A member of AMG Advanced Metallurgical Group, N.V.

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AMG reports third quarter 2011 results
09 November 2011

Key Highlights

 

  • Revenue was $356.4 million in the third quarter 2011, a 48% increase over the same period in 2010
  • Operating profit was $19.6 million in the third quarter 2011, an 88% increase over the same period in 2010
  • EBITDA[1] was $27.7 million in the third quarter 2011, a 48% increase over the same period in 2010
  • EPS on a fully diluted basis was $0.29 compared to ($0.41) in the third quarter 2010; excluding Timminco and loss on extinguishment of debt, EPS was $0.33 in the third quarter 2011, compared to $0.11 in the third quarter 2010
  • The Advanced Materials Division generated revenue of $226.8 million and EBITDA of $12.3 million in the third quarter 2011
  • The Engineering Systems Division generated revenue of $86.3 million and EBITDA of $9.3 million in the third quarter 2011
  • Graphit Kropfmühl generated revenue of $43.3 million and EBITDA of $6.2 million in the third quarter 2011
  • As of September 30, 2011 cash on hand was $71.3 million; net debt was $203.6 million

Amsterdam, 9 November 2011 (Regulated Information) --- AMG Advanced Metallurgical Group N.V. ("AMG", EURONEXT AMSTERDAM: "AMG") reported third quarter 2011 revenue of $356.4 million, a 48% increase from $240.4 million in the third quarter 2010.

EBITDA increased 48% to $27.7 million in the third quarter 2011 from $18.8 million in the third quarter 2010. Net profit attributable to shareholders for the third quarter 2011 was $8.0 million, or $0.29 per fully diluted share. This was up from a loss attributable to shareholders of $11.2 million, or ($0.41) per fully diluted share, in the third quarter 2010. Excluding AMG's share of Timminco's net loss in the third quarter, AMG's net profit attributable to shareholders for the third quarter 2011 was $9.2 million, or $0.33 per fully diluted share compared to $0.11 in the third quarter 2010.

Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, "The business continued to perform well in the third quarter 2011. Demand, particularly in critical materials for the aerospace and energy markets, remained high during the quarter. Pricing also remained strong for products including antimony trioxide, chromium metal and tantalum. The Engineering Systems' revenues increased and it generated a slight improvement in order intake compared to third quarter 2010, despite the challenging 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

Q3'11

Q3'10

Change

Revenue

$356,415

$240,427

48%

Gross profit

58,688

42,102

39%

Gross margin

16.5%

17.5%

Operating profit

19,565

10,433

88%

Operating margin

5.5%

4.3%

Net profit (loss) attributable to shareholders

8,034

(11,170)

N/A

EPS- Fully diluted

0.29

(0.41)

N/A

Adjusted EPS- Fully diluted [1]

0.33

0.11

200%

EBIT [2]

20,412

13,098

56%

EBITDA [3]

27,748

18,756

48%

EBITDA margin

7.8%

7.8%

Note:

[1] Adjusted to exclude equity losses from Timminco, which accounted for ($0.52) and ($0.04) in Q3 2010 and Q3 2011, respectively

[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

Q3'11[1]

Q3'10

Change

Revenue

$226,800

$154,888

46%

Gross profit

29,603

21,999

35%

Operating profit

8,485

4,491

89%

EBITDA

12,254

9,424

30%

Capital expenditures

6,576

5,595

18%

[1] 2011 includes the KB Alloys LLC acquisition

The Advanced Materials Division's third quarter 2011 financial results were positively impacted by the acquisition of KB Alloys LLC, improvements in titanium master alloys volumes and increases in chromium metal, tantalum and antimony prices. Revenue increased by $71.9 million or 46% to $226.8 million. The increase in revenue was specifically the result of $20.7 million of revenue from KB Alloys LLC, which was acquired in February 2011, and a 101%, 46%, and 41% increase in tantalum, antimony revenue and titanium master alloys and chemicals, respectively.

The third quarter 2011 gross margin of 13% of revenue, declined from 14% of revenue from the third quarter of 2010. Increased economies of scale were more than offset by unfavourable changes in product mix, specifically a 69% increase in low margin aluminium products revenue and higher raw materials costs, resulting in lower gross margins.

The third quarter 2011 EBITDA increased by $2.8 million to 5% of revenue. This was a slight decrease from 6% of revenue in the third quarter 2010. The increase in EBITDA was the result of the $7.6 million increase in gross profit, slightly offset by a 30% increase in SG&A, primarily due to a $1.3 million of SG&A related to KB Alloys and an increase in compensation expenses of $2.0 million due to the increase in headcount.

Capital expenditures were $6.6 million for the quarter, 18% more than the third quarter 2010. Significant growth capital investments made in the third quarter include $2.4 million in the Brazilian tantalum mine and $1.8 million to expand aerospace titanium master alloy production.

Engineering Systems Division

Q3'11

Q3'10

Change

Revenue

$86,280

$53,155

62%

Gross profit

20,782

16,927

23%

Operating profit

6,379

5,128

24%

EBITDA

9,270

7,362

26%

Capital expenditures

2,569

819

214%

The Engineering Systems Division's third quarter 2011 revenue increased by $33.1 million, or 62%, to $86.3 million. Sales of solar silicon DSS furnaces increased 50% in the third quarter 2011 compared to the same period in 2010, accounting for 24% of revenue in the third quarter 2011. Revenues from heat treatment furnaces for the production of light weight automotive components increased 132% to $19.6 million, while sales of remelting furnaces, primarily for the aerospace and specialty steel industries, increased 40% to $11.7 million.

The order backlog decreased 14% to $172.8 million as of September 30, 2011, from $200.6 million as of June 30, 2011. The division generated order intake of $68.5 million in the third quarter 2011, a 0.79x book to bill ratio, and a 2% increase compared to the third quarter 2010. Order intake for remelting and nuclear sintering furnaces accounted for 31% and 23% of total order intake, respectively.

The third quarter 2011 gross margin of 24% of revenue decreased from 32% of revenue in the third quarter 2010 as a result of increased end market pricing pressure and unfavourable product mix, slightly offset by increased economies of scale.

Third quarter 2011 EBITDA increased by $1.9 million to 11% of revenue. This declined from 14% of revenue in the third quarter 2010. The $1.9 million increase in EBITDA was a result of the $3.9 million increase in gross profit, offset by a $2.6 million, or 22% increase in SG&A. The increase in SG&A was primarily the result of $0.7 million increase in compensation expenses due to the increase in headcount at the growing Own and Operate business and AMG Idealcast Solar, and $0.4 million increase in research and development expenses

Capital expenditures were $2.6 million, 214% more than the third quarter of 2010. The increase in capital investments is primarily related to additional capacity for the U.S. Own and Operate facility.

Graphit Kropfmühl

Q3'11

Q3'10

Change

Revenue

$43,335

$32,384

34%

Gross profit

Operating profit

8,303

4,701

3,176

814

161%

478%

EBITDA

6,224

1,970

216%

Capital expenditures

2,683

687

291%

Graphit Kropfmühl's third quarter 2011 revenue increased by $11.0 million, or 34%, to $43.3 million. Natural graphite revenue increased $3.7 million, or 31%, driven by an increase in prices, despite lower volumes. Silicon metal revenue increased by $7.3 million or 35%, primarily as a result of higher silicon metal prices and increased volumes of silicon by products.

The third quarter 2011 gross margin increased to 19% of revenue from 10% of revenue in the third quarter of 2010. The increase in gross margin was primarily the result of higher sales prices for silicon metal and natural graphite products.

Third quarter 2011 EBITDA increased by $4.3 million to 14% of revenue. This improved from 6% of revenue in the third quarter 2010. The EBITDA margin increase was attributable to the increased gross margins for silicon metal and natural graphite, slightly offset by a 42% increase in SG&A due to increases in personnel costs.

Capital expenditures increased to $2.7 million in the third quarter 2011, 291% more than the third 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 September 30, 2011. AMG accounts for its investment in Timminco via the equity accounting method. Timminco's loss for the third quarter 2011 of $1.1 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 $10.3 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 $3.8 million in the third quarter 2011 compared to a tax expense of $0.3 million in the third 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 third quarter 2011. For the first nine months of 2011, excluding share of loss of associates, AMG's effective tax rate is 38%.

SG&A

AMG's SG&A expenses were $40.6 million in the third quarter 2011, compared to $31.7 million in the third quarter 2010. The $8.9 million change in SG&A expenses was primarily due to a $2.4 million increase in personnel costs from growth based hiring, primarily at the operating level, $2.3 million in bad debt expense and an additional $1.6 million in 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 appreciation in the value of the US dollar as of September 30, 2011 compared to June 30, 2011, resulted in a decrease in the assets and liabilities on the balance sheet of $38.8 million and $27.2 million, respectively. The net result of the depreciation in the value of the US dollar in the third quarter 2011 compared to the third quarter 2010, resulted in an increase in revenue and EBITDA of $18.3 million and $2.3 million, respectively in the third quarter 2011.

Liquidity

September 30, 2011

December 31, 2010

Change

Total debt

$274,890

$237,089

16%

Cash & short-term investments

71,253

89,311

(20%)

Net debt

203,637

147,778

38%

AMG had a net debt position of $203.6 million as of September 30, 2011. AMG's net debt position increased $55.9 million since December 31, 2010 primarily the result of a $55.0 million increase in working capital due to increasing material costs, $31.7 million in capital investments, $25.9 million of cash tax payments, the $24.3 million acquisition of KB Alloys LLC and $5.5 million of cash interest paid, reduced by EBITDA of $85.4 million. Including the $71.3 million of cash, AMG had $115.9 million of total liquidity as of September 30, 2011.

During the fourth quarter, AMG exercised the accordion feature of its primary credit facility and secured approximately $15 million in incremental credit from Fifth Third Bank. The total credit facility is now approximately $315 million and it matures in April 2016.

Cash Flow

For the nine months ended

September 30
2011

September 30
2010

Net cash flows from (used in) operations

$10,361

$(13,903)

Capital expenditures

(31,741)

(19,054)

Acquisitions, net of cash

(24,703)

(17,287)

Investment in associates

-

(10,755)

Cash flows (used in) from other investing

(1,569)

1,420

Net cash flows used in investing activities

(58,013)

(45,676)

Cash flows generated from financing activities

28,013

36,812

Cash flows from operations were $10.4 million in the nine months ended September 30, 2011 compared to cash flows used in operations of $13.9 million in the same period 2010. The cash flows from operations in the first nine months of 2011 are primarily the result of $85.4 million in EBITDA less $25.9 million in cash tax payments and a $55.0 million increase in working capital. 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 $58.0 million in the first nine months of 2011. This $12.3 million increase compared to the first nine months 2010 is composed of a $12.7 million increase in capital investments and a $7.4 million increase in acquisitions, slightly offset by a $10.8 million decrease in cash flows due to investment in associates. In 2011, AMG acquired KB Alloys LLC for $24.3 million while in 2010 AMG acquired an antimony mine in Turkey for $17.3 million.

Cash generated from financing activities was $28.0 million in the first nine months of 2011, an $8.8 million decrease from the first nine months of 2010. This decrease was primarily attributable to $10.6 million in payments for transaction costs related to debt issuance, offset by $2.0 million increase in net draws on revolving lines of credit. The draws on the revolving lines of credit were used to fund the acquisition of KB Alloys LLC and the related transaction costs.

Outlook

Despite the uncertainty in the financial markets, AMG's business remains healthy. The Advanced Materials Division continues to experience demand and reasonable pricing for antimony trioxide, tantalum, titanium aerospace alloys and chromium metal. The Engineering Systems Division's order intake remains adversely impacted by the current economic environment, with solar particularly affected, leading to potential delays in new orders. Demand and pricing for Graphit Kropfmühl's natural graphite and silicon metal products should remain stable for the balance of 2011. AMG expects to generate approximately 30% EBITDA growth in 2011.

Given the potential spread of the financial turmoil to the general economy, as a cautionary measure, AMG is selectively limiting new capital investments and personnel expansion plans, and intends not to exceed current working capital levels in 2012. We have started an initial mining and smelting operation on a commercial level at our antimony property in Turkey. We are undertaking an extensive drilling program, which will be the basis for developing a mining plan for large-scale mining operations.

The current economic uncertainty makes providing specific guidance for 2012 difficult; however, AMG is well positioned to deliver revenue and EBITDA growth subject to general economic conditions which are extraordinarily difficult to predict.

AMG Advanced Metallurgical Group N.V.

Condensed interim consolidated income statement

For the three months ended September 30

In thousands of US Dollars

2011

2010

Unaudited

Unaudited

Continuing operations

Revenue

356,415

240,427

Cost of sales

297,727

198,325

Gross profit

58,688

42,102

Selling, general and administrative expenses

40,613

31,682

Restructuring expense

37

-

Environmental expense

136

257

Other income, net

(1,663)

(270)

Operating profit

19,565

10,433

Finance expense

8,583

4,840

Finance income

(1,335)

(1,341)

Foreign exchange gain

(757)

(578)

Net finance costs

6,491

2,921

Share of loss of associates

680

17,554

Profit (loss) before income tax

12,394

(10,042)

Income tax expense

3,755

325

Profit (loss) for the period

8,639

(10,367)

Attributable to:

Shareholders of the Company

8,034

(11,170)

Non-controlling interests

605

803

8,639

(10,367)

Earnings per share

Basic earnings per share

0.29

(0.41)

Diluted earnings per share

0.29

(0.41)

AMG Advanced Metallurgical Group N.V.

Condensed interim consolidated income statement

For the nine months ended September 30

In thousands of US Dollars

2011

2010

Unaudited

Unaudited

Continuing operations

Revenue

1,042,732

719,764

Cost of sales

855,271

590,588

Gross profit

187,461

129,176

Selling, general and administrative expenses

128,315

92,169

Restructuring expense

2,496

6

Environmental expense

382

763

Other income, net

(3,490)

(698)

Operating profit

59,758

36,936

Loss on early extinguishment of debt

3,902

-

Finance expense

15,601

15,761

Finance income

(3,993)

(2,970)

Foreign exchange loss (gain)

528

(4,334)

Net finance costs

16,038

8,457

Share of loss of associates

6,751

26,974

Profit before income tax

36,969

1,505

Income tax expense

16,547

11,317

Profit (loss) for the period

20,422

(9,812)

Attributable to:

Shareholders of the Company

18,357

(10,067)

Non-controlling interests

2,065

255

20,422

(9,812)

Earnings per share

Basic earnings per share

0.66

(0.37)

Diluted earnings per share

0.66

(0.37)

AMG Advanced Metallurgical Group N.V.

Condensed interim consolidated statement of financial position

In thousands of US Dollars

September 30,
2011

December 31,
2010

Unaudited

Audited

Assets

Property, plant and equipment

257,172

228,612

Goodwill

25,014

21,704

Intangible assets

9,283

5,298

Investments in associates and joint ventures

18,779

25,186

Derivative financial instruments

1,475

5,199

Deferred tax assets

27,022

22,107

Restricted cash

11,167

12,528

Notes receivable

1,555

322

Other assets

15,283

15,372

Total non-current assets

366,750

336,328

Inventories

247,617

207,204

Trade and other receivables

219,087

175,421

Derivative financial instruments

3,459

5,731

Other assets

40,143

41,080

Cash and cash equivalents

71,253

89,311

Total current assets

581,559

518,747

Total assets

948,309

855,075

AMG Advanced Metallurgical Group N.V.

Condensed interim consolidated statement of financial position (continued)

In thousands of US Dollars

September 30, 2011

December 31, 2010

Unaudited

Audited

Equity

Issued capital

741

741

Share premium

381,636

381,636

Other reserves

19,256

36,158

Retained earnings (deficit)

(178,168)

(196,481)

Equity attributable to shareholders of the Company

223,465

222,054

Non-controlling interests

14,896

11,911

Total equity

238,361

233,965

Liabilities

Loans and borrowings

223,529

187,813

Employee benefits

94,016

88,372

Provisions

19,951

20,607

Government grants

168

642

Other liabilities

8,373

5,517

Derivative financial instruments

1,069

698

Deferred tax liabilities

31,609

25,436

Total non-current liabilities

378,715

329,085

Loans and borrowings

4,793

4,254

Short term bank debt

46,568

45,022

Government grants

48

175

Other liabilities

61,342

43,287

Trade and other payables

129,635

102,253

Derivative financial instruments

17,519

1,754

Advance payments

33,584

49,597

Current taxes payable

16,030

24,979

Provisions

21,714

20,704

Total current liabilities

331,233

292,025

Total liabilities

709,948

621,110

Total equity and liabilities

948,309

855,075

AMG Advanced Metallurgical Group N.V.

Condensed interim consolidated statement of cash flows

For the nine months ended September 30

In thousands of US Dollars

2011

2010

Unaudited

Unaudited

Cash flows used in operating activities

Profit for the period

20,422

(9,812)

Adjustments to reconcile profit to net cash flows:

Non-cash:

Depreciation and amortization

21,504

17,755

Restructuring expense

2,496

6

Environmental expense

382

763

Net finance costs

16,038

8,457

Share of loss of associates

6,751

26,974

Equity-settled share-based payment transactions

2,820

4,911

Income tax expense

16,547

11,317

Change in working capital and provisions

(53,993)

(38,238)

Other

8,764

2,312

Finance costs paid, net

(5,478)

(9,191)

Income tax paid, net

(25,892)

(29,157)

Net cash flows from (used in) operating activities

10,361

(13,903)

Cash flows used in investing activities

Proceeds from sale of property, plant and equipment

87

1,046

Acquisition of associates and joint ventures

-

(10,755)

Acquisition of subsidiaries (net of cash acquired of $3,860)

(24,703)

(17,287)

Acquisition of property, plant and equipment and intangibles

(31,741)

(19,054)

Related party loans

(4,924)

-

Change in restricted cash

1,604

427

Other

1,664

(53)

Net cash flows used in investing activities

(58,013)

(45,676)

Cash flows from financing activities

Proceeds from the issuance of debt

227,526

36,636

Payment of transaction costs related to debt issuance

(10,592)

-

Repayment of long term borrowings

(188,931)

-

Other

10

176

Net cash flows from financing activities

28,013

36,812

Net decrease in cash and cash equivalents

(19,639)

(22,767)

Cash and cash equivalents at January 1

89,311

117,016

Effect of exchange rate fluctuations on cash

1,581

(4,036)

Cash and cash equivalents at September 30

71,253

90,213

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).

For further information please contact:

AMG Advanced Metallurgical Group N.V. +1 610 975 4901

Jonathan Costello

Vice President of Corporate Communications

jcostello(at)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 third quarter 2011 results