AMG Advanced Metallurgical Group N.V. Reports Third Quarter 2018 Results
Key Highlights
Revenue increased by 27% to $328.1 million in the third quarter 2018 from $258.9 million in the third quarter 2017
Gross profit was $79.6 million in the third quarter 2018, an increase of $28.3 million, or 55%, over the same period in 2017
EBITDA(2) was $59.1 million in the third quarter 2018, a 114% increase over the same period in 2017
Net income attributable to shareholders increased by 115% to $29.9 million in the third quarter 2018 from $14.0 million in the third quarter 2017
EPS, on a fully diluted basis, increased by 111% to $0.93 in the third quarter 2018 from $0.44 in the third quarter 2017
Annualized return on capital employed increased to 32.8% in the third quarter 2018, as compared to 21.5% in the third quarter 2017
Amsterdam, 1 November 2018 (Regulated Information) --- AMG Advanced Metallurgical Group N.V. ("AMG", EURONEXT AMSTERDAM: "AMG") reported third quarter 2018 revenue of $328.1 million, a 27% increase from $258.9 million in the third quarter of 2017. EBITDA for the third quarter of 2018 was $59.1 million, a 114% increase from $27.6 million in the third quarter of 2017.
Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, "As demonstrated through our third quarter results, our business portfolio continues to perform exceptionally well. Thanks to strong end market fundamentals and our relentless pursuit of improvements in productivity and efficiency, AMG's EBITDA in the third quarter 2018 is the highest reported quarterly EBITDA in 10 years.
AMG Critical Materials generated EBITDA of $52.1 million during the third quarter of 2018, an increase of 122% from $23.5 million in the third quarter of 2017, thanks to increased vanadium prices and strong financial performance in chrome metal and aluminum products.
AMG Engineering achieved EBITDA of $7.0 million during the third quarter of 2018, an increase of 69% from the third quarter of 2017, driven by higher profitability generated from the delivery of turbine blade coating furnaces and increased after-sales services during the quarter.
On a year to date basis, AMG Engineering signed $248.1 million in new orders in the current year, representing a 1.32x book to bill ratio. Order backlog was $251.2 million as of September 30, 2018, an increase of 21% from December 31, 2017."
Note:
EBIT is defined as earnings before interest and income taxes. EBIT excludes restructuring and equity-settled share-based payments and includes foreign currency gains or losses.
EBITDA is defined as EBIT adjusted for depreciation and amortization.
AMG Critical Materials revenue in the third quarter increased by $58.6 million, or 29%, to $262.0 million, driven mainly by improved vanadium, aluminum, and chrome metal prices, as well as higher sales volumes of tantalum and aluminum products.
Gross profit in the third quarter increased by $24.8 million, or 67%, to $61.5 million. Strong financial performances in vanadium, chrome metal, and aluminum were partially offset by lower gross profit in silicon metal. This strong performance was driven by higher vanadium prices, improved chrome metal product mix effects and strong sales volumes of aluminum products. The reduction in gross profit in silicon metal was primarily driven by an additional accrual for the repayment of a subsidy granted by the German government in 2012 and 2013, following the completion of negotiations. Furthermore, AMG Silicon quarterly gross profit was adversely affected by additional furnace maintenance due to residual production issues associated with low quality graphite electrodes.
SG&A expenses in the third quarter of 2018 increased by $1.6 million, or 8%, compared to the same period in the prior year due to higher personnel costs, an increase in research and development expenses, and foreign exchange effects related to the strengthening of the euro relative to the US dollar.
Third quarter 2018 EBITDA margin increased to 20%, compared to 12% in the third quarter of 2017, due to the substantial improvement in gross profit.
AMG Engineering signed $57.1 million in new orders during the third quarter 2018, representing a 0.86x book to bill ratio. Order intake in the quarter was driven by sales of turbine blade coating furnaces, powder metallurgy furnaces and induction furnaces for the aerospace market.
On a year to date basis, AMG Engineering signed $248.1 million in new orders in the current year, representing a 1.32x book to bill ratio. Order backlog was $251.2 million as of September 30, 2018, an increase of 21% from December 31, 2017.
AMG Engineering's third quarter 2018 revenue increased $10.5 million, or 19%, to $66.1 million, due to higher revenue generated from the delivery of turbine blade coating furnaces and higher after-sales service revenues.
Third quarter 2018 gross profit increased by $3.5 million, or 24%, to $18.1 million and gross margin increased slightly to 27% from 26% in the third quarter of 2017, driven by higher revenues generated during the quarter.
SG&A expenses increased by $0.2 million, from $12.6 million in the third quarter of 2017 to $12.8 million in the third quarter of 2018.
EBITDA increased by $2.8 million to $7.0 million in the third quarter of 2018 due to higher profitability generated from the delivery of vacuum furnaces during the quarter.
Financial Review
Tax
AMG recorded an income tax expense of $10.0 million in the third quarter of 2018 as compared to a tax expense of $1.7 million in the same period in 2017, driven by higher levels of profitability, the full recognition of AMG's US operating loss carryforwards in 2017, and the revaluation of AMG's Brazilian tax balances.
AMG continues to benefit from net operating loss carryforward balances, primarily in the United States, to offset taxes payable. As a result, despite high pre-tax profitability, AMG paid taxes of $6.3 million in the third quarter of 2018 as compared to tax payments of $3.2 million in the same period in 2017. For the third quarter of 2018, AMG's effective cash tax rate dropped to 16% in comparison to 21% for the same period in the prior year.
Due to the volatile nature of the company's Brazilian deferred tax balances, AMG believes that the cash tax rate is a more meaningful metric.
Non-Recurring Items
AMG's third quarter 2018 gross profit of $79.6 million includes non-recurring items, which are not included in the calculation of EBITDA.
A summary of non-recurring items included in gross profit in the third quarters of 2018 and 2017 are below: