Key Highlights
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EPS, on a fully diluted basis, was $0.18 in the third quarter 2015, a 50% increase from the same period in 2014
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Annualized return on capital employed increased to 14.7% in the third quarter 2015, from 11.4% in the same period in 2014
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As of September 30, 2015, net debt was $20.3 million, a reduction of $21.6 million in the third quarter 2015
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EBITDA(2) was $20.4 million in the third quarter 2015, $23.4 million when adjusted for foreign currency translation effects(3)
Amsterdam, 5 November 2015 (Regulated Information) — AMG Advanced Metallurgical Group N.V. (“AMG”, EURONEXT AMSTERDAM: “AMG”) reported net income attributable to shareholders for the third quarter 2015 of $4.9 million, a 52% increase from $3.2 million in the third quarter 2014. EBITDA decreased to $20.4 million in the third quarter 2015 from $23.4 million in the third quarter 2014.
Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, “AMG earnings and cash flow for the third quarter were strong despite collapsing metal prices and the unfavorable translation impact of foreign currency on reported earnings. The aggressive steps taken by AMG to strengthen our balance sheet, manage price risk and reduce cost has positioned the company well, resulting in significantly higher levels of profitability and cash flow than experienced in previous market downturns.
AMG Engineering achieved EBITDA of $4.9 million during the quarter, the highest in nine quarters, making further progress towards our stated objective to reduce cost and return the Engineering business to historic levels of profitability in 2016. Order intake of $67.4 million represented a 1.25x book to bill ratio. The Engineering division continues to experience strong demand in the areas of heat treatment furnaces for the automotive market, plasma remelting furnaces for the aerospace market and induction furnaces for powder metallurgy applications.
AMG Critical Materials remains profitable in all business units despite difficult trading conditions and double-digit market price declines in seven of AMG’s nine critical materials.
AMG reduced net debt by $67.5 million in the first nine months of 2015 to $20.3 million, a net debt to last twelve months EBITDA ratio of 0.23.”
Key Figures
| In 000’s US Dollar | |||
| Q3 ’15 | Q3 ’14 | Change | |
| Revenue | $241,867 | $279,718 | (14%) |
| Gross profit | 39,660 | 48,059 | (17%) |
| Gross margin | 16.4% | 17.2% | |
| Operating profit | 8,297 | 14,999 | (45%) |
| Operating margin | 3.4% | 5.4% | |
| Net income attributable to shareholders | 4,933 | 3,236 | 52% |
| EPS – Fully diluted | 0.18 | 0.12 | 50% |
| EBIT (1) | 12,751 | 15,285 | (17%) |
| EBITDA (2) | 20,416 | 23,414 | (13%) |
| EBITDA margin | 8.4% | 8.4% | |
| Cash flows from operating activities | 27,697 | 47,662 | (42%) |
Note:
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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.
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EBITDA adjusted for foreign currency translation effects is explained under ‘Currency Fluctuations’.
Operational Review
AMG Critical Materials
| Q3 ’15 | Q3 ’14 | Change | |
| Revenue | $187,741 | $218,586 | (14%) |
| Gross profit | * 27,102 | 37,575 | (28%) |
| Operating profit | 6,143 | 16,383 | (63%) |
| EBITDA | 15,531 | 22,705 | (32%) |
* Includes $2.1 million non-cash expense related to vanadium, nickel and molybdenum inventory adjustments in the third quarter 2015
AMG Critical Materials continues to be impacted by unfavorable Euro to US Dollar currency translation effects and lower metal prices, and as a result, revenue decreased by 14%, to $187.7 million.
The reduction in market prices of antimony metal, vanadium, nickel and molybdenum of 27%, 30%, 43% and 54%, respectively, negatively affected revenue in the third quarter of 2015 compared to the third quarter of 2014.
Gross profit decreased $10.5 million, or 28%, to $27.1 million, driven by foreign currency translation effects, falling metals prices and lower sales of aluminum master alloys and tantalum during the quarter.
AMG Vanadium incurred a non-cash inventory adjustment expense of $2.1 million in the third quarter 2015 due to rapidly falling vanadium, nickel and molybdenum prices. Excluding this adjustment, gross margin declined to 16% from 17% in the third quarter of 2014.
Third quarter 2015 EBITDA margin decreased to 8% from 10% in the third quarter of 2014. SG&A cost reductions of 12% partially offset the impact of a reduction in gross profit in the quarter.
AMG Engineering
| Q3 ’15 | Q3 ’14 | Change | |
| Revenue | $54,126 | $61,132 | (11%) |
| Gross profit | 12,558 | 10,484 | 20% |
| Operating profit (loss) | 2,154 | (1,384) | N/A |
| EBITDA | 4,885 | 709 | 589% |
AMG Engineering signed $67.4 million in new orders during the third quarter of 2015, representing a 1.25x book to bill ratio. Order backlog was $153.1 million as of September 30, 2015, an increase of 11% from June 30, 2015.
AMG Engineering’s third quarter 2015 revenue decreased $7.0 million, or 11%, to $54.1 million, as an increase in local currency revenues was more than offset by foreign currency translation effects. Revenue generated from heat treatment furnaces and induction furnaces increased in the third quarter of 2015 compared to the third quarter of 2014.
Third quarter 2015 gross margin increased to 23% from 17% in the third quarter of 2014 due to higher revenue in local currency, product mix effects and improved project cost management.
EBITDA increased by $4.2 million, to $4.9 million, in the third quarter of 2015, the highest quarterly EBITDA in nine quarters, due to higher gross profit and lower SG&A costs.
Financial Review
Tax
AMG recorded an income tax expense of $14.2 million through the first nine months of 2015 as compared to a tax expense of $8.9 million in the first nine months of 2014. The largest driver of this variance relates to changes in the valuation of the Brazilian currency.
The effective tax rate of 54% was negatively impacted by the currency effect of the Brazilian Real on deferred taxes and refinancing costs of $5.4 million in the second quarter of 2015, for which no tax benefit could be recognized.
AMG paid taxes of $3.7 million in the first nine months of 2015 as compared to tax payments of $4.5 million in the first nine months of 2014. For the first nine months of 2015, AMG’s effective cash tax rate is 14%, as compared to 20% in the first nine months of 2014.
Liquidity
| September 30, 2015 | December 31, 2014 | Change | |
| Total debt | $134,406 | $195,878 | (31%) |
| Cash and cash equivalents | 114,070 | 108,029 | 6% |
| Net debt | 20,336 | 87,849 | (77%) |
AMG had a net debt position of $20.3 million as of September 30, 2015. Net debt and gross debt decreased $67.5 million and $61.5 million, respectively, from December 31, 2014.
Cash flows from operating activities were $42.8 million in the first nine months of 2015 compared to $72.5 million in the same period in 2014.
Capital expenditures declined to $12.3 million in the first nine months of 2015 compared to $17.2 million in the same period in 2014. Capital spending in the first nine months of 2015 included $8.0 million of maintenance capital. The largest expansion capital project was for AMG’s titanium aluminides business.
Including the $114.1 million of cash, AMG had $261.8 million of total liquidity as of September 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 September 30, 2015 compared to December 31, 2014, resulted in a decrease of $47 million and $38 million in assets and liabilities on the balance sheet, respectively. The appreciation of the US Dollar compared to the Euro in the third quarter of 2015 in relation to the third quarter of 2014, resulted in a reduction in revenue and EBITDA of $28 million and $3 million, respectively.
EBITDA adjusted for Euro foreign currency translation effects is therefore $23.4 million in the third quarter 2015.
Outlook
AMG expects to continue to generate strong operating cash flow and further reduce gross and net debt in the fourth quarter 2015.
Since the second quarter 2015, prices of ferrovanadium, nickel and molybdenum have declined by 9%, 19% and 22% respectively. Despite the negative impact of these price declines on earnings, AMG expects to generate 2015 full year EBITDA of approximately $80 million.
In this challenging environment, AMG’s management target is to maintain current levels of profitability in 2016 and continue to generate strong operating cash flow.
| AMG Advanced Metallurgical Group N.V. | ||
| Condensed interim consolidated income statement | ||
| For the quarter ended September 30 | ||
| In thousands of US Dollars | 2015 | 2014 |
| Unaudited | Unaudited | |
| Revenue | 241,867 | 279,718 |
| Cost of sales | 202,207 | 231,659 |
| Gross profit | 39,660 | 48,059 |
| Selling, general and administrative expenses | 28,925 | 33,125 |
| Restructuring expense | 2,455 | 19 |
| Other income, net | (17) | (84) |
| Operating profit | 8,297 | 14,999 |
| Finance income | (70) | (197) |
| Finance expense | 52 | 3,671 |
| Foreign exchange gain | (1,460) | (22) |
| Net finance costs | (1,478) | 3,452 |
| Share of profit (loss) of associates and joint ventures | 53 | (1,252) |
| Profit before income tax | 9,828 | 10,295 |
| Income tax expense | 4,679 | 7,101 |
| Profit for the period | 5,149 | 3,194 |
| Attributable to: | ||
| Shareholders of the Company | 4,933 | 3,236 |
| Non-controlling interests | 216 | (42) |
| Profit for the period | 5,149 | 3,194 |
| Earnings per share | ||
| Basic earnings per share | 0.18 | 0.12 |
| Diluted earnings per share | 0.18 | 0.12 |
| AMG Advanced Metallurgical Group N.V. | ||
| Condensed interim consolidated income statement | ||
| For the nine months ended September 30 | ||
| In thousands of US Dollars | 2015 | 2014 |
| Unaudited | Unaudited | |
| Revenue | 756,301 | 833,511 |
| Cost of sales | 628,726 | 694,137 |
| Gross profit | 127,575 | 139,374 |
| Selling, general and administrative expenses | 91,931 | 102,259 |
| Restructuring expense | 6,114 | 1,811 |
| Environmental | (2,286) | – |
| Other income, net | (156) | (1,630) |
| Operating profit | 31,972 | 36,934 |
| Finance income | (542) | (538) |
| Finance expense | 9,048 | 14,098 |
| Foreign exchange gain | (2,577) | (8) |
| Net finance costs | 5,929 | 13,552 |
| Share of profit (loss) of associates and joint ventures | 250 | (469) |
| Profit before income tax | 26,293 | 22,913 |
| Income tax expense | 14,235 | 8,912 |
| Profit for the period | 12,058 | 14,001 |
| Attributable to: | ||
| Shareholders of the Company | 11,417 | 14,600 |
| Non-controlling interests | 641 | (599) |
| Profit for the period | 12,058 | 14,001 |
| Earnings per share | ||
| Basic earnings per share | 0.41 | 0.53 |
| Diluted earnings per share | 0.41 | 0.53 |
| AMG Advanced Metallurgical Group N.V. | ||
| Condensed interim consolidated statement of financial position | ||
| September 30, | December 31, | |
| In thousands of US Dollars | 2015 | 2014 |
| Unaudited | ||
| Assets | ||
| Property, plant and equipment | 216,128 | 237,418 |
| Goodwill | 19,193 | 20,618 |
| Intangible assets | 10,136 | 11,116 |
| Investments in associates and joint ventures | 1,873 | 1,450 |
| Derivative financial instruments | 13 | – |
| Deferred tax assets | 34,624 | 37,903 |
| Restricted cash | 2,554 | 7,582 |
| Other assets | 31,477 | 21,987 |
| Total non-current assets | 315,998 | 338,074 |
| Inventories | 134,667 | 145,418 |
| Trade and other receivables | 137,572 | 135,293 |
| Derivative financial instruments | 1,159 | 1,997 |
| Other assets | 32,433 | 47,055 |
| Assets held for sale | – | 2,553 |
| Cash and cash equivalents | 114,070 | 108,029 |
| Total current assets | 419,901 | 440,345 |
| Total assets | 735,899 | 778,419 |
| AMG Advanced Metallurgical Group N.V. | ||
| Condensed interim consolidated statement of financial position | ||
| (continued) | ||
| September 30 | December 31, | |
| In thousands of US Dollars | 2015 | 2014 |
| Unaudited | ||
| Equity | ||
| Issued capital | 745 | 745 |
| Share premium | 382,978 | 382,978 |
| Other reserves | (53,408) | (59,728) |
| Retained earnings (deficit) | (203,196) | (225,843) |
| Equity attributable to shareholders of the | 127,119 | 98,152 |
| Company | ||
| Non-controlling interests | 25,553 | 2,825 |
| Total equity | 152,672 | 100,977 |
| Liabilities | ||
| Loans and borrowings | 112,390 | 167,990 |
| Employee benefits | 144,059 | 159,672 |
| Provisions | 29,025 | 37,056 |
| Deferred revenue | 18,999 | 8,950 |
| Government grants | 536 | 666 |
| Other liabilities | 7,230 | 8,885 |
| Derivative financial instruments | 6,158 | 5,056 |
| Deferred tax liabilities | 10,319 | 8,261 |
| Total non-current liabilities | 328,716 | 396,536 |
| Loans and borrowings | 3,301 | 6,562 |
| Short term bank debt | 18,715 | 21,326 |
| Government grants | 101 | 88 |
| Liabilities associated with assets held for sale | – | 248 |
| Other liabilities | 46,697 | 53,257 |
| Trade and other payables | 105,628 | 134,373 |
| Derivative financial instruments | 10,682 | 9,104 |
| Advance payments | 38,430 | 31,689 |
| Deferred revenue | 14,909 | 8,414 |
| Current taxes payable | 2,897 | 671 |
| Provisions | 13,151 | 15,174 |
| Total current liabilities | 254,511 | 280,906 |
| Total liabilities | 583,227 | 677,442 |
| Total equity and liabilities | 735,899 | 778,419 |
| AMG Advanced Metallurgical Group N.V. | ||
| Condensed interim consolidated statement of cash flows | ||
| For the nine months ended September 30 |
||
| In thousands of US Dollars | 2015 | 2014 |
| Unaudited | Unaudited | |
| Cash flows from operating activities | ||
| Profit for the period | 12,058 | 14,001 |
| Adjustments to reconcile net profit to net cash | ||
| flows: | ||
| Non-cash: | ||
| Income tax expense | 14,235 | 8,912 |
| Depreciation and amortization | 21,957 | 24,447 |
| Net finance costs | 5,929 | 13,552 |
| Share of (profit) loss of associates and joint ventures | (250) | 469 |
| (Gain) loss on sale or disposal of property, plant and equipment | (179) | 325 |
| Equity-settled share-based payment transactions | 3,326 | 673 |
| Movement in provisions, pensions and government grants | 1,340 | (4,174) |
| Working capital and deferred revenue adjustments | (2,049) | 27,639 |
| Cash flows from operating activities | 56,367 | 85,844 |
| Finance costs paid, net | (9,935) | (8,922) |
| Income tax paid, net | (3,674) | (4,472) |
| Net cash flows from operating activities | 42,758 | 72,450 |
| Cash flows used in investing activities | ||
| Proceeds from sale of property, plant and equipment | 951 | 260 |
| Proceeds from sale of subsidiaries (net of cash divested of $1,384) | (1,567) | – |
| Acquisition of property, plant and equipment and | (12,260) | (17,232) |
| intangibles | ||
| Change in restricted cash | 4,861 | (169) |
| Other | (10) | 157 |
| Net cash flows used in investing activities | (8,025) | (16,984) |
| AMG Advanced Metallurgical Group N.V. | ||
| Condensed interim consolidated statement of cash flows | ||
| (continued) | ||
| For the nine months ended September 30 | ||
| In thousands of US Dollars | 2015 | 2014 |
| Unaudited | Unaudited | |
| Cash flows used in financing activities | ||
| Proceeds from issuance of debt | 177,205 | – |
| Payment of transaction costs related to debt issuance | (5,199) | – |
| Repayment of borrowings | (230,780) | (30,822) |
| Change in non-controlling interests | 37,530 | 28 |
| Dividends paid | (2,669) | – |
| Other | (167) | 3 |
| Net cash flows used in financing activities | (24,080) | (30,791) |
| Net increase in cash and cash equivalents | 10,653 | 24,675 |
| Cash and cash equivalents at January 1 | 108,029 | 103,067 |
| Effect of exchange rate fluctuations on cash held | (4,612) | (5,512) |
| Cash and cash equivalents at September 30 | 114,070 | 122,230 |
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.