AMG reports first quarter 2010 results

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.


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AMG reports first quarter 2010 results