Key Highlights
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Revenue increased by 20% to $308.4 million in the first quarter 2018 from $258.0 million in the first quarter 2017
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EBITDA(2) was $44.5 million in the first quarter 2018, a 35% increase over the same period in 2017
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Net income attributable to shareholders increased by 18% to $18.4 million in the first quarter 2018 from $15.6 million in the first quarter 2017
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Cash from operating activities was $24.8 million in the first quarter 2018, an increase of $7.0 million over the same period in 2017
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Strong cashflows from operating activities caused net debt to decrease by $0.9 million in the first quarter of 2018, to $9.4 million, despite capital expenditures of $22.6 million during the period
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Annualized return on capital employed increased to 28.4% in the first quarter 2018, as compared to 25.5% in the first quarter 2017
Amsterdam, 2 May 2018 (Regulated Information) — AMG Advanced Metallurgical Group N.V. (« AMG », EURONEXT AMSTERDAM: « AMG ») reported first quarter 2018 revenue of $308.4 million, a 20% increase from $258.0 million in the first quarter 2017. EBITDA for the first quarter 2018 was $44.5 million, a 35% increase from $33.0 million in the first quarter 2017. Net income attributable to shareholders increased 18% to $18.4 million in the first quarter 2018 from $15.6 million in the first quarter 2017.
Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, « AMG achieved a considerable improvement in profitability during the quarter, driven by improved pricing and higher sales volumes in AMG Critical Materials. In addition, continuing strong demand for our industry leading vacuum furnace solutions resulted in the highest quarterly order intake in 10 years and the highest order backlog in over 9 years.
AMG Critical Materials generated EBITDA of $37.1 million during the first quarter 2018, an increase of 44% from $25.7 million in the first quarter of 2017, thanks to strong financial performance in vanadium, silicon, titanium alloys, graphite, chrome and aluminum, driven by higher vanadium and silicon metal prices, and strong sales volumes.
AMG Engineering achieved EBITDA of $7.4 million during the first quarter 2018, a slight increase from $7.3 million in the first quarter 2017. AMG Engineering signed $104.8 million in new orders during the first quarter 2018, representing a 1.74x book to bill ratio, driven by strong orders of turbine blade coating and powder metallurgy furnaces for the aerospace market, heat treatment furnaces for the automotive market and induction heated quartz tube (IWQ) furnaces for fiber optic applications. Order backlog was $255.8 million as of March 31, 2018, an increase of 24% compared to December 31, 2017.
In the first quarter of 2018, AMG generated cash from operating activities of $24.8 million, an increase of $7.0 million compared to the same period in 2017. As a result of the strong cashflow generation, AMG’s net debt decreased by $0.9 million in the first quarter of 2018, despite capital expenditures of $22.6 million during the period. In summary, the Company is operating at record levels. »
Key Figures
| In 000’s US Dollar | |||
| Q1 ’18 | Q1 ’17 | Change | |
| Revenue | $308,448 | $257,969 | 20% |
| Gross profit | 70,118 | 52,503 | 34% |
| Gross margin | 22.7% | 20.4% | |
| Operating profit | 34,579 | 21,028 | 64% |
| Operating margin | 11.2% | 8.2% | |
| Net income attributable to shareholders | 18,389 | 15,566 | 18% |
| EPS – Fully diluted | 0.58 | 0.50 | 16% |
| EBIT (1) | 36,256 | 25,721 | 41% |
| EBITDA (2) | 44,480 | 32,966 | 35% |
| EBITDA margin | 14.4% | 12.8% | |
| Cash from operating activities | 24,808 | 17,830 | 39% |
Note:
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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.
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EBITDA is defined as EBIT adjusted for depreciation and amortization.
Operational Review
AMG Critical Materials
| Q1 ’18 | Q1 ’17 | Change | |
| Revenue | $248,351 | $194,506 | 28% |
| Gross profit | 51,922 | 36,268 | 43% |
| Operating profit | 28,979 | 15,610 | 86% |
| EBITDA | 37,076 | 25,668 | 44% |
AMG Critical Materials revenue in the first quarter increased by $53.8 million, or 28%, to $248.4 million, driven by improved vanadium, silicon metal, aluminum, antimony, graphite and titanium prices, and higher sales volumes of vanadium, aluminum, chrome, graphite, tantalum and titanium products.
Gross profit in the first quarter increased by $15.7 million, or 43%, to $51.9 million. Strong financial performance in vanadium, silicon, titanium alloys, graphite, chrome and aluminum was partially offset by lower gross profit in tantalum. The strong financial performance was driven by higher vanadium and silicon metal prices, and strong sales volumes. The reduction in tantalum gross profit was driven by lower sales prices in the first quarter of 2018, compared to the first quarter of 2017, which benefited from the recognition of an additional $6.8 million in deferred revenue, following the early cancellation of AMG Mineração’s tantalum supply contract.
SG&A expenses in the first quarter 2018 increased by $2.3 million, or 11%, compared to the same period in the prior year, primarily due to foreign exchange effects related to the strengthening of the euro relative to the dollar and higher personnel costs.
First quarter 2018 EBITDA margin increased to 15%, compared to 13% in the first quarter 2017, due primarily to the improvement in vanadium and silicon metal pricing.
AMG Engineering
| Q1 ’18 | Q1 ’17 | Change | |
| Revenue | $60,097 | $63,463 | (5%) |
| Gross profit | 18,196 | 16,235 | 12% |
| Operating profit | 5,600 | 5,418 | 3% |
| EBITDA | 7,404 | 7,298 | 1% |
AMG Engineering signed $104.8 million in new orders during the first quarter 2018, representing a 1.74x book to bill ratio. Order backlog was $255.8 million as of March 31, 2018, an increase of 24% from December 31, 2017. This was driven by strong sales of turbine blade coating, powder metallurgy, heat treatment and induction heated quartz tube (IWQ) furnaces for fiber optic applications.
AMG Engineering’s first quarter 2018 revenue decreased $3.4 million, or 5%, to $60.1 million, primarily due to timing effects. Early stage engineering work underway on a number of large orders received in recent months resulted in lower levels of revenue in the quarter. Higher levels of revenue will be recognized on these projects as they progress into the build stage.
First quarter 2018 gross profit increased by $2.0 million, or 12%, to $18.2 million and gross margin increased to 30% from 26% in the first quarter 2017, due to favorable product mix effects.
SG&A expenses increased by $1.8 million, or 16%, compared to the prior year primarily due to foreign exchange effects related to the strengthening of the euro relative to the dollar and higher personnel costs. AMG Engineering is in the process of expanding its workforce in response to the increased level of order backlog, driven primarily by strong demand from the aerospace market.
EBITDA increased slightly by $0.1 million to $7.4 million in the first quarter 2018.
Financial Review
Tax
AMG recorded an income tax expense of $9.7 million in the first quarter 2018 as compared to a tax expense of $3.5 million in the same period in 2017. The increase in tax expense is driven by higher profitability and the full recognition of AMG’s US operating loss carry forwards in 2017.
Due to the volatile nature of the company’s deferred tax balances, AMG believes that the cash tax rate is a more meaningful metric. AMG paid taxes of $2.2 million in the first quarter 2018 as compared to tax payments of $1.5 million in the same period in 2017. For the first quarter 2018, AMG’s effective cash tax rate remained unchanged compared to the prior year at 8%.
Non-Recurring Items
AMG’s first quarter 2018 gross profit of $70.1 million includes non-recurring items, which are not included in the calculation of EBITDA.
A summary of non-recurring items included in gross profit in the first quarters of 2018 and 2017 are below:
Non-recurring items included in gross profit
| Q1 ’18 | Q1 ’17 | Change | ||
| Gross profit | $70,118 | $52,503 | 34% | |
| Restructuring expense | 189 | 467 | (60%) | |
| Asset impairment expense | – | 2,217 | N/A | |
| Gross profit before non- recurring items |
70,307 | 55,187 | 27% | |
Gross profit before non-recurring items by reporting segment
| Q1 ’18 | Q1 ’17 | Change | |
| AMG Critical Materials | $52,079 | $38,885 | 34% |
| AMG Engineering | 18,228 | 16,302 | 12% |
| Gross profit before non- recurring items |
70,307 | 55,187 | 27% |
Liquidity
| March 31, 2018 | December 31, 2017 |
Change | |
| Total debt | $376,751 | $189,108 | 99% |
| Cash and cash equivalents ** | 367,359 | 178,800 | 105% |
| Net debt ** | 9,392 | 10,308 | (9%) |
** As a result of the refinancing of AMG’s credit facility, cash of $17.1 million has been temporarily restricted and will be released during the course of 2018. Due to the nature of this balance, we have included the amount within the debt calculation disclosed above.
AMG had a net debt position of $9.4 million as of March 31, 2018. Net debt decreased by $0.9 million and total debt increased by $187.6 million from December 31, 2017.
Cash from operating activities increased by $7.0 million to $24.8 million in the first quarter 2018.
Capital expenditures increased to $22.6 million in the first quarter 2018 compared to $10.9 million in the same period in 2017. Capital spending in the first quarter 2018 included $6.9 million of maintenance capital. The largest expansion capital project was AMG’s lithium project in Brazil.
AMG had $519.8 million of total liquidity as of March 31, 2018, following the successful refinancing of AMG’s credit facilities during the quarter.
Net Finance Costs
AMG’s first quarter 2018 net finance costs increased to $6.5 million compared to $2.0 million in the first quarter 2017. The increase was partially due to the write-off of $2.9 million of costs associated with the previous credit facility, following the refinancing exercise completed in January 2018. In addition, interest expenses associated with AMG’s new, long term credit facility increased by $1.7 million, due to higher levels of gross debt and higher interest rates associated with the long term nature of the facility.
SG&A
AMG’s first quarter 2018 SG&A expenses were $35.6 million compared to $31.6 million in the first quarter 2017, primarily due to foreign exchange effects related to the strengthening of the euro relative to the dollar and, to a lesser extent, higher personnel costs.
Outlook
As demonstrated in the first quarter of 2018, AMG expects full year 2018 EBITDA to improve considerably compared to the prior year.
| AMG Advanced Metallurgical Group N.V. | ||
| Condensed Interim Consolidated Income Statement | ||
| For the quarter ended March 31 | ||
| In thousands of US Dollars | 2018 | 2017 |
| Unaudited | Unaudited | |
| Continuing operations | ||
| Revenue | 308,448 | 257,969 |
| Cost of sales | 238,330 | 205,466 |
| Gross profit | 70,118 | 52,503 |
| Selling, general and administrative expenses | 35,626 | 31,580 |
| Net other operating income | (87) | (105) |
| Operating profit | 34,579 | 21,028 |
| Finance income | (518) | (176) |
| Finance cost | 7,059 | 2,161 |
| Net finance cost | 6,541 | 1,985 |
| Profit before income tax | 28,038 | 19,043 |
| Income tax expense | 9,705 | 3,477 |
| Profit for the period | 18,333 | 15,566 |
| Attributable to: | ||
| Shareholders of the Company | 18,389 | 15,566 |
| Non-controlling interests | (56) | – |
| Profit for the period | 18,333 | 15,566 |
| Earnings per share | ||
| Basic earnings per share | 0.62 | 0.55 |
| Diluted earnings per share | 0.58 | 0.50 |
| AMG Advanced Metallurgical Group N.V. |
||
| Condensed Interim Consolidated Statement of Financial Position | ||
| In thousands of US Dollars | March 31, 2018 Unaudited |
December 31, 2017 |
| Assets | ||
| Property, plant and equipment | 310,102 | 298,540 |
| Goodwill and other intangible assets | 38,720 | 38,110 |
| Derivative financial instruments | 722 | 636 |
| Other investments | 30,650 | 30,562 |
| Deferred tax assets | 41,339 | 40,108 |
| Restricted cash | 18,293 | 829 |
| Non-current tax asset | 2,488 | 2,488 |
| Other assets | 18,731 | 17,729 |
| Total non-current assets | 461,045 | 429,002 |
| Inventories | 199,076 | 162,505 |
| Derivative financial instruments | 5,385 | 6,372 |
| Trade and other receivables | 159,539 | 137,174 |
| Other assets | 33,336 | 37,547 |
| Current tax assets | 6,509 | 3,147 |
| Cash and cash equivalents | 350,238 | 178,800 |
| Assets held for sale | 936 | 2,056 |
| Total current assets | 755,019 | 527,601 |
| Total assets | 1,216,064 | 956,603 |
| AMG Advanced Metallurgical Group N.V. | ||
| Condensed Interim Consolidated Statement of Financial Position | ||
| (continued) | ||
| In thousands of US Dollars | March 31, 2018 Unaudited |
December 31, 2017 |
| Equity | ||
| Issued capital | 796 | 796 |
| Share premium | 432,844 | 432,844 |
| Treasury shares | (3,275) | (3,461) |
| Other reserves | (69,959) | (72,880) |
| Retained earnings (deficit) | (81,024) | (99,343) |
| Equity attributable to shareholders of the Company | 279,382 | 257,956 |
| Non-controlling interests | 25,233 | 24,633 |
| Total equity | 304,615 | 282,589 |
| Liabilities | ||
| Loans and borrowings | 358,597 | 164,788 |
| Employee benefits | 160,702 | 156,193 |
| Provisions | 35,961 | 35,887 |
| Other liabilities | 4,367 | 4,011 |
| Derivative financial instruments | 637 | – |
| Deferred tax liabilities | 7,386 | 7,888 |
| Total non-current liabilities | 567,650 | 368,767 |
| Loans and borrowings | 2,654 | 8,820 |
| Short term bank debt | 15,500 | 15,500 |
| Other liabilities | 59,783 | 60,212 |
| Trade and other payables | 159,979 | 155,115 |
| Derivative financial instruments | 2,620 | 1,415 |
| Advance payments | 58,487 | 33,025 |
| Deferred revenue | 2,055 | 1,624 |
| Current taxes payable | 18,043 | 9,155 |
| Provisions | 24,678 | 20,381 |
| Total current liabilities | 343,799 | 305,247 |
| Total liabilities | 911,449 | 674,014 |
| Total equity and liabilities | 1,216,064 | 956,603 |
| AMG Advanced Metallurgical Group N.V. | ||
| Condensed Interim Consolidated Statement of Cash Flows | ||
| For the quarter ended March 31 |
||
| In thousands of US Dollars | 2018 | 2017 |
| Unaudited | Unaudited | |
| Cash from operating activities | ||
| Profit for the year | 18,333 | 15,566 |
| Adjustments to reconcile net profit to net cash flows: | ||
| Non-cash: | ||
| Income tax expense | 9,705 | 3,477 |
| Depreciation and amortization | 8,224 | 7,245 |
| Asset impairment expense | – | 2,217 |
| Net finance costs | 6,541 | 1,985 |
| Gain on sale or disposal of property, plant and equipment | (37) | (61) |
| Equity-settled share-based payment transactions | 1,634 | 2,176 |
| Movement in provisions, pensions and government grants | 3,537 | 293 |
| Working capital and deferred revenue adjustments | (17,654) | (11,124) |
| Cash generated from operating activities | 30,283 | 21,774 |
| Finance costs paid, net | (3,240) | (2,400) |
| Income tax paid, net | (2,235) | (1,544) |
| Net cash from operating activities | 24,808 | 17,830 |
| Cash used in investing activities | ||
| Proceeds from sale of property, plant and equipment | 39 | 66 |
| Acquisition of property, plant and equipment and intangibles | (22,575) | (10,859) |
| Change in restricted cash | (17,405) | 217 |
| Other | (23) | 16 |
| Net cash used in investing activities | (39,964) | (10,560) |
| AMG Advanced Metallurgical Group N.V. | ||
| Condensed Interim Consolidated Statement of Cash Flows | ||
| (continued) | ||
| For the quarter ended March 31 | ||
| In thousands of US Dollars | 2018 | 2017 |
| Unaudited | Unaudited | |
| Cash from (used in) financing activities | ||
| Proceeds from issuance of debt | 346,335 | – |
| Transaction costs related to the issuance of debt | (9,339) | – |
| Repayment of borrowings | (155,094) | (3,050) |
| Net repurchase of common stock | (230) | – |
| Issuance of treasury shares | – | 151 |
| Net cash from (used in) financing activities | 181,672 | (2,899) |
| Net increase in cash and cash equivalents | 166,516 | 4,371 |
| Cash and cash equivalents at January 1 | 178,800 | 160,744 |
| Effect of exchange rate fluctuations on cash held | 4,922 | 1,341 |
| Cash and cash equivalents at March 31 | 350,238 | 166,456 |
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, lithium, 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 3,300 employees, AMG operates globally with production facilities in Germany, the United Kingdom, France, the Czech Republic, the United States, China, Mexico, Brazil, India, Sri Lanka and Mozambique, 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.