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AMG Advanced Metallurgical Group N.V. Reports Third Quarter 2016 Results

Key Highlights

  • AMG ended the third quarter 2016 net debt free, with net cash of $1.9 million
  • EBITDA(2) was $23.4 million in the third quarter 2016, a 15% increase over the same period in 2015
  • Net income attributable to shareholders increased by 5% to $5.2 million in the third quarter 2016 from $4.9 million in the third quarter 2015
  • EPS, on a fully diluted basis, was $0.18 in the third quarter 2016, unchanged from third quarter 2015
  • Annualized return on capital employed increased to 18.0% in the third quarter 2016, as compared to 14.7% in the third quarter 2015

AMSTERDAM, Netherlands, Nov. 03, 2016 (GLOBE NEWSWIRE) -- (Regulated Information) --- AMG Advanced Metallurgical Group N.V. ("AMG", EURONEXT AMSTERDAM: "AMG") reported third quarter 2016 revenue of $247.5 million, a 2% increase from $241.9 million in the third quarter 2015. EBITDA for the third quarter 2016 was $23.4 million, a 15% increase from $20.4 million in the third quarter 2015. Net income attributable to shareholders increased to $5.2 million in the third quarter 2016 from $4.9 million in the third quarter 2015. On a year to date basis, EBITDA increased by 7% to $70.6 million, from $65.9 million in the prior year, despite an increase in AMG's Performance Share Unit ("PSU") plan costs of $8.7 million, compared to the same period in 2015, driven by AMG's strong share price performance.

Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, "AMG's focus on operational excellence and price risk management resulted in solid financial results in the third quarter 2016. We are particularly pleased with the impact new innovations have had on the results of AMG Engineering, such as: our industry leading SyncroTherm® heat treatment furnaces; powder metallurgy furnaces related to additive manufacturing; titanium re-melting furnaces; and turbine blade coating plants. These innovative product offerings drove a significant portion of third quarter 2016 sales.

AMG Engineering achieved EBITDA of $8.9 million during the third quarter 2016, an 83% increase from $4.9 million in the third quarter of 2015. AMG Engineering signed $68.1 million in new orders during the third quarter of 2016, representing a 0.97x book to bill ratio. The Engineering division continues to experience strong demand for plasma remelting and induction furnaces for the aerospace market and heat treatment furnaces for the automotive market. Order backlog was $158.1 million as of September 30, 2016, consistent with June 30, 2016.

AMG Critical Materials generated EBITDA of $14.5 million during the third quarter 2016. Year-over-year double-digit declines in average quarterly prices of Chrome, Graphite, and Silicon negatively affected revenue in the third quarter of 2016 compared to the third quarter of 2015.

On a year to date basis, AMG generated cash flows from operating activities of $40.7 million, a decrease of 5% from $42.8 million in the same period in 2015. The year to date operating cash flows of $40.7 million includes voluntary cash contributions to the Company's pension plans of $20.6 million made in the second quarter of 2016. This strong cash flow generation enabled AMG to end the third quarter net debt free, with net cash of $1.9 million."

Key Figures

In 000's US Dollar
Q3 '16Q3 '15Change
Revenue$247,526 $241,867 2%
Gross profit 46,532 39,660 17%
Gross margin 18.8% 16.4%
Operating profit 16,110 8,297 94%
Operating margin 6.5% 3.4%
Net income attributable to shareholders 5,181 4,933 5%
EPS - Fully diluted 0.18 0.18 -
EBIT (1) 16,231 12,751 27%
EBITDA (2) 23,403 20,416 15%
EBITDA margin 9.5% 8.4%
Cash flows from operating activities 20,677 27,697 (25%)

Note:

  1. 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.
  2. EBITDA is defined as EBIT adjusted for depreciation and amortization.

Operational Review

AMG Critical Materials

Q3 '16Q3 '15Change
Revenue$177,490 $187,741 (5%)
Gross profit 32,025 * 27,102 18%
Operating profit 9,106 6,143 48%
EBITDA 14,467 15,531 (7%)

* Includes $2.1 million non-cash expense related to vanadium, nickel and molybdenum inventory adjustments in the third quarter 2015

AMG Critical Materials continues to be impacted by weak metal prices, and as a result, revenue decreased by 5%, to $177.5 million.

Double-digit declines in average quarterly prices of Chrome, Graphite and Silicon negatively affected revenue in the third quarter of 2016 compared to the third quarter of 2015.

Gross profit in the third quarter increased by $4.9 million, or 18%, to $32.0 million, due to the strong performance of Aluminum Master Alloys and Tantalum. In addition, AMG Vanadium incurred a non-cash inventory adjustment expense of $2.1 million in the prior year due to rapidly falling vanadium, nickel and molybdenum prices.

SG&A expenses increased by $4.4 million, or 23%, compared to the prior year due to higher PSU plan costs.

Third quarter 2016 EBITDA margin remained steady at 8% compared to the third quarter 2015.

AMG Engineering

Q3 '16Q3 '15Change
Revenue$70,036 $54,126 29%
Gross profit 14,507 12,558 16%
Operating profit 7,004 2,154 225%
EBITDA 8,936 4,885 83%

AMG Engineering signed $68.1 million in new orders during the third quarter of 2016, representing a 0.97x book to bill ratio. Order backlog was $158.1 million as of September 30, 2016, consistent with June 30, 2016. Year to date, AMG Engineering signed $211.4 million in new orders, representing a 1.07x book to bill ratio.

AMG Engineering's third quarter 2016 revenue increased $15.9 million, or 29%, to $70.0 million, due to strong sales of plasma remelting and induction furnaces for the aerospace market.

Third quarter 2016 gross profit increased by $1.9 million, or 16%, to $14.5 million, due to higher revenues. Gross Margin decreased slightly to 21% from 23% in the third quarter of 2015 due to product mix effects.

SG&A expenses increased by $1.4 million, or 14%, compared to the prior year, due to higher PSU plan costs.

EBITDA increased by $4.1 million to $8.9 million in the third quarter of 2016, the highest quarterly EBITDA in nineteen quarters. The increase in EBITDA was driven by higher gross profit and the sale of an unused production facility in Berlin, which contributed $4.3 million to EBITDA during the quarter, offset by higher SG&A expenses.

Financial Review

Tax

AMG recorded an income tax expense of $4.1 million in the third quarter of 2016 as compared to a tax expense of $4.7 million in the same period in 2015. AMG paid taxes of $1.1 million in the third quarter of 2016 as compared to tax payments of $1.5 million in the same period in 2015. For the third quarter of 2016, AMG's effective cash tax rate was 12%, compared to 15% in the same period in 2015.

Liquidity

September 30, 2016December 31, 2015Change
Total debt$172,222 $126,743 36%
Cash and cash equivalents 174,077 127,778 36%
Net debt (cash) (1,855) (1,035) 79%

AMG had a net cash position of $1.9 million as of September 30, 2016. Net debt decreased by $0.8 million from December 31, 2015, while gross debt increased by $45.5 million, driven by the increased term loan associated with the new debt facility.

Cash flows from operating activities decreased to $20.7 million in the third quarter 2016 from $27.7 million in the third quarter 2015.

Capital expenditures increased to $8.3 million in the third quarter of 2016 compared to $5.2 million in the same period in 2015. Capital spending in the third quarter of 2016 included $4.2 million of maintenance capital. The largest expansion capital project was for AMG's Ancuabe graphite mine project.

Including the $174 million of cash, AMG had $350 million of total liquidity as of September 30, 2016. AMG successfully enlarged and extended its syndicated credit facility during the quarter. AMG incurred additional one-time financing costs of $4.0 million related to the new facility.

Net Finance Costs

AMG's third quarter 2016 net finance costs were $6.8 million compared to net finance income of $1.5 million in the third quarter of 2015. The increase was primarily due to the write-off of $4.0 million of costs associated with the previous credit facility, following the refinancing exercise completed in July 2016. Furthermore, in the third quarter 2015, net finance expenses benefited from the reversal of $2.1 million of accrued finance expenses.

SG&A

AMG's third quarter 2016 SG&A expenses were $34.7 million compared to $28.9 million in the third quarter of 2015, an increase of 20%. This increase was primarily due to higher costs associated with the PSU plan as a result of recent increases in the Company's share price compared to the defined peer group.

On a year to date basis, the PSU plan costs increased by $8.7 million, compared to the same period in 2015.

Outlook

Without exception, throughout 2016, AMG has delivered quarter-over-quarter improvements in EBITDA relative to the prior year. We expect to continue this performance in the fourth quarter 2016.

In 2017, AMG expects to continue its strong financial performance.

While we remain focused on operating cash flow and return on capital employed, management's priority in 2017 is to execute our transformational lithium project.


AMG Advanced Metallurgical Group N.V.
Condensed interim consolidated income statement
For the quarter ended September 30
In thousands of US Dollars 2016 2015
UnauditedUnaudited
Continuing operations
Revenue 247,526 241,867
Cost of sales 200,994 202,207
Gross profit 46,532 39,660
Selling, general and administrative expenses 34,701 28,925
Restructuring expense 234 2,455
Environmental 45 -
Other income, net (4,558) (17)
Operating profit 16,110 8,297
Finance income (165) (70)
Finance expense 6,293 52
Foreign exchange loss (gain) 708 (1,460)
Net finance costs 6,836 (1,478)
Share of profit of associates and joint ventures 368 53
Profit before income tax 9,642 9,828
Income tax expense 4,132 4,679
Profit for the period 5,510 5,149
Attributable to:
Shareholders of the Company 5,181 4,933
Non-controlling interests 329 216
Profit for the period 5,510 5,149
Earnings per share
Basic earnings per share 0.19 0.18
Diluted earnings per share 0.18 0.18




AMG Advanced Metallurgical Group N.V.
Condensed interim consolidated income statement
For the nine months ended September 30
In thousands of US Dollars 2016 2015
UnauditedUnaudited
Continuing operations
Revenue 733,274 756,301
Cost of sales 588,695 628,726
Gross profit 144,579 127,575
Selling, general and administrative expenses 100,761 91,931
Restructuring expense 756 6,114
Environmental 45 (2,286)
Other income, net (4,993) (156)
Operating profit 48,010 31,972
Finance income (459) (542)
Finance expense 10,806 9,048
Foreign exchange loss (gain) 1,644 (2,577)
Net finance costs 11,991 5,929
Share of profit of associates and joint ventures 1,804 250
Profit before income tax 37,823 26,293
Income tax expense 7,217 14,235
Profit for the period 30,606 12,058
Attributable to:
Shareholders of the Company 30,602 11,417
Non-controlling interests 4 641
Profit for the period 30,606 12,058
Earnings per share
Basic earnings per share 1.10 0.41
Diluted earnings per share 1.04 0.41


AMG Advanced Metallurgical Group N.V.
Condensed interim consolidated statement of financial position
In thousands of US Dollars September 30, 2016 UnauditedDecember 31, 2015
Assets
Property, plant and equipment213,444215,833
Goodwill23,72318,676
Intangible assets10,26010,246
Investments in associates and joint ventures-2,230
Other investments15,00014,000
Deferred tax assets31,21231,551
Restricted cash2,4742,527
Other assets20,75019,883
Total non-current assets316,863314,946
Inventories144,541126,389
Trade and other receivables137,084124,270
Derivative financial instruments1,972978
Other assets32,50927,648
Assets held for sale-673
Cash and cash equivalents174,077127,778
Total current assets490,183407,736
Total assets807,046722,682




AMG Advanced Metallurgical Group N.V.
Condensed interim consolidated statement of financial position
(continued)
In thousands of US Dollars September 30, 2016 UnauditedDecember 31, 2015
Equity
Issued capital 760 745
Share premium 389,466 382,978
Treasury shares (1,612) -
Other reserves (66,545) (49,500)
Retained earnings (deficit) (184,554) (205,662)
Equity attributable to shareholders of the Company 137,515 128,561
Non-controlling interests 22,015 25,006
Total equity 159,530 153,567
Liabilities
Loans and borrowings 160,542 112,217
Employee benefits 141,024 137,853
Provisions 29,985 29,617
Deferred revenue 4,615 13,539
Government grants 449 536
Other liabilities 20,167 8,821
Derivative financial instruments 890 5,642
Deferred tax liabilities 12,327 11,691
Total non-current liabilities 369,999 319,916
Loans and borrowings 2,566 3,222
Short term bank debt 9,114 11,304
Government grants 101 99
Liabilities associated with assets held for sale - 423
Other liabilities 48,412 42,872
Trade and other payables 137,762 108,019
Derivative financial instruments 3,841 8,379
Advance payments 40,546 44,184
Deferred revenue 11,915 16,124
Current taxes payable 7,942 3,093
Provisions 15,318 11,480
Total current liabilities 277,517 249,199
Total liabilities 647,516 569,115
Total equity and liabilities 807,046 722,682


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 2016 2015
UnauditedUnaudited
Cash flows from operating activities
Profit for the year 30,606 12,058
Adjustments to reconcile net profit to net cash flows:
Non-cash:
Income tax expense 7,217 14,235
Depreciation and amortization 22,010 21,957
Net finance costs 11,991 5,929
Share of profit of associates and joint ventures (1,804) (250)
Gain on sale or disposal of property, plant and equipment (4,193) (179)
Equity-settled share-based payment transactions 1,509 3,326
Movement in provisions, pensions and government grants (14,834) 1,340
Working capital and deferred revenue adjustments (2,043) (2,049)
Cash flows from operating activities 50,459 56,367
Finance costs paid, net (4,994) (9,935)
Income tax paid, net (4,793) (3,674)
Net cash flows from operating activities 40,672 42,758
Cash flows used in investing activities
Proceeds from sale of property, plant and equipment 522 951
Proceeds from sale of subsidiaries (net of cash divested of $1,820 and $1,347, respectively) 6,512 (1,567)
Acquisition of property, plant and equipment and intangibles (22,738) (12,260)
Acquisition of subsidiaries (net of cash acquired of $35 in 2016) (4,961) -
Acquisition of other non-current investments (1,000) -
Change in restricted cash 116 4,861
Other (46) (10)
Net cash flows used in investing activities (21,595) (8,025)




AMG Advanced Metallurgical Group N.V.
Condensed interim consolidated statement of cash flows
(continued)
For the nine months ended September 30
In thousands of US Dollars 2016 2015
UnauditedUnaudited
Cash flows from (used in) financing activities
Proceeds from issuance of debt 163,755 177,205
Payment of transaction costs related to debt issuance (3,267) (5,199)
Repayment of borrowings (121,640) (230,780)
Change in non-controlling interests (2,695) 37,530
Repurchase of common stock (1,705) -
Dividends paid (7,558) (2,669)
Other (68) (167)
Net cash flows from (used in) financing activities 26,822 (24,080)
Net increase in cash and cash equivalents 45,899 10,653
Cash and cash equivalents at January 1 127,778 108,029
Effect of exchange rate fluctuations on cash held 400 (4,612)
Cash and cash equivalents at September 30 174,077 114,070


This press release contains inside information within the meaning of Article 7(1) of the EU Market Abuse Regulation.

This press release contains regulated information as defined in the Dutch Financial Markets Supervision Act (Wet op het financieel toezicht).

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.

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Source:AMG Amsterdam Metallurgical Group NV