Key Highlights
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AMG ended the third quarter 2016 net debt free, with net cash of $1.9 million
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EBITDA(2) was $23.4 million in the third quarter 2016, a 15% increase over the same period in 2015
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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
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EPS, on a fully diluted basis, was $0.18 in the third quarter 2016, unchanged from third quarter 2015
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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, 3 November 2016 (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 ’16 | Q3 ’15 | Change | |
| 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:
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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
| Q3 ’16 | Q3 ’15 | Change | |
| 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 ’16 | Q3 ’15 | Change | |
| 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, 2016 | December 31, 2015 | Change | |
| 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 |
| Unaudited | Unaudited | |
| 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 |
| Unaudited | Unaudited | |
| 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 Unaudited | December 31, 2015 |
| Assets | ||
| Property, plant and equipment | 213,444 | 215,833 |
| Goodwill | 23,723 | 18,676 |
| Intangible assets | 10,260 | 10,246 |
| Investments in associates and joint ventures | – | 2,230 |
| Other investments | 15,000 | 14,000 |
| Deferred tax assets | 31,212 | 31,551 |
| Restricted cash | 2,474 | 2,527 |
| Other assets | 20,750 | 19,883 |
| Total non-current assets | 316,863 | 314,946 |
| Inventories | 144,541 | 126,389 |
| Trade and other receivables | 137,084 | 124,270 |
| Derivative financial instruments | 1,972 | 978 |
| Other assets | 32,509 | 27,648 |
| Assets held for sale | – | 673 |
| Cash and cash equivalents | 174,077 | 127,778 |
| Total current assets | 490,183 | 407,736 |
| Total assets | 807,046 | 722,682 |
| AMG Advanced Metallurgical Group N.V. | ||
| Condensed interim consolidated statement of financial position | ||
| (continued) | ||
| In thousands of US Dollars | September 30, 2016 Unaudited | December 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 |
| Unaudited | Unaudited | |
| 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 |
| Unaudited | Unaudited | |
| 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.