Key Highlights
- Revenue was $279.7 million in the third quarter 2014, a 2% decrease from the same period in 2013
- EBITDA([1]) was $23.4 million in the third quarter 2014, a 32% increase from the same period in 2013
- EPS on a fully diluted basis was $0.12 in the third quarter 2014, a 140% increase from the same period in 2013
- Cash flows from operating activities were $47.7 million in the third quarter 2014, compared to $24.7 million in the same period in 2013; record nine month free cash flow generation of $55.5[2] million
- As of September 30, 2014, cash on the balance sheet was $122.2 million; net debt was $103.9 million, a reduction of $56.7 million during 2014
Amsterdam, 7 November 2014 (Regulated Information) --- AMG Advanced Metallurgical Group N.V. ("AMG", EURONEXT AMSTERDAM: "AMG") reported third quarter 2014 revenue of $279.7 million, a 2% decrease from $286.4 million in the third quarter 2013. Net income attributable to shareholders for the third quarter 2014 was $3.2 million, or $0.12 per fully diluted share, an increase from $1.4 million, or $0.05 in the third quarter 2013. EBITDA increased 32% to $23.4 million in the third quarter 2014 from $17.7 million in the third quarter 2013.
Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, "AMG's efforts to improve its balance sheet and create financial flexibility have been a remarkable success. AMG generated record free cash flow for the first nine months of 2014 and reduced net debt by over $56 million, or 35%. This was accomplished despite subdued market conditions, through cost reductions, improved working capital management and disciplined capital spending. In the third quarter, AMG Processing and AMG Mining increased year over year gross margins through a focus on providing higher value-added products. AMG Engineering improved profitability compared to the second quarter 2014 and generated significant order intake."
Key Figures
| In 000's US Dollar | |||||||||
| Q3 '14 | Q3 '13 | Change | |||||||
| Revenue | $279,718 | $286,415 | (2%) | ||||||
| Gross profit | 48,059 | 39,792 | 21% | ||||||
| Gross margin | 17.2% | 13.9% | |||||||
| Operating profit | 14,999 | 7,275 | 106% | ||||||
| Operating margin | 5.4% | 2.5% | |||||||
| Net income attributable to shareholders | 3,236 | 1,407 | 130% | ||||||
| EPS- Fully diluted | 0.12 | 0.05 | 140% | ||||||
| EBIT (1) | 15,285 | 9,623 | 59% | ||||||
| EBITDA (2) | 23,414 | 17,701 | 32% | ||||||
| EBITDA margin | 8.4% | 6.2% | |||||||
| Cash flows from operating activities | 47,662 | 24,687 | 93% | ||||||
Note:
- EBIT is defined as earnings before interest, tax and excludes non-recurring items
- EBITDA is defined as earnings before interest, tax, depreciation and amortization and excludes non-recurring items
Operational Review
AMG Processing
| Q3 '14 | Q3 '13 | Change | |
| Revenue | $134,479 | $138,068 | (3%) |
| Gross profit | 20,493 | 13,008 | 58% |
| Operating profit | 8,724 | 814 | 972% |
| EBITDA | 11,911 | 4,629 | 157% |
AMG Processing's third quarter 2014 revenue decreased $3.6 million, or 3% to $134.5 million. A 78% increase in ferrovanadium volume was offset by a 28% decline in chrome volume, as AMG focused on higher margin, lower volume, chrome products. Improved product mix and increased operating efficiencies in the AMG Vanadium, Superalloys and Titanium Alloy and Coatings units all contributed to the increase in gross margin to 15.2% from 9.4% in the third quarter 2013. The increase in gross profit resulted in 157% improvement in EBITDA.
AMG Engineering
| Q3 '14 | Q3 '13 | Change | |
| Revenue | $61,132 | $66,093 | (8%) |
| Gross profit | 10,484 | 13,979 | (25%) |
| Operating (loss) profit | (1,384) | 475 | (391%) |
| EBITDA | 709 | 4,179 | (83%) |
AMG Engineering's third quarter 2014 revenue decreased $5.0 million, or 8%, to $61.1 million due to pricing pressure and delays in order intake. The third quarter 2014 gross margin decreased to 17%, from 21% in the third quarter 2013, due to reduced economies of scale and pricing pressure. The $3.5 million decline in gross profit directly corresponded to the decline in EBITDA.
AMG Engineering signed $66.9 million in new orders during the third quarter 2014, a 1.09x book to bill ratio. Order backlog was $141.1 million as of September 30, 2014 and excluding the impact of currency, the backlog increased 3% from June 30, 2014. Heat treatment furnaces accounted for approximately 43% of the order intake.
AMG Mining
| Q3 '14 | Q3 '13 | Change | |
| Revenue | $84,107 | $82,254 | 2% |
| Gross profit | 17,082 | 12,805 | 33% |
| Operating profit | 7,659 | 5,986 | 28% |
| EBITDA | 10,794 | 8,893 | 21% |
AMG Mining's third quarter 2014 revenue increased $1.9 million, or 2%, to $84.1 million, with increases in tantalum, graphite and silicon revenues offsetting declines in antimony. AMG Mineração's revenue grew due to a 50% increase in tantalum volume. AMG Graphite's revenue improved primarily due to a 13% increase in volume, despite lower prices. Third quarter 2014 gross margins increased to 20.3% from 15.6% in the third quarter 2013 due to increased revenue from higher value-added products and the recent production efficiency improvements. EBITDA increased 21%, to 13% of revenue, primarily due to the 33% improvement in gross profit.
Financial Review
SG&A
AMG's third quarter 2014 SG&A expenses were $33.1 million, up slightly from $32.3 million in the third quarter 2013. A one-time charge for an update to the long-term pension liability resulted in the increase in SG&A.
Non-Recurring Items
AMG did not incur any material non-recurring charges during the third quarter 2014. In the third quarter 2013 AMG incurred $1.8 million of charges consisting primarily of $1.3 million and $0.3 million for AMG Engineering and AMG Mining restructuring, respectively.
Liquidity
| September 30, 2014 | December 31, 2013 | Change | ||
| Total debt | $226,092 | $263,580 | (14%) | |
| Cash and cash equivalents | 122,230 | 103,067 | 19% | |
| Net debt | 103,862 | 160,513 | (35%) | |
AMG had a net debt position of $103.9 million as of September 30, 2014. The net debt decreased $56.7 million from December 31, 2013 due to strong cash flow from operations and lower capital spending.
Cash flows from operating activities were $72.5 million in the first nine months of 2014 compared to $57.3 million in the first nine months of 2013. The improvement is primarily attributable to the $1.8 million increase in EBITDA and the $9.5 million reduction in financing and tax payments during 2014.
Capital expenditures declined $5.3 million in the first nine months of 2014 compared to the first nine months of 2013. The $17.2 million of capital spending in the first nine months of 2014 included $8.4 million of maintenance capital. The largest expansion capital projects were for AMG TAC's titanium aluminides, AMG Silicon efficiency improvements, and increased capacity of higher value-added graphite products.
Including the $122.2 million of cash, AMG had $191.6 million of total liquidity as of September 30, 2014.
Engineering Strategic Alternatives Update
As previously announced, AMG has retained a financial advisor to evaluate a potential IPO of ALD. Equity markets for small cap IPOs have not cooperated for such a transaction to go forward. We will continue to update the market accordingly.
Outlook
In this challenging environment, AMG has generated significant free cash flow and considerably reduced gross and net debt. AMG expects full year 2014 EBITDA growth in excess of 10%. 2014 net income and ROCE will substantially exceed 2013 levels, despite the weakening global economic outlook. AMG is well positioned to further reduce debt through increased profitability and selective capital spending in 2015.
AMG Advanced Metallurgical Group N.V.
Condensed interim consolidated income statement
| For the quarter ended September 30 | |||||
| In thousands of US Dollars | 2014 | 2013 | |||
| Unaudited | Unaudited | ||||
| Revenue | 279,718 | 286,415 | |||
| Cost of sales | 231,659 | 246,623 | |||
| Gross profit | 48,059 | 39,792 | |||
| Selling, general and administrative expenses | 33,125 | 32,343 | |||
| Restructuring expense | 19 | 1,753 | |||
| Other income, net | (84) | (1,579) | |||
| Operating profit | 14,999 | 7,275 | |||
| Finance expense | 3,671 | 6,347 | |||
| Finance income | (197) | (324) | |||
| Foreign exchange gain | (22) | (358) | |||
| Net finance costs | 3,452 | 5,665 | |||
| Share of (loss) profit of associates and joint ventures | (1,252) | 26 | |||
| Profit before income tax | 10,295 | 1,636 | |||
| Income tax expense | 7,101 | 459 | |||
| Profit for the period | 3,194 | 1,177 | |||
| Attributable to: | |||||
| Shareholders of the Company | 3,236 | 1,407 | |||
| Non-controlling interests | (42) | (230) | |||
| Profit for the period | 3,194 | 1,177 | |||
| Earnings per share | |||||
| Basic earnings per share | 0.12 | 0.05 | |||
| Diluted earnings per share | 0.12 | 0.05 | |||
AMG Advanced Metallurgical Group N.V.
Condensed interim consolidated income statement
| For the nine months ended September 30 | |||||
| In thousands of US Dollars | 2014 | 2013 | |||
| Unaudited | Unaudited | ||||
| Revenue | 833,511 | 874,421 | |||
| Cost of sales | 694,137 | 737,753 | |||
| Gross profit | 139,374 | 136,668 | |||
| Selling, general and administrative expenses | 102,259 | 102,354 | |||
| Asset impairment expense | - | 49,703 | |||
| Restructuring expense | 1,811 | 8,488 | |||
| Other income, net | (1,630) | (1,970) | |||
| Operating profit (loss) | 36,934 | (21,907) | |||
| Finance expense | 14,098 | 17,384 | |||
| Finance income | (538) | (640) | |||
| Foreign exchange gain | (8) | (313) | |||
| Net finance costs | 13,552 | 16,431 | |||
| Share of loss of associates and joint ventures | (469) | (530) | |||
| Profit (loss) before income tax | 22,913 | (38,868) | |||
| Income tax expense | 8,912 | 2,383 | |||
| Profit (loss) for the period | 14,001 | (41,251) | |||
| Attributable to: | |||||
| Shareholders of the Company | 14,600 | (38,363) | |||
| Non-controlling interests | (599) | (2,888) | |||
| Profit (loss) for the period | 14,001 | (41,251) | |||
| Earnings (loss) per share | |||||
| Basic earnings (loss) per share | 0.53 | (1.39) | |||
| Diluted earnings (loss) per share | 0.53 | (1.39) | |||
| AMG Advanced Metallurgical Group N.V. | |||||||||
| Condensed interim consolidated statement of financial position In thousands of US Dollars | |||||||||
| Sept 30, 2014 | Dec 31, 2013 | ||||||||
| Unaudited | |||||||||
| Assets | |||||||||
| Property, plant and equipment | 240,954 | 259,683 | |||||||
| Goodwill | 23,196 | 25,078 | |||||||
| Intangible assets | 11,245 | 12,116 | |||||||
| Investments in associates and joint ventures | 1,476 | 4,755 | |||||||
| Derivative financial instruments | - | 271 | |||||||
| Deferred tax assets | 30,995 | 27,003 | |||||||
| Restricted cash | 7,748 | 7,967 | |||||||
| Other assets | 22,753 | 25,519 | |||||||
| Total non-current assets | 338,367 | 362,392 | |||||||
| Inventories | 157,453 | 179,343 | |||||||
| Trade and other receivables | 156,100 | 150,807 | |||||||
| Derivative financial instruments | 3,712 | 2,177 | |||||||
| Other assets | 31,350 | 34,430 | |||||||
| Cash and cash equivalents | 122,230 | 103,067 | |||||||
| Total current assets | 470,845 | 469,824 | |||||||
| Total assets | 809,212 | 832,216 | |||||||
| AMG Advanced Metallurgical Group N.V. | ||||||||||||||
| Condensed interim consolidated statement of financial position (continued) In thousands of US Dollars | ||||||||||||||
| | Sept 30, 2014 Unaudited | Dec 31, 2013 | ||||||||||||
| Equity | ||||||||||||||
| Issued capital | 744 | 744 | ||||||||||||
| Share premium | 382,518 | 382,518 | ||||||||||||
| Other reserves | (18,923) | (4,605) | ||||||||||||
| Retained earnings (deficit) | (235,556) | (246,304) | ||||||||||||
| Equity attributable to shareholders of the Company | 128,783 | 132,353 | ||||||||||||
| Non-controlling interests | 3,476 | 2,237 | ||||||||||||
| Total equity | 132,259 | 134,590 | ||||||||||||
| Liabilities | ||||||||||||||
| Loans and borrowings | 192,318 | 223,788 | ||||||||||||
| Employee benefits | 140,817 | 138,009 | ||||||||||||
| Provisions | 29,829 | 30,443 | ||||||||||||
| Deferred revenue | 11,008 | 11,776 | ||||||||||||
| Government grants | 716 | 883 | ||||||||||||
| Other liabilities | 9,232 | 8,425 | ||||||||||||
| Derivative financial instruments | 6,818 | 7,702 | ||||||||||||
| Deferred tax liabilities | 4,328 | 3,121 | ||||||||||||
| Total non-current liabilities | 395,066 | 424,147 | ||||||||||||
| Loans and borrowings | 11,627 | 20,873 | ||||||||||||
| Short term bank debt | 22,147 | 18,919 | ||||||||||||
| Government grants | 148 | 74 | ||||||||||||
| Other liabilities | 55,834 | 54,383 | ||||||||||||
| Trade and other payables | 126,569 | 127,381 | ||||||||||||
| Derivative financial instruments | 5,200 | 5,298 | ||||||||||||
| Advance payments | 31,156 | 16,341 | ||||||||||||
| Deferred revenue | 9,033 | 5,009 | ||||||||||||
| Current taxes payable | 3,550 | 2,329 | ||||||||||||
| Employee benefits | 200 | 1,350 | ||||||||||||
| Provisions | 16,423 | 21,522 | ||||||||||||
| Total current liabilities | 281,887 | 273,479 | ||||||||||||
| Total liabilities | 676,953 | 697,626 | ||||||||||||
| Total equity and liabilities | 809,212 | 832,216 | ||||||||||||
AMG Advanced Metallurgical Group N.V.
Condensed interim consolidated statement of cash flows
| For the nine months ended September 30 | ||||
| In thousands of US Dollars | 2014 | 2013 | ||
| Unaudited | Unaudited | |||
| Cash flows from operating activities | ||||
| Profit (loss) for the period | 14,001 | (41,251) | ||
| Adjustments to reconcile net profit to net cash flows: | ||||
| Non-cash: | ||||
| Income tax expense | 8,912 | 2,383 | ||
| Depreciation and amortization | 24,447 | 24,822 | ||
| Asset impairment expense | - | 49,703 | ||
| Net finance costs | 13,552 | 16,431 | ||
| Share of loss of associates and joint ventures | 469 | 530 | ||
| Loss (gain) on sale or disposal of property, plant and equipment | 325 | (1,429) | ||
| Equity-settled share-based payment transactions | 673 | 666 | ||
| Movement in provisions, pensions and government grants | (4,174) | 969 | ||
| Change in working capital and deferred revenue | 27,639 | 27,369 | ||
| Cash flows from operating activities | 85,844 | 80,193 | ||
| Finance costs paid, net | (8,922) | (11,331) | ||
| Income tax paid, net | (4,472) | (11,544) | ||
| Net cash flows from operating activities | 72,450 | 57,318 | ||
| Cash flows used in investing activities | ||||
| Proceeds from sale of property, plant and equipment | 260 | 1,821 | ||
| Proceeds from sale of investment in associate | - | 650 | ||
| Acquisition of property, plant and equipment and intangibles | (17,232) | (22,534) | ||
| Acquisition of other non-current asset investments | - | (4,000) | ||
| Change in restricted cash | (169) | 1,952 | ||
| Other | 157 | 13 | ||
| Net cash flows used in investing activities | (16,984) | (22,098) | ||
| Cash flows used in financing activities | ||||
| Proceeds from issuance of debt | - | 38 | ||
| Repayment of borrowings | (30,822) | (42,572) | ||
| Change in non-controlling interests | 28 | (69) | ||
| Other | 3 | 7 | ||
| Net cash flows used in financing activities | (30,791) | (42,596) | ||
| Net increase (decrease) in cash and cash equivalents | 24,675 | (7,376) | ||
| Cash and cash equivalents at January 1 | 103,067 | 121,639 | ||
| Effect of exchange rate fluctuations on cash held | (5,512) | 2,015 | ||
| Cash and cash equivalents at September 30 | 122,230 | 116,278 | ||
About AMG
AMG creates and applies innovative metallurgical solutions to the global trend of sustainable development of natural resources and CO2 reduction. AMG produces highly engineered specialty metal products and advanced vacuum furnace systems for the Energy, Aerospace, Infrastructure, and Specialty Metals and Chemicals end markets.
AMG Processing develops and produces specialty metals, alloys, and high performance materials. AMG is a significant producer of specialty metals, such as ferrovanadium, ferronickel-molybdenum, aluminum master alloys and additives, chromium metal and ferrotitanium, for Energy, Aerospace, Infrastructure and Specialty Metal and Chemicals applications. Other key products include specialty alloys for titanium and superalloys, coating materials and vanadium chemicals.
AMG Engineering designs and produces advanced vacuum furnace systems, and operates vacuum heat treatment facilities, primarily for the Aerospace and Energy industries. Furnace systems produced by AMG include vacuum remelting, solar silicon melting and crystallization, vacuum induction melting, vacuum heat treatment and high pressure gas quenching, turbine blade coating and sintering. AMG also provides vacuum case-hardening heat treatment services on a tolling basis.
AMG Mining produces critical materials utilizing its secure raw material sources in Africa, Asia, Europe, and South America. AMG Mining produces critical materials such as high purity natural graphite, tantalum, antimony and silicon metal. These materials are of significant importance to the global economy and are available in limited supply. End markets for these materials include electronics, energy efficiency, green energy, and infrastructure.
With over 3,000 employees, AMG operates globally with production facilities in Germany, the United Kingdom, France, Czech Republic, United States, China, Mexico, Brazil, Turkey, Poland, India, 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. +1 610 975 4901
Jonathan Costello
Vice President of Corporate Development and 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.
