AMG Advanced Metallurgical Group N.V.
amsterdam : AMG

August 09, 2012 01:17 ET

AMG reports second quarter 2012 results

AMSTERDAM, THE NETHERLANDS--(Marketwire - Aug 9, 2012) - (Regulated Information)

Key Highlights

* Revenue was $319.6 million in the second quarter 2012, a 13% decrease from the same period in 2011

* EBITDA(1) was $23.6 million in the second quarter 2012, a 25% decrease from the same period in 2011

* EPS on a fully diluted basis was ($0.10) in the second quarter 2012, a $0.22 decrease from $0.12 in same period in 2011

* The Advanced Materials Division generated revenue of $211.7 million and EBITDA of $14.5 million in the second quarter 2012

* The Engineering Systems Division generated revenue of $65.4 million and EBITDA of $3.7 million in the second quarter 2012

* Graphit Kropfmühl generated revenue of $42.5 million and EBITDA of $5.4 million in the second quarter 2012

* As of June 30, 2012, cash on the balance sheet was $93.6 million; net debt was $212.3 million

AMG Advanced Metallurgical Group N.V. ("AMG", EURONEXT AMSTERDAM: "AMG") reported second quarter 2012 revenue of $319.6 million, a 13% decrease from $368.3 million in the second quarter 2011.

EBITDA decreased 25% to $23.6 million in the second quarter 2012 from $31.4 million in the second quarter 2011. Net loss attributable to shareholders for the second quarter 2012 was $2.6 million, or ($0.10) per fully diluted share, down from a net profit attributable to shareholders of $3.4 million, or $0.12 per fully diluted share, in the second quarter 2011.

Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, "Demand and pricing for Advanced Materials products, particularly in critical materials for the aerospace and energy markets, remained stable in the second quarter. Delayed order intake and increased pricing pressure in the Engineering Systems Division resulted in lower profitability in the quarter. Unfavorable product mix in natural graphite and lower than expected silicon metal production marginally reduced Graphit Kropfmühl's second quarter earnings. Following the completion of the squeeze out, AMG intends to fully integrate GK and address cost savings opportunities. Given the challenging markets, AMG's number one priority is increasing its operational efficiency across all of AMG's units, under the leadership of Eric Jackson, AMG's recently appointed COO."

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

Key Figures

In 000's US Dollar

                                                   Q2'12    Q2'11   Change



 Revenue                                        $319,591 $368,318    (13%)
--------------------------------------------------------------------------
 Gross profit                                     53,996   68,993    (22%)

 Gross margin                                      16.9%    18.7%


--------------------------------------------------------------------------
 Operating profit                                  7,827   22,787    (66%)

 Operating margin                                   2.4%     6.2%



 Net (loss) profit attributable to shareholders
                                                 (2,647)    3,351      N/A
--------------------------------------------------------------------------


 EPS- Fully diluted                               (0.10)     0.12      N/A



 EBIT (1)                                         16,603   24,592    (32%)

 EBITDA (2)                                       23,639   31,447    (25%)

 EBITDA margin                                      7.4%     8.5%
--------------------------------------------------------------------------

Note:

(1) EBIT is defined as earnings before interest, tax and excludes non- recurring Items

(2) EBITDA is defined as earnings before interest, tax, depreciation and amortization and excludes non-recurring items

Operational Review

Advanced Materials Division

                         Q2'12      Q2'11   Change
---------------------------------------------------
  Revenue             $211,656   $235,580    (10%)

  Gross profit          31,435     37,747    (17%)

  Operating profit       9,725     12,865    (24%)

  EBITDA                14,549     17,534    (17%)

  Capital expenditures   6,225          6,194   1%

The Advanced Materials Division's second quarter 2012 revenue decreased $23.9 million, or 10%, to $211.7 million. The decrease in revenue was primarily the result of 18% and 16% decreases in aluminum products and antimony revenue, respectively, slightly offset by 12% and 10% increases in titanium master alloys and chrome products revenue, respectively, compared to the second quarter 2011.

The second quarter 2012 gross margin declined to 15% from 16% in the second quarter 2011. Higher operating and raw material costs, particularly in antimony and chrome products, more than offset higher gross margins in aluminum products, which were the result of operational improvements.

The second quarter 2012 EBITDA decreased $3.0 million to 7% of revenue, which was consistent with the 7% of revenue level achieved in the second quarter 2011. The EBITDA decrease was the result of the $6.3 million decrease in gross profit slightly offset by a $3.3 million, or 14% decrease in SG&A. The SG&A decline was the result of a reduction in personnel expenses, primarily long- term incentive costs.

Capital expenditures were $6.2 million for the second quarter 2012, essentially flat compared to the second quarter 2011. Significant growth capital investments made in the second quarter included a $1.4 million investment in the expansion of the spent catalyst recycling facility for ferrovanadium production, $1.3 million related to expansion of the Brazilian tantalum mine, and maintenance expenditures of $1.4 million.

Engineering Systems Division

                               Q2'12     Q2'11   Change
--------------------------------------------------------
  Revenue                    $65,400   $89,812    (27%)

  Gross profit                14,929    22,661    (34%)

  Operating (loss) profit    (5,387)     5,047      N/A

  EBITDA                       3,725     7,671    (51%)

  Capital expenditures         2,911     2,984     (2%)

The Engineering Systems Division's second quarter 2012 revenue decreased $24.4 million, or 27%, to $65.4 million. Revenue from Heat Treatment Services for the production of automotive components for fuel-efficient vehicles increased 16% to $12.5 million and revenue from heat treatment furnaces, primarily for the transportation industry, increased 3% to $18.0 million. These increases were more than offset by 71% and 38% decreases in solar silicon and sintering furnace revenue, respectively, compared to the second quarter 2011.

Order backlog decreased 15% to $150.0 million as of June 30, 2012, from $176.2 million as of March 31, 2012. The division generated order intake of $36.4 million in the second quarter 2012, which represents a 59% decrease compared to the second quarter 2011 and a 0.56x book to bill ratio. Order intake for heat treatment systems accounted for 29% of total order intake.

The second quarter 2012 gross margin of 23% decreased from 25% achieved in the second quarter 2011. Favorable product mix was more than offset by increased end market pricing pressure and a decline in the economies of scale, resulting in decreased gross margins.

The second quarter 2012 EBITDA decreased $3.9 million, to 6% of revenue. EBITDA declined from 9% of revenue in the second quarter 2011. The EBITDA decrease was the result of the $7.7 million decrease in gross profit slightly offset by a $3.2 million, or 19% decrease in SG&A. The SG&A decline was the result of a reduction in personnel costs, primarily long-term incentive costs.

Capital expenditures were $2.9 million, 2% less than the second quarter of 2011. Capital investments in the second quarter were primarily maintenance and expansion capital expenditures for the Heat Treatment Services business.

Graphit Kropfmühl

                           Q2'12     Q2'11   Change
----------------------------------------------------
  Revenue                $42,535   $42,926     (1%)

  Gross profit             7,632     8,585    (11%)
  Operating profit         3,489     4,875    (28%)

  EBITDA                   5,365     6,242    (14%)

  Capital expenditures     2,781     2,486      12%

Graphit Kropfmühl's second quarter 2012 revenue decreased $0.4 million, or 1%, to $42.5 million. Natural graphite revenue decreased $0.7 million, or 5%, primarily caused by a 6% decrease in average pricing. Silicon metal revenue increased $0.3 million, or 1%, as an unfavorable product mix offset a 7% increase in volumes.

The second quarter 2012 gross margin decreased to 18% from 20% in the second quarter of 2011. The decrease in gross margin was primarily the result of unfavorable product mix for silicon metal and natural graphite products.

The second quarter 2012 EBITDA declined $0.9 million to 13% of revenue. This was a decrease from 15% of revenue in the second quarter 2011. The lower EBITDA was attributable to the decreased gross profit for both silicon metal and natural graphite, slightly offset by a 7% decline in SG&A due to a decline in personnel costs.

Capital expenditures were $2.8 million in the second quarter 2012, 12% more than the second quarter 2011, primarily because of upgrading the electric arc furnaces and storage facilities at the silicon metal operation.

Financial Review

Tax

AMG recorded a tax expense of $5.5 million in the second quarter 2012 as compared to a tax expense of $7.8 million in the second quarter 2011. The second quarter 2012 effective tax rate was adversely impacted by the reversal of previously recognized deferred tax assets in several jurisdictions, including Brazil. In addition, a significant portion of the restructuring and asset impairment expense in the quarter relates to entities for which a tax benefit cannot be booked. For the first half of 2012 AMG's effective tax rate is 103%. The expected full year effective tax rate is expected to be approximately 65% which is higher than the normalized statutory rate due to the items noted above.

SG&A

AMG's second quarter 2012 SG&A expenses were $38.0 million, a 15% decrease from $44.8 million in the second quarter 2011. The $6.7 million decrease in SG&A expenses was due to a reduction in long-term incentive expenses and external consulting costs.

Non-Recurring Items

AMG's second quarter 2012 operating profit of $7.8 million includes non-recurring items, which are not included in the calculation of EBITDA. These items are comprised of income and expense items that, in the view of management, do not arise in the normal course of business and items that, because of their nature and/or size, should be presented separately to enable more accurate analysis of the results. AMG incurred $8.4 million of non-recurring items in the second quarter 2012, consisting of $6.8 million write down and restructuring of AMG Idealcast assets, $0.6 million in environmental costs, $0.5 million restructuring charge related to the closure of a UK entity and $0.5 million management restructuring in the Advanced Materials Division. AMG incurred $2.3 million of non-recurring items in the second quarter 2011, related to the closure of Silmag joint venture.

Currency Fluctuations

AMG transacts business in many currencies other than the U.S. dollar, the Company's reporting currency. AMG's financial statements are prepared in U.S. dollars, so fluctuations in the exchange rates between the U.S. dollar and other currencies have an effect both on the results of operations and on the reported value of assets and liabilities as measured in U.S. dollars. The appreciation in the value of the U.S. dollar as of June 30, 2012 compared to March 31, 2012, resulted in a decrease in the assets and liabilities on the balance sheet of $40.5 million and $29.3 million, respectively. The net result of the appreciation in the value of the U.S. dollar in the second quarter 2012 compared to the second quarter 2011, resulted in a decrease in revenue and EBITDA of $21.1 million and $2.3 million, respectively.

Liquidity

                                 June 30, 2012   December 31, 2011   Change
---------------------------------------------------------------------------
  Total debt                          $305,906            $268,621      14%

  Cash & short-term investments         93,624              79,571      18%
---------------------------------------------------------------------------
  Net debt                             212,282             189,050      12%

AMG had a net debt position of $212.3 million as of June 30, 2012. AMG's net debt position increased $23.2 million since December 31, 2011 primarily due to $22.4 million increase in working capital, $23.4 million in capital investments, $9.3 million of cash tax payments, $9.0 million of cash interest payments and $6.6 million in Graphit Kropfmühl share purchases, reduced by EBITDA of $45.5 million. Including the $93.6 million of cash, AMG had $156.2 million of total liquidity as of June 30, 2012.

Cash Flow

                                                   H1'12       H1'11
--------------------------------------------------------------------


  Net cash flows from (used in) operations        $3,134   $(12,080)
--------------------------------------------------------------------
  Capital expenditures                          (23,443)    (19,913)

  Acquisitions, net of cash                      (1,920)    (26,816)

  Cash flows from other investing activities         534       2,844
--------------------------------------------------------------------
  Net cash flows used in investing activities   (24,829)    (43,885)
--------------------------------------------------------------------
  Cash flows from financing activities            36,091      23,899
--------------------------------------------------------------------

Cash flows from operations were $3.1 million in the first half of 2012 compared to cash flows used in operations of $12.1 million in the first half of 2011. Cash flows from operations in the first half of 2012 are primarily the result of $45.5 million in EBITDA less $22.4 million increase in working capital, $9.3 million in cash tax payments and $9.0 million in cash interest payments.

Cash used in investing activities was $24.8 million in the first half of 2012. The $19.1 million decrease compared to the first half 2011 is composed of a $24.9 million decrease in cash used in acquisitions, slightly offset by a $3.5 million increase in capital investments and a $2.3 million increase in cash flows from other investing activities due to a decrease in restricted cash for project work in the Engineering Systems Division. In the first half of 2012, AMG acquired 5.5% of Graphit Kropfmühl's outstanding common shares for $6.6 million, for which $1.9 million is shown as a cash flow used in investing activities while $4.7 million is shown as a cash flow used in financing activities.

Cash from financing activities was $36.1 million in the first half 2012, a $12.2 million increase from the first half 2011. This increase was primarily attributable to a net increase of $40.7 million in existing credit facilities, compared to $34.4 million in net draws in new and existing lines of credit offset by $10.5 million in transaction costs related to debt issuance in the first half of 2011. The increase in the credit facility during the first half of 2012 was used to fund the Brazilian mine expansion and the acquisition of Graphit Kropfmühl shares as well as to retire Graphit Kropfmühl's external debt.

Outlook

The slowdown in Europe is impacting AMG. In the Advanced Materials Division, its European centric businesses, particularly antimony and other non- aerospace businesses, are being affected. The Engineering Systems Division is responding to the deterioration in demand for capital goods across most end markets through operational improvements. Higher input prices and moderating demand are affecting Graphit Kropfmühl's ability to maintain current profitability levels. While AMG cannot affect the direction of the markets, it is addressing profitability issues through companywide improvement initiatives, specifically focused on AMG Mining and the Engineering Systems Division to reduce costs. AMG is also working to improve cash flow and reduce indebtedness through working capital and capital expenditure reductions. Despite these changes, achieving the prior year's revenue and earnings levels will be difficult, as the growth previously anticipated in the second half of 2012 is not expected to materialize.

AMG Advanced Metallurgical Group N.V.

Condensed interim consolidated income statement

For the three months ended June 30

In thousands of US Dollars                     2012      2011

                                              Unaudited Unaudited

 Continuing operations

 Revenue                                      319,591     368,318

 Cost of sales                                265,595     299,325

 Gross profit                                  53,996      68,993



 Selling, general and administrative
 expenses                                      38,022      44,765

 Restructuring and asset impairment expense     7,821       2,174

 Environmental expense                            560         141

 Other income, net                              (234)       (874)

 Operating profit                               7,827      22,787



 Finance expense                                6,250       8,915

 Finance income                                 (457)     (1,158)

 Foreign exchange loss                            100       1,302

 Net finance costs                              5,893       9,059



 Share of profit (loss) of associates              83     (1,694)

 Profit before income tax                       2,017      12,034



 Income tax expense                             5,452       7,828

 (Loss) profit for the period                 (3,435)       4,206





 Attributable to:

   Shareholders of the Company                (2,647)       3,351

   Non-controlling interests                    (788)         855

                                              (3,435)       4,206



 (Loss) earnings  per share

 Basic earnings per share                      (0.10)        0.12

 Diluted earnings per share                    (0.10)        0.12



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

 For the six months ended June 30

 In thousands of US Dollars                     2012      2011

                                              Unaudited Unaudited

 Continuing operations

 Revenue                                      643,575     686,317

 Cost of sales                                536,168     557,544

 Gross profit                                 107,407     128,773



 Selling, general and administrative
 expenses                                      77,096      87,702

 Restructuring and asset impairment expense    10,664       2,459

 Environmental expense                          1,288         246

 Other income, net                              (702)     (1,827)

 Operating profit                              19,061      40,193



 Finance expense                               12,941      10,920

 Finance income                                 (612)     (2,658)

 Foreign exchange loss                            509       1,285

 Net finance costs                             12,838       9,547



 Share of profit (loss) of associates             249     (6,071)

 Profit before income tax                       6,472      24,575



 Income tax expense                             6,696      12,792

 (Loss) profit for the period                   (224)      11,783





 Attributable to:

   Shareholders of the Company                    856      10,323

   Non-controlling interests                  (1,080)       1,460

                                                (224)      11,783



 Earnings  per share

 Basic earnings per share                        0.03        0.37

 Diluted earnings per share                      0.03        0.37





 AMG Advanced Metallurgical Group N.V.

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

                                                     June 30,  December 31,
                                                       2012        2011

                                                     Unaudited   Audited

 Assets

   Property, plant and equipment                       261,427 263,586

   Goodwill                                             22,750  23,535

   Intangible assets                                    14,666  14,557

   Investments in associates and joint ventures          5,188   5,085

   Derivative financial instruments                          -       1

   Deferred tax assets                                  22,781  29,142

   Restricted cash                                      10,692  11,074

   Notes receivable                                        264     250

   Other assets                                         18,250  17,866

 Total non-current assets                              356,018 365,096



   Inventories                                         223,665 228,887

   Trade and other receivables                         201,092 188,103

   Derivative financial instruments                      3,573   3,956

   Other assets                                         43,286  35,184

   Cash and cash equivalents                            93,624  79,571

 Total current assets                                  565,240 535,701

 Total assets                                          921,258 900,797







 AMG Advanced Metallurgical Group N.V.

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



                                          June 30,      December 31,
                                            2012            2011

                                              Unaudited   Audited

 Equity

   Issued capital                                   742          742

   Share premium                                377,245      381,921

   Other reserves                                10,311       14,157

   Retained earnings (deficit)                (190,506)    (191,362)

 Equity attributable to shareholders of the
 Company                                        197,792      205,458

 Non-controlling interests                       11,411       15,160

 Total equity                                   209,203      220,618



 Liabilities

   Loans and borrowings                         259,462      210,448

   Employee benefits                             88,360       90,078

   Provisions                                    27,304       27,019

   Government grants                                479          732

   Other liabilities                              8,545        9,276

   Derivative financial instruments               9,821        8,122

   Deferred tax liabilities                      27,424       26,434

 Total non-current liabilities                  421,395      372,109



   Loans and borrowings                          14,144       17,436

   Short term bank debt                          32,300       40,737

   Government grants                                 53           34

   Other liabilities                             48,873       51,673

   Trade and other payables                     136,084      128,493

   Derivative financial instruments               8,208       10,661

   Advance payments                              32,110       30,204

   Current taxes payable                          5,443       14,468

   Provisions                                    13,445       14,364

 Total current liabilities                      290,660      308,070

 Total liabilities                              712,055      680,179

 Total equity and liabilities                   921,258      900,797



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                               2012      2011

                                                       Unaudited  Unaudited

 Cash flows from (used in) operating activities

 (Loss) profit for the period                             (224)      11,783

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

 Non-cash:

    Depreciation and amortization                        14,152      14,169

    Restructuring expense                                 4,331       2,459

    Asset impairment expense                              6,333           -

    Environmental expense                                 1,288         246

    Net finance costs                                    12,838       9,547

    Share of (profit) loss of associates                  (249)       6,071

    Equity-settled share-based payment transactions         856       1,833

    Income tax expense                                    6,696      12,792

 Change in working capital and provisions              (22,413)    (46,736)

 Other                                                  (2,113)       2,528

 Finance costs paid, net                                (9,017)     (5,136)

 Income tax paid, net                                   (9,344)    (21,636)

 Net cash flows from (used in) operating activities       3,134    (12,080)



 Cash flows used in investing activities

 Proceeds from sale of property, plant and equipment        147          49

 Acquisition of property, plant and equipment and
 intangibles                                           (23,443)    (19,913)

 Acquisition of non-controlling interests and
 subsidiaries (net of cash acquired of nil and $690,
 respectively)                                          (1,920)    (26,816)

 Change in restricted cash                                  388       1,839

 Other                                                      (1)         956

 Net cash flows used in investing activities           (24,829)    (43,885)



 Cash flows from financing activities

 Proceeds from the issuance of debt                      59,981     221,626

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

 Repayment of borrowings                               (19,248)   (187,276)

 Premium paid for non-controlling interests             (4,673)           -

 Other                                                       31           6

 Net cash flows from financing activities                36,091      23,899



 Net increase (decrease) in cash and cash equivalents    14,396    (32,066)

 Cash and cash equivalents at January 1                  79,571      89,311

 Effect of exchange rate fluctuations on cash             (343)       3,891

 Cash and cash equivalents at June 30                    93,624      61,136

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, 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.

AMG reports second quarter 2012 results: http://hugin.info/138060/R/1632874/523846.pdf

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

[HUG#1632874]

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