Market Overview

AMG Advanced Metallurgical Group N.V. Reports First Quarter 2018 Results

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Key Highlights

  • Revenue increased by 20% to $308.4 million in the first quarter 2018 from $258.0 million in the first quarter 2017
  • EBITDA(2) was $44.5 million in the first quarter 2018, a 35% increase over the same period in 2017
  • Net income attributable to shareholders increased by 18% to $18.4 million in the first quarter 2018 from $15.6 million in the first quarter 2017
  • Cash from operating activities was $24.8 million in the first quarter 2018, an increase of $7.0 million over the same period in 2017
  • Strong cashflows from operating activities caused net debt to decrease by $0.9 million in the first quarter of 2018, to $9.4 million, despite capital expenditures of $22.6 million during the period
  • Annualized return on capital employed increased to 28.4% in the first quarter 2018, as compared to 25.5% in the first quarter 2017

Amsterdam, 2 May 2018 (Regulated Information) --- AMG Advanced Metallurgical Group N.V. ("AMG", EURONEXT AMSTERDAM: "AMG") reported first quarter 2018 revenue of $308.4 million, a 20% increase from $258.0 million in the first quarter 2017. EBITDA for the first quarter 2018 was $44.5 million, a 35% increase from $33.0 million in the first quarter 2017. Net income attributable to shareholders increased 18% to $18.4 million in the first quarter 2018 from $15.6 million in the first quarter 2017.

Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, "AMG achieved a considerable improvement in profitability during the quarter, driven by improved pricing and higher sales volumes in AMG Critical Materials. In addition, continuing strong demand for our industry leading vacuum furnace solutions resulted in the highest quarterly order intake in 10 years and the highest order backlog in over 9 years.

AMG Critical Materials generated EBITDA of $37.1 million during the first quarter 2018, an increase of 44% from $25.7 million in the first quarter of 2017, thanks to strong financial performance in vanadium, silicon, titanium alloys, graphite, chrome and aluminum, driven by higher vanadium and silicon metal prices, and strong sales volumes.

AMG Engineering achieved EBITDA of $7.4 million during the first quarter 2018, a slight increase from $7.3 million in the first quarter 2017. AMG Engineering signed $104.8 million in new orders during the first quarter 2018, representing a 1.74x book to bill ratio, driven by strong orders of turbine blade coating and powder metallurgy furnaces for the aerospace market, heat treatment furnaces for the automotive market and induction heated quartz tube (IWQ) furnaces for fiber optic applications. Order backlog was $255.8 million as of March 31, 2018, an increase of 24% compared to December 31, 2017.

In the first quarter of 2018, AMG generated cash from operating activities of $24.8 million, an increase of $7.0 million compared to the same period in 2017. As a result of the strong cashflow generation, AMG's net debt decreased by $0.9 million in the first quarter of 2018, despite capital expenditures of $22.6 million during the period. In summary, the Company is operating at record levels."

Key Figures

In 000's US Dollar      
  Q1 '18 Q1 '17 Change
Revenue $308,448 $257,969 20%
Gross profit 70,118 52,503 34%
Gross margin 22.7% 20.4%  
       
Operating profit 34,579 21,028 64%
Operating margin 11.2% 8.2%  
       
Net income attributable to shareholders 18,389 15,566 18%
       
EPS - Fully diluted 0.58 0.50 16%
       
EBIT (1) 36,256 25,721 41%
EBITDA (2)  44,480 32,966 35%
EBITDA margin 14.4% 12.8%  
       
Cash from operating activities 24,808 17,830 39%

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

  Q1 '18 Q1 '17 Change
Revenue $248,351 $194,506 28%
Gross profit  51,922  36,268 43%
Operating profit 28,979 15,610 86%
EBITDA 37,076 25,668 44%
       

AMG Critical Materials revenue in the first quarter increased by $53.8 million, or 28%, to $248.4 million, driven by improved vanadium, silicon metal, aluminum, antimony, graphite and titanium prices, and higher sales volumes of vanadium, aluminum, chrome, graphite, tantalum and titanium products.

Gross profit in the first quarter increased by $15.7 million, or 43%, to $51.9 million. Strong financial performance in vanadium, silicon, titanium alloys, graphite, chrome and aluminum was partially offset by lower gross profit in tantalum. The strong financial performance was driven by higher vanadium and silicon metal prices, and strong sales volumes. The reduction in tantalum gross profit was driven by lower sales prices in the first quarter of 2018, compared to the first quarter of 2017, which benefited from the recognition of an additional $6.8 million in deferred revenue, following the early cancellation of AMG Mineração's tantalum supply contract.

SG&A expenses in the first quarter 2018 increased by $2.3 million, or 11%, compared to the same period in the prior year, primarily due to foreign exchange effects related to the strengthening of the euro relative to the dollar and higher personnel costs.

First quarter 2018 EBITDA margin increased to 15%, compared to 13% in the first quarter 2017, due primarily to the improvement in vanadium and silicon metal pricing.

AMG Engineering

  Q1 '18 Q1 '17 Change
Revenue $60,097 $63,463 (5%)
Gross profit 18,196 16,235 12%
Operating profit 5,600 5,418 3%
EBITDA 7,404 7,298 1%
       

AMG Engineering signed $104.8 million in new orders during the first quarter 2018, representing a 1.74x book to bill ratio. Order backlog was $255.8 million as of March 31, 2018, an increase of 24% from December 31, 2017. This was driven by strong sales of turbine blade coating, powder metallurgy, heat treatment and induction heated quartz tube (IWQ) furnaces for fiber optic applications.

AMG Engineering's first quarter 2018 revenue decreased $3.4 million, or 5%, to $60.1 million, primarily due to timing effects. Early stage engineering work underway on a number of large orders received in recent months resulted in lower levels of revenue in the quarter. Higher levels of revenue will be recognized on these projects as they progress into the build stage.

First quarter 2018 gross profit increased by $2.0 million, or 12%, to $18.2 million and gross margin increased to 30% from 26% in the first quarter 2017, due to favorable product mix effects.

SG&A expenses increased by $1.8 million, or 16%, compared to the prior year primarily due to foreign exchange effects related to the strengthening of the euro relative to the dollar and higher personnel costs. AMG Engineering is in the process of expanding its workforce in response to the increased level of order backlog, driven primarily by strong demand from the aerospace market.

EBITDA increased slightly by $0.1 million to $7.4 million in the first quarter 2018.

Financial Review

Tax

AMG recorded an income tax expense of $9.7 million in the first quarter 2018 as compared to a tax expense of $3.5 million in the same period in 2017. The increase in tax expense is driven by higher profitability and the full recognition of AMG's US operating loss carry forwards in 2017.

Due to the volatile nature of the company's deferred tax balances, AMG believes that the cash tax rate is a more meaningful metric. AMG paid taxes of $2.2 million in the first quarter 2018 as compared to tax payments of $1.5 million in the same period in 2017. For the first quarter 2018, AMG's effective cash tax rate remained unchanged compared to the prior year at 8%.

Non-Recurring Items

AMG's first quarter 2018 gross profit of $70.1 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 first quarters of 2018 and 2017 are below:

Non-recurring items included in gross profit

  Q1 '18 Q1 '17 Change
Gross profit $70,118 $52,503 34%
Restructuring expense 189 467 (60%)
Asset impairment expense - 2,217 N/A
Gross profit before non-
  recurring items
70,307 55,187 27%

Gross profit before non-recurring items by reporting segment

  Q1 '18 Q1 '17 Change
AMG Critical Materials $52,079 $38,885 34%
AMG Engineering 18,228 16,302 12%
Gross profit before non-
  recurring items
70,307 55,187 27%

Liquidity

  March 31, 2018 December 31,
2017
Change
Total debt $376,751 $189,108 99%
Cash and cash equivalents ** 367,359 178,800 105%
Net debt ** 9,392 10,308 (9%)

** As a result of the refinancing of AMG's credit facility, cash of $17.1 million has been temporarily restricted and will be released during the course of 2018. Due to the nature of this balance, we have included the amount within the debt calculation disclosed above.

AMG had a net debt position of $9.4 million as of March 31, 2018. Net debt decreased by $0.9 million and total debt increased by $187.6 million from December 31, 2017.

Cash from operating activities increased by $7.0 million to $24.8 million in the first quarter 2018.

Capital expenditures increased to $22.6 million in the first quarter 2018 compared to $10.9 million in the same period in 2017. Capital spending in the first quarter 2018 included $6.9 million of maintenance capital. The largest expansion capital project was AMG's lithium project in Brazil.

AMG had $519.8 million of total liquidity as of March 31, 2018, following the successful refinancing of AMG's credit facilities during the quarter.

Net Finance Costs

AMG's first quarter 2018 net finance costs increased to $6.5 million compared to $2.0 million in the first quarter 2017. The increase was partially due to the write-off of $2.9 million of costs associated with the previous credit facility, following the refinancing exercise completed in January 2018. In addition, interest expenses associated with AMG's new, long term credit facility increased by $1.7 million, due to higher levels of gross debt and higher interest rates associated with the long term nature of the facility.

SG&A

AMG's first quarter 2018 SG&A expenses were $35.6 million compared to $31.6 million in the first quarter 2017, primarily due to foreign exchange effects related to the strengthening of the euro relative to the dollar and, to a lesser extent, higher personnel costs.

Outlook

As demonstrated in the first quarter of 2018, AMG expects full year 2018 EBITDA to improve considerably compared to the prior year.



AMG Advanced Metallurgical Group N.V.    
Condensed Interim Consolidated Income Statement    
     
For the quarter ended March 31    
In thousands of US Dollars 2018 2017
  Unaudited Unaudited
Continuing operations    
Revenue 308,448 257,969
Cost of sales 238,330 205,466
Gross profit 70,118 52,503
     
Selling, general and administrative expenses 35,626 31,580
     
Net other operating income (87) (105)
     
Operating profit 34,579 21,028
     
Finance income (518) (176)
Finance cost 7,059 2,161
Net finance cost 6,541 1,985
     
Profit before income tax 28,038 19,043
     
Income tax expense  9,705 3,477
     
Profit for the period 18,333 15,566
     
Attributable to:    
Shareholders of the Company 18,389 15,566
Non-controlling interests (56) -
Profit for the period 18,333 15,566
     
Earnings per share    
Basic earnings per share 0.62 0.55
Diluted earnings per share 0.58 0.50
     




 

AMG Advanced Metallurgical Group N.V.
   
Condensed Interim Consolidated Statement of Financial Position     
     
     
     
In thousands of US Dollars    March 31, 2018
Unaudited
  December 31, 2017

 
Assets    
Property, plant and equipment 310,102 298,540
Goodwill and other intangible assets 38,720 38,110
Derivative financial instruments 722 636
Other investments 30,650 30,562
Deferred tax assets 41,339 40,108
Restricted cash 18,293 829
Non-current tax asset 2,488 2,488
Other assets 18,731 17,729
Total non-current assets 461,045 429,002
Inventories 199,076 162,505
Derivative financial instruments 5,385 6,372
Trade and other receivables 159,539 137,174
Other assets 33,336 37,547
Current tax assets 6,509 3,147
Cash and cash equivalents 350,238 178,800
Assets held for sale 936 2,056
Total current assets 755,019 527,601
Total assets 1,216,064 956,603




AMG Advanced Metallurgical Group N.V.    
Condensed Interim Consolidated Statement of Financial Position     
(continued)    
     
     
In thousands of US Dollars    March 31, 2018
Unaudited
  December 31, 2017

 
Equity    
Issued capital 796 796
Share premium 432,844 432,844
Treasury shares (3,275) (3,461)
Other reserves (69,959) (72,880)
Retained earnings (deficit) (81,024) (99,343)
Equity attributable to shareholders of the Company 279,382 257,956
     
Non-controlling interests 25,233 24,633
Total equity 304,615 282,589
     
Liabilities    
Loans and borrowings 358,597 164,788
Employee benefits 160,702 156,193
Provisions 35,961 35,887
Other liabilities 4,367 4,011
Derivative financial instruments 637 -
Deferred tax liabilities 7,386 7,888
Total non-current liabilities 567,650 368,767
     
Loans and borrowings 2,654 8,820
Short term bank debt 15,500 15,500
Other liabilities 59,783 60,212
Trade and other payables 159,979 155,115
Derivative financial instruments 2,620 1,415
Advance payments 58,487 33,025
Deferred revenue 2,055 1,624
Current taxes payable 18,043 9,155
Provisions 24,678 20,381
Total current liabilities 343,799 305,247
Total liabilities 911,449 674,014
Total equity and liabilities 1,216,064 956,603




AMG Advanced Metallurgical Group N.V.    
Condensed Interim Consolidated Statement of Cash Flows    
 

For the quarter ended March 31
   
In thousands of US Dollars 2018 2017
  Unaudited Unaudited
Cash from operating activities    
Profit for the year 18,333 15,566
Adjustments to reconcile net profit to net cash flows:    
Non-cash:    
Income tax expense 9,705 3,477
Depreciation and amortization 8,224 7,245
Asset impairment expense - 2,217
Net finance costs 6,541 1,985
Gain on sale or disposal of property, plant and equipment (37) (61)
Equity-settled share-based payment transactions 1,634 2,176
Movement in provisions, pensions and government grants 3,537 293
Working capital and deferred revenue adjustments (17,654) (11,124)
Cash generated from operating activities 30,283 21,774
Finance costs paid, net (3,240) (2,400)
Income tax paid, net (2,235) (1,544)
Net cash from operating activities 24,808 17,830
     
Cash used in investing activities    
Proceeds from sale of property, plant and equipment 39 66
Acquisition of property, plant and equipment and intangibles (22,575) (10,859)
Change in restricted cash (17,405) 217
Other (23) 16
Net cash used in investing activities (39,964) (10,560)




AMG Advanced Metallurgical Group N.V.    
Condensed Interim Consolidated Statement of Cash Flows    
(continued)    
For the quarter ended March 31    
In thousands of US Dollars 2018 2017
  Unaudited Unaudited
Cash from (used in) financing activities    
Proceeds from issuance of debt 346,335 -
Transaction costs related to the issuance of debt (9,339) -
Repayment of borrowings (155,094) (3,050)
Net repurchase of common stock (230) -
Issuance of treasury shares - 151
Net cash from (used in) financing activities 181,672 (2,899)
     
Net increase in cash and cash equivalents 166,516 4,371
     
Cash and cash equivalents at January 1 178,800 160,744
Effect of exchange rate fluctuations on cash held 4,922 1,341
Cash and cash equivalents at March 31 350,238 166,456


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, lithium, 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 3,300 employees, AMG operates globally with production facilities in Germany, the United Kingdom, France, the Czech Republic, the United States, China, Mexico, Brazil, India, 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@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.

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