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AMG Advanced Metallurgical Group N.V. Reports First Quarter 2019 Results

Key Highlights

  • Revenue increased by 12% to $346.5 million in the first quarter 2019 from $308.4 million in the first quarter 2018

  • EBITDA(2) was $50.4 million in the first quarter 2019, a 13% increase over the same period in 2018

  • Annualized return on capital employed continued at a high level of 28.3% in the first quarter 2019, as compared to 28.4% in the first quarter 2018

  • AMG ended the first quarter of 2019 with net debt of $14.6 million, an increase of $15.0 million versus prior year-end 2018

Amsterdam, 1 May 2019 (Regulated Information) --- AMG Advanced Metallurgical Group N.V. ("AMG", EURONEXT AMSTERDAM: "AMG") reported first quarter 2019 revenue of $346.5 million, a 12% increase from $308.4 million in the first quarter 2018. EBITDA for the first quarter 2019 was $50.4 million, a 13% increase from $44.5 million in the first quarter 2018. EBIT increased 11% to $40.4 million in the first quarter 2019 from $36.3 million in the first quarter 2018.

Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, "AMG achieved a 13% increase in EBITDA during the quarter compared to prior year, mainly driven by AMG Technologies due to increased profitability associated with our turbine blade coating furnaces and higher after-market sales compared to the first quarter of last year."

"AMG Critical Materials generated EBITDA of $31.2 million during the first quarter of 2019, a slight increase of 1% from $30.8 million in the first quarter of 2018, due to strong financial performance in vanadium, chrome and antimony, which was partially offset by lower gross profit in tantalum, graphite, silicon and additional ramp-up costs associated with lithium in Brazil."

"AMG Technologies achieved EBITDA of $19.3 million during the first quarter of 2019, a 40% increase from $13.7 million in the first quarter 2018. Order backlog was $224.1 million as of March 31, 2019."

"In addition, despite ongoing working capital investments and capital expenditures related to the expansion projects, AMG maintained a low level of net debt due to strong profitability in the quarter. AMG continued to generate a high return on capital employed of 28.3% in the first quarter 2019."

Key Figures

In 000`s US dollar

Q1 `19 (3)

Q1 `18

Change

Revenue

$346,523

$308,448

12%

Gross profit

67,120

70,118

(4%)

Gross margin

19.4%

22.7%

Operating profit

29,796

34,579

(14%)

Operating margin

8.6%

11.2%

Net income attributable to shareholders

14,827

18,389

(19%)

EPS - Fully diluted

0.47

0.58

(19%)

EBIT (1)

40,388

36,256

11%

EBITDA (2)

50,423

44,480

13%

EBITDA margin

14.6%

14.4%

Cash from operating activities

6,935

24,808

(72%)

Note:

  1. EBIT is defined as earnings before interest and income taxes. EBIT excludes restructuring, asset impairment and equity-settled share-based payments and includes foreign currency gains or losses.

  2. EBITDA is defined as EBIT adjusted for depreciation and amortization.

  3. The Company applied IFRS 16 (lease accounting) for the first time as of January 1, 2019. The Company recognized new assets and liabilities for its operating leases which are primarily comprised of buildings, equipment, machinery and automobiles. Right of use assets are included within property, plant and equipment and classified in the same manner as if the underlying assets were owned by the Company. The lease liabilities are presented as a separate line item on the consolidated statement of financial position. The nature and pattern of expense recognition in relation to these leases has changed. The Company recognizes depreciation on the right of use assets on a straight-line basis over the expected term of the lease. Interest expense related to the lease liabilities are recognized over the expected term of the lease using the effective interest method. Comparative figures have not been adjusted. Assets and liabilities increased per January 1, 2019 by $37 million and depreciation and interest expenses increased in the first quarter by $1 million.

Operational Review

AMG Critical Materials

Q1 `19

Q1 `18

Change

Revenue

$228,591

$208,525

10%

Gross profit
Gross profit excluding
exceptional items

37,638
45,672

44,018
44,104

(14%)
4%

Operating profit

16,192

24,304

(33%)

EBITDA

31,152

30,759

1%

AMG Critical Materials` revenue in the first quarter increased by $20.1 million, or 10%, to $228.6 million, driven by improved average vanadium and chrome prices during the quarter, and higher sales volumes of lithium concentrate and antimony products.

Gross profit in the first quarter decreased by $6.4 million, or 14%, to $37.6 million. The reduction in gross profit was driven by a non-cash expense related to a vanadium inventory adjustment, additional ramp-up costs associated with lithium in Brazil, lower sales volumes in graphite`s heat insulation business and a decrease in silicon metal prices. This reduction was partially offset by higher chrome metal prices and improved antimony sales volumes.

SG&A expenses in the first quarter of 2019 increased by $1.7 million, or 9%, compared to the same period in the prior year, primarily due to higher professional fees.

First quarter 2019 EBITDA margin was 14%, relatively consistent with prior year.

AMG Technologies

Q1 `19

Q1 `18

Change

Revenue

$117,932

$99,923

18%

Gross profit
Gross profit excluding
exceptional items

29,482
31,278

26,100
26,203

13%
19%

Operating profit

13,604

10,275

32%

EBITDA

19,271

13,721

40%

Despite a 7% decrease versus December 31, 2018, order backlog maintained its historically high level of $224.1 million as of March 31, 2019 and the Company signed $56.2 million in new orders during the first quarter of 2019. This represents a 0.82x book to bill ratio, driven by strong orders of heat treatment furnaces for the automotive market and induction and remelting furnaces for the aerospace market.

AMG Technologies` first quarter 2019 revenue increased $18.0 million, or 18%, to $117.9 million, due to higher titanium master alloy prices and higher revenue generated by the delivery of turbine blade coating, casting and nuclear waste recycling furnaces.

First quarter 2019 gross profit increased by $3.4 million, or 13%, to $29.5 million and gross margin was relatively consistent at 25% compared to 26% in the first quarter 2018.

SG&A expenses remained consistent at $15.9 million in the first quarter, compared to the same period in 2018.

AMG Technologies` first quarter EBITDA increased by 40%, or $5.6 million, to $19.3 million from $13.7 million in the first quarter of 2018, largely due to higher levels of gross profit.

Financial Review

Tax

AMG recorded an income tax expense of $5.9 million in the first quarter 2019 as compared to a tax expense of $9.7 million in the same period in 2018. The decrease in tax expense is due to lower profitability and a benefit from the impact of the Brazilian real on the company`s deferred tax positions.

Due to the volatile nature of the company`s deferred tax balances, AMG believes that the cash tax rate is a more meaningful metric. AMG paid taxes of $3.9 million in the first quarter 2019 as compared to tax payments of $2.2 million in the same period in 2018. For the first quarter 2019, AMG`s effective cash tax rate increased to 19% in comparison to 8% for the same period in 2018. The prior year rate benefited from net operating loss carryforwards in the United States which were fully utilized in 2018.

Exceptional Items

AMG`s first quarter 2019 gross profit of $67.1 million includes exceptional items, which are not included in the calculation of EBITDA.

A summary of exceptional items included in gross profit in the first quarter of 2019 and 2018 are below:

Exceptional items included in gross profit

Q1 `19

Q1 `18

Change

Gross profit

$67,120

$70,118

(4%)

Restructuring (reversal) expense

(53)

189

N/A

Inventory cost adjustment

9,883

-

N/A

Gross profit excluding
exceptional items

76,950

70,307

9%

AMG had a $9.9 million exceptional non-cash expense related to a net realizable value adjustment to the vanadium inventory cost position on March 31, 2019. This adjustment was driven by a combination of the high vanadium prices at which the Company purchased its inventory in the second half of 2018 and the lower comparable price on March 31, 2019. The vanadium price nearly doubled from September to November of 2018, and then returned to the September levels at the end of March 2019. This exceptional price movement impacted our inventory cost position and resulted in a balance sheet adjustment which has been adjusted in EBITDA.

Liquidity

March 31, 2019

December 31,
2018

Change

Total debt

$380,872

$381,444

-

Cash and cash equivalents

366,296

381,900

(4%)

Net debt (cash)

14,576

(456)

N/A

AMG had a net debt position of $14.6 million as of March 31, 2019. Net debt increased by $15.0 million and total debt decreased by $0.6 million from December 31, 2018.

Cash from operating activities decreased by $17.9 million to $6.9 million in the first quarter of 2019, primarily due to higher working capital investment at AMG Critical Materials, as well as higher interest and tax payments.

Capital expenditures decreased to $12.8 million in the first quarter of 2019 compared to $22.6 million in the same period in 2018. Capital spending in the first quarter 2019 included $5.9 million of maintenance capital. The remaining $6.9 million of capital spending is primarily attributable to expansion projects at AMG`s lithium, vanadium and heat treatment facilities.

Including the $366.3 million of cash, AMG had $535.9 million of total liquidity as of March 31, 2019.

Net Finance Costs

AMG`s first quarter 2019 net finance costs increased to $9.2 million compared to $6.5 million in the first quarter 2018. Interest expenses associated with AMG`s long-term credit facility increased due to higher levels of gross debt and higher interest rates associated with the long-term nature of the facility.

SG&A

AMG`s first quarter 2019 SG&A expenses were $37.4 million compared to $35.6 million in the first quarter of 2018, primarily due to higher professional fees.

Outlook

AMG`s lithium concentrate plant startup is proceeding well: We have reached a 90 ton per hour feed rate (95% of target); a metallurgical recovery rate of 90% of target; we are producing in-spec material; and, most importantly, latest estimates essentially confirm our target cost per ton. Our EPC contractor expects to achieve 100% of the target capacity by the end of May.

Though our Critical Materials business continues to experience strong demand for its products, it is experiencing very high price volatility, with spot prices for vanadium, chrome, silicon, tantalum and spodumene down significantly versus year-end 2018. To illustrate the unexpected dramatic fall in vanadium prices in recent weeks: the decline from year-end 2018 to the end of Q1 is 41%; and the additional decline to today is 23%. In light of this and similar weaknesses in other materials we have adjusted our EBITDA target to be $150 million.

AMG`s confidence in the longer-term trends within its business units remains strong. As such, we are targeting $200 million of EBITDA in 2020.

AMG`s five-year target EBITDA will be detailed at the Annual General Meeting today at 13:00 CEST.

Net Income to EBITDA reconciliation

Q1 `19

Q1 `18

Net Income

$14,703

$18,333

Income tax expense

5,876

9,705

Net finance cost*

8,852

6,578

Equity-settled share-based payment transactions

1,118

1,634

Restructuring expense

(53)

189

Inventory cost adjustment

9,883

-

Others

9

(183)

EBIT

40,388

36,256

Depreciation and amortization

10,035

8,224

EBITDA

50,423

44,480

*Excludes foreign exchange expense (income)

AMG Advanced Metallurgical Group N.V.

Condensed Interim Consolidated Income Statement

For the quarter ended March 31

In thousands of US dollars

2019

2018

Unaudited

Unaudited

Continuing operations

Revenue

346,523

308,448

Cost of sales

279,403

238,330

Gross profit

67,120

70,118

Selling, general and administrative expenses

37,357

35,626

Net other operating income

33

87

Operating profit

29,796

34,579

Finance income

(971)

(518)

Finance cost

10,188

7,059

Net finance cost

9,217

6,541

Profit before income tax

20,579

28,038

Income tax expense

5,876

9,705

Profit for the period

14,703

18,333

Attributable to:

Shareholders of the Company

14,827

18,389

Non-controlling interests

(124)

(56)

Profit for the period

14,703

18,333

Earnings per share

Basic earnings per share

0.48

0.62

Diluted earnings per share

0.47

0.58


AMG Advanced Metallurgical Group N.V.

Condensed Interim Consolidated Statement of Financial Position

In thousands of US dollars

March 31,
2019
Unaudited

December 31, 2018

Assets

Property, plant and equipment

364,161

327,951

Goodwill and other intangible assets

34,444

35,130

Derivative financial instruments

1,415

7,592

Other investments

22,125

21,452

Deferred tax assets

33,133

34,112

Restricted cash

1,367

1,715

Other assets

10,438

11,266

Total non-current assets

467,083

439,218

Inventories

313,012

316,715

Derivative financial instruments

2,007

1,335

Trade and other receivables

148,714

138,530

Other assets

42,244

39,570

Current tax assets

3,257

3,668

Cash and cash equivalents

366,296

381,900

Total current assets

875,530

881,718

Total assets

1,342,613

1,320,936




AMG Advanced Metallurgical Group N.V.

Condensed Interim Consolidated Statement of Financial Position

(continued)

In thousands of US dollars

March 31,
2019
Unaudited

December 31, 2018

Equity

Issued capital

831

812

Share premium

489,546

462,891

Treasury shares

(7,120)

(347)

Other reserves

(101,575)

(104,274)

Retained earnings (deficit)

(51,608)

(39,158)

Equity attributable to shareholders of the Company

330,074

319,924

Non-controlling interests

23,782

24,119

Total equity

353,856

344,043



Liabilities
Loans and borrowings

356,997

356,997

Lease liabilities

32,580

-

Employee benefits

147,035

149,217

Provisions

31,294

32,527

Other liabilities

5,085

4,371

Derivative financial instruments

6,543

5,148

Deferred tax liabilities

4,368

7,930



Total non-current liabilities

583,902

556,190



Loans and borrowings

8,375

8,947

Lease liabilities

3,816

-

Short term bank debt

15,500

15,500

Other liabilities

63,381

61,120

Trade and other payables

202,597

230,939

Derivative financial instruments

6,163

8,267

Advance payments

51,247

50,210

Current taxes payable

25,244

19,675

Provisions

28,532

26,045

Total current liabilities

404,855

420,703

Total liabilities

988,757

976,893

Total equity and liabilities

1,342,613

1,320,936


AMG Advanced Metallurgical Group N.V.

Condensed Interim Consolidated Statement of Cash Flows



For the quarter ended March 31

In thousands of US dollars

2019

2018

Unaudited

Unaudited

Cash from operating activities

Profit for the period

14,703

18,333

Adjustments to reconcile net profit to net cash flows:

Non-cash:

Income tax expense

5,876

9,705

Depreciation and amortization

10,035

8,224

Net finance costs

9,217

6,541

Gain on sale or disposal of property, plant and equipment

(168)

(37)

Equity-settled share-based payment transactions

1,118

1,634

Movement in provisions, pensions and government grants

1,708

3,537

Working capital and deferred revenue adjustments

(26,017)

(17,654)

Cash generated from operating activities

16,472

30,283

Finance costs paid, net

(5,680)

(3,240)

Income tax paid, net

(3,857)

(2,235)

Net cash from operating activities

6,935

24,808

Cash used in investing activities

Proceeds from sale of property, plant and equipment

237

39

Acquisition of property, plant and equipment and intangibles

(12,759)

(22,575)

Change in restricted cash

334

(17,405)

Other

-

(23)

Net cash used in investing activities

(12,188)

(39,964)


AMG Advanced Metallurgical Group N.V.

Condensed Interim Consolidated Statement of Cash Flows

(continued)



For the quarter ended March 31

In thousands of US dollars

2019

2018

Unaudited

Unaudited

Cash (used in) from financing activities

Proceeds from issuance of debt

-

346,335

Transaction costs related to the issuance of debt

-

(9,339)

Repayment of borrowings

(875)

(155,094)

Net repurchase of common shares

(7,351)

(230)

Payment of lease liabilities

(936)

-

Net cash (used in) from financing activities

(9,162)

181,672

Net (decrease) increase in cash and cash equivalents

(14,415)

166,516

Cash and cash equivalents at January 1

381,900

178,800

Effect of exchange rate fluctuations on cash held

(1,189)

4,922

Cash and cash equivalents at March 31

366,296

350,238

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, ferrovanadium, natural graphite, chromium metal, antimony, lithium, tantalum, niobium and silicon metal. AMG Technologies produces titanium aluminides and titanium alloys for the aerospace market; 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. +1 610 975 4979
Michele Fischer
mfischer@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.

First Quarter 2019 Press Release


This announcement is distributed by West Corporation on behalf of West Corporation clients.

The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: AMG Advanced Metallurgical Group N.V. via GlobeNewswire

HUG#2243189