Key Highlights
- Q1 2010 revenue was $235.8 million, an increase of 9% compared to Q1 2009
- Q1 2010 EBITDA[1] was 22.0 million, an increase of 39% compared to Q1 2009
- EPS on a fully diluted basis was breakeven compared to Q1 2009 of ($0.57) EPS. Adjusted EPS, excluding non-recurring charges, on a fully diluted basis was $0.11 in the first quarter 2010
- The Advanced Materials Division continued its recovery; first quarter 2010 revenue was $140.5 million; EBITDA was $8.5 million
- The Engineering Systems Division’s first quarter 2010 revenue was $65.3 million; EBITDA was $12.1 million
- Graphit Kropfmühl’s first quarter revenue was $29.9 million; EBITDA was $1.5 million
- As of March 31, 2010 cash on hand was $98.9 million, net debt was $104.1 million; Q1 2010 free cash flow[2] was $4.1 million
[1] EBITDA is defined as earnings before interest, tax, depreciation and amortization and excludes nonrecurring items
[2] Free cash flow is defined as EBITDA less change in working capital and maintenance capital expenditures
Amsterdam, 12 May 2010 (Regulated Information) — AMG Advanced Metallurgical Group N.V. (“AMG”, EURONEXT AMSTERDAM: “AMG”) reported first quarter 2010 revenue increased 9% to $235.8 million from $215.7 million in the first quarter 2009.
Net income attributable to shareholders for the first quarter 2010 was breakeven, compared to net loss of ($15.4) million or ($0.57) per fully diluted share for the first quarter 2009. Excluding non-recurring charges and Timminco, which was deconsolidated as of September 30, 2009, AMG’s net income attributable to shareholders for the first quarter 2010 was $3.1 million, or $0.11 per fully diluted share. EBITDA increased 39% to $22.0 million in the first quarter 2010 compared with $15.9 million in the first quarter 2009.
In commenting on results, Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, “The first quarter 2010 continued the upward trend that began in late 2009. Demand has begun to return in Advanced Materials, as both volumes and prices increased. Engineering Systems remained challenged by low levels of order intake; however, requests for quotes have increased. Graphit Kropfmühl increased revenues and earnings, driven by end market demand. AMG is guardedly optimistic that the global economy will continue to improve, and our portfolio of metals technologies is well positioned to benefit from this trend in 2010.”
Key Figures
| In 000’s US Dollar | |||
| Q1’10 | Q1’09 | Change | |
| Revenue | $235,793 | $215,719 | 9% |
| Gross profit | 42,584 | 33,860 | 26% |
| Gross margin | 18.1% | 15.7% | |
| Operating income | 11,787 | 6,310 | 87% |
| Operating margin | 5.0% | 2.9% | |
| Net loss attributable to shareholders | (64) |
(15,394) |
N/A |
| EPS- Fully diluted | 0.00 | (0.57) | N/A |
| Adjusted EPS- Fully diluted[1] | 0.11 | (0.22) | N/A |
| EBIT[1] | 15,866 | 10,963 | 45% |
| EBITDA[1][2] | 22,047 | 15,892 | 39% |
| EBITDA margin | 9.4% | 7.4% |
Note:
[1] Adjusted for discontinued operations and equity accounting treatment for AMG’s investment in Timminco
[2] EBITDA is defined as earnings before interest, tax, depreciation and amortization and excludes nonrecurring items
Operational Review
Advanced Materials Division
| Q1’10 | Q1’09 | Change | |
| Revenue | $140,534 | $98,160 | 43% |
| Gross margin | 21,136 | 2,891 | 631% |
| Operating income (loss) | 4,301 | (12,990) | N/A |
| EBITDA | 8,499 | (8,371) | N/A |
| Capital expenditures | 3,321 | 4,860 | (32%) |
Demand improved for most of the Advanced Materials specialty metals during the first quarter 2010. Prices for ferrovanadium, and specialty alloys for aerospace both increased substantially during the first quarter. Revenue increased by $42.4 million or 43%, while gross margin increased by $18.2 million or 631%.
Gross margin percentage increased from 3% of revenue in the first quarter of 2009 to 15% in first quarter of 2010. This was due to a sharp increase in end product prices, particularly in ferrovanadium. Ferrovanadium reference prices increased 18%, with most of the increase coming at the end of the quarter, while volumes were essentially unchanged compared to the first quarter 2009. Vanadium chemicals, ferronickel-molybdenum, ferrotitanium and antimony products also benefitted from increasing end market prices. AMG benefitted from a $3.6 million mark to market write up in inventory during the first quarter 2010 compared to a $3.9 million mark to market write down in inventory in the same period in the prior year. Even more significant was the general improvement in volumes during the quarter.
The first quarter 2010 EBITDA increased by $16.9 million due to the increase in revenue and gross margin, which were slightly offset by a 5% increase in SG&A.
Capital expenditures were $3.3 million for the quarter, 32% less than the comparable period in 2009. The primary growth capital investment made in the first quarter was for the expansion of the ferrovanadium logistics facility.
Engineering Systems Division
| Q1’10 | Q1’09 | Change | |
| Revenue | $65,313 | $93,943 | (30%) |
| Gross margin | 18,303 | 28,595 | (36%) |
| Operating income | 7,169 | 19,411 | (63%) |
| EBITDA | 12,079 | 23,443 | (48%) |
| Capital expenditures | 845 | 2,379 | (64%) |
The Engineering Systems division is still impacted by the global economic slowdown as customers continued to defer investment decisions. Order-backlog was $127 million on March 31, 2010, down 22% from $162 million on December 31, 2009. Order intake for the solar industry continues to be challenging, while some encouraging signs were seen in the nuclear and titanium markets. The backlog consists primarily of melting and remelting systems for the titanium and specialty steel industries.
First quarter 2010 revenue decreased by $28.6 million or 30%. Sales of solar silicon DSS melting furnaces for the photovoltaic industry decreased 47% in the first quarter 2010 compared to the same period in 2009. During the first quarter 2010, 45% of revenue was generated from sales of solar silicon and melting furnaces, down from 60% in the same period 2009. Revenue from remelting systems, primarily for the aerospace and specialty steel industries, decreased by 10% in the first quarter 2010.
Gross margin decreased 2% to 28% of revenue in the first quarter 2010 from the first quarter 2009. The decrease was due to changes in product mix and lower capacity utilization.
First quarter 2010 EBITDA was $12.1 million, a 48% decrease over the same period in 2009. The EBITDA margin decreased to 18% in the first quarter 2010 compared to 25% for the same period in 2009. The EBITDA margin decrease was attributable to the lower revenue and increases in research and development.
In the quarter ended March 31, 2010, capital expenditures were $0.8 million, 64% less than the first quarter of 2009. The division continued to focus on minimizing capital investment during quarter.
Graphit Kropfmühl
| Q1 ’10 | Q1 ’09 | Change | |
| Revenue | $29,946 | $23,616 | 27% |
| Gross profit | 3,145 | 2,374 | 32% |
| Operating income (loss) | 317 | (111) | N/A |
| EBITDA | 1,469 | 820 | 79% |
| Capital expenditures | 980 | 4,728 | (79%) |
Graphit Kropfmühl’s (“GK”) first quarter 2010 revenue increased by 27% primarily due to a 36% increase in natural graphite revenues as both prices and volumes increased over the first quarter 2009.
Gross margin improved to 11% of revenue in the first quarter 2010 from 10% of revenues in the first quarter 2009. The first quarter 2010 operating income was $0.3 million generated by the increase in revenue, slightly offset by higher SG&A costs.
First quarter 2010 EBITDA was $1.5 million, a 79% increase compared to the first quarter 2009. The EBITDA margin increased to 5% during the fourth quarter 2009 compared to 3% in the same period 2009. The EBITDA margin increase was largely attributable to the increase in revenue from natural graphite, offset by lower gross margin on silicon metal due to an increase in silicon metal production costs.
Capital expenditures decreased to $1.0 million for the first quarter 2010, 79% less than the same period 2009. The decrease in capital expenditures was a result of the completion of the expansion of the silicon metal facilities in early 2009.
Timminco
AMG owned 38.6% of Timminco’s common equity as of March 31, 2010. AMG accounts for its investment in Timminco via the equity accounting method. Timminco’s net loss for the first quarter 2010 is included in share of loss from associates on AMG’s income statement and the carrying value of AMG’s investment in Timminco of $16.4 million is listed as an asset on AMG’s balance sheet. Additional information on Timminco and its first quarter 2010 financial statements can be found at www.Timminco.com.
Financial Review
Tax
AMG recorded tax expense of $3.9 million in the quarter ended March 31, 2010 as compared to tax expense of $7.9 million in the quarter ended March 31, 2009. During the first quarter 2009, AMG was unable to book certain tax benefits due to some losses being generated in jurisdictions where AMG already had significant net operating losses. The mix of jurisdictional profitability in the first quarter 2010 allowed the Company to recognize certain benefits of those net operating losses, but the effective tax rate is still affected by losses in jurisdictions where benefits are unable to be booked.
Liquidity
| March 31, 2010 | December 31, 2009 | Change | |
| Total debt | 202,979 | $203,796 | (0%) |
| Cash & short-term Investments | 98,857 | 117,016 | (16%) |
| Net debt | 104,122 | 86,780 | 20% |
AMG has a net debt position of $104.1 million as of March 31, 2010.
Cash Flow
| Q1’10 | Q1’09 | |
| Operating cash flows from continuing operations | ($14,921) | 2,034 |
| Operating cash flows from discontinued operations | – | (3,096) |
| Net cash flows used in operations | $(14,921) | $(1,062) |
| Capital expenditures | (5,146) | (11,967) |
| Acquisitions, net of cash | (600) | – |
| Cash flows used in discontinued operations | – | (15,480) |
| Cash flows used in other investing | (191) | (10,502) |
| Net cash flows used in investing activities | (5,937) | (37,949) |
| Financing cash flows from continuing operations | 7,643 | 3,717 |
| Financing cash flows from discontinued operations | – | 20,720 |
| Cash flows generated from financing activities | 7,643 | 24,437 |
Cash flows used in operations were ($14.9) million for the first quarter 2010 as compared to ($1.1) million in 2009. First quarter 2010 cash flows used in operations increased significantly as a result of $12.1 million in tax payments made as well as a $14.9 million increase in working capital. These were offset by an improvement in overall profitability.
Cash used in investing activities was $5.9 million during the first quarter 2010. This decrease of $32.0 million from 2009 was primarily related to the $6.8 million decrease in capital investments, an $11.5 million decrease in investments in associates and a $15.5 million decrease in cash flows used by Timminco, which was classified as a discontinued operation, in the same period in 2009.
First quarter 2010 cash generated from financing activities was $7.6 million, a decrease of $16.8 million from the same period in 2009. This decrease was most notably attributable to cash flows from discontinued operations recognized in 2009 that are not applicable in 2010.
Outlook
The measures taken to reduce our cost structure in 2009 have positively impacted the results in the first quarter 2010. The market is showing signs of gradual improvement from the recession of 2008-2009. These signs of strength, while uneven, are encouraging. The Advanced Materials division is currently benefitting from increases in specialty metals prices and demand as the global economy is restocking, increasing inventory levels. Requests for new orders in Engineering Systems are slowly increasing; however these will take additional time to convert into firm orders, which should result in a slight improvement in order backlog in the second half of 2010. Graphit Kropfmühl’s end markets are also improving, particularly natural graphite demand. AMG’s focus on its core markets of aerospace, energy, infrastructure and specialty metals and chemicals will drive long term growth. In 2010, AMG expects that its portfolio of metals based technologies will produce improved results over 2009 levels.
AMG Advanced Metallurgical Group N.V.
Condensed interim consolidated income statement
| For the three months ended March 31 | ||||
| In thousands of US Dollars | 2010 | 2009 | ||
| Unaudited | Unaudited | |||
| Continuing operations | *Restated | |||
| Revenue | 235,793 | 215,719 | ||
| Cost of sales | 193,209 | 181,859 | ||
| Gross profit | 42,584 | 33,860 | ||
| Selling, general and administrative expenses | 30,614 | 29,039 | ||
| Restructuring expense | 7 | 198 | ||
| Environmental expense | 257 | 5 | ||
| Other income, net | (81) | (1,691) | ||
| Operating profit | 11,787 | 6,309 | ||
| Finance expense | 6,320 | 4,541 | ||
| Finance income | (547) | (613) | ||
| Foreign exchange gain | (2,164) | (1,097) | ||
| Net finance costs | 3,609 | 2,831 | ||
| Share of loss of associates | 4,395 | 787 | ||
| Profit before income tax | 3,783 | 2,691 | ||
| Income tax expense | 3,867 | 7,938 | ||
| Loss for the period from continuing operations | (84) | (5,247) | ||
| Loss after tax for the period from discontinued operations | – | (18,487) | ||
| Loss for the year | (84) | (23,734) | ||
| Attributable to: | ||||
| Shareholders of the Company | (64) | (15,394) | ||
| Minority interests | (20) | (8,340) | ||
| (84) | (23,734) | |||
| Earnings (loss) per share | ||||
| Basic earnings (loss) per share | 0.00 | (0.57) | ||
| Diluted earnings (loss) per share | 0.00 | (0.57) | ||
| Earnings (loss) per share for continuing operations | ||||
| Basic earnings (loss) per share from continuing operations | 0.00 | (0.22) | ||
| Diluted earnings (loss) per share from continuing operations | 0.00 | (0.22) | ||
*The prior year comparative information in the consolidated income statement and consolidated statement of cash flows has been restated to reflect a change in ownership of Timminco. See AMG’s annual financial statements for more information.
| AMG Advanced Metallurgical Group N.V. Condensed interim consolidated statement of financial position In thousands of US Dollars |
||||
| March 31, 2010 | December 31, 2009 | |||
| Unaudited | Audited | |||
| Assets | ||||
| Property, plant and equipment | 204,977 | 211,022 | ||
| Intangible assets | 26,351 | 28,253 | ||
| Investments in associates | 30,225 | 34,794 | ||
| Deferred tax assets | 9,688 | 10,912 | ||
| Restricted cash | 12,985 | 13,263 | ||
| Notes receivable | 2,328 | 5,542 | ||
| Derivative financial instruments | – | 1,718 | ||
| Other assets | 12,300 | 11,980 | ||
| Total non-current assets | 298,854 | 317,484 | ||
| Inventories | 180,630 | 193,378 | ||
| Trade and other receivables | 175,078 | 147,787 | ||
| Derivative financial instruments | 4,561 | 4,954 | ||
| Other assets | 32,621 | 30,359 | ||
| Cash and cash equivalents | 98,857 | 117,016 | ||
| Total current assets | 491,747 | 493,494 | ||
| Total assets | 790,601 | 810,978 | ||
| Equity | ||||
| Issued capital | 725 | 725 | ||
| Share premium | 379,518 | 379,518 | ||
| Other reserves | 27,858 | 31,284 | ||
| Retained earnings (deficit) | (198,961) | (198,897) | ||
| Equity attributable to shareholders of the Company | 209,140 | 212,630 | ||
| Minority interests | 15,007 | 15,793 | ||
| Total equity | 224,147 | 228,423 | ||
| Liabilities | ||||
| Loans and borrowings | 159,800 | 168,319 | ||
| Employee benefits | 86,917 | 91,358 | ||
| Provisions | 14,646 | 14,862 | ||
| Government grants | 588 | 669 | ||
| Other liabilities | 8,051 | 7,984 | ||
| Derivative financial instruments | 970 | 1,339 | ||
| Deferred tax liabilities | 13,252 | 26,395 | ||
| Total non-current liabilities | 284,224 | 310,926 | ||
| Loans and borrowings | 3,547 | 3,464 | ||
| Short term bank debt | 39,632 | 32,013 | ||
| Government grants | 205 | 234 | ||
| Other liabilities | 43,843 | 46,179 | ||
| Trade and other payables | 80,658 | 69,791 | ||
| Derivative financial instruments | 7,212 | 6,048 | ||
| Advance payments | 39,807 | 54,764 | ||
| Current taxes payable | 40,314 | 36,050 | ||
| Provisions | 27,012 | 23,086 | ||
| Total current liabilities | 282,230 | 271,629 | ||
| Total liabilities | 566,454 | 582,555 | ||
| Total equity and liabilities | 790,601 | 810,978 | ||
AMG Advanced Metallurgical Group N.V.
Condensed interim consolidated statement of cash flows
| For the three months ended March 31 | |||
| In thousands of US Dollars | 2010 | 2009 | |
| Unaudited | Unaudited | ||
| Cash flows used in operating activities | *Restated | ||
| Loss for the period from continuing operations | (84) | (5,247) | |
| Loss for the period from discontinued operations | – | (18,487) | |
| Loss for the period | (84) | (23,734) | |
| Adjustments to reconcile profit (loss) to net cash flows: | |||
| Non-cash: | |||
| Depreciation and amortization | 6,181 | 4,929 | |
| Restructuring expense | 7 | 198 | |
| Environmental expense | 257 | 5 | |
| Net finance costs | 3,610 | 2,830 | |
| Share of loss of associates | 4,395 | 787 | |
| Equity-settled share-based payment transactions | 1,650 | 3,353 | |
| Cash-settled share-based payment transactions | (309) | – | |
| Income tax expense | 3,867 | 7,938 | |
| Change in working capital and provisions | (23,210) | (9,180) | |
| Other | 2,410 | (474) | |
| Interest paid, net | (1,616) | (1,189) | |
| Income tax paid, net | (12,079) | (1,916) | |
| Cash flows from discontinued operations | – | 15,391 | |
| Net cash flows used in operating activities | (14,921) | (1,062) | |
| Cash flows used in investing activities | |||
| Proceeds from sale of property, plant and equipment | 17 | – | |
| Acquisition of associates | (600) | – | |
| Acquisition of property, plant and equipment and intangibles | (5,146) | (11,967) | |
| Investments in associates | – | (11,519) | |
| Change in restricted cash | (208) | 1,005 | |
| Other | – | 12 | |
| Cash flows used in discontinued operations | – | (15,480) | |
| Net cash flows used in investing activities | (5,937) | (37,949) | |
| Cash flows from financing activities | |||
| Net proceeds from issuance of debt | 7,582 | 3,639 | |
| Other | 61 | 78 | |
| Cash flows from discontinued operations | – | 20,720 | |
| Net cash flows from financing activities | 7,643 | 24,437 | |
| Net decrease in cash and cash equivalents | (13,215) | (14,574) | |
| Cash and cash equivalents at January 1 | 117,016 | 143,473 | |
| Effect of exchange rate fluctuations and consolidation changes on cash | (4,944) | (6,126) | |
| Cash and cash equivalents at March 31 | 98,857 | 122,773 |
*The prior year comparative information in the consolidated income statement, and consolidated statement of cash flows has been restated to reflect a change in ownership of Timminco. See AMG’s annual financial statements for more information.
About AMG
AMG, incorporated in the Netherlands, is a global leader in the production of highly engineered specialty metal products and advanced vacuum furnace systems. AMG serves growing industries worldwide with its unique combination of metallurgical engineering expertise and production know-how. AMG is a market leader in many of its products and systems, which are critical to the production of key components for the aerospace, energy (including solar and nuclear), electronics, optics, chemicals, construction and transportation industries. AMG has two operating divisions of businesses, Advanced Materials and Engineering Systems, and owns interests in publicly-listed companies Graphit Kropfmühl AG (Deutsche Börse: GKR.DE) and Timminco Limited (TSX: “TIM”).
The Advanced Materials Division develops and produces niche specialty metals and complex metals products, many of which are used in demanding, safety-critical, high-stress environments. AMG is one of a limited number of significant producers globally of niche specialty metals, such as ferrovanadium, ferronickel-molybdenum, aluminum master alloys and additives, chromium metal and ferrotitanium, used by steel, aluminum, chemical and superalloy producers for aerospace, automotive, energy, electronics, optics, chemicals, construction and other applications. Other key products produced by AMG include specialty alloys for titanium and superalloys, coating materials, tantalum and niobium oxides, vanadium chemicals and antimony trioxide.
The Engineering Systems Division designs, engineers and produces advanced vacuum furnace systems and operates vacuum heat treatment facilities. AMG is a global leader in supplying technologically-advanced vacuum furnace systems to customers in the aerospace, energy (including solar and nuclear), transportation, electronics, superalloys and specialty steel industries. Examples of furnace systems produced by AMG include vacuum remelting, solar silicon melting and crystallization, vacuum induction melting, vacuum heat treatment and high pressure gas quenching, vacuum precision casting, turbine blade coating and sintering. AMG also provides vacuum case-hardening heat treatment services on a tolling basis to customers through facilities equipped with vacuum heat treatment furnaces.
Graphit Kropfmühl AG is a majority controlled, publicly listed subsidiary of AMG. Based on its secure raw material sources in Africa, China and Europe, Graphit Kropfmühl is a specialist in the production of silicon metal and the extraction, processing and refining of natural crystalline graphite for a wide range of energy saving industrial applications.
Timminco Limited is a publicly listed affiliate of AMG. Timminco produces silicon metal for the chemical, aluminum, electronic and solar industries. Timminco also produces solar grade silicon, using its proprietary technology for purifying silicon metal, for the solar energy industry.
AMG operates globally with production facilities in Germany, the United Kingdom, France, Czech Republic, the United States, Canada, Mexico, Brazil, Sri Lanka and Australia and also has sales and customer service offices in Belgium, Russia, China and Japan (website: www.amg-nv.com).
For further information please contact:
AMG Advanced Metallurgical Group N.V. +1 610 975 4901
Jonathan Costello
Vice President of Corporate Communications
jcostello@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.
The full press release including tables can be downloaded from the following link:
AMG reports first quarter 2010 results