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AMG Reports Strong Third Quarter in Face of Challenging Economic Conditions AMSTERDAM, NETHERLANDS--(MARKET WIRE)--Nov 12, 2008 -- Key Highlights
* Revenue increased 49% in the third quarter 2008 compared to the
third quarter 2007; year to date increase 40%
* EBITDA increased 121% in the third quarter 2008 when compared to
the third quarter 2007; year to date increase 99%
* EPS on a fully diluted basis increased to $0.75 compared to the
third quarter 2007 to ($0.94), EPS, excluding non-recurring
charges, increased to $1.19
* Advanced Materials' third quarter revenue and EBITDA improved by
17% and 120% compared to the third quarter of 2007
* Engineering Systems' third quarter revenue and EBITDA improved by
70% and 54% compared to the third quarter of 2007
* Timminco's third quarter revenue increased by 56% to $66.6
million and EBITDA increased to $7.4 million in the third quarter
of 2007
* Graphit Kropfmühl contributed $36.4 million to revenue and $4.1
million to EBITDA during Q3 2008
* Strong balance sheet; cash on hand of $154.2 million, net debt of
$79.6 million with no significant debt maturities until 2012;
$114.8 million year to date free cash flow [1]
[1] Free cash flow is defined as EBITDA less change in working capital and maintenance capital expenditures
Net income attributable to shareholders for the third quarter 2008 was $20.8 million, or $0.75 per fully diluted share. Excluding the non-recurring asset impairment expenses at AMG's 50.4% owned subsidiary, Timminco, and non-recurring acquisition purchase accounting at Graphit Kropfmühl, net income attributable to shareholders for the third quarter 2008 was $32.8 million, or $1.19 per fully diluted share. Adjusted net income was $9.4 million or $0.35 per fully diluted share for the third quarter 2007. EBITDA rose 121% to $71.1 million in the third quarter 2008 compared with $32.1 million in the third quarter 2007. Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, commented: "I am pleased to report our best quarter to date. Both the Advanced Materials and Engineering Systems divisions increased revenue and earnings driven by the solar, energy and superalloy end markets. AMG's majority owned subsidiary, Timminco Limited, continued to increase production of the solar grade silicon ramp up during the third quarter, shipping 300 metric tonnes, a 36% improvement over the second quarter 2008. Through AMG's diversified business model, conservative balance sheet and significant cash position, AMG is well positioned to endure the economic fallout from the global credit crisis. Demand and pricing for some of our major products are clearly being impacted by the growing uncertainties in the global economy. We are responding to these uncertainties by adjusting production levels on some of our products and increasing our cost containment measures. AMG is focused on protecting free cash flow in 2009."
Key Figures
In 000's US Dollar
Q3'08 Q3'07 [1] Change
Revenue $437,561 $292,897 49%
Gross profit 94,601 49,585 91%
Gross margin 21.6% 16.9%
Operating income 47,665 23,902 99%
Operating margin 10.9% 8.2%
Net Income attributable to 20,769 (25,630)
shareholders
EPS- Fully diluted 0.75 (0.94)
Adjusted EPS-Fully diluted [2] 1.19 0.35
EBIT [2] 52,805 27,818 90%
EBITDA [2] [3] 71,118 32,119 121%
EBITDA margin 16.3% 11.0%
Notes:
[1] Q3 2007 Revenue has been restated due to an adjustment at
Timminco
[2] In 2008, adjusted for non-recurring, restructuring and
impairment charges at Timminco and non-recurring purchase accounting
at GK. In Q3 2007 adjusted for debt extinguishment
[3] EBITDA is defined as earnings before interest, tax, depreciation
and amortization and excludes nonrecurring items
Operational Review
Advanced Materials Division
Q3'08 Q3'07 Change
Revenue $199,396 $170,981 17%
Gross profit 42,702 23,426 82%
Operating income 22,621 6,701 238%
EBITDA 25,427 11,560 120%
Capital expenditures 7,643 5,684 34%The Advanced Materials division's third quarter 2008 financial results were driven by continued strong pricing and solid volumes in ferrovanadium and certain other key products. Revenue increased by $28.4 million or 17% to $199.4 million. Gross profit improved by $19.3 million or 82% to $42.7 million. As a percentage of sales, SG&A expenses decreased despite additional corporate infrastructure. EBITDA increased by $13.9 million, a 120% improvement over the third quarter 2007 to $25.4 million. Gross margins expanded from 14% in the third quarter of 2007 to 21% in third quarter of 2008. The division's secure raw material supply, particularly in ferrovanadium, enabled it to increase gross margins at a faster pace than revenue. The increase in revenue and margins was primarily driven by ferrovanadium, with reference prices increasing by 68% and volumes by 6% over third quarter 2007. Coating materials for thin film solar applications, vanadium chemicals and antimony products also delivered strong margins in the period. Ferronickel-molybdenum and chromium metal suffered significant declines in volumes during the quarter as weakness in the stainless and specialty steel markets impacted demand. Operating income for the third quarter 2008 improved 238% to $22.6 million, up from $6.7 million for the comparable period in 2007. This was primarily due to the increase in gross profit offset by a marginal increase in selling, general and administrative expenses that was attributable to a build-up in corporate infrastructure. Capital expenditures were $7.6 million for the quarter, 34% higher than the comparable period in 2007, as previously announced capacity expansion initiatives in ferrovanadium, tantalum and hydropower continued during the quarter.
Q3'08 Q3'07 Change
Revenue $135,155 $79,350 70%
Gross profit 44,326 24,207 83%
Operating income 30,836 19,781 56%
EBITDA 34,241 22,202 54%
Capital expenditures 4,392 1,775 147%
Third quarter 2008 revenue and EBITDA increased $55.8 million, or 70%, and $12.0 million, or 54%, respectively, over the same period in 2007. Sales of solar silicon melting and crystallization furnaces for the photovoltaic industry increased 147% in the third quarter 2008 compared to the same period a year ago. Significant capacity expansion in the Berlin production facility was essential to meet the growing global demand for solar silicon DSS furnaces. As of the end of the third quarter 2008, 6 furnaces per week were produced, compared to one furnace per week at the end of the fourth quarter 2007. Revenue from remelting systems primarily for the aerospace, materials, and specialty steel industries remained on a similar steady growth trajectory as during the second quarter. Geographically, sales to the Asia Pacific region and Europe accounted for a majority of total revenues. Almost all product lines achieved strong margins on increased volumes. The EBITDA margin decreased to 25% during the third quarter 2008 compared to 28% for the same period in 2007. Excluding a onetime gain in the third quarter of 2007, EBITDA margin increased from 22% in the third quarter 2007 to 25% in the third quarter 2008. The one-time $5 million gain recorded during the third quarter 2007 related to the grants earned in connection with the acquisition of the Berlin production facility. The EBITDA margin increased due to economies of scale resulting from additional sales of DSS vacuum furnace systems. The division continues to proactively address the market changes and is adjusting production capacity to reflect those changes. In the quarter ended 30 September 2008, capital expenditures increased to $4.4 million from $1.8 million for the third quarter of 2007. This increase was a result of the expansion of the Berlin facility.
Timminco
Q3'08 Q3'07 Change
Revenue $66,579 $42,566 56%
Gross profit 11,796 1,952 504%
Operating income (loss) 2,055 (2,580) N/A
EBITDA 7,393 (1,643) N/A
Capital expenditures 24,997 7,446 236%
Silicon gross profit for the third quarter 2008 was $8.6 million or 17% of sales compared to a gross profit of $0.2 million in the third quarter of 2007. Timminco sold 300 metric tons of solar grade silicon during the third quarter 2008 at an average price of $53kg. The main contributor to the increase in margin was the 36% increase in solar grade silicon volumes and a decrease of the unit production costs of solar grade silicon to $30. Magnesium gross profit for the third quarter 2008 was $3.2 million or 18.7% of sales compared to $1.8 million or 11% of sales in the third quarter of 2007. Timminco had operating income in the quarter of $2.1 million compared to ($2.6) million loss in the third quarter 2007, due to higher gross profit which was partially offset by increased selling, general and administrative expenses. Higher professional fees and travel related to various strategic initiatives resulted in an increase in SG&A. During the quarter ended 30 September 2008, Timminco continued the expansion of its solar grade silicon production capacity. This expansion is expected to bring the installed annual solar grade silicon production capacity to 14,400 metric tons, although the ramp up of this capacity will continue for six to twelve months after installation. Capital expenditures increased to $25.0 million for the quarter from $7.4 million in the same period 2007, as the previously announced solar grade silicon capacity expansion continued during the quarter. Sources of funding for this expansion include cash flow from operations, the Company's existing credit facilities, customer deposits and cash on hand. Customer deposits totalled $30.1 million in the third quarter of 2008. Continued growth in solar silicon revenues and gross margin improvement are expected for the balance of 2008.
Graphit Kropfmühl
Q3'08
Revenue $36,431
Gross profit* (4,223)
Operating income* (7,847)
EBITDA 4,057
Capital expenditures 1,727* Gross profit and operating income include purchase accounting adjustments in the amount of $10.2 million and $11.0 million, respectively. Graphit Kropfmühl ("GK") generated $36.4 million in revenue and $4.2 million in gross losses during the quarter ended 30 September 2008. The gross loss was caused by the $10.2 million in purchase accounting related to the acquisition of GK by AMG. Excluding these charges, GK generated $3.2 million in operating income. The EBITDA for the quarter was $4.1 million or 11% of revenue, reflecting the higher average selling prices for silicon metal sales than in the second quarter 2008. GK spent $1.7 million in capital expenditures during the quarter, primarily to begin a project that will expand the production capacity of the silicon metal operations from 30,000 tonnes to 31,000 tonnes.
Financial Review
Liquidity
Q3'08 Q4'07 Change
Total debt $233,797 $140,782 (66)%
Cash & short-term investments 154,162 187,891 (18)%
Net debt (cash) 79,635 (47,109) (269)%AMG had a net debt position of $79.6 million as of 30 September 2008. The increase in the Company's net debt is primarily a result of the acquisition of Graphit Kropfmühl, which used $62.9 million of cash and included the assumption of $27.3 million of debt. In addition, Timminco's year-to-date $48.3 million investment in a solar grade silicon expansion and an increased investment in working capital across all segments of the business also impacted liquidity. AMG's term debt and revolving credit facility do not mature until August 2012.
Cash
Flow
Nine months ended
30 September 2008 30 September 2007
Cash flows from operations $76,038 $65,840
Capital expenditures (95,262) (33,079)
Acquisitions, net of cash (66,484) (49,321)
Cash flows from other 2,991 4,927
investing
Cash flows used in investing (158,755) (77,473)
activities
Cash flows generated from 73,124 186,419
(used in) financing activities
Effect of exchange rates on (8,803) 14,789
cash held
Net (decrease) increase in (18,396) 189,575
cash and cash equivalents
Cash used in investing activities was $158.8 million for the nine months ended 30 September 2008. This increase of $81.3 million over the comparable period in 2007 is primarily related to two items; $48.3 million in costs related to the expansion of the solar silicon production facility at Timminco and $62.9 million for the purchase of approximately 79.5% of Graphit Kropfmühl. Cash from financing activities was $73.1 million, a decrease of $113.3 million from the same period in 2007. This decrease was primarily the result of two factors, $287.1 million generated from the AMG initial public offering in 2007, offset by the net repayment of $183.6 million debt as compared to the 2008 borrowings on the credit facility for the acquisition of approximately 79.5% of Graphit Kropfmühl and borrowings to fund the working capital increases in Advanced Materials and Timminco.
Despite the challenging economic conditions, AMG remains positive on long term growth prospects for the core markets of solar, fuel economy, nuclear and recycling that it serves. In the near term, however, AMG is taking cost containment steps, delaying non-essential capital projects and focusing on reducing working capital to maximize profitability and free cash flow through the current economic downturn and uncertain global markets. The impact of the current volatile economic situation makes visibility for 2009 difficult at this point; however AMG expects to substantially exceed its full year 2008 EBITDA target of 65% growth over 2007.
AMG Advanced Metallurgical Group N.V.
Interim consolidated balance sheet at 30
September 2008
In thousands of US Dollars
30 September 31 December
2008 2007
Unaudited Audited
Property, plant and equipment 297,807 155,763
Intangible assets 69,863 50,291
Investments in associates 9,646 15,145
Derivative financial instruments 176 194
Deferred tax assets 31,449 34,537
Restricted cash 17,816 14,582
Notes receivable 7,397 7,068
Other assets 10,074 5,087
Total non-current assets 444,228 282,667
Inventories 330,997 186,410
Trade and other receivables 235,055 187,243
Derivative financial instruments 8,948 3,582
Prepayments and other current assets 66,197 48,754
Short term investments - 15,333
Cash and cash equivalents 154,162 172,558
Total current assets 795,359 613,880
Total assets 1,239,587 896,547
Equity
Issued capital 724 722
Share premium 379,325 392,304
Other reserves (40) (9,923)
Retained earnings (deficit) (69,007) (137,439)
Equity attributable to shareholders of the 311,002 245,664
Company
Minority interests 67,430 64,133
Total equity 378,432 309,797
Liabilities
Loans and borrowin gs 157,296 115,726
Employee benefits 119,014 102,809
Provisions 13,356 12,011
Government grants 2,408 8,585
Other liabilities 8,780 9,087
Derivative financial instruments 148 77
Deferred tax liabilities 57,380 32,112
Total non-current liabilities 358,382 280,407
Loans and borrowings 6,481 1,102
Short-term bank debt 63,147 16,202
Related party debt 6,873 7,752
Government grants 8,457 7,927
Other liabilities 54,264 42,356
Trade and other payables 186,333 126,827
Derivative financial instruments 7,182 4,994
Advance payments 100,312 74,731
Unearned revenue 37,512 -
Current taxes payable 15,589 11,496
Provisions 16,623 12,956
Total current liabilities 502,773 306,343
Total liabilities 861,155 586,750
Total equity and liabilities 1,239,587 896,547
AMG Advanced Metallurgical Group N.V.
Interim consolidated income statement for the nine months ended 30
September 2008
For the nine months ended 30 September
In thousands of US Dollars 2008 2007
Unaudited Unaudited
Continuing operations
Revenue 1,176,714 838,734
Cost of sales 922,901 690,968
Gross profit 253,813 147,766
Selling, general and administrative expenses 116,998 85,306
Restructuring expense 13,912 51
Asset impairment expense 3,65 2 -
Environmental expense 197 244
Other expenses 46 312
Other income (4,944) (7,773)
Operating profit 123,952 69,626
Loss on early extinguishment of debt - 35,069
Interest expense 15,920 23,929
Interest income (5,027) (4,983)
Foreign exchange loss (gain) 3,643 (2,748)
Net finance costs 14,536 51,267
Share of loss of associates (10,999) (1,963)
Profit before income tax 98,417 16,396
Income tax expense 36,767 22,854
Profit (loss) for the period 61,650 (6,458)
Attributable to:
Shareholders of the Company 68,548 (6,473)
Minority interests (6,898) 15
61,650 (6,458)
Earnings per share
Basic earnings (loss) per share 2.56 (0.24)
Diluted earnings (loss) per share 2.49 (0.24)
AMG Advanced Metallurgical Group N.V.
Interim consolidated income statement for the three months ended 30
September 2008
For the three months ended 30 September
In thousands of US Dollars 2008 2007
Unaudited Unaudited
Continuing operations
Revenue 437,561 292,897
Cost of sales 342,960 243,312
Gross profit 94,601 49,585
Selling, general and administrative 44,397 31,900
expenses
Restructuring expense 666 21
Asset impairment expense 3,652 -
Environmental expense 104 42
Other expenses - 25
Other income (1,883) (6,305)
Operating profit 47,665 23,902
Loss on early extinguishment of debt - 35,069
Interest expense 6,156 6,003
Interest income (1,611) (2,954)
Foreign exchange loss (gain) 2,105 (1,217)
Net finance costs 6,650 36,901
Share of loss of associates (11,717) (877)
Profit (loss) before income tax 29,298 (13,876)
Income tax expense 13,974 11,215
Profit (loss) for the period 15,324 (25,091)
Attributable to:
Shareholders of the Company 20,769 (25,630)
Minority interests (5,445) 539
15,324 (25,091)
Earnings per share
Basic earnings (loss) per share 0.77 (0.96)
Diluted earnings (loss) per share 0.75 (0.94)
AMG Advanced Metallurgical Group N.V.
Interim condensed consolidated cash flow statement for the nine
months ended 30 September
For the nine months ended 30 September
In thousands of US Dollars 2008 2007
Unaudited Unaudited
Cash flows from operating activities
Profit (loss) for the period 61,650 (6,458)
Adjustments to reconcile profit (loss) to net
cash flows:
Non-cash
Depreciation and amortization 30,884 13,579
Restructuring expense 13,912 51
Asset impairment expense 3,652 -
Environmental expense 197 124
Net finance costs 14,536 51,267
Share of loss of associates 10,999 1,96 3
Equity-settled share-based payment transactions 8,189 2,635
Income tax expense 36,767 22,854
Change in working capital (71,376) 17,014
Other (11,351) (12,488)
Interest paid, net (4,707) (15,080)
Income tax paid (17,582) (9,621)
Cash received from dividends 268 -
Net cash flows from operating activities 76,038 65,840
Cash flows used in investing activities
Proceeds from sale of property, plant and 469 730
equipment
Acquisitions of property, plant and equipment and (95,262) (33,079)
intangibles
Acquisitions, net of cash (66,484) (49,321)
Related party loans (5,848) (26)
Change in short-term investments 14,884 -
Change in restricted cash (3,866) -
Other (2,648) 4,223
Net cash flows used in investing activities (158,755) (77,473)
Cash flows from financing activities
Proceeds from issuance of debt 79,951 91,470
Repayment of borrowings (7,140) (275,083)
Issuance of shares and related transaction costs - 264,005
Capital infusion - 106,076
Other 313 (49)
Net cash flows from financing activities 73,124 186,419
Net (decrease) increase in cash and cash (9,593) 174,786
equivalents
Cash and cash equivalents at 1 January 172,558 54,610
Effect of exchange rate fluctuations on cash held (8,803) 14,789
Cash and cash equival ents at 30 September 154,162 244,185
AMG, incorporated in the Netherlands, is a global leader in the production of highly engineered specialty metal products and advanced vacuum furnace systems. AMG serves growing industries worldwide with its unique combination of metallurgical engineering expertise and production know-how. AMG is a market leader in many of its products and systems, which are critical to the production of key components for the aerospace, energy (including solar and nuclear), electronics, optics, chemicals, construction and transportation industries. AMG has two operating divisions of businesses, Advanced Materials and Engineering Systems, and owns majority interests in publicly-listed companies Timminco Limited (TSX: "TIM") and Graphit Kropfmühl AG (Deutsche Börse: GKR.DE). The Advanced Materials Division develops and produces niche specialty metals and complex metals products, many of which are used in demanding, safety-critical, high-stress environments. AMG is one of a limited number of significant producers globally of niche specialty metals, such as ferrovanadium, ferronickel-molybdenum, aluminium master alloys and additives, chromium metal and ferrotitanium, used by steel, aluminium, chemical and superalloy producers for aerospace, automotive, energy, electronics, optics, chemicals, construction and other applications. Other key products produced by AMG include specialty alloys for titanium and superalloys, coating materials, tantalum and niobium oxides, vanadium chemicals and antimony trioxide. The Engineering Systems Division designs, engineers and produces advanced vacuum furnace systems and operates vacuum heat treatment facilities. AMG is a global leader in supplying technologically-advanced vacuum furnace systems to customers in the aerospace, energy (including solar and nuclear), transportation, electronics, superalloys and specialty steel industries. Examples of furnace systems produced by AMG include vacuum remelting, solar silicon melting and crystallization, vacuum induction melting, vacuum heat treatment and high pressure gas quenching, vacuum precision casting, turbine blade coating and sintering. AMG also provides vacuum case-hardening heat treatment services on a tolling basis to customers through facilities equipped with vacuum heat treatment furnaces. Timminco Limited is a majority controlled, publicly listed subsidiary of AMG. Timminco is a leader in the production of upgraded metallurgical silicon for the rapidly growing solar photovoltaic energy industry. Timminco also produces silicon metal and magnesium products for use in a broad range of industrial applications. Graphit Kropfmühl AG is a majority controlled, publicly listed subsidiary of AMG. Based on its secure raw material sources in Africa, China 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. AMG operates globally with production facilities in Germany, the United Kingdom, France, Czech Republic, the United States, Canada, Mexico, Brazil, Sri Lanka and Australia and also has sales and customer service offices in Belgium, Russia, China and Japan (website: www.amg-nv.com). For further information please contact: AMG Advanced Metallurgical Group N.V. +1 610 975 4901 Jonathan Costello Director of Corporate Communications jcostello@amg-nv.com Disclaimer Certain statements in this press release are not historical facts and are "forward looking". Forward looking statements include statements concerning AMG's plans, expectations, projections, objectives, targets, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans and intentions relating to acquisitions, AMG's competitive strengths and weaknesses, plans or goals relating to forecasted production, reserves, financial position and future operations and development, AMG's business strategy and the trends AMG anticipates in the industries and the political and legal environment in which it operates and other information that is not historical information. When used in this press release, the words "expects," "believes," "anticipates," "plans," "may," "will," "should," and similar expressions, and the negatives thereof, are intended to identify forward looking statements. By their very nature, forward looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that the predictions, forecasts, projections and other forward looking statements will not be achieved. These forward looking statements speak only as of the date of this press release. AMG expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward looking statement contained herein to reflect any change in AMG's expectations with regard thereto or any change in events, conditions or circumstances on which any forward looking statement is based. The full press release including tables can be downloaded from the following link: AMG Reports Strong Third Quarter in Face of Challenging Economic Conditions (http://hugin.info/138060/R/1268929/280385.pdf) AMG Reports Strong Third Quarter in Face of Challenging Economic Conditions: http://hugin.info/138060/R/1268929/280385.pdf This announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.
Contact: Source: AMG Advanced Metallurgical Group N.V.
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