SOURCE: AMG Advanced Metallurgical Group N.V.

May 09, 2008 01:07 ET

AMG Reports Record First Quarter Results

AMSTERDAM, NETHERLANDS--(Marketwire - May 9, 2008) -


Key Highlights

  * Revenue increased 22% and EBITDA improved 73% in the first
    quarter 2008 compared to the first quarter 2007
  * Advanced Materials division experienced robust revenue and EBITDA
    growth during the quarter, led primarily by improved pricing for
    ferrovanadium
  * Engineering Systems division continued its strong revenue and
    EBITDA growth trend as demand for solar and remelting furnaces
    continued at a fervent pace
  * Timminco's revenue and EBITDA benefitted from sales of solar
    silicon as its new plant commenced production and began its ramp
    up phase according to schedule
  * EPS on a fully diluted basis increased 193% from the first
    quarter 2007 to $0.82
  * AMG completed the previously announced acquisition of
    approximately 74% of Graphit Kropfmuehl AG in April 2008

Amsterdam, 9 May 2008 --- AMG Advanced Metallurgical Group N.V. ("AMG", EURONEXT AMSTERDAM: "AMG") today announced its first quarter 2008 results. The Company's revenue increased to $326.1 million in the quarter ended 31 March 2008 from $266.8 million in the first quarter 2007, a 22.2% increase.

Net income attributable to shareholders for the first quarter 2008 was $22.5 million, or $0.82 per fully diluted share. This represents an increase of 204% compared to net income of $7.4 million or $0.28 per fully diluted share for the first quarter 2007. EBITDA rose 73.1% to $42.6 million in the first quarter 2008 compared with $24.6 million in the first quarter 2007.

In commenting on results, Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said: "I am pleased to report record earnings for the first quarter 2008. We had strong performances in both our Advanced Materials and Engineering Systems businesses. Both divisions delivered significant growth due to favorable conditions in the solar, steel, titanium and superalloy end markets. AMG's majority owned subsidiary, Timminco Limited, completed the commissioning of its 3,600 metric ton per annum upgraded metallurgical silicon facility in the first quarter and the ramp up of production is progressing in line with our expectations with output and shipments to our customers increasing each month."


Key Figures


In 000's US Dollar
                                           Q1'08 Q1'07 [1] Change

Revenue                                 $326,148  $266,829  22.2%
Gross profit                              67,210    45,103  49.0%
Gross margin                               20.6%     16.9%

Operating income                          35,408    20,591  72.0%
Operating margin                           10.9%      7.7%

Net Income attributable to shareholders   22,509     7,398 204.3%

EPS- Fully diluted                          0.82      0.28 192.9%

EBITDA [2]                                42,633    24,623  73.1%

Notes:
[1] Q1 2007 revenue has been restated due to an adjustment at
Timminco
[2] EBITDA is defined as earnings before interest, tax, depreciation,
and amortisation and excludes non-recurring items

Operational Review

Advanced Materials Division


                        Q1'08    Q1'07 Change
Revenue              $184,409 $169,347   8.9%
Gross profit           33,466   24,775  35.1%
Operating income       14,668    9,157  60.2%
EBITDA                 19,375   12,003  61.4%
Capital expenditures    4,504    2,292  96.5%


The Advanced Materials division's first quarter 2008 revenue was driven by strong demand for the majority of its products, most notably in the steel, superalloy and titanium markets. Revenue increased by $15.1 million or 8.9%, while gross margins increased by $8.7 million or 35.1%. EBITDA increased by $7.4 million, a 61.4% improvement over the first quarter 2007 as a result of the increase in revenues and essentially flat SG&A and conversion expenses.

Almost all key products delivered improved gross margins on strong volumes, tight cost control, and higher unit pricing. Secure raw material supply drove much of the increase in revenue to the bottom line. The most notable pricing and revenue increases over first quarter 2007 were in ferrovanadium and chromium metal. Although ferrovanadium volume was essentially unchanged from the first quarter 2007, the average sales price increased over 60% as the result of increased global demand and reduced market discounts. The majority of the Company's ferrovanadium sales are made under annual contracts, priced monthly based upon a prior month's average price index. Chromium metal volumes and prices also increased substantially during the first quarter 2008 compared to the first quarter 2007, with volumes increasing by approximately 40% and sales prices increasing by over 30%. The tight global supply/demand balance continues to drive strong performance in both of these products.

Operating income for the first quarter 2008 improved 60.2% to $14.7 million, up from $9.2 million for the comparable period in 2007. This was primarily due to the increase in gross profit offset by a marginal increase in selling, general and administrative expenses that was attributable to a buildup in corporate infrastructure.

Capital expenditures increased to $4.5 million for the quarter ended 31 March 2008 due to the planned tantalum expansion and hydro-plant in Brazil.

During the quarter, the Advanced Materials division signed a new multi-year agreement with a major operator in the Alberta Oil Sands to process and recycle additional quantities of spent catalysts at the Ohio ferrovanadium recycling facility. The second phase of that facility expansion, which will increase capacity 24% to 5.6 million pounds of vanadium per annum, is scheduled to be completed in 2010. 2008 stated capacity is approximately 4.5 million pounds. The division also continued progress on high priority projects such as the expansion of capacity at the Brazilian tantalum mine and the associated hydropower project, and saw increased market acceptance of coating products for the thin film solar industry.

Engineering Systems Division


                       Q1'08   Q1'07 Change
Revenue              $94,358 $61,170  54.3%
Gross profit          29,253  18,425  58.8%
Operating income      20,480  11,334  80.7%
EBITDA                21,909  12,866  70.3%
Capital expenditures   9,205   2,863 221.5%

The Engineering Systems division achieved another record quarter. Order-backlog was at $351 million on 31 March 2008, up 39.2% from $252 million on 31 December 2007 primarily based on the success of its solar and titanium furnace systems. First quarter 2008 revenue increased by $33.2 million or 54.3%, while EBITDA increased by $9.0 million or 70.3% over the same period in 2007.

For the third consecutive year, demand in almost all markets of the Engineering Systems division remains at record levels. Growth in solar silicon crystallization and melting furnaces, or directional solidification systems ("DSS"), for the solar market increased 40.1% in the first quarter 2008 from the same period in 2007. The division is meeting this increased demand through capacity expansion at its recently acquired Berlin facility. The Company produced three DSS furnaces per week at the end of the first quarter 2008 as compared to one per week during the fourth quarter 2007. The Berlin solar furnace production facility is working to increase its capacity to five furnaces per week by the fourth quarter 2008 in order to meet growing global demand. During the quarter, the Engineering Systems division continued to improve the efficiency of its solar furnaces, including optimising the use of upgraded metallurgical silicon at its solar silicon testing facility in Freiberg, Germany.

The Engineering Systems division also experienced a 45.0% increase in revenue from remelting systems primarily for the aerospace, electronics, and specialty steel industries. Geographically, the Asia Pacific region and Europe drove revenue growth. Almost all product lines achieved improved margins on increased volumes.

The division increased its EBITDA margin to 23.2% during the first quarter 2008 from 21.0% for the same period in 2007. This increase was driven by the sale of vacuum furnace systems based upon the division's proprietary technology and increased economies of scale. The division continues to focus on reducing lead times for key product lines in order to meet the demands of its expanding customer base while generating margins at levels achieved in 2007.

During the quarter ended 31 March 2008, capital expenditures increased to $9.2 million, from $2.9 million for the first quarter of 2007. The building and expansion of the Mexican Own and Operate facility is the primary driver of this growth in capital spending.

Timminco


                       Q1'08   Q1'07 Change
Revenue              $47,381 $36,312  30.5%
Gross profit           4,491   1,903 136.0%
Operating income         260     100 160.0%
EBITDA                 1,349   (246)   n.m.
Capital expenditures  15.514   1.521 920.0%

Timminco's revenue for the first quarter 2008 was $47.4 million compared with $36.3 million in the first quarter 2007, an increase of 30.5%. The increase is primarily attributable to the growth in the sales of the Company's solar grade silicon and silicon metal products. Gross margin improved due to the increase in sales of higher margin solar grade silicon as compared to the silicon metal that was sold in the first quarter 2007.

Silicon gross profit for the first quarter 2008 was $3.2 million or 9.4% of sales compared to gross margin of $0.9 million or 4.8% of sales in the first quarter of 2007. Timminco sold 100 metric tons of solar grade silicon during the first quarter 2008, approximately triple what it had shipped in the fourth quarter of 2007, at an average price in excess of $60/kg. The main contributor to the increase in margin was the increase in sales of solar grade silicon. Included in cost of sales are $2.0 million of start-up costs incurred in the quarter relating to the commissioning of the solar grade silicon facility. Magnesium gross profit for the first quarter 2008 was $1.3 million or 9.4% of sales compared to $1.0 million or 6.0% of sales in the first quarter of 2007.

Timminco's operating income improved to $0.3 million in the first quarter of 2008 due to higher gross profit which was offset by increased selling, general and administrative expenses. The increase in SG&A was largely attributable to higher professional fees and travel related to various strategic initiatives.

The expansion of Timminco's 3,600 metric ton solar silicon facility has been completed according to budget and schedule and is currently in the ramp up phase. This accounts for the majority of the division's capital expenditures. Timminco is comfortable with current solar grade silicon production levels and continues to expect to achieve a cost in the range of $10 to $15 per kilogram at long-term nominal production levels. Continued growth in solar silicon revenues and gross margin improvement are expected for the balance of 2008.


Financial Review

Liquidity


                                 Q1'08    Q4'07  Change
Total debt                    $175,767 $140,782   24.9%
Cash & short-term Investments  208,391  187,891   10.9%
Net cash                        32,624   47,109 (30.7)%

AMG has a significant net cash position of $32.6 million as of 31 March 2008. The Company's liquidity position decreased modestly due to investments in working capital owing to higher volumes and pricing in a number of products and the $8.5 million cash payments and escrow for shares of Graphit Kropfmuehl AG, in advance of the completion of the share purchase.

Cash Flow

                                                        Q1'08   Q1'07

Cash Flows from Operations                            $30,352 $42,703
Capital expenditures                                 (29,223) (6,676)
Acquisitions, net of cash                             (8,575) (1,547)
Cash flows from other investing                         4,744   1,709
Cash Flows used in Investing Activities              (33,054) (6,514)
Cash Flows generated from (used in) Financing          25,951 (3,764)
Activities
Effect of exchange rates on cash held                   6,895   1,347
Net increase in cash and cash equivalents              30,144  33,772

The strong increase in net income was offset by higher investments in working capital during the quarter ended 31 March 2008 resulting in cash flows from operations totaling $30.4 million, down from $42.7 million in the first quarter 2007. The lower level of cash generation is primarily due to necessary working capital build in all areas of the business, which was expected as part of the expansion plans for the Advanced Materials division and Timminco, and a lower level of advanced payments at the Engineering Systems division.

Cash flows used in investing activities of $33.1 million for the quarter ended 31 March 2008 was significantly higher than in the first quarter 2007. This is primarily due to the $14.5 million in costs related to the expansion of the Timminco solar silicon production facility. Cash flows from financing activities were $26.0 million, an increase from cash used in finance activities of $3.8 million in the same period in 2007. This increase was a result of the $20.0 million drawdown on the credit facility in preparation for the acquisition of approximately 74% of Graphit Kropfmuehl in April 2008.


Interim consolidated income statements

For the three months ended 31 March

In thousands of US Dollars                     2008      2007
                                             Unaudited Unaudited
Continuing operations
Revenue                                        326,148   266,829
Cost of sales                                  258,938   221,726
Gross profit                                    67,210    45,103

Selling, general and administrative expenses    32,969    25,638
Restructuring and asset impairment expenses        128         7
Environmental expense                               84       120
Other expenses                                       -        25
Other income                                   (1,379)   (1,278)
Operating profit                                35,408    20,591

Interest expense                                 3,968     9,017
Interest income                                (2,006)     (966)
Foreign exchange gain (loss)                     1,336     (364)

Net finance costs                                3,298     8,415

Share of profit of associates                      101     (130)
Profit before income tax                        32,211    12,046

Income tax expense                               8,680     5,043
Profit for the period                           23,531     7,003

Attributable to:
   Shareholders of the Company                  22,509     7,398
   Minority interests                            1,022     (395)
                                                23,531     7,003

Earnings per share
Basic earnings per share                          0.84      0.28
Diluted earnings per share                        0.82      0.28

The notes are an integral part of these consolidated interim financial statements

Interim consolidated balance sheet at 31 March 2008 and 31 December 2007


In thousands of US Dollars                    March 31,  December 31,
                                                 2008        2007
                                              Unaudited    Audited
   Property, plant and equipment                 181,763      155,763
   Intangible assets                              51,018       50,291
   Investments in associates                      30,220       15,145
   Derivative financial instruments                  931          194
   Deferred tax assets                            39,940       34,537
   Restricted cash                                15,685       14,582
   Notes receivable                                4,292        7,068
   Other assets                                    5,243        5,087
Total non-current assets                         329,092      282,667
   Inventories                                   218,631      186,410
   Trade and other receivables                   252,475      187,243
   Derivative financial instruments               11,162        3,582
   Prepayments                                    47,251       48,754
   Short-term investments                          5,689       15,333
   Cash and cash equivalents                     202,702      172,558
Total current assets                             737,910      613,880
Total assets                                   1,067,002      896,547
Equity
   Issued capital                                    722          722
   Share premium                                 376,370      392,304
   Other reserves                                  6,812      (9,923)
   Retained earnings (deficit)                 (114,930)    (137,439)
Equity attributable to shareholders of the       268,974      245,664
Company
Minority interests                                63,671       64,133
Total equity                                     332,645      309,797
Liabilities
   Loans and borrowings                          145,260      115,726
   Employee benefits                             108,065      102,809
   Provisions                                     12,014       12,011
   Government grants                               6,968        8,585
   Other liabilities                               9,441        9,087
   Derivative financial instruments                   57           77
   Deferred tax liabilities                       41,131       32,112
Total non-current liabilities                    322,936      280,407
   Loans and borrowings                            1,195        1,102
   Short-term bank debt                           22,545       16,202
   Related party debt                              6,767        7,752
   Government grants                               9,292        7,927
   Other Liabilities                              41,310       42,356
   Trade and other payables                      156,293      126,827
   Derivative financial instruments               11,616        4,994
   Advance payments                              136,530       74,731
   Current taxes payable                          14,268       11,496
   Provisions                                     11,605       12,956
Total current liabilities                        411,421      306,343
Total liabilities                                734,357      586,750
Total equity and liabilities                   1,067,002      896,547


Interim consolidated cash flow statements


For the three months ended 31 March
In thousands of US Dollars                          2008      2007
                                                  Unaudited Unaudited
Cash flows from operating activities
Profit for the period                                23,531     7,003
Adjustments to reconcile profit to net cash
flows:
Non-cash
   Depreciation and amortization                      5,722     4,523
   Restructuring expense and impairment losses          128         7
   Environmental expense                                 84        68
   Net finance costs                                  3,298     8,415
   Share of (profit) loss of associates               (101)       130
   Equity-settled share-based payment                 2,627         -
transactions
   Income tax expense                                 8,680     5,043
Change in working capital                           (4,771)    25,587
Other                                               (4,635)   (1,458)
Interest received/(paid)                                566   (1,042)
Income tax paid                                     (4,691)   (1,951)
Cash paid for dividends                                (86)   (3,622)
Net cash flows from operating activities             30,352    42,703


Cash flows used in investing activities


Proceeds from sale of property, plant and equipment         -     701
Acquisitions of property, plant and equipment and    (29,223) (6,676)
intangibles
Acquisitions, net of cash                             (8,575) (1,547)
Related party loans                                   (3,315)       -
Change in short-term investments                        9,274       -
Other                                                 (1,215)   1,008
Net cash flows used in investing activities          (33,054) (6,514)

Cash flows from financing activities
Proceeds from issuance of debt                         26,131     127
Repayment of borrowings                                 (261) (3,502)
Capital infusion                                           11      67
Other                                                      70   (456)
Net cash flows used in (from) financing activities     25,951 (3,764)

Net increase in cash and cash equivalents              23,249  32,425
Cash and cash equivalents at 1 January                172,558  54,610
Effect of exchange rate fluctuations on cash held       6,895   1,347
Cash and cash equivalents at 31 March                 202,702  88,382



About AMG

AMG, incorporated in the Netherlands, is a global leader in the production of highly engineered specialty metal products and advanced vacuum furnace systems. AMG serves growing industries worldwide with its unique combination of metallurgical engineering expertise and production know-how. AMG is a market leader in many of its products and systems, which are critical to the production of key components for the aerospace, energy (including solar and nuclear), electronics, optics, chemicals, construction and transportation industries. AMG has two operating divisions of businesses, Advanced Materials and Engineering Systems, and owns a majority interest in publicly-listed Timminco Limited (TSX: "TIM").

The Advanced Materials Division develops and produces niche specialty metals and complex metals products, many of which are used in demanding, safety-critical, high-stress environments. AMG is one of a limited number of significant producers globally of niche specialty metals, such as ferrovanadium, ferronickel-molybdenum, aluminum master alloys and additives, chromium metal and ferrotitanium, used by steel, aluminum, chemical and superalloy producers for aerospace, automotive, energy, electronics, optics, chemicals, construction and other applications. Other key products produced by AMG include specialty alloys for titanium and superalloys, coating materials, tantalum and niobium oxides, vanadium chemicals and antimony trioxide.

The Engineering Systems Division designs, engineers and produces advanced vacuum furnace systems and operates vacuum heat treatment facilities. AMG is a global leader in supplying technologically-advanced vacuum furnace systems to customers in the aerospace, energy (including solar and nuclear), transportation, electronics, superalloys and specialty steel industries. Examples of furnace systems produced by AMG include vacuum remelting, solar silicon melting and crystallization, vacuum induction melting, vacuum heat treatment and high pressure gas quenching, vacuum precision casting, turbine blade coating and sintering. AMG also provides vacuum case-hardening heat treatment services on a tolling basis to customers through facilities equipped with vacuum heat treatment furnaces.

Timminco Limited is a majority controlled, publicly-listed subsidiary of AMG. Timminco is a leader in the production of upgraded metallurgical silicon for the rapidly growing solar photovoltaic energy industry. Timminco also produces silicon metal and magnesium products for use in a broad range of industrial applications.

AMG operates globally with production facilities in Germany, the United Kingdom, France, the United States, Canada, Mexico, Brazil and Australia and also has sales and customer service offices in Belgium, Russia, China and Japan (website: www.amg-nv.com).


For further information please contact:

AMG Advanced Metallurgical Group N.V.        +1 610 975 4901
Jonathan Costello
Director of Corporate Communications
jcostello@amg-nv.com


Disclaimer

Certain statements in this press release are not historical facts and are "forward looking". Forward looking statements include statements concerning AMG's plans, expectations, projections, objectives, targets, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans and intentions relating to acquisitions, AMG's competitive strengths and weaknesses, plans or goals relating to forecasted production, reserves, financial position and future operations and development, AMG's business strategy and the trends AMG anticipates in the industries and the political and legal environment in which it operates and other information that is not historical information. When used in this press release, the words "expects," "believes," "anticipates," "plans," "may," "will," "should," and similar expressions, and the negatives thereof, are intended to identify forward looking statements. By their very nature, forward looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that the predictions, forecasts, projections and other forward looking statements will not be achieved. These forward looking statements speak only as of the date of this press release. AMG expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward looking statement contained herein to reflect any change in AMG's expectations with regard thereto or any change in events, conditions or circumstances on which any forward looking statement is based.


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http://hugin.info/138060/R/1217812/255003.pdf



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