AMG reports fourth quarter and full year 2011 results

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Overig advies 14/03/2012 07:03
Key Highlights
Revenue was $308.6 million in the fourth quarter 2011, a 14% increase over the same period in 2010; full year revenue was $1,351.3 million, a 36% increase over 2010
EBITDA[1] was $24.8 million in the fourth quarter 2011, a 23% increase over the same period in 2010; full year EBITDA was $110.1 million, a 30% increase over the full year 2010
[EPS on a fully diluted basis was ($0.47) in the fourth quarter 2011; full year EPS, was $0.19; excluding non-recurring items, EPS improved to $0.26 in Q4 2011, up from $0.23 in Q4 2010; full year EPS excluding non-recurring items was $1.34]
The Advanced Materials Division generated revenue of $198.7 million and EBITDA of $6.0 million in Q4 2011; full year revenue and EBITDA were $871.9 million and $50.4 million, respectively
The Engineering Systems Division generated revenue of $72.9 million and EBITDA of $11.8 million in Q4 2011; full year revenue and EBITDA were $313.8 million and $34.0 million, respectively
Graphit Kropfmühl generated revenue of $37.0 million and EBITDA of $7.0 million in Q4 2011; full year revenue and EBITDA were $165.5 million and $25.8 million, respectively
As of 31 December 2011, cash on the balance sheet was $79.6 million, net debt was $189.1 million

Amsterdam, 14 March 2012 (Regulated Information) --- AMG Advanced Metallurgical Group N.V. ("AMG", EURONEXT AMSTERDAM: "AMG") reported fourth quarter 2011 revenue of $308.6 million a 14% increase from $270.7 million in the fourth quarter 2010.

EBITDA increased 23% to $24.8 million in the fourth quarter 2011 from $20.2 million in the fourth quarter 2010. Net loss attributable to shareholders for the fourth quarter 2011 was $13.2 million, or ($0.47) per fully diluted share. Net income attributable to shareholders for the fourth quarter 2010 was $12.5 million, or $0.46 per fully diluted share. Excluding AMG's non-recurring charges in the fourth quarter, AMG's net income attributable to shareholders for the fourth quarter 2011 was $7.2 million, or $0.26 per fully diluted share compared to $6.2 million or $0.23 per fully diluted share in 2010.

Full year 2011 revenue increased 36% to $1,351.3 million, from $990.5 million in 2010. EBITDA increased 30% to $110.1 million in 2011 compared with $84.9 million in 2010. Net income attributable to shareholders for the full year 2011 was $5.2 million, or $0.19 per fully diluted share. Excluding non-recurring charges, AMG's net income attributable to shareholders for the full year 2011 was $37.1 million, or $1.34 per fully diluted share. Net income attributable to shareholders for continuing operations for the full year 2010, excluding non-recurring items, was $20.1 million, or $0.75 per fully diluted share.

Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, commented: "The business performed well in 2011. Despite the European economic slowdown that affected the fourth quarter, demand and pricing for the Advanced Materials division's products improved substantially over 2010, particularly in the aerospace and energy end markets. In the Engineering Systems division, however, lower capital goods demand in 2011 caused a decline in operating results. Graphit Kropfmühl continued its strong performance, driven by improved silicon metal and natural graphite prices. The overall growth in 2011 financial results clearly illustrated the value of AMG's portfolio of critical materials and related technologies. The simplification of AMG's corporate structure and investments in our vertically integrated businesses in 2012 should help buffer AMG from the challenging global economy."

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

Key Figures
In 000's US Dollar
Q4 '11 Q4 '10 Change FY '11 FY '10 Change
Revenue $308,574 $270,731 14% $1,351,306 $990,495 36%
Gross profit 50,515 49,382 2% 237,976 178,558 33%
Gross margin 16.4% 18.2% 17.6% 18.0%
Operating profit 9,778 6,323 55% 69,536 43,259 61%
Operating margin 3.2% 2.3% 5.1% 4.4%
Net (loss) income attributable to shareholders (13,197) 12,481 N/A
5,160 2,414 114%
EPS- Fully diluted ($0.47) $0.46 $0.19 $0.09
Adjusted EPS-Fully diluted[1] $0.26 $0.23 $1.34 $0.75
EBIT[2] 16,424 12,917 27% 80,282 59,866 34%
EBITDA[3] 24,779 20,171 23% 110,142 84,875 30%
EBITDA margin 8.0% 7.5% 8.2% 8.6%

Notes:
[1] Adjusted to exclude non-recurring charges, as described in Non-Recurring Items
[2] EBIT is defined as earnings before interest, tax and excludes nonrecurring items
[3] EBITDA is defined as earnings before interest, tax, depreciation and amortization and excludes nonrecurring items

Financial Review
Taxes
AMG recorded a tax expense of $18.7 million in the year ended December 31, 2011 as compared to a tax expense of $11.2 million in the year ended December 31, 2010. Excluding share of loss of associates, for which AMG cannot recognize a tax benefit since these companies are not consolidated, AMG's effective tax rate was 19.5% in the fourth quarter 2011. Excluding Timminco related charges, AMG's 2011 effective tax rate was 34.1%.

SG&A
AMG's fourth quarter 2011 SG&A expenses were $42.5 million, compared to $36.8 million in the fourth quarter 2010. The $5.7 million increase in SG&A expenses was due to a $7.5 million noncash charge, for the write down of assets related to Timminco, and increases in bad debt, travel and professional fees, slightly offset by a $5.5 million decrease in personnel costs. The $7.5 million noncash charge was included in AMG's consolidated SG&A, but not allocated to the Advanced Materials Division's or the Engineering Systems Division's SG&A for segment reporting purposes.

For the full year 2011, AMG's SG&A expenses were $170.8 million, compared to $128.9 million in 2010, an increase of 32%. Excluding the noncash $7.5 million charge related to the Timminco write down, the increase in SG&A was 27% over 2010. The increase was due to the acquisitions of KB Alloys and AMG Idealcast as well as an increase in compensation expenses.

Non-Recurring Items
AMG's 2011 operating profit of $69.5 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 better analysis of the results.

Cash flows from operations were $45.0 million in 2011 compared to cash flows used in operations of $1.6 million in 2010. The 2011 cash flows from operations are primarily the result of $110.1 million in EBITDA less $34.2 million in cash tax payments and an $18.1 million increase in working capital. The substantial cash tax payments are primarily due to the difference between IFRS percentage of completion accounting as compared to completed contract methodology for tax payments in the Engineering Systems division.

Cash used in investing activities was $82.8 million in 2011. The $20.3 million increase compared to 2010 is composed of an $18.9 million increase in capital investments and a $9.3 million increase in acquisitions, slightly offset by a $10.8 million decrease in cash flows due to investment in associates. In 2011, AMG acquired KB Alloys LLC and AMG Intellifast GmbH for $29.0 million, while in 2010 AMG acquired an antimony mine in Turkey for $17.3 million.

Cash generated from financing activities was $27.9 million in 2011, a $14.4 million decrease from 2010. This decrease was attributed to $10.8 million in payments for transaction costs related to debt issuance and a $3.3 million decrease in net draws on revolving lines of credit. The draws on the revolving lines of credit were used to fund the acquisition of KB Alloys LLC and the related transaction costs.

Outlook
The global market is still challenging. After a difficult year-end period particularly for Advanced Materials, there are signs of improvement, but growth differs amongst geographic segments and end markets. Specific markets such as aerospace are robust, while the infrastructure and energy markets continue to suffer from supply-demand imbalances. Scarcity of resources, particularly in critical raw materials such as antimony, tantalum and natural graphite continue to be an issue. In this environment, AMG is focused on improving existing operations to maximize profitability. Progress is being made in the Turkey and Brazil mine based businesses, which are producing ore and performing extensive drilling programs, which are the basis for a more detailed and effective mining plan. In February 2012, AMG initiated a Voluntary Tender offer in an attempt to take Graphit Kropfmühl private in order to simplify the AMG capital structure and increase operational efficiencies. Despite the global uncertainties, AMG expects an increase in revenue and EBITDA and net income attributable to shareholders in 2012.








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