Key Highlights
Revenue was $319.6 million in the second quarter 2012, a 13% decrease from the same period in 2011
EBITDA(1) was $23.6 million in the second quarter 2012, a 25% decrease from the same period in 2011
EPS on a fully diluted basis was ($0.10) in the second quarter 2012, a $0.22 decrease from $0.12 in same period in 2011
The Advanced Materials Division generated revenue of $211.7 million and EBITDA of $14.5 million in the second quarter 2012
The Engineering Systems Division generated revenue of $65.4 million and EBITDA of $3.7 million in the second quarter 2012
Graphit Kropfmühl generated revenue of $42.5 million and EBITDA of $5.4 million in the second quarter 2012
As of June 30, 2012, cash on the balance sheet was $93.6 million; net debt was $212.3 million


Amsterdam, 9 August 2012 (Regulated Information) --- AMG Advanced Metallurgical Group N.V. ("AMG", EURONEXT AMSTERDAM: "AMG") reported second quarter 2012 revenue of $319.6 million, a 13% decrease from $368.3 million in the second quarter 2011.

EBITDA decreased 25% to $23.6 million in the second quarter 2012 from $31.4 million in the second quarter 2011. Net loss attributable to shareholders for the second quarter 2012 was $2.6 million, or ($0.10) per fully diluted share, down from a net profit attributable to shareholders of $3.4 million, or $0.12 per fully diluted share, in the second quarter 2011.

Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, "Demand and pricing for Advanced Materials products, particularly in critical materials for the aerospace and energy markets, remained stable in the second quarter. Delayed order intake and increased pricing pressure in the Engineering Systems Division resulted in lower profitability in the quarter. Unfavorable product mix in natural graphite and lower than expected silicon metal production marginally reduced Graphit Kropfmühl's second quarter earnings. Following the completion of the squeeze out, AMG intends to fully integrate GK and address cost savings opportunities. Given the challenging markets, AMG's number one priority is increasing its operational efficiency across all of AMG's units, under the leadership of Eric Jackson, AMG's recently appointed COO."

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

Key Figures
In 000's US Dollar
Q2'12 Q2'11 Change
Revenue $319,591 $368,318 (13%)
Gross profit 53,996 68,993 (22%)
Gross margin 16.9% 18.7%
Operating profit 7,827 22,787 (66%)
Operating margin 2.4% 6.2%
Net (loss) profit attributable to shareholders(2,647)3,351N/A
EPS- Fully diluted (0.10) 0.12 N/A
EBIT (1) 16,603 24,592 (32%)
EBITDA (2) 23,639 31,447 (25%)
EBITDA margin 7.4% 8.5%
Note:
(1) EBIT is defined as earnings before interest, tax and excludes non-recurring items

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

Operational Review
Advanced Materials Division
Q2'12 Q2'11 Change
Revenue $211,656 $235,580 (10%)
Gross profit 31,435 37,747 (17%)
Operating profit 9,725 12,865 (24%)
EBITDA 14,549 17,534 (17%)
Capital expenditures 6,225 6,194 1%

The Advanced Materials Division's second quarter 2012 revenue decreased $23.9 million, or 10%, to $211.7 million. The decrease in revenue was primarily the result of 18% and 16% decreases in aluminum products and antimony revenue, respectively, slightly offset by 12% and 10% increases in titanium master alloys and chrome products revenue, respectively, compared to the second quarter 2011.

The second quarter 2012 gross margin declined to 15% from 16% in the second quarter 2011. Higher operating and raw material costs, particularly in antimony and chrome products, more than offset higher gross margins in aluminum products, which were the result of operational improvements.

The second quarter 2012 EBITDA decreased $3.0 million to 7% of revenue, which was consistent with the 7% of revenue level achieved in the second quarter 2011. The EBITDA decrease was the result of the $6.3 million decrease in gross profit slightly offset by a $3.3 million, or 14% decrease in SG&A. The SG&A decline was the result of a reduction in personnel expenses, primarily long-term incentive costs.

Capital expenditures were $6.2 million for the second quarter 2012, essentially flat compared to the second quarter 2011. Significant growth capital investments made in the second quarter included a $1.4 million investment in the expansion of the spent catalyst recycling facility for ferrovanadium production, $1.3 million related to expansion of the Brazilian tantalum mine, and maintenance expenditures of $1.4 million.

Engineering Systems Division
Q2'12 Q2'11
Change
Revenue $65,400 $89,812 (27%)
Gross profit 14,929 22,661 (34%)
Operating (loss) profit (5,387) 5,047 N/A
EBITDA 3,725 7,671 (51%)
Capital expenditures 2,911 2,984 (2%)

The Engineering Systems Division's second quarter 2012 revenue decreased $24.4 million, or 27%, to $65.4 million. Revenue from Heat Treatment Services for the production of automotive components for fuel-efficient vehicles increased 16% to $12.5 million and revenue from heat treatment furnaces, primarily for the transportation industry, increased 3% to $18.0 million. These increases were more than offset by 71% and 38% decreases in solar silicon and sintering furnace revenue, respectively, compared to the second quarter 2011.

Order backlog decreased 15% to $150.0 million as of June 30, 2012, from $176.2 million as of March 31, 2012. The division generated order intake of $36.4 million in the second quarter 2012, which represents a 59% decrease compared to the second quarter 2011 and a 0.56x book to bill ratio. Order intake for heat treatment systems accounted for 29% of total order intake.

The second quarter 2012 gross margin of 23% decreased from 25% achieved in the second quarter 2011. Favorable product mix was more than offset by increased end market pricing pressure and a decline in the economies of scale, resulting in decreased gross margins.

The second quarter 2012 EBITDA decreased $3.9 million, to 6% of revenue. EBITDA declined from 9% of revenue in the second quarter 2011. The EBITDA decrease was the result of the $7.7 million decrease in gross profit slightly offset by a $3.2 million, or 19% decrease in SG&A. The SG&A decline was the result of a reduction in personnel costs, primarily long-term incentive costs.

Capital expenditures were $2.9 million, 2% less than the second quarter of 2011. Capital investments in the second quarter were primarily maintenance and expansion capital expenditures for the Heat Treatment Services business.

Financial Review
Tax
AMG recorded a tax expense of $5.5 million in the second quarter 2012 as compared to a tax expense of $7.8 million in the second quarter 2011. The second quarter 2012 effective tax rate was adversely impacted by the reversal of previously recognized deferred tax assets in several jurisdictions, including Brazil. In addition, a significant portion of the restructuring and asset impairment expense in the quarter relates to entities for which a tax benefit cannot be booked. For the first half of 2012 AMG's effective tax rate is 103%. The expected full year effective tax rate is expected to be approximately 65% which is higher than the normalized statutory rate due to the items noted above.

SG&A
AMG's second quarter 2012 SG&A expenses were $38.0 million, a 15% decrease from $44.8 million in the second quarter 2011. The $6.7 million decrease in SG&A expenses was due to a reduction in long-term incentive expenses and external consulting costs.

Non-Recurring Items
AMG's second quarter 2012 operating profit of $7.8 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 $8.4 million of non-recurring items in the second quarter 2012, consisting of $6.8 million write down and restructuring of AMG Idealcast assets, $0.6 million in environmental costs, $0.5 million restructuring charge related to the closure of a UK entity and $0.5 million management restructuring in the Advanced Materials Division. AMG incurred $2.3 million of non-recurring items in the second quarter 2011, related to the closure of Silmag joint venture.

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 appreciation in the value of the U.S. dollar as of June 30, 2012 compared to March 31, 2012, resulted in a decrease in the assets and liabilities on the balance sheet of $40.5 million and $29.3 million, respectively. The net result of the appreciation in the value of the U.S. dollar in the second quarter 2012 compared to the second quarter 2011, resulted in a decrease in revenue and EBITDA of $21.1 million and $2.3 million, respectively.

Liquidity
June 30, 2012 December 31, 2011 Change

Total debt $305,906 $268,621 14%
Cash & short-term investments 93,624 79,571 18%
Net debt 212,282 189,050 12%

AMG had a net debt position of $212.3 million as of June 30, 2012. AMG's net debt position increased $23.2 million since December 31, 2011 primarily due to $22.4 million increase in working capital, $23.4 million in capital investments, $9.3 million of cash tax payments, $9.0 million of cash interest payments and $6.6 million in Graphit Kropfmühl share purchases, reduced by EBITDA of $45.5 million. Including the $93.6 million of cash, AMG had $156.2 million of total liquidity as of June 30, 2012.

Cash Flow
H1'12 H1'11
Net cash flows from (used in) operations $3,134 $(12,080)
Capital expenditures (23,443) (19,913)
Acquisitions, net of cash (1,920) (26,816)
Cash flows from other investing activities 534 2,844
Net cash flows used in investing activities (24,829) (43,885)
Cash flows from financing activities 36,091 23,899

Cash flows from operations were $3.1 million in the first half of 2012 compared to cash flows used in operations of $12.1 million in the first half of 2011. Cash flows from operations in the first half of 2012 are primarily the result of $45.5 million in EBITDA less $22.4 million increase in working capital, $9.3 million in cash tax payments and $9.0 million in cash interest payments.

Cash used in investing activities was $24.8 million in the first half of 2012. The $19.1 million decrease compared to the first half 2011 is composed of a $24.9 million decrease in cash used in acquisitions, slightly offset by a $3.5 million increase in capital investments and a $2.3 million increase in cash flows from other investing activities due to a decrease in restricted cash for project work in the Engineering Systems Division. In the first half of 2012, AMG acquired 5.5% of Graphit Kropfmühl's outstanding common shares for $6.6 million, for which $1.9 million is shown as a cash flow used in investing activities while $4.7 million is shown as a cash flow used in financing activities.

Cash from financing activities was $36.1 million in the first half 2012, a $12.2 million increase from the first half 2011. This increase was primarily attributable to a net increase of $40.7 million in existing credit facilities, compared to $34.4 million in net draws in new and existing lines of credit offset by $10.5 million in transaction costs related to debt issuance in the first half of 2011. The increase in the credit facility during the first half of 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
The slowdown in Europe is impacting AMG. In the Advanced Materials Division, its European centric businesses, particularly antimony and other non-aerospace businesses, are being affected. The Engineering Systems Division is responding to the deterioration in demand for capital goods across most end markets through operational improvements. Higher input prices and moderating demand are affecting Graphit Kropfmühl's ability to maintain current profitability levels. While AMG cannot affect the direction of the markets, it is addressing profitability issues through companywide improvement initiatives, specifically focused on AMG Mining and the Engineering Systems Division to reduce costs. AMG is also working to improve cash flow and reduce indebtedness through working capital and capital expenditure reductions. Despite these changes, achieving the prior year's revenue and earnings levels will be difficult, as the growth previously anticipated in the second half of 2012 is not expected to materialize.

AMG Advanced Metallurgical Group N.V.