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

Key Highlights

  • Revenue was $278.9 million in the second quarter 2014, a 4% decrease from the same period in 2013
  • EBITDA([1]) was $20.4 million in the second quarter 2014, an 8% decrease from the same period in 2013
  • EPS on a fully diluted basis was $0.27 in the second quarter 2014, compared to ($1.53) in the same period in 2013
  • Cash flows from operating activities were $19.1 million in the second quarter 2014, compared to $32.0 million in the same period in 2013
  • As of June 30, 2014, cash on the balance sheet was $114.9 million; net debt was $147.8 million, a reduction of $12.7 million during the year

AMSTERDAM, Netherlands, Aug. 6, 2014 (GLOBE NEWSWIRE) -- AMG Advanced Metallurgical Group N.V. ("AMG", EURONEXT AMSTERDAM: "AMG") reported second quarter 2014 revenue of $278.9 million, a 4% decrease from $291.5 million in the second quarter 2013. Net income attributable to shareholders for the second quarter 2014 was $7.4 million, or $0.27 per fully diluted share, compared to a loss of $42.2 million, or ($1.53) in the second quarter 2013. EBITDA decreased 8% to $20.4 million in the second quarter 2014. However, the EBITDA was consistent with the first quarter 2014 EBITDA of $20.1 million.

Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, "AMG continued to deliver on its objective of improving operational performance, and reducing gross and net debt. Despite a low metal price environment, market demand was stable during the second quarter 2014. AMG Processing benefited from cost reduction and restructuring efforts, while AMG Mining improved gross margins due to its focus on higher value-added products. AMG Engineering had a disappointing quarter in terms of profitability, the result of weak order intake in the second half of 2013, but generated significant order intake during the quarter, which should result in improved earnings in the second half of the year."

Key Figures

In 000's US Dollar
Q2 '14 Q2 '13 Change
Revenue $278,941 $291,528 (4%)
Gross profit 44,963 48,618 (8%)
Gross margin 16.1% 16.7%
Operating profit (loss) 11,124 (40,222) N/M
Operating margin 4.0% (13.8%)
Net income (loss) attributable to shareholders 7,445 (42,230) N/M
EPS- Fully diluted 0.27 (1.53) N/M
EBIT (1) 12,221 14,140 (14%)
EBITDA (2) 20,392 22,184 (8%)
EBITDA margin 7.3% 7.6%
Cash flows from operating activities 19,129 31,966 (40%)

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

Q2 '14 Q2 '13 Change
Revenue $144,508 $144,603 0%
Gross profit 20,757 17,718 17%
Operating profit 6,650 4,322 54%
EBITDA 11,158 7,992 40%

AMG Processing's second quarter 2014 revenue was consistent with prior year while gross profit improved by 17%. A 103% increase in ferrovanadium volumes was offset by lower demand in certain aerospace end markets. Improved production efficiencies and lower cost structures at AMG Vanadium and AMG Superalloys were the primary reasons for the improved gross margins. The consistency of metal prices, improved production efficiencies and the impacts of previous restructuring efforts all contributed to the 2% increase in gross margin. The increase in gross margins led to the 40% improvement in EBITDA.

AMG Engineering

Q2 '14 Q2 '13 Change
Revenue $49,676 $66,618 (25%)
Gross profit 7,485 18,189 (59%)
Operating loss (3,760) (12,420) (70%)
EBITDA (1,801) 8,443 N/M

AMG Engineering's second quarter 2014 revenue decreased $16.9 million, or 25%, to $49.7 million. Low order intake in the second half of 2013 caused the decline in revenue during the quarter. The second quarter 2014 gross margin decreased to 15%, from 27% in the second quarter 2013 due to reduced volumes and pricing pressure. The $10.7 million decline in gross profit directly impacted EBITDA.

Order backlog increased 9% to $148.0 million at June 30, 2014 from $135.8 million at March 31, 2014, as delayed orders began to be realized. $62.3 million in new orders were signed in the second quarter 2014, a 1.25x book to bill ratio. Turbine blade coating systems accounted for approximately 33% of the order intake.

AMG Mining

Q2 '14 Q2 '13 Change
Revenue $84,757 $80,307 6%
Gross profit 16,721 12,711 32%
Operating profit (loss) 8,234 (32,124) N/M
EBITDA 11,035 5,749 92%

AMG Mining's second quarter 2014 revenue increased $4.5 million, or 6%, to $84.8 million, with tantalum and graphite recording the biggest improvements. AMG Tantalum's revenue increased due to a 54% increase in volumes, and price improvements related to a long-term contract, while AMG Graphite revenues improved primarily due to a 21% increase in volumes. The focus on operational efficiencies and increased sales of higher margin graphite products for the energy efficiency market improved AMG Graphite's gross margin to 20% from 16%. The EBITDA increased 92% to 13% of revenue, primarily due to the 32% improvement in gross profit.

Financial Review

SG&A

AMG's second quarter 2014 SG&A expenses were $34.1 million, consistent with $34.0 million in the second quarter 2013. SG&A expenses were stable, despite incurring approximately $1.1 million in costs related to specific strategic initiatives.

Non-Recurring Items

AMG's second quarter 2014 operating profit of $11.1 million includes non-recurring items, which are not included in the calculation of EBITDA.

A summary of non-recurring items in the second quarter 2014 and 2013 are below:

For the three months ended

June
2014
June
2013
Non-recurring items included in operating profit (loss):
Restructuring expense $1,034 $5,399
Asset impairment expense - 49,703
Total non-recurring items included in operating profit (loss) 1,034 55,102

AMG Processing incurred $1.0 million during the second quarter 2014 to right size the workforce to current market realities. This is a substantial reduction from $55.1 million of restructuring and asset impairment expenses recorded in 2013 related to the Company's solar operations and non-developed mining assets.

Liquidity

June 30, 2014 December 31, 2013 Change
Total debt $262,743 $263,580 (0%)
Cash & short-term investments 114,940 103,067 12%
Net debt 147,803 160,513 (8%)

AMG had a net debt position of $147.8 million as of June 30, 2014. This decreased $12.7 million since December 31, 2013 due to strong cash flow from operations and lower capital spending.

Cash flows from operating activities were $24.8 million in the first half of 2014 compared to $32.6 million in the first half of 2013. The decline is primarily attributable to a $15.0 million long-term contract prepayment received in the first half of 2013 that did not recur in 2014.

Capital expenditures declined $5.7 million in the first half of 2014 as compared to the first half of 2013. The $10.5 million of capital spending incurred in the first half of 2014 included $6.1 million of maintenance capital. The largest capital projects were for AMG TAC's titanium aluminide expansion, AMG Silicon efficiency improvements, and capacity expansion of higher value-added graphite products.

Including the $114.9 million of cash, AMG had $172.7 million of total liquidity as of June 30, 2014.

On May 27, 2014, AMG amended its revolving credit facility. The amendment extended the modified tangible net worth covenant through April 2016, the remainder of the term of the credit facility.

Outlook

The specialty metals markets are relatively stable as the global economy is slowly improving. In this low growth environment, AMG is rationalizing production, limiting capital investments, and continuing cost reduction programs. These actions are the primary factors behind the improved AMG Processing and AMG Mining margins. The increase in AMG Engineering's backlog and the lower cost base in AMG Processing and AMG Mining, should position the Company for improved EBITDA and net income, and reduced debt levels, in the second half of 2014.

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

For the quarter ended June 30
In thousands of US Dollars 2014 2013
Unaudited Unaudited
Revenue 278,941 291,528
Cost of sales 233,978 242,910
Gross profit 44,963 48,618
Selling, general and administrative expenses 34,098 33,994
Asset impairment expense - 49,703
Restructuring expense 1,034 5,399
Other income, net (1,293) (256)
Operating profit (loss) 11,124 (40,222)
Finance expense 5,752 5,320
Finance income (138) (173)
Foreign exchange loss 199 964
Net finance costs 5,813 6,111
Share of profit of associates and joint ventures 678 156
Profit (loss) before income tax 5,989 (46,177)
Income tax benefit (1,463) (1,788)
Profit (loss) for the period 7,452 (44,389)
Attributable to:
Shareholders of the Company 7,445 (42,230)
Non-controlling interests 7 (2,159)
Profit (loss) for the period 7,452 (44,389)
Earnings (loss) per share
Basic earnings (loss) per share 0.27 (1.53)
Diluted earnings (loss) per share 0.27 (1.53)

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

For the six months ended June 30
In thousands of US Dollars 2014 2013
Unaudited Unaudited
Revenue 553,793 588,006
Cost of sales 462,478 491,130
Gross profit 91,315 96,876
Selling, general and administrative expenses 69,134 70,011
Asset impairment expense - 49,703
Restructuring expense 1,792 6,735
Other income, net (1,546) (391)
Operating profit (loss) 21,935 (29,182)
Finance expense 10,427 11,037
Finance income (341) (316)
Foreign exchange loss 14 45
Net finance costs 10,100 10,766
Share of profit (loss) of associates and joint ventures 783 (556)
Profit (loss) before income tax 12,618 (40,504)
Income tax expense 1,811 1,924
Profit (loss) for the period 10,807 (42,428)
Attributable to:
Shareholders of the Company 11,364 (39,770)
Non-controlling interests (557) (2,658)
Profit (loss) for the period 10,807 (42,428)
Earnings (loss) per share
Basic earnings (loss) per share 0.41 (1.44)
Diluted earnings (loss) per share 0.41 (1.44)
AMG Advanced Metallurgical Group N.V.
Condensed interim consolidated statement of financial position

In thousands of US Dollars
June 30,
2014
December 31, 2013
Unaudited
Assets
Property, plant and equipment 251,268 259,683
Goodwill 24,817 25,078
Intangible assets 11,346 12,116
Investments in associates and joint ventures 4,806 4,755
Derivative financial instruments 71 271
Deferred tax assets 34,336 27,003
Restricted cash 8,959 7,967
Other assets 24,558 25,519
Total non-current assets 360,161 362,392
Assets held for sale 689 -
Inventories 166,945 179,343
Trade and other receivables 174,425 150,807
Derivative financial instruments 2,675 2,177
Other assets 31,928 34,430
Cash and cash equivalents 114,940 103,067
Total current assets 491,602 469,824
Total assets 851,763 832,216
AMG Advanced Metallurgical Group N.V.
Condensed interim consolidated statement of financial position (continued)
In thousands of US Dollars
June 30,
2014
Unaudited
December 31, 2013
Equity
Issued capital 744 744
Share premium 382,518 382,518
Other reserves (9,450) (4,605)
Retained earnings (deficit) (234,281) (246,304)
Equity attributable to shareholders of the Company 139,531 132,353
Non-controlling interests 1,376 2,237
Total equity 140,907 134,590
Liabilities
Loans and borrowings 217,776 223,788
Employee benefits 148,904 138,009
Provisions 30,424 30,443
Deferred revenue 8,903 11,776
Government grants 781 883
Other liabilities 7,346 8,425
Derivative financial instruments 6,471 7,702
Deferred tax liabilities 4,329 3,121
Total non-current liabilities 424,934 424,147
Loans and borrowings 19,555 20,873
Short term bank debt 25,412 18,919
Government grants 95 74
Other liabilities 56,055 54,383
Trade and other payables 128,221 127,381
Derivative financial instruments 1,792 5,298
Advance payments 22,497 16,341
Deferred revenue 12,310 5,009
Current taxes payable 2,836 2,329
Employee benefits 200 1,350
Provisions 16,949 21,522
Total current liabilities 285,922 273,479
Total liabilities 710,856 697,626
Total equity and liabilities 851,763 832,216

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 2014 2013
Unaudited Unaudited
Cash flows from operating activities
Profit (loss) for the period 10,807 (42,428)
Adjustments to reconcile net profit to net cash flows:
Non-cash:
Income tax expense 1,811 1,924
Depreciation and amortization 16,320 16,744
Asset impairment expense - 49,703
Net finance costs 10,100 10,766
Share of (profit) loss of associates and joint ventures (783) 556
Loss on sale or disposal of property, plant and equipment 134 30
Equity-settled share-based payment transactions 429 428
Movement in provisions, pensions and government grants (5,240) 2,473
Change in working capital and deferred revenue 2,956 11,360
Cash flows from operating activities 36,534 51,556
Finance costs paid, net (7,921) (9,296)
Income tax paid, net (3,825) (9,629)
Net cash flows from operating activities 24,788 32,631
Cash flows used in investing activities
Proceeds from sale of property, plant and equipment 220 356
Proceeds from sale of investment in associate - 650
Acquisition of property, plant and equipment and intangibles (10,478) (16,219)
Change in restricted cash (1,220) 523
Other (5) (4,000)
Net cash flows used in investing activities (11,483) (18,690)
Cash flows used in financing activities
Proceeds from issuance of debt - 41
Repayment of borrowings (857) (22,471)
Change in non-controlling interests 28 (69)
Other - 5
Net cash flows used in financing activities (829) (22,494)
Net increase (decrease) in cash and cash equivalents 12,476 (8,553)
Cash and cash equivalents at January 1 103,067 121,639
Effect of exchange rate fluctuations on cash held (603) (856)
Cash and cash equivalents at June 30 114,940 112,230

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 and produces advanced vacuum furnace systems, and operates vacuum heat treatment facilities, primarily for the Aerospace and Energy 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

August 5 2014 Q2

http://hugin.info/138060/R/1846774/643843.pdf

HUG#1846774

Source:AMG Advanced Metallurgical Group N.V.