AMG Reports Full Year and Fourth Quarter 2015 Results; Ends Year Net Debt Free -- Ready for Growth

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Algemeen advies 11/03/2016 07:23
Key Highlights
AMG ended the year net debt free, reducing net debt by $88.9 million in 2015, or $3.22 per ordinary share
Fourth quarter 2015 cash flows from operating activities were $33.6 million, a 48% increase over the same period in 2014
EBITDA(3) was $75.6 million in 2015, $85.7 million when adjusted for foreign currency translation effects(4)
Full year profit before income tax increased by 38% to $28.6 million in 2015 from $20.7 million in 2014
Total 2015 dividend proposed of €0.21 per ordinary share, including the interim dividend of €0.10, paid on September 16, 2015
AMG provides strategy update, including growth plan to pursue organic and acquisition opportunities

Amsterdam, 11 March 2016 (Regulated Information) --- AMG Advanced Metallurgical Group N.V. ("AMG", EURONEXT AMSTERDAM: "AMG") reported a net debt reduction of $88.9 million in 2015, ending the year net debt free with net cash of $1.0 million. The EBITDA for 2015 amounted to $75.6 million, a 12% decrease from $85.7 million in 2014. Fourth quarter EBITDA decreased to $9.7 million from $21.9 million in 2014.

Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, "AMG cash flow for the fourth quarter was strong thanks to the pro-active steps taken by management to mitigate price risk and reduce cost. AMG ended the year free of net debt, exceeding management's deleveraging target by a considerable margin.

AMG Engineering achieved EBITDA of $2.6 million during the quarter, in line with 2014. Strong demand in the areas of heat treatment furnaces for the automotive market, plasma remelting furnaces for the aerospace market and induction furnaces for powder metallurgy applications resulted in an improvement in year ending order backlog of 10%, compared to December 31, 2014.

AMG Critical Materials profitability was adversely affected by non-cash expenses related to vanadium inventory adjustments of $4.4 million during the fourth quarter 2015. Despite double-digit declines in market pricing for all key products in 2015, AMG's continuing focus on operating performance resulted in solid financial results in all eight Critical Materials business units on a full year basis.

Despite the severe headwinds in the market, AMG generated free cash flow of $55.8 million during 2015, the second highest free cash flow in the company's history. We are pleased to be able to propose a full year dividend of €0.21 to our shareholders.

Growth strategy update
Following three years of intense focus on cash flow optimization and debt reduction, we now find ourselves with significant available capital and a unique opportunity to grow both organically as well as through select acquisitions.

AMG's organic growth strategy is focused on certain critical materials within our portfolio that are marked by strong demand growth or supply limitations. We have a number of projects which we have continued to develop during our austerity period which we are now beginning to progress.

Our acquisition strategy is very selective. We have developed a list of acquisition targets, each of which would be synergistic with our current businesses, and provide incremental technology or market share growth. AMG is the result of an acquisition strategy and we are fundamentally value buyers. We would expect every acquisition we undertake to be accretive to our earnings per share."

Operational Review
AMG Critical Materials
Q4 '15 Q4 '14 Change FY '15 FY '14 Change
Revenue $166,275 $199,501 (17%) $757,492 873,439 (13%)
Gross profit * 20,733 33,846 (39%) ** 111,153 142,479 (22%)
Operating profit 2,559 10,840 (76%) 31,630 53,831 (41%)

EBITDA 7,039 19,169 (63%) 60,798 82,605 (26%)
* Includes $4.4 million non-cash expense related to vanadium, nickel and molybdenum inventory adjustments in the fourth quarter 2015
** Includes $6.5 million non-cash expense related to vanadium, nickel and molybdenum inventory adjustments in the full year 2015


AMG Critical Materials continues to be impacted by unfavorable Euro to US Dollar currency translation effects and lower metal prices, and as a result, fourth quarter 2015 revenue decreased by 17%, to $166.3 million.

The reduction in market prices of antimony, vanadium, molybdenum, nickel and aluminum of 38%, 47%, 48%, 40% and 24%, respectively, negatively affected revenue in the fourth quarter of 2015 compared to the fourth quarter of 2014.

Gross profit in the fourth quarter decreased $13.1 million, or 39%, to $20.7 million, driven primarily by a non-cash inventory adjustment expense of $4.4 incurred due to rapidly falling vanadium, nickel and molybdenum prices, foreign currency translation effects and lower sales volumes.

Full year 2015 sales volumes were largely in line with 2014, with the exception of Aluminum, which decreased due to a planned reduction in capacity, and Titanium Master Alloys, which decreased due to product mix optimization.

AMG Engineering
Q4 '15 Q4 '14 Change FY '15 FY '14 Change
Revenue $54,567 $60,877 (10%) $219,651 $220,450 -
Gross profit 11,652 11,072 5% 48,807 41,813 17%
Operating profit (loss) 1,632 (7,142) N/A 4,533 (13,199) N/A
EBITDA 2,637 2,689 (2%) 14,824 3,127 374%

AMG Engineering signed $48.0 million in new orders during the fourth quarter of 2015, representing a 0.88x book to bill ratio. Order backlog was $140.9 million as of December 31, 2015, a 10% increase from $128.3 million as of December 31, 2014.

AMG Engineering's fourth quarter 2015 revenue decreased $6.3 million, or 10%, to $54.6 million, as an increase in local currency revenues was more than offset by foreign currency translation effects. Revenue generated from heat treatment furnaces, remelting furnaces and heat treatment services increased in the fourth quarter of 2015 compared to the fourth quarter of 2014.

Fourth quarter 2015 gross margin increased to 21% from 18% in the fourth quarter of 2014 due to higher revenue in local currency, product mix effects and improved project cost management.

EBITDA of $2.6 million in the fourth quarter of 2015 was in line with the same period in 2014.

Financial Review
Tax
AMG recorded an income tax expense of $18.7 million in 2015 as compared to a tax benefit of $1.0 million in 2014. The largest driver of this variance relates to the one-time recognition of US tax benefits in 2014.

The effective tax rate of 65% in 2015 was negatively impacted by the currency effect of the Brazilian Real on deferred taxes and refinancing costs of $5.4 million in the second quarter of 2015, for which no tax benefit could be recognized.

AMG paid taxes of $5.7 million in 2015 as compared to tax payments of $6.3 million in 2014. AMG's effective cash tax rate was 20% in 2015, as compared to 30% in 2014.

SG&A
AMG's fourth quarter 2015 SG&A expenses were $30.4 million, down slightly from $31.2 million in the fourth quarter 2014. A reduction in professional fees of $2.0 million between the fourth quarter 2015 and the fourth quarter 2014 was partially offset by an increase in project related costs.

Full year 2015 SG&A expenses were $122.3 million, an 8% reduction from $133.5 million in 2014.

Non-Recurring Items
AMG's fourth quarter 2015 operating profit of $4.2 million includes non-recurring items, which are not included in the calculation of EBITDA.

A summary of non-recurring items in the fourth quarter 2015 and 2014 are below:

Non-recurring items included in operating profit
Q4 '15 Q4 '14 Change
Restructuring expense ($3,011) $3,059 N/A
Asset impairment expense - 1,867 N/A
Environmental 1,529 5,544 (72%)

Total non-recurring items included in operating profit (1,482) 10,470 N/A

Net income in the fourth quarter 2015 was positively impacted by the revision of a restructuring plan related to cost reduction initiatives as well as the release of a value-added tax provision.

During the fourth quarter 2015, AMG recorded non-recurring environmental accrual of $1.5 million related to its Newfield, NJ site.

Liquidity
December 31, 2015
December 31, 2014 Change
Total debt $126,743 $195,878 (35%)
Cash and cash equivalents 127,778 108,029 18%
Net (cash) debt (1,035) 87,849 N/A


AMG had a net cash position of $1.0 million as of December 31, 2015. Net debt and gross debt decreased $88.9 million and $69.1 million, respectively, from December 31, 2014.

Cash flows from operating activities were $76.3 million in 2015 compared to $95.1 million in 2014.

Capital expenditures decreased to $23.3 million in 2015 compared to $24.0 million in 2014. Capital spending in 2015 included $13.1 million of maintenance capital. The largest expansion capital project was for AMG's titanium aluminides business.

Including the $127.8 million of cash, AMG had $282.7 million of total liquidity as of December 31, 2015.

Currency Fluctuations
AMG's financial statements are prepared in US Dollars, so fluctuations in the exchange rate between the US Dollar and other currencies, primarily the Euro and Brazilian Real, have an effect on the results of operations and on the reported value of assets and liabilities as measured in US Dollars.


The appreciation of the US Dollar as of December 31, 2015 compared to December 31, 2014, resulted in a decrease of $47 million and $36 million in assets and liabilities on the balance sheet, respectively. The appreciation of the US Dollar compared to the Euro in the fourth quarter of 2015 in relation to the fourth quarter of 2014, resulted in a reduction in revenue and EBITDA of $24 million and $2 million, respectively. On a full year basis, the appreciation of the US Dollar compared to the Euro resulted in a reduction in revenue and EBITDA of $109 million and $10 million, respectively, compared to the prior year.

EBITDA adjusted for Euro foreign currency translation effects is therefore $85.7 million for full year 2015.

Divestment
On February 29, 2016, AMG sold its 100% ownership interest in Intellifast, GmbH to Aero Products Invest GmbH of Augsburg, Germany.

Final Dividend Proposed
AMG intends to declare a dividend of €0.21 per ordinary share over the financial year 2015. The interim dividend of €0.10, paid on September 16, 2015, will be deducted from the amount to be distributed to shareholders. The proposed final dividend per ordinary share therefore amounts to €0.11.


A proposal to resolve upon the final dividend distribution will be included on the agenda for the annual general meeting to be held on May 4, 2016.

Outlook
In this challenging market environment, AMG's management target is to continue to generate strong operating cash flow and maintain 2015 levels of profitability in 2016.



tijd 09.32
De Smallcap 758,94 +5,08 +0,67% AMG EUR 8,83 +32ct vol. 28.432




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