

234

51%

Asset impairment (reversal) expense

(101)

-

N/A

Gross profit before non-

  recurring items

51,525

46,532

11%

 

Gross profit before non-recurring items by reporting segment

 

 

Q3 '17

Q3 '16

Change

AMG Critical Materials

$36,873

$32,025

15%

AMG Engineering

14,652

14,507

1%

Gross profit before non-

  recurring items

51,525

46,532

11%

 

As noted in AMG's 2016 financial statements, the Company modified its income statement presentation in order to take into consideration ESMA's latest recommendations. This resulted in the reclassification of restructuring expenses and asset impairment expenses into expenses by function, and consequently gross profit.

 

Liquidity

 

September 30, 2017

December 31, 2016

Change

Total debt

$187,217

$168,080

11%

Cash and cash equivalents

171,789

160,744

7%

Net debt

15,428

7,336

110%

 

 

AMG had a net debt position of $15.4 million as of September 30, 2017. Total debt increased by $19.1 million and net debt increased $8.1 million from December 31, 2016, as we borrowed in Brazil for our first spodumene plant.

 

Cash from operating activities decreased by $3.9 million, or 19%, to $16.8 million in the third quarter 2017, due to an increase in working capital during the quarter which was largely driven by an increase in accounts receivable related to increases in price and volume in AMG Critical Materials.

 

Capital expenditures increased to $23.2 million in the third quarter 2017 compared to $8.3 million in the same period in 2016. Capital spending in the third quarter 2017 included $9.2 million of maintenance capital. The largest expansion capital projects were the lithium project in Brazil, and the titanium aluminide expansion in Germany.

 

Including the $171.8 million of cash, AMG had $338 million of total liquidity as of September 30, 2017.

 

Net Finance Costs

 

AMG's third quarter 2017 net finance costs decreased to $2.3 million from $6.8 million in the third quarter 2016, due to significant finance costs recognized in the third quarter of 2016 as a result of refinancing the credit facility.

 

SG&A

 

AMG's third quarter 2017 SG&A expenses were $33.8 million compared to $34.7 million in the third quarter 2016, primarily due to a decrease in share-based compensation expenses of $4.3 million, partially offset by higher employee related expenses of $2.8 million.

 

Outlook

 

AMG expects full year 2017 EBITDA to improve by 10%, or more, relative to 2016.

 

In 2018, AMG expects to continue its strong financial performance and improve profitability relative to 2017.

 

 

 

 

AMG Advanced Metallurgical Group N.V.

 

 

Condensed Interim Consolidated Income Statement

 

 

 

 

 

For the quarter ended September 30

 

 

In thousands of US Dollars

2017

2016

 

Unaudited

Unaudited

Continuing operations

 

 

Revenue

258,941

247,526

Cost of sales

207,668

201,228

Gross profit

51,273

46,298

 

 

 

Selling, general and administrative expenses

33,787

34,701

 

 

 

Environmental expense

-

45

 

 

 

Net other operating income

(270)

(4,558)

 

 

 

Operating profit

17,756

16,110

 

 

 

Finance income

(229)

(165)

Finance expense

2,136

6,293

Foreign exchange loss

359

708

Net finance costs

2,266

6,836

 

 

 

Share of gain of associates and joint ventures, net of tax

-

368

 

 

 

Profit before income tax

15,490

9,642

 

 

 

Income tax expense 

1,731

4,132

 

 

 

Profit for the period

13,759

5,510

 

 

 

Attributable to:

 

 

Shareholders of the Company

13,953

5,181

Non-controlling interests

(194)

329

Profit for the period

13,759

5,510

 

 

 

Earnings per share

 

 

Basic earnings per share

0.47

0.19

Diluted earnings per share

0.44

0.18

 

 

 

AMG Advanced Metallurgical Group N.V.

 

 

Condensed Interim Consolidated Income Statement

 

 

 

 

 

For the nine months ended September 30

 

 

In thousands of US Dollars

2017

2016

 

Unaudited

Unaudited

Continuing operations

 

 

Revenue

778,952

733,274

Cost of sales

620,832

589,451

Gross profit

158,120

143,823

 

 

 

Selling, general and administrative expenses

97,339

100,761

 

 

 

Environmental expense

-

45

 

 

 

Net other operating income

(580)

(4,993)

 

 

 

Operating profit

61,361

48,010

 

 

 

Finance income

(650)

(459)

Finance expense

6,440

10,806

Foreign exchange loss

276

1,644

Net finance costs

6,066

11,991

 

 

 

Share of gain of associates and joint ventures, net of tax

-

1,804

 

 

 

Profit before income tax

55,295

37,823

 

 

 

Income tax expense 

12,925

7,217

 

 

 

Profit for the period

42,370

30,606

 

 

 

Attributable to:

 

 

Shareholders of the Company

42,634

30,602

Non-controlling interests

(264)

4

Profit for the period

42,370

30,606

 

 

 

Earnings per share

 

 

Basic earnings per share

1.47

1.10

Diluted earnings per share

1.34

1.04

 

AMG Advanced Metallurgical Group N.V.

 

 

Condensed Interim Consolidated Statement of Financial Position 

 

 

 

 

 

 

 

 

In thousands of US Dollars 

September 30,

2017

Unaudited

December 31, 2016

Assets

 

 

Property, plant and equipment

271,258

226,098

Goodwill

24,753

22,729

Intangible assets

12,368

10,486

Derivative financial instruments

751

740

Other investments

30,411

29,930

Deferred tax assets

37,113

41,285

Restricted cash

817

2,526

Other assets

12,738

17,207

Total non-current assets

390,209

351,001

Inventories

158,565

143,593

Derivative financial instruments

8,523

4,007

Trade and other receivables

149,186

129,220

Other assets

38,760

31,598

Cash and cash equivalents

171,789

160,744

Assets held for sale

2,025

149

Total current assets

528,848

469,311

Total assets

919,057

820,312

 

 

 

 

AMG Advanced Metallurgical Group N.V.

 

 

Condensed Interim Consolidated Statement of Financial Position 

 

 

(continued)

 

 

 

 

 

 

 

 

In thousands of US Dollars 

September 30, 2017

Unaudited

December 31, 2016*

Equity

 

 

Issued capital

796

760

Share premium

432,848

389,066

Treasury shares

(3,821)

(570)

Other reserves

(78,768)

(97,085)

Retained earnings (deficit)

(114,889)

(116,457)

Equity attributable to shareholders of the Company

236,166

175,714

 

 

 

Non-controlling interests

24,280

22,073

Total equity

260,446

197,787

 

 

 

Liabilities

 

 

Loans and borrowings

155,393

150,959

Employee benefits

153,675

141,588

Provisions

31,054

30,854

Deferred revenue

-

2,822

Other liabilities

3,968

6,874

Derivative financial instruments

60

887

Deferred tax liabilities

9,398

8,435

Total non-current liabilities

353,548

342,419

 

 

 

Loans and borrowings

16,324

9,621

Short term bank debt

15,500

7,500

Other liabilities

56,639

57,528

Trade and other payables

144,225

133,328

Derivative financial instruments

1,109

4,661

Advance payments

40,982

29,404

Deferred revenue

1,098

10,198

Current taxes payable

10,819

7,065

Provisions

18,367

20,801

Total current liabilities

305,063

280,106

Total liabilities

658,611

622,525

Total equity and liabilities

919,057

820,312

 

 

*Reclassified share reserves from other reserves to retained earnings (deficit) for December 31, 2016

 

AMG Advanced Metallurgical Group N.V.

 

 

Condensed Interim Consolidated Statement of Cash Flows

 

 

 

For the nine months ended September 30

 

 

In thousands of US Dollars

2017

2016

 

Unaudited

Unaudited

Cash from operating activities

 

 

Profit for the year

42,370

30,606

Adjustments to reconcile net profit to net cash flows:

 

 

Non-cash:

 

 

Income tax expense

12,925

7,217

Depreciation and amortization

22,501

22,010

Asset impairment expense

811

-

Net finance costs

6,066

11,991

Share of gain of associates and joint ventures

-

(1,804)

Gain on sale or disposal of property, plant and equipment

(43)

(4,193)

Equity-settled share-based payment transactions

6,624

1,509

Movement in provisions, pensions and government grants

(4,718)

(14,834)

Working capital and deferred revenue adjustments

(27,318)

(2,043)

Cash generated from operating activities

59,218

50,459

Finance costs paid, net

(5,813)

(4,994)

Income tax paid, net

(8,152)

(4,793)

Net cash from operating activities

45,253

40,672

 

 

 

Cash used in investing activities

 

 

Proceeds from sale of property, plant and equipment

183

522

Insurance proceeds on property, plant and equipment

1,516

-

Proceeds from sale of subsidiaries (net of cash divested of $1,820 in 2016)

-

6,512

Acquisition of property, plant and equipment and intangibles

(52,677)

(22,738)

Acquisition of subsidiaries (net of cash acquired of $35 in 2016)

-

(4,961)

Acquisition of other non-current investments

-

(1,000)

Change in restricted cash

1,883

116

Other

(11)

(46)

Net cash used in investing activities

(49,106)

(21,595)

 

 

 

AMG Advanced Metallurgical Group N.V.

 

 

Condensed Interim Consolidated Statement of Cash Flows

 

 

(continued)

 

 

For the nine months ended September 30

 

 

In thousands of US Dollars

2017

2016

 

Unaudited

Unaudited

Cash from financing activities

 

 

Proceeds from issuance of debt

19,500

163,755

Payment of transaction costs related to debt issuance

-

(3,267)

Repayment of borrowings

(7,909)

(121,640)

Change in non-controlling interests

-

(2,695)

Proceeds from issuance of common shares

14,370

-

Net repurchase of common stock

(12,434)

(1,705)

Dividend

(9,310)

(7,558)

Other

-

(68)

Net cash from financing activities

4,217

26,822

 

 

 

Net increase in cash and cash equivalents

364

45,899

 

 

 

Cash and cash equivalents at January 1

160,744

127,778

Effect of exchange rate fluctuations on cash held

10,681

400

Cash and cash equivalents at September 30

171,789

174,077

 

 

 

This press release contains inside information within the meaning of Article 7(1) of the EU Market Abuse Regulation.

 

This press release contains regulated information as defined in the Dutch Financial Markets Supervision Act (Wet op het financieel toezicht).

 

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, Sri Lanka and Mozambique, 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.

 

Nov 2 2017b