AMG Corporate Strategy Presentation December 2013

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AMG Corporate Strategy Presentation December 2013

  1. 1. Corporate Presentation Comments on Strategy December 2013
  2. 2. Cautionary Note THIS DOCUMENT IS STRICTLY CONFIDENTIAL AND IS BEING PROVIDED TO YOU SOLELY FOR YOUR INFORMATION BY AMG ADVANCED METALLURGICAL GROUP N.V. (THE “COMPANY”) AND MAY NOT BE REPRODUCED IN ANY FORM OR FURTHER DISTRIBUTED TO ANY OTHER PERSON OR PUBLISHED, IN WHOLE OR IN PART, FOR ANY PURPOSE. FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF APPLICABLE SECURITIES LAWS. This presentation does not constitute or form part of, and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire securities of the Company or any of its subsidiaries nor should it or any part of it, nor the fact of its distribution, form the basis of, or be relied on in connection with, any contract or commitment whatsoever. This presentation has been prepared by, and is the sole responsibility of, the Company. This document, any presentation made in conjunction herewith and any accompanying materials are for information only and are not a prospectus, offering circular or admission document. This presentation does not form a part of, and should not be construed as, an offer, invitation or solicitation to subscribe for or purchase, or dispose of any of the securities of the companies mentioned in this presentation. These materials do not constitute an offer of securities for sale in the United States or an invitation or an offer to the public or form of application to subscribe for securities. Neither this presentation nor anything contained herein shall form the basis of, or be relied on in connection with, any offer or commitment whatsoever. The information contained in this presentation has not been independently verified. No representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy or completeness of the information or the opinions contained herein. The Company and its advisors are under no obligation to update or keep current the information contained in this presentation. To the extent allowed by law, none of the Company or its affiliates, advisors or representatives accept any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection with the presentation. Certain statements in this presentation constitute forward-looking statements, including statements regarding the Company's financial position, business strategy, plans and objectives of management for future operations. These statements, which contain the words "believe,” “expect,” “anticipate,” “intends,” “estimate,” “forecast,” “project,” “will,” “may,” “should” and similar expressions, reflect the beliefs and expectations of the management board of directors of the Company and are subject to risks and uncertainties that may cause actual results to differ materially. These risks and uncertainties include, among other factors, the achievement of the anticipated levels of profitability, growth, cost and synergy of the Company’s recent acquisitions, the timely development and acceptance of new products, the impact of competitive pricing, the ability to obtain necessary regulatory approvals, and the impact of general business and global economic conditions. These and other factors could adversely affect the outcome and financial effects of the plans and events described herein. Neither the Company, nor any of its respective agents, employees or advisors intend or have any duty or obligation to supplement, amend, update or revise any of the forward-looking statements contained in this presentation. The information and opinions contained in this document are provided as at the date of this presentation and are subject to change without notice. This document has not been approved by any competent regulatory or supervisory authority. 2
  3. 3. Overview Listed: Founded: LTM Revenues: NYSE-Euronext Amsterdam: AMG 2006 $1,149.6M LTM EBITDA: $80.4M LTM Operating Cashflow: $89.5M Employees: Facilities: 3,137 Netherlands, Germany, France, Czech Republic, Poland, UK, USA, Brazil, Mexico, China, India, Sri Lanka, Turkey, Zimbabwe, Mozambique Market Cap: €202M ($278M) Enterprise Value: €319M ($438M) EV / EBITDA Shares outstanding: 52 week range: Recent share price: 3 Note: LTM values are September YTD 5.5x 27.6M €5.88–€8.35 €7.35 (December 16, 2013)
  4. 4. AMG - Three Divisions AMG Processing AMG Mining AMG Engineering  AMG’s conversion and recycling based businesses  AMG’s vacuum systems and services business  Metals & alloys  Coating materials 4  Integrated AMG’s mine based businesses  Concentrates  Capital equipment & service for high purity materials
  5. 5. Divisions – AMG Processing AMG Processing – conversion and recycling operations Value Proposition  Aluminum grain refiners and master alloys for high performance materials in aerospace, automotive and infrastructure applications  Ferrovanadium for high strength, low alloy steels for infrastructure; ferronickel-molybdenum for stainless steel  Titanium master alloys for high performance, light weight aerospace engine and frame, and coating materials for aerospace turbines  Chrome metal for stainless steel, electrical resistance wire, and superalloys 5 Key Products Major Applications
  6. 6. Divisions – AMG Mining AMG Mining – mine based value chains Value Proposition  Antimony trioxide and master batches for flame retardant on electronics, paints, and plastics  Tantalum and niobium superalloys for aerospace engines and industrial gas turbines  Conflict-free tantalum concentrate for tantalum capacitors used on portable electronics  Natural graphite for building insulation materials, energy storage, li-ion batteries for electrical vehicle, and lubricants  Silicon metal for aluminum production and solar panel materials 6 Key Products Major Applications
  7. 7. Divisions – AMG Engineering AMG Engineering – vacuum systems and services Value Proposition  Vacuum melting and re- melting furnaces for highperformance titanium, steel and alloys, and purification of rare metals and alloys  Vacuum heat treatment furnaces and services for high-performance materials of aerospace and automotive applications  Vacuum coating furnace for aerospace turbine blade coatings  Vacuum sintering and annealing furnaces for nuclear fuel productions 7 Key Products Major Applications
  8. 8. AMG Global Locations area enlarged above 8 Offices
  9. 9. Critical Raw Materials  The EU identified 14 critical raw materials* to the European economy – focusing on two determinants – economic importance and supply risk Materials mined or processed by AMG, or treated in AMG vacuum systems REE Materials treated by AMG vacuum systems Nb Sb C Ta Li Ti V Mo Si F e 9 Note: *European Commission Annex V to the Report of the Ad-hoc Working Group on defining critical raw materials Al Ni Cr
  10. 10. Critical Raw Materials – Definition*  A critical raw material is one whose risk of supply shortage and its impacts on the economy are higher compared with most of the other raw materials  Demand for these raw materials is driven by the growth of developing economies and new emerging technologies  Two types of risks are considered when determining which raw materials qualify as critical:  Supply risk, which takes into account:  Political-economic stability of the producing countries  Level of concentration of production(high share of the world’s production comes from a few countries)  Potential for substitution  Recycling rate  Environmental country risk, which considers the measures that might be taken by countries with weak environmental performance in order to protect the environment and thus possibly endanger the supply of raw materials 10 Note: *European Commission Report of the Ad-hoc Working Group on defining critical raw materials
  11. 11. Core Competences AMG Processing Input Upgrading Output Cr oxide, Al powder Pyrometallurgy(smelting) Cr Metal V-contained spent catalyst& slag Pyrometallurgy (roasting, smelting) FeV, FeNiMo, and V chemicals Ti, V, Nb, Mo, Al Pyrometallurgy (smelting), Alloying Ti Master Alloys/Ti Alloys Al, Mn, Cr, Fe, Ti, B etc. Pyrometallurgy, Alloying Al Master Alloys & Grain Refiners AMG Mining Ta/Nb ore, FeTaNb Ta/Nb concentrate Natural graphite ore Ta/Nb concentrate Mining Mineral Processing Ta/Nb oxide Advanced graphite products Hydrometallurgy Antimony metal ATO & masterbatches Pyrometallurgy (smelting, oxidation) AMG Engineering Quartz, wood chips, coal 11 Silicon metal Design elements, Furnace components Furnace assembly High-performance metallurgical furnaces Engine components Heat treatment services Heat-treated parts Focus on Proprietary Technologies
  12. 12. AMG’s Strategy - The Complexity Issue Complexity - Vertical Materials Engineering Vacuum Furnaces 96.0 MOLYBDENUM 58.7 NICKEL 12 Complexity Horizontal
  13. 13. AMG’s Strategy - The Uniqueness Challenge High Ease of Assessment High Quality of Strategy Type 1 RARE Type 2 Low Measurement of Strategy ■ ■ Ongoing Strategic Projects Quality of Strategy ■ Ability to generate cash over the long run Ease of Assessment ■ Effort required to estimate future performance Cash Flow from Operations ( in USD millions) $65.6 $57.3 $45.0 Significant L-T Improvement Achieved -$2.1 - Low 13 Type 3 Source: Harvard Business Review, November 2013, Company modified -$1.6 - - - 2009 2010 2011 2012 Sep YTD 2013
  14. 14. AMG’s Strategy AMG is a leader in mining, processing, and upgrading critical materials for the production of high value added specialty metals and alloys. AMG focuses its strategy on building critical mass in materials where AMG possesses a significant market position and potential for long-term growth exceeding global GDP. Process ■ ■ ■ 14 Strengthen AMG’s Balance Sheet ■ Increase operating cash flow ■ Reduce net debt Evaluate assets that are non-core to AMG’s strategy of building critical mass in high value added critical materials Deepen focus on high value added critical materials, and expand through both investment and acquisitions Results ■ ■ ■ ■ Reduced complexity More focused business on highly proprietary materials, in which AMG has critical mass, a significant market position (either 1 of 2 or 3), and potential for long-term growth above global GDP Lower net debt to EBITDA Increase Shareholder Value
  15. 15. Strategy - Industry Consolidation Horizontal – Aluminum  AMG acquired KB Alloys in February 2011  AMG was the market leader in Europe and South America  KB Alloys was the market leader in North America  Combination created the #1 global player Bauxite Primary Aluminum Grain Refiners & Master Alloys AMG (#1) KB Alloys (#2) Aluminum Alloys World leader in aluminum master alloys and grain refiners KBM (Netherlands) Aleastur (Spain)  Increased market share with global footprint giving AMG critical mass in the aluminum industry  Cost synergies and expansion of best practices and core competencies leading to:  SG&A down 12%  EBITDA up 130%  Working capital down 60% 15
  16. 16. Financial Highlights 16
  17. 17. Financial Highlights – 5 Year Revenue Gross Profit (in USD millions) (in USD millions) $238.0 $1,351.3 $1,215.6 $196.5 $1,149.6 $165.6 $990.5 $178.6 $178.1 $867.4 2009 2010 2011 2012 LTM 2013 EBITDA 2009 2010 2011 15.1% (in USD millions) $84.8 $84.9 11.9% $81.6 10.5% 9.5% $69.1 17 LTM 2013 ROCE $110.1 2009 2012 2010 2011 2012 LTM 2013 2009 2010 2011 2012 8.9% LTM 2013
  18. 18. Financial Highlights - 2013 Revenue Gross Margin YTD September 2013 Revenue: $874.4 (in USD millions) YTD September 2013 Gross Margin: 15.6% 24.6% AMG Engineering $193.2 15.7% AMG Mining AMG Processing 11.6% $245.5 $435.7 AMG Processing EBITDA AMG Mining AMG Processing 18 AMG Engineering Capital Expenditure YTD September 2013 EBITDA: $62.1 AMG Engineering AMG Mining $18.2 $22.5 $21.3 (in USD millions) YTD September 2013 CAPEX: $22.5 AMG Engineering AMG Mining AMG Processing $1.4 $7.3 $13.9 (in USD millions)
  19. 19. Capital Base Net Debt ( in USD millions) $189.0 $194.2 $163.6 $147.2 Dec-10 19 Dec-11 Dec-12 Sep. 2013 ■ Net debt: $163.6M ■ A reduction of $16.4 million in Q3’13 ■ Debt to capitalization: 0.67x ■ Net Debt to LTM EBITDA: 2.01x ■ Revolver availability: $73.7M ■ Total liquidity: $190.0M ■ AMG’s primary debt facility is a $370 million term loan and revolving credit facility ■ 5 year term – until 2016 ■ Obtained waiver for tangible net worth covenant as of June 30, 2013 ■ Currently in compliance with all debt covenants ■ YTD Q3’13 $57.3M Cash Flows from Operations, up 71% compared to YTD Q3’12
  20. 20. End Markets Revenue Gross Profit ( in USD millions) YTD September 2013: $874.4 ( in USD millions) YTD September 2013: $136.7 Aerospace 45.4% Aerospace 40.7% Energy 18.1% Infrastructure 12.2% Energy 17.2% Infrastructure 9.8% Specialty Metals & Chemicals 29.0% Aerospace - 9% vs. YTD Sep. 2012 20 Specialty Metals & Chemicals 27.6 Aerospace - 2% vs. YTD Sep. 2012 Titanium alloys and Chrome metal revenue decreased Focusing on higher margin products for Aerospace
  21. 21. Appendix: AMG’s Critical Materials for Aerospace & Critical Materials Prices
  22. 22. AMG - Aerospace ■ AMG’s Aerospace Revenue consists of a diversified mix of high value added products and services Aerospace Revenue by Division Revenue by End Market Energy 18.1% Specialty Metals & Chemicals 29.0% Superalloys 3.7% Aerospace 40.7% Aluminum Alloys 9.3% Ti Alloys & Coatings 6.0% Engineering 19.2% Infrastructure 12.2% 22 Note: YTD 2013 Revenue Ferrovanadium 2.5%
  23. 23. AMG – Aerospace Example Operating temperature [°C] 23 Ti-64 up to 400 Ti-6246 up to 550 Ti-834 Ni-based Superalloys 600 1,230 - 730 up to TiAl up to 730
  24. 24. AMG – Aerospace COMPRESSOR BLADES Cobalt COMPRESSOR DISCS Cobalt LP TURBINE BLADES Cobalt HP TURBINE DISCS Cobalt EXHAUST Cobalt Chromium Niobium Tantalum Chromium Chromium Niobium Tantalum Chromium Tantalum Chromium Hafnium Tantalum Titanium Tungsten Titanium Tungsten Vanadium (Ti Alloys) Tungsten Rare Earths Tungsten Vanadium (Ti Alloys) ANCILLARIES & CONTROL SYSTEMS Cobalt Rare Earths Tantalum 24 COMBUSTOR Cobalt Chromium Rare Earths Tungsten Materials produced by AMG Tungsten HP TURBINE BLADES Cobalt LP TURBINE DISCS Cobalt Chromium Chromium Niobium Tantalum Hafnium Platinum Rhenium Rare Earths Tantalum Tungsten Tungsten
  25. 25. AMG – Aerospace 25 New AMG Product: Vacuum-coated transducers are applied to the bolts on the 3 Bearing Swivel Module of the Joint Strike Fighter F-35B
  26. 26. 5 Year Price Trends Tantalum Concentrate (Ta2O5 Contained) 140 Niobium Pentoxide 70 30 100 50 25 80 123.6 60 112.7 85.0 40 40 62.6 30 55.2 41.3 20 38.9 2008 2009 2011 2012 Year 0 2013 Spot* 6.6 5.3 2 5.2 5.9 4.5 4.1 Price in $/kg Price in $/lb 2010 2011 2012 0 2013 Spot* 2008 2009 2010 2011 12.7 2012 Year Titanium Sponge 9.7 2013 Spot* Nickel 12 10 8 4 7 6 5 4 9.0 7.6 7.3 6.7 3 8 6 3.5 10.4 9.9 9.5 4 7.9 6.7 5.2 2 1 6.6 2 1 2008 2009 2010 2011 Year 26 2009 15.5 9 5 0 2008* 10 6 3 11.1 5 Year Chrome Metal 7 28.9 15.7 10 2010 15 10 40.0 Price in $/lb 0 45.9 20 32.4 64.4 20 Price in $/lb 60 Price in $/kg 120 Price in $/lb Molybdenum 35 2012 2013 Spot* 0 2008 2009 2010 2011 Year 2012 2013 Spot* 0 2008 2009 2010 2011 Year Notes: *Spot prices are as of 1 November 2013, Nb 2013 spot as of Dec; Nb pentoxide price not available before 2009 Sources: Ta2O5 and Ti sponge from Metal Pages; Nb from Asian Metal; Mo from Platts; Chrome Metal from Ryan’s Notes; Nickel from Metal Bulletin 2012 2013 Spot*
  27. 27. 5 Year Price Trends Ferrovanadium 35 2,500 20 30.9 10 10.9 2008 2009 14.5 14.8 14.9 12.3 2010 2011 2012 2,173 1,000 0 2013 Spot* 2,395 2,018 1,817 600 500 2008 2009 2010 2011 2012 174 161 523 143 131 124 40 10,000 8,000 14,722 12,863 6,000 6,141 2010 2011 Year 2012 2013 Spot* 0 10,350 9,047 2,000 20 2009 2010 2011 2012 2013 Spot* Graphite 1,200 4,000 2009 582 1,400 2008 1,000 800 1,462 1,454 600 400 5,210 2009 Price in $/mt 100 Price in $/mt 120 2008 1,600 12,000 140 2008 530 Year 14,000 125 700 635 300 0 2013 Spot* Antimony 16,000 160 60 933 400 200 Year 180 Price in cents/lb 2,567 500 Silicon 200 27 1,500 700 100 Year 0 2,000 1,670 5 80 800 Price in $/mt Price in $/mt Price in $/lb 25 0 Carbon Steel 1,000 900 30 15 Aluminum 3,000 784 710 2008 2009 950 845 200 2010 2011 Year 2012 2013 Spot* Note: *Spot prices are as of 1 November 2013 Source: FeV from Ryan’s Notes; Al, Carbon Steel, Si and Sb from Metal Bulletin; Graphite from Industrial Minerals 0 2010 2011 Year 2012 2013 Spot*

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