Market Overview

AMG Advanced Metallurgical Group N.V. Reports Third Quarter 2015 Results

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Key Highlights

  • EPS, on a fully diluted basis, was $0.18 in the third quarter 2015, a 50% increase from the same period in 2014
  • Annualized return on capital employed increased to 14.7% in the third quarter 2015, from 11.4% in the same period in 2014
  • As of September 30, 2015, net debt was $20.3 million, a reduction of $21.6 million in the third quarter 2015
  • EBITDA(2) was $20.4 million in the third quarter 2015, $23.4 million when adjusted for foreign currency translation effects(3)

AMSTERDAM, Netherlands, Nov. 5, 2015 (GLOBE NEWSWIRE) -- (Regulated Information) --- AMG Advanced Metallurgical Group N.V. ("AMG", EURONEXT AMSTERDAM: "AMG") reported net income attributable to shareholders for the third quarter 2015 of $4.9 million, a 52% increase from $3.2 million in the third quarter 2014. EBITDA decreased to $20.4 million in the third quarter 2015 from $23.4 million in the third quarter 2014.

Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, "AMG earnings and cash flow for the third quarter were strong despite collapsing metal prices and the unfavorable translation impact of foreign currency on reported earnings. The aggressive steps taken by AMG to strengthen our balance sheet, manage price risk and reduce cost has positioned the company well, resulting in significantly higher levels of profitability and cash flow than experienced in previous market downturns.

AMG Engineering achieved EBITDA of $4.9 million during the quarter, the highest in nine quarters, making further progress towards our stated objective to reduce cost and return the Engineering business to historic levels of profitability in 2016. Order intake of $67.4 million represented a 1.25x book to bill ratio. The Engineering division continues to experience 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.

AMG Critical Materials remains profitable in all business units despite difficult trading conditions and double-digit market price declines in seven of AMG's nine critical materials.

AMG reduced net debt by $67.5 million in the first nine months of 2015 to $20.3 million, a net debt to last twelve months EBITDA ratio of 0.23."

Key Figures

In 000's US Dollar      
  Q3 '15 Q3 '14 Change
Revenue $241,867 $279,718 (14%)
Gross profit 39,660 48,059 (17%)
Gross margin 16.4% 17.2%  
       
Operating profit 8,297 14,999 (45%)
Operating margin 3.4% 5.4%  
       
Net income attributable to shareholders 4,933 3,236 52%
       
EPS - Fully diluted 0.18 0.12 50%
       
EBIT (1) 12,751 15,285 (17%)
EBITDA (2)  20,416 23,414 (13%)
EBITDA margin 8.4% 8.4%  
       
Cash flows from operating activities 27,697 47,662 (42%)

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

Operational Review

AMG Critical Materials

  Q3 '15 Q3 '14 Change
Revenue $187,741 $218,586 (14%)
Gross profit  * 27,102 37,575 (28%)
Operating profit 6,143 16,383 (63%)
EBITDA 15,531 22,705 (32%)
       

* Includes $2.1 million non-cash expense related to vanadium, nickel and molybdenum inventory adjustments in the third quarter 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, revenue decreased by 14%, to $187.7 million.

The reduction in market prices of antimony metal, vanadium, nickel and molybdenum of 27%, 30%, 43% and 54%, respectively, negatively affected revenue in the third quarter of 2015 compared to the third quarter of 2014.

Gross profit decreased $10.5 million, or 28%, to $27.1 million, driven by foreign currency translation effects, falling metals prices and lower sales of aluminum master alloys and tantalum during the quarter.

AMG Vanadium incurred a non-cash inventory adjustment expense of $2.1 million in the third quarter 2015 due to rapidly falling vanadium, nickel and molybdenum prices. Excluding this adjustment, gross margin declined to 16% from 17% in the third quarter of 2014.

Third quarter 2015 EBITDA margin decreased to 8% from 10% in the third quarter of 2014. SG&A cost reductions of 12% partially offset the impact of a reduction in gross profit in the quarter.

AMG Engineering

  Q3 '15 Q3 '14 Change
Revenue $54,126 $61,132 (11%)
Gross profit 12,558 10,484 20%
Operating profit (loss) 2,154 (1,384) N/A
EBITDA 4,885 709 589%
       

AMG Engineering signed $67.4 million in new orders during the third quarter of 2015, representing a 1.25x book to bill ratio. Order backlog was $153.1 million as of September 30, 2015, an increase of 11% from June 30, 2015.

AMG Engineering's third quarter 2015 revenue decreased $7.0 million, or 11%, to $54.1 million, as an increase in local currency revenues was more than offset by foreign currency translation effects. Revenue generated from heat treatment furnaces and induction furnaces increased in the third quarter of 2015 compared to the third quarter of 2014.

Third quarter 2015 gross margin increased to 23% from 17% in the third quarter of 2014 due to higher revenue in local currency, product mix effects and improved project cost management.

EBITDA increased by $4.2 million, to $4.9 million, in the third quarter of 2015, the highest quarterly EBITDA in nine quarters, due to higher gross profit and lower SG&A costs.

Financial Review

Tax

AMG recorded an income tax expense of $14.2 million through the first nine months of 2015 as compared to a tax expense of $8.9 million in the first nine months of 2014.  The largest driver of this variance relates to changes in the valuation of the Brazilian currency.

The effective tax rate of 54% 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 $3.7 million in the first nine months of 2015 as compared to tax payments of $4.5 million in the first nine months of 2014. For the first nine months of 2015, AMG's effective cash tax rate is 14%, as compared to 20% in the first nine months of 2014.

Liquidity

  September 30, 2015 December 31, 2014 Change
Total debt $134,406 $195,878 (31%)
Cash and cash equivalents 114,070 108,029 6%
Net debt 20,336 87,849 (77%)

AMG had a net debt position of $20.3 million as of September 30, 2015.  Net debt and gross debt decreased $67.5 million and $61.5 million, respectively, from December 31, 2014.

Cash flows from operating activities were $42.8 million in the first nine months of 2015 compared to $72.5 million in the same period in 2014.

Capital expenditures declined to $12.3 million in the first nine months of 2015 compared to $17.2 million in the same period in 2014.  Capital spending in the first nine months of 2015 included $8.0 million of maintenance capital. The largest expansion capital project was for AMG's titanium aluminides business.

Including the $114.1 million of cash, AMG had $261.8 million of total liquidity as of September 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 September 30, 2015 compared to December 31, 2014, resulted in a decrease of $47 million and $38 million in assets and liabilities on the balance sheet, respectively. The appreciation of the US Dollar compared to the Euro in the third quarter of 2015 in relation to the third quarter of 2014, resulted in a reduction in revenue and EBITDA of $28 million and $3 million, respectively. 

EBITDA adjusted for Euro foreign currency translation effects is therefore $23.4 million in the third quarter 2015.

Outlook

AMG expects to continue to generate strong operating cash flow and further reduce gross and net debt in the fourth quarter 2015.

Since the second quarter 2015, prices of ferrovanadium, nickel and molybdenum have declined by 9%, 19% and 22% respectively. Despite the negative impact of these price declines on earnings, AMG expects to generate 2015 full year EBITDA of approximately $80 million.

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

AMG Advanced Metallurgical Group N.V.    
Condensed interim consolidated income statement    
     
For the quarter ended September 30    
In thousands of US Dollars 2015 2014
  Unaudited Unaudited
     
Revenue 241,867 279,718
Cost of sales 202,207 231,659
Gross profit 39,660 48,059
     
Selling, general and administrative expenses 28,925 33,125
Restructuring expense 2,455 19
Other income, net (17) (84)
Operating profit 8,297 14,999
     
Finance income (70) (197)
Finance expense 52 3,671
Foreign exchange gain (1,460) (22)
Net finance costs (1,478) 3,452
     
Share of profit (loss) of associates and joint ventures 53 (1,252)
Profit before income tax 9,828 10,295
     
Income tax expense 4,679 7,101
Profit for the period 5,149 3,194
     
     
Attributable to:    
Shareholders of the Company 4,933 3,236
Non-controlling interests 216 (42)
Profit for the period 5,149 3,194
     
Earnings per share    
Basic earnings per share 0.18 0.12
Diluted earnings per share 0.18 0.12
AMG Advanced Metallurgical Group N.V.    
Condensed interim consolidated income statement    
     
For the nine months ended September 30    
In thousands of US Dollars 2015 2014
  Unaudited Unaudited
     
Revenue 756,301 833,511
Cost of sales 628,726 694,137
Gross profit 127,575 139,374
     
Selling, general and administrative expenses 91,931 102,259
Restructuring expense 6,114 1,811
Environmental (2,286) -
Other income, net (156) (1,630)
Operating profit 31,972 36,934
     
Finance income (542) (538)
Finance expense 9,048 14,098
Foreign exchange gain (2,577) (8)
Net finance costs 5,929 13,552
     
Share of profit (loss) of associates and joint ventures 250 (469)
Profit before income tax 26,293 22,913
     
Income tax expense 14,235 8,912
Profit for the period 12,058 14,001
     
     
Attributable to:    
Shareholders of the Company 11,417 14,600
Non-controlling interests 641 (599)
Profit for the period 12,058 14,001
     
Earnings per share    
Basic earnings per share 0.41 0.53
Diluted earnings per share 0.41 0.53
AMG Advanced Metallurgical Group N.V.    
Condensed interim consolidated statement of financial position     
     
  September 30, December 31,
In thousands of US Dollars    2015 2014
  Unaudited  
Assets    
Property, plant and equipment 216,128 237,418
Goodwill 19,193 20,618
Intangible assets 10,136 11,116
Investments in associates and joint ventures 1,873 1,450
Derivative financial instruments 13 -
Deferred tax assets 34,624 37,903
Restricted cash 2,554 7,582
Other assets 31,477 21,987
Total non-current assets 315,998 338,074
Inventories 134,667 145,418
Trade and other receivables 137,572 135,293
Derivative financial instruments 1,159 1,997
Other assets 32,433 47,055
Assets held for sale - 2,553
Cash and cash equivalents 114,070 108,029
Total current assets 419,901 440,345
Total assets 735,899 778,419
AMG Advanced Metallurgical Group N.V.    
Condensed interim consolidated statement of financial position    
(continued)    
     
  September 30 December 31,
In thousands of US Dollars    2015 2014
  Unaudited  
Equity    
Issued capital 745 745
Share premium 382,978 382,978
Other reserves (53,408) (59,728)
Retained earnings (deficit) (203,196) (225,843)
Equity attributable to shareholders of the 127,119 98,152
Company    
Non-controlling interests 25,553 2,825
Total equity 152,672 100,977
     
Liabilities    
Loans and borrowings 112,390 167,990
Employee benefits 144,059 159,672
Provisions 29,025 37,056
Deferred revenue 18,999 8,950
Government grants 536 666
Other liabilities 7,230 8,885
Derivative financial instruments 6,158 5,056
Deferred tax liabilities 10,319 8,261
Total non-current liabilities 328,716 396,536
     
Loans and borrowings 3,301 6,562
Short term bank debt 18,715 21,326
Government grants 101 88
Liabilities associated with assets held for sale - 248
Other liabilities 46,697 53,257
Trade and other payables 105,628 134,373
Derivative financial instruments 10,682 9,104
Advance payments 38,430 31,689
Deferred revenue 14,909 8,414
Current taxes payable 2,897 671
Provisions 13,151 15,174
Total current liabilities 254,511 280,906
Total liabilities 583,227 677,442
Total equity and liabilities 735,899 778,419
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 2015 2014
  Unaudited Unaudited
Cash flows from operating activities    
Profit for the period 12,058 14,001
Adjustments to reconcile net profit to net cash    
flows:    
Non-cash:    
Income tax expense 14,235 8,912
Depreciation and amortization 21,957 24,447
Net finance costs 5,929 13,552
Share of (profit) loss of associates and joint ventures (250) 469
(Gain) loss on sale or disposal of property, plant and equipment (179) 325
Equity-settled share-based payment transactions 3,326 673
Movement in provisions, pensions and government grants 1,340 (4,174)
Working capital and deferred revenue adjustments (2,049) 27,639
Cash flows from operating activities 56,367 85,844
Finance costs paid, net (9,935) (8,922)
Income tax paid, net (3,674) (4,472)
Net cash flows from operating activities 42,758 72,450
     
Cash flows used in investing activities    
Proceeds from sale of property, plant and equipment 951 260
Proceeds from sale of subsidiaries (net of cash divested of $1,384) (1,567) -
Acquisition of property, plant and equipment and (12,260) (17,232)
intangibles    
Change in restricted cash 4,861 (169)
Other (10) 157
Net cash flows used in investing activities (8,025) (16,984)
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 2015 2014
  Unaudited Unaudited
Cash flows used in financing activities    
Proceeds from issuance of debt 177,205 -
Payment of transaction costs related to debt issuance (5,199) -
Repayment of borrowings (230,780) (30,822)
Change in non-controlling interests 37,530 28
Dividends paid (2,669) -
Other (167) 3
Net cash flows used in financing activities (24,080) (30,791)
     
Net increase in cash and cash equivalents 10,653 24,675
     
Cash and cash equivalents at January 1 108,029 103,067
Effect of exchange rate fluctuations on cash held (4,612) (5,512)
Cash and cash equivalents at September 30 114,070 122,230

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@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.

November 5 2015 http://hugin.info/138060/R/1964150/716880.pdf

HUG#1964150

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