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AMG Advanced Metallurgical Group N.V. Reports Third Quarter 2013 Results

AMSTERDAM, Netherlands, Nov. 8, 2013 (GLOBE NEWSWIRE) --

Key Highlights * Revenue was $286.4 million in the third quarter 2013, a 4% decrease from the same period in 2012 * EBITDA(()[1]()) was $17.7 million in the third quarter 2013, an 11% decrease from the same period in 2012 * EPS on a fully diluted basis was $0.05 in the third quarter 2013 compared to $0.18 in the same period in 2012 * Cash flows from operating activities were $24.7 million in the third quarter 2013, compared to $30.4 million in the same period in 2012 * AMG Processing generated revenue of $138.1 million and EBITDA of $4.6 million in the third quarter 2013 * AMG Engineering generated revenue of $66.1 million and EBITDA of $4.2 million in the third quarter 2013 * AMG Mining generated revenue of $82.3 million and EBITDA of $8.9 million in the third quarter 2013 * As of September 30, 2013, cash on the balance sheet was $116.3 million; net debt was $163.6 million, a reduction of $16.4 million during the third quarter 2013 Amsterdam, 8 November 2013 (Regulated Information) --- AMG Advanced Metallurgical Group N.V. ("AMG", EURONEXT AMSTERDAM: "AMG") reported third quarter 2013 revenue of $286.4 million, a 4% decrease from $296.9 million in the third quarter 2012. EBITDA decreased 11% to $17.7 million in the third quarter 2013 from $19.8 million in the third quarter 2012. Net income attributable to shareholders for the third quarter 2013 was $1.4 million, or $0.05 per fully diluted share, compared to net income of $5.0 million, or earnings attributable to shareholders of $0.18 in the third quarter 2012. Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, "The specialty metals industry experienced double digit price declines during the third quarter 2013. These declines, from already low 2012 market price levels were most significant in chrome metal, antimony, and vanadium. We have begun to see the benefits of restructuring efforts in AMG Engineering and AMG Mining. Management's comprehensive actions resulted in strong cash flows from operating activities and a significant reduction in net debt. As a result of low prices and lower capacity utilization, we are implementing fixed cost reduction measures at AMG Processing to right size the business for current market conditions. Strategically, we are focusing on the core strengths of our product portfolio and streamlining activities." Key Figures In 000's US Dollar Q3 '13 Q3 '12 Change Revenue $286,415 $296,851 (4%) ---------------------------------------------------------------------------- Gross profit 39,792 47,537 (16%) Gross margin 13.9% 16.0% ---------------------------------------------------------------------------- Operating profit 7,275 11,124 (35%) Operating margin 2.5% 3.7% Net income attributable to 1,407 5,006 (72%) shareholders ---------------------------------------------------------------------------- EPS- Fully diluted 0.05 0.18 (72%) EBIT ((1)) 9,623 12,714 (24%) EBITDA ((2)) 17,701 19,814 (11%) EBITDA margin 6.2% 6.7% Cash flows from operating activities 24,687 30,374 (19%) ---------------------------------------------------------------------------- Note: 1. EBIT is defined as earnings before interest, tax and excludes non-recurring items 2. EBITDA is defined as earnings before interest, tax, depreciation and amortization and excludes non-recurring items Operational Review AMG Processing Q3 '13 Q3 '12 Change ----------------------------------------------------- Revenue $138,068 $146,886 (6%) Gross profit 13,008 19,451 (33%) Operating profit 814 5,000 (84%) EBITDA 4,629 9,086 (49%) Capital expenditures 3,074 5,309 (42%) AMG Processing's third quarter 2013 revenue decreased $8.8 million, or 6%, to $138.1 million. AMG Aluminum revenue increased 2% compared to the third quarter 2012, despite slightly lower aluminum prices. This improvement was more than offset by significant price declines in vanadium and titanium alloys, which resulted in 28% and 6% decreases in AMG Vanadium and AMG Titanium Alloys & Coatings revenue, respectively. The third quarter 2013 gross margin decreased to 9% from 13% in the third quarter 2012, as declining metal prices significantly affected AMG Processing's margins. Specifically, an unfavorable product mix resulted in a 71% decline in AMG Superalloys gross margins. In addition, significant declines in solar coatings and titanium alloy revenue resulted in a 38% decline in AMG Titanium Alloys & Coatings gross margins. These impacts more than offset a 79% increase in AMG Aluminum gross margins, which was the result of the rationalization of lower margin products and productivity improvements. The third quarter 2013 EBITDA decreased $4.5 million to 3% of revenue from 6% of revenue in the third quarter 2012. The EBITDA decrease was the result of the $6.4 million decline in gross profit offset by a $2.0 million decrease in SG&A personnel expenses. Capital expenditures were $3.1 million for the third quarter 2013, a 42% decrease from the third quarter 2012. Capital investments made in the third quarter included $2.2 million of maintenance expenditures. AMG Engineering Q3 '13 Q3 '12 Change --------------------------------------------------- Revenue $66,093 $71,209 (7%) Gross profit 13,979 14,813 (6%) Operating profit 475 3,213 (85%) EBITDA 4,179 5,787 (28%) Capital expenditures 487 1,345 (64%) AMG Engineering's third quarter 2013 revenue decreased $5.1 million, or 7%, to $66.1 million. Revenue from nuclear furnaces increased 55% to $7.8 million and turbine blade coating furnace revenue increased 843% to $7.2 million, the result of one significant order. These increases were mitigated by a 51% and 32% decrease in revenue from sintering furnaces and remelting furnaces, respectively, compared to the third quarter 2012. Order backlog decreased 8% to $133.5 million at September 30, 2013 from $145.2 million at June 30, 2013. AMG Engineering generated order intake of $48.4 million in the third quarter 2013, a 39% decrease compared to the third quarter 2012 and a 0.73x book to bill ratio. Remelting furnaces were the largest portion of the order intake, accounting for 28% of the total. The third quarter 2013 gross margin was 21%, consistent with the third quarter 2012. Improved profitability on certain large projects and an increased focus on cost control resulted in a consistent margin, despite the decline in revenue. The third quarter 2013 EBITDA decreased $1.6 million, to 6% of revenue from 8% of revenue in the third quarter 2012. The EBITDA decrease was the result of the $0.8 million decrease in gross profit and the $0.6 million increase in SG&A. The increase in SG&A was the result of incentive compensation related to the increase in the AMG share price. Capital expenditures were $0.5 million in the third quarter 2013, 64% less than the third quarter 2012. Capital investments in the third quarter were primarily maintenance capital expenditures for the heat treatment services business. AMG Mining Q3 '13 Q3 '12 Change --------------------------------------------------- Revenue $82,254 $78,756 4% Gross profit 12,805 13,273 (4%) Operating profit 5,986 2,911 106% EBITDA 8,893 4,941 80% Capital expenditures 2,754 3,778 (27%) AMG Mining's third quarter 2013 revenue increased $3.5 million, or 4%, to $82.3 million. Volumes for most products increased, while prices were mixed. Prices increased 12% and 5% for AMG Mineração's tantalum and AMG Graphite products, respectively, while AMG Antimony and AMG Silicon product prices decreased 11% and 9%, respectively, compared to the third quarter 2012. The third quarter 2013 gross margin decreased to 16%, from 17% in the third quarter 2012. The gross margin decrease was primarily the result of lower average prices for the higher volume products at AMG Silicon and AMG Antimony. The third quarter 2013 EBITDA increased $4.0 million, to 11% of revenue from 6% of revenue in the third quarter 2012. The EBITDA increase was the result of $1.5 million and $0.5 million decreases in environmental expenses and SG&A professional fees, respectively, and a $1.5 million increase in other income from the sale of land. These improvements were slightly offset by the $0.5 million decrease in gross profit. Capital expenditures were $2.8 million in the third quarter 2013, 27% less than the third quarter 2012. Capital expenditures were primarily composed of $1.0 million for a silicon metal furnace efficiency upgrade and $1.1 million for maintenance expenditures. Financial Review For purposes of this release, AMG restated the December 31, 2012 statement of financial position and 2012 income statement to comply with new IFRS standards and interpretations. IAS 19 Employee Benefits (Revised 2011) (IAS 19R) and IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine were effective for periods beginning after January 1, 2013 and require restatement for comparability. Tax AMG recorded an income tax expense of $0.5 million in the third quarter 2013 or a 28% effective tax rate. The income tax expense in the third quarter 2012 was $2.1 million, or a 30% effective tax rate. The third quarter 2013 effective tax rate was consistent with AMG's long-term tax rate expectations of 30-35% per annum. SG&A AMG's third quarter 2013 SG&A expenses were $32.3 million, compared to $34.4 million in the third quarter 2012, a decrease of 6%. The $2.1 million decrease in SG&A expenses was primarily due to a $2.3 million decrease in variable compensation expense. Non-Recurring Items AMG's third quarter 2013 $7.3 million operating profit includes non-recurring items, which are not included in the calculation of EBITDA. These items are comprised of income and expense items, that in the view of management, do not arise in the normal course of business and items that, because of their nature and/or size, should be presented separately to enable better analysis of the results. A summary of non-recurring items in the third quarter 2013 and 2012 are below: For the three months ended September September 2013 2012 ---------------------------------------------------------------------------- Non-recurring items included in operating profit: Restructuring expense $1,753 $476 ---------------------------------------------------------------------------- Total non-recurring items included in operating 1,753 476 profit ---------------------------------------------------------------------------- AMG incurred $1.8 million of non-recurring restructuring items in the third quarter 2013, consisting primarily of $1.3 million and $0.3 million related to AMG Engineering and AMG Mining restructuring, respectively. These restructuring expenses are part of the Company's ongoing cost reduction efforts and the process to simplify the corporate structure. Currency Fluctuations AMG transacts business in many currencies other than the U.S. dollar, the Company's reporting currency. AMG's financial statements are prepared in U.S. dollars, so fluctuations in the exchange rates between the U.S. dollar and other currencies have an effect both on the results of operations and on the reported value of assets and liabilities as measured in U.S. dollars. The depreciation in the value of the U.S. dollar as of September 30, 2013 compared to June 30, 2013, resulted in an increase in the assets and liabilities on the balance sheet of $20.9 million and $14.6 million, respectively. The net result of the depreciation in the value of the U.S. dollar in the third quarter 2013 compared to the third quarter 2012, resulted in an increase in revenue and EBITDA of $9.3 million and $0.8 million, respectively. Liquidity September 30, 2013 December 31, 2012 Change ------------------------------------------------------------------------------ Total debt $279,894 $315,844 (11%) Cash and cash equivalents 116,278 121,639 (4%) ------------------------------------------------------------------------------ Net debt 163,616 194,205 (16%) AMG had a net debt position of $163.6 million as of September 30, 2013. AMG's net debt position decreased $30.6 million since December 31, 2012 primarily due to $62.1 million of EBITDA and a $27.4 million decrease in working capital and deferred revenue. These cash generation activities were offset by $22.5 million in capital investments, $11.5 million of cash tax payments, $11.3 million of net cash interest payments, and restructuring costs and pension payments in excess of expense of $7.0 million. Including the $116.3 million of cash, AMG had $190.0 million of total liquidity as of September 30, 2013. Cash Flow For the nine months ended September 30 2013 2012 -------------------------------------------------------------------------------- Net cash flows from operating activities $57,318 $33,508 -------------------------------------------------------------------------------- Capital expenditures (22,534) (33,875) Cash flows from (used in) other investing 436 (169) activities -------------------------------------------------------------------------------- Net cash flows used in investing activities (22,098) (34,044) -------------------------------------------------------------------------------- Net cash flows (used in) from financing (42,596) 32,260 activities -------------------------------------------------------------------------------- Cash flows from operating activities were $57.3 million for the nine months ended September 30, 2013 compared to cash flows from operating activities of $33.5 million in the same period in 2012. Net cash flows from operating activities are comprised of $62.1 million in EBITDA and $27.4 million decrease in working capital and deferred revenue, slightly offset by $11.5 million in cash tax payments and $11.3 million in cash interest payments. Cash flows used in investing activities were $22.1 million for the nine months ended September 30, 2013. The $11.9 million decrease compared to the same period in 2012 is primarily composed of an $11.3 million decrease in capital investments. This reduction in capital investments reflects management's cash control initiatives and more stringent return metrics. Cash flows used in financing activities were $42.6 million for the nine months ended September 30, 2013 as the Company repaid $42.6 million of borrowings. In the same period in 2012, AMG generated $32.3 million from financing activities primarily to fund the Brazilian mine expansion and the acquisition of Graphit Kropfmühl shares. Outlook The specialty metals markets continue to be weak, specifically due to destocking in the global aerospace value chain, continued stagnation for high performance steel, and slowing growth in China. These conditions are affecting prices and volumes for many of AMG's products. AMG has rationalized production levels in AMG Mining and AMG Engineering and is currently implementing plans to reduce the fixed cost structure and decrease capital expenditures in AMG Processing. AMG expects that it will generate positive operating cash flow during the fourth quarter. Overall, AMG's full year 2013 EBITDA will decline compared to 2012. AMG Advanced Metallurgical Group N.V. Condensed interim consolidated income statement For the three months ended September 30 In thousands of US Dollars 2013 2012 Unaudited Unaudited[2] Continuing operations Revenue 286,415 296,851 Cost of sales 246,623 249,314 Gross profit 39,792 47,537 Selling, general and administrative expenses 32,343 34,411 Restructuring expense 1,753 476 Environmental expense 48 1,712 Other income, net (1,627) (186) Operating profit 7,275 11,124 Finance expense 6,347 5,270 Finance income (324) (243) Foreign exchange gain (358) (699) Net finance costs 5,665 4,328 Share of profit of associates 26 208 Profit before income tax 1,636 7,004 Income tax expense 459 2,101 Profit for the period 1,177 4,903 Attributable to: Shareholders of the Company 1,407 5,006 Non-controlling interests (230) (103) Profit for the period 1,177 4,903 Earnings per share Basic earnings per share 0.05 0.18 Diluted earnings per share 0.05 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 2013 2012 Unaudited Unaudited[3] Continuing operations Revenue 874,421 940,426 Cost of sales 737,753 785,555 Gross profit 136,668 154,871 Selling, general and administrative expenses 102,354 111,185 Asset impairment expense 49,703 6,333 Restructuring expense 8,488 4,807 Environmental expense 125 3,000 Other income, net (2,095) (888) Operating (loss) profit (21,907) 30,434 Finance expense 17,384 18,211 Finance income (640) (855) Foreign exchange gain (313) (190) Net finance costs 16,431 17,166 Share of (loss) profit of associates (530) 457 (Loss) profit before income tax (38,868) 13,725 Income tax expense 2,383 8,782 (Loss) profit for the period (41,251) 4,943 Attributable to: Shareholders of the Company (38,363) 6,126 Non-controlling interests (2,888) (1,183) (Loss) profit for the period (41,251) 4,943 (Loss) earnings per share Basic (loss) earnings per share (1.39) 0.22 Diluted (loss) earnings per share (1.39) 0.22 AMG Advanced Metallurgical Group N.V. Condensed interim consolidated statement of financial position In thousands of US Dollars Sept 30, 2013 Dec 31,2012[4] Unaudited Assets Property, plant and equipment 258,211 288,269 Goodwill 25,080 24,751 Intangible assets 11,459 13,971 Investments in associates and joint ventures 6,313 7,351 Derivative financial instruments 200 527 Deferred tax assets 37,064 35,455 Restricted cash 9,944 11,888 Notes receivable 251 227 Other assets 24,406 22,262 Total non-current assets 372,928 404,701 Inventories 185,569 211,531 Trade and other receivables 161,310 177,232 Derivative financial instruments 4,196 3,229 Other assets 32,300 30,438 Cash and cash equivalents 116,278 121,639 Total current assets 499,653 544,069 Total assets 872,581 948,770 AMG Advanced Metallurgical Group N.V. Condensed interim consolidated statement of financial position (continued) In thousands of US Dollars Dec Sept 30, 2013 31, 2012[5] Unaudited Equity Issued capital 743 743 Share premium 382,176 382,176 Other reserves (5,540) (10,190) Retained earnings (deficit) (241,022) (204,284) Equity attributable to shareholders of the Company 136,357 168,445 Non-controlling interests 3,615 6,818 Total equity 139,972 175,263 Liabilities Loans and borrowings 244,658 265,553 Employee benefits 132,981 137,957 Provisions 31,754 31,852 Deferred revenue 13,572 2,724 Government grants 903 472 Other liabilities 6,299 6,690 Derivative financial instruments 9,082 11,082 Deferred tax liabilities 22,547 26,120 Total non-current liabilities 461,796 482,450 Loans and borrowings 14,797 20,333 Short term bank debt 20,439 29,958 Government grants 56 55 Other liabilities 53,562 58,934 Trade and other payables 123,272 125,342 Derivative financial instruments 5,588 3,900 Advance payments 26,878 26,989 Deferred revenue 5,251 2,533 Current taxes payable 2,076 8,623 Provisions 18,894 14,390 Total current liabilities 270,813 291,057 Total liabilities 732,609 773,507 Total equity and liabilities 872,581 948,770 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 2013 2012 Unaudited Unaudited[6] Cash flows from operating activities (Loss) profit for the period (41,251) 4,943 Adjustments to reconcile net (loss) profit to net cash flows: Non-cash: Income tax expense 2,383 8,782 Depreciation and amortization 24,822 21,252 Asset impairment expense 49,703 6,333 Net finance costs 16,431 17,166 Share of loss (profit) of associates and joint ventures 530 (457) (Gain) loss on sale or disposal of property, plant and equipment (1,429) 210 Equity-settled share-based payment transactions 666 1,268 Movement in provisions, pensions and government grants 969 6,433 Change in working capital and deferred revenue 27,369 (10,773) ----------------------- Cash flows from operating activities 80,193 55,157 Finance costs paid, net (11,331) (10,030) Income tax paid, net (11,544) (11,619) ----------------------- Net cash flows from operating activities 57,318 33,508 Cash flows used in investing activities Proceeds from sale of property, plant and equipment 1,821 226 Proceeds from sale of investment in associate 650 - Acquisition of property, plant and equipment and intangibles (22,534) (33,875) Acquisition of subsidiaries (net of cash acquired of $139) - (594) Acquisition of other non-current asset investments (4,000) - Change in restricted cash 1,952 144 Other 13 55 ----------------------- Net cash flows used in investing activities (22,098) (34,044) Cash flows (used in) from financing activities Proceeds from issuance of debt 38 67,185 Repayment of borrowings (42,572) (27,791) Change in non-controlling interests (69) (7,128) Other 7 (6) ----------------------- Net cash flows (used in) from financing activities (42,596) 32,260 Net (decrease) increase in cash and cash equivalents (7,376) 31,724 Cash and cash equivalents at January 1 121,639 79,571 Effect of exchange rate fluctuations on cash held 2,015 91 Cash and cash equivalents at September 30 116,278 111,386 About AMG AMG creates and applies innovative metallurgical solutions to the global trend of sustainable development of natural resources and CO(2) reduction. AMG produces highly engineered specialty metal products and advanced vacuum furnace systems for the Energy, Aerospace, Infrastructure, and Specialty Metals and Chemicals end markets. AMG Processing develops and produces specialty metals, alloys, and high performance materials. AMG is a significant producer of specialty metals, such as ferrovanadium, ferronickel-molybdenum, aluminum master alloys and additives, chromium metal and ferrotitanium, for Energy, Aerospace, Infrastructure and Specialty Metal and Chemicals applications. Other key products include specialty alloys for titanium and superalloys, coating materials and vanadium chemicals. AMG Engineering designs, engineers and produces advanced vacuum furnace systems and operates vacuum heat treatment facilities, primarily for the Aerospace and Energy (including solar and nuclear) industries. Furnace systems produced by AMG include vacuum remelting, solar silicon melting and crystallization, vacuum induction melting, vacuum heat treatment and high pressure gas quenching, turbine blade coating and sintering. AMG also provides vacuum case-hardening heat treatment services on a tolling basis. AMG Mining produces critical materials utilizing its secure raw material sources in Africa, Asia, Europe, and South America. AMG Mining produces critical materials such as high purity natural graphite, tantalum, antimony and silicon metal. These materials are of significant importance to the global economy and are available in limited supply. End markets for these materials include electronics, energy efficiency, green energy, and infrastructure. With over 3,000 employees, AMG operates globally with production facilities in Germany, the United Kingdom, France, Czech Republic, United States, China, Mexico, Brazil, Turkey, Poland, India, and Sri Lanka and has sales and customer service offices in Belgium, Russia, and Japan (www.amg-nv.com). For further information, please contact: AMG Advanced Metallurgical Group N.V. +1 610 975 4901 Jonathan Costello Vice President of Corporate Development and Communications jcostello@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. 1. EBITDA is defined as earnings before interest, tax, depreciation and amortization and excludes non-recurring items [2]1 AMG restated the December 31, 2012 statement of financial position and 2012 income statement to comply with new IFRS standards and interpretations. [3] AMG restated the December 31, 2012 statement of financial position and 2012 income statement to comply with new IFRS standards and interpretations. [4] AMG restated the December 31, 2012 statement of financial position and 2012 income statement to comply with new IFRS standards and interpretations. [5] AMG restated the December 31, 2012 statement of financial position and 2012 income statement to comply with new IFRS standards and interpretations. [6] AMG restated the December 31, 2012 statement of financial position and 2012 income statement to comply with new IFRS standards and interpretations. 8 November 2013: http://hugin.info/138060/R/1741629/585212.pdf [HUG#1741629] Source:AMG Advanced Metallurgical Group N.V.