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AMG Advanced Metallurgical Group N.V. Reports Full Year and Fourth Quarter 2014 Results

Key Highlights

  • Revenue was $1,093.9 million in 2014, a 6% decrease from 2013; fourth quarter 2014 revenue was $260.4 million, an 8% decrease from the same period in 2013
  • EBITDA(1) was $85.7 million in 2014, an 18% increase over 2013; fourth quarter 2014 EBITDA was $21.9 million, a 108% increase over the same period in 2013
  • EPS on a fully diluted basis was $0.79 in 2014, compared to ($1.51) in 2013; fourth quarter EPS was $0.26, compared to ($0.12) in the same period in 2013
  • Cash flows from operating activities were $95.1 million in 2014, a 36% increase over 2013; fourth quarter 2014 cash flows from operating activities were $22.7 million, an 83% increase over the same period in 2013
  • Record full year free cash flow(2) generation of $72.1 million in 2014
  • As of December 31, 2014, cash on the balance sheet was $108.0 million; net debt was $87.8 million, a reduction of $72.7 million, or 45%, during 2014

AMSTERDAM, Netherlands, March 12, 2015 (GLOBE NEWSWIRE) -- (Regulated Information) -- AMG Advanced Metallurgical Group N.V. ("AMG", EURONEXT AMSTERDAM: "AMG") reported fourth quarter 2014 improvements in operating cash flow, EBITDA and earnings per share. Net income attributable to shareholders for the fourth quarter 2014 was $7.3 million, or $0.26 per fully diluted share, compared to a net loss of $3.2 million, or ($0.12) per fully diluted share in the fourth quarter 2013. EBITDA increased 108% to $21.9 million in the fourth quarter 2014 from $10.5 million in the fourth quarter 2013. AMG achieved these improvements despite an 8% decrease in fourth quarter 2014 revenue to $260.4 million.

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 during 2014 and reduced net debt by $72.7 million, or 45%. This was accomplished despite subdued market conditions, by improving overall profitability, managing working capital and maintaining discipline in capital spending. In the fourth quarter, AMG Processing and AMG Mining continued to increase year over year gross margins through improved productivity, a reduced cost structure and a focus on providing higher value-added products. AMG Engineering EBITDA improved to $2.7 million in the fourth quarter, the highest quarterly performance of 2014 for the segment. Despite the improvement, AMG Engineering is still below expectations and additional measures will be taken to ensure a return to historical profitability levels."

Key Figures

In 000's US Dollar
Q4 '14 Q4 '13 Change FY '14 FY '13 Change
Revenue $260,378 $284,023 (8%) $1,093,889 $1,158,444 (6%)
Gross profit 44,918 41,034 9% 184,292 177,702 4%
Gross margin 17.3% 14.4% 16.8% 15.3%
Operating profit (loss) 3,698 (4,289) N/A 40,632 (26,196) N/A
Operating margin 1.4% (1.5%) 3.7% (2.3%)
Net income (loss) attributable to shareholders 7,310 (3,175) N/A 21,910 (41,538) N/A
EPS- Fully diluted $0.26 ($0.12) N/A $0.79 ($1.51) N/A
EBIT (1) 13,813 2,090 561% 53,238 39,353 35%
EBITDA (2) 21,858 10,516 108% 85,732 72,601 18%
EBITDA margin 8.4% 3.7% 7.8% 6.3%
Cash flows from operating activities 22,664 12,389 83% 95,114 69,707 36%

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

Q4 '14 Q4 '13 Change FY '14 FY '13 Change
Revenue $128,440 $132,882 (3%) $552,537 $568,629 (3%)
Gross profit 16,165 10,498 54% 76,342 61,149 25%
Operating (loss) profit (6,051) (8,229) 26% 14,562 2,139 581%
EBITDA 6,392 167 N.M. 38,880 21,501 81%

AMG Processing's fourth quarter 2014 revenue decreased $4.4 million, or 3%, to $128.4 million. Reduced volumes of low margin products drove this decline as AMG Superalloys and AMG Aluminum continued to optimize product mix. A 54% increase in ferrovanadium volume in the quarter partially offset this reduction.

Improved product mix and increased operating efficiencies at AMG Vanadium, AMG Superalloys and AMG Titanium Alloys and Coatings all contributed to an increase in gross margin, which improved to 13% in the fourth quarter 2014 from 8% in the fourth quarter 2013. The increase in gross profit resulted in a $6.2 million improvement in EBITDA to $6.4 million in the fourth quarter 2014.

AMG Engineering

Q4 '14 Q4 '13 Change FY '14 FY '13 Change
Revenue $60,877 $66,978 (9%) $220,450 $260,200 (15%)
Gross profit 11,072 15,388 (28%) 41,813 62,922 (34%)
Operating loss (7,142) (609) N.M. (13,199) (10,957) (20%)
EBITDA 2,689 2,379 13% 3,127 20,593 (85%)

AMG Engineering's fourth quarter 2014 revenue decreased $6.1 million, or 9%, to $60.9 million due to the comparative timing of order intake in 2013 and 2014. The fourth quarter 2014 gross margin decreased to 18% from 23% in the fourth quarter 2013 due to reduced economies of scale and pricing pressure. The decline in gross profit was more than offset by a reduction in SG&A costs due to cost control efforts.

AMG Engineering signed $56.6 million in new orders during the fourth quarter 2014, a 0.93x book to bill ratio. Order backlog was $128.3 million as of December 31, 2014. Excluding the impact of currency, the backlog decreased 5% from September 30, 2014. Heat treatment furnaces accounted for approximately 32% of the order intake during the quarter.

AMG Mining

Q4 '14 Q4 '13 Change FY '14 FY '13 Change
Revenue $71,061 $84,163 (16%) $320,902 $329,615 (3%)
Gross profit 17,681 15,148 17% 66,137 53,631 23%
Operating profit (loss) 16,891 4,549 271% 39,269 (17,378) 326%
EBITDA 12,777 7,970 60% 43,725 30,507 43%

AMG Mining's fourth quarter 2014 revenue decreased $13.1 million, or 16%, to $71.1 million. The decline was primarily attributable to lower volumes at AMG Silicon and AMG Mineracao and lower metals prices at AMG Antimony. Fourth quarter 2014 gross margins increased to 25% from 18% in the fourth quarter 2013 due to an improved product mix, operational efficiencies and energy rebates received at AMG Silicon of $2.7 million. EBITDA increased 60% to 18% of revenue, primarily due to the 17% improvement in gross profit.

Financial Review

SG&A

AMG's fourth quarter 2014 SG&A expenses were $31.2 million, down significantly from $38.5 million in the fourth quarter 2013. The most significant variance between the fourth quarter 2014 and the fourth quarter 2013 relates to variable compensation. In the fourth quarter 2013, significant bonus expense was recorded due to achievement of operating cash flow goals, whereas in 2014, bonus expense was more normalized on a quarterly basis.

Non-Recurring Items

AMG's fourth quarter 2014 operating profit of $3.7 million includes non-recurring items, which are not included in the calculation of EBITDA.

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

For the three months ended

December 31, 2014 December 31, 2013 Change
Non-recurring items included in operating profit (loss):
Restructuring expense $3,059 $5,737 (47%)
Asset impairment expense 1,867 1,321 41%
Environmental 5,544 - N/A
Total non-recurring items included in operating profit (loss) 10,470 7,058 48%

Restructuring expense in the fourth quarter of 2014 and 2013 primarily related to AMG's continuous focus on improving its cost structure. The largest elements of asset impairment expense related to solar assets in AMG Engineering and an additional reduction in the value of the antimony mine in Turkey, offset by a reversal of impairment expense in AMG Mining as a result of the previously announced sale of 40% of the graphite business.

During the fourth quarter 2014, AMG recorded non-recurring environmental expenses of $5.5 million mainly related to its Newfield, NJ site.

Liquidity

December 31, 2014 December 31, 2013 Change
Total debt $195,878 $263,580 (26%)
Cash and cash equivalents 108,029 103,067 5%
Net debt 87,849 160,513 (45%)

AMG had a net debt position of $87.8 million as of December 31, 2014. The net debt decreased $72.7 million from December 31, 2013 due to strong cash flow from operations and reduced capital spending.

Cash flows from operating activities were $95.1 million for the year ended December 31, 2014 compared to $69.7 million in the same period in 2013. The improvement is primarily attributable to the $13.1 million increase in EBITDA and the $10.1 million reduction in financing and tax payments during 2014.

Capital expenditures declined $8.1 million in the year ended December 31, 2014 compared to the same period in 2013. The $24.0 million of capital spending in the year ended December 31, 2014 included $12.8 million of maintenance capital. The largest expansion capital projects were for AMG Titanium Alloys and Coatings' titanium aluminides, AMG Silicon efficiency improvements, and increased capacity of higher value-added graphite products.

AMG had $200.4 million of total liquidity as of December 31, 2014, which included $108.0 million of cash.

AMG Engineering Update

AMG Engineering will undertake an extensive cost reduction plan in 2015, based on a new procurement optimization program combined with a reduction in headcount. These actions will result in cost savings of approximately $7 million annually. Accordingly, management expects the Engineering business to return to historical sustainable levels of profitability in 2016.

Supervisory Board Composition

During its meeting yesterday in Amsterdam, AMG's Supervisory Board appointed Mr. Norbert Quinkert as the successor of Mr. Pedro Pablo Kuczynski as Chairman of the Supervisory Board. The appointment is effective as of the Annual Meeting on May 7, 2015. Mr Kuczynski's term ends in May 2015 and he has indicated that he is not available for a new term on AMG's Supervisory Board. Mr. Quinkert has been a member of the Supervisory Board since 2007. In addition, Ms. Ute Wolf has indicated to the Supervisory Board that she intends to step down when her term ends in May 2015. The Supervisory Board resolved further that it will nominate Professor Steve Hanke for re-appointment at the Annual Meeting in May next to the nominations of Mr. Robert Meuter and Mr. Petteri Soininen, as announced on March 9, 2015.

Outlook

In this challenging environment, AMG has generated significant free cash flow and considerably reduced gross and net debt. Despite weak metal prices, AMG expects to continue to improve its return on capital employed and earnings per share in 2015.

AMG Advanced Metallurgical Group N.V.
Consolidated Income Statement
For the three months ended December 31
In thousands of US Dollars 2014 2013
Unaudited Unaudited
Continuing operations
Revenue 260,378 284,023
Cost of sales 215,460 242,989
Gross profit 44,918 41,034
Selling, general and administrative expenses 31,241 38,502
Restructuring expense 3,059 5,737
Asset impairment expense 1,867 1,321
Environmental 5,544 (211)
Other income, net (491) (26)
Operating profit (loss) 3,698 (4,289)
Finance income (386) (170)
Finance expense 5,846 4,319
Foreign exchange loss 537 488
Net finance costs 5,997 4,637
Share of profit (loss) of associates and joint ventures 62 (1,618)
Loss before income tax (2,237) (10,544)
Income tax benefit (9,884) (6,759)
Profit (loss) for the period 7,647 (3,785)
Attributable to:
Shareholders of the Company 7,310 (3,175)
Non-controlling interests 337 (610)
Profit (loss) for the period 7,647 (3,785)
Earnings (loss) per share
Basic earnings (loss) per share 0.26 (0.12)
Diluted earnings (loss) per share 0.26 (0.12)
AMG Advanced Metallurgical Group N.V.
Consolidated Income Statement
For the year ended December 31
In thousands of US Dollars 2014 2013
Unaudited
Continuing operations
Revenue 1,093,889 1,158,444
Cost of sales 909,597 980,742
Gross profit 184,292 177,702
Selling, general and administrative expenses 133,500 140,856
Restructuring expense 4,870 14,225
Asset impairment expense 1,867 51,024
Environmental 5,544 (86)
Other income, net (2,121) (2,121)
Operating profit (loss) 40,632 (26,196)
Finance income (924) (810)
Finance expense 19,944 21,703
Foreign exchange loss 529 175
Net finance costs 19,549 21,068
Share of loss of associates and joint ventures (407) (2,148)
Profit (loss) before income tax 20,676 (49,412)
Income tax benefit (972) (4,376)
Profit (loss) for the year 21,648 (45,036)
Attributable to:
Shareholders of the Company 21,910 (41,538)
Non-controlling interests (262) (3,498)
Profit (loss) for the year 21,648 (45,036)
Earnings (loss) per share
Basic earnings (loss) per share 0.79 (1.51)
Diluted earnings (loss) per share 0.79 (1.51)
AMG Advanced Metallurgical Group N.V.
Consolidated Statement of Financial Position
As at December 31
In thousands of US Dollars 2014 2013
Unaudited
Assets
Property, plant and equipment 237,418 259,683
Goodwill 20,618 25,078
Intangible assets 11,116 12,116
Investments in associates and joint ventures 1,450 4,755
Derivative financial instruments - 271
Deferred tax assets 37,903 27,003
Restricted cash 7,582 7,967
Other assets 21,987 25,519
Total non-current assets 338,074 362,392
Inventories 145,418 179,343
Trade and other receivables 135,293 150,807
Derivative financial instruments 1,997 2,177
Other assets 47,055 34,430
Assets held for sale 2,553 -
Cash and cash equivalents 108,029 103,067
Total current assets 440,345 469,824
Total assets 778,419 832,216
AMG Advanced Metallurgical Group N.V.
Consolidated Statement of Financial Position (continued)
As at December 31
In thousands of US Dollars 2014 2013
Unaudited
Equity
Issued capital 745 744
Share premium 382,978 382,518
Other reserves (59,728) (4,605)
Retained earnings (deficit) (225,843) (246,304)
Equity attributable to shareholders of the 98,152 132,353
Company
Non-controlling interests 2,825 2,237
Total equity 100,977 134,590
Liabilities
Loans and borrowings 167,990 223,788
Employee benefits 159,672 138,009
Provisions 37,056 30,443
Deferred revenue 8,950 11,776
Government grants 666 883
Other liabilities 8,885 8,425
Derivative financial instruments 5,056 7,702
Deferred tax liabilities 8,261 3,121
Total non-current liabilities 396,536 424,147
Loans and borrowings 6,562 20,873
Short term bank debt 21,326 18,919
Government grants 88 74
Liabilities associated with assets held for sale 248 -
Other liabilities 53,257 54,383
Trade and other payables 134,373 127,381
Derivative financial instruments 9,104 5,298
Advance payments 31,689 16,341
Deferred revenue 8,414 5,009
Current taxes payable 671 2,329
Employee benefits - 1,350
Provisions 15,174 21,522
Total current liabilities 280,906 273,479
Total liabilities 677,442 697,626
Total equity and liabilities 778,419 832,216
AMG Advanced Metallurgical Group N.V.
Condensed Consolidated Statement of Cash Flows
For the year ended December 31
In thousands of US Dollars 2014 2013
Unaudited
Cash flows from operating activities
Profit (loss) for the year 21,648 (45,036)
Adjustments to reconcile net profit (loss) to net
cash flows:
Non-cash:
Income tax benefit (972) (4,376)
Depreciation and amortization 32,494 33,248
Asset impairment expense 1,867 51,024
Net finance costs 19,549 21,068
Share of loss of associates and joint ventures 407 2,148
Loss (gain) on sale or disposal of property, plant 297 (1,296)
and equipment
Equity-settled share-based payment transactions 854 475
Movement in provisions, pensions and 44 2,427
government grants
Working capital and deferred revenue 38,991 40,200
adjustments
Cash flows from operating activities 115,179 99,882
Finance costs paid, net (13,813) (18,046)
Income tax paid, net (6,252) (12,129)
Net cash flows from operating activities 95,114 69,707
Cash flows used in investing activities
Proceeds from sale of property, plant and equipment 493 2,515
Proceeds from sale of investment in associate 354 650
Acquisition of property, plant and equipment and (23,957) (32,025)
intangibles
Change in restricted cash (105) 3,989
Acquisition of other non-current asset investments - (4,000)
Other 184 9
Net cash flows used in investing activities (23,031) (28,862)




AMG Advanced Metallurgical Group N.V.
Condensed Consolidated Statement of Cash Flows (continued)
For the year ended December 31
In thousands of US Dollars 2014 2013
Unaudited
Cash flows used in financing activities
Proceeds from issuance of debt 2,691 38
Repayment of borrowings (60,649) (61,679)
Contributions by non-controlling interests 28 392
Change of non-controlling interests - (1,007)
Other 5 4
Net cash flows used in financing activities (57,925) (62,252)
Net increase (decrease) in cash and cash equivalents 14,158 (21,407)
Cash and cash equivalents at January 1 103,067 121,639
Effect of exchange rate fluctuations on cash held (9,196) 2,835
Cash and cash equivalents at December 31 108,029 103,067

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 aerospace, infrastructure, energy, and specialty metals & chemicals end markets.

AMG produces aluminum master alloys and powders, titanium alloys and coatings, ferrovanadium, natural graphite, chromium metal, antimony, tantalum, niobium and silicon metal. AMG Engineering designs and produces vacuum furnace equipment and systems used to produce and upgrade specialty metals and alloys for the aerospace, automotive, infrastructure, and energy markets.

With approximately 3,000 employees, AMG operates globally with production facilities in Germany, the United Kingdom, France, Czech Republic, United States, China, Mexico, Brazil, Turkey 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. +1 610 293 5804
Steve Daniels
Vice President of Investor Relations
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.

Free cash flow is defined as cash flows from operating activities less cash flows used in investing activities

March 12 2015

http://hugin.info/138060/R/1902265/676314.pdf

HUG#1902265

Source:AMG Advanced Metallurgical Group N.V.