AMG Advanced Metallurgical Group N.V. Reports Second Quarter 2016 Results

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Key Highlights

  • EBITDA(2) was $26.0 million in the second quarter 2016, a 4% increase over the same period in 2015
  • Net income attributable to shareholders more than tripled to $13.4 million in the second quarter 2016 from $3.8 million in the second quarter 2015
  • EPS, on a fully diluted basis, increased to $0.48 in the second quarter 2016, from $0.14 in the same period in 2015
  • Cash flows from operating activities increased by 116% to $24.3 million in the second quarter 2016 from $11.3 million in the second quarter 2015
  • Annualized return on capital employed increased to 17.8% in the second quarter 2016, as compared to 15.7% in the second quarter 2015

AMSTERDAM, Netherlands, Aug. 4, 2016 (GLOBE NEWSWIRE) — (Regulated Information) AMG Advanced Metallurgical Group N.V. (“AMG”, EURONEXT AMSTERDAM: “AMG”) reported EBITDA for the second quarter 2016 of $26.0 million, a 4% increase from $25.1 million in the second quarter 2015. Net income attributable to shareholders increased to $13.4 million in the second quarter 2016 from $3.8 million in the second quarter 2015. On a year to date basis, EBITDA increased by 4% to $47.2 million, from $45.5 million in the prior year, despite an increase in AMG’s Performance Share Unit (PSU) plan costs of $3.2 million, compared to the same period in 2015, driven by AMG’s strong share price performance.

Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, “AMG’s focus on operational excellence, cost reduction and price risk management resulted in solid financial results in the second quarter 2016. Despite weak metals prices, AMG performed well across all key financial metrics during the quarter.

AMG Engineering achieved EBITDA of $5.6 million during the second quarter 2016, a 33% increase from $4.2 million in the second quarter of 2015.  AMG Engineering signed $92.8 million in new orders during the second quarter of 2016, the highest quarterly order intake since Q4 2010, representing a 1.39x book to bill ratio. The Engineering division continues to experience strong demand for plasma remelting, induction and turbine blade coating furnaces for the aerospace market and heat treatment furnaces for the automotive market. Order backlog was $158.8 million as of June 30, 2016, an increase of 17% from March 31, 2016.

AMG Critical Materials generated EBITDA of $20.5 million during the second quarter 2016. Year-over-year double-digit declines in average quarterly prices of Nickel, Aluminum, Chrome, Niobium and Antimony negatively affected revenue in the second quarter of 2016 compared to the second quarter of 2015.

Cash flows from operating activities increased to $24.3 million in the second quarter 2016 from $11.3 million in the second quarter 2015, due to lower levels of working capital driven by the advance payments received by AMG Engineering.”

Key Figures

In 000’s US Dollar      
  Q2 ’16 Q2 ’15 Change
Revenue $248,349 $257,443 (4%)
Gross profit 53,756 44,613 20%
Gross margin 21.6% 17.3%  
       
Operating profit 18,967 12,122 56%
Operating margin 7.6% 4.7%  
       
Net income attributable to shareholders 13,447 3,808 253%
       
EPS – Fully diluted 0.48 0.14 243%
       
EBIT (1) 18,585 18,031 3%
EBITDA (2)  26,049 25,142 4%
EBITDA margin 10.5% 9.8%  
       
Cash flows from operating activities 24,315 11,264 116%

Note: 

  1. EBIT is defined as earnings before interest and income taxes. EBIT excludes restructuring and equity-settled share-based payments and includes foreign currency gains or losses.
  2. EBITDA is defined as EBIT adjusted for depreciation and amortization.

Operational Review

AMG Critical Materials

  Q2 ’16 Q2 ’15 Change
Revenue $181,619 $201,188 (10%)
Gross profit * 38,230 32,112 19%
Operating profit 15,016 12,272 22%
EBITDA 20,485 20,955 (2%)
       

* Includes $3.6 million non-cash benefit related to reversal of previously expensed vanadium, nickel and molybdenum inventory adjustments

AMG Critical Materials continues to be impacted by weak metal prices, and as a result, revenue decreased by 10%, to $181.6 million.

Double-digit declines in average quarterly prices of Nickel, Aluminum, Chrome, Niobium and Antimony negatively affected revenue in the second quarter of 2016 compared to the second quarter of 2015.

Gross profit in the second quarter increased by $6.1 million, or 19%, to $38.2 million, due to strong sales of Aluminum combined with lower production costs in Aluminum, Tantalum, Chrome and Silicon. In addition, Vanadium gross profit in the second quarter 2016 benefited from a $3.6 million reversal of previously recorded inventory adjustment expenses, due to improving vanadium and molybdenum prices.

Second quarter 2016 EBITDA margin increased to 11% from 10% in the second quarter 2015.

AMG Engineering

  Q2 ’16 Q2 ’15 Change
Revenue $66,730 $56,255 19%
Gross profit 15,526 12,501 24%
Operating profit 3,951 (150) N/A
EBITDA 5,564 4,187 33%
       

AMG Engineering signed $92.8 million in new orders during the second quarter of 2016, representing a 1.39x book to bill ratio. Order backlog was $158.8 million as of June 30, 2016, an increase of 17% from March 31, 2016. Order intake in the quarter benefited from a number of orders which had been postponed from the first quarter of 2016. Year to date, AMG Engineering signed $143.3 million in new orders, representing a 1.12x book to bill ratio.

AMG Engineering’s second quarter 2016 revenue increased $10.5 million, or 19%, to $66.7 million, due to strong sales of plasma remelting and induction furnaces for the aerospace market and heat treatment furnaces for the automotive market.

Second quarter 2016 gross margin increased to 23% from 22% in the second quarter of 2015 due to higher revenue, product mix effects and improved project cost management.

EBITDA increased by $1.4 million to $5.6 million in the second quarter of 2016, the highest quarterly EBITDA in twelve quarters, due to higher levels of gross profit.

Financial Review

Tax

AMG recorded an income tax expense of $2.8 million in the second quarter of 2016 as compared to a tax expense of $4.1 million in the same period in 2015. The currency effect of the strengthening Brazilian Real on deferred taxes positively affected tax expense in the quarter.

AMG paid taxes of $1.8 million in the second quarter of 2016 as compared to tax payments of $1.6 million in the same period in 2015. For the second quarter of 2016, AMG’s effective cash tax rate was 11%.

Liquidity

  June 30, 2016 December 31, 2015 Change
Total debt $131,251 $126,743 4%
Cash and cash equivalents 125,075 127,778 (2%)
Net debt (cash) 6,176 (1,035) N/A

AMG had a net debt position of $6.2 million as of June 30, 2016. Net debt and gross debt increased $7.2 million and $4.5 million, respectively, from December 31, 2015.

Cash flows from operating activities increased to $24.3 million in the second quarter 2016 from $11.3 million in the second quarter 2015, primarily due to lower levels of working capital driven by advance payments received by AMG Engineering.

Historic declines in discount rates have negatively influenced AMG’s defined benefit plan liabilities and the related funding status of those plans. In response, the Company made cash contributions to its pension plans of $20.6 million during the second quarter 2016. Voluntary contributions to the plans create flexibility in reducing plan liabilities and allow the Company to avoid certain future costs associated with plan deficits. The contributions made during the quarter negatively impacted cash flows from operating activities and the Company’s net debt balance.

Cash flow used in investing activities increased to $7.8 million in the second quarter of 2016 compared to $0.7 million in the same period in 2015, due to higher levels of capital expenditures.

Capital expenditures increased to $7.5 million in the second quarter of 2016 compared to $3.3 million in the same period in 2015. Capital spending in the second quarter of 2016 included $3.0 million of maintenance capital. The largest expansion capital project was for AMG’s Ancuabe graphite mine project.

Including the $125.1 million of cash, AMG had $268.0 million of total liquidity as of June 30, 2016.

SG&A

AMG’s second quarter 2016 SG&A expenses were $34.8 million compared to $32.9 million in the second quarter of 2015, an increase of 6%. This increase was primarily due to higher costs associated with AMG’s Performance Share Unit (PSU) plan as a result of recent increases in the Company’s share price compared to the defined peer group.

Interim Dividend

AMG has announced an interim dividend in respect of the period from January 1, 2016, to June 30, 2016, of €0.13 per ordinary share, an increase of €0.03, or 30%, compared to the interim dividend paid in September 2015.

The increased dividend reflects AMG’s ongoing commitment to return value to our shareholders and the Board’s confidence in our long term ability to generate solid cash flow.

Outlook

In this challenging market environment, AMG expects 2016 full year profitability to improve relative to 2015. AMG will also continue to generate strong operating cash flows throughout the year.

AMG Advanced Metallurgical Group N.V.    
Condensed interim consolidated income statement    
     
For the quarter ended June 30    
In thousands of US Dollars 2016 2015
  Unaudited Unaudited
Continuing operations    
Revenue 248,349 257,443
Cost of sales 194,593 212,830
Gross profit 53,756 44,613
     
Selling, general and administrative expenses 34,762 32,863
Restructuring expense 454 1,965
Environmental (2,286)
Other income, net (427) (51)
Operating profit 18,967 12,122
     
Finance income (179) (134)
Finance expense 2,423 5,324
Foreign exchange loss (gain) 1,082 (1,289)
Net finance costs 3,326 3,901
     
Share of (loss) profit of associates and joint ventures (14) 122
Profit before income tax 15,627 8,343
     
Income tax expense  2,802 4,091
Profit for the period 12,825 4,252
     
     
Attributable to:    
Shareholders of the Company 13,447 3,808
Non-controlling interests (622) 444
Profit for the period 12,825 4,252
     
Earnings per share    
Basic earnings per share 0.48 0.14
Diluted earnings per share 0.48 0.14
AMG Advanced Metallurgical Group N.V.    
Condensed interim consolidated income statement    
     
For the six months ended June 30    
In thousands of US Dollars 2016 2015
  Unaudited Unaudited
Continuing operations    
Revenue 485,748 514,434
Cost of sales 387,701 426,519
Gross profit 98,047 87,915
     
Selling, general and administrative expenses 66,060 63,006
Restructuring expense 522 3,659
Environmental (2,286)
Other income, net (435) (139)
Operating profit 31,900 23,675
     
Finance income (294) (472)
Finance expense 4,513 8,996
Foreign exchange loss (gain) 936 (1,117)
Net finance costs 5,155 7,407
     
Share of profit of associates and joint ventures 1,436 197
Profit before income tax 28,181 16,465
     
Income tax expense  3,085 9,556
Profit for the period 25,096 6,909
     
     
Attributable to:    
Shareholders of the Company 25,421 6,484
Non-controlling interests (325) 425
Profit for the period 25,096 6,909
     
Earnings per share    
Basic earnings per share 0.91 0.23
Diluted earnings per share 0.90 0.23
AMG Advanced Metallurgical Group N.V.    
Condensed interim consolidated statement of financial position     
     
     
In thousands of US Dollars  June 30, 2016 Unaudited December 31, 2015
Assets    
Property, plant and equipment 211,897 215,833
Goodwill 23,141 18,676
Intangible assets 10,522 10,246
Investments in associates and joint ventures 2,230
Other investments 15,000 14,000
Deferred tax assets 32,037 31,551
Restricted cash 2,548 2,527
Other assets 21,429 19,883
Total non-current assets 316,574 314,946
Inventories 131,422 126,389
Trade and other receivables 143,174 124,270
Derivative financial instruments 3,099 978
Other assets 31,660 27,648
Assets held for sale 2,431 673
Cash and cash equivalents 125,075 127,778
Total current assets 436,861 407,736
Total assets 753,435 722,682
AMG Advanced Metallurgical Group N.V.    
Condensed interim consolidated statement of financial position     
(continued)    
     
     
In thousands of US Dollars    June 30, 2016 Unaudited December 31, 2015
Equity    
Issued capital 760 745
Share premium 389,387 382,978
Treasury shares (1,716)
Other reserves (64,166) (49,500)
Retained earnings (deficit) (182,660) (205,662)
Equity attributable to shareholders of the Company 141,605 128,561
     
Non-controlling interests 24,758 25,006
Total equity 166,363 153,567
     
Liabilities    
Loans and borrowings 118,262 112,217
Employee benefits 136,704 137,853
Provisions 29,807 29,617
Deferred revenue 6,131 13,539
Government grants 460 536
Other liabilities 14,171 8,821
Derivative financial instruments 1,895 5,642
Deferred tax liabilities 11,286 11,691
Total non-current liabilities 318,716 319,916
     
Loans and borrowings 2,945 3,222
Short term bank debt 10,044 11,304
Government grants 101 99
Liabilities associated with assets held for sale 1,087 423
Other liabilities 43,927 42,872
Trade and other payables 129,441 108,019
Derivative financial instruments 4,288 8,379
Advance payments 41,454 44,184
Deferred revenue 14,294 16,124
Current taxes payable 6,031 3,093
Provisions 14,744 11,480
Total current liabilities 268,356 249,199
Total liabilities 587,072 569,115
Total equity and liabilities 753,435 722,682
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 2016 2015
  Unaudited Unaudited
Cash flows from operating activities    
Profit for the year 25,096 6,909
Adjustments to reconcile net profit to net cash flows:    
Non-cash:    
Income tax expense 3,085 9,556
Depreciation and amortization 14,838 14,292
Net finance costs 5,155 7,407
Share of profit of associates and joint ventures (1,436) (197)
Gain on sale or disposal of property, plant and equipment (80) (156)
Equity-settled share-based payment transactions 914 2,788
Movement in provisions, pensions and government grants (15,735) (896)
Working capital and deferred revenue adjustments (5,006) (15,524)
Cash flows from operating activities 26,831 24,179
Finance costs paid, net (3,162) (6,946)
Income tax paid, net (3,674) (2,172)
Net cash flows from operating activities 19,995 15,061
     
Cash flows used in investing activities    
Proceeds from sale of property, plant and equipment 368 931
Proceeds from sale of subsidiaries (net of cash divested of $35 and $1,347, respectively) 675 (550)
Acquisition of property, plant and equipment and intangibles (14,389) (7,040)
Acquisition of subsidiaries (net of cash acquired of $35 in 2016) (4,961)
Acquisition of other non-current investments (1,000)
Change in restricted cash 19 437
Other 28 26
Net cash flows used in investing activities (19,260) (6,196)
AMG Advanced Metallurgical Group N.V.    
Condensed interim consolidated statement of cash flows    
(continued)    
For the six months ended June 30    
In thousands of US Dollars 2016 2015
  Unaudited Unaudited
Cash flows (used in) from financing activities    
Proceeds from issuance of debt 1,573 177,272
Payment of transaction costs related to debt issuance (4,371)
Repayment of borrowings (184,871)
Change in non-controlling interests 37,530
Repurchase of common stock (1,785)
Dividends paid (3,503)
Other 1 (132)
Net cash flows (used in) from financing activities (3,714) 25,428
     
Net (decrease) increase in cash and cash equivalents (2,979) 34,293
     
Cash and cash equivalents at January 1 127,778 108,029
Effect of exchange rate fluctuations on cash held 276 (5,199)
Cash and cash equivalents at June 30 125,075 137,123

About AMG

AMG is a global critical materials company at the forefront of CO2 reduction trends. AMG produces highly engineered specialty metals and mineral products and provides related vacuum furnace systems and services to the transportation, infrastructure, energy, and specialty metals & chemicals end markets.

AMG Critical Materials produces aluminum master alloys and powders, titanium alloys and coatings, ferrovanadium, natural graphite, chromium metal, antimony, tantalum, niobium and silicon metal. AMG Engineering designs, engineers, and produces advanced vacuum furnace systems and operates vacuum heat treatment facilities, primarily for the transportation and energy industries.

With approximately 3,000 employees, AMG operates globally with production facilities in Germany, the United Kingdom, France, Czech Republic, the United States, China, Mexico, Brazil and Sri Lanka, and has sales and customer service offices in Russia and Japan (www.amg-nv.com).  

For further information, please contact:
AMG Advanced Metallurgical Group N.V.          +1 610 293 5804
Steve Daniels
Senior Vice President
sdaniels@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.

August 4 2016 B http://hugin.info/138060/R/2033029/756870.pdf

HUG#2033029

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