AMG Advanced Metallurgical Group N.V.
amsterdam : AMG

May 11, 2011 01:15 ET

AMG reports first quarter 2011 results

AMSTERDAM, NETHERLANDS--(Marketwire - May 11, 2011) -


Key Highlights

  * Revenue was $318.0 million in the first quarter 2011, a 35% increase
    over the same period in 2010
  * Operating profit was $17.4 million in the first quarter 2011, a 48%
    increase over the same period in 2010
  * EBITDA[1] was $26.2 million in the first quarter 2011, a 19% increase
    over the same period in 2010
  * EPS on a fully diluted basis was $0.25 compared to $0.00 in the first
    quarter 2010; excluding Timminco, EPS was $0.41 in the first quarter
    2011, compared to $0.11 in the first quarter 2010
  * The Advanced Materials Division generated revenue of $210.8 million and
    EBITDA of $14.6 million in the first quarter 2011
  * The Engineering Systems Division generated revenue of $64.9 million and
    EBITDA of $5.3 million in the first quarter 2011
  * Graphit Kropfmühl generated revenue of $42.3 million and EBITDA of
    $6.3 million in the first quarter 2011
  * As of March 31, 2011 cash on hand was $66.1 million;  net debt was
    $201.0 million

Amsterdam, 11 May 2011 (Regulated Information) --- AMG Advanced Metallurgical Group N.V. ("AMG", EURONEXT AMSTERDAM: "AMG") reported first quarter 2011 revenue of $318.0 million, a 35% increase from $235.8 million in the first quarter 2010.

EBITDA increased 19% to $26.2 million in the first quarter 2011 from $22.0 million in the first quarter 2010. Net profit attributable to shareholders for the first quarter 2011 was $7.0 million, or $0.25 per fully diluted share. This was up from breakeven, or $0.00 per fully diluted share, in the first quarter 2010. Excluding AMG's share of Timminco's net loss in the first quarter, AMG's net profit attributable to shareholders for the first quarter 2011 was $11.4 million, or $0.41 per fully diluted share compared to $0.11 in the first quarter 2010.

Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, "The business performed well in the first quarter 2011. Improved pricing in a number of Advanced Materials products such as antimony, chromium and tantalum resulted in increased earnings. Engineering Systems' order intake was encouraging, however, revenue was flat compared to the same period in the prior year and EBITDA decreased. Increases in silicon metal prices and natural graphite demand resulted in significant improvements in Graphit Kropfmühl's revenue and earnings during the quarter. AMG's implementation of vertical raw material strategies, horizontal consolidation and continued investment in technology has contributed to the Company's positive start to 2011."

[1] EBITDA is defined as earnings before interest, tax, depreciation and amortization and excludes nonrecurring items

Key Figures

In 000's US Dollar

                                                Q1'11      Q1'10   Change



Revenue                                      $317,999   $235,793      35%
---------------------------------------------------------------------------
Gross profit                                   59,780     42,584      40%

Gross margin                                     18.8%      18.1%


---------------------------------------------------------------------------
Operating profit                               17,406     11,787      48%

Operating margin                                  5.5%       5.0%


Net profit (loss) attributable to shareholders  6,972       (64)      N/A
---------------------------------------------------------------------------


EPS- Fully diluted                               0.25       0.00      N/A

Adjusted EPS- Fully diluted (1)                  0.41       0.11     273%



EBIT (2)                                       18,854     15,866      19%

EBITDA (3)                                     26,168     22,047      19%

EBITDA margin                                     8.2%       9.4%
---------------------------------------------------------------------------
Note:
(1) Adjusted to exclude all Timminco results including equity losses which
accounted for $0.16 in EPS in Q1 2011
(2) EBIT is defined as earnings before interest, tax and excludes
nonrecurring
items
(3) EBITDA is defined as earnings before interest, tax, depreciation and
amortization and excludes nonrecurring items


Operational Review

Advanced Materials Division
                        Q1'11(1)      Q1'10    Change
------------------------------------------------------
 Revenue                $210,845   $140,534       50%

 Gross margin             32,380     21,136       53%

 Operating profit          9,153      4,301      113%

 EBITDA                   14,563      8,499       71%

 Capital expenditures      5,554      3,321       67%

(1) Results include KB Alloys LLC from the February 18, 2011 date of
acquisition

The Advanced Materials division's first quarter 2011 financial results were positively impacted by the acquisition of KB Alloys LLC, increasing chromium metal and aluminum master alloy volumes and a rise in antimony prices. Revenue increased by $70.3 million or 50% to $210.8 million. The increase in revenue was specifically the result of $11.0 million of revenue from KB Alloys LLC, which was acquired in February 2011, and a 37% and 34% increase in chromium and non-KB Alloys aluminum revenue, respectively.

The first quarter 2011 gross margin of 15% of revenue was consistent with the first quarter of 2010. Increased economies of scale were offset by unfavourable changes in product mix, specifically increased lower margin aluminum products revenue, resulting in consistent gross margins.

The first quarter 2011 EBITDA increased by $6.1 million to 7% of revenue from 6% of revenue in 2010, due to the increase in gross profit, but this was offset by a 44% increase in SG&A due to the acquisition of KB Alloys and long-term incentive expenses.

Capital expenditures were $5.6 million for the quarter, 67% more than the first quarter 2010. Significant growth capital investments made in the first quarter included a $1.1 million investment in the hydropower facility in Brazil.

Engineering Systems Division
                               Q1'11            Q1'10    Change
----------------------------------------------------------------
 Revenue                     $64,887          $65,313      (1%)

 Gross margin                 18,464           18,303        1%

 Operating profit              2,970            7,169     (59%)

 EBITDA                        5,256           12,079     (56%)

 Capital expenditures          1,544              845       83%

The Engineering Systems division's first quarter 2011 revenue was flat compared to the first quarter 2010 as a slightly higher opening order backlog in 2011 was offset by longer project lead times. The order backlog increased to $195.9 million as of March 31, 2011, up 7% from $183.3 million as of December 31, 2010. The division generated order intake of $65.7 million in the first quarter 2011, a 1.01x book to bill ratio and a 71% increase compared to the first quarter 2010. Order intake of solar silicon DSS furnaces improved 301% from the first quarter 2010, accounting for 43% of total order intake. Demand for vacuum furnaces for specialty steel used in aerospace and energy also increased substantially compared to the same period in the prior year.

Sales of solar silicon DSS furnaces decreased 42% in the first quarter 2011 compared to the same period in 2010, however, sales were still 27% of revenue in the first quarter 2011. Revenue from remelting systems, primarily for the aerospace and specialty steel industries, decreased by 20% to $10.7 million in the first quarter 2011 while the Own and Operate business increased revenue by 57% to $9.8 million.

The first quarter 2011 gross margin of 28% of revenue was flat compared to the first quarter 2010 as a result of level revenue and production cost controls.

First quarter 2011 EBITDA decreased by $6.8 million to 8% of revenue from 18% of revenue in the first quarter 2010 due to increases in long-term incentive expenses and costs associated with the acquisition of the Mono2™ technology.

Capital expenditures were $1.5 million, 83% more than the first quarter of 2010. This growth capital investment is creating additional capacity for its U.S. Own and Operate facility to meet increasing demand.

Graphit Kropfmühl
                         Q1 '11         Q1 '10   Change
--------------------------------------------------------
 Revenue                $42,267        $29,946      41%

 Gross profit             8,936          3,145     184%
 Operating profit         5,283            317    1567%

 EBITDA                   6,349          1,469     332%

 Capital expenditures     1,151            980      17%

Increasing silicon metal prices and natural graphite volumes resulted in significantly improved financial results for Graphit Kropfmühl ("GK") in the first quarter 2011. First quarter 2011 revenue increased by $12.3 million, or 41%, to $42.3 million. Natural graphite revenue increased $5.3 million, or 57%, driven by increases in both volumes and pricing. Silicon metal revenue increased by $7.0 million or 34%, primarily as a result of higher silicon sales prices.

The first quarter 2011 gross margin increased to 21% of revenue from 11% of revenue in the first quarter of 2010. Increased economies of scale resulting in lower per unit production costs of natural graphite and higher sales prices for silicon metal resulted in a significant increase in gross margins.

First quarter 2011 EBITDA was $6.3 million, a 332% increase compared to the first quarter 2010. The EBITDA margin increased to 15% in the first quarter 2011, up significantly from 5% in the same period 2010. The EBITDA margin increase was attributable to the increase gross margins for silicon metal and natural graphite, slightly offset by a 22% increase in SG&A due to incentive plan expenses.

Capital expenditures increased to $1.2 million in the first quarter 2011, 17% more than the first quarter 2010. The increase in capital expenditures was a result of upgrading the high purity natural graphite production facility to meet market demand.

Timminco

AMG's ownership in Timminco was 42.5% as of March 31, 2011. AMG accounts for its investment in Timminco via the equity accounting method. Timminco's loss for the first quarter 2011 is included in share of loss of associates on AMG's income statement and the carrying value of AMG's investment in Timminco of $13.3 million is listed as an asset on AMG's balance sheet. Additional information on Timminco can be found at www.Timminco.com.

Financial Review

Tax

AMG recorded a tax expense of $5.0 million in the first quarter 2011 as compared to a tax expense of $3.9 million in the first quarter 2010. Excluding share of loss of associates, for which AMG cannot recognize a tax benefit since these companies are not consolidated, AMG's effective tax rate was 29% in the first quarter 2011.

SG&A

AMG's SG&A expenses were $42.9 million in the first quarter 2011, compared to $30.6 million in the first quarter 2010. The $12.3 million change in SG&A expenses was primarily due to an increase in long-term incentive expenses as well as acquisition costs related to the KB Alloys LLC transaction and the additional SG&A expenses incurred by AMG Idealcast Solar (formerly BP Solar), and KB Alloys LLC.

Currency Fluctuations

AMG transacts business in many currencies other than the US dollar, our reporting currency. As our financial statements are prepared in US dollars, fluctuations in the exchange rates between the US dollar and other currencies have an effect both on our results of operations and on the reported value of our assets and liabilities as measured in US dollars. The decline in the value of the US dollar as of March 31, 2011 resulted in an increase in the assets and liabilities on the balance sheet of $32.5 million and $25.4 million, respectively. The net result of the appreciation in the value of the US dollar quarter over quarter resulted in a decrease in revenue and EBITDA of $2.2 million and $0.3 million, respectively in the first quarter 2011.

Liquidity
                               March 31, 2011   December 31, 2010   Change
---------------------------------------------------------------------------
 Total debt                          $267,060            $237,089      13%

 Cash & short-term investments         66,071              89,311    (26%)
---------------------------------------------------------------------------
 Net debt                             200,989             147,778      36%

AMG had a net debt position of $201.0 million as of March 31, 2011. AMG's net debt position increased $53.2 million since December 31, 2010 primarily due to $16.3 million of cash tax payments, $8.2 million in capital investments, the $24.3 million acquisition of KB Alloys LLC, and a $39.1 million increase in working capital due to increasing material costs, reduced by EBITDA of $26.2 million.

Following the close of the first quarter, AMG refinanced its primary credit facility and secured a $300 million credit facility composed of a Euro denominated, U.S. dollar equivalent, $100 million term loan and a $200 million revolving credit facility. This facility has a five-year term and matures in April 2016.

Cash Flow
                                                      Q1'11       Q1'10
------------------------------------------------------------------------


 Net cash flows used in operations                $(13,753)   $(14,921)
------------------------------------------------------------------------
 Capital expenditures                               (8,249)     (5,146)

 Acquisitions, net of cash                         (26,823)       (600)

 Cash flows used in other investing                   2,195       (191)
------------------------------------------------------------------------
 Net cash flows used in investing activities       (32,877)     (5,937)
------------------------------------------------------------------------
 Cash flows generated from financing activities      19,389       7,643
------------------------------------------------------------------------

Cash flows used in operations were $13.8 million in the first quarter 2011 as compared to $14.9 million in the first quarter 2010. The cash flows used in operations in the first quarter 2011 are a result of $16.3 million in cash tax payments as well as a $29.0 million increase in working capital and provisions, offset by $26.2 million in EBITDA. The substantial cash tax payments are partially due to the difference between IFRS percentage of completion accounting as compared to completed contract methodology for tax payments in the Engineering Systems division.

Cash used in investing activities was $32.9 million in the first quarter 2011. This increase of $26.9 million from the first quarter 2010 is composed of a $26.2 million increase in acquisitions, primarily for KB Alloys LLC, and a $3.1 million increase in capital investments, slightly offset by a $2.4 million decrease in cash flows in other investing activities due to a decrease in restricted cash for project work at the Engineering Systems division.

Cash generated from financing activities was $19.4 million in the first quarter 2011, an $11.8 million increase from the first quarter 2010. This increase was primarily attributable to $15.0 million in draws on the revolving lines of credit, which were used to fund the acquisition of KB Alloys LLC.

Outlook

The Advanced Materials division is experiencing strong prices for some of its products including antimony trioxide, tantalum and chromium metal and improved operating results reflecting cost improvements made in 2009 and 2010. Requests for new orders in Engineering Systems are slowly increasing. Graphit Kropfmühl's end markets are improving, particularly natural graphite demand and silicon metal prices. Based upon current market conditions, AMG expects to generate EBITDA growth in excess of 20% in 2011.

AMG Advanced Metallurgical Group N.V.
Condensed interim consolidated income statement

For the three months ended March 31

In thousands of US Dollars                             2011            2010

                                                  Unaudited       Unaudited

Continuing operations

Revenue                                             317,999         235,793

Cost of sales                                       258,219         193,209

Gross profit                                         59,780          42,584



Selling, general and administrative
expenses                                             42,937          30,614

Restructuring expense                                   285               7

Environmental expense                                   105             257

Other income, net                                     (953)            (81)

Operating profit                                     17,406          11,787



Finance expense                                       3,760           6,320

Finance income                                      (3,255)           (547)

Foreign exchange gain                                  (17)         (2,164)

Net finance costs                                       488           3,609



Share of loss of associates                           4,377           4,395

Profit before income tax                             12,541           3,783



Income tax expense                                    4,964           3,867

Profit (loss) for the period                          7,577            (84)





Attributable to:

  Shareholders of the Company                         6,972            (64)

  Non-controlling interests                             605            (20)

                                                      7,577            (84)



Earnings  per share

Basic earnings per share                               0.25            0.00

Diluted earnings per share                             0.25            0.00




AMG Advanced Metallurgical Group N.V.

Condensed interim consolidated statement of financial
position
In thousands of US Dollars

                                                         March December 31,
                                                      31, 2011         2010

                                                     Unaudited      Audited

Assets

  Property, plant and equipment                        244,724      228,612

  Intangible assets                                     36,641       27,002

  Investments in associates and joint ventures          22,376       25,186

  Deferred tax assets                                   23,716       22,107

  Restricted cash                                       11,179       12,528

  Notes receivable                                         733          322

  Derivative financial instruments                       7,427        5,199

  Other assets                                          16,504       15,372

Total non-current assets                               363,300      336,328



  Inventories                                          244,920      207,204

  Trade and other receivables                          206,247      175,421

  Derivative financial instruments                       7,287        5,731

  Other assets                                          43,427       41,080

  Cash and cash equivalents                             66,071       89,311

Total current assets                                   567,952      518,747

Total assets                                           931,252      855,075






AMG Advanced Metallurgical Group N.V.

Condensed interim consolidated statement of financial position (continued)
In thousands of US Dollars


                                                              December 31,
                                           March 31, 2011             2010

                                                Unaudited          Audited

Equity

  Issued capital                                      741              741

  Share premium                                   381,636          381,636

  Other reserves                                   42,210           36,158

  Retained earnings (deficit)                   (189,523)        (196,481)

Equity attributable to shareholders of the
Company                                           235,064          222,054

Non-controlling interests                          13,188           11,911

Total equity                                      248,252          233,965



Liabilities

  Loans and borrowings                            211,027          187,813

  Employee benefits                                95,011           88,372

  Provisions                                       21,097           20,607

  Government grants                                   636              642

  Other liabilities                                 5,848            5,517

  Derivative financial instruments                    470              698

  Deferred tax liabilities                         27,983           25,436

Total non-current liabilities                     362,072          329,085



  Loans and borrowings                              4,820            4,254

  Short term bank debt                             51,213           45,022

  Government grants                                   187              175

  Other liabilities                                55,732           43,287

  Trade and other payables                        115,877          102,253

  Derivative financial instruments                  3,971            1,754

  Advance payments                                 53,541           49,597

  Current taxes payable                            15,749           24,979

  Provisions                                       19,838           20,704

Total current liabilities                         320,928          292,025

Total liabilities                                 683,000          621,110

Total equity and liabilities                      931,252          855,075


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                                   2011      2010

                                                        Unaudited Unaudited

Cash flows used in operating activities

Profit (loss) for the period                                7,577      (84)

Adjustments to reconcile profit (loss) to net cash flows:

Non-cash:

   Depreciation and amortization                            7,314     6,181

   Restructuring expense                                      285         7

   Environmental expense                                      105       257

   Net finance costs                                          488     3,610

   Share of loss of associates                              4,377     4,395

   Equity-settled share-based payment transactions          1,044     1,650

   Cash-settled share-based payment transactions            6,832     (309)

   Income tax expense                                       4,964     3,867

Change in working capital and provisions                 (29,015)  (23,210)

Other                                                       (240)     2,410

Interest paid, net                                        (1,203)   (1,616)

Income tax paid, net                                     (16,281)  (12,079)

Net cash flows used in operating activities              (13,753)  (14,921)



Cash flows used in investing activities

Proceeds from sale of property, plant and equipment            50        17

Acquisition of associates and joint ventures                    -     (600)

Acquisition of subsidiaries (net of cash acquired
 of $91)                                                 (26,823)         -

Acquisition of property, plant and equipment and
intangibles                                               (8,249)   (5,146)

Change in restricted cash                                   1,753     (208)

Other                                                         392         -

Net cash flows used in investing activities              (32,877)   (5,937)



Cash flows from financing activities

Net proceeds from issuance of debt                         19,364     7,582

Other                                                          25        61

Net cash flows from financing activities                   19,389     7,643



Net decrease in cash and cash equivalents                (27,241)  (13,215)

Cash and cash equivalents at January 1                     89,311   117,016

Effect of exchange rate fluctuations and consolidation
changes on cash                                             4,001   (4,944)

Cash and cash equivalents at March 31                      66,071    98,857

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 consists of two operating divisions, 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 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, 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, primarily for the Aerospace and Energy (including solar and nuclear) 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. 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. With over 2,600 employees, AMG operates globally with production facilities in Germany, the United Kingdom, France, Czech Republic, United States, China, Canada, Mexico, Brazil, Turkey, Poland, India and Sri Lanka and also has sales and customer service offices in Belgium, Russia and Japan (www.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 2011 results: http://hugin.info/138060/R/1514401/450450.pdf

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Source: AMG Advanced Metallurgical Group N.V. via Thomson Reuters ONE

[HUG#1514401]

Contact Information

  • For further information please contact:
    AMG Advanced Metallurgical Group N.V.
    +1 610 975 4901
    Jonathan Costello
    Vice President of Corporate Communications
    Email Contact