AMG Advanced Metallurgical Group N.V. Reports Record Earnings for Second Quarter 2022

Strategic Highlights

  • Construction and commissioning of the new vanadium spent catalyst recycling facility in Zanesville, Ohio is proceeding as planned. The roaster is fully operational, and the entire plant is expected to be at run-rate capacity by the end of the fourth quarter of 2022.
  • The project to expand the spodumene production in AMG Brazil is on time and on budget. The objective is to be in full production in the second half of 2023 or earlier.
  • AMG Lithium has started construction of the first European lithium refinery, and commissioning for the first module of the battery-grade lithium hydroxide upgrader will commence in the second half of 2023.
  • AMG’s first lithium vanadium battery (“LIVA”) for industrial power management applications is proceeding as planned and the objective is to be fully operational in the fourth quarter of 2022.
  • Shell & AMG Recycling B.V. (“SARBV”) and its partner, the United Company for Industry (“UCI”), have signed an agreement with Saudi Arabian Oil Company (“Aramco”). Basic engineering has begun on the first of four projects to build, own and operate a conversion plant of vanadium-containing gasification ash supplied by Aramco into vanadium oxide and vanadium electrolyte.

Financial Highlights

  • Revenue increased by 42% to $424.1 million in the second quarter of 2022 from $298.4 million in the second quarter of 2021.
  • EBITDA was $81.1 million in the second quarter of 2022, up 158% versus the second quarter 2021 EBITDA of $31.4 million, marking the highest six-month and quarterly EBITDA in AMG’s history and its eighth straight quarter of sequential improvement.
  • Annualized return on capital employed was 25.5% for the first six months of 2022, more than double the 10.0% for the same period in 2021.
  • Net income to shareholders for the second quarter of 2022 was $29.6 million, yielding 91 cents diluted earnings per share, compared to $3.6 million of net income to shareholders in the same period in the prior year and 11 cents diluted earnings per share.
  • AMG’s liquidity as of June 30, 2022, was $476 million, with $301 million of unrestricted cash and $175 million of revolving credit availability.
  • AMG declares an interim dividend of €0.30 per ordinary share, to be paid in the third quarter of 2022.

Amsterdam, 28 July 2022 (Regulated Information) AMG Advanced Metallurgical Group N.V. (“AMG”, EURONEXT AMSTERDAM: “AMG”) reported second quarter 2022 revenue of $424.1 million, a 42% increase versus the second quarter of 2021. EBITDA for the second quarter of 2022 was $81.1 million, a 158% increase versus the second quarter of 2021. This also marks the eighth straight quarter of sequential growth after the pandemic low point in the second quarter of 2020.

Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, “AMG generated the highest quarterly EBITDA in our history in the second quarter of 2022. EBITDA for the second quarter of 2022 was $81 million, up 158% from the same period in 2021, and 48% higher than the first quarter of 2022. This outstanding result is mainly driven by our AMG Clean Energy Materials segment, where strong lithium prices lead to improved profitability in AMG Brazil, as well as by increased aerospace activity within our AMG Critical Materials Technologies segment.

“All of AMG’s strategic projects cluster in our AMG Clean Energy Materials segment and all of these projects are proceeding as planned. Each of these projects is oriented toward growing our production of electricity storage materials or increasing our footprint in the circular economy.

  1. Commissioning has started at the Zanesville, Ohio, spent catalyst recycling facility. The roasting plant has reached its design capacity and is presently undergoing the final performance test. The “melt shop” is starting its commissioning process. With this new recycling plant, AMG solidifies its position as the world leader in the recycling of refinery waste. We are pleased to announce that large scale shipments of refinery waste from overseas have started.
  2. The expansion project of AMG Brazil’s lithium concentrate production is proceeding as planned and the production is fully sold at market price via long-term contracts.
  3. AMG Lithium has begun construction of the first European lithium refinery. The first module of the battery-grade lithium hydroxide upgrader will commence commissioning in the second half of 2023.
  4. AMG’s first lithium vanadium battery (“LIVA”) for industrial power management applications has begun commissioning.
  5. SARBV and UCI recently signed agreements in the Kingdom of Saudi Arabia. The joint venture plans to execute four distinct projects under an entity currently being formed, Advanced Circular Materials Company (“ACMC”):
    1. Build, own and operate a conversion plant of vanadium-containing gasification ash into vanadium oxide and vanadium electrolyte for redox flow batteries;
    2. A spent catalyst recycling facility;
    3. A fresh catalyst R&D laboratory;
    4. Mass energy storage facilities (vanadium redox flow battery manufacturing).

Basic engineering for the first project has begun and it will lay the foundation for all other projects with the Supercenter. It will produce and sell high-purity vanadium oxide and vanadium electrolyte. This is the largest such project in the world and is under long-term market-based contracts with Aramco. The materials this project will produce are destined to feed the emerging vanadium redox flow battery market.

“We are extremely pleased to announce the accomplishments of these strategic projects along with the best quarterly results in the history of the Company.”

Key Figures

In 000’s US dollars
Q2 ‘22 Q2 ‘21 Change
Revenue $424,094 $298,374         42%
Gross profit 102,240 48,499         111%
Gross margin         24.1%         16.3%
Operating profit 65,246 3,691         1,668%
Operating margin         15.4%         1.2%
Net income attributable to shareholders 29,631 3,566         731%
EPS – Fully diluted 0.91 0.11         727%
EBIT (1) 69,763 20,462         241%
EBITDA (2) 81,126 31,401         158%
EBITDA margin         19.1%         10.5%
Cash from operating activities 39,505 23,018         72%

Notes:

(1)   EBIT is defined as earnings before interest and income taxes. EBIT excludes restructuring, asset impairment, inventory cost adjustments, environmental provisions, exceptional legal expenses, equity-settled share-based payments, and strategic expenses.
(2)   EBITDA is defined as EBIT adjusted for depreciation and amortization.

Operational Review

AMG Clean Energy Materials

Q2 ‘22 Q2 ‘21 Change
Revenue $159,762 $90,135         77%
Gross profit 60,821 13,822         340%
Gross profit before non-recurring items 61,654 16,122         282%
Operating profit (loss) 49,704 (7,415) N/A
EBITDA 58,232 12,554         364%

AMG Clean Energy Materials’ revenue increased 77% compared to the second quarter of 2021, to $159.8 million, driven mainly by higher prices in vanadium, tantalum and lithium concentrates. Sales volumes were down due to shipping schedule variances from AMG Brazil and maintenance downtime at our Cambridge facility.

Gross profit before non-recurring items for the quarter increased 282% compared to the same period in the prior year, primarily due to the increased price environment.

SG&A expenses in the second quarter of 2022 were $11.1 million, $1.6 million higher than the second quarter of 2021, largely due to higher share-based and variable compensation expense.

The second quarter 2022 EBITDA increased 364%, to $58.2 million, from $12.6 million in the second quarter of 2021, due to the improved gross profit as noted above.

AMG Critical Minerals

Q2 ‘22 Q2 ‘21 Change
Revenue $103,416 $76,793         35%
Gross profit 14,028 13,732         2%
Gross profit before non-recurring items 14,029 13,397         5%
Operating profit 7,086 7,009         1%
EBITDA 9,069 9,220         (2%)

AMG Critical Minerals’ revenue increased by $26.6 million, or 35%, to $103.4 million, driven by strong sales volumes of antimony and graphite as well as higher sales prices in silicon and antimony.

Gross profit before non-recurring items of $14.0 million in the second quarter was $0.6 million higher compared to the second quarter of 2021. The higher revenue was due to the improved pricing and higher sales volumes noted above and was offset by increased raw material prices as well as the ongoing rise in energy and shipping costs.

SG&A expenses in the second quarter of 2022 slightly increased by 2%, to $7.0 million, compared to the same period in 2021.

The second quarter 2022 EBITDA was consistent with the same period in the prior year despite ongoing inflationary pressures including energy and shipping cost increases.

AMG Critical Materials Technologies

Q2 ‘22 Q2 ‘21 Change
Revenue $160,916 $131,446         22%
Gross profit 27,391 20,945         31%
Gross profit before non-recurring items 27,431 21,059         30%
Operating profit 8,456 4,097         106%
EBITDA 13,825 9,627         44%

AMG Critical Materials Technologies’ second quarter 2022 revenue increased by $29.5 million, or 22%, compared to the same period in 2021. This improvement was due to increased titanium alloys sales, as well as higher chrome metal pricing associated with improving conditions in the aerospace sector. Second quarter 2022 gross profit before non-recurring items increased by $6.4 million, or 30%, to $27.4 million due to the higher volumes and prices.

SG&A expenses increased by $2.1 million in the second quarter of 2022 compared to the same period in 2021, mainly driven by higher share-based and variable compensation expense and higher professional fees in the current quarter.

AMG Critical Materials Technologies’ EBITDA increased to $13.8 million during the quarter, compared to $9.6 million in the second quarter of 2021. This was primarily due to higher profitability in chrome metal and titanium alloys.

AMG Engineering signed $59.8 million in new orders during the second quarter of 2022, driven by strong orders of induction furnaces, representing a 1.10x book to bill ratio. Order backlog was $181.0 million as of June 30, 2022, slightly lower than the $183.5 million as of March 31, 2022.

Financial Review

Tax

AMG recorded an income tax expense of $23.2 million in the second quarter of 2022, compared to an income tax benefit of $5.6 million in the same period in 2021. This variance was mainly driven by higher pre-tax income compared to the prior period and movements in the Brazilian real versus the US dollar. The effects of the Brazilian real caused a $3.8 million non-cash tax expense in the second quarter of 2022 compared to a $12.4 million non-cash tax benefit in the second quarter of 2021. Movements in the Brazilian real exchange rate impact the valuation of the Company’s net deferred tax positions related to our operations in Brazil.

AMG paid taxes of $9.1 million in the second quarter of 2022, compared to tax payments of $2.5 million in the second quarter of 2021.

Exceptional Items

AMG’s second quarter 2022 gross profit includes exceptional items, which are not included in the calculation of EBITDA.

A summary of exceptional items included in gross profit in the second quarters of 2022 and 2021 are below:

Exceptional items included in gross profit

Q2 ‘22 Q2 ‘21 Change
Gross profit $102,240         $48,499         111%
Inventory cost adjustment         —         1,497 N/A
Restructuring expense         41         334         (88%)
Asset impairment reversal         —         (640) N/A
Strategic project expense 833         888         (6%)
Gross profit excluding exceptional items 103,114 50,578         104%

Energy Costs

Total energy costs were $9.9 million higher in the second quarter of 2022 versus the same period in 2021 due to significant increases in gas and electricity costs during the quarter. The majority of this increase was at our silicon business in Germany, but that business benefited from fully hedged power costs. Other business units benefited from long-term electricity contracts that have no price escalation clauses, and the business units that did experience energy cost increases were able to pass through most of these increased costs to their customers.

SG&A

AMG’s second quarter 2022 SG&A expenses were $37.0 million compared to $33.2 million in the second quarter of 2021, with the variance largely driven by higher compensation expense due to higher profitability forecasted for the year and increased professional fees associated with strategic projects.

Liquidity

June 30, 2022 December 31, 2021 Change
Senior secured debt $365,751 $371,897         (2%)
Cash & cash equivalents 300,758 337,877         (11%)
Senior secured net debt 64,993 34,020         91%
Other debt 22,644 24,398         (7%)
Net debt excluding municipal bond 87,637 58,418         50%
Municipal bond debt 319,363 319,476         —%
Restricted cash 42,182 93,434         (55%)
Net debt 364,818 284,460         28%

AMG had a net debt position of $364.8 million as of June 30, 2022. This increase was mainly due to the significant investment in growth initiatives during the quarter.

AMG continued to maintain a strong balance sheet and adequate sources of liquidity during the second quarter. Employee benefit liabilities decreased $55 million during the quarter to $108 million mainly due to rising discount rates. This decrease in employee benefit liabilities combined with AMG’s higher earnings have increased our equity attributable to shareholders to $357 million, a 33% increase over the year-end value.

As of June 30, 2022, the Company had $301 million in unrestricted cash and cash equivalents and $175 million available on its revolving credit facility. As such, AMG had $476 million of total liquidity as of June 30, 2022.

Net Finance Costs

AMG’s second quarter 2022 net finance costs were $12.2 million compared to $4.8 million in the second quarter of 2021. This increase was mainly driven by non-cash intergroup related foreign exchange losses of $7.5 million during the quarter.

AMG capitalized $2.1 million of interest costs in the second quarter of 2022 versus $3.8 million in the same period in 2021, driven by interest associated with the Company’s tax-exempt municipal bond supporting the vanadium expansion in Ohio. This decrease is due to a portion of the municipal bond interest costs which are no longer being capitalized due to the ramp up of production at our Zanesville facility.

Outlook

AMG continues to provide strong and consistent results despite the global economic fallout from the geopolitical turbulence in recent months. We are continuing to focus on the things we can control and are extremely pleased with the noted achievements in our strategic initiatives which will drive long-term value creation. EBITDA was $81.1 million in the second quarter of 2022, the highest quarterly EBITDA in AMG’s history. As mentioned, it was the eighth straight quarter of sequential improvement.

As the year has progressed and more information is available, AMG is increasing its EBITDA guidance for the full year 2022 to a range of between $280 million and $300 million. This range is supported by AMG’s geographic diversification and the strength of the global lithium market.

Net income to EBITDA reconciliation

Q2 ‘22 Q2 ‘21
Net income $29,879 $4,272
Income tax expense (benefit) 23,156 (5,580)
Net finance cost 12,211 4,761
Equity-settled share-based payment transactions 1,372 1,194
Restructuring expense 41 334
Inventory cost adjustment 1,497
Asset impairment reversal (640)
Environmental provision 11,651
Strategic project expense (1) 3,107 2,525
Others (3) 448
EBIT 69,763 20,462
Depreciation and amortization 11,363 10,939
EBITDA 81,126 31,401

(1) The Company is in the initial development and ramp-up phases for several strategic expansion projects, including AMG Vanadium’s expansion project, the joint venture with Shell, Hybrid Lithium Vanadium Redox Flow Battery System, and the lithium expansion in Germany, which incurred project expenses during the quarter but are not yet operational. AMG is adjusting EBITDA for these exceptional charges.

AMG Advanced Metallurgical Group N.V.
Condensed Interim Consolidated Income Statement
For the quarter ended June 30    
In thousands of US dollars 2022 2021
  Unaudited Unaudited
Continuing operations
Revenue         424,094         298,374
Cost of sales         (321,854)         (249,875)
Gross profit         102,240         48,499
Selling, general and administrative expenses         (37,034)         (33,232)
Environmental expense         —         (11,651)
Other income, net         40         75
Net other operating income (expense)         40         (11,576)
Operating profit         65,246         3,691
Finance income         2,081         264
Finance cost         (14,292)         (5,025)
Net finance cost         (12,211)         (4,761)
Share of loss of associates and joint ventures                  (238)
Profit (loss) before income tax         53,035         (1,308)
Income tax (expense) benefit         (23,156)         5,580
Profit for the period         29,879         4,272
Profit attributable to:
Shareholders of the Company         29,631         3,566
Non-controlling interests         248         706
Profit for the period         29,879         4,272
Earnings per share
Basic earnings per share         0.93         0.11
Diluted earnings per share         0.91         0.11

 

AMG Advanced Metallurgical Group N.V.
Condensed Interim Consolidated Income Statement
For the six months ended June 30    
In thousands of US dollars 2022 2021
  Unaudited Unaudited
Continuing operations
Revenue         827,957         562,360
Cost of sales         (650,523)         (466,997)
Gross profit         177,434         95,363
Selling, general and administrative expenses         (74,496)         (66,325)
Environmental expense         —         (11,711)
Other income, net         122         173
Net other operating income (expense)         122         (11,538)
Operating profit         103,060 17,500
Finance income         2,380         474
Finance cost         (23,510)         (13,889)
Net finance cost         (21,130)         (13,415)
Share of loss of associates and joint ventures         (500)         (625)
Profit before income tax         81,430         3,460
Income tax (expense) benefit         (21,667)         6,490
Profit for the period         59,763         9,950
Profit attributable to:
Shareholders of the Company         58,746         8,665
Non-controlling interests         1,017         1,285
Profit for the period         59,763         9,950
Earnings per share
Basic earnings per share         1.84         0.29
Diluted earnings per share         1.81         0.28

 

AMG Advanced Metallurgical Group N.V.
Condensed Interim Consolidated Statement of Financial Position
In thousands of US dollars June 30,2022 Unaudited December 31, 2021
Assets
Property, plant and equipment 739,610 693,624
Goodwill and other intangible assets 41,761 44,684
Derivative financial instruments 22,508 95
Other investments 26,707 29,830
Deferred tax assets 39,953 52,937
Restricted cash 33,682 85,023
Other assets 8,394 8,471
Total non-current assets         912,615         914,664
Inventories         263,273         218,320
Derivative financial instruments         5,854         4,056
Trade and other receivables         194,563         145,435
Other assets         80,641         65,066
Current tax assets         9,093         5,888
Restricted cash         8,500         8,411
Cash and cash equivalents         300,758         337,877
Total current assets         862,682         785,053
Total assets         1,775,297         1,699,717

 

AMG Advanced Metallurgical Group N.V.
Condensed Interim Consolidated Statement of Financial Position
(continued)
In thousands of US dollars June 30, 2022 Unaudited December 31, 2021
Equity
Issued capital         853         853
Share premium         553,715         553,715
Treasury shares (14,906) (16,596)
Other reserves (56,868) (96,421)
Retained earnings (deficit) (126,088) (173,117)
Equity attributable to shareholders of the Company         356,706         268,434
Non-controlling interests         25,052         25,718
Total equity         381,758         294,152
Liabilities
Loans and borrowings         663,781         675,384
Lease liabilities         41,277         45,692
Employee benefits         107,827         162,628
Provisions         14,467         14,298
Deferred revenue         21,105         22,341
Other liabilities         7,116         11,098
Derivative financial instruments         818         2,064
Deferred tax liabilities         5,076         5,617
Total non-current liabilities         861,467         939,122
Loans and borrowings         31,528         27,341
Lease liabilities         4,237         4,857
Short-term bank debt         12,449         13,046
Deferred revenue         20,957         18,478
Other liabilities         83,078         80,672
Trade and other payables         283,443         252,765
Derivative financial instruments         12,518         6,010
Advance payments from customers         49,601         35,091
Current tax liability         18,318         10,586
Provisions         15,943         17,597
Total current liabilities         532,072         466,443
Total liabilities         1,393,539         1,405,565
Total equity and liabilities         1,775,297         1,699,717

 

AMG Advanced Metallurgical Group N.V.
Condensed Interim Consolidated Statement of Cash Flows
For the six months ended June 30
In thousands of US dollars 2022 2021
  Unaudited Unaudited
Cash from operating activities
Profit for the period         59,763         9,950
Adjustments to reconcile net profit to net cash flows:
Non-cash:
Income tax expense (benefit)         21,667         (6,490)
Depreciation and amortization         21,890         21,902
Asset impairment reversal         —         (776)
Net finance cost         21,130         13,415
Share of loss of associates and joint ventures         500         625
Loss (gain) on sale or disposal of property, plant and equipment         33         (91)
Equity-settled share-based payment transactions         2,752         2,127
Movement in provisions, pensions, and government grants         (2,917)         2,647
Working capital and deferred revenue adjustments         (63,774)         14,171
Cash generated from operating activities         61,044         57,480
Finance costs paid, net         (12,153)         (10,053)
Income tax paid         (13,040)         (4,499)
Net cash from operating activities         35,851         42,928
Cash used in investing activities
Proceeds from sale of property, plant and equipment         93         1,055
Acquisition of property, plant and equipment and intangibles         (82,608)         (78,606)
Investments in associates and joint ventures         (500) (1,000)
Change in restricted cash         51,252         65,562
Interest received on restricted cash         76         25
Capitalized borrowing cost         (8,321)         (7,795)
Other         8         19
Net cash used in investing activities (40,000) (20,740)

 

AMG Advanced Metallurgical Group N.V.
Condensed Interim Consolidated Statement of Cash Flows
(continued)
For the six months ended June 30
In thousands of US dollars 2022 2021
Unaudited Unaudited
Cash (used in) from financing activities
Proceeds from issuance of debt         152         2,411
Payment of transaction costs related to debt         —         (390)
Repayment of borrowings         (8,437) (3,127)
Net (repurchase of) proceeds from issuance common shares         (1,523)         121,569
Dividends paid         (10,098)         (3,858)
Payment of lease liabilities         (2,588) (2,608)
Contributions by non-controlling interests         —         648
Net cash (used in) from financing activities         (22,494)         114,645
Net (decrease) increase in cash and cash equivalents         (26,643)         136,833
Cash and cash equivalents at January 1         337,877         207,366
Effect of exchange rate fluctuations on cash held         (10,476)         (3,097)
Cash and cash equivalents at June 30         300,758         341,102

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 Clean Energy Materials segment combines AMG’s recycling and mining operations, producing materials for infrastructure and energy storage solutions while reducing the CO2 footprint of both suppliers and customers. AMG Clean Energy Materials segment spans the vanadium, lithium, and tantalum value chains. AMG Critical Materials Technologies segment combines AMG’s leading vacuum furnace technology line with high-purity materials serving global leaders in the aerospace sector. AMG Critical Minerals segment consists of AMG’s mineral processing operations in antimony, graphite, and silicon metal.

With approximately 3,300 employees, AMG operates globally with production facilities in Germany, the United Kingdom, France, the United States, China, Mexico, Brazil, India, Sri Lanka, and Mozambique, and has sales and customer service offices in Japan (www.amg-nv.com).

For further information, please contact:
AMG Advanced Metallurgical Group N.V.        +1 610 975 4979
Michele Fischer
mfischer@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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