AMG reports fourth quarter and full year 2009 results

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Overig advies 17/03/2010 07:07
Key Highlights
. Revenue was $231.4 million in the fourth quarter 2009; full year revenue was $867.4 million
. EBITDA[1] was $12.4 million in the fourth quarter 2009; full year EBITDA was $69.1 million
. EPS on a fully diluted basis was ($1.13) in the fourth quarter 2009; full year EPS, was ($2.82); Adjusted EPS, excluding Timminco and non-recurring charges on a fully diluted basis was $0.03 in the fourth quarter 2009; full year EPS, was ($0.39)
. The Advanced Materials Division continued to recover in the second half of 2010; fourth quarter revenue was $124.3 million; EBITDA was $5.3 million
. The Engineering Systems Division fourth quarter revenue was $73.8 million; EBITDA was $5.9 million
. Graphit Kropfmühl fourth quarter revenue was $33.3 million; EBITDA was $1.2 million
. As of 31 December 2009 cash on hand was $117.0 million, net debt of $86.8 million; $34.1 million full year 2009 free cash flow[2]

[1] EBITDA is defined as earnings before interest, tax, depreciation and amortization and excludes nonrecurring items.
[2] Free cash flow is defined as EBITDA less change in working capital and maintenance capital expenditures

Amsterdam, 17 March 2010 (Regulated Information) --- AMG Advanced Metallurgical Group N.V. ("AMG", EURONEXT AMSTERDAM: "AMG") reported fourth quarter 2009 revenue of $231.4 million a 17% decrease from $280.1 million in the fourth quarter 2008.

EBITDA increased 264% to $12.4 million in the fourth quarter 2009 from $3.4 million in the fourth quarter 2008. Net loss attributable to shareholders for the fourth quarter 2009 was ($30.2) million, or ($1.13) per fully diluted share. Excluding non-recurring charges and Timminco, AMG's net income attributable to shareholders for the fourth quarter 2009 was $0.8 million, or $0.03 per fully diluted share. Net loss attributable to shareholders for the fourth quarter 2008 was ($54.1) million, or ($1.96) per fully diluted share.

Full year 2009 revenue decreased 32% to $867.4 million, from $1,280.1 million in 2008. EBITDA decreased 58% to $69.1 million in 2009 compared with $165.3 million in 2008. Net loss attributable to shareholders for the full year 2009 was ($75.6) million, or ($2.82) per fully diluted share. Excluding non-recurring charges and Timminco, AMG's net loss attributable to shareholders for the full year 2009 was ($10.6) million, or ($0.39) per fully diluted share. Net income attributable to shareholders for continuing operations for the full year 2008, excluding the non-recurring write down in AMG's investment in Graphit Kropfmühl, was $74.3 million, or $2.70 per fully diluted share.

Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, commented: "2009 was a challenging year. Our end primary markets of aerospace, energy, infrastructure and specialty metals and chemicals underwent dramatic contractions and dislocations caused by the global economic crisis. While AMG's portfolio approach to metallurgical based solutions helped stabilize the impact on revenues, we were still significantly affected across all of our business units. The Advanced Materials Division's revenues and earnings improved in the second half of 2009, driven by the recovery in the global economy. The Engineering Systems Division entered 2009 with a significant order backlog, but the market for capital equipment deteriorated as the year progressed. Graphit Kropfmühl delivered consistent results throughout the year, driven by resiliency in the energy and specialty chemicals markets, but profits were impacted by higher raw material costs. During the fourth quarter, however, demand improved with revenue increasing in both Advanced Materials and Engineering Systems. We remain focused on our long term business strategy and we expect to see a substantial improvement in market conditions in the second half of 2010."

Accounting Note
On September 28, 2009, the Company reduced its ownership percentage of Timminco from 50.8% to 47.9%. AMG owned 42.5% of Timminco as of December 31, 2009. As such, AMG accounts for Timminco under the IFRS equity method of accounting. For purposes of this release, this accounting treatment requires AMG to deconsolidate its investment in Timminco as of September 28 and include Timminco's quarterly and year to date financial results as one line item - "discontinued operations" on the profit and loss statement. For the fourth quarter, Timminco's results are shown in the line item share of loss from associates. The carrying value of AMG's investment in Timminco is included as an "Investment in Associate" on the asset portion of AMG's balance sheet. As such, the Key Figures below except for net income attributable to shareholders and earnings per share exclude the financial performance of Timminco during the period and all prior year figures have been restated to exclude Timminco.

Key Figures
In 000's US Dollar
Q4 '09 Q4 '08 Change FY '09 FY '08 Change
Revenue $231,388 $280,076 (17%) $867,447 $1,280,12 (32%)
Gross profit 46,354 35,671 30% 165,587 262,369 (37%)
Gross margin 20.0% 12.7% 19.1% 20.5%
Operating income (loss) 1,840 (51,094) N/A 20,561 78,869 (74%)
Operating margin 0.8% N/A 2.4% 6.2%
Net (loss) income attributable to shareholders (30,227) (54,096) N/A
(75,642) 14,453 N/A
EPS- Fully diluted ($1.13) ($1.96) ($2.82) $0.53
Adjusted EPS-Fully diluted[1] $0.03 ($0.38) ($0.39) 2.70
EBIT[1] 6,165 (3,193) N/A 45,370 140,45 (68%)
EBITDA[1][2] 12,432 3,413 264% 69,128 165,330 (58%)
EBITDA margin 5.4% 1.2% 8.0% 12.9%

Notes:

[1] Adjusted for non-recurring, restructuring charges, discontinued operations and equity accounting treatment for AMG's investment in Timminco

[2]EBITDA is defined as earnings before interest, tax, depreciation and amortization and excludes nonrecurring items


Operational Review - Fourth Quarter 2009

Advanced Materials Division
Q4 '09 Q4 '08 Change
Revenue $124,306 $146,469 (15%)
Gross profit 20,827 1,180 1665%
Operating income (loss) 689 (14,853) N/A
EBITDA 5,331 (13,270) N/A
Capital expenditures 4,983 13,648 (63%)

The Advanced Materials division's fourth quarter 2009 financial results continued to be impacted by sluggish demand for the majority of its products, most notably in the steel, superalloy and titanium markets. Fourth quarter revenue decreased 15% to $124.3 million from the fourth quarter 2008.

Gross margin percentage increased from 1% of revenue in the fourth quarter of 2008 to 17% in the fourth quarter of 2009. The 2008 gross margin was impacted by a write down in ferrovanadium inventories. Gross margin in 2009 was characterized by slightly lower volumes in most specialty metals and a decline in end product prices slightly offset by cost containment measures, from the fourth quarter of 2008. The decrease in revenue and margins was primarily caused by ferrovanadium, with reference prices decreasing by 47% and volumes declining by 12% over the fourth quarter 2008. Titanium master alloys, vanadium chemicals, ferronickel-molybdenum and ferrotitanium products were also impacted by falling end market prices. Even more significant were the decreased volumes as the result of decreased global demand. Aluminium master alloys volumes decreased 9% and titanium master alloys volumes declined by 80% during the fourth quarter 2009 compared to the fourth quarter 2008. Despite these challenges, end market demand continued to improve slowly from a bottom in the second quarter of 2009.

The fourth quarter 2009 EBITDA increased by $18.6 million to $5.3 million, compared to the same period in 2008. This was the result of the increase in gross margin, which was driven by cost savings and efficiency initiatives implemented during 2009. Sequentially, fourth quarter 2009 EBITDA was essentially flat, with increases in revenues and margins offset by corporate costs.

Capital expenditures were $5.0 million for the third quarter 2009, 63% less than the comparable period in 2008. The Division was only performing maintenance capital investment during the quarter because of the cost containment measures.

Timminco

AMG's ownership in Timminco decreased to less than 50% of Timminco's common equity as the result of issuance of shares by Timminco during the third quarter 2009. AMG owned 42.5% of Timminco's common equity as of December 31, 2009. AMG now accounts for its investment in Timminco via the equity accounting method. Timminco's net loss through nine months is included in discontinued operations while its losses since deconsolidation are included in share of loss from associates on AMG's income statement and the carrying value of AMG's investment in Timminco of $19.5 million is reported as an asset on AMG's balance sheet. Additional information on Timminco and its fourth quarter 2009 financial statements can be found at www.Timminco.com


Financial Review

Taxes

AMG recorded a tax provision of $15.2 million in the year ended 31 December 2009 on pre-tax losses of $28.6 million. This does not compare favourably with the normalized effective tax rate of 38%. This is due to a $27.5 million loss from AMG's share in Timminco's losses in the fourth quarter of 2009, which is not deductible for tax purposes. Additionally, there are losses being generated in jurisdictions where AMG already has significant net operating losses. The inability to recognise these tax benefits is due to the Company's historical net operating loss position of the subsidiaries where the expenses were recorded.

Cash flows from operations were ($2.1) million for full year 2009 as compared to $123.4 million in 2008. 2009 cash flows from operations were down significantly year over year, as a result of a $96.2 million decrease in EBITDA, and a $26.1 million increase in working capital, as compared to 2008. The working capital increase is the result of a decrease in accounts payable and customer deposits in the Engineering Systems division, offset by a decrease in inventory due to lower raw material prices and inventory levels for the Advanced Materials division's products. Inventories declined by $52.8 million within continuing operations.

Cash used in investing activities was $90.2 million in 2009. This decrease of $130.5 million from 2008 is primarily related to the $42.9 million decrease in capital investments, primarily in Advanced Materials and Engineering Systems and the $62.9 million cost for the purchase of approximately 79.5% of Graphit Kropfmühl in 2008.

2009 cash from financing activities was $62.6 million, a decrease of $16.9 million from 2008. This decrease was primarily the result of two factors, $20.0 million borrowed on the credit facility for the acquisition of approximately 79.5% of Graphit Kropfmühl in April 2008, and $10.7 million borrowings to fund the working capital increases in Advanced Materials during 2008, offset in 2009 by a net $14.4 million draw down from various credit facilities.


Outlook

The market continues to show signs of improvement. The Advanced Materials division is currently benefitting from increases in specialty metals prices and demand, albeit from low levels. The Engineering Systems division entered 2010 with a substantially reduced backlog compared to 2009. Requests for new orders are increasing from mid-year 2009 low levels, but the first half of 2010 will continue to be challenging. GK's end markets are also gradually improving, but this growth is not expected to accelerate until the second half of the year. AMG remains positive on long term growth prospects for its core markets of aerospace, energy, infrastructure and specialty metals and chemicals, however most of the near term growth is expected to occur later in the year. Overall, AMG expects its portfolio of metals based technology businesses to produce results ahead of 2009 levels.

Unaudited
AMG Advanced Metallurgical Group N.V.
Consolidated Income Statement

Amsterdam, 17 March 2010 --- AMG Advanced Metallurgical Group N.V. ("AMG", EURONEXT AMSTERDAM: "AMG") was informed by its largest shareholder, Safeguard International Fund, L.P. ("Safeguard International") that the duration of Safeguard International's limited partnership life has been extended by 12 months, until 31 March 2011.
AMG is working with Safeguard International and its investors to facilitate an orderly transition of the shareholder structure of AMG in a way beneficial to the Safeguard International investors and to the future of AMG. The parties intend to complete this transition no later than September 30, 2010.






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