Key Highlights
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AMG ended the year net debt free, reducing net debt by $88.9 million in 2015, or $3.22 per ordinary share
- Fourth quarter 2015 cash flows from operating activities were $33.6 million, a 48% increase over the same period in 2014
- EBITDA(3) was $75.6 million in 2015, $85.7 million when adjusted for foreign currency translation effects(4)
- Full year profit before income tax increased by 38% to $28.6 million in 2015 from $20.7 million in 2014
- Total 2015 dividend proposed of €0.21 per ordinary share, including the interim dividend of €0.10, paid on September 16, 2015
- AMG provides strategy update, including growth plan to pursue organic and acquisition opportunities
Amsterdam, 11 March 2016 (Regulated Information) — AMG Advanced Metallurgical Group N.V. (« AMG », EURONEXT AMSTERDAM: « AMG ») reported a net debt reduction of $88.9 million in 2015, ending the year net debt free with net cash of $1.0 million. The EBITDA for 2015 amounted to $75.6 million, a 12% decrease from $85.7 million in 2014. Fourth quarter EBITDA decreased to $9.7 million from $21.9 million in 2014.
Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, « AMG cash flow for the fourth quarter was strong thanks to the pro-active steps taken by management to mitigate price risk and reduce cost. AMG ended the year free of net debt, exceeding management’s deleveraging target by a considerable margin.
AMG Engineering achieved EBITDA of $2.6 million during the quarter, in line with 2014. Strong demand in the areas of heat treatment furnaces for the automotive market, plasma remelting furnaces for the aerospace market and induction furnaces for powder metallurgy applications resulted in an improvement in year ending order backlog of 10%, compared to December 31, 2014.
AMG Critical Materials profitability was adversely affected by non-cash expenses related to vanadium inventory adjustments of $4.4 million during the fourth quarter 2015. Despite double-digit declines in market pricing for all key products in 2015, AMG’s continuing focus on operating performance resulted in solid financial results in all eight Critical Materials business units on a full year basis.
Despite the severe headwinds in the market, AMG generated free cash flow of $55.8 million during 2015, the second highest free cash flow in the company’s history. We are pleased to be able to propose a full year dividend of €0.21 to our shareholders.
Growth strategy update
Following three years of intense focus on cash flow optimization and debt reduction, we now find ourselves with significant available capital and a unique opportunity to grow both organically as well as through select acquisitions.
AMG’s organic growth strategy is focused on certain critical materials within our portfolio that are marked by strong demand growth or supply limitations. We have a number of projects which we have continued to develop during our austerity period which we are now beginning to progress.
Our acquisition strategy is very selective. We have developed a list of acquisition targets, each of which would be synergistic with our current businesses, and provide incremental technology or market share growth. AMG is the result of an acquisition strategy and we are fundamentally value buyers. We would expect every acquisition we undertake to be accretive to our earnings per share. »
Key Figures
| In 000’s US Dollar | ||||||
| Q4 ’15 | Q4 ’14 | Change | FY ’15 | FY ’14 | Change | |
| Revenue | $220,842 | $260,378 | (15%) | $977,143 | $1,093,889 | (11%) |
| Gross profit | 32,385 | 44,918 | (28%) | 159,960 | 184,292 | (13%) |
| Gross margin | 14.7% | 17.3% | 16.4% | 16.8% | ||
| Operating profit | 4,191 | 3,698 | 13% | 36,163 | 40,632 | (11%) |
| Operating margin | 1.9% | 1.4% | 3.7% | 3.7% | ||
| Profit before income tax | 2,275 | (2,237) | N/A | 28,568 | 20,676 | 38% |
| Net (loss) income attributable to shareholders | (337) | 7,310 | N/A | 11,080 | 21,910 | (49%) |
| Net (loss) income attributable to shareholders, adjusted for one-time refinancing costs | (337) | 7,310 | N/A | 16,452 | 21,910 | (25%) |
| EPS – Fully diluted | (0.01) | 0.26 | N/A | 0.40 | 0.79 | (49%) |
| EPS – Fully diluted, adjusted for one-time refinancing costs | (0.01) | 0.26 | N/A | 0.59 | 0.79 | (25%) |
| EBIT (2) | 2,043 | 13,813 | (85%) | 46,032 | 53,238 | (14%) |
| EBITDA (3) | 9,676 | 21,858 | (56%) | 75,622 | 85,732 | (12%) |
| EBITDA margin | 4.4% | 8.4% | 7.7% | 7.8% | ||
| Cash flows from operating activities | 33,550 | 22,664 | 48% | 76,308 | 95,114 | (20%) |
Notes:
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Free cash flow is defined as cash flows from operating activities less cash flows used in investing activities.
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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.
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EBITDA adjusted for foreign currency translation effects is explained under ‘Currency Fluctuations’.
Operational Review
AMG Critical Materials
| Q4 ’15 | Q4 ’14 | Change | FY ’15 | FY ’14 | Change | |
| Revenue | $166,275 | $199,501 | (17%) | $757,492 | 873,439 | (13%) |
| Gross profit | * 20,733 | 33,846 | (39%) | ** 111,153 | 142,479 | (22%) |
| Operating profit | 2,559 | 10,840 | (76%) | 31,630 | 53,831 | (41%) |
| EBITDA | 7,039 | 19,169 | (63%) | 60,798 | 82,605 | (26%) |
* Includes $4.4 million non-cash expense related to vanadium, nickel and molybdenum inventory adjustments in the fourth quarter 2015
** Includes $6.5 million non-cash expense related to vanadium, nickel and molybdenum inventory adjustments in the full year 2015
AMG Critical Materials continues to be impacted by unfavorable Euro to US Dollar currency translation effects and lower metal prices, and as a result, fourth quarter 2015 revenue decreased by 17%, to $166.3 million.
The reduction in market prices of antimony, vanadium, molybdenum, nickel and aluminum of 38%, 47%, 48%, 40% and 24%, respectively, negatively affected revenue in the fourth quarter of 2015 compared to the fourth quarter of 2014.
Gross profit in the fourth quarter decreased $13.1 million, or 39%, to $20.7 million, driven primarily by a non-cash inventory adjustment expense of $4.4 incurred due to rapidly falling vanadium, nickel and molybdenum prices, foreign currency translation effects and lower sales volumes.
Full year 2015 sales volumes were largely in line with 2014, with the exception of Aluminum, which decreased due to a planned reduction in capacity, and Titanium Master Alloys, which decreased due to product mix optimization.
AMG Engineering
| Q4 ’15 | Q4 ’14 | Change | FY ’15 | FY ’14 | Change | |
| Revenue | $54,567 | $60,877 | (10%) | $219,651 | $220,450 | – |
| Gross profit | 11,652 | 11,072 | 5% | 48,807 | 41,813 | 17% |
| Operating profit (loss) | 1,632 | (7,142) | N/A | 4,533 | (13,199) | N/A |
| EBITDA | 2,637 | 2,689 | (2%) | 14,824 | 3,127 | 374% |
AMG Engineering signed $48.0 million in new orders during the fourth quarter of 2015, representing a 0.88x book to bill ratio. Order backlog was $140.9 million as of December 31, 2015, a 10% increase from $128.3 million as of December 31, 2014.
AMG Engineering’s fourth quarter 2015 revenue decreased $6.3 million, or 10%, to $54.6 million, as an increase in local currency revenues was more than offset by foreign currency translation effects. Revenue generated from heat treatment furnaces, remelting furnaces and heat treatment services increased in the fourth quarter of 2015 compared to the fourth quarter of 2014.
Fourth quarter 2015 gross margin increased to 21% from 18% in the fourth quarter of 2014 due to higher revenue in local currency, product mix effects and improved project cost management.
EBITDA of $2.6 million in the fourth quarter of 2015 was in line with the same period in 2014.
Financial Review
Tax
AMG recorded an income tax expense of $18.7 million in 2015 as compared to a tax benefit of $1.0 million in 2014. The largest driver of this variance relates to the one-time recognition of US tax benefits in 2014.
The effective tax rate of 65% in 2015 was negatively impacted by the currency effect of the Brazilian Real on deferred taxes and refinancing costs of $5.4 million in the second quarter of 2015, for which no tax benefit could be recognized.
AMG paid taxes of $5.7 million in 2015 as compared to tax payments of $6.3 million in 2014. AMG’s effective cash tax rate was 20% in 2015, as compared to 30% in 2014.
SG&A
AMG’s fourth quarter 2015 SG&A expenses were $30.4 million, down slightly from $31.2 million in the fourth quarter 2014. A reduction in professional fees of $2.0 million between the fourth quarter 2015 and the fourth quarter 2014 was partially offset by an increase in project related costs.
Full year 2015 SG&A expenses were $122.3 million, an 8% reduction from $133.5 million in 2014.
Non-Recurring Items
AMG’s fourth quarter 2015 operating profit of $4.2 million includes non-recurring items, which are not included in the calculation of EBITDA.
A summary of non-recurring items in the fourth quarter 2015 and 2014 are below:
Non-recurring items included in operating profit
| Q4 ’15 | Q4 ’14 | Change | ||||
| Restructuring expense | ($3,011) | $3,059 | N/A | |||
| Asset impairment expense | – | 1,867 | N/A | |||
| Environmental | 1,529 | 5,544 | (72%) | |||
| Total non-recurring items included in operating profit | (1,482) | 10,470 | N/A | |||
Net income in the fourth quarter 2015 was positively impacted by the revision of a restructuring plan related to cost reduction initiatives as well as the release of a value-added tax provision.
During the fourth quarter 2015, AMG recorded non-recurring environmental accrual of $1.5 million related to its Newfield, NJ site.
Liquidity
| December 31, 2015 | December 31, 2014 | Change | |
| Total debt | $126,743 | $195,878 | (35%) |
| Cash and cash equivalents | 127,778 | 108,029 | 18% |
| Net (cash) debt | (1,035) | 87,849 | N/A |
AMG had a net cash position of $1.0 million as of December 31, 2015. Net debt and gross debt decreased $88.9 million and $69.1 million, respectively, from December 31, 2014.
Cash flows from operating activities were $76.3 million in 2015 compared to $95.1 million in 2014.
Capital expenditures decreased to $23.3 million in 2015 compared to $24.0 million in 2014. Capital spending in 2015 included $13.1 million of maintenance capital. The largest expansion capital project was for AMG’s titanium aluminides business.
Including the $127.8 million of cash, AMG had $282.7 million of total liquidity as of December 31, 2015.
Currency Fluctuations
AMG’s financial statements are prepared in US Dollars, so fluctuations in the exchange rate between the US Dollar and other currencies, primarily the Euro and Brazilian Real, have an effect on the results of operations and on the reported value of assets and liabilities as measured in US Dollars.
The appreciation of the US Dollar as of December 31, 2015 compared to December 31, 2014, resulted in a decrease of $47 million and $36 million in assets and liabilities on the balance sheet, respectively. The appreciation of the US Dollar compared to the Euro in the fourth quarter of 2015 in relation to the fourth quarter of 2014, resulted in a reduction in revenue and EBITDA of $24 million and $2 million, respectively. On a full year basis, the appreciation of the US Dollar compared to the Euro resulted in a reduction in revenue and EBITDA of $109 million and $10 million, respectively, compared to the prior year.
EBITDA adjusted for Euro foreign currency translation effects is therefore $85.7 million for full year 2015.
Divestment
On February 29, 2016, AMG sold its 100% ownership interest in Intellifast, GmbH to Aero Products Invest GmbH of Augsburg, Germany.
Final Dividend Proposed
AMG intends to declare a dividend of €0.21 per ordinary share over the financial year 2015. The interim dividend of €0.10, paid on September 16, 2015, will be deducted from the amount to be distributed to shareholders. The proposed final dividend per ordinary share therefore amounts to €0.11.
A proposal to resolve upon the final dividend distribution will be included on the agenda for the annual general meeting to be held on May 4, 2016.
Outlook
In this challenging market environment, AMG’s management target is to continue to generate strong operating cash flow and maintain 2015 levels of profitability in 2016.
| AMG Advanced Metallurgical Group N.V. | ||
| Consolidated Income Statement | ||
| For the quarter ended December 31 | ||
| In thousands of US Dollars | 2015 | 2014 |
| Unaudited | Unaudited | |
| Continuing operations | ||
| Revenue | 220,842 | 260,378 |
| Cost of sales | 188,457 | 215,460 |
| Gross profit | 32,385 | 44,918 |
| Selling, general and administrative expenses | 30,400 | 31,241 |
| Restructuring expense | (3,011) | 3,059 |
| Asset impairment expense | – | 1,867 |
| Environmental | 1,529 | 5,544 |
| Other income, net | (724) | (491) |
| Operating profit | 4,191 | 3,698 |
| Finance income | (786) | (386) |
| Finance expense | 2,219 | 5,846 |
| Foreign exchange gain | 865 | 537 |
| Net finance costs | 2,298 | 5,997 |
| Share of profit of associates and joint ventures | 382 | 62 |
| Profit (loss) before income tax | 2,275 | (2,237) |
| Income tax expense (benefit) | 4,416 | (9,884) |
| (Loss) profit for the period | (2,141) | 7,647 |
| Attributable to: | ||
| Shareholders of the Company | (337) | 7,310 |
| Non-controlling interests | (1,804) | 337 |
| (Loss) profit for the period | (2,141) | 7,647 |
| Earnings per share | ||
| Basic earnings per share | (0.01) | 0.26 |
| Diluted earnings per share | (0.01) | 0.26 |
| AMG Advanced Metallurgical Group N.V. | ||
| Consolidated Income Statement | ||
| For the year ended December 31 | ||
| In thousands of US Dollars | 2015 | 2014 |
| Unaudited | ||
| Continuing operations | ||
| Revenue | 977,143 | 1,093,889 |
| Cost of sales | 817,183 | 909,597 |
| Gross profit | 159,960 | 184,292 |
| Selling, general and administrative expenses | 122,331 | 133,500 |
| Restructuring expense | 3,103 | 4,870 |
| Asset impairment expense | – | 1,867 |
| Environmental | (757) | 5,544 |
| Other income, net | (880) | (2,121) |
| Operating profit | 36,163 | 40,632 |
| Finance income | (1,328) | (924) |
| Finance expense | 11,267 | 19,944 |
| Foreign exchange (gain) loss | (1,712) | 529 |
| Net finance costs | 8,227 | 19,549 |
| Share of gain (loss) of associates and joint ventures | 632 | (407) |
| Profit before income tax | 28,568 | 20,676 |
| Income tax expense (benefit) | 18,651 | (972) |
| Profit for the year | 9,917 | 21,648 |
| Attributable to: | ||
| Shareholders of the Company | 11,080 | 21,910 |
| Non-controlling interests | (1,163) | (262) |
| Profit for the year | 9,917 | 21,648 |
| Earnings per share | ||
| Basic earnings per share | 0.40 | 0.79 |
| Diluted earnings per share | 0.40 | 0.79 |
| AMG Advanced Metallurgical Group N.V. | ||
| Consolidated Statement of Financial Position | ||
| As at December 31 | ||
| In thousands of US Dollars | 2015 | 2014 |
| Unaudited | ||
| Assets | ||
| Property, plant and equipment | 215,833 | 237,418 |
| Goodwill | 18,676 | 20,618 |
| Intangible assets | 10,246 | 11,116 |
| Investments in associates and joint ventures | 2,230 | 1,450 |
| Other investments | 14,000 | – |
| Deferred tax assets | 31,551 | 37,903 |
| Restricted cash | 2,527 | 7,582 |
| Other assets | 19,883 | 21,987 |
| Total non-current assets | 314,946 | 338,074 |
| Inventories | 126,389 | 145,418 |
| Trade and other receivables | 124,270 | 135,293 |
| Derivative financial instruments | 978 | 1,997 |
| Other assets | 27,648 | 47,055 |
| Assets held for sale | 673 | 2,553 |
| Cash and cash equivalents | 127,778 | 108,029 |
| Total current assets | 407,736 | 440,345 |
| Total assets | 722,682 | 778,419 |
| AMG Advanced Metallurgical Group N.V. | ||
| Consolidated Statement of Financial Position | ||
| (continued) | ||
| As at December 31 | ||
| In thousands of US Dollars | 2015 | 2014 |
| Unaudited | ||
| Equity | ||
| Issued capital | 745 | 745 |
| Share premium | 382,978 | 382,978 |
| Other reserves | (49,500) | (59,728) |
| Retained earnings (deficit) | (205,662) | (225,843) |
| Equity attributable to shareholders of the Company | 128,561 | 98,152 |
| Non-controlling interests | 25,006 | 2,825 |
| Total equity | 153,567 | 100,977 |
| Liabilities | ||
| Loans and borrowings | 112,217 | 167,990 |
| Employee benefits | 137,853 | 159,672 |
| Provisions | 29,617 | 37,056 |
| Deferred revenue | 13,539 | 8,950 |
| Government grants | 536 | 666 |
| Other liabilities | 8,821 | 8,885 |
| Derivative financial instruments | 5,642 | 5,056 |
| Deferred tax liabilities | 11,691 | 8,261 |
| Total non-current liabilities | 319,916 | 396,536 |
| Loans and borrowings | 3,222 | 6,562 |
| Short term bank debt | 11,304 | 21,326 |
| Government grants | 99 | 88 |
| Liabilities associated with assets held for sale | 423 | 248 |
| Other liabilities | 42,872 | 53,257 |
| Trade and other payables | 108,019 | 134,373 |
| Derivative financial instruments | 8,379 | 9,104 |
| Advance payments | 44,184 | 31,689 |
| Deferred revenue | 16,124 | 8,414 |
| Current taxes payable | 3,093 | 671 |
| Provisions | 11,480 | 15,174 |
| Total current liabilities | 249,199 | 280,906 |
| Total liabilities | 569,115 | 677,442 |
| Total equity and liabilities | 722,682 | 778,419 |
| AMG Advanced Metallurgical Group N.V. | ||
| Consolidated Statement of Cash Flows | ||
| For the year ended December 31 |
||
| In thousands of US Dollars | 2015 | 2014 |
| Unaudited | ||
| Cash flows from operating activities | ||
| Profit for the year | 9,917 | 21,648 |
| Adjustments to reconcile net profit to net cash flows: | ||
| Non-cash: | ||
| Income tax expense | 18,651 | (972) |
| Depreciation and amortization | 29,590 | 32,494 |
| Asset impairment expense | – | 1,867 |
| Net finance costs | 8,227 | 19,549 |
| Share of (profit) loss of associates and joint ventures | (632) | 407 |
| Loss on sale or disposal of property, plant and equipment | 2 | 297 |
| Equity-settled share-based payment transactions | 5,041 | 854 |
| Movement in provisions, pensions and government grants | 1,062 | 44 |
| Working capital and deferred revenue adjustments | 21,551 | 38,991 |
| Cash flows from operating activities | 93,409 | 115,179 |
| Finance costs paid, net | (11,394) | (13,813) |
| Income tax paid, net | (5,707) | (6,252) |
| Net cash flows from operating activities | 76,308 | 95,114 |
| Cash flows used in investing activities | ||
| Proceeds from sale of property, plant and equipment | 709 | 493 |
| Proceeds from sale of subsidiaries (net of cash divested of $1,384 in 2015 (2014:nil)) | (1,567) | 354 |
| Acquisition of property, plant and equipment and intangibles | (23,264) | (23,957) |
| Change in restricted cash | 4,812 | (105) |
| Acquisition of other non-current asset investments | (1,200) | – |
| Other | (16) | 184 |
| Net cash flows used in investing activities | (20,526) | (23,031) |
| AMG Advanced Metallurgical Group N.V. | ||
| Condensed interim consolidated statement of cash flows | ||
| (continued) | ||
| For the year ended December 31 | ||
| In thousands of US Dollars | 2015 | 2014 |
| Unaudited | ||
| Cash flows used in financing activities | ||
| Proceeds from issuance of debt | 188,890 | 2,691 |
| Payment of transaction costs related to debt issuance | (5,081) | – |
| Repayment of borrowings | (248,490) | (60,649) |
| Change in non-controlling interests | 38,740 | 28 |
| Dividends paid | (3,134) | – |
| Other | (34) | 5 |
| Net cash flows used in financing activities | (29,109) | (57,925) |
| Net increase in cash and cash equivalents | 26,673 | 14,158 |
| Cash and cash equivalents at January 1 | 108,029 | 103,067 |
| Effect of exchange rate fluctuations on cash held | (6,924) | (9,196) |
| Cash and cash equivalents at December 31 | 127,778 | 108,029 |
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 and Sri Lanka, 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.