AMG reports third quarter 2009 results
(Thomson Reuters ONE) - Key Highlights * Revenue was $205.4 million in Q3 2009; YTD 2009 revenue was $636.1 million * EBITDA[1] was $18.6 million in Q3 2009; YTD 2009 EBITDA was $56.7 million * EPS on a fully diluted basis was ($0.76) in Q3 2009 * Advanced Materials Division performance improved, generating revenue of $110.1 million and EBITDA of $5.0 million, in Q3 2009 * Engineering Systems Division was impacted by the global slowdown, generating revenue of $61.6 million and EBITDA of $11.0 million, in Q3 2009 * Graphit Kropfmühl revenues and EBITDA improved to $33.7 million and $2.6 million, respectively in Q3 2009 * Timminco was deconsolidated during the quarter as AMG's ownership dropped below 50% due to Timminco's issuance of additional shares * As of September 30, 2009 cash on hand was $124.4 million, net debt was $77.9 million; Q3 2009 free cash flow[2] was $8.8 million[1] EBITDA is defined as earnings before interest, tax, depreciationand amortization and excludes nonrecurring items[2] Free cash flow is defined as EBITDA less change in workingcapital and maintenance capital expendituresAmsterdam, 11 November 2009 (Regulated Information) --- AMG AdvancedMetallurgical Group N.V. ("AMG", EURONEXT AMSTERDAM: "AMG") reportedthird quarter 2009 revenue of $205.4 million, a decrease 45% from$371.0 million in the third quarter 2008.Net loss attributable to shareholders for the third quarter 2009 was($20.3) million, or ($0.76) per fully diluted share, compared to netincome of $20.8 million or $0.75 per fully diluted share for thethird quarter 2008. EBITDA declined 71% to $18.6 million in thethird quarter 2009 from $63.7 million in the third quarter 2008.In commenting on results, Dr. Heinz Schimmelbusch, Chairman of theManagement Board and CEO, said, "The decline in market conditionsmoderated during the third quarter 2009. During the quarter,Advanced Materials prices and volumes increased slightly from thelows of the second quarter 2009, but both volumes and prices remainadversely affected by the unprecedented slowdown in global industrialactivity. The Engineering Systems Division's financial performancewas significantly impacted by the low levels of order intake andseasonal slowdowns. Graphit Kropfmühl improved profitability duringthe quarter due to a slight rebound in silicon metal prices. Despitethe apparent bottoming of economic activity, the recovery process maybe slow and uneven. AMG continues to limit capital investment and isreducing costs to preserve free cash flow."Accounting NoteAMG owned less than 50% (47.9%) of Timminco as of September 30, 2009,and therefore going forward AMG will account for Timminco under theIFRS equity method of accounting. For purposes of this release, thisaccounting treatment requires AMG to deconsolidate its investment inTimminco and include Timminco's quarterly and year to date financialresults as one line item - "discontinued operations" on the profitand loss statement. The carrying value of AMG's investment inTimminco is included as an "Investment in Associate" on the assetportion of AMG's balance sheet. As such, the Key Figures belowexcept for net income attributable to shareholders exclude thefinancial performance of Timminco during the period and all prioryear figures have been restated to exclude Timminco.While AMG no longer owns more than 50% of Timminco, Timminco remainsa strategic asset of AMG.Key FiguresIn 000's US Dollar Q3'09 Q3'08 ChangeRevenue $205,406 $370,982 (45%)Gross profit 39,949 82,805 (52%)Gross margin 19.4% 22.3%Operating income (110) 45,609 N/AOperating margin (0.0%) 12.3%Net Income attributable to shareholders (20,302) 20,769 N/AEPS- Fully diluted (0.76) 0.75 N/AAdjusted EPS- Continuing Operations Fullydiluted (1) (0.30) 0.99 N/AEBITDA (2) 18,602 63,725 (71%)EBITDA margin 9.1% 17.2%Notes:(1) Adjusted for non-recurring, restructuring charges and equityaccounting treatment for AMG's investment in Timminco(2) EBITDA is defined as earnings before interest, tax, depreciationand amortization and excludes nonrecurring itemsOperational ReviewAdvanced Materials Division Q3'09 Q3'08 ChangeRevenue $110,143 $199,396 (45%)Gross profit 15,736 42,702 (63%)Operating income (8,444) 22,620 N/AEBITDA 5,012 25,427 (80%)Capital expenditures 1,937 7,643 (75%)The Advanced Materials division's third quarter 2009 financialresults were impacted by continued weak demand for the majority ofits products, most notably in the steel, superalloy and titaniummarkets. Third quarter revenue decreased 45% to $110.1 million fromthe third quarter 2008.Gross margin percentage decreased from 21% of revenue in the thirdquarter of 2008 to 14% in the third quarter of 2009. This was causedby a sharp decline in end product prices and lower volumes,particularly in ferrovanadium, from the third quarter of 2008. Thedecrease in revenue and margins was primarily caused byferrovanadium, with reference prices decreasing by 59% and volumesdeclining by 42% over the third quarter 2008. Titanium masteralloys, vanadium chemicals, ferronickel-molybdenum and ferrotitaniumproducts were also impacted by falling end market prices. Even moresignificant were the decreased volumes as the result of decreasedglobal demand. Aluminium master alloys volumes decreased 43% andtitanium master alloys volumes declined by 77% during the thirdquarter 2009 compared to the third quarter 2008. The globalrecession continued to impact industrial production across allmarkets, although less so than in the second quarter of 2009.The Division's working capital increased slightly during the thirdquarter 2009, after decreasing by over $18 million since December 31,2008. To mitigate the decrease in revenue, the Advanced MaterialsDivision has reduced SG&A expenses by approximately 21% from thethird quarter 2008.The third quarter 2009 EBITDA decreased by $20.4 million to $5.0million, compared to the same period in 2008. This was the result ofthe decrease in revenue and gross margin, which were slightly offsetby a decline in SG&A. Sequentially, third quarter 2009 EBITDAimproved by $7.0 million over the second quarter 2009 driven by costsaving measures.Capital expenditures were $1.9 million for the third quarter 2009,75% less than the comparable period in 2008. The Division was onlyperforming maintenance capital investment during the quarter becauseof the cost containment measures.Engineering Systems Division Q3'09 Q3'08 ChangeRevenue $61,598 $135,155 (54%)Gross profit 20,637 44,326 (53%)Operating income 7,132 30,836 (77%)EBITDA 11,036 34,241 (68%)Capital expenditures 1,239 4,392 (72%)The Engineering Systems division's order intake was significantlyaffected by the global economic slowdown as customers continued todefer investment decisions during third quarter 2009 because of theweak credit markets and a slow recovery in their end market demand. Order backlog was at $204 million on September 30, 2009, down 9%from $223 million on June 30, 2009. The decrease was primarily dueto a significant reduction in orders for solar furnace systems to$16.7 million during the quarter. Overall, order intake was $44.2million during the third quarter 2009, down from $53.5 in the secondquarter 2009. The backlog consists primarily of melting andremelting systems for the titanium and specialty steel industries andsolar silicon DSS furnaces.Third quarter 2009 revenue decreased by $73.6 million or 54%. Salesof solar silicon DSS melting furnaces for the photovoltaic industrydecreased 66% in the third quarter 2009 compared to the same period ayear ago. During the third quarter 2009, 39% of revenue wasgenerated by sales of solar silicon and melting furnaces, down from51% in the same period 2008. Revenue from remelting systems,primarily for the aerospace and specialty steel industries, decreasedby 59% during the third quarter 2009. The recently implementednuclear business contributed $1.8 million in revenue during the thirdquarter.Despite these challenging markets, the Engineering Systems divisionwas able to stabilize gross margin at 34% of revenue in the thirdquarter 2009 up from 33% in the same period in 2008. The stablegross margin was due to constant prices per unit and a slightdecrease in raw material prices.Third quarter 2009 EBITDA was $11.0 million, a 68% decrease over thesame period in 2008. The EBITDA margin decreased to 18% during thethird quarter 2009 compared to 25% for the same period in 2008. TheEBITDA margin decrease was attributable to the economy of scaleimpact of lower revenue as well as one-time research and developmentexpenses.Capital expenditures decreased to $1.2 million for the third quarter2009, 72% less than the comparable period in 2008. This decrease wasa result of the completion of the expansion of the Berlin facilityduring 2008 and the focus on minimizing capital investment during thethird quarter 2009.Graphit Kropfmühl Q3'09 Q3'08 ChangeRevenue $33,665 $36,431 (8%)Gross profit 3,576 (4,223) N/AOperating income 1,202 (7,847) N/AEBITDA 2,554 4,057 (37%)Capital expenditures 385 1,727 (78%)Graphit Kropfmühl ("GK") was impacted by the decline in globaleconomic activity during the third quarter 2009, particularly in thenatural graphite division. Third quarter 2009 revenue decreased by$2.8 million or 8% primarily due to a 30% reduction in naturalgraphite revenues.Gross margin improved to 11% of revenue in the third quarter 2009.The third quarter 2008 gross profit of negative $4.2 million was aresult of purchase accounting adjustments related to the acquisitionof GK by AMG.Third quarter 2009 EBITDA was $2.6 million, a 37% decrease comparedto the third quarter 2008. The EBITDA margin decreased to 8% duringthe third quarter 2009 compared to 11% in the same period 2008. TheEBITDA margin decrease was attributable to lower selling prices andvolumes in both silicon and graphite, which were slightly offset by adecrease in SG&A expenses.Capital expenditures decreased to $0.4 million for the third quarter2009, 78% less than the same period 2008. The decrease in capitalexpenditures was a result of the completion of the expansion of thesilicon metal facilities in 2008.TimmincoAMG's ownership in Timminco decreased as the result of issuance ofshares by Timminco. Following the decrease in AMG's common equityownership of Timminco to 47.9% as of Septermber 30, 2009, AMG nowaccounts for its investment in Timminco via the equity accountingmethod. Timminco's net loss is included on its own line item onAMG's income statement and the carrying value of AMG's investment inTimminco of $41.8 million is listed as an asset on AMG's balancesheet. Additional information on Timminco and its third quarter 2009financial statements can be found at www.Timminco.com.Financial ReviewTaxAMG recorded a tax expense of $5.7 million in the quarter endedSeptember 30, 2009 as compared to a tax expense of $11.9 million inthe quarter ended September 30, 2008. A tax benefit for the pre-taxlosses was not booked in the third quarter 2009 due to the lossesbeing generated in jurisdictions where AMG already has significantnet operating losses.Liquidity Q3'09 Q4'08 (1) ChangeTotal debt $202,332 $183,352 10%Cash & cash equivalents 124,391 139,786 (11%)Net debt 77,941 43,566 79%Notes:(1) Restated to account for Timminco under IFRS equity accountingmethod.AMG had a net debt position of $77.9 million as of September 30,2009. The Company's liquidity position decreased by $34.4 million,due to $20.8 million of capital investments and $23.8 million ofcapital infusions in Timminco, offset by positive operating cashflows from continuing operations.Cash Flow Nine Months Ended September '09 September '08Cash Flows (used in) / from $(6,033) $76,038OperationsCapital expenditures (20,755) (42,060)Acquisitions, net of cash - (66,484)Other investing (31,964) (50,211)Cash Flows used in Investing (52,719) (158,755)ActivitiesCash Flows generated from 35,415 73,124Financing ActivitiesThe significant decline in net income was partially offset by lowerinvestments in working capital and lower tax payments during the ninemonths ended September 30, 2009 resulting in negative cash flows fromoperations totaling $6.0 million, down from positive operating cashflows of $76.0 million in the first nine months 2008. The lowerlevel of cash flows from operations is primarily due to the operatingloss from the Advanced Materials Division, and a decline in theoperating income from the Engineering Systems Division offset byimprovements in inventory and accounts receivable balances ofapproximately $40.0 million.Cash flows used in investing activities of $52.7 million for the ninemonths ended September 30, 2009 decreased from $158.8 million in thefirst nine months of 2008. This is due to the $21.3 million decreasein capital investments, primarily in Advanced Materials andEngineering Systems, and the $62.9 million cost for the purchase ofapproximately 79.5% of Graphit Kropfmühl in April 2008.Cash flows from financing activities were $35.4 million, a decreaseof $37.7 million in the same period of 2008. This decrease wasprimarily the result of two factors, $20.0 million borrowed on thecredit facility for the acquisition of approximately 79.5% of GraphitKropfmühl in April 2008, and borrowings to fund the working capitalincreases in Advanced Materials during 2008, offset in the first ninemonths 2009 by a net draw down from various credit facilities.OutlookThe markets continue to be challenging. Although signs of an ongoingbottoming of the severe drop in demand are evident, it is stillundetermined if the markets are improving. Demand and prices remainfragile and are both subject to near term economic swings.Engineering Systems' order intake continues to be sluggish ascompanies delay investment decisions into the new year. AdvancedMaterials prices have rebounded from historic lows, but demand andpricing increases have moderated and they continue to be far belownormal market conditions. AMG continues to address this situation byadjusting production levels, limiting capital investment and costreduction programs. These actions position AMG to take advantage ofopportunities as markets improve.About AMGAMG, incorporated in the Netherlands, is a global leader in theproduction of highly engineered specialty metal products and advancedvacuum furnace systems. AMG serves growing industries worldwide withits unique combination of metallurgical engineering expertise andproduction know-how. AMG is a market leader in many of its productsand systems, which are critical to the production of key componentsfor the aerospace, energy (including solar and nuclear), electronics,optics, chemicals, construction and transportation industries. AMGhas two operating divisions, Advanced Materials and EngineeringSystems, and owns interests in publicly-listed companies GraphitKropfmühl AG (Deutsche Börse: GKR.DE) and Timminco Limited (TSX:"TIM").The Advanced Materials Division develops and produces niche specialtymetals and complex metals products, many of which are used indemanding, safety-critical, high-stress environments. AMG is one ofa limited number of significant producers globally of niche specialtymetals, such as ferrovanadium, ferronickel-molybdenum, aluminummaster alloys and additives, chromium metal and ferrotitanium, usedby steel, aluminum, chemical and superalloy producers for aerospace,automotive, energy, electronics, optics, chemicals, construction andother applications. Other key products produced by AMG includespecialty alloys for titanium and superalloys, coating materials,tantalum and niobium oxides, vanadium chemicals and antimonytrioxide.The Engineering Systems Division designs, engineers and producesadvanced vacuum furnace systems and operates vacuum heat treatmentfacilities. AMG is a global leader in supplyingtechnologically-advanced vacuum furnace systems to customers in theaerospace, energy (including solar and nuclear), transportation,electronics, superalloys and specialty steel industries. Examples offurnace systems produced by AMG include vacuum remelting, solarsilicon melting and crystallization, vacuum induction melting, vacuumheat treatment and high pressure gas quenching, vacuum precisioncasting, turbine blade coating and sintering. AMG also providesvacuum case-hardening heat treatment services on a tolling basis tocustomers through facilities equipped with vacuum heat treatmentfurnaces.Graphit Kropfmühl AG is a majority controlled, publicly listedsubsidiary of AMG. Based on its secure raw material sources inAfrica, China and Europe, Graphit Kropfmühl is a specialist in theproduction of silicon metal and the extraction, processing andrefining of natural crystalline graphite for a wide range of energysaving industrial applications.Timminco Limited is a publicly listed associate of AMG. Timminco isa leader in the production of upgraded metallurgical silicon for therapidly growing solar photovoltaic energy industry. Timminco alsoproduces silicon metal for use in a broad range of industrialapplications.AMG operates globally with production facilities in Germany, theUnited Kingdom, France, Czech Republic, the United States, Canada,Mexico, Brazil, Sri Lanka and Australia and also has sales andcustomer 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 4901Jonathan CostelloVice President of Corporate Communicationsjcostello(at)amg-nv.comDisclaimerCertain statements in this press release are not historical facts andare "forward looking." Forward looking statements include statementsconcerning AMG's plans, expectations, projections, objectives,targets, goals, strategies, future events, future revenues orperformance, capital expenditures, financing needs, plans andintentions relating to acquisitions, AMG's competitive strengths andweaknesses, 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 theindustries and the political and legal environment in which itoperates and other information that is not historical information.When used in this press release, the words "expects," "believes,""anticipates," "plans," "may," "will," "should," and similarexpressions, and the negatives thereof, are intended to identifyforward looking statements. By their very nature, forward lookingstatements involve inherent risks and uncertainties, both general andspecific, and risks exist that the predictions, forecasts,projections and other forward looking statements will not beachieved. These forward looking statements speak only as of the dateof this press release. AMG expressly disclaims any obligation orundertaking to release publicly any updates or revisions to anyforward looking statement contained herein to reflect any change inAMG's expectations with regard thereto or any change in events,conditions or circumstances on which any forward looking statement isbased.AMG Advanced Metallurgical Group N.V.Condensed interim consolidated statement of incomeFor the three months endedSeptember 30In thousands of US Dollars 2009 2008 Unaudited Unaudited*Continuing operationsRevenue 205,406 370,982Cost of sales 165,457 288,177Gross profit 39,949 82,805Selling, general andadministrative expenses 31,876 39,069Restructuring expense 5,302 -Environmental expense 4,075 10Other income, net (1,194) (1,883)Operating (loss) profit (110) 45,609Interest expense 6,109 5,771Interest income (617) (1,611)Foreign exchange (gain) / loss (27) 1,272Net finance costs 5,465 5,432Share of (loss) profit ofassociates (1,285) 24(Loss) profit before income tax (6,860) 40,201Income tax expense 5,694 11,921 (Loss) profit for the period fromcontinuing operations (12,554) 28,280Loss after tax for the period fromdiscontinued operations (14,240) (12,956)(Loss) profit for the period (26,794) 15,324Attributable to: Shareholders of the Company (20,302) 20,769 Minority interests (6,492) (5,445) (26,794) 15,324(Loss)/Earnings per shareBasic (loss) earnings per share (0.76) 0.77Diluted (loss) earnings per share (0.76) 0.75(Loss)/Earnings per share fromcontinuing operationsBasic (loss) earnings per sharefrom continuing operations (0.50) 1.02Diluted (loss) earnings per sharefrom continuing operations (0.50) 0.99*RestatedAMG Advanced Metallurgical Group N.V.Condensed interim consolidated statement of incomeFor the nine months ended September 30In thousands of US Dollars 2009 2008 Unaudited Unaudited*Continuing operationsRevenue 636,059 1,000,045Cost of sales 516,825 773,347Gross profit 119,234 226,698Selling, general and administrativeexpenses 94,932 101,473Restructuring expense 5,696 129Environmental expense 4,162 31Other income, net (4,277) (4,896)Operating profit 18,721 129,961Interest expense 15,880 16,376Interest income (2,617) (5,027)Foreign exchange (gain) / loss (176) 2,095Net finance costs 13,087 13,444Share of loss of associates (2,685) 581Profit before income tax 2,949 117,098Income tax expense 17,642 33,092(Loss) profit for the period fromcontinuing operations (14,693) 84,006Loss after tax for the period fromdiscontinued operations (54,580) (22,356)(Loss) profit for the period (69,273) 61,650Attributable to: Shareholders of the Company (45,415) 68,548 Minority interests (23,858) (6,898) (69,273) 61,650(Loss)/Earnings per shareBasic (loss) earnings per share (1.69) 2.56Diluted (loss) earnings per share (1.69) 2.49(Loss)/Earnings per share fromcontinuing operationsBasic (loss) earnings per share fromcontinuing operations (0.65) 2.98Diluted (loss) earnings per share fromcontinuing operations (0.65) 2.90*Restated AMG Advanced Metallurgical Group N.V.Condensed interim consolidated statements offinancial positionIn thousands of US Dollars September 30, 2009 December 31, 2008 Unaudited AuditedAssets Property, plant and equipment 220,308 313,470 Intangible assets 27,877 47,060 Investments in associates 55,269 15,700 Deferred tax assets 22,797 29,181 Restricted cash 13,578 15,889 Notes receivable 2,221 2,132 Derivative financial instruments 57 - Other assets 12,481 11,612Total non-current assets 354,588 435,044 Inventories 197,886 318,793 Trade and other receivables 149,277 173,422 Derivative financial instruments 5,821 6,393 Other assets 35,293 52,804 Short term investments - 95 Cash and cash equivalents 124,391 143,473Total current assets 512,668 694,980Total assets 867,256 1,130,024AMG Advanced Metallurgical GroupN.V.Condensed interim consolidatedstatements of financialposition (continued)In thousands of US DollarsEquity Issued capital 724 724 Share premium 379,297 379,297 Other reserves 28,049 (2,215) Retained earnings (deficit) (168,539) (123,110)Equity attributable to shareholders ofthe Company 239,531 254,696Minority interests 19,627 57,115Total equity 259,158 311,811Liabilities Loans and borrowings 165,367 138,990 Employee benefits 91,004 103,176 Provisions 11,986 12,841 Government grants 750 291 Other liabilities 10,221 9,245 Derivative financial instruments 6,318 3,530 Deferred tax liabilities 44,247 56,013Total non-current liabilities 329,893 324,086 Loans and borrowings 3,204 3,021 Short term bank debt 33,761 83,566 Related party debt - 6,456 Government grants 2,330 8,360 Other liabilities 45,492 53,882 Trade and other payables 80,556 156,697 Derivative financial instruments 7,528 15,419 Advance payments 47,945 94,049 Unearned revenue - 35,624 Current taxes payable 35,769 14,708 Provisions 21,620 22,345Total current liabilities 278,205 494,127Total liabilities 608,098 818,213Total equity and liabilities 867,256 1,130,024AMG Advanced Metallurgical Group N.V.Condensed interim consolidated statement of cash flowsFor the nine months ended September 30In thousands of US Dollars 2009 2008 Unaudited Unaudited*Cash flows (used in) / from operatingactivities(Loss) / Profit for the period from continuingoperations (14,693) 84,006(Loss) for the period from discontinuedoperations (54,580) (22,356)Profit for the period (69,273) 61,650Adjustments to reconcile profit to net cashflows: Depreciation and amortization 17,491 18,271 Amortization of purchase accountingadjustment to inventory - 8,178 Restructuring expense 5,696 129 Environmental expense 4,162 31 Net finance costs 13,087 13,444 Share of loss / (profit) of associates 2,685 (581) Equity-settled share-based paymenttransactions 10,451 7,439 Income tax expense 17,642 33,092Change in working capital and provisions (35,117) (59,273)Other 4,420 3,606Interest paid, net (7,502) (4,663)Income tax paid, net (6,101) (17,526)Cash flows from discontinued operations 36,326 12,241Net cash flows (used in) / from operatingactivities (6,033) 76,038Cash flows used in investing activitiesProceeds from asset sales - 90Acquisition of associates, net of cash - (66,484)Acquisition of property, plant and equipmentand intangibles (20,755) (42,060)Change in short-term investments - (842)Change in restricted cash 1,228 (3,866)Other 16 (5,217)Cash flow from discontinued operations (33,208) (40,376)Net cash flows used in investing activities (52,719) (158,755)Cash flows from financing activitiesProceeds from issuance of debt 19,255 48,984Repayment of borrowings (8,171) -Capital infusion (23,832) (180)Other 439 379Cash flow from discontinued operations 47,724 23,941Net cash flows from financing activities 35,415 73,124Net (decrease) in cash and cash equivalents (23,337) (9,593)Cash and cash equivalents at January 1 143,473 172,558Effect of exchange rate and consolidationchanges on cash held 4,255 (8,803)Cash and cash equivalents at September 30 124,391 154,162*RestatedThe full press release including tables can be downloaded from thefollowing link:http://hugin.info/138060/R/1354151/328212.pdfThis announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.
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