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AMG Reports Full Year and Fourth Quarter 2015 Results; Ends Year Net Debt Free -- Ready for Growth

Key Highlights

  • AMG ended the year net debt free, reducing net debt by $88.9 million in 2015, or $3.22 per ordinary share
  • Fourth quarter 2015 cash flows from operating activities were $33.6 million, a 48% increase over the same period in 2014
  • EBITDA(3) was $75.6 million in 2015, $85.7 million when adjusted for foreign currency translation effects(4)
  • Full year profit before income tax increased by 38% to $28.6 million in 2015 from $20.7 million in 2014
  • Total 2015 dividend proposed of €0.21 per ordinary share, including the interim dividend of €0.10, paid on September 16, 2015
  • AMG provides strategy update, including growth plan to pursue organic and acquisition opportunities

AMSTERDAM, Netherlands, March 11, 2016 (GLOBE NEWSWIRE) -- AMG Advanced Metallurgical Group N.V. ("AMG", EURONEXT AMSTERDAM: "AMG") reported a net debt reduction of $88.9 million in 2015, ending the year net debt free with net cash of $1.0 million. The EBITDA for 2015 amounted to $75.6 million, a 12% decrease from $85.7 million in 2014. Fourth quarter EBITDA decreased to $9.7 million from $21.9 million in 2014.

Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, "AMG cash flow for the fourth quarter was strong thanks to the pro-active steps taken by management to mitigate price risk and reduce cost. AMG ended the year free of net debt, exceeding management's deleveraging target by a considerable margin.

AMG Engineering achieved EBITDA of $2.6 million during the quarter, in line with 2014. Strong demand in the areas of heat treatment furnaces for the automotive market, plasma remelting furnaces for the aerospace market and induction furnaces for powder metallurgy applications resulted in an improvement in year ending order backlog of 10%, compared to December 31, 2014.

AMG Critical Materials profitability was adversely affected by non-cash expenses related to vanadium inventory adjustments of $4.4 million during the fourth quarter 2015. Despite double-digit declines in market pricing for all key products in 2015, AMG's continuing focus on operating performance resulted in solid financial results in all eight Critical Materials business units on a full year basis.

Despite the severe headwinds in the market, AMG generated free cash flow of $55.8 million during 2015, the second highest free cash flow in the company's history. We are pleased to be able to propose a full year dividend of €0.21 to our shareholders.

Growth strategy update

Following three years of intense focus on cash flow optimization and debt reduction, we now find ourselves with significant available capital and a unique opportunity to grow both organically as well as through select acquisitions.

AMG's organic growth strategy is focused on certain critical materials within our portfolio that are marked by strong demand growth or supply limitations. We have a number of projects which we have continued to develop during our austerity period which we are now beginning to progress.

Our acquisition strategy is very selective. We have developed a list of acquisition targets, each of which would be synergistic with our current businesses, and provide incremental technology or market share growth. AMG is the result of an acquisition strategy and we are fundamentally value buyers. We would expect every acquisition we undertake to be accretive to our earnings per share."

Key Figures

In 000's US Dollar
Q4 '15 Q4 '14 Change FY '15 FY '14 Change
Revenue $220,842 $260,378 (15%) $977,143 $1,093,889 (11%)
Gross profit 32,385 44,918 (28%) 159,960 184,292 (13%)
Gross margin 14.7% 17.3% 16.4% 16.8%
Operating profit 4,191 3,698 13% 36,163 40,632 (11%)
Operating margin 1.9% 1.4% 3.7% 3.7%
Profit before income tax 2,275 (2,237) N/A 28,568 20,676 38%
Net (loss) income attributable to shareholders (337) 7,310 N/A 11,080 21,910 (49%)
Net (loss) income attributable to shareholders, adjusted for one-time refinancing costs (337) 7,310 N/A 16,452 21,910 (25%)
EPS - Fully diluted (0.01) 0.26 N/A 0.40 0.79 (49%)
EPS - Fully diluted, adjusted for one-time refinancing costs (0.01) 0.26 N/A 0.59 0.79 (25%)
EBIT (2) 2,043 13,813 (85%) 46,032 53,238 (14%)
EBITDA (3) 9,676 21,858 (56%) 75,622 85,732 (12%)
EBITDA margin 4.4% 8.4% 7.7% 7.8%
Cash flows from operating activities 33,550 22,664 48% 76,308 95,114 (20%)

Notes:

  1. Free cash flow is defined as cash flows from operating activities less cash flows used in investing activities.
  2. EBIT is defined as earnings before interest and income taxes. EBIT excludes restructuring and equity-settled share-based payments and includes foreign currency gains or losses.
  3. EBITDA is defined as EBIT adjusted for depreciation and amortization.
  4. EBITDA adjusted for foreign currency translation effects is explained under 'Currency Fluctuations'.

Operational Review

AMG Critical Materials

Q4 '15 Q4 '14 Change FY '15 FY '14 Change
Revenue $166,275 $199,501 (17%) $757,492 873,439 (13%)
Gross profit * 20,733 33,846 (39%) ** 111,153 142,479 (22%)
Operating profit 2,559 10,840 (76%) 31,630 53,831 (41%)
EBITDA 7,039 19,169 (63%) 60,798 82,605 (26%)

* Includes $4.4 million non-cash expense related to vanadium, nickel and molybdenum inventory adjustments in the fourth quarter 2015

** Includes $6.5 million non-cash expense related to vanadium, nickel and molybdenum inventory adjustments in the full year 2015

AMG Critical Materials continues to be impacted by unfavorable Euro to US Dollar currency translation effects and lower metal prices, and as a result, fourth quarter 2015 revenue decreased by 17%, to $166.3 million.

The reduction in market prices of antimony, vanadium, molybdenum, nickel and aluminum of 38%, 47%, 48%, 40% and 24%, respectively, negatively affected revenue in the fourth quarter of 2015 compared to the fourth quarter of 2014.

Gross profit in the fourth quarter decreased $13.1 million, or 39%, to $20.7 million, driven primarily by a non-cash inventory adjustment expense of $4.4 incurred due to rapidly falling vanadium, nickel and molybdenum prices, foreign currency translation effects and lower sales volumes.

Full year 2015 sales volumes were largely in line with 2014, with the exception of Aluminum, which decreased due to a planned reduction in capacity, and Titanium Master Alloys, which decreased due to product mix optimization.

AMG Engineering

Q4 '15 Q4 '14 Change FY '15 FY '14 Change
Revenue $54,567 $60,877 (10%) $219,651 $220,450 -
Gross profit 11,652 11,072 5% 48,807 41,813 17%
Operating profit (loss) 1,632 (7,142) N/A 4,533 (13,199) N/A
EBITDA 2,637 2,689 (2%) 14,824 3,127 374%

AMG Engineering signed $48.0 million in new orders during the fourth quarter of 2015, representing a 0.88x book to bill ratio. Order backlog was $140.9 million as of December 31, 2015, a 10% increase from $128.3 million as of December 31, 2014.

AMG Engineering's fourth quarter 2015 revenue decreased $6.3 million, or 10%, to $54.6 million, as an increase in local currency revenues was more than offset by foreign currency translation effects. Revenue generated from heat treatment furnaces, remelting furnaces and heat treatment services increased in the fourth quarter of 2015 compared to the fourth quarter of 2014.

Fourth quarter 2015 gross margin increased to 21% from 18% in the fourth quarter of 2014 due to higher revenue in local currency, product mix effects and improved project cost management.

EBITDA of $2.6 million in the fourth quarter of 2015 was in line with the same period in 2014.

Financial Review

Tax

AMG recorded an income tax expense of $18.7 million in 2015 as compared to a tax benefit of $1.0 million in 2014. The largest driver of this variance relates to the one-time recognition of US tax benefits in 2014.

The effective tax rate of 65% in 2015 was negatively impacted by the currency effect of the Brazilian Real on deferred taxes and refinancing costs of $5.4 million in the second quarter of 2015, for which no tax benefit could be recognized.

AMG paid taxes of $5.7 million in 2015 as compared to tax payments of $6.3 million in 2014. AMG's effective cash tax rate was 20% in 2015, as compared to 30% in 2014.

SG&A

AMG's fourth quarter 2015 SG&A expenses were $30.4 million, down slightly from $31.2 million in the fourth quarter 2014. A reduction in professional fees of $2.0 million between the fourth quarter 2015 and the fourth quarter 2014 was partially offset by an increase in project related costs.

Full year 2015 SG&A expenses were $122.3 million, an 8% reduction from $133.5 million in 2014.

Non-Recurring Items

AMG's fourth quarter 2015 operating profit of $4.2 million includes non-recurring items, which are not included in the calculation of EBITDA.

A summary of non-recurring items in the fourth quarter 2015 and 2014 are below:

Non-recurring items included in operating profit

Q4 '15 Q4 '14 Change
Restructuring expense ($3,011) $3,059 N/A
Asset impairment expense - 1,867 N/A
Environmental 1,529 5,544 (72%)
Total non-recurring items included in operating profit (1,482) 10,470 N/A

Net income in the fourth quarter 2015 was positively impacted by the revision of a restructuring plan related to cost reduction initiatives as well as the release of a value-added tax provision.

During the fourth quarter 2015, AMG recorded non-recurring environmental accrual of $1.5 million related to its Newfield, NJ site.

Liquidity

December 31, 2015 December 31, 2014 Change
Total debt $126,743 $195,878 (35%)
Cash and cash equivalents 127,778 108,029 18%
Net (cash) debt (1,035) 87,849 N/A

AMG had a net cash position of $1.0 million as of December 31, 2015. Net debt and gross debt decreased $88.9 million and $69.1 million, respectively, from December 31, 2014.

Cash flows from operating activities were $76.3 million in 2015 compared to $95.1 million in 2014.

Capital expenditures decreased to $23.3 million in 2015 compared to $24.0 million in 2014. Capital spending in 2015 included $13.1 million of maintenance capital. The largest expansion capital project was for AMG's titanium aluminides business.

Including the $127.8 million of cash, AMG had $282.7 million of total liquidity as of December 31, 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 December 31, 2015 compared to December 31, 2014, resulted in a decrease of $47 million and $36 million in assets and liabilities on the balance sheet, respectively. The appreciation of the US Dollar compared to the Euro in the fourth quarter of 2015 in relation to the fourth quarter of 2014, resulted in a reduction in revenue and EBITDA of $24 million and $2 million, respectively. On a full year basis, the appreciation of the US Dollar compared to the Euro resulted in a reduction in revenue and EBITDA of $109 million and $10 million, respectively, compared to the prior year.

EBITDA adjusted for Euro foreign currency translation effects is therefore $85.7 million for full year 2015.

Divestment

On February 29, 2016, AMG sold its 100% ownership interest in Intellifast, GmbH to Aero Products Invest GmbH of Augsburg, Germany.

Final Dividend Proposed

AMG intends to declare a dividend of €0.21 per ordinary share over the financial year 2015. The interim dividend of €0.10, paid on September 16, 2015, will be deducted from the amount to be distributed to shareholders. The proposed final dividend per ordinary share therefore amounts to €0.11.

A proposal to resolve upon the final dividend distribution will be included on the agenda for the annual general meeting to be held on May 4, 2016.

Outlook

In this challenging market environment, AMG's management target is to continue to generate strong operating cash flow and maintain 2015 levels of profitability in 2016.

AMG Advanced Metallurgical Group N.V.
Consolidated Income Statement
For the quarter ended December 31
In thousands of US Dollars 2015 2014
Unaudited Unaudited
Continuing operations
Revenue 220,842 260,378
Cost of sales 188,457 215,460
Gross profit 32,385 44,918
Selling, general and administrative expenses 30,400 31,241
Restructuring expense (3,011) 3,059
Asset impairment expense - 1,867
Environmental 1,529 5,544
Other income, net (724) (491)
Operating profit 4,191 3,698
Finance income (786) (386)
Finance expense 2,219 5,846
Foreign exchange gain 865 537
Net finance costs 2,298 5,997
Share of profit of associates and joint ventures 382 62
Profit (loss) before income tax 2,275 (2,237)
Income tax expense (benefit) 4,416 (9,884)
(Loss) profit for the period (2,141) 7,647
Attributable to:
Shareholders of the Company (337) 7,310
Non-controlling interests (1,804) 337
(Loss) profit for the period (2,141) 7,647
Earnings per share
Basic earnings per share (0.01) 0.26
Diluted earnings per share (0.01) 0.26
AMG Advanced Metallurgical Group N.V.
Consolidated Income Statement
For the year ended December 31
In thousands of US Dollars 2015 2014
Unaudited
Continuing operations
Revenue 977,143 1,093,889
Cost of sales 817,183 909,597
Gross profit 159,960 184,292
Selling, general and administrative expenses 122,331 133,500
Restructuring expense 3,103 4,870
Asset impairment expense - 1,867
Environmental (757) 5,544
Other income, net (880) (2,121)
Operating profit 36,163 40,632
Finance income (1,328) (924)
Finance expense 11,267 19,944
Foreign exchange (gain) loss (1,712) 529
Net finance costs 8,227 19,549
Share of gain (loss) of associates and joint ventures 632 (407)
Profit before income tax 28,568 20,676
Income tax expense (benefit) 18,651 (972)
Profit for the year 9,917 21,648
Attributable to:
Shareholders of the Company 11,080 21,910
Non-controlling interests (1,163) (262)
Profit for the year 9,917 21,648
Earnings per share
Basic earnings per share 0.40 0.79
Diluted earnings per share 0.40 0.79
AMG Advanced Metallurgical Group N.V.
Consolidated Statement of Financial Position
As at December 31
In thousands of US Dollars 2015 2014
Unaudited
Assets
Property, plant and equipment 215,833 237,418
Goodwill 18,676 20,618
Intangible assets 10,246 11,116
Investments in associates and joint ventures 2,230 1,450
Other investments 14,000 -
Deferred tax assets 31,551 37,903
Restricted cash 2,527 7,582
Other assets 19,883 21,987
Total non-current assets 314,946 338,074
Inventories 126,389 145,418
Trade and other receivables 124,270 135,293
Derivative financial instruments 978 1,997
Other assets 27,648 47,055
Assets held for sale 673 2,553
Cash and cash equivalents 127,778 108,029
Total current assets 407,736 440,345
Total assets 722,682 778,419
AMG Advanced Metallurgical Group N.V.
Consolidated Statement of Financial Position
(continued)
As at December 31
In thousands of US Dollars 2015 2014
Unaudited
Equity
Issued capital 745 745
Share premium 382,978 382,978
Other reserves (49,500) (59,728)
Retained earnings (deficit) (205,662) (225,843)
Equity attributable to shareholders of the Company 128,561 98,152
Non-controlling interests 25,006 2,825
Total equity 153,567 100,977
Liabilities
Loans and borrowings 112,217 167,990
Employee benefits 137,853 159,672
Provisions 29,617 37,056
Deferred revenue 13,539 8,950
Government grants 536 666
Other liabilities 8,821 8,885
Derivative financial instruments 5,642 5,056
Deferred tax liabilities 11,691 8,261
Total non-current liabilities 319,916 396,536
Loans and borrowings 3,222 6,562
Short term bank debt 11,304 21,326
Government grants 99 88
Liabilities associated with assets held for sale 423 248
Other liabilities 42,872 53,257
Trade and other payables 108,019 134,373
Derivative financial instruments 8,379 9,104
Advance payments 44,184 31,689
Deferred revenue 16,124 8,414
Current taxes payable 3,093 671
Provisions 11,480 15,174
Total current liabilities 249,199 280,906
Total liabilities 569,115 677,442
Total equity and liabilities 722,682 778,419
AMG Advanced Metallurgical Group N.V.
Consolidated Statement of Cash Flows


For the year ended December 31
In thousands of US Dollars 2015 2014
Unaudited
Cash flows from operating activities
Profit for the year 9,917 21,648
Adjustments to reconcile net profit to net cash flows:
Non-cash:
Income tax expense 18,651 (972)
Depreciation and amortization 29,590 32,494
Asset impairment expense - 1,867
Net finance costs 8,227 19,549
Share of (profit) loss of associates and joint ventures (632) 407
Loss on sale or disposal of property, plant and equipment 2 297
Equity-settled share-based payment transactions 5,041 854
Movement in provisions, pensions and government grants 1,062 44
Working capital and deferred revenue adjustments 21,551 38,991
Cash flows from operating activities 93,409 115,179
Finance costs paid, net (11,394) (13,813)
Income tax paid, net (5,707) (6,252)
Net cash flows from operating activities 76,308 95,114
Cash flows used in investing activities
Proceeds from sale of property, plant and equipment 709 493
Proceeds from sale of subsidiaries (net of cash divested of $1,384 in 2015 (2014:nil)) (1,567) 354
Acquisition of property, plant and equipment and intangibles (23,264) (23,957)
Change in restricted cash 4,812 (105)
Acquisition of other non-current asset investments (1,200) -
Other (16) 184
Net cash flows used in investing activities (20,526) (23,031)
AMG Advanced Metallurgical Group N.V.
Condensed interim consolidated statement of cash flows
(continued)
For the year ended December 31
In thousands of US Dollars 2015 2014
Unaudited
Cash flows used in financing activities
Proceeds from issuance of debt 188,890 2,691
Payment of transaction costs related to debt issuance (5,081) -
Repayment of borrowings (248,490) (60,649)
Change in non-controlling interests 38,740 28
Dividends paid (3,134) -
Other (34) 5
Net cash flows used in financing activities (29,109) (57,925)
Net increase in cash and cash equivalents 26,673 14,158
Cash and cash equivalents at January 1 108,029 103,067
Effect of exchange rate fluctuations on cash held (6,924) (9,196)
Cash and cash equivalents at December 31 127,778 108,029

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
Senior Vice President
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.

March 11 2016 http://hugin.info/138060/R/1993439/733887.pdf

HUG#1993439

Source: AMG Advanced Metallurgical Group N.V.