Lithium Performance Drives AMG to All-time Record Earnings and Increased Full Year Guidance

Amsterdam, 2 November 2022 (Regulated Information) AMG Advanced Metallurgical Group N.V. (“AMG”, EURONEXT AMSTERDAM: “AMG”), a global critical materials company at the forefront of CO2 reduction trends, reported third quarter 2022 revenue of $425 million, a 36% increase versus the third quarter of 2021. Third quarter 2022 EBITDA of $103 million was the highest in AMG’s history, and a 210% increase versus the third quarter of 2021.

Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, “This outstanding result was largely driven by AMG Lithium. The continued strength in both lithium demand and our low-cost position led to improved profitability in AMG Lithium in Brazil. The mission of AMG Lithium is to be the number one producer of electric vehicle battery materials in Europe by expanding production of battery-grade hydroxide, vertically integrating its Brazilian spodumene production and pursuing additional mineral resources.”

Outlook

Given the strong performance to date and the visibility into year end, AMG is increasing its EBITDA guidance for the full year 2022 to $320 million or higher, from a previous range of between $280 million and $300 million.

Important parameters for 2023 guidance are first and foremost the startup of the expanded production of lithium concentrate in Brazil in the second half of 2023; the market conditions primarily in lithium; and the ramp-up of the Zanesville refinery to full production. In view of this, AMG’s EBITDA guidance for 2023 is to exceed $400 million. It is important to note that since the increase of spodumene production will occur in the latter half of the year, 2023 EBITDA development will be back-end weighted.

Strategic Highlights

Lithium

  • The project to expand the spodumene production in AMG Brazil is under construction. The objective is to be at full capacity in the second half of 2023.
  • The AMG Lithium refinery in Bitterfeld, Germany, Europe’s first lithium hydroxide refinery, is under construction, and commissioning for the first 20,000-ton module of the battery-grade lithium hydroxide upgrader will commence in the fourth quarter of 2023.
  • AMG Lithium’s battery-grade hydroxide refinery has signed a binding supply agreement with EcoPro, a leading South Korean cathode paste producer, for an initial three-year term to deliver a minimum of 5,000 tons per annum of battery-grade lithium hydroxide to EcoPro’s cathode materials production plant in Debrecen, Hungary.
  • AMG has negotiated a strategic tolling contract for our spodumene production as well as third-party spodumene to supply technical-grade hydroxide to Bitterfeld.
  • AMG has consolidated its lithium value chain under one legal entity and is currently aligning its lithium management and governance structures to further increase the long-term value of its lithium activities. Accordingly, we are preparing a re-segmentation of AMG to be approved by the Supervisory Board in December and become effective on January 1, 2023.

Vanadium

  • The new vanadium spent catalyst recycling facility in Zanesville, Ohio, which started operating on October 29, 2022, is a clear manifestation of AMG’s industry leadership in the recycling of hazardous refinery waste globally. We are extremely pleased about the successful startup of both the roaster and the melt shop, and we expect the ramp-up to full production to take between three to four months.
  • Shell & AMG Recycling B.V. (“SARBV”) and its partner, the United Company for Industry (“UCI”), continue to advance the first project of the Supercenter in conjunction with Saudi Arabian Oil Company (“Aramco”). Plant design optimization, site selection and permitting activities are progressing and the FEL3 partnering with Hatch is expected to begin later this month. The SARBV-UCI-Aramco consortium are also developing a pipeline of projects which will conclude with the deployment of AMG’s LIVA Hybrid Energy Storage System technology.
  • AMG’s innovative lithium vanadium battery (“LIVA”) for industrial power management applications has successfully started up at our plant in Hauzenberg, Germany.

Financial Highlights

  • Revenue increased by 36% to $425 million in the third quarter of 2022 from $312 million in the third quarter of 2021.
  • EBITDA was a record $103 million in the third quarter of 2022, up 210% versus the third quarter 2021 EBITDA of $33 million.
  • Annualized return on capital employed was 29.5% for the first nine months of 2022, more than double the 10.4% for the same period in 2021.
  • Cash flow from operations was $75 million for the third quarter 2022, driven by the high profitability of AMG Lithium in Brazil.
  • Net income attributable to shareholders for the third quarter of 2022 was $68 million, yielding $2.09 diluted earnings per share, compared to $0.02 diluted loss per share in the third quarter of 2021.
  • AMG’s liquidity as of September 30, 2022 was $489 million, with $306 million of unrestricted cash and $183 million of revolving credit availability.

Key Figures

In 000’s US dollars
Q3 ‘22 Q3 ‘21 Change
Revenue $424,813 $311,946 36%
Gross profit 112,071 51,083 119%
Gross margin 26.4% 16.4%
Operating profit 121,680 17,346 601%
Operating margin 28.6% 5.6%
Net income (loss) attributable to shareholders 68,146 (599) N/A
EPS – Fully diluted 2.09 (0.02) N/A
EBIT (1) 91,536 22,475 307%
EBITDA (2) 102,603 33,051 210%
EBITDA margin 24.2% 10.6%
Cash from operating activities 74,747 17,635 324%

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 and other exceptional items, 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

Q3 ‘22 Q3 ‘21 Change
Revenue $188,318 $105,308 79%
Gross profit 86,454 20,120 330%
Gross profit before non-recurring items 87,710 21,721 304%
Operating profit 74,888 9,985 650%
EBITDA 83,674 18,029 364%

AMG Clean Energy Materials’ revenue increased 79% compared to the third quarter of 2021, to $188 million, driven mainly by higher prices in vanadium, tantalum and lithium concentrates, as well as increased sales volumes of lithium concentrate. Sales volumes were up due to shipping schedule variances from AMG Brazil. This increase in the third quarter of 2022 includes a catch up from the second quarter as well as additional volumes that shipped in the third quarter that were planned for the fourth quarter.

Gross profit before non-recurring items for the quarter increased 304% compared to the same period in the prior year, primarily due to the increased price environment.

SG&A expenses in the third quarter of 2022 were $12 million, 15% higher than the third quarter of 2021, largely due to strategic project costs and higher variable compensation expense in the current quarter.

The third quarter 2022 EBITDA increased 364%, to $84 million, from $18 million in the third quarter of 2021, due to the improved gross profit as noted above.

AMG Critical Minerals

Q3 ‘22 Q3 ‘21 Change
Revenue $84,935 $79,392 7%
Gross profit 674 10,660 (94%)
Gross profit before non-recurring items 12,210 10,843 13%
Operating profit 40,301 4,028 901%
EBITDA 7,327 6,509 13%

AMG Critical Minerals’ revenue increased by $6 million, or 7%, to $85 million, driven by higher sales prices in all three businesses.

Gross profit before non-recurring items of $12 million in the third quarter was 13% higher compared to the third quarter of 2021. The higher revenue was due to the improved price environment, partially offset by increased raw material prices as well as the ongoing rise in energy and shipping costs.

SG&A expenses in the third quarter of 2022 slightly increased by 3%, to $7 million, compared to the same period in 2021.

Despite ongoing inflationary pressures, the third quarter 2022 EBITDA increased 13% compared to the same period in 2021.

Effective January 1, 2023, AMG will place its silicon metal plant in Pocking, Germany, on care and maintenance due to external economic factors and will review this decision on a quarterly basis. The overall EBITDA effect, should there be a shutdown longer than one quarter, is immaterial to AMG’s overall projected 2023 results.

Associated with this shutdown, AMG recorded income from the sale of an existing supply contract which positively impacted operating profit for the quarter. This income was offset by a settlement with a major customer and an impairment of existing assets. The future proceeds are also available to offset potential restructuring expenses in the future. The cost associated with retaining current employees for care and maintenance will be recorded as incurred in accordance with accounting standards.

AMG Critical Materials Technologies

Q3 ‘22 Q3 ‘21 Change
Revenue $151,560 $127,246 19%
Gross profit 24,943 20,303 23%
Gross profit before non-recurring items 24,990 20,293 23%
Operating profit 6,491 3,333 95%
EBITDA 11,602 8,513 36%

AMG Critical Materials Technologies’ third quarter 2022 revenue increased by $24 million, or 19%, compared to the same period in 2021. This improvement was due to increased titanium alloys sales, as well as higher titanium alloy and chrome metal pricing. Third quarter 2022 gross profit before non-recurring items increased by $5 million, or 23%, to $25 million due to the higher volumes and prices.

SG&A expenses increased by 9% in the third 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 $12 million during the quarter, compared to $9 million in the third quarter of 2021. This was primarily due to higher profitability in chrome metal and titanium alloys.

AMG Engineering signed $93 million in new orders during the third quarter of 2022, driven by strong orders of remelting, induction and heat treatment furnaces, representing a 1.73x book to bill ratio. Order backlog was $211 million as of September 30, 2022, 17% greater than the $181 million as of June 30, 2022.

Financial Review

Tax

AMG recorded an income tax expense of $39 million in the third quarter of 2022, compared to $10 million in the same period in 2021. This variance was mainly driven by enhanced operating results coupled with movements in the Brazilian real. The effects of the Brazilian real caused a $2 million deferred tax benefit in the third quarter of 2022 (2021: $8 million tax expense). Fluctuations 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 $10 million in the third quarter of 2022, compared to tax payments of $4 million in the third quarter of 2021.

Exceptional Items

AMG’s third 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 third quarters of 2022 and 2021 are below:

Exceptional items included in gross profit

Q3 ‘22 Q3 ‘21 Change
Gross profit $112,071 $51,083 119%
Restructuring expense 11 261 (96%)
Asset impairment expense (reversal) 11,587 (88) N/A
Strategic project expense 1,241 1,095 13%
Others 506 N/A
Gross profit excluding exceptional items 124,910 52,857 136%

Energy Costs

Total energy costs were $5 million higher in the third 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 third quarter 2022 SG&A expenses were $37 million compared to $34 million in the third 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.

Net Other Operating Income

AMG recorded a net contract settlement benefit of $46 million associated with the cancellation of a supply contract for AMG Silicon, offset by a settlement with a major customer.

Liquidity

September 30, 2022 December 31, 2021 Change
Senior secured debt $357,685 $371,897 (4%)
Cash & cash equivalents 306,416 337,877 (9%)
Senior secured net debt 51,269 34,020 51%
Other debt 14,926 24,398 (39%)
Net debt excluding municipal bond 66,195 58,418 13%
Municipal bond debt 319,304 319,476 — %
Restricted cash 17,069 93,434 (82%)
Net debt 368,430 284,460 30%

AMG had a net debt position of $368 million as of September 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 third quarter. As of September 30, 2022, the Company had $306 million in unrestricted cash and cash equivalents and $183 million available on its revolving credit facility. As such, AMG had $489 million of total liquidity as of September 30, 2022.

Net Finance Costs

AMG’s third quarter 2022 net finance costs were $14 million compared to $8 million in the third quarter of 2021. This increase was mainly driven by foreign exchange losses of $6 million during the quarter primarily due to non-cash intergroup balances.

AMG capitalized $2 million of interest costs in the third quarter of 2022 versus $4 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.

Profit (loss) for the period to EBITDA reconciliation

Q3 ‘22 Q3 ‘21
Profit (loss) for the period $68,339 ($310)
Income tax expense 38,603 9,904
Net finance cost 13,988 7,543
Equity-settled share-based payment transactions 1,386 1,015
Restructuring expense 11 261
Net contract settlements (46,407)
Asset impairment expense (reversal) 11,587 (88)
Strategic project expense (1) 3,282 3,311
Share of loss of associates 750 209
Others (3) 630
EBIT 91,536 22,475
Depreciation and amortization 11,067 10,576
EBITDA 102,603 33,051

(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 September 30
In thousands of US dollars 2022 2021
Unaudited Unaudited
Continuing operations
Revenue 424,813 311,946
Cost of sales (312,742) (260,863)
Gross profit 112,071 51,083
Selling, general and administrative expenses (36,888) (33,750)
Other income, net 46,497 13
Net other operating income 46,497 13
Operating profit 121,680 17,346
Finance income 1,222 357
Finance cost (15,210) (7,900)
Net finance cost (13,988) (7,543)
Share of loss of associates and joint ventures (750) (209)
Profit before income tax 106,942 9,594
Income tax expense (38,603) (9,904)
Profit (loss) for the period 68,339 (310)
Profit (loss) attributable to:
Shareholders of the Company 68,146 (599)
Non-controlling interests 193 289
Profit (loss) for the period 68,339 (310)
Earnings (loss) per share
Basic earnings (loss) per share 2.13 (0.02)
Diluted earnings (loss) per share 2.09 (0.02)
AMG Advanced Metallurgical Group N.V.
Condensed Interim Consolidated Income Statement
For the nine months ended September 30
In thousands of US dollars 2022 2021
Unaudited Unaudited
Continuing operations
Revenue 1,252,770 874,306
Cost of sales (963,265) (727,860)
Gross profit 289,505 146,446
Selling, general and administrative expenses (111,384) (100,075)
Environmental expense (11,711)
Other income, net 46,619 186
Net other operating income (expense) 46,619 (11,525)
Operating profit 224,740 34,846
Finance income 3,602 831
Finance cost (38,720) (21,789)
Net finance cost (35,118) (20,958)
Share of loss of associates and joint ventures (1,250) (834)
Profit before income tax 188,372 13,054
Income tax expense (60,270) (3,414)
Profit for the period 128,102 9,640
Profit attributable to:
Shareholders of the Company 126,892 8,066
Non-controlling interests 1,210 1,574
Profit for the period 128,102 9,640
Earnings per share
Basic earnings per share 3.97 0.26
Diluted earnings per share 3.91 0.26

 

AMG Advanced Metallurgical Group N.V.
Condensed Interim Consolidated Statement of Financial Position
In thousands of US dollars September 30, 2022 Unaudited December 31, 2021
Assets
Property, plant and equipment 748,398 693,624
Goodwill and other intangible assets 40,241 44,684
Derivative financial instruments 34,753 95
Other investments 26,218 29,830
Deferred tax assets 32,824 52,937
Restricted cash 11,841 85,023
Other assets 8,709 8,471
Total non-current assets 902,984 914,664
Inventories 273,804 218,320
Derivative financial instruments 5,689 4,056
Trade and other receivables 160,789 145,435
Other assets 123,329 65,066
Current tax assets 8,621 5,888
Restricted cash 5,228 8,411
Cash and cash equivalents 306,416 337,877
Total current assets 883,876 785,053
Total assets 1,786,860 1,699,717
AMG Advanced Metallurgical Group N.V.
Condensed Interim Consolidated Statement of Financial Position
(continued)
In thousands of US dollars September 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 (54,829) (96,421)
Retained earnings (deficit) (66,832) (173,117)
Equity attributable to shareholders of the Company 418,001 268,434
Non-controlling interests 23,978 25,718
Total equity 441,979 294,152
Liabilities
Loans and borrowings 662,181 675,384
Lease liabilities 39,318 45,692
Employee benefits 105,256 162,628
Provisions 14,031 14,298
Deferred revenue 20,541 22,341
Other liabilities 5,260 11,098
Derivative financial instruments 1,014 2,064
Deferred tax liabilities 16,263 5,617
Total non-current liabilities 863,864 939,122
Loans and borrowings 23,844 27,341
Lease liabilities 4,161 4,857
Short-term bank debt 5,890 13,046
Deferred revenue 22,713 18,478
Other liabilities 67,971 80,672
Trade and other payables 262,143 252,765
Derivative financial instruments 15,749 6,010
Advance payments from customers 40,766 35,091
Current tax liability 26,524 10,586
Provisions 11,256 17,597
Total current liabilities 481,017 466,443
Total liabilities 1,344,881 1,405,565
Total equity and liabilities 1,786,860 1,699,717
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 2022 2021
Unaudited Unaudited
Cash from operating activities
Profit for the period 128,102 9,640
Adjustments to reconcile net profit to net cash flows:
Non-cash:
Income tax expense 60,270 3,414
Depreciation and amortization 32,957 32,478
Asset impairment expense (reversal) 11,587 (864)
Net finance cost 35,118 20,958
Share of loss of associates and joint ventures 1,250 834
Loss (gain) on sale or disposal of property, plant and equipment 12 (96)
Equity-settled share-based payment transactions 4,138 3,143
Movement in provisions, pensions, and government grants (7,532) (3,267)
Working capital and deferred revenue adjustments (113,601) 17,908
Cash generated from operating activities 152,301 84,148
Finance costs paid, net (19,014) (14,960)
Income tax paid (22,689) (8,625)
Net cash from operating activities 110,598 60,563
Cash used in investing activities
Proceeds from sale of property, plant and equipment 151 1,071
Acquisition of property, plant and equipment and intangibles (134,244) (125,366)
Investments in associates and joint ventures (1,250) (1,000)
Change in restricted cash 76,365 94,092
Interest received on restricted cash 179 33
Capitalized borrowing cost (15,307) (15,608)
Other 12 (428)
Net cash used in investing activities (74,094) (47,206)
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 2022 2021
Unaudited Unaudited
Cash (used in) from financing activities
Proceeds from issuance of debt 83 2,644
Payment of transaction costs related to debt (390)
Repayment of borrowings (23,948) (8,047)
Net (repurchase of) proceeds from issuance of common shares (1,523) 121,569
Dividends paid (19,885) (7,598)
Payment of lease liabilities (3,738) (3,939)
Contributions by non-controlling interests 648
Net cash (used in) from financing activities (49,011) 104,887
Net (decrease) increase in cash and cash equivalents (12,507) 118,244
Cash and cash equivalents at January 1 337,877 207,366
Effect of exchange rate fluctuations on cash held (18,954) (6,156)
Cash and cash equivalents at September 30 306,416 319,454

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.

Attachment