Key Highlights
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Revenue increased by 23% to $344.4 million in the fourth quarter of 2018 from $280.7 million in the fourth quarter of 2017
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EBITDA(2) was $62.8 million in the fourth quarter of 2018, a 90% increase over the same period in 2017
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Full year 2018 EBITDA was the highest in AMG’s history, increasing by 73% to $217.1 million, from $125.5 million in the prior year
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EPS, on a fully diluted basis, increased by 104% to $0.92 in the fourth quarter of 2018 from $0.45 in the fourth quarter of 2017
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Full year 2018 EPS, the highest in AMG’s history, increased by 65% to $2.97 per fully diluted share from $1.80 per share in 2017
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Return on capital employed increased to 35.4% in 2018, as compared to 21.2% in 2017
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Operating cash flow was $97.4 million in 2018, a 24% increase over 2017, enabling AMG to end the year in a net cash position
- Total 2018 dividend proposed of €0.50 per ordinary share, including the interim dividend of €0.20, paid on August 14, 2018, an increase of 79% over the prior year’s total dividend of €0.28
Amsterdam, 28 February 2019 (Regulated Information) — AMG Advanced Metallurgical Group N.V. (“AMG”, EURONEXT AMSTERDAM: “AMG”) reported fourth quarter 2018 revenue of $344.4 million, a 23% increase from $280.7 million in the fourth quarter of 2017. EBITDA for the fourth quarter of 2018 was $62.8 million, a 90% increase from $33.0 million in the fourth quarter of 2017. On a full year basis, EBITDA increased by 73% to $217.1 million, from $125.5 million in the prior year.
Net income attributable to shareholders increased to $29.0 million in the fourth quarter of 2018 from $14.3 million in the fourth quarter of 2017. EPS, on a fully diluted basis, increased by 104% to $0.92 in the fourth quarter of 2018 from $0.45 in the fourth quarter of 2017. On a full year basis, net income attributable to shareholders increased by 66% to $94.6 million in 2018 from $57.0 million in 2017. EPS, on a fully diluted basis, increased by 65% to $2.97 in 2018 from $1.80 in 2017.
Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, “Very strong financial results in the fourth quarter of 2018 resulted in the highest EBITDA and earnings per share in the Company’s history.
“AMG Critical Materials generated EBITDA of $55.7 million during the fourth quarter of 2018, an increase of 107% from $26.9 million in the fourth quarter of 2017, due to a combination of higher vanadium prices, as well as improved product mix and strong sales volumes across much of the Critical Materials portfolio.
“AMG Engineering signed $315.9 million in new orders during 2018, representing a 1.22x book to bill ratio. Order backlog was $241.4 million as of December 31, 2018, a 17% increase from $207.0 million as of December 31, 2017. AMG Engineering achieved EBITDA of $7.1 million during the fourth quarter of 2018, an increase of $1.0 million compared to the fourth quarter of 2017, driven by higher profitability generated from the delivery of casting furnaces and increased after-sales services during the quarter.
“In the fourth quarter of 2018, AMG generated cash from operating activities of $50.7 million, an increase of $17.4 million, or 52%, over the same period in 2017. On a full year basis, AMG generated cash from operating activities of $97.4 million in 2018, an increase of $18.9 million, or 24%, compared to the same period in 2017.”
Key Figures
| In 000’s US dollar | ||||||
| Q4 ’18 | Q4 ’17 | Change | FY ’18 | FY ’17 | Change | |
| Revenue | $344,448 | $280,699 | 23% | $1,310,288 | $1,059,651 | 24% |
| Gross profit | 86,341 | 56,507 | 53% | 315,175 | 214,627 | 47% |
| Gross margin | 25.1% | 20.1% | 24.1% | 20.3% | ||
| Operating profit | 42,461 | 18,391 | 131% | 163,261 | 79,752 | 105% |
| Operating margin | 12.3% | 6.6% | 12.5% | 7.5% | ||
| Net income attributable to shareholders | 28,980 | 14,331 | 102% | 94,616 | 56,965 | 66% |
| EPS – Fully diluted | 0.92 | 0.45 | 104% | 2.97 | 1.80 | 65% |
| EBIT (1) | 54,327 | 24,629 | 121% | 184,099 | 94,598 | 95% |
| EBITDA (2) | 62,788 | 33,027 | 90% | 217,133 | 125,497 | 73% |
| EBITDA margin | 18.2% | 11.8% | 16.6% | 11.8% | ||
| Cash from operating activities | 50,675 | 33,272 | 52% | 97,422 | 78,525 | 24% |
Notes:
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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
| Q4 ’18 | Q4 ’17 | Change | FY ’18 | FY ’17 | Change | |||||
| Revenue | $272,939 | $213,963 | 28% | $1,050,460 | $814,446 | 29% | ||||
| Gross profit | 65,924 | 39,325 | 68% | 241,452 | 149,871 | 61% | ||||
| Gross profit before non-recurring items | 66,623 | 40,113 | 66% | 246,837 | 152,825 | 62% | ||||
| Operating profit | 37,324 | 14,350 | 160% | 143,089 | 62,608 | 129% | ||||
| EBITDA | 55,665 | 26,907 | 107% | 190,132 | 99,967 | 90% | ||||
AMG Critical Materials’ revenue in the fourth quarter increased by $59.0 million, or 28%, to $272.9 million, driven by substantially improved vanadium prices, as well as price increases for aluminum products, chrome metal, and titanium products, and higher sales volumes of aluminum products.
Gross profit before non-recurring items in the fourth quarter increased by $26.5 million, or 66%, to $66.6 million. Strong financial performances in vanadium, chrome metal, titanium alloys and graphite in the quarter were partially offset by lower gross profit in silicon metal and in Brazil. Profitability in our tantalum and lithium mine in Brazil was adversely affected by lithium start-up costs and lower prices. Titanium alloys benefited from the early termination of a customer contract.
SG&A expenses in the fourth quarter of 2018 decreased by $2.0 million, or 9%, compared to the same period in the prior year, due to lower personnel costs and professional fees.
EBITDA increased by $28.8 million, or 107%, to $55.7 million in the fourth quarter of 2018 due to higher levels of gross profit.
AMG Engineering
| Q4 ’18 | Q4 ’17 | Change | FY ’18 | FY ’17 | Change | |
| Revenue | $71,509 | $66,736 | 7% | $259,828 | $245,205 | 6% |
| Gross profit | 20,417 | 17,182 | 19% | 73,723 | 64,756 | 14% |
| Gross profit before non- recurring items |
20,415 | 17,514 | 17% | 73,723 | 65,509 | 13% |
| Operating profit | 5,137 | 4,041 | 27% | 20,172 | 17,144 | 18% |
| EBITDA | 7,123 | 6,120 | 16% | 27,001 | 25,530 | 6% |
AMG Engineering signed $67.8 million in new orders during the fourth quarter of 2018, representing a 0.95x book to bill ratio, due to strong orders of turbine blade coating and heat treatment furnaces. Order backlog was $241.4 million as of December 31, 2018, a 17% increase from $207.0 million as of December 31, 2017. On a full year basis, AMG Engineering signed $315.9 million in new orders, representing a 1.22x book to bill ratio.
AMG Engineering’s fourth quarter 2018 revenue increased by $4.8 million, or 7%, to $71.5 million, due to higher sales of turbine blade coating and vacuum induction furnaces and an increase in after-sales service revenues, partially offset by lower sales of remelting and heat treatment furnaces.
Fourth quarter 2018 gross profit before non-recurring items increased by $2.9 million, or 17%, to $20.4 million, and gross margin before non-recurring items improved to 29% from 26% in the fourth quarter of 2017, due to product mix effects.
SG&A expenses increased by $2.2 million, or 17%, in the fourth quarter of 2018 compared to the fourth quarter of 2017, due to higher employee related expenses partly associated with increased hiring to grow our after-sales business.
EBITDA increased by $1.0 million to $7.1 million in the fourth quarter of 2018, due to higher levels of gross profit before non-recurring items, partially offset by higher SG&A expenses. On a full year basis, EBITDA in 2018 rose by 6% from $25.5 million in 2017 to $27.0 million.
Financial Review
Tax
AMG recorded an income tax expense of $45.0 million in 2018 as compared to $13.9 million in 2017. The increase in income tax expense was driven by the full recognition of AMG’s US operating loss carryforwards in the prior year and higher levels of profitability in 2018.
Due to the volatile nature of the company’s Brazilian deferred tax balances, AMG believes that the cash tax rate is a more meaningful metric. In the fourth quarter of 2018, AMG benefited from operating loss carryforwards that offset taxes payable. As a result of high pre-tax profitability, AMG paid taxes of $21.3 million in 2018 as compared to $10.3 million in 2017. For 2018, AMG’s effective cash tax rate was 15%, as compared to 14% in 2017.
Non-Recurring Items
AMG’s fourth quarter 2018 and full year 2018 gross profit include non-recurring items, which are not included in the calculation of EBITDA.
A summary of non-recurring items in 2018 and 2017 are below:
Non-recurring items included in gross profit
| Q4 ’18 | Q4 ’17 | Change | FY ’18 | FY ’17 | Change | |
| Gross profit | $86,341 | $56,507 | 53% | $315,175 | $214,627 | 47% |
| Restructuring expense | 564 | 771 | (27%) | 2,052 | 2,547 | (19%) |
| Asset impairment expense | 133 | 349 | (62%) | 3,333 | 1,160 | 187% |
| Gross profit before non-recurring items | 87,038 | 57,627 | 51% | 320,560 | 218,334 | 47% |
Gross profit before non-recurring items by reporting segment
| Q4 ’18 | Q4 ’17 | Change | FY ’18 | FY ’17 | Change | |
| AMG Critical Materials | $66,623 | $40,113 | 66% | $246,837 | $152,825 | 62% |
| AMG Engineering | 20,415 | 17,514 | 17% | 73,723 | 65,509 | 13% |
| Gross profit before non-recurring items | 87,038 | 57,627 | 51% | 320,560 | 218,334 | 47% |
Non-recurring environmental expense
| Q4 ’18 | Q4 ’17 | Change | FY ’18 | FY ’17 | Change | |
| Environmental expense | 8,722 | 3,092 | 182% | 8,757 | 3,092 | 183% |
During the fourth quarter of 2018, AMG recorded non-recurring environmental expense of $8.7 million, the majority of which was related to its Newfield, New Jersey site, which is not included in the calculation of EBITDA.
Liquidity
| December 31, 2018 | December 31, 2017 | Change | |
| Total debt | $381,444 | $189,108 | 102% |
| Cash and cash equivalents | 381,900 | 178,800 | 114% |
| Net (cash) debt | (456) | 10,308 | N/A |
AMG had a net cash position of $0.5 million as of December 31, 2018. Net debt decreased by $10.8 million from December 31, 2017, while gross debt increased by $192.3 million.
Cash from operating activities increased to $97.4 million in 2018 from $78.5 million in 2017.
Capital expenditures decreased to $73.0 million in 2018 compared to $80.9 million in 2017. Capital spending in 2018 included $27.9 million of maintenance capital, compared to $32.0 million in 2017. The largest expansion capital project in 2018 was AMG’s lithium project in Brazil.
Including the $381.9 million of cash, AMG had $551.5 million of total liquidity as of December 31, 2018.
Net Finance Costs
AMG’s fourth quarter 2018 net finance costs were $6.9 million compared to $2.3 million in the fourth quarter of 2017. The increase was primarily due to higher interest rates and higher outstanding gross debt associated with AMG’s new, long-term credit facility.
SG&A
AMG’s fourth quarter 2018 SG&A expenses were $35.1 million, a slight increase of 1% from the same period in the prior year.
Full year 2018 SG&A expenses were $143.6 million, a 9% increase from $132.3 million in 2017, primarily due to an increase in personnel costs.
Final Dividend Proposed
AMG intends to declare a dividend of €0.50 per ordinary share over the financial year 2018. The interim dividend of €0.20, paid on August 14, 2018, will be deducted from the amount to be distributed to shareholders. The proposed final dividend per ordinary share therefore amounts to €0.30.
A proposal to resolve upon the final dividend distribution will be included on the agenda for the Annual General Meeting to be held on May 1, 2019.
Outlook
As regards outlook, our last long-term guidance at the AGM in May 2018 was that we would reach $200 million of EBITDA, or more, by 2020 or earlier. Obviously, we reached our target earlier – and with record numbers all around. For 2019, our target is to exceed the $200 million mark again.
The updated long-term guidance will be published at the AGM on May 1, 2019.
AMG Advanced Metallurgical Group N.V. |
||
| Condensed Consolidated Income Statement | ||
| For the quarter ended December 31 | ||
| In thousands of US dollars | 2018 | 2017 |
| Unaudited | Unaudited | |
| Continuing operations | ||
| Revenue | 344,448 | 280,699 |
| Cost of sales | 258,107 | 224,192 |
| Gross profit | 86,341 | 56,507 |
| Selling, general and administrative expenses | 35,131 | 34,955 |
| Environmental expense |
8,722 |
3,092 |
| Other expense, net | 27 | 69 |
| Net other operating expense | 8,749 | 3,161 |
| Operating profit | 42,461 | 18,391 |
| Finance income | (1,509) | (1,116) |
| Finance cost | 8,450 | 3,444 |
| Net finance cost | 6,941 | 2,328 |
| Profit before income tax | 35,520 | 16,063 |
| Income tax expense | 5,849 | 980 |
| Profit for the period | 29,671 | 15,083 |
| Attributable to: | ||
| Shareholders of the Company | 28,980 | 14,331 |
| Non-controlling interests | 691 | 752 |
| Profit for the period | 29,671 | 15,083 |
| Earnings per share | ||
| Basic earnings per share | 0.95 | 0.48 |
| Diluted earnings per share | 0.92 | 0.45 |
| AMG Advanced Metallurgical Group N.V. |
||
| Condensed Consolidated Income Statement | ||
| For the year ended December 31 | ||
| In thousands of US dollars | 2018 | 2017 |
| Unaudited | ||
| Continuing operations | ||
| Revenue | 1,310,288 | 1,059,651 |
| Cost of sales | 995,113 | 845,024 |
| Gross profit | 315,175 | 214,627 |
| Selling, general and administrative expenses | 143,581 | 132,294 |
| Environmental expense |
8,757 |
3,092 |
| Other income, net | (424) | (511) |
| Net other operating expense | 8,333 | 2,581 |
| Operating profit |
163,261 |
79,752 |
| Finance income |
(3,721) |
(1,766) |
| Finance cost | 27,230 | 10,160 |
| Net finance cost | 23,509 | 8,394 |
| Profit before income tax |
139,752 |
71,358 |
| Income tax expense | 44,971 | 13,905 |
| Profit for the year | 94,781 | 57,453 |
| Attributable to: | ||
| Shareholders of the Company | 94,616 | 56,965 |
| Non-controlling interests | 165 | 488 |
| Profit for the year | 94,781 | 57,453 |
| Earnings per share | ||
| Basic earnings per share | 3.12 | 1.95 |
| Diluted earnings per share | 2.97 | 1.80 |
| AMG Advanced Metallurgical Group N.V. | ||
| Consolidated Statement of Financial Position | ||
| In thousands of US dollars | December 31, 2018 Unaudited |
December 31, 2017 |
| Assets | ||
| Property, plant and equipment | 327,951 | 298,540 |
| Goodwill and other intangible assets | 35,130 | 38,110 |
| Derivative financial instruments | 7,592 | 636 |
| Other investments | 21,452 | 30,562 |
| Deferred tax assets | 34,112 | 40,108 |
| Restricted cash | 1,715 | 829 |
| Non-current tax asset | – | 2,488 |
| Other assets | 11,266 | 17,729 |
| Total non-current assets | 439,218 | 429,002 |
| Inventories | 316,715 | 162,505 |
| Derivative financial instruments | 1,335 | 6,372 |
| Trade and other receivables | 138,530 | 137,174 |
| Other assets | 39,426 | 37,547 |
| Current tax assets | 3,668 | 3,147 |
| Cash and cash equivalents | 381,900 | 178,800 |
| Assets held for sale | 144 | 2,056 |
| Total current assets | 881,718 | 527,601 |
| Total assets | 1,320,936 | 956,603 |
| AMG Advanced Metallurgical Group N.V. |
||
| Consolidated Statement of Financial Position | ||
| (continued) | ||
| In thousands of US dollars | December 31, 2018 Unaudited |
December 31, 2017 |
| Equity | ||
| Issued capital | 812 | 796 |
| Share premium | 462,891 | 432,844 |
| Treasury shares | (347) | (3,461) |
| Other reserves | (104,274) | (72,880) |
| Retained earnings (deficit) | (39,158) | (99,343) |
| Equity attributable to shareholders of the Company | 319,924 | 257,956 |
| Non-controlling interests | 24,119 | 24,633 |
| Total equity | 344,043 | 282,589 |
| Liabilities | ||
| Loans and borrowings | 356,997 | 164,788 |
| Employee benefits | 149,217 | 156,193 |
| Provisions | 32,527 | 35,887 |
| Other liabilities | 4,371 | 4,011 |
| Derivative financial instruments | 5,148 | – |
| Deferred tax liabilities | 7,930 | 7,888 |
| Total non-current liabilities | 556,190 | 368,767 |
| Loans and borrowings | 8,947 | 8,820 |
| Short-term bank debt | 15,500 | 15,500 |
| Other liabilities | 61,120 | 61,836 |
| Trade and other payables | 230,939 | 155,115 |
| Derivative financial instruments | 8,267 | 1,415 |
| Advance payments | 50,210 | 33,025 |
| Current taxes payable | 19,675 | 9,155 |
| Provisions | 26,045 | 20,381 |
| Total current liabilities | 420,703 | 305,247 |
| Total liabilities | 976,893 | 674,014 |
| Total equity and liabilities | 1,320,936 | 956,603 |
| AMG Advanced Metallurgical Group N.V. | ||
| Condensed Consolidated Statement of Cash Flows | ||
| For the year ended December 31 |
||
| In thousands of US dollars | 2018 | 2017 |
| Unaudited | ||
| Cash from operating activities | ||
| Profit for the year | 94,781 | 57,453 |
| Adjustments to reconcile net profit to net cash flows: | ||
| Non-cash: | ||
| Income tax expense | 44,971 | 13,905 |
| Depreciation and amortization | 33,034 | 30,899 |
| Asset impairment | 3,333 | 1,160 |
| Net finance costs | 23,509 | 8,394 |
| (Gain) loss on sale or disposal of property, plant and equipment | (720) | 75 |
| Equity-settled share-based payment transactions | 7,499 | 8,697 |
| Movement in provisions, pensions and government grants | 3,724 | (3,016) |
| Working capital and deferred revenue adjustments | (73,107) | (21,308) |
| Cash generated from operating activities | 137,024 | 96,259 |
| Finance costs paid, net | (18,273) | (7,443) |
| Income tax paid, net | (21,329) | (10,291) |
| Net cash from operating activities | 97,422 | 78,525 |
| Cash used in investing activities | ||
| Proceeds from sale of property, plant and equipment | 1,660 | 254 |
| Insurance proceeds on property, plant and equipment | 1,300 | 1,516 |
| Acquisition of property, plant and equipment and intangibles | (73,031) | (80,904) |
| Change in restricted cash | (923) | 1,911 |
| Other | (325) | 3 |
| Net cash used in investing activities | (71,319) | (77,220) |
| AMG Advanced Metallurgical Group N.V. | ||
| Condensed Consolidated Statement of Cash Flows | ||
| (continued) | ||
| For the year ended December 31 | ||
| In thousands of US dollars | 2018 | 2017 |
| Unaudited | ||
| Cash from financing activities | ||
| Proceeds from issuance of debt | 353,087 | 30,000 |
| Transaction costs related to the issuance of debt | (9,238) | – |
| Repayment of borrowings | (155,423) | (17,153) |
| Proceeds from issuance of common shares | 15,923 | 14,370 |
| Net repurchase of common shares | (9,558) | (12,434) |
| Dividends paid | (12,092) | (9,293) |
| Net cash from financing activities | 182,699 | 5,490 |
| Net increase in cash and cash equivalents | 208,802 | 6,795 |
| Cash and cash equivalents at January 1 | 178,800 | 160,744 |
| Effect of exchange rate fluctuations on cash held | (5,702) | 11,261 |
| Cash and cash equivalents at December 31 | 381,900 | 178,800 |
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.
Critical Materials produces aluminum master alloys and powders, ferrovanadium, natural graphite, chromium metal, antimony, lithium, tantalum, niobium and silicon metal. AMG Technologies produces titanium aluminides and titanium alloys for the aerospace market; 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 5814
Grace Stubel
gstubel@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.