Revenue increased by 12% to $346.5 million in the first quarter 2019 from $308.4 million in the first quarter 2018
EBITDA(2) was $50.4 million in the first quarter 2019, a 13% increase over the same period in 2018
Annualized return on capital employed continued at a high level of 28.3% in the first quarter 2019, as compared to 28.4% in the first quarter 2018
AMG ended the first quarter of 2019 with net debt of $14.6 million, an increase of $15.0 million versus prior year-end 2018
Amsterdam, 1 May 2019 (Regulated Information) --- AMG Advanced Metallurgical Group N.V. ("AMG", EURONEXT AMSTERDAM: "AMG") reported first quarter 2019 revenue of $346.5 million, a 12% increase from $308.4 million in the first quarter 2018. EBITDA for the first quarter 2019 was $50.4 million, a 13% increase from $44.5 million in the first quarter 2018. EBIT increased 11% to $40.4 million in the first quarter 2019 from $36.3 million in the first quarter 2018.
Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, "AMG achieved a 13% increase in EBITDA during the quarter compared to prior year, mainly driven by AMG Technologies due to increased profitability associated with our turbine blade coating furnaces and higher after-market sales compared to the first quarter of last year."
"AMG Critical Materials generated EBITDA of $31.2 million during the first quarter of 2019, a slight increase of 1% from $30.8 million in the first quarter of 2018, due to strong financial performance in vanadium, chrome and antimony, which was partially offset by lower gross profit in tantalum, graphite, silicon and additional ramp-up costs associated with lithium in Brazil."
"AMG Technologies achieved EBITDA of $19.3 million during the first quarter of 2019, a 40% increase from $13.7 million in the first quarter 2018. Order backlog was $224.1 million as of March 31, 2019."
"In addition, despite ongoing working capital investments and capital expenditures related to the expansion projects, AMG maintained a low level of net debt due to strong profitability in the quarter. AMG continued to generate a high return on capital employed of 28.3% in the first quarter 2019."
Key Figures In 000's US dollar
Q1 '19 (3) Q1 '18 Change
Revenue $346,523 $308,448 12%
Gross profit 67,120 70,118 (4%)
Gross margin 19.4% 22.7%
Operating profit 29,796 34,579 (14%)
Operating margin 8.6% 11.2%
Net income attributable to shareholders 14,827 18,389 (19%)
EPS - Fully diluted 0.47 0.58 (19%)
EBIT (1) 40,388 36,256 11%
EBITDA (2) 50,423 44,480 13%
EBITDA margin 14.6% 14.4%
Cash from operating activities 6,935 24,808 (72%)
EBIT is defined as earnings before interest and income taxes. EBIT excludes restructuring, asset impairment and equity-settled share-based payments and includes foreign currency gains or losses.
EBITDA is defined as EBIT adjusted for depreciation and amortization.
The Company applied IFRS 16 (lease accounting) for the first time as of January 1, 2019. The Company recognized new assets and liabilities for its operating leases which are primarily comprised of buildings, equipment, machinery and automobiles. Right of use assets are included within property, plant and equipment and classified in the same manner as if the underlying assets were owned by the Company. The lease liabilities are presented as a separate line item on the consolidated statement of financial position. The nature and pattern of expense recognition in relation to these leases has changed. The Company recognizes depreciation on the right of use assets on a straight-line basis over the expected term of the lease. Interest expense related to the lease liabilities are recognized over the expected term of the lease using the effective interest method. Comparative figures have not been adjusted. Assets and liabilities increased per January 1, 2019 by $37 million and depreciation and interest expenses increased in the first quarter by $1 million.
AMG Critical Materials Q1 '19 Q1 '18 Change
Revenue $228,591 $208,525 10%
Gross profit Gross profit excluding exceptional items 37,638 45,672 44,018 44,104 (14%) 4%
Operating profit 16,192 24,304 (33%)
EBITDA 31,152 30,759 1%
AMG Critical Materials' revenue in the first quarter increased by $20.1 million, or 10%, to $228.6 million, driven by improved average vanadium and chrome prices during the quarter, and higher sales volumes of lithium concentrate and antimony products.
Gross profit in the first quarter decreased by $6.4 million, or 14%, to $37.6 million. The reduction in gross profit was driven by a non-cash expense related to a vanadium inventory adjustment, additional ramp-up costs associated with lithium in Brazil, lower sales volumes in graphite's heat insulation business and a decrease in silicon metal prices. This reduction was partially offset by higher chrome metal prices and improved antimony sales volumes.
SG&A expenses in the first quarter of 2019 increased by $1.7 million, or 9%, compared to the same period in the prior year, primarily due to higher professional fees.
First quarter 2019 EBITDA margin was 14%, relatively consistent with prior year.
Q1 '19 Q1 '18 Change
Revenue $117,932 $99,923 18%
Gross profit excluding exceptional items 29,482 31,278 26,10026,203 13% 19%
Operating profit 13,604 10,275 32%
EBITDA 19,271 13,721 40%
Despite a 7% decrease versus December 31, 2018, order backlog maintained its historically high level of $224.1 million as of March 31, 2019 and the Company signed $56.2 million in new orders during the first quarter of 2019. This represents a 0.82x book to bill ratio, driven by strong orders of heat treatment furnaces for the automotive market and induction and remelting furnaces for the aerospace market.
AMG Technologies' first quarter 2019 revenue increased $18.0 million, or 18%, to $117.9 million, due to higher titanium master alloy prices and higher revenue generated by the delivery of turbine blade coating, casting and nuclear waste recycling furnaces.
First quarter 2019 gross profit increased by $3.4 million, or 13%, to $29.5 million and gross margin was relatively consistent at 25% compared to 26% in the first quarter 2018.
SG&A expenses remained consistent at $15.9 million in the first quarter, compared to the same period in 2018.
AMG Technologies' first quarter EBITDA increased by 40%, or $5.6 million, to $19.3 million from $13.7 million in the first quarter of 2018, largely due to higher levels of gross profit.
AMG recorded an income tax expense of $5.9 million in the first quarter 2019 as compared to a tax expense of $9.7 million in the same period in 2018. The decrease in tax expense is due to lower profitability and a benefit from the impact of the Brazilian real on the company's deferred tax positions.
Due to the volatile nature of the company's deferred tax balances, AMG believes that the cash tax rate is a more meaningful metric. AMG paid taxes of $3.9 million in the first quarter 2019 as compared to tax payments of $2.2 million in the same period in 2018. For the first quarter 2019, AMG's effective cash tax rate increased to 19% in comparison to 8% for the same period in 2018. The prior year rate benefited from net operating loss carryforwards in the United States which were fully utilized in 2018.
AMG's first quarter 2019 gross profit of $67.1 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 quarter of 2019 and 2018 are below:
Exceptional items included in gross profit
Q1 '19 Q1 '18 Change
Gross profit $67,120 $70,118 (4%)
Restructuring (reversal) expense (53) 189 N/A
Inventory cost adjustment 9,883 - N/A
Gross profit excluding exceptional items 76,950 70,307 9%
AMG had a $9.9 million exceptional non-cash expense related to a net realizable value adjustment to the vanadium inventory cost position on March 31, 2019. This adjustment was driven by a combination of the high vanadium prices at which the Company purchased its inventory in the second half of 2018 and the lower comparable price on March 31, 2019. The vanadium price nearly doubled from September to November of 2018, and then returned to the September levels at the end of March 2019. This exceptional price movement impacted our inventory cost position and resulted in a balance sheet adjustment which has been adjusted in EBITDA.
March 31, 2019 December 31,2018 Change
Total debt $380,872 $381,444 -
Cash and cash equivalents 366,296 381,900 (4%)
Net debt (cash) 14,576 (456) N/A
AMG had a net debt position of $14.6 million as of March 31, 2019. Net debt increased by $15.0 million and total debt decreased by $0.6 million from December 31, 2018.
Cash from operating activities decreased by $17.9 million to $6.9 million in the first quarter of 2019, primarily due to higher working capital investment at AMG Critical Materials, as well as higher interest and tax payments.
Capital expenditures decreased to $12.8 million in the first quarter of 2019 compared to $22.6 million in the same period in 2018. Capital spending in the first quarter 2019 included $5.9 million of maintenance capital. The remaining $6.9 million of capital spending is primarily attributable to expansion projects at AMG's lithium, vanadium and heat treatment facilities.
Including the $366.3 million of cash, AMG had $535.9 million of total liquidity as of March 31, 2019.
Net Finance Costs
AMG's first quarter 2019 net finance costs increased to $9.2 million compared to $6.5 million in the first quarter 2018. Interest expenses associated with AMG's long-term credit facility increased due to higher levels of gross debt and higher interest rates associated with the long-term nature of the facility.
AMG's first quarter 2019 SG&A expenses were $37.4 million compared to $35.6 million in the first quarter of 2018, primarily due to higher professional fees.
AMG's lithium concentrate plant startup is proceeding well: We have reached a 90 ton per hour feed rate (95% of target); a metallurgical recovery rate of 90% of target; we are producing in-spec material; and, most importantly, latest estimates essentially confirm our target cost per ton. Our EPC contractor expects to achieve 100% of the target capacity by the end of May.
Though our Critical Materials business continues to experience strong demand for its products, it is experiencing very high price volatility, with spot prices for vanadium, chrome, silicon, tantalum and spodumene down significantly versus year-end 2018. To illustrate the unexpected dramatic fall in vanadium prices in recent weeks: the decline from year-end 2018 to the end of Q1 is 41%; and the additional decline to today is 23%. In light of this and similar weaknesses in other materials we have adjusted our EBITDA target to be $150 million.
AMG's confidence in the longer-term trends within its business units remains strong. As such, we are targeting $200 million of EBITDA in 2020.
AMG's five-year target EBITDA will be detailed at the Annual General Meeting today at 13:00 CEST.
With approximately 3,300 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
AMG Advanced Metallurgical Group N.V. Presents Update on Long-term Financial Goals
Amsterdam, 1 May 2019 (Regulated Information) --- AMG Advanced Metallurgical Group N.V. ("AMG", EURONEXT AMSTERDAM: "AMG") is pleased to announce that during its Annual General Meeting held in Amsterdam on May 1, 2019, shareholders approved all agenda items presented, including the re-appointment of Professor Steve Hanke as independent member of the Supervisory Board for a term of four years beginning May 1, 2019. Professor Hanke will replace Mr. Jack Messman as Chairman of the Supervisory Board. Mr. Messman retired as Chairman, after serving on AMG's Supervisory Board since June 2007.
In addition, Ms. Dagmar Bottenbruch was appointed as an independent member of the Supervisory Board for a term of four years beginning May 1, 2019.
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).