- Key Highlights
Revenue was $278.9 million in the second quarter 2014, a 4% decrease from the same period in 2013
EBITDA([1]) was $20.4 million in the second quarter 2014, an 8% decrease from the same period in 2013
EPS on a fully diluted basis was $0.27 in the second quarter 2014, compared to ($1.53) in the same period in 2013
Cash flows from operating activities were $19.1 million in the second quarter 2014, compared to $32.0 million in the same period in 2013
As of June 30, 2014, cash on the balance sheet was $114.9 million; net debt was $147.8 million, a reduction of $12.7 million during the year

Amsterdam, 6 August 2014 (Regulated Information) --- AMG Advanced Metallurgical Group N.V. ("AMG", EURONEXT AMSTERDAM: "AMG") reported second quarter 2014 revenue of $278.9 million, a 4% decrease from $291.5 million in the second quarter 2013. Net income attributable to shareholders for the second quarter 2014 was $7.4 million, or $0.27 per fully diluted share, compared to a loss of $42.2 million, or ($1.53) in the second quarter 2013. EBITDA decreased 8% to $20.4 million in the second quarter 2014. However, the EBITDA was consistent with the first quarter 2014 EBITDA of $20.1 million.

Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, "AMG continued to deliver on its objective of improving operational performance, and reducing gross and net debt. Despite a low metal price environment, market demand was stable during the second quarter 2014. AMG Processing benefited from cost reduction and restructuring efforts, while AMG Mining improved gross margins due to its focus on higher value-added products. AMG Engineering had a disappointing quarter in terms of profitability, the result of weak order intake in the second half of 2013, but generated significant order intake during the quarter, which should result in improved earnings in the second half of the year."
Key Figures In 000's US Dollar
Q2 '14 Q2 '13 Change
Revenue $278,941 $291,528 (4%)
Gross profit 44,963 48,618 (8%)
Gross margin 16.1% 16.7%
Operating profit (loss) 11,124 (40,222) N/M
Operating margin 4.0% (13.8%)
Net income (loss) attributable to shareholders
7,445 (42,230) N/M
EPS- Fully diluted 0.27 (1.53) N/M
EBIT (1) 12,221 14,140 (14%)
EBITDA (2) 20,392 22,184 (8%)
EBITDA margin 7.3% 7.6%
Cash flows from operating activities 19,129 31,966 (40%)

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
AMG Processing
Q2 '14 Q2 '13 Change
Revenue $144,508 $144,603 0%
Gross profit 20,757 17,718 17%
Operating profit 6,650 4,322 54%
EBITDA 11,158 7,992 40%

AMG Processing's second quarter 2014 revenue was consistent with prior year while gross profit improved by 17%. A 103% increase in ferrovanadium volumes was offset by lower demand in certain aerospace end markets. Improved production efficiencies and lower cost structures at AMG Vanadium and AMG Superalloys were the primary reasons for the improved gross margins. The consistency of metal prices, improved production efficiencies and the impacts of previous restructuring efforts all contributed to the 2% increase in gross margin. The increase in gross margins led to the 40% improvement in EBITDA.

AMG Engineering
Q2 '14 Q2 '13 Change
Revenue $49,676 $66,618 (25%)
Gross profit 7,485 18,189 (59%)
Operating loss (3,760) (12,420) (70%)
EBITDA (1,801) 8,443 N/M

AMG Engineering's second quarter 2014 revenue decreased $16.9 million, or 25%, to $49.7 million. Low order intake in the second half of 2013 caused the decline in revenue during the quarter. The second quarter 2014 gross margin decreased to 15%, from 27% in the second quarter 2013 due to reduced volumes and pricing pressure. The $10.7 million decline in gross profit directly impacted EBITDA.

Order backlog increased 9% to $148.0 million at June 30, 2014 from $135.8 million at March 31, 2014, as delayed orders began to be realized. $62.3 million in new orders were signed in the second quarter 2014, a 1.25x book to bill ratio. Turbine blade coating systems accounted for approximately 33% of the order intake.

AMG Mining
Q2 '14 Q2 '13 Change
Revenue $84,757 $80,307 6%
Gross profit 16,721 12,711 32%
Operating profit (loss) 8,234 (32,124) N/M
EBITDA 11,035 5,749 92%

AMG Mining's second quarter 2014 revenue increased $4.5 million, or 6%, to $84.8 million, with tantalum and graphite recording the biggest improvements. AMG Tantalum's revenue increased due to a 54% increase in volumes, and price improvements related to a long-term contract, while AMG Graphite revenues improved primarily due to a 21% increase in volumes. The focus on operational efficiencies and increased sales of higher margin graphite products for the energy efficiency market improved AMG Graphite's gross margin to 20% from 16%. The EBITDA increased 92% to 13% of revenue, primarily due to the 32% improvement in gross profit.

Financial Review
SG&A
AMG's second quarter 2014 SG&A expenses were $34.1 million, consistent with $34.0 million in the second quarter 2013. SG&A expenses were stable, despite incurring approximately $1.1 million in costs related to specific strategic initiatives.

Non-Recurring Items
AMG's second quarter 2014 operating profit of $11.1 million includes non-recurring items, which are not included in the calculation of EBITDA.

A summary of non-recurring items in the second quarter 2014 and 2013 are below:

For the three months ended
June 2014 June 2013
Non-recurring items included in operating profit (loss):
Restructuring expense $1,034 $5,399
Asset impairment expense - 49,703

Total non-recurring items included in operating profit (loss) 1,034 55,102

AMG Processing incurred $1.0 million during the second quarter 2014 to right size the workforce to current market realities. This is a substantial reduction from $55.1 million of restructuring and asset impairment expenses recorded in 2013 related to the Company's solar operations and non-developed mining assets.

Liquidity
June 30, 2014 December 31, 2013 Change
Total debt $262,743 $263,580 (0%)
Cash & short-term investments 114,940 103,067 12%
Net debt 147,803 160,513 (8%)

AMG had a net debt position of $147.8 million as of June 30, 2014. This decreased $12.7 million since December 31, 2013 due to strong cash flow from operations and lower capital spending.

Cash flows from operating activities were $24.8 million in the first half of 2014 compared to $32.6 million in the first half of 2013. The decline is primarily attributable to a $15.0 million long-term contract prepayment received in the first half of 2013 that did not recur in 2014.

Capital expenditures declined $5.7 million in the first half of 2014 as compared to the first half of 2013. The $10.5 million of capital spending incurred in the first half of 2014 included $6.1 million of maintenance capital. The largest capital projects were for AMG TAC's titanium aluminide expansion, AMG Silicon efficiency improvements, and capacity expansion of higher value-added graphite products.

Including the $114.9 million of cash, AMG had $172.7 million of total liquidity as of June 30, 2014.

On May 27, 2014, AMG amended its revolving credit facility. The amendment extended the modified tangible net worth covenant through April 2016, the remainder of the term of the credit facility.

Outlook
The specialty metals markets are relatively stable as the global economy is slowly improving. In this low growth environment, AMG is rationalizing production, limiting capital investments, and continuing cost reduction programs. These actions are the primary factors behind the improved AMG Processing and AMG Mining margins. The increase in AMG Engineering's backlog and the lower cost base in AMG Processing and AMG Mining, should position the Company for improved EBITDA and net income, and reduced debt levels, in the second half of 2014.


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AMG Advanced Metallurgical Group N.V. Explores Strategic Alternatives for Engineering Unit.
Amsterdam, 6 August 2014 (Regulated Information) --- AMG Advanced Metallurgical Group N.V. ("AMG", EURONEXT AMSTERDAM: "AMG") announces that its Supervisory Board has authorized AMG's Management Board to retain financial advisors to explore strategic alternatives for AMG Engineering's ALD Vacuum Technologies GmbH ("ALD") unit. These alternatives may include a potential listing of ALD on the Euronext Amsterdam stock exchange or the sale of an interest in ALD.
This step is consistent with AMG's strategic direction to simplify its structure and focus on expanding and optimizing its critical materials, mining, and processing activities. The benefits for ALD include direct access to capital markets for growth opportunities. AMG will update the market on this process during the third quarter earnings release in November.