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AMG Advanced Metallurgical Group N.V. Reports Second Quarter 2015 Results

Key Highlights

  • EBITDA([1]) was $25.1 million in the second quarter 2015, a 23% increase from the same period in 2014
  • EPS, adjusted for the one-time cost of refinancing, on a fully diluted basis, was $0.33 in the second quarter 2015, a 22% increase from the same period in 2014
  • Annualized return on capital employed increased to 15.7% in the second quarter 2015, from 9.9% in the same period in 2014
  • As of June 30, 2015, net debt was $41.9 million, a reduction of $44.9 million in the second quarter of 2015

AMSTERDAM, Netherlands, Aug. 5, 2015 (GLOBE NEWSWIRE) -- (Regulated Information) --- AMG Advanced Metallurgical Group N.V. ("AMG", EURONEXT AMSTERDAM: "AMG") reported second quarter 2015 revenue of $257.4 million, an 8% decrease from $278.9 million in the second quarter 2014. Net income attributable to shareholders, adjusted for the one-time costs of refinancing, for the second quarter 2015 was $9.2 million, or $0.33 per fully diluted share, a 22% increase from $7.4 million, or $0.27 in the second quarter 2014. EBITDA increased 23% to $25.1 million in the second quarter 2015 from $20.4 million in the second quarter 2014.

Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, "AMG earnings and cash flow for the second quarter were strong despite an extremely weak metal price environment and the unfavorable translation impact of foreign currency on reported earnings.

AMG Engineering achieved EBITDA of $4.2 million during the quarter, the highest in eight quarters, making continuous progress towards our stated objective to reduce cost and return the Engineering business to historic levels of profitability in 2016. Order intake of $81.8 million, representing a 1.45x book to bill ratio, was the highest in thirteen quarters. The improvement was due to orders of heat treatment furnaces for the automotive market, plasma re-melting furnaces for the aerospace market and induction furnaces for powder metallurgy applications.

AMG Critical Materials continues to acquire market share in certain business units despite difficult trading conditions and double-digit market price declines in five of AMG's nine critical materials.

AMG reduced net debt by $45.9 million in the first half of 2015 to $41.9 million, a net debt to last twelve months EBITDA ratio of 0.46. AMG's strong balance sheet liquidity, as well as the Board's confidence in our long term ability to generate solid cash flow, has resulted in a change in dividend policy. This change reflects our commitment to return value to shareholders."

Key Figures

In 000's US Dollar
Q2 '15 Q2 '14 Change
Revenue $257,443 $278,941 (8%)
Gross profit 44,613 44,963 (1%)
Gross margin 17.3% 16.1%
Operating profit 12,122 11,124 9%
Operating margin 4.7% 4.0%
Net income attributable to shareholders 3,808 7,445 (49%)
Net income attributable to shareholders, adjusted for one-time refinancing costs 9,180 7,445 23%
EPS - Fully diluted 0.14 0.27 (48%)
EPS - Fully diluted, adjusted for one-time refinancing costs 0.33 0.27 22%
EBIT (1) 18,031 12,221 48%
EBITDA (2) 25,142 20,392 23%
EBITDA margin 9.8% 7.3%
Cash flows from operating activities 11,264 19,129 (41%)

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 Critical Materials

Q2 '15 Q2 '14 Change
Revenue $201,188 $229,265 (12%)
Gross profit 32,112 37,478 (14%)
Operating profit 12,272 14,884 (18%)
EBITDA 20,955 22,193 (6%)

AMG Critical Materials' second quarter 2015 revenue decreased $28.1 million, or 12%, to $201.2 million. The decline was primarily the result of unfavorable Euro to US Dollar currency translation effects, lower metal prices and product portfolio optimization.

The reduction in market prices of antimony metal and ferrovanadium of 10% and 28%, respectively, negatively affected revenue in the second quarter of 2015 compared to the second quarter of 2014.

Despite difficult trading conditions, sales volumes of ferrovanadium, antimony, chrome metal and silicon metal increased as the business units continue to increase market share. Titanium Alloys and Aluminum sales volumes reduced compared to the prior year due to the planned elimination of low margin titanium products, the previously announced aluminum capacity reductions and the sale of AMG Aluminum's Benda-Lutz-Alpoco operation.

Gross profit decreased $5.4 million, or 14%, to $32.1 million, primarily due to foreign currency translation effects and falling ferrovanadium prices. However, AMG Critical Materials' second quarter 2015 gross margin remained at 16% compared to the same period in 2014.

Second quarter 2015 EBITDA margin of 10% was in-line with the second quarter of 2014. SG&A reductions and a reversal of previously recorded environmental expense offset the impact of a reduction in gross profit in the quarter.

AMG Engineering

Q2 '15 Q2 '14 Change
Revenue $56,255 $49,676 13%
Gross profit 12,501 7,485 67%
Operating loss (150) (3,760) 96%
EBITDA 4,187 (1,801) N/A

AMG Engineering signed $81.8 million in new orders during the second quarter of 2015, representing a 1.45x book to bill ratio, the highest order intake in 13 quarters. Order backlog was $138.3 million as of June 30, 2015, an increase of 19% from March 31, 2015.

AMG Engineering's second quarter 2015 revenue increased $6.6 million, or 13%, to $56.3 million, due to the improved order intake in the second half of 2014. Revenue generated from turbine blade coating furnaces, heat treatment furnaces and induction furnaces increased in the second quarter of 2015 compared to the second quarter of 2014.

Second quarter 2015 gross margin increased to 22% from 15% in the second quarter of 2014 due to higher sales, product mix effects and improved project cost management.

EBITDA increased by $6.0 million, to $4.2 million, in the second quarter of 2015, the highest quarterly EBITDA in eight quarters, primarily as a result of higher gross profit.

Financial Review

Refinancing Costs

In the second quarter of 2015, AMG incurred $5.4 million related to the refinancing of the Company's credit facility. As refinancing the credit facility is not ordinary course of business, these charges are considered non-recurring for the purposes of adjusted earnings per share.

Tax

AMG recorded a tax expense of $9.6 million through the first six months of 2015 as compared to a tax expense of $1.8 million in the first half of 2014. The largest driver of this variance relates to changes in the valuation of the Brazilian currency.

Movements in the Brazilian Real exchange rate impact the valuation of the Company's net deferred tax assets. The devaluation of the Real during the first half of 2015 resulted in additional tax expense of $1.6 million. The appreciation of the Real in the first half of 2014 resulted in a $3.2 million tax benefit. The 2015 effective tax rate was also adversely impacted by the refinancing costs of $5.4 million, for which no tax benefit could be recognized.

Liquidity

June 30, 2015 December 31, 2014 Change
Total debt $179,026 $195,878 (9%)
Cash and cash equivalents 137,123 108,029 27%
Net debt 41,903 87,849 (52%)

AMG had a net debt position of $41.9 million as of June 30, 2015. Net debt and gross debt decreased $45.9 million and $16.9 million, respectively, from December 31, 2014.

Cash flows from operating activities were $15.1 million in the first six months of 2015 compared to $24.8 million in the same period in 2014. Due to the refinancing of the credit facility, $3.0 million of cash was spent that will not reoccur.

Capital expenditures declined to $7.0 million in the first six months of 2015 compared to $10.5 million in the same period in 2014. The $7.0 million of capital spending in the first six months of 2015 included $4.6 million of maintenance capital. The largest expansion capital project was for AMG's titanium aluminides business.

Including the $137.1 million of cash, AMG had $263.0 million of total liquidity as of June 30, 2015.

Currency Fluctuations

AMG's financial statements are prepared in US Dollars, so fluctuations in the exchange rate between the US Dollar and other currencies, primarily the Euro and Brazilian Real, have an effect on the results of operations and on the reported value of assets and liabilities as measured in US Dollars.

The appreciation of the US Dollar as of June 30, 2015 compared to December 31, 2014, resulted in a decrease of $48.7 and $37.0 million in assets and liabilities on the balance sheet, respectively. The appreciation of the US Dollar compared to the Euro in the second quarter of 2015 in relation to the second quarter of 2014, resulted in a reduction in revenue and EBITDA of $30.2 million and $2.9 million, respectively.

Outlook & Dividend Policy

In this challenging environment, AMG will continue to reduce cost and maintain a conservative balance sheet.

AMG Critical Materials expects to continue to acquire market share in certain business units although currency translation effects and metal prices will continue to affect revenues in the division.

AMG Engineering expects to return to historic levels of profitability in 2016. The strong order intake in the second quarter of 2015 and successful launch of new product lines has positioned the division well at the midpoint of the current fiscal year.

Against weak industry trends, AMG expects to generate full year EBITDA in-line with prior year and improve its return on capital employed in 2015.

The change in AMG's dividend policy reflects a commitment to return value to shareholders and is a result of an improved balance sheet, ample liquidity and confidence in our ability to generate strong cash flows.

AMG Advanced Metallurgical Group N.V.
Condensed interim consolidated income statement
For the quarter ended June 30
In thousands of US Dollars 2015 2014
Unaudited Unaudited
Revenue 257,443 278,941
Cost of sales 212,830 233,978
Gross profit 44,613 44,963
Selling, general and administrative expenses 32,863 34,098
Restructuring expense 1,965 1,034
Environmental (2,286) -
Other income, net (51) (1,293)
Operating profit 12,122 11,124
Finance income (134) (138)
Finance expense 5,324 5,752
Foreign exchange (gain) loss (1,289) 199
Net finance costs 3,901 5,813
Share of profit of associates and joint ventures 122 678
Profit before income tax 8,343 5,989
Income tax expense (benefit) 4,091 (1,463)
Profit for the period 4,252 7,452
Attributable to:
Shareholders of the Company 3,808 7,445
Non-controlling interests 444 7
Profit for the period 4,252 7,452
Earnings per share
Basic earnings per share 0.14 0.27
Diluted earnings per share 0.14 0.27
AMG Advanced Metallurgical Group N.V.
Condensed interim consolidated income statement
For the six months ended June 30
In thousands of US Dollars 2015 2014
Unaudited Unaudited
Revenue 514,434 553,793
Cost of sales 426,519 462,478
Gross profit 87,915 91,315
Selling, general and administrative expenses 63,006 69,134
Restructuring expense 3,659 1,792
Environmental (2,286) -
Other income, net (139) (1,546)
Operating profit 23,675 21,935
Finance income (472) (341)
Finance expense 8,996 10,427
Foreign exchange (gain) loss (1,117) 14
Net finance costs 7,407 10,100
Share of profit of associates and joint ventures 197 783
Profit before income tax 16,465 12,618
Income tax expense 9,556 1,811
Profit for the period 6,909 10,807
Attributable to:
Shareholders of the Company 6,484 11,364
Non-controlling interests 425 (557)
Profit for the period 6,909 10,807
Earnings per share
Basic earnings per share 0.23 0.41
Diluted earnings per share 0.23 0.41
AMG Advanced Metallurgical Group N.V.
Condensed interim consolidated statement of financial position
June 30, December 31,
In thousands of US Dollars 2015 2014
Unaudited
Assets
Property, plant and equipment 217,618 237,418
Goodwill 18,996 20,618
Intangible assets 9,914 11,116
Investments in associates and joint ventures 1,795 1,450
Derivative financial instruments 14 -
Deferred tax assets 33,923 37,903
Restricted cash 6,946 7,582
Other assets 21,180 21,987
Total non-current assets 310,386 338,074
Inventories 143,214 145,418
Trade and other receivables 141,703 135,293
Derivative financial instruments 2,156 1,997
Other assets 37,261 47,055
Assets held for sale 476 2,553
Cash and cash equivalents 137,123 108,029
Total current assets 461,933 440,345
Total assets 772,319 778,419
AMG Advanced Metallurgical Group N.V.
Condensed interim consolidated statement of financial position
(continued)
June 30 December 31,
In thousands of US Dollars 2015 2014
Unaudited
Equity
Issued capital 745 745
Share premium 382,978 382,978
Other reserves (47,421) (59,728)
Retained earnings (deficit) (204,338) (225,843)
Equity attributable to shareholders of the 131,964 98,152
Company
Non-controlling interests 25,051 2,825
Total equity 157,015 100,977
Liabilities
Loans and borrowings 152,400 167,990
Employee benefits 141,010 159,672
Provisions 29,433 37,056
Deferred revenue 6,689 8,950
Government grants 556 666
Other liabilities 7,733 8,885
Derivative financial instruments 577 5,056
Deferred tax liabilities 10,125 8,261
Total non-current liabilities 348,523 396,536
Loans and borrowings 3,272 6,562
Short term bank debt 23,354 21,326
Government grants 101 88
Liabilities associated with assets held for sale 1,834 248
Other liabilities 47,943 53,257
Trade and other payables 126,432 134,373
Derivative financial instruments 8,835 9,104
Advance payments 30,450 31,689
Deferred revenue 7,341 8,414
Current taxes payable 3,417 671
Provisions 13,802 15,174
Total current liabilities 266,781 280,906
Total liabilities 615,304 677,442
Total equity and liabilities 772,319 778,419
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 2015 2014
Unaudited Unaudited
Cash flows from operating activities
Profit for the period 6,909 10,807
Adjustments to reconcile net profit to net cash
flows:
Non-cash:
Income tax expense 9,556 1,811
Depreciation and amortization 14,292 16,320
Net finance costs 7,407 10,100
Share of gain of associates and joint ventures (197) (783)
(Gain) loss on sale or disposal of property, plant and equipment (156) 134
Equity-settled share-based payment transactions 2,788 429
Movement in provisions, pensions and government grants (896) (5,240)
Working capital and deferred revenue adjustments (15,524) 2,956
Cash flows from operating activities 24,179 36,534
Finance costs paid, net (6,946) (7,921)
Income tax paid, net (2,172) (3,825)
Net cash flows from operating activities 15,061 24,788
Cash flows used in investing activities
Proceeds from sale of property, plant and equipment 931 220
Proceeds from sale of subsidiaries (net of cash divested of $1,347) (550) -
Acquisition of property, plant and equipment and (7,040) (10,478)
Intangibles
Change in restricted cash 437 (1,220)
Other 26 (5)
Net cash flows used in investing activities (6,196) (11,483)
AMG Advanced Metallurgical Group N.V.
Condensed interim consolidated statement of cash flows
(continued)
For the six months ended June 30
In thousands of US Dollars 2015 2014
Unaudited Unaudited
Cash flows from (used in) financing activities
Proceeds from issuance of debt 177,272 -
Payment of transaction costs related to debt issuance (4,371) -
Repayment of borrowings (184,871) (857)
Change in non-controlling interests 37,530 28
Other (132) -
Net cash flows from (used in) financing activities 25,428 (829)
Net increase in cash and cash 34,293 12,476
Equivalents
Cash and cash equivalents at January 1 108,029 103,067
Effect of exchange rate fluctuations on cash held (5,199) (603)
Cash and cash equivalents at June 30 137,123 114,940

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

AMG Critical Materials produces aluminum master alloys and powders, titanium alloys and coatings, ferrovanadium, natural graphite, chromium metal, antimony, tantalum, niobium and silicon metal. AMG Engineering designs, engineers, and produces advanced vacuum furnace systems and operates vacuum heat treatment facilities, primarily for the transportation and energy industries.

With approximately 3,000 employees, AMG operates globally with production facilities in Germany, the United Kingdom, France, Czech Republic, the United States, China, Mexico, Brazil 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.

  1. EBITDA is defined as earnings before interest, tax, depreciation and amortization and excludes non-recurring items


August 5 2015 Earnings

http://hugin.info/138060/R/1943698/703929.pdf

HUG#1943698

Source:AMG Advanced Metallurgical Group N.V.