AMG Advanced Metallurgical Group N.V. Reports First Quarter 2013 Results

• Revenue was $296.5 million in the first quarter 2013, an 8% decrease from the same period in 2012 

• EBITDA^([1]) was $22.2 million in the first quarter 2013, a 1% increase over the same period in 2012 

• EPS on a fully diluted basis was $0.09 in the first quarter 2013, a 31% decrease from the same period in 2012

• AMG Processing generated revenue of $153.1 million and EBITDA of $8.7 million in the first quarter 2013 

• AMG Engineering generated revenue of $60.5 million and EBITDA of $5.6 million in the first quarter 2013 

• AMG Mining generated revenue of $82.9 million and EBITDA of $7.9 million in the first quarter 2013 

• As of March 31, 2013, cash on the balance sheet was $106.7 million; net debt was $200.7 million  

Amsterdam, 3 May 2013 (Regulated Information) — AMG Advanced Metallurgical Group N.V. (« AMG », EURONEXT AMSTERDAM: « AMG ») reported first quarter 2013 revenue of $296.5 million, an 8% decrease from $324.0 million in the first quarter 2012.

EBITDA increased 1% to $22.2 million in the first quarter 2013 from $22.0 million in the first quarter 2012.  Net income attributable to shareholders for the first quarter 2013 was $2.5 million, or $0.09 per fully diluted share, a 31% decrease compared to the first quarter 2012.  Net income attributable to shareholders for the first quarter 2012 was $3.6 million, or $0.13 per fully diluted share.  

Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, « Business conditions remained challenging in the first quarter 2013.  Revenue decreased due to the stagnant global economy; however, the decline was more than offset by cost reductions and operational improvements, resulting in a slight increase in EBITDA.  In particular, AMG Mining and AMG Engineering reduced costs, generating increases in operating profit and EBITDA.  AMG Processing continues to make strides to improve its cost structure and more work can be done.  AMG is focusing primarily on generating cash flow. »

Key Figures

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

AMG Processing’s first quarter 2013 revenue decreased $13.2 million, or 8%, to $153.1 million.  The decrease in revenue was primarily the result of 27%, 17%, and 11% decreases in revenue from chrome products, titanium master alloys, and ferrovanadium, respectively, partially offset by an 8% increase in coating revenue, compared to the first quarter 2012.  Prices and volumes decreased across most of AMG Processing’s materials.  

The first quarter 2013 gross margin decreased to 13%, from 15% in the first quarter 2012.  The gross margin decline was caused by lower revenues resulting in lower economies of scale and the ramp up at the ferrovanadium facility, slightly offset by a 68% increase in aluminum master alloy gross margins due to a reduction of low margin product sales and productivity improvements.  

The first quarter 2013 EBITDA decreased $3.8 million, to 6% of revenue from 8% of revenue in the first quarter 2012.  The EBITDA decrease was the result of the $5.3 million decrease in gross profit slightly offset by $1.3 million decrease in SG&A personnel expenses.  

Capital expenditures were $6.6 million for the first quarter 2013, a 16% increase from the first quarter 2012.  Growth capital investments made in the first quarter included $4.7 million for the expansion of the spent catalyst recycling facility for ferrovanadium production.

AMG Engineering

AMG Engineering’s first quarter 2013 revenue decreased $7.5 million, or 11%, to $60.5 million.  Revenue from casting and sintering furnace systems increased 74% to $14.1 million.  This increase was more than offset by 61%, 34%, and 7% decreases in revenues from heat treatment furnaces, remelting furnaces, and heat treatment services, respectively, compared to the first quarter 2012.

Order backlog decreased 20% to $132.2 million at March 31, 2013 from $165.3 million at December 31, 2012 as a number of orders were delayed until the second quarter.  AMG Engineering generated order intake of $30.9 million in the first quarter 2013, a 62% decrease compared to the first quarter 2012 and a 0.51x book to bill ratio.  Heat treatment services were the largest portion of the order intake accounting for 39% of the total.

The first quarter 2013 gross margin increased to 25%, from 22% in the first quarter 2012.  Improved profitability on certain large projects was the primary driver of the increase in gross margin.  This was slightly offset by lower revenues, which resulted in a decline in economies of scale.

The first quarter 2013 EBITDA increased $2.1 million, to 9% of revenue from 5% of revenue in the first quarter 2012.  The EBITDA increase was primarily the result of the $0.5 million increase in gross profit and the $0.7 million decrease in research and development expenses.

Capital expenditures were $0.3 million in the first quarter 2013, 70% less than the first quarter 2012.  Capital investments in the first quarter were primarily maintenance capital expenditures for the heat treatment services business.

AMG Mining

 

AMG Mining’s first quarter 2013 revenue decreased $6.7 million, or 8%, to $82.9 million.  Volume declines caused revenue to decrease 21% and 8% for antimony and silicon metal, respectively.  The decrease was partially offset by 16% and 3% increases in revenue from graphite and tantalum, respectively, compared to the first quarter 2012.

The first quarter 2013 gross margin increased to 16%, from 15% in the first quarter 2012.  The gross margin increase was primarily the result of substantially improved operational performance of the tantalum mine, slightly offset by 11% lower average silicon metal prices.
   
The first quarter 2013 EBITDA increased by $2.0 million, to 10% of revenue from 7% of revenue in the first quarter 2012.  The EBITDA increase was the result of the improvement in gross profit and a 9% decrease in SG&A due to cost containment measures.

Capital expenditures were $2.2 million in the first quarter 2013, 53% less than the first quarter 2012.  Capital expenditures were primarily composed of the Mozambique natural graphite mine exploration program.

Financial Review

For purposes of this release, AMG restated the December 31, 2012 statement of financial position and 2012 income statement to comply with new IFRS standards and interpretations.  IAS 19R and IFRIC 20 were effective for periods beginning after January 1, 2013 and require restatement for comparability.

Tax

AMG recorded a tax expense of $3.7 million, or a 65% effective tax rate in the first quarter 2013.  In the first quarter 2013, AMG generated losses in countries where the benefits of those losses cannot be booked, thus generating a high effective tax rate.

SG&A

AMG’s first quarter 2013 SG&A expenses were $36.0 million, compared to $39.0 million in the first quarter 2012, a decrease of 8%.  The $3.0 million decrease in SG&A expenses was due to a decrease in personnel and research and development costs.

Non-Recurring Items

AMG’s first quarter 2013 $11.0 million operating profit includes non-recurring items, which are not included in the calculation of EBITDA.  These items are comprised of income and expense items, that in the view of management, do not arise in the normal course of business and items that, because of their nature and/or size, should be presented separately to enable better analysis of the results.  

A summary of non-recurring items in the first quarter 2013 and 2012 are below:

                        For the three months ended

AMG incurred $1.4 million of non-recurring items in the first quarter 2013, consisting of $1.3 million for the management restructuring of AMG Engineering and less than $0.1 million in environmental costs.

Currency Fluctuations

AMG transacts business in many currencies other than the U.S. dollar, the Company’s reporting currency.  AMG’s financial statements are prepared in U.S. dollars, so fluctuations in the exchange rates between the U.S. dollar and other currencies have an effect both on the results of operations and on the reported value of assets and liabilities as measured in U.S. dollars.  The appreciation in the value of the U.S. dollar as of March 31, 2013 compared to December 31, 2012, resulted in a decrease in the assets and liabilities on the balance sheet of $18.6 million and $12.6 million, respectively.  The net result of the slight depreciation in the value of the U.S. dollar in the first quarter 2013 compared to the first quarter 2012, resulted in an increase in revenue and EBITDA of $1.3 million and $0.1 million, respectively.

Liquidity

AMG had a net debt position of $200.7 million as of March 31, 2013.  AMG’s net debt position increased $6.4 million since December 31, 2012 primarily due to $10.8 million increase in working capital and provisions, $9.1 million in capital investments, $6.4 million of cash tax payments, $2.2 million of net cash interest payments, reduced by $22.2 million of EBITDA.  Including the $106.7 million of cash, AMG had $172.9 million of total liquidity as of March 31, 2013.

Cash Flow

Cash flows from operations were $0.7 million in the first quarter 2013 compared to cash used in operations of $3.1 million in the first quarter 2012.  The first quarter 2013 cash flows from operations are primarily the result of $22.2 million in EBITDA less $10.8 million increase in working capital and provisions, $6.4 million in cash tax payments and $2.2 million in cash interest payments.

Cash used in investing activities was $9.1 million in the first quarter 2013.  The $2.3 million decrease compared to the first quarter 2012 is primarily composed of a $2.4 million decrease in capital investments.

Cash used in financing activities was $4.2 million in the first quarter 2013 as the Company repaid balances on its revolving credit facility.  In the first quarter 2012, AMG drew $16.3 million on its revolving lines of credit, which was the primary driver for the $14.6 million of cash flows from financing activities in that period.  The borrowings on the revolving lines of credit in the first quarter 2012 were used to fund working capital increases as well as the acquisition of Graphit Kropfmühl shares and related transaction costs.

 Outlook

AMG’s markets, particularly for the European centric businesses, remain challenging.  While AMG is addressing this low growth environment through securing long-term contracts, where possible, and focusing on cost reductions, global demand is expected to remain sluggish.  AMG is making progress on reducing costs, achieving an 8% reduction in SG&A in the first quarter 2013.  AMG believes that cost reductions and operational improvements will generate an increase in EBITDA and stable cash flows in 2013.

Composition of Supervisory Board

General Wesley Clark has asked the Supervisory Board of AMG to withdraw his nomination for re-appointment to the AMG Supervisory Board at AMG’s 2013 Annual General Meeting.  General Clark’s term as a Supervisory Board member of AMG will end on May 13, 2013.  The Supervisory Board of AMG wishes to thank General Clark for his six years of service to the Company.

     

AMG Advanced Metallurgical Group N.V.
Consolidated Income Statement

 

               

AMG Advanced Metallurgical Group N.V.
Consolidated Statement of Cash Flows       
                                       

 

The notes are an integral part of these consolidated financial statements.

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 consists of three segments: AMG Processing, AMG Engineering and AMG Mining.

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, engineers and produces advanced vacuum furnace systems and operates vacuum heat treatment facilities, primarily for the Aerospace and Energy (including solar and nuclear) 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 Belgium, 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 Corporate 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 nonrecurring items