AMG Advanced Metallurgical Group N.V.
amsterdam : AMG

August 10, 2011 01:56 ET

AMG reports second quarter 2011 results

AMSTERDAM, NETHERLANDS--(Marketwire - Aug 10, 2011) -



Key Highlights

  * Revenue was $368.3 million in the second quarter 2011, a 51% increase
    over the same period in 2010
  * Operating profit was $22.8 million in the second quarter 2011, a 55%
    increase over the same period in 2010
  * EBITDA[1] was $31.4 million in the second quarter 2011, a 32% increase
    over the same period in 2010
  * EPS on a fully diluted basis was $0.12 compared to $0.04 in the second
    quarter 2010; excluding Timminco and loss on extinguishment of debt,
    EPS was $0.29 in the second quarter 2011, compared to $0.20 in the
    second quarter 2010
  * The Advanced Materials Division generated revenue of $235.6 million and
    EBITDA of $17.5 million in the second quarter 2011
  * The Engineering Systems Division generated revenue of $89.8 million and
    EBITDA of $7.7 million in the second quarter 2011
  * Graphit Kropfmühl generated revenue of $42.9 million and EBITDA
    of $6.2 million in the second quarter 2011
  * As of June 30, 2011 cash on hand was $61.1 million; net debt was $217.3
    million


Amsterdam, 10 August 2011 (Regulated Information) --- AMG Advanced Metallurgical Group N.V. ("AMG", EURONEXT AMSTERDAM: "AMG") reported second quarter 2011 revenue of $368.3 million, a 51% increase from $243.5 million in the second quarter 2010.

EBITDA increased 32% to $31.4 million in the second quarter 2011 from $23.9 million in the second quarter 2010. Net profit attributable to shareholders for the second quarter 2011 was $3.4 million, or $0.12 per fully diluted share. This was up from $1.2 million, or $0.04 per fully diluted share, in the second quarter 2010. Excluding AMG's share of Timminco's net loss in the second quarter and loss on extinguishment of debt, AMG's net profit attributable to shareholders for the second quarter 2011 was $8.0 million, or $0.29 per fully diluted share compared to $0.20 in the second quarter 2010.

Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, "The business performed well in the second quarter 2011. Demand, particularly in critical materials for the aerospace and energy markets, remained high during the quarter. Pricing materials remained strong including antimony trioxide, chromium metal and tantalum. The integration of KB Alloys is proceeding on plan. The Engineering Systems' order intake increased 35% from the first quarter 2011, despite the challenging solar capital goods market. Graphit Kropfmühl's silicon metal and natural graphite products continued to experience strong demand and pricing."

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



Key Figures

 In 000's US Dollar

                                      Q2'11      Q2'10   Change



 Revenue                           $368,318   $243,544      51%
----------------------------------------------------------------
 Gross profit                        68,993     44,490      55%

 Gross margin                         18.7%      18.3%


----------------------------------------------------------------
 Operating profit                    22,787     14,713      55%

 Operating margin                      6.2%       6.0%



 Net profit attributable to
 shareholders                         3,351      1,164     188%
----------------------------------------------------------------


 EPS- Fully diluted                    0.12       0.04     200%

 Adjusted EPS- Fully diluted (1)       0.29       0.20      45%



 EBIT (2)                            24,592     17,986      37%

 EBITDA (3)                          31,447     23,902      32%

 EBITDA margin                         8.5%       9.8%
----------------------------------------------------------------

Note:

(1) Adjusted to exclude equity losses from Timminco, and the loss on
extinguishment of debt of $0.07 and $0.10, respectively, in Q2 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

                        Q2'11(1)      Q2'10   Change
-----------------------------------------------------
 Revenue                $235,580   $151,982      55%

 Gross profit             37,747     27,350      38%

 Operating profit         12,865     10,452      23%

 EBITDA                   17,534     14,165      24%

 Capital expenditures      6,194       4,247     46%



(1) 2011 includes the KB Alloys LLC acquisition



The Advanced Materials Division's second quarter 2011 financial results were positively impacted by the acquisition of KB Alloys LLC, improvements in aerospace alloys volumes and increases in chromium metal, tantalum and antimony prices. Revenue increased by $83.6 million or 55% to $235.6 million. The increase in revenue was specifically the result of $25.0 million of revenue from KB Alloys LLC, which was acquired in February 2011, and 55%, 53%, and 38% increase in aerospace master alloys and chemicals, tantalum and antimony revenue, respectively.

The second quarter 2011 gross margin of 16% of revenue, declined from 18% of revenue from the second quarter of 2010. Increased economies of scale were more than offset by unfavourable changes in product mix, specifically an 87% increase in lower margin aluminium products revenue and higher raw materials costs, resulting in lower gross margins.

The second quarter 2011 EBITDA increased by $3.4 million to 7% of revenue from 9% of revenue in 2010 due to the increase in gross profit, but this was offset by a 42% increase in SG&A due to the acquisition of KB Alloys and long-term incentive expenses of $1.6 million.

Capital expenditures were $6.2 million for the quarter, 46% more than the second quarter 2010. Significant growth capital investments made in the second quarter include $1.6 million in the Brazilian tantalum mine and $1.0 million to expand aerospace master alloy production.



Engineering Systems Division

                          Q2'11     Q2'10   Change
---------------------------------------------------
 Revenue                $89,812   $59,507      51%

 Gross profit            22,661    13,942      63%

 Operating profit         5,047     3,578      41%

 EBITDA                   7,671     8,047     (5%)

 Capital expenditures     2,984     1,301     129%



The Engineering Systems Division's second quarter 2011 revenue increased by $30.3 million, or 51%, to $89.8 million. Sales of solar silicon DSS furnaces increased 43% in the second quarter 2011 compared to the same period in 2010, accounting for 29% of revenue in the second quarter 2011. Own and Operate revenue increased by 55% to $10.8 million, more than offsetting the 28% decline to $12.4 million in revenue from remelting systems, primarily for the aerospace and specialty steel industries.

The order backlog increased 2% to $200.6 million as of June 30, 2011, from $195.9 million as of March 31, 2011. The division generated order intake of $88.6 million in the second quarter 2011, a 0.99x book to bill ratio and a 31% increase compared to the second quarter 2010. Order intake for heat treatment furnaces and nuclear sintering furnaces accounted for 45% and 15% of total order intake, respectively.

The second quarter 2011 gross margin of 25% of revenue increased from 23% of revenue in the second quarter 2010 due to increased economies of scale, lower costs in the MOX nuclear furnace business and increased capacity utilization at the Own and Operate business.

Second quarter 2011 EBITDA decreased by $0.4 million to 9% of revenue from 14% of revenue in the second quarter 2010. This was caused by a 62% increase in SG&A due to long-term incentive expenses, research and development expenses and costs associated with Mono(2™ )technology at AMG Idealcast Solar.

Capital expenditures were $3.0 million, 129% more than the second quarter of 2010. This increase in capital investments is primarily related to additional capacity for the U.S. Own and Operate facility.



Graphit Kropfmühl

                          Q2'11     Q2'10   Change
---------------------------------------------------
 Revenue                $42,926   $32,055      34%

 Gross profit             8,585     3,198     168%
 Operating profit         4,875       683     614%

 EBITDA                   6,242     1,690     269%

 Capital expenditures     2,486     1,259      97%



Graphit Kropfmühl's second quarter 2011 revenue increased by $10.9 million, or 34%, to $42.9 million. Natural graphite revenue increased $3.3 million, or 28%, driven by an increase in prices, despite lower volumes. Silicon metal revenue increased by $7.6 million or 37%, primarily as a result of higher silicon metal prices and increased volumes of silicon by products.

The second quarter 2011 gross margin increased to 20% of revenue from 10% of revenue in the second 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.

Second quarter 2011 EBITDA was $6.2 million, a 269% increase compared to the second quarter 2010. The EBITDA margin increased to 15% in the second 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 51% increase in SG&A due to increases in personnel costs.

Capital expenditures increased to $2.5 million in the second quarter 2011, 97% more than the second quarter 2010. The increase in capital expenditures was a result of upgrading the electrodes at the silicon metal operation and adding milling capacity in natural graphite.

Timminco

AMG's ownership in Timminco Limited ("Timminco") was 41.9% as of June 30, 2011. AMG accounts for its investment in Timminco via the equity accounting method. Timminco's loss for the second quarter 2011 of $1.9 million is included in share of loss of associates on AMG's income statement and the carrying value of AMG's investment in Timminco of $11.4 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 $7.8 million in the second quarter 2011 compared to a tax expense of $7.1 million in the second 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 57% in the second quarter 2011. For the first half of 2011, excluding share of loss of associates, AMG's effective tax rate is 42%.

SG&A

AMG's SG&A expenses were $44.8 million in the second quarter 2011, compared to $29.9 million in the second quarter 2010. The $14.9 million change in SG&A expenses was primarily due to a $5.0 million increase in personnel costs, primarily at the operating level, $2.6 increase in long-term incentive expenses, $2.3 million in bad debt expense as well as the additional $1.6 SG&A expenses incurred by AMG Idealcast 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 June 30, 2011 compared to March 31, 2011, resulted in an increase in the assets and liabilities on the balance sheet of $13.5 million and $9.9 million, respectively. The net result of the depreciation in the value of the US dollar quarter over quarter resulted in an increase in revenue and EBITDA of $23.6 million and $3.3 million, respectively in the second quarter 2011.



Liquidity

                                 June 30, 2011   December 31, 2010   Change
---------------------------------------------------------------------------
 Total debt                           $278,473            $237,089      17%

 Cash & short-term investments          61,136              89,311    (32%)
---------------------------------------------------------------------------
 Net debt                              217,337             147,778      47%



AMG had a net debt position of $217.3 million as of June 30, 2011. AMG's net debt position increased $69.6 million since December 31, 2010 primarily due to $21.6 million of cash tax payments, $19.9 million in capital investments, the $24.3 million acquisition of KB Alloys LLC, and a $46.7 million increase in working capital due to increasing material costs, reduced by EBITDA of $57.6 million.

During the second 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

                                                      H1'11       H1'10
------------------------------------------------------------------------


 Net cash flows used in operations                $(12,080)   $(20,295)
------------------------------------------------------------------------
 Capital expenditures                              (19,913)    (11,953)

 Acquisitions, net of cash                         (26,816)           -

 Investment in associates                                  -   (10,322)

 Cash flows used in other investing                   2,844         246
------------------------------------------------------------------------
 Net cash flows used in investing activities       (43,885)    (22,029)
------------------------------------------------------------------------
 Cash flows generated from financing activities      23,899      21,207
------------------------------------------------------------------------



Cash flows used in operations were $12.1 million in the first half of 2011 as compared to $20.3 million in the first half of 2010. The cash flows used in operations in the first half of 2011 are a result of $21.6 million in cash tax payments as well as a $46.7 million increase in working capital and provisions, offset by $57.6 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 $43.9 million in the first half of 2011. This increase of $21.9 million from the first half of 2010 is composed of a $26.8 million increase in acquisitions, primarily for KB Alloys LLC, and an $8.0 million increase in capital investments, slightly offset by a $10.3 million decrease in cash flows for investment in associates. In Q2 2010, AMG made an investment in Timminco as part of an equity offering.

Cash generated from financing activities was $23.9 million in the first half of 2011, a $2.7 million increase from the first half of 2010. This increase was primarily attributable to $34.4 million in net draws on new and existing revolving lines of credit, offset by $10.5 million in transaction costs related to debt issuance. The draws on the revolving lines of credit were used to fund the acquisition of KB Alloys LLC and the related transaction costs.


Outlook

The Advanced Materials Division should continue to generate strong revenues, albeit at levels slightly below the second quarter 2011, for many of its products including antimony trioxide, tantalum, titanium aerospace alloys and chromium metal. In the second half of 2011, Advanced Materials' conversion businesses will be impacted by higher raw material prices as lower cost inventory stocks are depleted. As AMG enters the seasonally slow period in its business, due to planned summer plant shutdowns of customers' and certain AMG operations, AMG's is continuing to ramp up the tantalum and antimony mining operations. Order Intake in Engineering Systems is stable but continues to be adversely impacted by the current economic environment, with solar particularly affected. Demand and pricing for Graphit Kropfmühl's natural graphite and silicon metal products should remain strong for the balance of 2011. Management will focus on reducing working capital and lowering net debt through cash from operations in the second half of 2011. Provided the current macroeconomic environment remains stable, AMG expects to generate in excess of 25% EBITDA growth in 2011.



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

 For the three months ended June 30

 In thousands of US Dollars                            2011        2010

                                                  Unaudited   Unaudited

 Continuing operations

 Revenue                                            368,318     243,544

 Cost of sales                                      299,325     199,054

 Gross profit                                        68,993      44,490


 Selling, general and administrative expenses        44,765      29,874

 Restructuring expense                                2,174           -

 Environmental expense                                  141         249

 Other income, net                                    (874)       (346)

 Operating profit                                    22,787      14,713


 Loss on early extinguishment of debt                 3,902           -

 Finance expense                                      5,013       4,600

 Finance income                                     (1,158)     (1,082)

 Foreign exchange loss (gain)                         1,302     (1,592)

 Net finance costs                                    9,059       1,926


 Share of loss of associates                          1,694       5,024

 Profit before income tax                            12,034       7,763


 Income tax expense                                   7,828       7,126

 Profit for the period                                4,206         637



 Attributable to:

  Shareholders of the Company                         3,351       1,164

  Non-controlling interests                             855       (527)

                                                      4,206         637


 Earnings per share

 Basic earnings per share                              0.12        0.04

 Diluted earnings per share                            0.12        0.04





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

 For the six months ended June 30

 In thousands of US Dollars                            2011        2010

                                                  Unaudited   Unaudited

 Continuing operations

 Revenue                                            686,317     479,338

 Cost of sales                                      557,544     392,264

 Gross profit                                       128,773      87,074


 Selling, general and administrative expenses        87,702      60,487

 Restructuring expense                                2,459           7

 Environmental expense                                  246         506

 Other income, net                                  (1,827)       (427)

 Operating profit                                    40,193      26,501


 Loss on early extinguishment of debt                 3,902           -

 Finance expense                                      7,018      10,921

 Finance income                                     (2,658)     (1,629)

 Foreign exchange loss (gain)                         1,285     (3,756)

 Net finance costs                                    9,547       5,536


 Share of loss of associates                          6,071       9,420

 Profit before income tax                            24,575      11,545


 Income tax expense                                  12,792      10,993

 Profit for the period                               11,783         552



 Attributable to:

  Shareholders of the Company                        10,323       1,099

  Non-controlling interests                           1,460       (547)

                                                     11,783         552


 Earnings  per share

 Basic earnings per share                              0.37        0.04

 Diluted earnings per share                            0.37        0.04






AMG Advanced Metallurgical Group N.V.

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

                                                          June December 31,
                                                      30, 2011         2010

                                                     Unaudited      Audited

Assets

  Property, plant and equipment                        262,033      228,612

  Intangible assets                                     33,556       27,002

  Investments in associates and joint ventures          20,799       25,186

  Derivative financial instruments                       5,139        5,199

  Deferred tax assets                                   26,552       22,107

  Restricted cash                                       11,261       12,528

  Notes receivable                                       1,144          322

  Other assets                                          15,827       15,372

Total non-current assets                               376,311      336,328



  Inventories                                          258,198      207,204

  Trade and other receivables                          216,929      175,421

  Derivative financial instruments                       6,148        5,731

  Other assets                                          46,998       41,080

  Cash and cash equivalents                             61,136       89,311

Total current assets                                   589,409      518,747

Total assets                                           965,720      855,075










AMG Advanced Metallurgical Group N.V.

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





                                                              December 31,
                                                 June 30, 2011        2010

                                                     Unaudited     Audited

 Equity

     Issued capital                                        741         741

     Share premium                                     381,636     381,636

     Other reserves                                     44,291      36,158

     Retained earnings (deficit)                     (186,205)   (196,481)

 Equity attributable to shareholders of the Company    240,463     222,054

 Non-controlling interests                              13,888      11,911

 Total equity                                          254,351     233,965



 Liabilities

     Loans and borrowings                              219,761     187,813

     Employee benefits                                  98,238      88,372

     Provisions                                         21,021      20,607

     Government grants                                     602         642

     Other liabilities                                   9,733       5,517

     Derivative financial instruments                      548         698

     Deferred tax liabilities                           33,630      25,436

 Total non-current liabilities                         383,533     329,085



     Loans and borrowings                                4,981       4,254

     Short term bank debt                               53,731      45,022

     Government grants                                     190         175

     Other liabilities                                  56,996      43,287

     Trade and other payables                          117,472     102,253

     Derivative financial instruments                    5,189       1,754

     Advance payments                                   45,715      49,597

     Current taxes payable                              19,649      24,979

     Provisions                                         23,913      20,704

 Total current liabilities                             327,836     292,025

 Total liabilities                                     711,369     621,110

 Total equity and liabilities                          965,720     855,075





AMG Advanced Metallurgical Group N.V.
Condensed interim consolidated statement of cash flows

For the six months ended June 30

In thousands of US Dollars                                   2011      2010

                                                        Unaudited Unaudited

Cash flows used in operating activities

Profit for the period                                      11,783       552

Adjustments to reconcile profit to net cash flows:

Non-cash:

   Depreciation and amortization                           14,169    12,096

   Restructuring expense                                    2,459         7

   Environmental expense                                      246       506

   Net finance costs                                        9,547     5,536

   Share of loss of associates                              6,071     9,420

   Equity-settled share-based payment transactions          1,833     3,081

   Income tax expense                                      12,791    10,993

Change in working capital and provisions                 (46,736)  (35,719)

Other                                                       2,529     2,119

Finance costs paid, net                                   (5,136)   (7,449)

Income tax paid, net                                     (21,636)  (21,437)

Net cash flows used in operating activities              (12,080)  (20,295)



Cash flows used in investing activities

Proceeds from sale of property, plant and equipment            49       439

Acquisition of property, plant and equipment and
intangibles                                              (19,913)  (11,953)

Acquisition of associates and joint ventures                    -  (10,322)

Acquisition of subsidiaries
(net of cash acquired of $692)                           (26,816)         -

Change in restricted cash                                   1,839     (181)

Other                                                         956      (12)

Net cash flows used in investing activities              (43,885)  (22,029)



Cash flows from financing activities

Proceeds from the issuance of debt                        221,626    22,512

Payment of transaction costs related to debt issuance    (10,457)         -

Repayment of long term borrowings                       (187,276)   (1,420)

Other                                                           6       115

Net cash flows from financing activities                   23,899    21,207



Net decrease in cash and cash equivalents                (32,066)  (21,117)

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

Effect of exchange rate fluctuations and consolidation
changes on cash                                             3,891  (11,325)

Cash and cash equivalents at June 30                       61,136    84,574



About AMG

AMG creates and applies innovative metallurgical solutions to the global trend of sustainable development of natural resources and CO(2) 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, Asia 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 3,000 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 second quarter 2011 results


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

[HUG#1537338]

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