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

 
  Key Highlights
  • 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

In 000’s US Dollar
Q1’13 Q1’12 Change
Revenue $296,478 $323,984 (8%)
Gross profit 48,258 53,437 (10%)
Gross margin 16.3% 16.5%
Operating profit 11,040 11,363 (3%)
Operating margin 3.7% 3.5%
Net profit attributable to shareholders 2,460 3,648 (33%)
EPS- Fully diluted 0.09 0.13 (31%)
EBIT (1) 13,532 14,886 (9%)
EBITDA (2)        22,232 22,002 1%
EBITDA margin 7.5% 6.8%

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

Q1’13 Q1’12 Change
Revenue $153,076 $166,315 (8%)
Gross profit 19,925 25,182 (21%)
Operating profit 5,232 7,516 (30%)
EBITDA 8,713 12,562 (31%)
Capital expenditures       6,557         5,640     16%

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

Q1’13 Q1’12 Change
Revenue $60,511 $68,035 (11%)
Gross profit 15,366 14,837 4%
Operating profit 1,597 887 80%
EBITDA 5,592 3,525 59%
Capital expenditures        318      1,076     (70%)

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

Q1 ’13 Q1 ’12 Change
Revenue $82,891     $89,634 (8%)
Gross profit 12,967       13,418 (3%)
Operating profit 4,211         2,960 42%
EBITDA 7,927         5,915 34%
Capital expenditures 2,249         4,810 (53%)

 

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

        March
          2013
          March
          2012
Non-recurring items included in operating profit:
Restructuring expense 1,336 2,843
Environmental expense 33 728
Total non-recurring items included in operating profit 1,369 3,571

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

March 31, 2013 December 31, 2012 Change
Total debt $307,350 $315,844 (3%)
Cash & short-term investments 106,697 121,639 (12%)
Net debt 200,653 194,205 3%

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

Q1’13 Q1’12
Net cash flows from (used in) operations     $665          ($3,066)
Capital expenditures    (9,124)          (11,526)
Cash flows from other investing activities         29               104
Net cash flows used in investing activities     (9,095)           (11,422)
Net cash flows (used in)  from financing activities     (4,163)           14,642

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

For the period ended March 31
In thousands of US Dollars   2013 2012
Continuing operations (restated)
Revenue 296,478 323,984
Cost of sales 248,220 270,547
Gross profit 48,258 53,437
Selling, general and administrative expenses 36,017 38,971
Restructuring expense 1,336 2,843
Environmental expense 33 728
Other income, net (168) (468)
Operating  profit 11,040 11,363
Finance expense 5,717 6,691
Finance income (143) (155)
Foreign exchange (gain) loss (919) 409
Net finance costs 4,655 6,945
Share of (loss) profit of associates and joint ventures (712) 166
Profit before income tax 5,673 4,584
Income tax expense 3,712 1,228
Profit for the period 1,961 3,356
Attributable to:
Shareholders of the Company 2,460 3,648
Non-controlling interests (499) (292)
1,961 3,356
Earnings per share
Basic earnings per share 0.09 0.13
Diluted earnings per share 0.09 0.13


AMG Advanced Metallurgical Group N.V.
Consolidated Statement of Financial Position
In thousands of US Dollars                                                                                                           March 31, 2013 December 31, 2012
(restated)
Assets
Property, plant and equipment 281,786 288,269
Goodwill 24,278 24,751
Intangible assets 14,962 13,971
Investments in associates and joint ventures 6,449 7,351
Derivative financial instruments 133 527
Deferred tax assets 35,296 37,437
Restricted cash 11,829 11,888
Notes receivable 255 227
Other assets 21,894 22,262
Total non-current assets 396,882 406,683
Inventories 205,384 211,531
Trade and other receivables 187,193 177,232
Derivative financial instruments 3,380 3,229
Other assets 32,101 30,438
Cash and cash equivalents 106,697 121,639
Total current assets 534,755 544,069
Total assets 931,637 950,752
AMG Advanced Metallurgical Group N.V.
Consolidated Statement of Financial Position (continued)
Equity
Issued capital 743 743
Share premium 382,176 382,176
Other reserves (14,396) (10,190)
Retained earnings (deficit) (201,745) (204,284)
Equity attributable to shareholders of the Company 166,778 168,445
Non-controlling interests 6,412 6,818
Total equity 173,190 175,263
Liabilities
Loans and borrowings 258,923 265,553
Employee benefits 132,821 137,957
Provisions 31,109 31,852
Deferred revenue 2,724
Government grants 447 472
Other liabilities 9,370 6,690
Derivative financial instruments 10,770 11,082
Deferred tax liabilities 29,381 28,102
Total non-current liabilities 472,821 484,432
Loans and borrowings 14,764 20,333
Short term bank debt 33,662 29,958
Government grants 54 55
Other liabilities 52,922 58,934
Trade and other payables 135,593 125,342
Derivative financial instruments 4,325 3,900
Advance payments 21,810 26,989
Deferred revenue 5,258 2,533
Current taxes payable 2,809 8,623
Provisions 14,429 14,390
Total current liabilities 285,626 291,057
Total liabilities 758,447 775,489
Total equity and liabilities 931,637 950,752

 

               

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

For the period ended March 31
In thousands of US Dollars     2013 2012
Cash flows from (used in) operating activities (restated)
Profit for the period 1,961 3,356
Adjustments to reconcile net profit to net cash flows:
Non-cash:
   Income tax expense 3,712 1,228
   Depreciation and amortization 8,700 7,116
   Net finance costs 4,655 6,945
   Share of loss (profit) of associates and joint ventures 712 (166)
   Loss on sale or disposal of property, plant and equipment 107 28
   Equity-settled share-based payment transactions 205 362
   Movement in provisions, pensions and government grants (1,597) 3,155
   Change in working capital (9,242) (18,745)
Cash flows from operating activities 9,213 3,279
Finance costs paid, net (2,192) (3,114)
Income tax paid, net (6,356) (3,231)
Net cash flows from (used in) operating activities 665 (3,066)
Cash flows used in investing activities
Proceeds from sale of property, plant and equipment 12 32
Acquisition of property, plant and equipment and intangibles (9,124) (11,526)
Change in restricted cash (20) 78
Other 37 (6)
Net cash flows used in investing activities (9,095) (11,422)
Cash flows (used in) from financing activities
Proceeds from issuance of debt 16,298
Repayment of borrowings (4,159) (1,628)
Acquisition of non-controlling interests (76)
Other (4) 48
Net cash flows (used in) from financing activities (4,163) 14,642
Net (decrease) increase in cash and cash equivalents (12,593) 154
Cash and cash equivalents at January 1 121,639 79,571
Effect of exchange rate fluctuations on cash held (2,349) 1,515
Cash and cash equivalents at March 31 106,697 81,240
 

 

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 

Download PDF