AMG Advanced Metallurgical Group N.V. Reports Record Full Year and Fourth Quarter 2018 Results

Key Highlights

  • Revenue increased by 23% to $344.4 million in the fourth quarter of 2018 from $280.7 million in the fourth quarter of 2017
  • EBITDA(2) was $62.8 million in the fourth quarter of 2018, a 90% increase over the same period in 2017
  • 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
  • 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
  • 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
  • Return on capital employed increased to 35.4% in 2018, as compared to 21.2% in 2017
  • 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: 

  1. 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.
  2. 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.

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