Market Overview

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

Share:

Key Highlights

  • Revenue increased by 26% to $329.3 million in the second quarter 2018 from $262.0 million in the second quarter 2017
  • Gross profit was $79.2 million in the second quarter 2018, an increase of $24.8 million, or 46%, over the same period in 2017
  • EBITDA(2) was $50.7 million in the second quarter 2018, a 59% increase over the same period in 2017
  • Profit before income tax increased by 77% to $36.7 million in the second quarter 2018 from $20.8 million in the second quarter 2017
  • EPS, on a fully diluted basis, increased by 29% to $0.54 in the second quarter 2018 from $0.42 in the second quarter 2017
  • Annualized return on capital employed increased to 30.6% in the second quarter 2018, as compared to 23.9% in the second quarter 2017

Amsterdam, 2 August 2018 (Regulated Information) --- AMG Advanced Metallurgical Group N.V. ("AMG", EURONEXT AMSTERDAM: "AMG") reported second quarter 2018 revenue of $329.3 million, a 26% increase from $262.0 million in the second quarter of 2017. EBITDA for the second quarter of 2018 was $50.7 million, a 59% increase from $31.9 million in the second quarter of 2017.

Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, "AMG achieved a sharp improvement in EBITDA during the quarter, driven primarily by improved pricing and higher sales volumes in AMG Critical Materials. Furthermore, relentless improvements in productivity have resulted in an upward trend, both in terms of profitability and return on capital employed.

AMG Critical Materials generated EBITDA of $45.3 million during the second quarter of 2018, an increase of 89% from $23.9 million in the second quarter of 2017, thanks to strong financial performances in vanadium, chrome metal and aluminum products.

AMG Engineering signed $86.2 million in new orders during the second quarter of 2018, representing a 1.39x book to bill ratio, driven by strong sales of turbine blade coating and heat treatment furnaces. Order backlog was $263.2 million as of June 30, 2018, an increase of 27% compared to December 31, 2017.

AMG Engineering achieved EBITDA of $5.5 million during the second quarter of 2018, a decrease of $2.5 million from $8.0 million in the second quarter of 2017 due to higher SG&A expenses and lower gross profit generated from the heat treatment services division. On a full year basis, AMG Engineering expects 2018 EBITDA to be in line with prior year."

Key Figures

In 000's US dollar      
  Q2 '18 Q2 '17 Change
Revenue $329,321 $262,042 26%
Gross profit 79,161 54,344 46%
Gross margin 24.0% 20.7%  
       
Operating profit 42,019 22,577 86%
Operating margin 12.8% 8.6%  
       
Net income attributable to shareholders ** 17,309 13,115 32%
       
EPS - Fully diluted 0.54 0.42 29%
       
EBIT (1) 42,751 24,369 75%
EBITDA (2)  50,749 31,866 59%
EBITDA margin 15.4% 12.2%  
       
Cash (used in) from operating activities (1,197) 10,633 N/A

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.

** Net income attributable to shareholders was impacted by an additional, non-cash tax expense of $6.0 million in the quarter, due to the significant movement of the Brazilian real against the US dollar.

Operational Review

AMG Critical Materials

  Q2 '18 Q2 '17 Change
Revenue $267,213 $202,625 32%
Gross profit  62,151  37,583 65%
Operating profit 37,869 16,896 124%
EBITDA 45,252 23,883 89%
       

AMG Critical Materials revenue in the second quarter increased by $64.6 million, or 32%, to $267.2 million, driven by improved vanadium, silicon metal, aluminum, graphite, chrome metal and tantalum prices, and higher sales volumes of vanadium, aluminum, tantalum and titanium products.

Gross profit in the second quarter increased by $24.6 million, or 65%, to $62.2 million. Strong financial performances in vanadium, chrome metal and aluminum were partially offset by lower gross profit in silicon metal. The strong financial performance was driven by higher vanadium sales volumes and prices, improved chrome metal product mix effects and strong sales volumes of aluminum products. The reduction in gross profit in silicon metal was driven by lower volumes, as a result of unplanned furnace maintenance during the quarter, as well as an accrual for the repayment of a subsidy granted by the German government in 2012-13.

SG&A expenses in the second quarter of 2018 increased by $3.4 million, or 16%, 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 US dollar as well as higher personnel costs.

Second quarter 2018 EBITDA margin increased to 17%, compared to 12% in the second quarter of 2017, due to the improvement in gross profit as noted above.

AMG Engineering

  Q2 '18 Q2 '17 Change
Revenue $62,108 $59,417 5%
Gross profit 17,010 16,761 1%
Operating profit 4,150 5,681 (27%)
EBITDA 5,497 7,983 (31%)
       

AMG Engineering signed $86.2 million in new orders during the second quarter 2018, representing a 1.39x book to bill ratio. Order backlog was $263.2 million as of June 30, 2018, an increase of 3% from March 31, 2018. This was driven by strong sales of turbine blade coating and heat treatment furnaces.

AMG Engineering's second quarter 2018 revenue increased $2.7 million, or 5%, to $62.1 million. Higher revenue generated from the sale of vacuum furnaces was partially offset by lower revenue in the heat treatment services division, as automotive customers transition to new engine programs. Following the completion of this transition process, heat treatment service revenues are expected to return to normal levels in early 2019.

Second quarter 2018 gross profit increased by $0.2 million, or 1%, to $17.0 million and gross margin decreased slightly to 27% from 28% in the second quarter of 2017. The reduction in gross margin was driven by lower gross profit in the heat treatment services division due to lower sales volumes and consequently lower utilization rates.

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 US 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 decreased by $2.5 million to $5.5 million in the second quarter of 2018 due to higher SG&A expenses, increased currency impacts, and lower gross profit generated from the heat treatment services division.

Financial Review

Tax

AMG recorded an income tax expense of $19.5 million in the second quarter of 2018 as compared to a tax expense of $7.7 million in the same period in 2017, driven by higher levels of profitability, the full recognition of AMG's US operating loss carryforwards in 2017, and the revaluation of AMG's Brazilian tax balances. Due to the significant movement of the Brazilian real against the US dollar, AMG incurred an additional non-cash tax expense of $6.0 million in the quarter.

AMG continues to benefit from net operating loss carry forward balances, primarily in the United States, to offset taxes payable. As a result, despite very high pre-tax profitability, AMG paid taxes of $7.0 million in the second quarter of 2018 as compared to tax payments of $3.4 million in the same period in 2017. For the second quarter of 2018, AMG's effective cash tax rate rose to 19% in comparison to 16% for the same period in the prior year.

Due to the volatile nature of the company's Brazilian deferred tax balances, AMG believes that the cash tax rate is a more meaningful metric.

Non-Recurring Items

AMG's second quarter 2018 gross profit of $79.2 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 second quarters of 2018 and 2017 are below:

Non-recurring items included in gross profit

  Q2 '18 Q2 '17 Change
Gross profit $79,161 $54,344 46%
Restructuring expense 950 956 (1%)
Asset impairment recovery (1,032) (1,305) (21%)
Gross profit before non-
  recurring items
79,079 53,995 46%

  
Gross profit before non-recurring items by reporting segment

  Q2 '18 Q2 '17 Change
AMG Critical Materials $62,099 $36,954 68%
AMG Engineering 16,980 17,041 -
Gross profit before non-
  recurring items
79,079 53,995 46%

Liquidity

  June 30,
2018
December 31,
2017
Change
Total debt $377,302 $189,108 100%
Cash and cash equivalents 342,537 178,800 92%
Net debt 34,765 10,308 237%

AMG had a net debt position of $34.8 million as of June 30, 2018. Net debt increased by $24.5 million and total debt increased by $188.2 million from December 31, 2017.

On a year to date basis, cash from operating activities decreased by $4.9 million, or 17%, compared to the same period in the prior year due to higher working capital balances driven by increased metals prices, partially offset by improved profitability in AMG Critical Materials.

Capital expenditures decreased slightly to $18.4 million in the second quarter of 2018 compared to $18.6 million in the same period in 2017. Capital spending in the second quarter of 2018 included $6.8 million of maintenance capital. The largest expansion capital project was AMG's lithium project in Brazil.

AMG had $512.1 million of total liquidity as of June 30, 2018, following the successful refinancing of AMG's credit facilities during the first quarter of 2018.

Net Finance Costs

AMG's second quarter 2018 net finance costs increased to $5.3 million compared to $1.8 million in the second quarter 2017, due to higher levels of gross debt and higher interest rates associated with AMG's new, long term credit facility.

SG&A

AMG's second quarter 2018 SG&A expenses were $37.2 million compared to $32.0 million in the second quarter of 2017, primarily due to foreign exchange effects related to the strengthening of the euro relative to the US dollar and higher personnel costs.

Outlook

Encouraged by the financial performance in the first 6 months of 2018, AMG expects full year 2018 EBITDA to improve by between 40%-50% compared to the prior year.



AMG Advanced Metallurgical Group N.V.    
Condensed Interim Consolidated Income Statement    
     
For the quarter ended June 30    
In thousands of US dollars 2018 2017
  Unaudited Unaudited
Continuing operations    
Revenue 329,321 262,042
Cost of sales 250,160 207,698
Gross profit 79,161 54,344
     
Selling, general and administrative expenses 37,179 31,972
     
Net other operating income (37) (205)
     
Operating profit 42,019 22,577
     
Finance income (864) (495)
Finance cost 6,202 2,310
Net finance cost 5,338 1,815
     
Profit before income tax 36,681 20,762
     
Income tax expense  19,456 7,717
     
Profit for the period 17,225 13,045
     
Attributable to:    
Shareholders of the Company 17,309 13,115
Non-controlling interests (84) (70)
Profit for the period 17,225 13,045
     
Earnings per share    
Basic earnings per share 0.57 0.45
Diluted earnings per share 0.54 0.42
     


AMG Advanced Metallurgical Group N.V.    
Condensed Interim Consolidated Income Statement    
     
For the six months ended June 30    
In thousands of US dollars 2018 2017
  Unaudited Unaudited
Continuing operations    
Revenue 637,769 520,011
Cost of sales 488,490 413,164
Gross profit 149,279 106,847
     
Selling, general and administrative expenses 72,805 63,552
     
Net other operating income (124) (310)
     
Operating profit 76,598 43,605
     
Finance income (1,382) (504)
Finance cost 13,261 4,304
Net finance cost 11,879 3,800
     
Profit before income tax 64,719 39,805
     
Income tax expense  29,161 11,194
     
Profit for the period 35,558 28,611
     
Attributable to:    
Shareholders of the Company 35,698 28,681
Non-controlling interests (140) (70)
Profit for the period 35,558 28,611
     
Earnings per share    
Basic earnings per share 1.19 1.00
Diluted earnings per share 1.12 0.91
     


 

AMG Advanced Metallurgical Group N.V.
   
Condensed Interim Consolidated Statement of Financial Position     
     
     
In thousands of US dollars    June 30, 2018
Unaudited
December 31, 2017

 
Assets    
Property, plant and equipment 315,252 298,540
Goodwill and other intangible assets 36,916 38,110
Derivative financial instruments 4,242 636
Other investments 30,291 30,562
Deferred tax assets 33,236 40,108
Restricted cash 806 829
Non-current tax asset - 2,488
Other assets 15,684 17,729
Total non-current assets 436,427 429,002
Inventories 232,242 162,505
Derivative financial instruments 2,403 6,372
Trade and other receivables 174,274 137,174
Other assets 39,548 37,547
Current tax assets 6,977 3,147
Cash and cash equivalents 342,537 178,800
Assets held for sale 403 2,056
Total current assets 798,384 527,601
Total assets 1,234,811 956,603




AMG Advanced Metallurgical Group N.V.    
Condensed Interim Consolidated Statement of Financial Position     
(continued)    
     
     
In thousands of US dollars    June 30, 2018
Unaudited
December 31, 2017

 
Equity    
Issued capital 812 796
Share premium 462,891 432,844
Treasury shares (931) (3,461)
Other reserves (92,682) (72,880)
Retained earnings (deficit) (96,207) (99,343)
Equity attributable to shareholders of the Company 273,883 257,956
     
Non-controlling interests 24,432 24,633
Total equity 298,315 282,589
     
Liabilities    
Loans and borrowings 360,027 164,788
Employee benefits 152,759 156,193
Provisions 32,203 35,887
Other liabilities 4,201 4,011
Derivative financial instruments 6,741 -
Deferred tax liabilities 7,035 7,888
Total non-current liabilities 562,966 368,767
     
Loans and borrowings 1,775 8,820
Short term bank debt 15,500 15,500
Other liabilities 62,326 61,836
Trade and other payables 186,311 155,115
Derivative financial instruments 11,760 1,415
Advance payments 51,456 33,025
Current taxes payable 17,221 9,155
Provisions 27,181 20,381
Total current liabilities 373,530 305,247
Total liabilities 936,496 674,014
Total equity and liabilities 1,234,811 956,603


 

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 2018 2017
  Unaudited Unaudited
Cash from operating activities    
Profit for the year 35,558 28,611
Adjustments to reconcile net profit to net cash flows:    
Non-cash:    
Income tax expense 29,161 11,194
Depreciation and amortization 16,222 14,742
Asset impairment (1,032) 912
Net finance costs 11,879 3,800
Gain on sale or disposal of property, plant and equipment (42) (68)
Equity-settled share-based payment transactions 3,005 4,418
Movement in provisions, pensions and government grants 4,675 (3,023)
Working capital and deferred revenue adjustments (58,607) (22,930)
Cash generated from operating activities 40,819 37,656
Finance costs paid, net (7,992) (4,249)
Income tax paid, net (9,216) (4,944)
Net cash from operating activities 23,611 28,463
     
Cash used in investing activities    
Proceeds from sale of property, plant and equipment 122 96
Insurance proceeds on property, plant and equipment 1,300 1,415
Acquisition of property, plant and equipment and intangibles (41,017) (29,452)
Change in restricted cash - 210
Other (37) 17
Net cash used in investing activities (39,632) (27,714)


 

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 2018 2017
  Unaudited Unaudited
Cash from (used in) financing activities    
Proceeds from issuance of debt 346,336 8,000
Payment of transaction costs related to the issuance of debt (9,238) -
Repayment of borrowings (155,082) (5,111)
Proceeds from issuance of common shares 15,923 14,370
Net repurchase of common shares (9,853) (13,386)
Dividends paid (5,013) (4,417)
Net cash from (used in) financing activities 183,073 (544)
     
Net increase in cash and cash equivalents 167,052 205
     
Cash and cash equivalents at January 1 178,800 160,744
Effect of exchange rate fluctuations on cash held (3,315) 7,904
Cash and cash equivalents at June 30 342,537 168,853



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.

Attachment

View Comments and Join the Discussion!