AMG Advanced Metallurgical Group N.V. Reports Second Quarter 2017 Results - AMG Corporate

AMG Advanced Metallurgical Group N.V. Reports Second Quarter 2017 Results

Key Highlights

  • Revenue increased by 6% to $262.0 million in the second quarter 2017 from $248.3 million in the second quarter 2016
  • EBITDA(2) was $31.9 million in the second quarter 2017, a 22% increase over the same period in 2016
  • Operating profit increased by 19% to $22.6 million in the second quarter 2017 from $19.0 million in the second quarter 2016
  • Cash from operating activities on a year to date basis was $28.5 million, an increase of $8.5 million over the same period in 2016
  • Annualized return on capital employed increased to 23.9% in the second quarter 2017, as compared to 17.8% in the second quarter 2016

Amsterdam, 3 August 2017 (Regulated Information) AMG Advanced Metallurgical Group N.V. (« AMG », EURONEXT AMSTERDAM: « AMG ») reported second quarter 2017 revenue of $262.0 million, a 6% increase from $248.3 million in the second quarter 2016. EBITDA for the second quarter 2017 was $31.9 million, a 22% increase from $26.0 million in the second quarter 2016. Net income attributable to shareholders slightly decreased to $13.1 million in the second quarter 2017 from $13.4 million in the second quarter 2016.

Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, « We are very pleased that AMG’s strong cash flow generation for the first six months of 2017 enabled the Company to end the quarter with net debt in line with the prior year end, despite substantial capital investments in the first half of 2017 in AMG’s lithium project in Brazil, and titanium aluminide expansion in Germany.

AMG’s lithium project continues to progress in line with our expectations and we intend to make a formal investment decision regarding our targeted expansion to 180,000 tons of lithium concentrate production capacity before the end of the year.

AMG Engineering achieved EBITDA of $8.0 million during the second quarter 2017, a 43% increase from $5.6 million in the second quarter 2016. AMG Engineering signed $76.9 million in new orders during the second quarter 2017, representing a 1.29x book to bill ratio. The Engineering segment continues to experience strong demand for turbine blade coating, powder metallurgy and plasma remelting furnaces for the aerospace market and heat treatment furnaces for the automotive market. Order backlog was $183.3 million as of June 30, 2017, an increase of 35% compared to December 31, 2016. The strong results in AMG Engineering reflect our efforts to diversify our product offerings in recent years, including the introduction of powder metallurgy and SyncroTherm in-line heat treatment furnaces.

AMG Critical Materials generated EBITDA of $23.9 million during the second quarter 2017, thanks to strong financial performance in vanadium and titanium alloys, and the recognition of $3.0 million in business interruption insurance, following the fire at the Mibra mine in Brazil.

In the second quarter of 2017, AMG generated cash from operating activities of $10.6 million, a decrease of $13.7 million over the same period in 2016. On a year to date basis, AMG generated cash from operating activities of $28.5 million in 2017, an increase of $8.5 million compared to the same period in 2016. »

Key Figures

In 000’s US Dollar      
  Q2 ’17 Q2 ’16 Change
Revenue $262,042 $248,349 6%
Gross profit 54,344 53,302 2%
Gross margin 20.7% 21.5%  
       
Operating profit 22,577 18,967 19%
Operating margin 8.6% 7.6%  
       
Net income attributable to shareholders 13,115 13,447 (2%)
       
EPS – Fully diluted 0.42 0.48 (13%)
       
EBIT (1) 24,369 18,585 31%
EBITDA (2)  31,866 26,049 22%
EBITDA margin 12.2% 10.5%  
       
Cash from operating activities  10,633 24,315 (56%)

Note: 

  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

  Q2 ’17 Q2 ’16 Change
Revenue $202,625 $181,619 12%
Gross profit  37,583 * 37,953 (1%)
Operating profit 16,896 15,016 13%
EBITDA 23,883 20,485 17%
       

* Includes $3.6 million non-cash benefit related to reversal of previously expensed vanadium, nickel and molybdenum inventory adjustments

AMG Critical Materials’ revenue in the second quarter increased by $21.0 million, or 12%, to $202.6 million, driven by improved vanadium, molybdenum, nickel, aluminum, titanium and antimony prices, and higher sales volumes of chrome, antimony, silicon, niobium and titanium products.

Gross profit in the second quarter decreased by $0.4 million, or 1%, to $37.6 million. Strong financial performance in vanadium and titanium alloys in the quarter was offset by lower gross profit in tantalum. The reduction in tantalum gross profit was driven by lower sales volumes, due to the temporary shutdown in one of AMG’s two tantalum production lines, and lower sales prices, following the termination of AMG’s long term supply agreement.

AMG is insured for the interruption to the tantalum business as a result of the fire, and has recorded insurance proceeds of $3.0 million during the second quarter 2017, which is included within gross profit and EBITDA.

In addition, AMG Critical Materials’ gross profit was positively impacted by the partial recovery of asset impairment expenses recorded in the first quarter 2017. AMG recorded an asset impairment expense of $2.2 million in the first quarter 2017 as a result of fire damage sustained at the Mibra mine in Brazil, and subsequently recorded a $1.4 million partial recovery in the second quarter 2017, following the receipt of insurance proceeds. 

Additional insurance proceeds, in respect of both business interruption and property damage, are expected to be recorded in the second half of 2017. In accordance with IFRS, AMG is recognizing the insurance proceeds as recovery amounts are finalized.

SG&A expenses in the second quarter 2017 decreased by $2.4 million, or 10%, compared to the same period in the prior year, primarily due to a reduction in share-based compensation expenses.

Second quarter 2017 EBITDA margin increased slightly to 12%, compared to 11% in the second quarter 2016.

AMG Engineering

  Q2 ’17 Q2 ’16 Change
Revenue $59,417 $66,730 (11%)
Gross profit 16,761 15,349 9%
Operating profit 5,681 3,951 44%
EBITDA 7,983 5,564 43%
       

AMG Engineering signed $76.9 million in new orders during the second quarter 2017, representing a 1.29x book to bill ratio. Order backlog was $183.3 million as of June 30, 2017, an increase of 35% from December 31, 2016.

AMG Engineering’s second quarter 2017 revenue decreased $7.3 million, or 11%, to $59.4 million, due to lower revenue from plasma remelting furnaces for the aerospace market and heat treatment services for the automotive market.

Second quarter 2017 gross profit increased by $1.4 million, or 9%, to $16.8 million and gross margin increased to 28% from 23%, due to a greater proportion of revenue being generated from high margin, aerospace market facing products in the quarter.

SG&A expenses decreased by $0.4 million, or 3%, compared to the prior year, primarily due to lower share-based compensation expenses.

EBITDA increased by $2.4 million to $8.0 million in the second quarter 2017, driven largely by higher gross profit and lower SG&A costs.

Financial Review

Tax

AMG recorded an income tax expense of $7.7 million in the second quarter 2017 as compared to a tax expense of $2.8 million in the same period in 2016.  The lower tax expense in second quarter 2016 was primarily due to a drop in the Brazilian Real, which reduced income tax expense.

Due to the volatile nature of the Company’s deferred tax balances caused by items such as the Brazil currency fluctuations, AMG focuses on cash tax payments.  AMG paid taxes of $3.4 million in the second quarter 2017 as compared to tax payments of $1.8 million in the same period in 2016. For the second quarter 2017, AMG’s effective cash tax rate was 16%, compared to 11% in the same period in 2016. The increase is due to higher profitability in countries where the Company does not have tax losses carried forward to reduce tax liabilities.

Non-Recurring Items

AMG’s second quarter 2017 gross profit of $54.3 million includes non-recurring items, which are not included in the calculation of EBITDA.

A summary of non-recurring items included in gross profit in the second quarters of 2017 and 2016 are below:

Non-recurring items included in gross profit

  Q2 ’17 Q2 ’16 Change
Gross profit $54,344 $53,302 2%
Restructuring expense 956 454 111%
Asset impairment (reversal) expense (1,305) N/A
Gross profit before non-
  recurring items
53,995 53,756

Gross profit before non-recurring items by reporting segment

  Q2 ’17 Q2 ’16 Change
AMG Critical Materials $36,954 $38,230 (3%)
AMG Engineering 17,041 15,526 10%
Gross profit before non-
  recurring items
53,995 53,756

AMG Critical Materials’ gross profit was positively impacted by the partial recovery of asset impairment expenses recorded in the first quarter 2017. AMG recorded an asset impairment expense of $2.2 million in the first quarter 2017 as a result of fire damage sustained at the Mibra mine in Brazil, and subsequently recorded a $1.4 million partial recovery in the second quarter 2017, following the receipt of insurance proceeds.

As noted in AMG’s 2016 financial statements, the Company modified its income statement presentation in order to take into consideration ESMA’s latest recommendations. This resulted in the reclassification of restructuring expenses and asset impairment expenses into expenses by function, and consequently gross profit.

Liquidity

  June 30, 2017 December 31, 2016 Change
Total debt $176,164 $168,080 5%
Cash and cash equivalents 168,853 160,744 5%
Net debt 7,311 7,336

AMG had a net debt position of $7.3 million as of June 30, 2017. Total debt increased by $8.1 million and net debt was unchanged from December 31, 2016.

Cash from operating activities decreased by $13.7 million to $10.6 million in the second quarter 2017, due to an $11.0 million increase in working capital during the quarter which was largely driven by an increase in accounts receivable.

Capital expenditures increased to $18.6 million in the second quarter 2017 compared to $7.5 million in the same period in 2016. Capital spending in the second quarter 2017 included $5.6 million of maintenance capital. The largest expansion capital projects were AMG’s lithium project in Brazil, and titanium aluminide expansion in Germany.

Including the $168.9 million of cash, AMG had $350 million of total liquidity as of June 30, 2017.

Net Finance Costs

AMG’s second quarter 2017 net finance costs decreased to $1.8 million from $3.3 million in the second quarter 2016, due to lower foreign exchange impacts.

SG&A

AMG’s second quarter 2017 SG&A expenses were $32.0 million compared to $34.8 million in the second quarter 2016, primarily due to a decrease in share-based compensation expenses of $1.6 million and lower pension expenses of $0.3 million, as a result of pension contributions made during 2016.

Interim Dividend

AMG has announced an interim dividend of €0.14 per ordinary share in respect of the period from January 1, 2017, to June 30, 2017.

Outlook

AMG expects full year 2017 profitability to improve relative to 2016.



AMG Advanced Metallurgical Group N.V.    
Condensed Interim Consolidated Income Statement    
     
For the quarter ended June 30    
In thousands of US Dollars 2017 2016
  Unaudited Unaudited
Continuing operations    
Revenue 262,042 248,349
Cost of sales 207,698 195,047
Gross profit 54,344 53,302
     
Selling, general and administrative expenses 31,972 34,762
     
Net other operating income (205) (427)
     
Operating profit 22,577 18,967
     
Finance income (245) (179)
Finance expense 2,310 2,423
Foreign exchange (gain) loss (250) 1,082
Net finance costs 1,815 3,326
     
Share of loss of associates and joint ventures, net of tax (14)
     
Profit before income tax 20,762 15,627
     
Income tax expense  7,717 2,802
     
Profit for the period 13,045 12,825
     
Attributable to:    
Shareholders of the Company 13,115 13,447
Non-controlling interests (70) (622)
Profit for the period 13,045 12,825
     
Earnings per share    
Basic earnings per share 0.45 0.48
Diluted earnings per share 0.42 0.48
 

 

 

 

 

AMG Advanced Metallurgical Group N.V.
   
Condensed Interim Consolidated Income Statement    
     
For the six months ended June 30    
In thousands of US Dollars 2017 2016
  Unaudited Unaudited
Continuing operations    
Revenue 520,011 485,748
Cost of sales 413,164 388,223
Gross profit 106,847 97,525
     
Selling, general and administrative expenses 63,552 66,060
     
Net other operating income (310) (435)
     
Operating profit 43,605 31,900
     
Finance income (421) (294)
Finance expense 4,304 4,513
Foreign exchange (gain) loss (83) 936
Net finance costs 3,800 5,155
     
Share of gain of associates and joint ventures, net of tax 1,436
     
Profit before income tax 39,805 28,181
     
Income tax expense  11,194 3,085
     
Profit for the period 28,611 25,096
     
Attributable to:    
Shareholders of the Company 28,681 25,421
Non-controlling interests (70) (325)
Profit for the period 28,611 25,096
     
Earnings per share    
Basic earnings per share 1.00 0.91
Diluted earnings per share 0.91 0.90



 

AMG Advanced Metallurgical Group N.V.
   
Condensed Interim Consolidated Statement of Financial Position 

 
 
     
     
In thousands of US Dollars  June 30,
2017
Unaudited
December 31, 2016
Assets    
Property, plant and equipment 247,470 226,098
Goodwill 24,148 22,729
Intangible assets 11,974 10,486
Derivative financial instruments 890 740
Other investments 30,200 29,930
Deferred tax assets 37,626 41,285
Restricted cash 2,504 2,526
Other assets 12,108 17,207
Total non-current assets 366,920 351,001
Inventories 146,820 143,593
Derivative financial instruments 4,820 4,007
Trade and other receivables 153,022 129,220
Other assets 36,120 31,598
Cash and cash equivalents 168,853 160,744
Assets held for sale 1,972 149
Total current assets 511,607 469,311
Total assets 878,527 820,312




AMG Advanced Metallurgical Group N.V.    
Condensed Interim Consolidated Statement of Financial Position   
(continued)    
     
     
In thousands of US Dollars  June 30, 2017
Unaudited
December 31, 2016*
Equity    
Issued capital 796 760
Share premium 432,844 389,066
Treasury shares (4,638) (570)
Other reserves (85,403) (97,085)
Retained earnings (deficit) (126,200) (116,457)
Equity attributable to shareholders of the Company 217,399 175,714
     
Non-controlling interests 23,727 22,073
Total equity 241,126 197,787
     
Liabilities    
Loans and borrowings 149,600 150,959
Employee benefits 150,381 141,588
Provisions 31,336 30,854
Deferred revenue 2,822
Other liabilities 6,838 6,874
Derivative financial instruments 887
Deferred tax liabilities 8,574 8,435
Total non-current liabilities 346,729 342,419
     
Loans and borrowings 11,064 9,621
Short term bank debt 15,500 7,500
Other liabilities 52,405 57,528
Trade and other payables 140,899 133,328
Derivative financial instruments 1,835 4,661
Advance payments 38,005 29,404
Deferred revenue 956 10,198
Current taxes payable 10,721 7,065
Provisions 19,287 20,801
Total current liabilities 290,672 280,106
Total liabilities 637,401 622,525
Total equity and liabilities 878,527 820,312

*Reclassified share reserves from other reserves to retained earnings (deficit) for December 31, 2016

 

 

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 2017 2016
  Unaudited Unaudited
Cash from operating activities    
Profit for the year 28,611 25,096
Adjustments to reconcile net profit to net cash flows:    
Non-cash:    
Income tax expense 11,194 3,085
Depreciation and amortization 14,742 14,838
Asset impairment expense 912
Net finance costs 3,800 5,155
Share of gain of associates and joint ventures (1,436)
Gain on sale or disposal of property, plant and equipment (68) (80)
Equity-settled share-based payment transactions 4,418 914
Movement in provisions, pensions and government grants (3,023) (15,735)
Working capital and deferred revenue adjustments (22,930) (5,006)
Cash generated from operating activities 37,656 26,831
Finance costs paid, net (4,249) (3,162)
Income tax paid, net (4,944) (3,674)
Net cash from operating activities 28,463 19,995
     
Cash used in investing activities    
Proceeds from sale of property, plant and equipment 96 368
Insurance proceeds on property, plant and equipment 1,415
Proceeds from sale of subsidiaries (net of cash divested of $35 in 2016) 675
Acquisition of property, plant and equipment and intangibles (29,452) (14,389)
Acquisition of subsidiaries (net of cash acquired of $35 in 2016) (4,961)
Acquisition of other non-current investments (1,000)
Change in restricted cash 210 19
Other 17 28
Net cash used in investing activities (27,714) (19,260)




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 2017 2016
  Unaudited Unaudited
Cash used in financing activities    
Net proceeds from issuance of debt 2,889 1,573
Proceeds from issuance of common shares 14,370
Net repurchase of common shares (13,386) (1,785)
Dividend (4,417) (3,503)
Other 1
Net cash used in financing activities (544) (3,714)
     
Net increase (decrease) in cash and cash equivalents 205 (2,979)
     
Cash and cash equivalents at January 1 160,744 127,778
Effect of exchange rate fluctuations on cash held 7,904 276
Cash and cash equivalents at June 30 168,853 125,075



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 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, 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 5804
Steve Daniels
Senior Vice President
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.

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Contact

AMG Advanced Metallurgical Group N.V.
+1 610 975 4979

Michele Fischer
mfischer@amg-nv.com