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

Key Highlights

  • Revenue was $279.7 million in the third quarter 2014, a 2% decrease from the same period in 2013
  • EBITDA([1]) was $23.4 million in the third quarter 2014, a 32% increase from the same period in 2013
  • EPS on a fully diluted basis was $0.12 in the third quarter 2014, a 140% increase from the same period in 2013
  • Cash flows from operating activities were $47.7 million in the third quarter 2014, compared to $24.7 million in the same period in 2013; record nine month free cash flow generation of $55.5[2] million
  • As of September 30, 2014, cash on the balance sheet was $122.2 million; net debt was $103.9 million, a reduction of $56.7 million during 2014

AMSTERDAM, Netherlands, Nov. 7, 2014 (GLOBE NEWSWIRE) -- (Regulated Information) -- AMG Advanced Metallurgical Group N.V. ("AMG", EURONEXT AMSTERDAM: "AMG") reported third quarter 2014 revenue of $279.7 million, a 2% decrease from $286.4 million in the third quarter 2013. Net income attributable to shareholders for the third quarter 2014 was $3.2 million, or $0.12 per fully diluted share, an increase from $1.4 million, or $0.05 in the third quarter 2013. EBITDA increased 32% to $23.4 million in the third quarter 2014 from $17.7 million in the third quarter 2013.

Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, "AMG's efforts to improve its balance sheet and create financial flexibility have been a remarkable success. AMG generated record free cash flow for the first nine months of 2014 and reduced net debt by over $56 million, or 35%. This was accomplished despite subdued market conditions, through cost reductions, improved working capital management and disciplined capital spending. In the third quarter, AMG Processing and AMG Mining increased year over year gross margins through a focus on providing higher value-added products. AMG Engineering improved profitability compared to the second quarter 2014 and generated significant order intake."

Key Figures

In 000's US Dollar
Q3 '14 Q3 '13 Change
Revenue $279,718 $286,415 (2%)
Gross profit 48,059 39,792 21%
Gross margin 17.2% 13.9%
Operating profit 14,999 7,275 106%
Operating margin 5.4% 2.5%
Net income attributable to shareholders 3,236 1,407 130%
EPS- Fully diluted 0.12 0.05 140%
EBIT (1) 15,285 9,623 59%
EBITDA (2) 23,414 17,701 32%
EBITDA margin 8.4% 6.2%
Cash flows from operating activities 47,662 24,687 93%

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 '14 Q3 '13 Change
Revenue $134,479 $138,068 (3%)
Gross profit 20,493 13,008 58%
Operating profit 8,724 814 972%
EBITDA 11,911 4,629 157%

AMG Processing's third quarter 2014 revenue decreased $3.6 million, or 3% to $134.5 million. A 78% increase in ferrovanadium volume was offset by a 28% decline in chrome volume, as AMG focused on higher margin, lower volume, chrome products. Improved product mix and increased operating efficiencies in the AMG Vanadium, Superalloys and Titanium Alloy and Coatings units all contributed to the increase in gross margin to 15.2% from 9.4% in the third quarter 2013. The increase in gross profit resulted in 157% improvement in EBITDA.

AMG Engineering

Q3 '14 Q3 '13 Change
Revenue $61,132 $66,093 (8%)
Gross profit 10,484 13,979 (25%)
Operating (loss) profit (1,384) 475 (391%)
EBITDA 709 4,179 (83%)

AMG Engineering's third quarter 2014 revenue decreased $5.0 million, or 8%, to $61.1 million due to pricing pressure and delays in order intake. The third quarter 2014 gross margin decreased to 17%, from 21% in the third quarter 2013, due to reduced economies of scale and pricing pressure. The $3.5 million decline in gross profit directly corresponded to the decline in EBITDA.

AMG Engineering signed $66.9 million in new orders during the third quarter 2014, a 1.09x book to bill ratio. Order backlog was $141.1 million as of September 30, 2014 and excluding the impact of currency, the backlog increased 3% from June 30, 2014. Heat treatment furnaces accounted for approximately 43% of the order intake.

AMG Mining

Q3 '14 Q3 '13 Change
Revenue $84,107 $82,254 2%
Gross profit 17,082 12,805 33%
Operating profit 7,659 5,986 28%
EBITDA 10,794 8,893 21%

AMG Mining's third quarter 2014 revenue increased $1.9 million, or 2%, to $84.1 million, with increases in tantalum, graphite and silicon revenues offsetting declines in antimony. AMG Mineração's revenue grew due to a 50% increase in tantalum volume. AMG Graphite's revenue improved primarily due to a 13% increase in volume, despite lower prices. Third quarter 2014 gross margins increased to 20.3% from 15.6% in the third quarter 2013 due to increased revenue from higher value-added products and the recent production efficiency improvements. EBITDA increased 21%, to 13% of revenue, primarily due to the 33% improvement in gross profit.

Financial Review

SG&A

AMG's third quarter 2014 SG&A expenses were $33.1 million, up slightly from $32.3 million in the third quarter 2013. A one-time charge for an update to the long-term pension liability resulted in the increase in SG&A.

Non-Recurring Items

AMG did not incur any material non-recurring charges during the third quarter 2014. In the third quarter 2013 AMG incurred $1.8 million of charges consisting primarily of $1.3 million and $0.3 million for AMG Engineering and AMG Mining restructuring, respectively.

Liquidity

September 30, 2014 December 31, 2013 Change
Total debt $226,092 $263,580 (14%)
Cash and cash equivalents 122,230 103,067 19%
Net debt 103,862 160,513 (35%)

AMG had a net debt position of $103.9 million as of September 30, 2014. The net debt decreased $56.7 million from December 31, 2013 due to strong cash flow from operations and lower capital spending.

Cash flows from operating activities were $72.5 million in the first nine months of 2014 compared to $57.3 million in the first nine months of 2013. The improvement is primarily attributable to the $1.8 million increase in EBITDA and the $9.5 million reduction in financing and tax payments during 2014.

Capital expenditures declined $5.3 million in the first nine months of 2014 compared to the first nine months of 2013. The $17.2 million of capital spending in the first nine months of 2014 included $8.4 million of maintenance capital. The largest expansion capital projects were for AMG TAC's titanium aluminides, AMG Silicon efficiency improvements, and increased capacity of higher value-added graphite products.

Including the $122.2 million of cash, AMG had $191.6 million of total liquidity as of September 30, 2014.

Engineering Strategic Alternatives Update

As previously announced, AMG has retained a financial advisor to evaluate a potential IPO of ALD. Equity markets for small cap IPOs have not cooperated for such a transaction to go forward. We will continue to update the market accordingly.

Outlook

In this challenging environment, AMG has generated significant free cash flow and considerably reduced gross and net debt. AMG expects full year 2014 EBITDA growth in excess of 10%. 2014 net income and ROCE will substantially exceed 2013 levels, despite the weakening global economic outlook. AMG is well positioned to further reduce debt through increased profitability and selective capital spending in 2015.

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

For the quarter ended September 30
In thousands of US Dollars 2014 2013
Unaudited Unaudited
Revenue 279,718 286,415
Cost of sales 231,659 246,623
Gross profit 48,059 39,792
Selling, general and administrative expenses 33,125 32,343
Restructuring expense 19 1,753
Other income, net (84) (1,579)
Operating profit 14,999 7,275
Finance expense 3,671 6,347
Finance income (197) (324)
Foreign exchange gain (22) (358)
Net finance costs 3,452 5,665
Share of (loss) profit of associates and joint ventures (1,252) 26
Profit before income tax 10,295 1,636
Income tax expense 7,101 459
Profit for the period 3,194 1,177
Attributable to:
Shareholders of the Company 3,236 1,407
Non-controlling interests (42) (230)
Profit for the period 3,194 1,177
Earnings per share
Basic earnings per share 0.12 0.05
Diluted earnings per share 0.12 0.05

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

For the nine months ended September 30
In thousands of US Dollars 2014 2013
Unaudited Unaudited
Revenue 833,511 874,421
Cost of sales 694,137 737,753
Gross profit 139,374 136,668
Selling, general and administrative expenses 102,259 102,354
Asset impairment expense - 49,703
Restructuring expense 1,811 8,488
Other income, net (1,630) (1,970)
Operating profit (loss) 36,934 (21,907)
Finance expense 14,098 17,384
Finance income (538) (640)
Foreign exchange gain (8) (313)
Net finance costs 13,552 16,431
Share of loss of associates and joint ventures (469) (530)
Profit (loss) before income tax 22,913 (38,868)
Income tax expense 8,912 2,383
Profit (loss) for the period 14,001 (41,251)
Attributable to:
Shareholders of the Company 14,600 (38,363)
Non-controlling interests (599) (2,888)
Profit (loss) for the period 14,001 (41,251)
Earnings (loss) per share
Basic earnings (loss) per share 0.53 (1.39)
Diluted earnings (loss) per share 0.53 (1.39)
AMG Advanced Metallurgical Group N.V.
Condensed interim consolidated statement of financial position



In thousands of US Dollars
Sept 30,
2014
Dec 31, 2013
Unaudited
Assets
Property, plant and equipment 240,954 259,683
Goodwill 23,196 25,078
Intangible assets 11,245 12,116
Investments in associates and joint ventures 1,476 4,755
Derivative financial instruments - 271
Deferred tax assets 30,995 27,003
Restricted cash 7,748 7,967
Other assets 22,753 25,519
Total non-current assets 338,367 362,392
Inventories 157,453 179,343
Trade and other receivables 156,100 150,807
Derivative financial instruments 3,712 2,177
Other assets 31,350 34,430
Cash and cash equivalents 122,230 103,067
Total current assets 470,845 469,824
Total assets 809,212 832,216
AMG Advanced Metallurgical Group N.V.
Condensed interim consolidated statement of financial position (continued)
In thousands of US Dollars


Sept 30,
2014
Unaudited
Dec 31, 2013

Equity
Issued capital 744 744
Share premium 382,518 382,518
Other reserves (18,923) (4,605)
Retained earnings (deficit) (235,556) (246,304)
Equity attributable to shareholders of the Company 128,783 132,353
Non-controlling interests 3,476 2,237
Total equity 132,259 134,590
Liabilities
Loans and borrowings 192,318 223,788
Employee benefits 140,817 138,009
Provisions 29,829 30,443
Deferred revenue 11,008 11,776
Government grants 716 883
Other liabilities 9,232 8,425
Derivative financial instruments 6,818 7,702
Deferred tax liabilities 4,328 3,121
Total non-current liabilities 395,066 424,147
Loans and borrowings 11,627 20,873
Short term bank debt 22,147 18,919
Government grants 148 74
Other liabilities 55,834 54,383
Trade and other payables 126,569 127,381
Derivative financial instruments 5,200 5,298
Advance payments 31,156 16,341
Deferred revenue 9,033 5,009
Current taxes payable 3,550 2,329
Employee benefits 200 1,350
Provisions 16,423 21,522
Total current liabilities 281,887 273,479
Total liabilities 676,953 697,626
Total equity and liabilities 809,212 832,216

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 2014 2013
Unaudited Unaudited
Cash flows from operating activities
Profit (loss) for the period 14,001 (41,251)
Adjustments to reconcile net profit to net cash flows:
Non-cash:
Income tax expense 8,912 2,383
Depreciation and amortization 24,447 24,822
Asset impairment expense - 49,703
Net finance costs 13,552 16,431
Share of loss of associates and joint ventures 469 530
Loss (gain) on sale or disposal of property, plant and equipment 325 (1,429)
Equity-settled share-based payment transactions 673 666
Movement in provisions, pensions and government grants (4,174) 969
Change in working capital and deferred revenue 27,639 27,369
Cash flows from operating activities 85,844 80,193
Finance costs paid, net (8,922) (11,331)
Income tax paid, net (4,472) (11,544)
Net cash flows from operating activities 72,450 57,318
Cash flows used in investing activities
Proceeds from sale of property, plant and equipment 260 1,821
Proceeds from sale of investment in associate - 650
Acquisition of property, plant and equipment and intangibles (17,232) (22,534)
Acquisition of other non-current asset investments - (4,000)
Change in restricted cash (169) 1,952
Other 157 13
Net cash flows used in investing activities (16,984) (22,098)
Cash flows used in financing activities
Proceeds from issuance of debt - 38
Repayment of borrowings (30,822) (42,572)
Change in non-controlling interests 28 (69)
Other 3 7
Net cash flows used in financing activities (30,791) (42,596)
Net increase (decrease) in cash and cash equivalents 24,675 (7,376)
Cash and cash equivalents at January 1 103,067 121,639
Effect of exchange rate fluctuations on cash held (5,512) 2,015
Cash and cash equivalents at September 30 122,230 116,278

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


([2]) Free cash flow is defined as cash flows from operating activities less cash flows used in investing activities


7 November 2014 earnings release http://hugin.info/138060/R/1869570/657377.pdf

HUG#1869570

Source:AMG Advanced Metallurgical Group N.V.