AMG Advanced Metallurgical Group N.V. Reports First Quarter 2015 Results

Key Highlights

• Revenue was $257.0 million in the first quarter 2015, a 6% decrease from the same period in 2014
• EBITDA^([1]) was $20.4 million in the first quarter 2015, a 2% increase from the same period in 2014
• EPS on a fully diluted basis was $0.10 in the first quarter 2015, a 29% decrease from the same period in 2014 
• Annualized return on capital employed increased to 12.7% in the first quarter 2015, from 9.7% in the same period in 2014
• Cash flows from operating activities were $3.8 million in the first quarter 2015, compared to $5.7 million in the same period in 2014
• As of March 31, 2015, cash on the balance sheet was $99.3 million; net debt was $86.8 million, a reduction of $1.1 million in the first quarter of 2015

Amsterdam, 7 May 2015 (Regulated Information) — AMG Advanced Metallurgical Group N.V. (« AMG », EURONEXT AMSTERDAM: « AMG ») reported first quarter 2015 revenue of $257.0 million, a 6% decrease from $274.9 million in the first quarter 2014. Net income attributable to shareholders for the first quarter 2015 was $2.7 million, or $0.10 per fully diluted share, a 32% decrease from $3.9 million, or $0.14 in the first quarter 2014. EBITDA increased 2% to $20.4 million in the first quarter 2015 from $20.1 million in the first quarter 2014.

Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, « Despite weakening metals prices and the unfavorable translation impact of foreign currency on reported earnings during the quarter, AMG’s efforts to reduce cost and optimize our product portfolio have resulted in improved year over year EBITDA. Annualized return on capital employed also improved to 12.7% in the first quarter of 2015 from 9.7% in the first quarter of 2014.

In the first quarter, AMG Critical Materials successfully maintained year over year gross margins, despite falling metals prices, through improved sales volumes and a continued focus on providing higher value added products. AMG Engineering improved EBITDA by 104% compared to the same period in 2014 due to improving revenues and lower SG&A costs.

As previously announced, AMG completed the sale of a 40% equity stake in AMG Graphit Kropfmühl GmbH. This transaction will result in a substantial reduction in net debt in the second quarter of 2015. »

Key Figures

Note: 

1. EBIT is defined as earnings before interest, tax and excludes non-recurring items
2. EBITDA is defined as earnings before interest, tax, depreciation and amortization and excludes non-recurring items

Operational Review

AMG Critical Materials

AMG Critical Materials’ first quarter 2015 revenue decreased $23.8 million, or 11%, to $202.3 million. The decline was primarily the result of unfavorable Euro to US Dollar currency translation effects, lower metal prices and product portfolio optimization.

Despite increased sales volume, the impact of lower antimony metal prices compared to the first quarter of 2014 and a reduction in low margin products at AMG Superalloys and AMG Aluminum, due to product mix optimization initiatives, negatively impacted revenues.

Gross profit decreased $2.4 million, or 7%, to $31.2 million, primarily due to foreign currency translation effects. However, AMG Critical Materials’ first quarter 2015 gross margin remained consistent at 15% compared to the same period in 2014.

First quarter 2015 EBITDA margin was 9%, up 1% from the first quarter of 2014.  Consistent gross margins and SG&A reductions of 8%, due to currency effects and cost cutting measures, resulted in an improved EBITDA margin.

AMG Engineering

AMG Engineering’s first quarter 2015 revenue increased $5.9 million, or 12%, to $54.7 million due to improved order backlog at the end of 2014, relative to the end of 2013.

First quarter 2015 gross margin decreased to 22% from 26% in the first quarter of 2014 due to product mix effects and cost overruns in certain long-term projects nearing completion.

EBITDA increased by $1.6 million, or 104%, to $3.1 million in the first quarter of 2015 due to lower SG&A costs.

AMG Engineering signed $51.9 million in new orders during the first quarter of 2015, a 0.95x book to bill ratio. Order backlog was $116.4 million as of March 31, 2015 and excluding the impact of currency, the backlog decreased 3% from December 31, 2014.  Heat treatment and induction furnaces accounted for approximately 58% of the order intake.

Financial Review

SG&A

AMG’s first quarter 2015 SG&A expenses were $30.1 million compared to $35.0 million in the first quarter of 2014, a decrease of 14%. This decline was due to lower employee expenses of $1.7 million and a reduction of $1.9 million in legal and professional fees. Foreign currency translation effects, cost cutting initiatives and lower transaction related legal and professional fees drove the improvement.

Non-Recurring Items

In the first quarter of 2015, AMG incurred $1.7 million in non-recurring charges compared to $0.8 million in the first quarter of 2014, which are not included in the calculation of EBITDA. These charges relate to the previously announced restructuring activities in AMG Engineering of $0.9 million and restructuring expenses incurred within AMG Critical Materials of $0.8 million, primarily associated with the divestiture of peripheral assets.

Liquidity

AMG had a net debt position of $86.8 million as of March 31, 2015.  Net debt and gross debt decreased $1.1 million and $9.8 million, respectively, from December 31, 2014.

Cash flows from operating activities were $3.8 million in the first three months of 2015 compared to $5.7 million in the same period in 2014.

Capital expenditures declined $2.1 million in the first three months of 2015 compared to the same period in 2014.  The $3.8 million of capital spending in the first three months of 2015 included $2.1 million of maintenance capital. The largest expansion capital project was for AMG’s titanium aluminides business.

Including the $99.3 million of cash, AMG had $173.1 million of total liquidity as of March 31, 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 March 31, 2015 compared to December 31, 2014, resulted in a decrease of $58.5 and $46.4 million in assets and liabilities on the balance sheet, respectively. The appreciation of the US Dollar compared to the Euro in the first quarter of 2015 in relation to the first quarter of 2014, resulted in a reduction in revenue and EBITDA of $27.3 million and $2.3 million, respectively. 

Outlook

In this challenging environment, AMG will continue to reduce cost, optimize its product portfolio and maintain a conservative balance sheet.

Despite weakening metals prices and the unfavorable translation impact of foreign currency on reported earnings, AMG expects to generate EBITDA in-line with prior year and improve its return on capital employed.

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.