Key Highlights
- Revenue was $296.9 million in the third quarter 2012, a 17% decrease from the same period in 2011
- EBITDA([1]) was $21.6 million in the third quarter 2012, a 22% decrease from the same period in 2011
EPS on a fully diluted basis was $0.18 in the third quarter 2012, a 38% decrease from $0.29 in same period in 2011
- The Advanced Materials Division generated revenue of $189.2 million and EBITDA of $12.1 million in the third quarter 2012
- The Engineering Systems Division generated revenue of $71.1 million and EBITDA of $5.3 million in the third quarter 2012
- Graphit Kropfmühl generated revenue of $36.5 million and EBITDA of $4.2 million in the third quarter 2012
- As of September 30, 2012, cash on the balance sheet was $111.4 million; net debt was $198.5 million
Amsterdam, 14 November 2012 (Regulated Information) --- AMG Advanced Metallurgical Group N.V. ("AMG", EURONEXT AMSTERDAM: "AMG") reported third quarter 2012 revenue of $296.9 million, a 17% decrease from $356.4 million in the third quarter 2011.

EBITDA decreased 22% to $21.6 million in the third quarter 2012 from $27.7 million in the third quarter 2011. Net profit attributable to shareholders for the third quarter 2012 was $5.1 million, or $0.18 per fully diluted share, down from a net profit attributable to shareholders of $8.0 million, or $0.29 per fully diluted share, in the third quarter 2011.

Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, "In this environment of slow economic activity we have reorganized our management structure with a clear focus on improving efficiencies, reducing operating costs and working capital levels and selective capital expenditures. These actions have begun to produce results. In the third quarter AMG generated $30 million of operating cash flow and reduced SG&A by 9% compared to the second quarter 2012."

Key Figures
In 000's US Dollar

Q3'12 Q3'11 Change
Revenue $296,851 $356,415 (17%)
Gross profit 47,663 58,688 (19%)
Gross margin 16.1% 16.5%
Operating profit 11,199 19,565 (43%)
Operating margin 3.8% 5.5%

Net profit attributable to shareholders 5,064 8,034 (37%)

EPS- Fully diluted 0.18 0.29 (38%)

EBIT (1) 14,499 20,412 (29%)
EBITDA (2) 21,600 27,748 (22%)

EBITDA margin 7.3% 7.8%

Note:
EBIT is defined as earnings before interest, tax and excludes non-recurring items

EBITDA is defined as earnings before interest, tax, depreciation and amortization and excludes non-recurring items

Operational Review
Advanced Materials Division
Q3'12 Q3'11 Change
Revenue $189,161 $226,800 (17%)
Gross profit 26,694 29,603 (10%)
Operating profit 5,551 8,485 (35%)
EBITDA 12,097 12,254 (1%)
Capital expenditures 7,005 6,576 7%

The Advanced Materials Division's third quarter 2012 revenue decreased $37.6 million, or 17%, to $189.2 million. The decrease in revenue was primarily the result of 33% and 22% decreases in antimony revenue and aluminum products revenue, respectively, partially offset by a 28% increase in tantalum revenue, compared to the third quarter 2011.

The third quarter 2012 gross margin improved to 14% from 13% in the third quarter 2011. The improvement in gross margin was driven by improvements in product mix for titanium master alloys, ferrovanadium and ferronickel-molybdenum and an increase in tantalum pricing.

The third quarter 2012 EBITDA was 6% of revenue, and improvement from the 5% of revenue level achieved in the third quarter 2011. The $0.2 million decrease in total EBITDA was the result of the $2.9 million decrease in gross profit slightly offset by a $2.7 million, or 12% decrease in operating expenses. This decline was the result of a reduction in personnel expenses.

Capital expenditures were $7.0 million for the third quarter 2012, 7% more than the third quarter 2011. Significant growth capital investments made in the third quarter included a $2.6 million investment in the expansion of the spent catalyst recycling facility for ferrovanadium production, and $0.7 million related to expansion of the Brazilian tantalum mine. Maintenance expenditures were $1.9 million.

Financial Review
Tax
AMG recorded a tax expense of $2.1 million, or a 30% effective tax rate, in the third quarter 2012, compared to a tax expense of $3.8 million, or a 30% effective tax rate, in the third quarter 2011. AMG's effective tax rate is 65% for the nine months ended September 2012 due to the reversal of previously recognized deferred tax assets in several jurisdictions, including Brazil during the second quarter. In addition, a significant portion of the restructuring and asset impairment expense in the second quarter related to entities for which a tax benefit cannot be booked. The expected full year effective tax rate is expected to improve due to German tax planning which will create a positive benefit from the squeeze-out of the minority shareholders at GK.

SG&A
AMG's third quarter 2012 SG&A expenses were $34.5 million, a 15% decrease from $40.6 million in the third quarter 2011. The $6.2 million decrease in SG&A expenses was due to lower personnel expenses and external consulting costs.

Non-Recurring Items
AMG's third quarter 2012 operating profit of $11.2 million includes non-recurring items, which are not included in the calculation of EBITDA. These items are comprised of income and expense items that, in the view of management, do not arise in the normal course of business and items that, because of their nature and/or size, should be presented separately to enable more accurate analysis of the results. AMG incurred $2.2 million of non-recurring expense in the third quarter 2012, consisting of $1.7 million in environmental costs and $0.5 million management restructuring. Environmental costs were primarily related to our Brazilian mining operation while restructuring costs are part of AMG's commitment to cost cutting. AMG incurred $0.9 million of non-recurring income in the third quarter 2011, primarily related to a write up of acquired assets of KB Alloys.

Currency Fluctuations
AMG transacts business in many currencies other than the U.S. dollar, the Company's reporting currency. AMG's financial statements are prepared in U.S. dollars, so fluctuations in the exchange rates between the U.S. dollar and other currencies have an effect both on the results of operations and on the reported value of assets and liabilities as measured in U.S. dollars. The depreciation in the value of the U.S. dollar as of September 30, 2012 compared to June 30, 2012, resulted in an increase in the assets and liabilities on the balance sheet of $20.0 million and $13.7 million, respectively. The net result of the appreciation in the value of the U.S. dollar in the third quarter 2012 compared to the third quarter 2011, resulted in a decrease in revenue and EBITDA of $21.9 million and $1.9 million, respectively.

Liquidity
September 30, 2012 December 31, 2011 Change
Total debt $309,846 $268,621 15%
Cash & short-term investments 111,386 79,571 40%
Net debt 198,460 189,050 5%

AMG had a net debt position of $198.5 million as of September 30, 2012. AMG's net debt position increased $9.4 million since December 31, 2011 primarily due to $33.9 million in capital investments, $11.6 million of cash tax payments, $10.0 million of cash interest payments, $7.1 million in Graphit Kropfmühl share purchases, and a $12.6 million increase in working capital and provisions reduced by EBITDA of $67.1 million. Including the $111.4 million of cash, AMG had $167.3 million of total liquidity as of September 30, 2012.

Cash Flow For the nine months ended

September 30, 2012 September 30, 2011
Net cash flows from operations $33,508 $10,361
Capital expenditures (33,875) (31,741)
Acquisitions, net of cash (594) (24,703)
Cash flows from (used in) other investing 425 (1,569)
Net cash flows used in investing activities (34,044) (58,013)

Cash flows generated from financing activities 32,260 28,013

Cash flows from operations were $33.5 million in the nine months ended September 30, 2012 compared to cash flows from operations of $10.4 million in the nine months ended September 30, 2011. Cash flows from operations in the nine months ended September 30, 2012 are primarily the result of $67.1 million in EBITDA less a $12.6 million increase in working capital and provisions, $11.6 million in cash tax payments and $10.0 million in cash interest payments.

Cash used in investing activities was $34.0 million in the nine months ended September 30, 2012. The $24.0 million decrease compared to the nine months ended September 30, 2011 is composed of a $24.1 million decrease in cash used in acquisitions and a $1.5 million decrease in restricted cash for project work in the Engineering Systems Division, slightly offset by a $2.1 million increase in capital investments.

Cash from financing activities was $32.3 million in the nine months ended September 30, 2012, a $4.2 million increase from the nine months ended September 30, 2011. This increase was primarily attributable to an increase of $0.8 million in net proceeds from issuance of debt and repayment of borrowings and $10.6 million decrease in transaction costs related to debt issuance in 2011, less $7.1 million for the acquisition of 5.5%, including related costs, of Graphit Kropfmühl's outstanding common shares during the nine months ended September 2012. The increase in the credit facility during the nine months ended September 30, 2012 was used to fund the Brazilian mine expansion and the acquisition of Graphit Kropfmühl shares as well as to retire Graphit Kropfmühl's external debt.

Outlook
We expect the economic environment to remain challenging in the near term. The downturn in global economic activity currently shows no signs of abating. The Advanced Materials Division's businesses, particularly antimony and other non-aerospace businesses are being impacted by the slowdown. The Engineering Systems Division is generating consistent order intake, but at a subdued level. The completion of the GK acquisition should result in cost reductions in 2013; however, moderating industrial production is adversely affecting natural graphite demand. In this environment, our targets are to produce stable results. We expect to achieve these targets.