Key Highlights
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Revenue increased by 26% to $329.3 million in the second quarter 2018 from $262.0 million in the second quarter 2017
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Gross profit was $79.2 million in the second quarter 2018, an increase of $24.8 million, or 46%, over the same period in 2017
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EBITDA(2) was $50.7 million in the second quarter 2018, a 59% increase over the same period in 2017
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Profit before income tax increased by 77% to $36.7 million in the second quarter 2018 from $20.8 million in the second quarter 2017
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EPS, on a fully diluted basis, increased by 29% to $0.54 in the second quarter 2018 from $0.42 in the second quarter 2017
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Annualized return on capital employed increased to 30.6% in the second quarter 2018, as compared to 23.9% in the second quarter 2017
Amsterdam, 2 August 2018 (Regulated Information) — AMG Advanced Metallurgical Group N.V. (“AMG”, EURONEXT AMSTERDAM: “AMG”) reported second quarter 2018 revenue of $329.3 million, a 26% increase from $262.0 million in the second quarter of 2017. EBITDA for the second quarter of 2018 was $50.7 million, a 59% increase from $31.9 million in the second quarter of 2017.
Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, “AMG achieved a sharp improvement in EBITDA during the quarter, driven primarily by improved pricing and higher sales volumes in AMG Critical Materials. Furthermore, relentless improvements in productivity have resulted in an upward trend, both in terms of profitability and return on capital employed.
AMG Critical Materials generated EBITDA of $45.3 million during the second quarter of 2018, an increase of 89% from $23.9 million in the second quarter of 2017, thanks to strong financial performances in vanadium, chrome metal and aluminum products.
AMG Engineering signed $86.2 million in new orders during the second quarter of 2018, representing a 1.39x book to bill ratio, driven by strong sales of turbine blade coating and heat treatment furnaces. Order backlog was $263.2 million as of June 30, 2018, an increase of 27% compared to December 31, 2017.
AMG Engineering achieved EBITDA of $5.5 million during the second quarter of 2018, a decrease of $2.5 million from $8.0 million in the second quarter of 2017 due to higher SG&A expenses and lower gross profit generated from the heat treatment services division. On a full year basis, AMG Engineering expects 2018 EBITDA to be in line with prior year.”
Key Figures
| In 000’s US dollar | |||
| Q2 ’18 | Q2 ’17 | Change | |
| Revenue | $329,321 | $262,042 | 26% |
| Gross profit | 79,161 | 54,344 | 46% |
| Gross margin | 24.0% | 20.7% | |
| Operating profit | 42,019 | 22,577 | 86% |
| Operating margin | 12.8% | 8.6% | |
| Net income attributable to shareholders | ** 17,309 | 13,115 | 32% |
| EPS – Fully diluted | 0.54 | 0.42 | 29% |
| EBIT (1) | 42,751 | 24,369 | 75% |
| EBITDA (2) | 50,749 | 31,866 | 59% |
| EBITDA margin | 15.4% | 12.2% | |
| Cash (used in) from operating activities | (1,197) | 10,633 | N/A |
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.
** Net income attributable to shareholders was impacted by an additional, non-cash tax expense of $6.0 million in the quarter, due to the significant movement of the Brazilian real against the US dollar.
Operational Review
AMG Critical Materials
| Q2 ’18 | Q2 ’17 | Change | |
| Revenue | $267,213 | $202,625 | 32% |
| Gross profit | 62,151 | 37,583 | 65% |
| Operating profit | 37,869 | 16,896 | 124% |
| EBITDA | 45,252 | 23,883 | 89% |
AMG Critical Materials revenue in the second quarter increased by $64.6 million, or 32%, to $267.2 million, driven by improved vanadium, silicon metal, aluminum, graphite, chrome metal and tantalum prices, and higher sales volumes of vanadium, aluminum, tantalum and titanium products.
Gross profit in the second quarter increased by $24.6 million, or 65%, to $62.2 million. Strong financial performances in vanadium, chrome metal and aluminum were partially offset by lower gross profit in silicon metal. The strong financial performance was driven by higher vanadium sales volumes and prices, improved chrome metal product mix effects and strong sales volumes of aluminum products. The reduction in gross profit in silicon metal was driven by lower volumes, as a result of unplanned furnace maintenance during the quarter, as well as an accrual for the repayment of a subsidy granted by the German government in 2012-13.
SG&A expenses in the second quarter of 2018 increased by $3.4 million, or 16%, compared to the same period in the prior year, primarily due to foreign exchange effects related to the strengthening of the euro relative to the US dollar as well as higher personnel costs.
Second quarter 2018 EBITDA margin increased to 17%, compared to 12% in the second quarter of 2017, due to the improvement in gross profit as noted above.
AMG Engineering
| Q2 ’18 | Q2 ’17 | Change | |
| Revenue | $62,108 | $59,417 | 5% |
| Gross profit | 17,010 | 16,761 | 1% |
| Operating profit | 4,150 | 5,681 | (27%) |
| EBITDA | 5,497 | 7,983 | (31%) |
AMG Engineering signed $86.2 million in new orders during the second quarter 2018, representing a 1.39x book to bill ratio. Order backlog was $263.2 million as of June 30, 2018, an increase of 3% from March 31, 2018. This was driven by strong sales of turbine blade coating and heat treatment furnaces.
AMG Engineering’s second quarter 2018 revenue increased $2.7 million, or 5%, to $62.1 million. Higher revenue generated from the sale of vacuum furnaces was partially offset by lower revenue in the heat treatment services division, as automotive customers transition to new engine programs. Following the completion of this transition process, heat treatment service revenues are expected to return to normal levels in early 2019.
Second quarter 2018 gross profit increased by $0.2 million, or 1%, to $17.0 million and gross margin decreased slightly to 27% from 28% in the second quarter of 2017. The reduction in gross margin was driven by lower gross profit in the heat treatment services division due to lower sales volumes and consequently lower utilization rates.
SG&A expenses increased by $1.8 million, or 16%, compared to the prior year primarily due to foreign exchange effects related to the strengthening of the euro relative to the US dollar and higher personnel costs.
AMG Engineering is in the process of expanding its workforce in response to the increased level of order backlog, driven primarily by strong demand from the aerospace market.
EBITDA decreased by $2.5 million to $5.5 million in the second quarter of 2018 due to higher SG&A expenses, increased currency impacts, and lower gross profit generated from the heat treatment services division.
Financial Review
Tax
AMG recorded an income tax expense of $19.5 million in the second quarter of 2018 as compared to a tax expense of $7.7 million in the same period in 2017, driven by higher levels of profitability, the full recognition of AMG’s US operating loss carryforwards in 2017, and the revaluation of AMG’s Brazilian tax balances. Due to the significant movement of the Brazilian real against the US dollar, AMG incurred an additional non-cash tax expense of $6.0 million in the quarter.
AMG continues to benefit from net operating loss carry forward balances, primarily in the United States, to offset taxes payable. As a result, despite very high pre-tax profitability, AMG paid taxes of $7.0 million in the second quarter of 2018 as compared to tax payments of $3.4 million in the same period in 2017. For the second quarter of 2018, AMG’s effective cash tax rate rose to 19% in comparison to 16% for the same period in the prior year.
Due to the volatile nature of the company’s Brazilian deferred tax balances, AMG believes that the cash tax rate is a more meaningful metric.
Non-Recurring Items
AMG’s second quarter 2018 gross profit of $79.2 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 2018 and 2017 are below:
Non-recurring items included in gross profit
| Q2 ’18 | Q2 ’17 | Change | ||
| Gross profit | $79,161 | $54,344 | 46% | |
| Restructuring expense | 950 | 956 | (1%) | |
| Asset impairment recovery | (1,032) | (1,305) | (21%) | |
| Gross profit before non- recurring items |
79,079 | 53,995 | 46% | |
Gross profit before non-recurring items by reporting segment
| Q2 ’18 | Q2 ’17 | Change | |
| AMG Critical Materials | $62,099 | $36,954 | 68% |
| AMG Engineering | 16,980 | 17,041 | – |
| Gross profit before non- recurring items |
79,079 | 53,995 | 46% |
Liquidity
| June 30, 2018 |
December 31, 2017 |
Change | |
| Total debt | $377,302 | $189,108 | 100% |
| Cash and cash equivalents | 342,537 | 178,800 | 92% |
| Net debt | 34,765 | 10,308 | 237% |
AMG had a net debt position of $34.8 million as of June 30, 2018. Net debt increased by $24.5 million and total debt increased by $188.2 million from December 31, 2017.
On a year to date basis, cash from operating activities decreased by $4.9 million, or 17%, compared to the same period in the prior year due to higher working capital balances driven by increased metals prices, partially offset by improved profitability in AMG Critical Materials.
Capital expenditures decreased slightly to $18.4 million in the second quarter of 2018 compared to $18.6 million in the same period in 2017. Capital spending in the second quarter of 2018 included $6.8 million of maintenance capital. The largest expansion capital project was AMG’s lithium project in Brazil.
AMG had $512.1 million of total liquidity as of June 30, 2018, following the successful refinancing of AMG’s credit facilities during the first quarter of 2018.
Net Finance Costs
AMG’s second quarter 2018 net finance costs increased to $5.3 million compared to $1.8 million in the second quarter 2017, due to higher levels of gross debt and higher interest rates associated with AMG’s new, long term credit facility.
SG&A
AMG’s second quarter 2018 SG&A expenses were $37.2 million compared to $32.0 million in the second quarter of 2017, primarily due to foreign exchange effects related to the strengthening of the euro relative to the US dollar and higher personnel costs.
Outlook
Encouraged by the financial performance in the first 6 months of 2018, AMG expects full year 2018 EBITDA to improve by between 40%-50% compared to the prior year.
| AMG Advanced Metallurgical Group N.V. | ||
| Condensed Interim Consolidated Income Statement | ||
| For the quarter ended June 30 | ||
| In thousands of US dollars | 2018 | 2017 |
| Unaudited | Unaudited | |
| Continuing operations | ||
| Revenue | 329,321 | 262,042 |
| Cost of sales | 250,160 | 207,698 |
| Gross profit | 79,161 | 54,344 |
| Selling, general and administrative expenses | 37,179 | 31,972 |
| Net other operating income | (37) | (205) |
| Operating profit | 42,019 | 22,577 |
| Finance income | (864) | (495) |
| Finance cost | 6,202 | 2,310 |
| Net finance cost | 5,338 | 1,815 |
| Profit before income tax | 36,681 | 20,762 |
| Income tax expense | 19,456 | 7,717 |
| Profit for the period | 17,225 | 13,045 |
| Attributable to: | ||
| Shareholders of the Company | 17,309 | 13,115 |
| Non-controlling interests | (84) | (70) |
| Profit for the period | 17,225 | 13,045 |
| Earnings per share | ||
| Basic earnings per share | 0.57 | 0.45 |
| Diluted earnings per share | 0.54 | 0.42 |
| AMG Advanced Metallurgical Group N.V. | ||
| Condensed Interim Consolidated Income Statement | ||
| For the six months ended June 30 | ||
| In thousands of US dollars | 2018 | 2017 |
| Unaudited | Unaudited | |
| Continuing operations | ||
| Revenue | 637,769 | 520,011 |
| Cost of sales | 488,490 | 413,164 |
| Gross profit | 149,279 | 106,847 |
| Selling, general and administrative expenses | 72,805 | 63,552 |
| Net other operating income | (124) | (310) |
| Operating profit | 76,598 | 43,605 |
| Finance income | (1,382) | (504) |
| Finance cost | 13,261 | 4,304 |
| Net finance cost | 11,879 | 3,800 |
| Profit before income tax | 64,719 | 39,805 |
| Income tax expense | 29,161 | 11,194 |
| Profit for the period | 35,558 | 28,611 |
| Attributable to: | ||
| Shareholders of the Company | 35,698 | 28,681 |
| Non-controlling interests | (140) | (70) |
| Profit for the period | 35,558 | 28,611 |
| Earnings per share | ||
| Basic earnings per share | 1.19 | 1.00 |
| Diluted earnings per share | 1.12 | 0.91 |
| AMG Advanced Metallurgical Group N.V. |
||
| Condensed Interim Consolidated Statement of Financial Position | ||
| In thousands of US dollars | June 30, 2018 Unaudited |
December 31, 2017 |
| Assets | ||
| Property, plant and equipment | 315,252 | 298,540 |
| Goodwill and other intangible assets | 36,916 | 38,110 |
| Derivative financial instruments | 4,242 | 636 |
| Other investments | 30,291 | 30,562 |
| Deferred tax assets | 33,236 | 40,108 |
| Restricted cash | 806 | 829 |
| Non-current tax asset | – | 2,488 |
| Other assets | 15,684 | 17,729 |
| Total non-current assets | 436,427 | 429,002 |
| Inventories | 232,242 | 162,505 |
| Derivative financial instruments | 2,403 | 6,372 |
| Trade and other receivables | 174,274 | 137,174 |
| Other assets | 39,548 | 37,547 |
| Current tax assets | 6,977 | 3,147 |
| Cash and cash equivalents | 342,537 | 178,800 |
| Assets held for sale | 403 | 2,056 |
| Total current assets | 798,384 | 527,601 |
| Total assets | 1,234,811 | 956,603 |
| AMG Advanced Metallurgical Group N.V. | ||
| Condensed Interim Consolidated Statement of Financial Position | ||
| (continued) | ||
| In thousands of US dollars | June 30, 2018 Unaudited |
December 31, 2017 |
| Equity | ||
| Issued capital | 812 | 796 |
| Share premium | 462,891 | 432,844 |
| Treasury shares | (931) | (3,461) |
| Other reserves | (92,682) | (72,880) |
| Retained earnings (deficit) | (96,207) | (99,343) |
| Equity attributable to shareholders of the Company | 273,883 | 257,956 |
| Non-controlling interests | 24,432 | 24,633 |
| Total equity | 298,315 | 282,589 |
| Liabilities | ||
| Loans and borrowings | 360,027 | 164,788 |
| Employee benefits | 152,759 | 156,193 |
| Provisions | 32,203 | 35,887 |
| Other liabilities | 4,201 | 4,011 |
| Derivative financial instruments | 6,741 | – |
| Deferred tax liabilities | 7,035 | 7,888 |
| Total non-current liabilities | 562,966 | 368,767 |
| Loans and borrowings | 1,775 | 8,820 |
| Short term bank debt | 15,500 | 15,500 |
| Other liabilities | 62,326 | 61,836 |
| Trade and other payables | 186,311 | 155,115 |
| Derivative financial instruments | 11,760 | 1,415 |
| Advance payments | 51,456 | 33,025 |
| Current taxes payable | 17,221 | 9,155 |
| Provisions | 27,181 | 20,381 |
| Total current liabilities | 373,530 | 305,247 |
| Total liabilities | 936,496 | 674,014 |
| Total equity and liabilities | 1,234,811 | 956,603 |
| 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 | 2018 | 2017 |
| Unaudited | Unaudited | |
| Cash from operating activities | ||
| Profit for the year | 35,558 | 28,611 |
| Adjustments to reconcile net profit to net cash flows: | ||
| Non-cash: | ||
| Income tax expense | 29,161 | 11,194 |
| Depreciation and amortization | 16,222 | 14,742 |
| Asset impairment | (1,032) | 912 |
| Net finance costs | 11,879 | 3,800 |
| Gain on sale or disposal of property, plant and equipment | (42) | (68) |
| Equity-settled share-based payment transactions | 3,005 | 4,418 |
| Movement in provisions, pensions and government grants | 4,675 | (3,023) |
| Working capital and deferred revenue adjustments | (58,607) | (22,930) |
| Cash generated from operating activities | 40,819 | 37,656 |
| Finance costs paid, net | (7,992) | (4,249) |
| Income tax paid, net | (9,216) | (4,944) |
| Net cash from operating activities | 23,611 | 28,463 |
| Cash used in investing activities | ||
| Proceeds from sale of property, plant and equipment | 122 | 96 |
| Insurance proceeds on property, plant and equipment | 1,300 | 1,415 |
| Acquisition of property, plant and equipment and intangibles | (41,017) | (29,452) |
| Change in restricted cash | – | 210 |
| Other | (37) | 17 |
| Net cash used in investing activities | (39,632) | (27,714) |
| 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 | 2018 | 2017 |
| Unaudited | Unaudited | |
| Cash from (used in) financing activities | ||
| Proceeds from issuance of debt | 346,336 | 8,000 |
| Payment of transaction costs related to the issuance of debt | (9,238) | – |
| Repayment of borrowings | (155,082) | (5,111) |
| Proceeds from issuance of common shares | 15,923 | 14,370 |
| Net repurchase of common shares | (9,853) | (13,386) |
| Dividends paid | (5,013) | (4,417) |
| Net cash from (used in) financing activities | 183,073 | (544) |
| Net increase in cash and cash equivalents | 167,052 | 205 |
| Cash and cash equivalents at January 1 | 178,800 | 160,744 |
| Effect of exchange rate fluctuations on cash held | (3,315) | 7,904 |
| Cash and cash equivalents at June 30 | 342,537 | 168,853 |
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, lithium, 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 3,300 employees, AMG operates globally with production facilities in Germany, the United Kingdom, France, the Czech Republic, the United States, China, Mexico, Brazil, India, 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.