Key Highlights
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EBITDA([1]) was $25.1 million in the second quarter 2015, a 23% increase from the same period in 2014
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EPS, adjusted for the one-time cost of refinancing, on a fully diluted basis, was $0.33 in the second quarter 2015, a 22% increase from the same period in 2014
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Annualized return on capital employed increased to 15.7% in the second quarter 2015, from 9.9% in the same period in 2014
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As of June 30, 2015, net debt was $41.9 million, a reduction of $44.9 million in the second quarter of 2015
Amsterdam, 5 August 2015 (Regulated Information) — AMG Advanced Metallurgical Group N.V. (“AMG”, EURONEXT AMSTERDAM: “AMG”) reported second quarter 2015 revenue of $257.4 million, an 8% decrease from $278.9 million in the second quarter 2014. Net income attributable to shareholders, adjusted for the one-time costs of refinancing, for the second quarter 2015 was $9.2 million, or $0.33 per fully diluted share, a 22% increase from $7.4 million, or $0.27 in the second quarter 2014. EBITDA increased 23% to $25.1 million in the second quarter 2015 from $20.4 million in the second quarter 2014.
Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, “AMG earnings and cash flow for the second quarter were strong despite an extremely weak metal price environment and the unfavorable translation impact of foreign currency on reported earnings.
AMG Engineering achieved EBITDA of $4.2 million during the quarter, the highest in eight quarters, making continuous progress towards our stated objective to reduce cost and return the Engineering business to historic levels of profitability in 2016. Order intake of $81.8 million, representing a 1.45x book to bill ratio, was the highest in thirteen quarters. The improvement was due to orders of heat treatment furnaces for the automotive market, plasma re-melting furnaces for the aerospace market and induction furnaces for powder metallurgy applications.
AMG Critical Materials continues to acquire market share in certain business units despite difficult trading conditions and double-digit market price declines in five of AMG’s nine critical materials.
AMG reduced net debt by $45.9 million in the first half of 2015 to $41.9 million, a net debt to last twelve months EBITDA ratio of 0.46. AMG’s strong balance sheet liquidity, as well as the Board’s confidence in our long term ability to generate solid cash flow, has resulted in a change in dividend policy. This change reflects our commitment to return value to shareholders.”
Key Figures
| In 000’s US Dollar | |||||||||
| Q2 ’15 | Q2 ’14 | Change | |||||||
| Revenue | $257,443 | $278,941 | (8%) | ||||||
| Gross profit | 44,613 | 44,963 | (1%) | ||||||
| Gross margin | 17.3% | 16.1% | |||||||
| Operating profit | 12,122 | 11,124 | 9% | ||||||
| Operating margin | 4.7% | 4.0% | |||||||
| Net income attributable to shareholders | 3,808 | 7,445 | (49%) | ||||||
| Net income attributable to shareholders, adjusted for one-time refinancing costs | 9,180 | 7,445 | 23% | ||||||
| EPS – Fully diluted | 0.14 | 0.27 | (48%) | ||||||
| EPS – Fully diluted, adjusted for one-time refinancing costs | 0.33 | 0.27 | 22% | ||||||
| EBIT (1) | 18,031 | 12,221 | 48% | ||||||
| EBITDA (2) | 25,142 | 20,392 | 23% | ||||||
| EBITDA margin | 9.8% | 7.3% | |||||||
| Cash flows from operating activities | 11,264 | 19,129 | (41%) | ||||||
Note:
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EBIT is defined as earnings before interest, tax and excludes non-recurring items
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EBITDA is defined as earnings before interest, tax, depreciation and amortization and excludes non-recurring items
Operational Review
AMG Critical Materials
| Q2 ’15 | Q2 ’14 | Change | |
| Revenue | $201,188 | $229,265 | (12%) |
| Gross profit | 32,112 | 37,478 | (14%) |
| Operating profit | 12,272 | 14,884 | (18%) |
| EBITDA | 20,955 | 22,193 | (6%) |
AMG Critical Materials’ second quarter 2015 revenue decreased $28.1 million, or 12%, to $201.2 million. The decline was primarily the result of unfavorable Euro to US Dollar currency translation effects, lower metal prices and product portfolio optimization.
The reduction in market prices of antimony metal and ferrovanadium of 10% and 28%, respectively, negatively affected revenue in the second quarter of 2015 compared to the second quarter of 2014.
Despite difficult trading conditions, sales volumes of ferrovanadium, antimony, chrome metal and silicon metal increased as the business units continue to increase market share. Titanium Alloys and Aluminum sales volumes reduced compared to the prior year due to the planned elimination of low margin titanium products, the previously announced aluminum capacity reductions and the sale of AMG Aluminum’s Benda-Lutz-Alpoco operation.
Gross profit decreased $5.4 million, or 14%, to $32.1 million, primarily due to foreign currency translation effects and falling ferrovanadium prices. However, AMG Critical Materials’ second quarter 2015 gross margin remained at 16% compared to the same period in 2014.
Second quarter 2015 EBITDA margin of 10% was in-line with the second quarter of 2014. SG&A reductions and a reversal of previously recorded environmental expense offset the impact of a reduction in gross profit in the quarter.
AMG Engineering
| Q2 ’15 | Q2 ’14 | Change | |
| Revenue | $56,255 | $49,676 | 13% |
| Gross profit | 12,501 | 7,485 | 67% |
| Operating loss | (150) | (3,760) | 96% |
| EBITDA | 4,187 | (1,801) | N/A |
AMG Engineering signed $81.8 million in new orders during the second quarter of 2015, representing a 1.45x book to bill ratio, the highest order intake in 13 quarters. Order backlog was $138.3 million as of June 30, 2015, an increase of 19% from March 31, 2015.
AMG Engineering’s second quarter 2015 revenue increased $6.6 million, or 13%, to $56.3 million, due to the improved order intake in the second half of 2014. Revenue generated from turbine blade coating furnaces, heat treatment furnaces and induction furnaces increased in the second quarter of 2015 compared to the second quarter of 2014.
Second quarter 2015 gross margin increased to 22% from 15% in the second quarter of 2014 due to higher sales, product mix effects and improved project cost management.
EBITDA increased by $6.0 million, to $4.2 million, in the second quarter of 2015, the highest quarterly EBITDA in eight quarters, primarily as a result of higher gross profit.
Financial Review
Refinancing Costs
In the second quarter of 2015, AMG incurred $5.4 million related to the refinancing of the Company’s credit facility. As refinancing the credit facility is not ordinary course of business, these charges are considered non-recurring for the purposes of adjusted earnings per share.
Tax
AMG recorded a tax expense of $9.6 million through the first six months of 2015 as compared to a tax expense of $1.8 million in the first half of 2014. The largest driver of this variance relates to changes in the valuation of the Brazilian currency.
Movements in the Brazilian Real exchange rate impact the valuation of the Company’s net deferred tax assets. The devaluation of the Real during the first half of 2015 resulted in additional tax expense of $1.6 million. The appreciation of the Real in the first half of 2014 resulted in a $3.2 million tax benefit. The 2015 effective tax rate was also adversely impacted by the refinancing costs of $5.4 million, for which no tax benefit could be recognized.
Liquidity
| June 30, 2015 | December 31, 2014 | Change | ||
| Total debt | $179,026 | $195,878 | (9%) | |
| Cash and cash equivalents | 137,123 | 108,029 | 27% | |
| Net debt | 41,903 | 87,849 | (52%) | |
AMG had a net debt position of $41.9 million as of June 30, 2015. Net debt and gross debt decreased $45.9 million and $16.9 million, respectively, from December 31, 2014.
Cash flows from operating activities were $15.1 million in the first six months of 2015 compared to $24.8 million in the same period in 2014. Due to the refinancing of the credit facility, $3.0 million of cash was spent that will not reoccur.
Capital expenditures declined to $7.0 million in the first six months of 2015 compared to $10.5 million in the same period in 2014. The $7.0 million of capital spending in the first six months of 2015 included $4.6 million of maintenance capital. The largest expansion capital project was for AMG’s titanium aluminides business.
Including the $137.1 million of cash, AMG had $263.0 million of total liquidity as of June 30, 2015.
Currency Fluctuations
AMG’s financial statements are prepared in US Dollars, so fluctuations in the exchange rate between the US Dollar and other currencies, primarily the Euro and Brazilian Real, have an effect on the results of operations and on the reported value of assets and liabilities as measured in US Dollars.
The appreciation of the US Dollar as of June 30, 2015 compared to December 31, 2014, resulted in a decrease of $48.7 and $37.0 million in assets and liabilities on the balance sheet, respectively. The appreciation of the US Dollar compared to the Euro in the second quarter of 2015 in relation to the second quarter of 2014, resulted in a reduction in revenue and EBITDA of $30.2 million and $2.9 million, respectively.
Outlook & Dividend Policy
In this challenging environment, AMG will continue to reduce cost and maintain a conservative balance sheet.
AMG Critical Materials expects to continue to acquire market share in certain business units although currency translation effects and metal prices will continue to affect revenues in the division.
AMG Engineering expects to return to historic levels of profitability in 2016. The strong order intake in the second quarter of 2015 and successful launch of new product lines has positioned the division well at the midpoint of the current fiscal year.
Against weak industry trends, AMG expects to generate full year EBITDA in-line with prior year and improve its return on capital employed in 2015.
The change in AMG’s dividend policy reflects a commitment to return value to shareholders and is a result of an improved balance sheet, ample liquidity and confidence in our ability to generate strong cash flows.
| AMG Advanced Metallurgical Group N.V. | ||
| Condensed interim consolidated income statement | ||
| For the quarter ended June 30 | ||
| In thousands of US Dollars | 2015 | 2014 |
| Unaudited | Unaudited | |
| Revenue | 257,443 | 278,941 |
| Cost of sales | 212,830 | 233,978 |
| Gross profit | 44,613 | 44,963 |
| Selling, general and administrative expenses | 32,863 | 34,098 |
| Restructuring expense | 1,965 | 1,034 |
| Environmental | (2,286) | – |
| Other income, net | (51) | (1,293) |
| Operating profit | 12,122 | 11,124 |
| Finance income | (134) | (138) |
| Finance expense | 5,324 | 5,752 |
| Foreign exchange (gain) loss | (1,289) | 199 |
| Net finance costs | 3,901 | 5,813 |
| Share of profit of associates and joint ventures | 122 | 678 |
| Profit before income tax | 8,343 | 5,989 |
| Income tax expense (benefit) | 4,091 | (1,463) |
| Profit for the period | 4,252 | 7,452 |
| Attributable to: | ||
| Shareholders of the Company | 3,808 | 7,445 |
| Non-controlling interests | 444 | 7 |
| Profit for the period | 4,252 | 7,452 |
| Earnings per share | ||
| Basic earnings per share | 0.14 | 0.27 |
| Diluted earnings per share | 0.14 | 0.27 |
| AMG Advanced Metallurgical Group N.V. | ||
| Condensed interim consolidated income statement | ||
| For the six months ended June 30 | ||
| In thousands of US Dollars | 2015 | 2014 |
| Unaudited | Unaudited | |
| Revenue | 514,434 | 553,793 |
| Cost of sales | 426,519 | 462,478 |
| Gross profit | 87,915 | 91,315 |
| Selling, general and administrative expenses | 63,006 | 69,134 |
| Restructuring expense | 3,659 | 1,792 |
| Environmental | (2,286) | – |
| Other income, net | (139) | (1,546) |
| Operating profit | 23,675 | 21,935 |
| Finance income | (472) | (341) |
| Finance expense | 8,996 | 10,427 |
| Foreign exchange (gain) loss | (1,117) | 14 |
| Net finance costs | 7,407 | 10,100 |
| Share of profit of associates and joint ventures | 197 | 783 |
| Profit before income tax | 16,465 | 12,618 |
| Income tax expense | 9,556 | 1,811 |
| Profit for the period | 6,909 | 10,807 |
| Attributable to: | ||
| Shareholders of the Company | 6,484 | 11,364 |
| Non-controlling interests | 425 | (557) |
| Profit for the period | 6,909 | 10,807 |
| Earnings per share | ||
| Basic earnings per share | 0.23 | 0.41 |
| Diluted earnings per share | 0.23 | 0.41 |
| AMG Advanced Metallurgical Group N.V. | ||
| Condensed interim consolidated statement of financial position | ||
| June 30, | December 31, | |
| In thousands of US Dollars | 2015 | 2014 |
| Unaudited | ||
| Assets | ||
| Property, plant and equipment | 217,618 | 237,418 |
| Goodwill | 18,996 | 20,618 |
| Intangible assets | 9,914 | 11,116 |
| Investments in associates and joint ventures | 1,795 | 1,450 |
| Derivative financial instruments | 14 | – |
| Deferred tax assets | 33,923 | 37,903 |
| Restricted cash | 6,946 | 7,582 |
| Other assets | 21,180 | 21,987 |
| Total non-current assets | 310,386 | 338,074 |
| Inventories | 143,214 | 145,418 |
| Trade and other receivables | 141,703 | 135,293 |
| Derivative financial instruments | 2,156 | 1,997 |
| Other assets | 37,261 | 47,055 |
| Assets held for sale | 476 | 2,553 |
| Cash and cash equivalents | 137,123 | 108,029 |
| Total current assets | 461,933 | 440,345 |
| Total assets | 772,319 | 778,419 |
| AMG Advanced Metallurgical Group N.V. | ||
| Condensed interim consolidated statement of financial position | ||
| (continued) | ||
| June 30 | December 31, | |
| In thousands of US Dollars | 2015 | 2014 |
| Unaudited | ||
| Equity | ||
| Issued capital | 745 | 745 |
| Share premium | 382,978 | 382,978 |
| Other reserves | (47,421) | (59,728) |
| Retained earnings (deficit) | (204,338) | (225,843) |
| Equity attributable to shareholders of the | 131,964 | 98,152 |
| Company | ||
| Non-controlling interests | 25,051 | 2,825 |
| Total equity | 157,015 | 100,977 |
| Liabilities | ||
| Loans and borrowings | 152,400 | 167,990 |
| Employee benefits | 141,010 | 159,672 |
| Provisions | 29,433 | 37,056 |
| Deferred revenue | 6,689 | 8,950 |
| Government grants | 556 | 666 |
| Other liabilities | 7,733 | 8,885 |
| Derivative financial instruments | 577 | 5,056 |
| Deferred tax liabilities | 10,125 | 8,261 |
| Total non-current liabilities | 348,523 | 396,536 |
| Loans and borrowings | 3,272 | 6,562 |
| Short term bank debt | 23,354 | 21,326 |
| Government grants | 101 | 88 |
| Liabilities associated with assets held for sale | 1,834 | 248 |
| Other liabilities | 47,943 | 53,257 |
| Trade and other payables | 126,432 | 134,373 |
| Derivative financial instruments | 8,835 | 9,104 |
| Advance payments | 30,450 | 31,689 |
| Deferred revenue | 7,341 | 8,414 |
| Current taxes payable | 3,417 | 671 |
| Provisions | 13,802 | 15,174 |
| Total current liabilities | 266,781 | 280,906 |
| Total liabilities | 615,304 | 677,442 |
| Total equity and liabilities | 772,319 | 778,419 |
| 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 | 2015 | 2014 |
| Unaudited | Unaudited | |
| Cash flows from operating activities | ||
| Profit for the period | 6,909 | 10,807 |
| Adjustments to reconcile net profit to net cash | ||
| flows: | ||
| Non-cash: | ||
| Income tax expense | 9,556 | 1,811 |
| Depreciation and amortization | 14,292 | 16,320 |
| Net finance costs | 7,407 | 10,100 |
| Share of gain of associates and joint ventures | (197) | (783) |
| (Gain) loss on sale or disposal of property, plant and equipment | (156) | 134 |
| Equity-settled share-based payment transactions | 2,788 | 429 |
| Movement in provisions, pensions and government grants | (896) | (5,240) |
| Working capital and deferred revenue adjustments | (15,524) | 2,956 |
| Cash flows from operating activities | 24,179 | 36,534 |
| Finance costs paid, net | (6,946) | (7,921) |
| Income tax paid, net | (2,172) | (3,825) |
| Net cash flows from operating activities | 15,061 | 24,788 |
| Cash flows used in investing activities | ||
| Proceeds from sale of property, plant and equipment | 931 | 220 |
| Proceeds from sale of subsidiaries (net of cash divested of $1,347) | (550) | – |
| Acquisition of property, plant and equipment and | (7,040) | (10,478) |
| Intangibles | ||
| Change in restricted cash | 437 | (1,220) |
| Other | 26 | (5) |
| Net cash flows used in investing activities | (6,196) | (11,483) |
| 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 | 2015 | 2014 |
| Unaudited | Unaudited | |
| Cash flows from (used in) financing activities | ||
| Proceeds from issuance of debt | 177,272 | – |
| Payment of transaction costs related to debt issuance | (4,371) | – |
| Repayment of borrowings | (184,871) | (857) |
| Change in non-controlling interests | 37,530 | 28 |
| Other | (132) | – |
| Net cash flows from (used in) financing activities | 25,428 | (829) |
| Net increase in cash and cash | 34,293 | 12,476 |
| Equivalents | ||
| Cash and cash equivalents at January 1 | 108,029 | 103,067 |
| Effect of exchange rate fluctuations on cash held | (5,199) | (603) |
| Cash and cash equivalents at June 30 | 137,123 | 114,940 |
About AMG
AMG is a global critical materials company at the forefront of CO2 reduction trends. AMG produces highly engineered specialty metals and mineral products and provides related vacuum furnace systems and services to the transportation, infrastructure, energy, and specialty metals & chemicals end markets.
AMG Critical Materials produces aluminum master alloys and powders, titanium alloys and coatings, ferrovanadium, natural graphite, chromium metal, antimony, tantalum, niobium and silicon metal. AMG Engineering designs, engineers, and produces advanced vacuum furnace systems and operates vacuum heat treatment facilities, primarily for the transportation and energy industries.
With approximately 3,000 employees, AMG operates globally with production facilities in Germany, the United Kingdom, France, Czech Republic, the United States, China, Mexico, Brazil and Sri Lanka, and has sales and customer service offices in Russia and Japan (www.amg-nv.com).
For further information, please contact:
AMG Advanced Metallurgical Group N.V. +1 610 293 5804
Steve Daniels
Vice President of Investor Relations
sdaniels@amg-nv.com
Disclaimer
Certain statements in this press release are not historical facts and are “forward looking.” Forward looking statements include statements concerning AMG’s plans, expectations, projections, objectives, targets, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans and intentions relating to acquisitions, AMG’s competitive strengths and weaknesses, plans or goals relating to forecasted production, reserves, financial position and future operations and development, AMG’s business strategy and the trends AMG anticipates in the industries and the political and legal environment in which it operates and other information that is not historical information. When used in this press release, the words “expects,” “believes,” “anticipates,” “plans,” “may,” “will,” “should,” and similar expressions, and the negatives thereof, are intended to identify forward looking statements. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that the predictions, forecasts, projections and other forward-looking statements will not be achieved. These forward-looking statements speak only as of the date of this press release. AMG expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in AMG’s expectations with regard thereto or any change in events, conditions, or circumstances on which any forward-looking statement is based.