Coronavirus Update
- As of today, we are grateful to report that we have no active
confirmed coronavirus cases globally. AMG had one of its employees
test positive for COVID-19. The employee fully recovered and has
since returned to work. This event did not result in a facility
closure or operational interruption. To protect the health and
safety of its employees, AMG continues to implement preventive
measures such as practicing social distancing, remote working when
possible, and restrictions on travel.
- The majority of our production facilities are operating and our
major expansion projects in vanadium and lithium are continuing on
schedule.
Strategic Highlights
- AMG and Shell Catalysts & Technologies received all
regulatory consents necessary for the formation of the Shell and
AMG Recycling B.V. joint venture, and has commenced
operations.
- AMG continued basic engineering for its lithium project in
Zeitz, Germany, and in Zanesville, Ohio, AMG has committed $140
million as of March 31, 2020 in construction and engineering
contracts for investment in a second ferrovanadium plant.
- AMG Engineering successfully completed the installation of the
first ceramic matrix composite (“CMC”) vacuum furnace and passed
the Final Acceptance Test at its customer’s location; this customer
acceptance represents a significant milestone in AMG Engineering’s
ongoing new product development program.
- In light of ongoing demand uncertainty in the global aerospace
market due to the effect of COVID-19, AMG has put the IPO of AMG
Technologies on hold.
Financial Highlights
- EBITDA(2) was $22.3 million in the first quarter of 2020 as the
Company’s segments provided balanced earnings
- SG&A declined 7% in the first quarter of 2020 to $34.9
million compared to $37.4 million in the first quarter of 2019 due
to lower personnel costs and initial steps on cost reduction
- AMG Technologies’ order backlog increased 9% to $242.2 million
as of March 31, 2020, compared to $222.6 million as of December 31,
2019
- AMG’s liquidity as of March 31, 2020 was $372.2 million and the
Company has maintained its final 2019 declared dividend of €0.20 to
be paid in the second quarter 2020
Amsterdam, 5 May 2020 (Regulated
Information) --- AMG Advanced Metallurgical Group N.V.
(“AMG”, EURONEXT AMSTERDAM: “AMG”) reported first quarter 2020
revenue of $278.3 million, a 20% decrease from $346.5 million in
the first quarter of 2019. EBITDA for the first quarter of 2020 was
$22.3 million, a 56% decrease from $50.4 million in the first
quarter of 2019, largely due to lower ferrovanadium prices and
lower titanium alloy sales versus the first quarter of last year.
EBIT decreased 71% to $11.9 million in the first quarter of 2020
from $40.4 million in the first quarter of 2019.
Revenue dropped 20% in the first quarter of
2020, driven by a significant metal price decline across AMG’s
entire portfolio. The 56% decrease in EBITDA to $22.3 million was
largely due to the Critical Materials segment, which achieved an
EBITDA of $9.7 million in the first quarter of 2020. The decline
was primarily driven by lower prices for ferrovanadium and chrome
metal. AMG Technologies achieved an EBITDA of $12.7 million, a 34%
decrease from the first quarter of 2019, due to lower titanium
alloy sales and lower profitability associated with metal price
declines for the Titanium Alloys and Coatings business.
Dr. Heinz Schimmelbusch, Chairman of the
Management Board and CEO, said, “I am pleased to report that out of
our 3,200 total AMG employees in 33 sites in 15 countries, AMG has
only had one employee test positive for COVID-19. The employee has
since fully recovered and has returned to work.
However, as a result of the Coronavirus crisis, some of
our production facilities are operating below capacity, reflecting
reduced demand levels. Our financial results reflect the “lowest
price” environment we are experiencing, and we continue to operate
in an austerity mode and focus on things we can control, such as
operational efficiency, capital expenditures and overhead costs.
This focus on expenditures will help to preserve our solid
liquidity position.
Despite our intense focus on cash flow, we
continue to progress our key strategic programs: the construction
of the plant in Zanesville, Ohio, which will essentially double our
recycling capacity for refinery residues, is proceeding as planned,
utilizing the funds raised from our municipal bond. Basic
engineering of the new lithium hydroxide production facility in
Germany is expected to be completed by year end. Shell & AMG
Recycling B.V. has started to operate and will pursue refinery
residue recycling opportunities globally.
Despite our excellent order intake in 2019 of $249 million and
of $104 million in the first quarter of 2020, representing a strong
1.3x book to bill ratio, foreseeable depressed conditions in the
aerospace industry has forced us to postpone the pursuit of a
public offering of AMG Technologies.”
Key Figures
In 000’s US
dollars |
|
|
|
|
Q1 ‘20 |
Q1 ‘19 |
Change |
Revenue |
$278,290 |
$346,523 |
(20%) |
Gross profit |
43,160 |
67,120 |
(36%) |
Gross margin |
15.5% |
19.4% |
|
|
|
|
|
Operating
profit |
8,326 |
29,796 |
(72%) |
Operating
margin |
3.0% |
8.6% |
|
|
|
|
|
Net (loss)
income attributable to shareholders |
(13,568) |
14,827 |
N/A |
|
|
|
|
EPS - Fully
diluted |
(0.48) |
0.47 |
N/A |
|
|
|
|
EBIT
(1) |
11,851 |
40,388 |
(71%) |
EBITDA
(2) |
22,329 |
50,423 |
(56%) |
EBITDA margin |
8.0% |
14.6% |
|
|
|
|
|
Cash (used in) from operating activities |
(3,679) |
6,935 |
N/A |
Note:
- EBIT is defined as earnings before interest and income taxes.
EBIT excludes restructuring, asset impairment, inventory cost
adjustments, environmental provisions, exceptional legal expenses,
equity-settled share-based payments, strategic expenses and
includes foreign currency gains or losses.
- EBITDA is defined as EBIT adjusted for depreciation and
amortization.
Operational Review
AMG Critical Materials
|
Q1 ‘20 |
Q1 ‘19 |
Change |
Revenue |
$159,191 |
$228,591 |
(30%) |
Gross profit |
20,646 |
37,638 |
(45%) |
Gross profit
excluding exceptional items |
20,043 |
45,672 |
(56%) |
Operating
profit |
1,909 |
16,192 |
(88%) |
EBITDA |
9,656 |
31,152 |
(69%) |
AMG Critical Materials’ revenue in the first
quarter decreased by $69.4 million, or 30%, to $159.2 million,
driven largely by lower average prices across all seven business
units during the quarter, partially offset by higher sales volumes
of ferrovanadium, graphite and silicon metal.
Gross profit in the first quarter decreased by
$17.0 million to $20.6 million. The reduction in gross profit was
primarily driven by decreased profitability in our vanadium
business offset by increased profitability in graphite and
silicon.
SG&A expenses in the first quarter of 2020
were $18.8 million, $2.7 million lower than the first quarter 2019,
primarily due to lower personnel costs, lower professional fees,
and initial cost reduction efforts across the business.
The first quarter 2020 EBITDA margin was 6% due
to lower profitability in the quarter noted above.
AMG Technologies
|
Q1 ‘20 |
Q1 ‘19 |
Change |
Revenue |
$119,099 |
$117,932 |
1% |
Gross profit |
22,514 |
29,482 |
(24%) |
Gross profit
excluding exceptional items |
23,056 |
31,278 |
(26%) |
Operating
profit |
6,417 |
13,604 |
(53%) |
EBITDA |
12,673 |
19,271 |
(34%) |
Order backlog increased 9% versus December 31,
2019, resulting in a robust level of $242.2 million as of March 31,
2020 as the Company signed $104.4 million in new orders during the
first quarter of 2020. This represents a 1.3x book to bill ratio.
This higher book to bill ratio was largely driven by strong orders
of turbine blade coating and remelting furnaces for the aerospace
market.
AMG Technologies' first quarter 2020 revenue
increased due to the completion of Engineering’s first CMC vacuum
furnace, which was offset by lower prices and volumes in the
Titanium Alloys and Coatings business driven by lower metals prices
as well as a decline in volume due to a slowdown in the aerospace
sector. As a result, first quarter 2020 gross profit decreased by
$7.0 million, or 24%, to $22.5 million, primarily driven by lower
results from the Titanium Alloys and Coatings business.
SG&A expenses were essentially flat at $16.1
million in the first quarter, compared to $15.9 million in the same
period in 2019 as initial cost reductions were offset by higher
insurance costs and professional fees.
AMG Technologies’ first quarter EBITDA decreased
by 34%, or $6.6 million, to $12.7 million from $19.3 million in the
first quarter of 2019 due to lower profitability of the Titanium
Alloys and Coatings business noted above.
Financial Review
Tax
AMG recorded an income tax expense of $16.5
million in the first quarter 2020, compared to $5.9 million in the
same period in 2019. The increase was primarily due to significant
devaluation of the Brazilian currency. Movements in the Brazilian
real exchange rate impact the valuation of the Company’s net
deferred tax assets. The devaluation of the real during the first
quarter of 2020 resulted in an additional non-cash tax expense of
$11.7 million. The appreciation of the real in the first quarter of
2019 resulted in a $1.9 million tax benefit.
AMG paid taxes of $0.9 million in the first
quarter 2020, compared to tax payments of $3.9 million in the same
period in 2019. The current quarter benefited from tax refunds from
2019 as well as the extensive relief due to international
COVID-19 tax measures which enabled AMG to delay most of its of tax
payments during the quarter.
Exceptional Items
AMG’s first quarter 2020 gross profit of $43.2
million includes exceptional items, which are not included in the
calculation of EBITDA.
A summary of exceptional items included in gross
profit in the first quarters of 2020 and 2019 are below:
Exceptional items included in gross profit
|
Q1 ‘20 |
Q1 ‘19 |
Change |
Gross profit |
$43,160 |
$67,120 |
(36%) |
Inventory cost
(reversal) adjustment |
(1,901) |
9,883 |
N/A |
Restructuring
expense (reversal) |
428 |
(53) |
N/A |
Asset impairment
expense |
17 |
– |
N/A |
Strategic project expense |
1,395 |
– |
N/A |
Gross profit
excluding exceptional items |
43,099 |
76,950 |
(44%) |
As a result of an improvement in vanadium prices
versus the fourth quarter of 2019, AMG had a $1.9 million reversal
of an exceptional non-cash charge for vanadium inventory cost
adjustments during the first quarter which has been adjusted in
EBITDA. The Company is in the ramp-up phase for three significant
strategic expansion projects, including the Zanesville vanadium
expansion, the vanadium joint venture with Shell, and the lithium
expansion in Germany, which incurred $1.4 million of project
expenses during the quarter but are not yet operational. AMG is
adjusting EBITDA for these exceptional charges.
Liquidity
|
March 31, 2020 |
December 31, 2019 |
Change |
Senior secured
debt |
$366,168 |
$366,682 |
– |
Cash & equivalents |
208,944 |
226,218 |
(8%) |
Senior secured net debt |
157,224 |
140,464 |
12% |
Other debt |
10,784 |
12,144 |
(11%) |
Net debt excluding municipal bond |
168,008 |
152,608 |
10% |
Municipal bond
debt |
319,860 |
319,911 |
– |
Restricted cash |
295,495 |
309,581 |
(5%) |
Net
debt |
192,373 |
162,938 |
18% |
AMG had a net debt position of $192.4 million as
of March 31, 2020. This increase was mainly due to the significant
investment in growth initiatives during the quarter, especially the
vanadium expansion.
Cash used in operating activities of ($3.7)
million in the first quarter of 2020 decreased by $10.6 million
compared to the same period in 2019, primarily due to lower
profitability.
Capital expenditures, including capitalized
borrowing costs, increased to $21.9 million in the first quarter of
2020 compared to $12.8 million in the same period in 2019. Capital
spending in the first quarter of 2020 included $5.5 million of
maintenance capital. The remaining $16.4 million of capital
spending is attributable to expansion projects at AMG’s vanadium,
titanium aluminide, lithium and heat treatment service
facilities.
As of March 31, 2020, AMG had $208.9 million of
unrestricted cash and equivalents and total liquidity of $372.2
million.
Net Finance Costs
AMG’s first quarter 2020 net finance costs
decreased to $5.4 million from $9.2 million in the first quarter of
2019. This decline is mainly driven by lower borrowing rates versus
the prior period and favorable foreign exchange movements.
Additionally, AMG capitalized $2.8 million of borrowing costs in
the first quarter of 2020 driven by interest associated with the
Company’s tax-exempt municipal bond supporting the vanadium
expansion in Ohio.
SG&A
AMG’s first quarter 2020 SG&A expenses were
$34.9 million compared to $37.4 million in the first quarter of
2019, primarily due to lower personnel costs, lower professional
fees and initial cost reduction efforts across the business.
Outlook
AMG operates with practiced business resilience
and we are acutely focused on safeguarding against the potential
for future pandemic-related disruptions. Management continues to
drive operational efficiency and manage for cash preservation in
2020 to ensure ongoing financial health and stability.
However, due to the speed with which the
COVID-19 situation is developing, there is uncertainty around its
ultimate impact; therefore, as previously announced, AMG has
decided to withdraw its earnings guidance for 2020. A new target
will be announced once the global industrial economy begins to
stabilize.
Net (loss) income to EBITDA reconciliation
|
Q1 ‘20 |
Q1 ‘19 |
Net (loss) income |
($13,597) |
$14,703 |
Income tax expense |
16,515 |
5,876 |
Net finance cost* |
6,335 |
8,852 |
Equity-settled share-based payment
transactions |
1,490 |
1,118 |
Restructuring expense |
428 |
(53) |
Inventory cost adjustment |
(1,901) |
9,883 |
Strategic project expense |
1,395 |
– |
Exceptional legal expense |
1,049 |
– |
Others |
137 |
9 |
EBIT |
11,851 |
40,388 |
Depreciation and amortization |
10,478 |
10,035 |
EBITDA |
22,329 |
50,423 |
*Excludes foreign exchange
expense (income).
AMG incurred $1.1 million of non-recurring legal
expense related to a dispute with a former customer. This dispute
was settled in the first quarter 2020 and will not impact the
Company’s financial results going forward.
AMG Advanced Metallurgical Group
N.V. |
|
|
Condensed Interim Consolidated Income
Statement |
|
|
|
|
|
For the quarter ended March
31 |
|
|
In thousands of US dollars |
2020 |
2019 |
|
Unaudited |
Unaudited |
Continuing
operations |
|
|
Revenue |
278,290 |
346,523 |
Cost of sales |
235,130 |
279,403 |
Gross
profit |
43,160 |
67,120 |
|
|
|
Selling, general and
administrative expenses |
34,887 |
37,357 |
|
|
|
Net other operating
income |
53 |
33 |
|
|
|
Operating profit |
8,326 |
29,796 |
|
|
|
Finance income |
(1,399) |
(971) |
Finance cost |
6,807 |
10,188 |
Net finance cost |
5,408 |
9,217 |
|
|
|
Profit before income
tax |
2,918 |
20,579 |
|
|
|
Income tax
expense |
16,515 |
5,876 |
|
|
|
(Loss) profit for the
period |
(13,597) |
14,703 |
|
|
|
Attributable to: |
|
|
Shareholders of the Company |
(13,568) |
14,827 |
Non-controlling interests |
(29) |
(124) |
(Loss) profit for the
period |
(13,597) |
14,703 |
|
|
|
(Loss) earnings per
share |
|
|
Basic (loss) earnings per share |
(0.48) |
0.48 |
Diluted (loss) earnings per share |
(0.48) |
0.47 |
|
|
|
|
|
|
AMG Advanced Metallurgical
Group N.V. |
|
|
Condensed Interim Consolidated
Statement of Financial Position |
|
|
|
|
|
|
|
|
In thousands of US dollars |
March 31, 2020 Unaudited |
December 31,2019 |
Assets |
|
|
Property, plant and equipment |
443,861 |
429,993 |
Goodwill and other intangible assets |
41,305 |
41,923 |
Derivative financial instruments |
- |
922 |
Other investments |
21,932 |
23,565 |
Deferred tax assets |
51,320 |
60,945 |
Restricted cash |
295,495 |
309,581 |
Other assets |
9,389 |
11,072 |
Total non-current
assets |
863,302 |
878,001 |
Inventories |
174,686 |
204,152 |
Derivative financial instruments |
313 |
2,693 |
Trade and other receivables |
144,503 |
119,052 |
Other assets |
34,128 |
33,860 |
Current tax assets |
6,756 |
7,980 |
Cash and cash equivalents |
208,944 |
226,218 |
Total current
assets |
569,330 |
593,955 |
Total assets |
1,432,632 |
1,471,956 |
AMG Advanced
Metallurgical Group N.V. |
|
|
Condensed Interim Consolidated
Statement of Financial Position |
|
|
(continued) |
|
|
|
|
|
|
|
|
In thousands of US dollars |
March 31, 2020 Unaudited |
December 31,2019 |
Equity |
|
|
Issued capital |
831 |
831 |
Share premium |
489,546 |
489,546 |
Treasury shares |
(80,584) |
(83,880) |
Other reserves |
(138,997) |
(116,358) |
Retained earnings (deficit) |
(146,001) |
(129,626) |
Equity attributable to
shareholders of the Company |
124,795 |
160,513 |
|
|
|
Non-controlling interests |
23,275 |
23,893 |
Total equity |
148,070 |
184,406 |
Liabilities Loans and borrowings |
667,850 |
669,497 |
Lease liabilities |
44,929 |
46,490 |
Employee benefits |
172,657 |
175,870 |
Provisions |
24,525 |
28,984 |
Other liabilities |
7,692 |
3,629 |
Derivative financial instruments |
7,959 |
4,289 |
Deferred tax liabilities |
5,293 |
4,300 |
Total non-current
liabilities |
930,905 |
933,059 |
Loans and borrowings |
21,462 |
21,740 |
Lease liabilities |
4,227 |
4,227 |
Short-term bank debt |
7,500 |
7,500 |
Other liabilities |
59,356 |
61,479 |
Trade and other payables |
166,344 |
157,108 |
Derivative financial instruments |
17,589 |
4,037 |
Advance payments |
36,023 |
57,650 |
Current tax liability |
19,194 |
18,299 |
Provisions |
21,962 |
22,451 |
Total current
liabilities |
353,657 |
354,491 |
Total liabilities |
1,284,562 |
1,287,550 |
Total equity and
liabilities |
1,432,632 |
1,471,956 |
AMG Advanced Metallurgical Group
N.V. |
|
|
Condensed Interim Consolidated
Statement of Cash Flows |
|
|
For the
quarter ended March 31 |
|
|
In thousands of US dollars |
2020 |
2019 |
|
Unaudited |
Unaudited |
Cash (used) from operating
activities |
|
|
(Loss) profit for the period |
(13,597) |
14,703 |
Adjustments to reconcile net (loss)
profit to net cash flows: |
|
|
Non-cash: |
|
|
Income tax expense |
16,515 |
5,876 |
Depreciation and amortization |
10,478 |
10,035 |
Asset impairments |
17 |
- |
Net finance cost |
5,408 |
9,217 |
Loss (gain) on sale or disposal of property, plant and
equipment |
112 |
(168) |
Equity-settled share-based payment transactions |
1,490 |
1,118 |
Movement in provisions, pensions, and government grants |
(2,761) |
1,708 |
Working capital and deferred revenue adjustments |
(15,468) |
(26,017) |
Cash generated from operating
activities |
2,194 |
16,472 |
Finance costs paid, net |
(4,951) |
(5,680) |
Income tax paid, net |
(922) |
(3,857) |
Net cash (used) from operating
activities |
(3,679) |
6,935 |
|
|
|
Cash used in investing
activities |
|
|
Proceeds from sale of property, plant
and equipment |
- |
237 |
Acquisition of property, plant and
equipment and intangibles |
(15,500) |
(12,759) |
Change in restricted cash |
14,086 |
334 |
Capitalized borrowing cost |
(6,395) |
- |
Other |
8 |
- |
Net cash used in investing
activities |
(7,801) |
(12,188) |
AMG Advanced Metallurgical Group
N.V. |
|
|
Condensed Interim Consolidated
Statement of Cash Flows |
|
|
(continued) |
|
|
For the
quarter ended March 31 |
|
|
In thousands of
US dollars |
2020 |
2019 |
|
Unaudited |
Unaudited |
Cash from used in financing
activities |
|
|
Repayment of borrowings |
(1,257) |
(875) |
Net repurchase of common shares |
(592) |
(7,351) |
Payment of lease liabilities |
(1,057) |
(936) |
Net cash used in financing
activities |
(2,906) |
(9,162) |
|
|
|
Net decrease in cash and cash
equivalents |
(14,386) |
(14,415) |
|
|
|
Cash and cash equivalents at January
1 |
226,218 |
381,900 |
Effect of exchange rate fluctuations on
cash held |
(2,888) |
(1,189) |
Cash and cash equivalents at
March 31 |
208,944 |
366,296 |
This press release contains inside information
within the meaning of Article 7(1) of the EU Market Abuse
Regulation.
This press release contains regulated
information as defined in the Dutch Financial Markets Supervision
Act (Wet op het financieel toezicht).
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, ferrovanadium, natural graphite, chromium
metal, antimony, lithium, tantalum, niobium and silicon
metal. AMG Technologies produces titanium aluminides and
titanium alloys for the aerospace market; designs, engineers, and
produces advanced vacuum furnace systems; and operates vacuum heat
treatment facilities, primarily for the transportation and energy
industries.
With approximately 3,200 employees, AMG operates
globally with production facilities in Germany, the United Kingdom,
France, the Czech Republic, the United States, China, Mexico,
Brazil, India, Sri Lanka and Mozambique, 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. +1 610 975
4979Michele
Fischermfischer@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.
- May 5 2020 First Quarter 2020 PR
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