Key Highlights
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Revenue increased by 27% to $328.1 million in the third quarter 2018 from $258.9 million in the third quarter 2017
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Gross profit was $79.6 million in the third quarter 2018, an increase of $28.3 million, or 55%, over the same period in 2017
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EBITDA(2) was $59.1 million in the third quarter 2018, a 114% increase over the same period in 2017
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Net income attributable to shareholders increased by 115% to $29.9 million in the third quarter 2018 from $14.0 million in the third quarter 2017
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EPS, on a fully diluted basis, increased by 111% to $0.93 in the third quarter 2018 from $0.44 in the third quarter 2017
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Annualized return on capital employed increased to 32.8% in the third quarter 2018, as compared to 21.5% in the third quarter 2017
Amsterdam, 1 November 2018 (Regulated Information) — AMG Advanced Metallurgical Group N.V. (“AMG”, EURONEXT AMSTERDAM: “AMG”) reported third quarter 2018 revenue of $328.1 million, a 27% increase from $258.9 million in the third quarter of 2017. EBITDA for the third quarter of 2018 was $59.1 million, a 114% increase from $27.6 million in the third quarter of 2017.
Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, “As demonstrated through our third quarter results, our business portfolio continues to perform exceptionally well. Thanks to strong end market fundamentals and our relentless pursuit of improvements in productivity and efficiency, AMG’s EBITDA in the third quarter 2018 is the highest reported quarterly EBITDA in 10 years.
AMG Critical Materials generated EBITDA of $52.1 million during the third quarter of 2018, an increase of 122% from $23.5 million in the third quarter of 2017, thanks to increased vanadium prices and strong financial performance in chrome metal and aluminum products.
AMG Engineering achieved EBITDA of $7.0 million during the third quarter of 2018, an increase of 69% from the third quarter of 2017, driven by higher profitability generated from the delivery of turbine blade coating furnaces and increased after-sales services during the quarter.
On a year to date basis, AMG Engineering signed $248.1 million in new orders in the current year, representing a 1.32x book to bill ratio. Order backlog was $251.2 million as of September 30, 2018, an increase of 21% from December 31, 2017.”
Key Figures
| In 000’s US dollar | |||
| Q3 ’18 | Q3 ’17 | Change | |
| Revenue | $328,071 | $258,941 | 27% |
| Gross profit | 79,555 | 51,273 | 55% |
| Gross margin | 24.2% | 19.8% | |
| Operating profit | 44,202 | 17,756 | 149% |
| Operating margin | 13.5% | 6.9% | |
| Net income attributable to shareholders | 29,938 | 13,953 | 115% |
| EPS – Fully diluted | 0.93 | 0.44 | 111% |
| EBIT (1) | 50,765 | 19,879 | 155% |
| EBITDA (2) | 59,116 | 27,638 | 114% |
| EBITDA margin | 18.0% | 10.7% | |
| Cash from operating activities | 23,136 | 16,790 | 38% |
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.
Operational Review
AMG Critical Materials
| Q3 ’18 | Q3 ’17 | Change | |
| Revenue | $261,957 | $203,352 | 29% |
| Gross profit | 61,455 | 36,695 | 67% |
| Operating profit | 38,917 | 15,752 | 147% |
| EBITDA | 52,139 | 23,509 | 122% |
AMG Critical Materials revenue in the third quarter increased by $58.6 million, or 29%, to $262.0 million, driven mainly by improved vanadium, aluminum, and chrome metal prices, as well as higher sales volumes of tantalum and aluminum products.
Gross profit in the third quarter increased by $24.8 million, or 67%, to $61.5 million. Strong financial performances in vanadium, chrome metal, and aluminum were partially offset by lower gross profit in silicon metal. This strong performance was driven by higher vanadium prices, improved chrome metal product mix effects and strong sales volumes of aluminum products. The reduction in gross profit in silicon metal was primarily driven by an additional accrual for the repayment of a subsidy granted by the German government in 2012 and 2013, following the completion of negotiations. Furthermore, AMG Silicon quarterly gross profit was adversely affected by additional furnace maintenance due to residual production issues associated with low quality graphite electrodes.
SG&A expenses in the third quarter of 2018 increased by $1.6 million, or 8%, compared to the same period in the prior year due to higher personnel costs, an increase in research and development expenses, and foreign exchange effects related to the strengthening of the euro relative to the US dollar.
Third quarter 2018 EBITDA margin increased to 20%, compared to 12% in the third quarter of 2017, due to the substantial improvement in gross profit.
AMG Engineering
| Q3 ’18 | Q3 ’17 | Change | |
| Revenue | $66,114 | $55,589 | 19% |
| Gross profit | 18,100 | 14,578 | 24% |
| Operating profit | 5,285 | 2,004 | 164% |
| EBITDA | 6,977 | 4,129 | 69% |
AMG Engineering signed $57.1 million in new orders during the third quarter 2018, representing a 0.86x book to bill ratio. Order intake in the quarter was driven by sales of turbine blade coating furnaces, powder metallurgy furnaces and induction furnaces for the aerospace market.
On a year to date basis, AMG Engineering signed $248.1 million in new orders in the current year, representing a 1.32x book to bill ratio. Order backlog was $251.2 million as of September 30, 2018, an increase of 21% from December 31, 2017.
AMG Engineering’s third quarter 2018 revenue increased $10.5 million, or 19%, to $66.1 million, due to higher revenue generated from the delivery of turbine blade coating furnaces and higher after-sales service revenues.
Third quarter 2018 gross profit increased by $3.5 million, or 24%, to $18.1 million and gross margin increased slightly to 27% from 26% in the third quarter of 2017, driven by higher revenues generated during the quarter.
SG&A expenses increased by $0.2 million, from $12.6 million in the third quarter of 2017 to $12.8 million in the third quarter of 2018.
EBITDA increased by $2.8 million to $7.0 million in the third quarter of 2018 due to higher profitability generated from the delivery of vacuum furnaces during the quarter.
Financial Review
Tax
AMG recorded an income tax expense of $10.0 million in the third quarter of 2018 as compared to a tax expense of $1.7 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.
AMG continues to benefit from net operating loss carryforward balances, primarily in the United States, to offset taxes payable. As a result, despite high pre-tax profitability, AMG paid taxes of $6.3 million in the third quarter of 2018 as compared to tax payments of $3.2 million in the same period in 2017. For the third quarter of 2018, AMG’s effective cash tax rate dropped to 16% in comparison to 21% 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 third quarter 2018 gross profit of $79.6 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 third quarters of 2018 and 2017 are below:
Non-recurring items included in gross profit
| Q3 ’18 | Q3 ’17 | Change | ||
| Gross profit | $79,555 | $51,273 | 55% | |
| Restructuring expense | 349 | 353 | (1%) | |
| Asset impairment expense (recovery) | 4,232 | (101) | N/A | |
| Gross profit before non- recurring items |
84,136 | 51,525 | 63% | |
Gross profit before non-recurring items by reporting segment
| Q3 ’18 | Q3 ’17 | Change | |
| AMG Critical Materials | $66,036 | $36,873 | 79% |
| AMG Engineering | 18,100 | 14,652 | 24% |
| Gross profit before non- recurring items |
84,136 | 51,525 | 63% |
AMG Critical Materials incurred a non-recurring non-cash asset impairment expense of $4.1 million in the third quarter due to the early termination of a customer contract. AMG is in negotiations with the customer in question to fully recover the impairment costs incurred and expects these negotiations to be finalized in the fourth quarter of 2018.
Liquidity
| September 30, 2018 |
December 31, 2017 |
Change | |
| Total debt | $382,148 | $189,108 | 102% |
| Cash and cash equivalents | 349,889 | 178,800 | 96% |
| Net debt | 32,259 | 10,308 | 213% |
AMG had a net debt position of $32.3 million as of September 30, 2018. Net debt increased by $22.0 million and total debt increased by $193.0 million from December 31, 2017.
Cash from operating activities increased by $6.3 million, or 38%, in the third quarter of 2018 compared to the same period in the prior year, primarily due to improved profitability in AMG Critical Materials and AMG Engineering.
Capital expenditures decreased to $14.0 million in the third quarter of 2018 compared to $23.2 million in the same period in 2017. Capital spending in the third quarter of 2018 included $5.6 million of maintenance capital. The largest expansion capital project was AMG’s lithium project in Brazil.
AMG had $519.5 million of total liquidity as of September 30, 2018, following the successful refinancing of AMG’s credit facilities during the first quarter of 2018.
Net Finance Costs
AMG’s third quarter 2018 net finance costs increased to $4.7 million compared to $2.3 million in the third 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 third quarter 2018 SG&A expenses increased by 5% to $35.6 million in the third quarter of 2017, primarily due to higher personnel costs, an increase in research and development expenses, and foreign exchange effects related to the strengthening of the euro relative to the US dollar.
Outlook
Based on improving market conditions across AMG’s Critical Materials portfolio, AMG expects full year 2018 EBITDA to exceed $200 million.
In 2019, AMG expects to continue its strong financial performance and improve profitability relative to 2018.
| AMG Advanced Metallurgical Group N.V. |
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| Condensed Interim Consolidated Income Statement | ||
| For the quarter ended September 30 | ||
| In thousands of US dollars | 2018 | 2017 |
| Unaudited | Unaudited | |
| Continuing operations | ||
| Revenue | 328,071 | 258,941 |
| Cost of sales | 248,516 | 207,668 |
| Gross profit | 79,555 | 51,273 |
| Selling, general and administrative expenses | 35,645 | 33,787 |
| Net other operating income | (292) | (270) |
| Operating profit | 44,202 | 17,756 |
| Finance income | (930) | (229) |
| Finance cost | 5,619 | 2,495 |
| Net finance cost | 4,689 | 2,266 |
| Profit before income tax | 39,513 | 15,490 |
| Income tax expense | 9,961 | 1,731 |
| Profit for the period | 29,552 | 13,759 |
| Attributable to: | ||
| Shareholders of the Company | 29,938 | 13,953 |
| Non-controlling interests | (386) | (194) |
| Profit for the period | 29,552 | 13,759 |
| Earnings per share | ||
| Basic earnings per share | 0.98 | 0.47 |
| Diluted earnings per share | 0.93 | 0.44 |
| AMG Advanced Metallurgical Group N.V. |
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| Condensed Interim Consolidated Income Statement | ||
| For the nine months ended September 30 | ||
| In thousands of US dollars | 2018 | 2017 |
| Unaudited | Unaudited | |
| Continuing operations | ||
| Revenue | 965,840 | 778,952 |
| Cost of sales | 737,006 | 620,832 |
| Gross profit | 228,834 | 158,120 |
| Selling, general and administrative expenses | 108,450 | 97,339 |
| Net other operating income | (416) | (580) |
| Operating profit | 120,800 | 61,361 |
| Finance income | (2,212) | (650) |
| Finance cost | 18,780 | 6,716 |
| Net finance cost | 16,568 | 6,066 |
| Profit before income tax | 104,232 | 55,295 |
| Income tax expense | 39,122 | 12,925 |
| Profit for the period | 65,110 | 42,370 |
| Attributable to: | ||
| Shareholders of the Company | 65,636 | 42,634 |
| Non-controlling interests | (526) | (264) |
| Profit for the period | 65,110 | 42,370 |
| Earnings per share | ||
| Basic earnings per share | 2.17 | 1.47 |
| Diluted earnings per share | 2.05 | 1.34 |
| AMG Advanced Metallurgical Group N.V. |
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| Condensed Interim Consolidated Statement of Financial Position | ||
| In thousands of US dollars | September 30, 2018 Unaudited |
December 31, 2017 |
| Assets | ||
| Property, plant and equipment | 318,550 | 298,540 |
| Goodwill and other intangible assets | 35,515 | 38,110 |
| Derivative financial instruments | 6,080 | 636 |
| Other investments | 30,463 | 30,562 |
| Deferred tax assets | 34,195 | 40,108 |
| Restricted cash | 804 | 829 |
| Non-current tax asset | – | 2,488 |
| Other assets | 15,942 | 17,729 |
| Total non-current assets | 441,549 | 429,002 |
| Inventories | 271,087 | 162,505 |
| Derivative financial instruments | 1,306 | 6,372 |
| Trade and other receivables | 166,731 | 137,174 |
| Other assets | 44,621 | 37,547 |
| Current tax assets | 7,852 | 3,147 |
| Cash and cash equivalents | 349,889 | 178,800 |
| Assets held for sale | 139 | 2,056 |
| Total current assets | 841,625 | 527,601 |
| Total assets | 1,283,174 | 956,603 |
| AMG Advanced Metallurgical Group N.V. |
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| Condensed Interim Consolidated Statement of Financial Position | ||
| (continued) | ||
| In thousands of US dollars | September 30, 2018 Unaudited |
December 31, 2017 |
| Equity | ||
| Issued capital | 812 | 796 |
| Share premium | 462,891 | 432,844 |
| Treasury shares | (596) | (3,461) |
| Other reserves | (93,967) | (72,880) |
| Retained earnings (deficit) | (72,061) | (99,343) |
| Equity attributable to shareholders of the Company | 297,079 | 257,956 |
| Non-controlling interests | 23,781 | 24,633 |
| Total equity | 320,860 | 282,589 |
| Liabilities | ||
| Loans and borrowings | 365,519 | 164,788 |
| Employee benefits | 152,878 | 156,193 |
| Provisions | 31,266 | 35,887 |
| Other liabilities | 4,464 | 4,011 |
| Derivative financial instruments | 6,989 | – |
| Deferred tax liabilities | 7,609 | 7,888 |
| Total non-current liabilities | 568,725 | 368,767 |
| Loans and borrowings | 896 | 8,820 |
| Short term bank debt | 15,733 | 15,500 |
| Other liabilities | 58,882 | 61,836 |
| Trade and other payables | 192,349 | 155,115 |
| Derivative financial instruments | 12,108 | 1,415 |
| Advance payments | 63,132 | 33,025 |
| Current taxes payable | 21,930 | 9,155 |
| Provisions | 28,559 | 20,381 |
| Total current liabilities | 393,589 | 305,247 |
| Total liabilities | 962,314 | 674,014 |
| Total equity and liabilities | 1,283,174 | 956,603 |
| AMG Advanced Metallurgical Group N.V. |
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| Condensed Interim Consolidated Statement of Cash Flows | ||
| For the nine months ended September 30 |
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| In thousands of US dollars | 2018 | 2017 |
| Unaudited | Unaudited | |
| Cash from operating activities | ||
| Profit for the year | 65,110 | 42,370 |
| Adjustments to reconcile net profit to net cash flows: | ||
| Non-cash: | ||
| Income tax expense | 39,122 | 12,925 |
| Depreciation and amortization | 24,573 | 22,501 |
| Asset impairment | 3,200 | 811 |
| Net finance costs | 16,568 | 6,066 |
| Gain on sale or disposal of property, plant and equipment | (1,065) | (43) |
| Equity-settled share-based payment transactions | 4,610 | 6,624 |
| Movement in provisions, pensions and government grants | 7,002 | (4,718) |
| Working capital and deferred revenue adjustments | (84,955) | (27,318) |
| Cash generated from operating activities | 74,165 | 59,218 |
| Finance costs paid, net | (11,949) | (5,813) |
| Income tax paid, net | (15,469) | (8,152) |
| Net cash from operating activities | 46,747 | 45,253 |
| Cash used in investing activities | ||
| Proceeds from sale of property, plant and equipment | 1,489 | 183 |
| Insurance proceeds on property, plant and equipment | 1,300 | 1,516 |
| Acquisition of property, plant and equipment and intangibles | (55,043) | (52,677) |
| Change in restricted cash | – | 1,883 |
| Other | (31) | (11) |
| Net cash used in investing activities | (52,285) | (49,106) |
| AMG Advanced Metallurgical Group N.V. |
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| Condensed Interim Consolidated Statement of Cash Flows | ||
| (continued) | ||
| For the nine months ended September 30 | ||
| In thousands of US dollars | 2018 | 2017 |
| Unaudited | Unaudited | |
| Cash from financing activities | ||
| Proceeds from issuance of debt | 351,172 | 19,500 |
| Payment of transaction costs related to the issuance of debt | (9,238) | – |
| Repayment of borrowings | (155,195) | (7,909) |
| Proceeds from issuance of common shares | 15,923 | 14,370 |
| Net repurchase of common shares | (9,558) | (12,434) |
| Dividends paid | (12,092) | (9,310) |
| Net cash from financing activities | 181,012 | 4,217 |
| Net increase in cash and cash equivalents | 175,474 | 364 |
| Cash and cash equivalents at January 1 | 178,800 | 160,744 |
| Effect of exchange rate fluctuations on cash held | (4,385) | 10,681 |
| Cash and cash equivalents at September 30 | 349,889 | 171,789 |
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.