AMG Advanced Metallurgical Group N.V. Reports First Quarter 2014 Results

Key Highlights

  • Revenue was $274.9 million in the first quarter 2014, a 7% decrease from the same period in 2013
  • EBITDA([1])was $20.1 million in the first quarter 2014, a 10% decrease from the same period in 2013
  • Earnings per share on a fully diluted basis was $0.14 in the first quarter 2014, a 56% increase over the same period in 2013
  • Cash flows from operating activities were $5.7 million in the first quarter 2014, compared to $0.7 million in the same period in 2013
  • AMG Processing generated revenue of $145.1 million and EBITDA of $9.4 million in the first quarter 2014
  • AMG Engineering generated revenue of $48.8 million and EBITDA of $1.5 million in the first quarter 2014
  • AMG Mining generated revenue of $81.0 million and EBITDA of $9.1 million in the first quarter 2014
  • As of March 31, 2014, cash on the balance sheet was $97.9 million; net debt was $160.9 million

AMSTERDAM, Netherlands, May 8, 2014 (GLOBE NEWSWIRE) -- AMG Advanced Metallurgical Group N.V. ("AMG", EURONEXT AMSTERDAM: "AMG") reported first quarter 2014 revenue of $274.9 million, a 7% decrease from $296.5 million in the first quarter 2013.

EBITDA decreased 10% to $20.1 million in the first quarter 2014 from $22.2 million in the first quarter 2013. Net income attributable to shareholders for the first quarter 2014 was $3.9 million, or $0.14 per fully diluted share, a 59% increase from $2.5 million, or $0.09 in the first quarter 2013.

Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, "The specialty metals industry continued to experience low market prices during the first quarter 2014. The management changes made in AMG Superalloys and AMG Titanium Alloys & Coatings began to yield operational improvements during the quarter. These operational activities resulted in improved margins and cash flows, which is our primary focus. We are also making progress on our strategic plans to optimize our portfolio and obtain critical mass in critical materials."

Key Figures

In 000's US Dollar
Q1 '14 Q1 '13 Change
Revenue $274,852 $296,478 (7%)
Gross profit 46,352 48,258 (4%)
Gross margin 16.9% 16.3%
Operating profit 10,811 11,040 (2%)
Operating margin 3.9% 3.7%
Net income attributable to shareholders 3,919 2,460 59%
EPS- Fully diluted $0.14 $0.09
EBIT (1) 11,919 13,501 (12%)
EBITDA (2) 20,068 22,200 (10%)
EBITDA margin 7.3% 7.5%
Cash Flow from operating activities 5,659 665 751%

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

Q1'14 Q1'13 Change
Revenue $145,110 $153,076 (5%)
Gross profit 18,927 19,925 (5%)
Operating profit 5,239 5,232 0%
EBITDA 9,419 8,713 8%
Capital expenditures 2,322 6,557 (65%)

AMG Processing's first quarter 2014 revenue decreased $8.0 million to $145.1 million. The decline was primarily the result of a 24% decline in AMG Titanium Alloys & Coatings revenue, due to lower prices and volumes, and a 3% decline in AMG Aluminum revenue, due to lower master alloy prices. These declines were partially offset by a 12% increase in AMG Vanadium revenue on improved volumes from the capacity expansion that was completed in 2013.

The first quarter 2014 gross margin was 13%, consistent with the first quarter 2013, due to improved operational performance, despite lower revenues. Specifically, improved vanadium prices and the operation of the expanded AMG Vanadium roaster compared to the first quarter 2013, resulted in a 200% increase in AMG Vanadium gross margins. This helped offset a 34% decline in AMG Superalloys margins as lower market prices impacted margins.

The first quarter 2014 EBITDA increased by $0.7 million, or 6% of revenue, which is consistent with the first quarter 2013. The EBITDA increase was the result of a $1.7 million decline in SG&A expenses, which more than offset a $1.0 million decrease in gross profit. The decrease in SG&A expenses was related to a decline in personnel cost and professional fees related to efficiency initiatives.

Capital expenditures were $2.3 million for the first quarter 2014, a 65% decrease from the first quarter 2013. Capital investments made in the first quarter included $1.9 million of maintenance expenditures.

AMG Engineering

Q1 '14 Q1 '13 Change
Revenue $48,765 $60,511 (19%)
Gross profit 12,772 15,366 (17%)
Operating (loss) profit (913) 1,597 N/A
EBITDA 1,530 5,592 (73%)
Capital expenditures 348 318 9%

AMG Engineering's first quarter 2014 revenue decreased $11.7 million, or 19%, to $48.8 million. The first quarter revenue was impacted by the low level of order backlog at the beginning of the quarter. Increases of 38% and 36% in revenue from heat treatment systems and nuclear systems, respectively, were more than offset by 62% and 54% declines in casting and sintering furnaces and remelting systems, respectively.

Order backlog increased 24% to $135.8 million at March 31, 2014 from $109.7 million at December 31, 2013. AMG Engineering generated order intake of $74.5 million in the first quarter 2014, a 141% increase compared to the first quarter 2013, and a 1.53x book to bill ratio.

The first quarter 2014 gross margin was 26%, consistent with the first quarter 2013. The impact of cost reductions made in 2013 combined with an increase in higher margin service revenues offset increased pricing pressure and resulted in the consistent gross margins.

The first quarter 2014 EBITDA decreased $4.1 million, to 3% of revenue from 9% of revenue in the first quarter 2013. The EBITDA decrease was primarily the result of the $2.6 million decrease in gross profit and a $0.8 million increase in SG&A professional fees.

Capital expenditures were $0.3 million in the first quarter 2014, which were primarily maintenance capital expenditures for the heat treatment services business.

AMG Mining

Q1 '14 Q1 '13 Change
Revenue $80,977 $82,891 (2%)
Gross profit 14,653 12,967 13%
Operating profit 6,485 4,211 54%
EBITDA 9,119 7,895 16%
Capital expenditures 3,181 2,249 41%

AMG Mining's first quarter 2014 revenue decreased $1.9 million, or 2%, to $81.0 million. Volumes were mixed, as increases in antimony and graphite products were offset by declines in tantalum and silicon. Antimony prices decreased 10%, while graphite and silicon prices remained consistent with the first quarter 2013.

The first quarter 2014 gross margin increased to 18%, from 16% in the first quarter 2013. The gross margin increase was primarily the result of an increase in antimony and graphite volumes, and improved product mix.

The first quarter 2014 EBITDA increased $1.2 million, to 11% of revenue from 10% of revenue in the first quarter 2013. The EBITDA increase was the result of $1.7 million increase in gross profit and a $0.5 million decrease in SG&A, offset slightly by lower depreciation expense included in the gross profit.

Capital expenditures were $3.2 million in the first quarter 2014, 41% more than the first quarter 2013. Capital expenditures were primarily composed of $2.0 million for a silicon metal furnace efficiency upgrade and $0.5 million for maintenance expenditures.

Financial Review

Tax

AMG recorded an income tax expense of $3.3 million in the first quarter 2014. The income tax expense was reflective of the composition of earnings among certain tax jurisdictions. The income tax expense in the first quarter 2013 was $3.7 million.

SG&A

AMG's first quarter 2014 SG&A expenses were $35.0 million, compared to $36.0 million in the first quarter 2013, a decrease of 3%. The $1.0 million decrease in SG&A expenses was primarily due to a decrease in personnel expenses.

Non-Recurring Items

AMG's first quarter 2014 operating income of $10.8 million 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 due to their nature and/or size should be presented separately to enable better analysis of the results.

AMG incurred $0.8 million of restructuring expense in the first quarter 2014, primarily related to AMG Processing. The restructuring expenses are part of the Company's process to simplify its corporate structure and ongoing cost reduction efforts.

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 compared to the Brazilian Real as of March 31, 2014 compared to December 31, 2013, resulted in a $1.6 million increase in both the assets and the liabilities on the balance sheet. The net result of the depreciation in the value of the U.S. dollar against the Euro in the first quarter 2014 compared to the first quarter 2013, resulted in an increase in revenue and EBITDA of $4.8 million and $0.4 million, respectively.

Liquidity

March 31, 2014 December
31, 2013
Change
Total debt $258,769 $263,580 (2%)
Cash and cash equivalents 97,866 103,067 (5%)
Net debt 160,903 160,513 0%

AMG had a net debt position of $160.9 million as of March 31, 2014. In a continuing effort to right size its balance sheet and reduce finance expense, AMG reduced its gross debt balance by $4.8 million during the first quarter. Including the $97.9 million of cash, AMG had $172.9 million of total liquidity as of March 31, 2014.

Cash Flow

For the quarter ended March 31
2014 2013
Net cash flows from operating activities $5,659 $665
Capital expenditures (5,851) (9,124)
Cash flows from other investing activities 118 29
Net cash flows used in investing activities (5,733) (9,095)
Net cash flows used in financing activities (5,138) (4,163)

Cash flows from operating activities were $5.7 million for the quarter ended March 31, 2014 compared to cash flows from operating activities of $0.7 million in the same period in 2013. Net cash flows from operating activities are comprised of $20.1 million in EBITDA offset by $7.2 million increase in working capital and deferred revenue, $1.3 million of cash tax payments, $0.9 million of net cash interest payments, and restructuring payments of $2.7 million.

Cash flows used in investing activities were $5.7 million for the quarter ended March 31, 2014. The $3.4 million decrease compared to the same period in 2013 is primarily composed of a $3.3 million decrease in capital investments. This reduction in capital investments reflects management's continued cash control initiatives and more stringent return metrics.

Cash flows used in financing activities were $5.1 million for the quarter ended March 31, 2014 as the Company repaid $5.2 million of borrowings. In the same period in 2013, AMG repaid $4.2 million of borrowings.

Outlook

AMG continues to improve its operational performance and is executing on the strategy to gain critical mass in critical materials. These improvements are helping offset the continued weak specialty metals markets. The destocking in the global aerospace value chain is expected to continue for the balance of the year and slowing China growth remains a concern. Despite these challenging market conditions, AMG's improved operational performance should enable it to produce significant operating cash flow in 2014, and increase ROCE, EBITDA, and net income over 2013 levels.

AMG Advanced Metallurgical Group N.V.
Condensed interim consolidated income statement

For the quarter ended March 31
In thousands of US Dollars 2014 2013
Unaudited Unaudited
Continuing operations
Revenue 274,852 296,478
Cost of sales 228,500 248,220
Gross profit 46,352 48,258
Selling, general and administrative expenses 35,036 36,017
Restructuring expense 758 1,336
Environmental - 33
Other income, net (253) (168)
Operating profit 10,811 11,040
Finance income (203) (143)
Finance expense 4,675 5,717
Foreign exchange gain (185) (919)
Net finance costs 4,287 4,655
Share of profit (loss) of associates and joint ventures 105 (712)
Profit before income tax 6,629 5,673
Income tax expense 3,274 3,712
Profit for the period 3,355 1,961
Attributable to:
Shareholders of the Company 3,919 2,460
Non-controlling interests (564) (499)
Profit for the period 3,355 1,961
Earnings per share
Basic earnings per share 0.14 0.09
Diluted earnings per share 0.14 0.09
AMG Advanced Metallurgical Group N.V.
Condensed interim consolidated statement of financial position

In thousands of US Dollars
March 31, 2014 December 31, 2013
Unaudited
Assets
Property, plant and equipment 254,683 259,683
Goodwill 25,054 25,078
Intangible assets 11,465 12,116
Investments in associates and joint ventures 4,856 4,755
Derivative financial instruments 100 271
Deferred tax assets 27,681 27,003
Restricted cash 7,770 7,967
Other assets 26,548 25,519
Total non-current assets 358,157 362,392
Inventories 178,111 179,343
Trade and other receivables 171,728 150,807
Derivative financial instruments 1,988 2,177
Other assets 31,271 34,430
Cash and cash equivalents 97,866 103,067
Total current assets 480,964 469,824
Total assets 839,121 832,216
AMG Advanced Metallurgical Group N.V.
Condensed interim consolidated statement of financial position (continued)
In thousands of US Dollars
March 31, 2014
Unaudited
December 31, 2013
Equity
Issued capital 744 744
Share premium 382,518 382,518
Other reserves (3,017) (4,605)
Retained earnings (deficit) (242,385) (246,304)
Equity attributable to shareholders of the Company 137,860 132,353
Non-controlling interests 1,562 2,237
Total equity 139,422 134,590
Liabilities
Loans and borrowings 223,528 223,788
Employee benefits 138,124 138,009
Provisions 30,498 30,443
Deferred revenue 11,292 11,776
Government grants 869 883
Other liabilities 8,348 8,425
Derivative financial instruments 7,944 7,702
Deferred tax liabilities 3,597 3,121
Total non-current liabilities 424,200 424,147
Loans and borrowings 9,976 20,873
Short term bank debt 25,265 18,919
Government grants 74 74
Other liabilities 60,225 54,383
Trade and other payables 130,547 127,381
Derivative financial instruments 2,806 5,298
Advance payments 19,526 16,341
Deferred revenue 5,012 5,009
Current taxes payable 3,354 2,329
Employee benefits 801 1,350
Provisions 17,913 21,522
Total current liabilities 275,499 273,479
Total liabilities 699,699 697,626
Total equity and liabilities 839,121 832,216

AMG Advanced Metallurgical Group N.V.
Condensed interim consolidated statement of cash flows

For the quarter ended March 31
In thousands of US Dollars 2014 2013
Unaudited Unaudited
Cash flows from operating activities
Profit for the period 3,355 1,961
Adjustments to reconcile net profit to net cash flows:
Non-cash:
Income tax expense 3,274 3,712
Depreciation and amortization 8,149 8,700
Net finance costs 4,287 4,655
Share of (profit) loss of associates and joint ventures (105) 712
(Gain) loss on sale or disposal of property, plant and equipment (36) 107
Equity-settled share-based payment transactions 165 205
Movement in provisions, pensions and government grants (4,003) (1,597)
Change in working capital and deferred revenue (7,198) (9,242)
Cash flows from operating activities 7,888 9,213
Finance costs paid, net (888) (2,192)
Income tax paid, net (1,341) (6,356)
Net cash flows from operating activities 5,659 665
Cash flows used in investing activities
Proceeds from sale of property, plant and equipment 118 12
Acquisition of property, plant and equipment and intangibles (5,851) (9,124)
Change in restricted cash (15) (20)
Other 15 37
Net cash flows used in investing activities (5,733) (9,095)
Cash flows used in financing activities
Repayment of borrowings (5,166) (4,159)
Contributions by non-controlling interests 28 -
Other - (4)
Net cash flows used in financing activities (5,138) (4,163)
Net decrease in cash and cash equivalents (5,212) (12,593)
Cash and cash equivalents at January 1 103,067 121,639
Effect of exchange rate fluctuations on cash held 11 (2,349)
Cash and cash equivalents at March 31 97,866 106,697

About AMG

AMG creates and applies innovative metallurgical solutions to the global trend of sustainable development of natural resources and CO2 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 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

8 May 2014

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Source:AMG Advanced Metallurgical Group N.V.