Amg investor presentation august 2013

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Amg investor presentation august 2013

  1. 1. Investor Presentation August 2013
  2. 2. 2 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. Cautionary Note
  3. 3. 3 Overview Listed: NYSE-Euronext Amsterdam: AMG Founded: 2006 LTM Revenues: $1,160.1M LTM EBITDA: $83.7M Employees: 3,145 Facilities: Netherlands, Germany, France, Czech Republic, Poland, UK, USA, Brazil, Mexico, China, India, Sri Lanka, Turkey, Zimbabwe, Mozambique Market Cap: €182M ($242M) Enterprise Value: €317M ($422M) Shares outstanding: 27.6M 52 week range: €5.84–€7.34 Recent share price: €6.60 (August 8, 2013) Global provider of high value added specialty metals and related engineering systems for growing end markets, including energy, aerospace, infrastructure, and specialty metals and chemicals
  4. 4. 4 Business Units, Products and Markets  High-value metals & alloys  Coating materials  Capital equipment & service for high purity materials  Critical raw materials AMG Processing AMG Engineering InfrastructureAerospaceEnergy AMG Mining Specialty Metals & Chemicals  AMG’s conversion and recycling based businesses  AMG’s vacuum systems and services business  Integrated AMG’s mine based businesses Serving the Technology Trends in Energy, Aerospace, Infrastructure, and Specialty Metals & Chemicals
  5. 5. 5 Critical Raw Materials F e  The EU identified 14 critical raw materials* to the European economy – focusing on two determinants – economic importance and supply risk Note: *European Commission Annex V to the Report of the Ad-hoc Working Group on defining critical raw materials Materials mined or processed by AMG, or treated in AMG vacuum systems Materials treated by AMG vacuum systems REE Li Al V Sb Cr Ni C Ta Nb Ti Si Mo
  6. 6. 6 Business Units – AMG Processing  Aluminum grain refiners and master alloys for high performance materials in aerospace, automotive and infrastructure applications Value Proposition  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  Tantalum and niobium superalloys and chrome metal for aerospace engine and industrial gas turbines Major ApplicationsKey Products AMG Processing – conversion and recycling operations
  7. 7. 7 Business Units – AMG Mining  Antimony trioxide and master batches for flame retardant on electronics, paints, and plastics Value Proposition  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 Major ApplicationsKey Products AMG Mining – mine based value chains
  8. 8. 8 Business Units – AMG Engineering  Vacuum melting and re- melting furnaces for high- performance titanium, steel and alloys, and purification of rare metals and alloys Value Proposition  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 Major ApplicationsKey Products AMG Engineering – vacuum systems and services
  9. 9. 9 Recent Developments – Operations Update AMG is improving operational performance and cash flow 2013 Objectives Progress Update ■ H1‘13 SG&A reduced by 8.8%, or $6.8M, compared to H1’12Reduce SG&A by 5% ■ H1’13 Gross margin 16.5%, down 0.2% compared to H1’12 ■ Significant decline in metal prices impacted margins ■ AMG Engineering gross margin up 4.1% compared to H1’12 Improve Gross Margin Increase Operating Cash Flow ■ H1’13 Operating cash flow $32.6M, up $29.5M compared to H1’12 ■ H1’13 Working capital reduced $54.4M, or 25% compared to H1’12 ■ H1’13 - 53 Days in Working capital, a decline of 12 days Reduce Net Debt ■ H1’13 Net Debt reduced by $14.2M, compared to December 2012
  10. 10. 10 ■ AMG Processing – simplifying the organization ■ AMG completed the sale of its 45% owned aluminum alloy joint venture in China ■ Part of AMG’s simplification of its operational structure ■ Serving the Asia markets through its wholly owned subsidiary, AMG Aluminum China ■ AMG Vanadium expansion ramp up on schedule ■ AMG Engineering - implementing cost reduction programs ■ Reduced headcount by 16% in Q2 ■ Merging internal operations and legal entities ■ Moving past the solar market downturn; $14.2M asset write downs ■ AMG Mining – prudently investing in mining expansions ■ Antimony – delaying mine project to improve cash flow and continuing drilling and geology campaign; $22.1M impairment charge ■ Graphite – optimizing current raw material supply chains and delaying Mozambique mine project; $13.3M impairment charge Recent Developments – Operations Update
  11. 11. 11 Financial Highlights
  12. 12. 12 Revenue - - - - -- - - - - $23.2 $19.8 $19.5 $22.2 $22.2 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Financial Highlights $319.6 $296.9 $275.2 $296.5 $291.5 Down 9% YoY Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 ■ Q2 2013 EPS: ($1.53) ■ Adjusted EPS: $0.22 Gross Profit EBITDA (in USD millions) Adjusted EPS - - - - -- - - - - $53.9 $47.5 $41.6 $48.3 $48.6 Down 10% YoY Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 LTM: $1,160.1 LTM: $83.7 (in USD millions)LTM: $186.0 (in USD millions)
  13. 13. 13 Capital Base ■ Net debt: $180.0M ■ Debt to capitalization: 0.69x ■ Net Debt to LTM EBITDA: 2.15x ■ Revolver availability: $60.5M ■ Total liquidity: $172.7M ■ AMG’s primary debt facility is a $370 million term loan and revolving credit facility ■ 5 year term – until 2016 ■ Secured an additional $62M for the credit facility in 2012 in conjunction with the Voluntary Tender Offering for GK ■ Obtained waiver for tangible net worth covenant as of June 30 ■ $32.6M in Cash Flows from Operations in H1’13 $89.9 $79.6 $121.6 $112.2 $237.1 $268.6 $315.8 $292.2 $147.2 $189.0 $194.2 $180.0 Dec-10 Dec-11 Dec-12 June 2013 Cash Debt Net Debt ( in USD millions) Cash and Debt Cash Flow from Operations - - - -- - - - -$20.3 -$12.1 $3.1 $32.6 2010 H1 2011 H1 2012 H1 2013 H1 ( in USD millions)
  14. 14. 14 $10.8 $4.5 $0.9 AMG Processing AMG Mining AMG Engineering $297.7 $163.2 $127.1 AMG Processing AMG Mining AMG Engineering Financial Highlights – New AMG Segments Revenue EBITDA (in USD millions) (in USD millions) $16.7 $13.7 $14.0 AMG Processing AMG Mining AMG Engineering H1 2013 EBITDA: $44.4 H1 2013 Revenue: $588.0 12.6% 15.7% 26.4% AMG Processing AMG Mining AMG Engineering H1 2013 Gross Margin: 16.5% Gross Margin Capital Expenditure (in USD millions)H1 2013 CAPEX: $16.2
  15. 15. 15 Key Products H1 2013: $588.0 Revenue Gross Profit H1 2013: $96.9 ( in USD millions) ( in USD millions)
  16. 16. 16 End Markets Aerospace - 9% vs. H1 2012 Aluminum Master Alloy and Chrome metal revenue decreased Aerospace - 9% vs. H1 2012 Aluminum Master Alloy and Chrome metal revenue decreased H1 2013: $588.0 Revenue Gross Profit H1 2013: $96.9 ( in USD millions) ( in USD millions) Aerospace 40.6% Infrastructure 12.3% Energy 17.7% Specialty Metals & Chemicals 29.4% Aerospace 46.0% Energy 16.2% Specialty Metals & Chemicals 28.1% Infrastructure 9.7% Aerospace + 4% vs. H1 2012 Focusing on higher margin products for Aerospace Aerospace + 4% vs. H1 2012 Focusing on higher margin products for Aerospace
  17. 17. 17 ■ Q2’13 revenue down 14% from Q2’12 ■ Significant price and volume declines across most materials ■ AMG Vanadium down 26%, AMG Superalloys down 20% ■ Q2’13 gross margin 12% of revenue, down from 15% in Q2’12 ■ Metal price declines impacted margins ■ AMG Aluminum gross margins up 19% due to product rationalization ■ Q2’13 EBITDA margin 6% of revenue, compared to 7% in Q2’12 ■ $1.5M decrease in personnel costs ■ Q2’13 CAPEX $4.3M ■ $0.9M for FeV expansion ■ $0.4M for maintenance $168.4 $144.6 $12.0 $8.0 $1.0 $6.0 $11.0 $16.0 $21.0 $- $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 $140.0 $160.0 $180.0 $200.0 Q2 12 Q2 13 Revenue EBITDA AMG Processing Financial Summary - - $3.1 $4.3 Q2 12 Q2 13 Capital Expenditure ( in USD millions) ( in USD millions)
  18. 18. 18 $85.8 $80.3 $7.1 $5.7 $1.0 $6.0 $11.0 $- $20.0 $40.0 $60.0 $80.0 $100.0 Q2 12 Q2 13 Revenue EBITDA  Q2’13 revenue down 6% from Q2’12  Silicon metal down 10%  Antimony down 4%  Natural graphite up 3%  Q2’13 gross margin 16% of revenue, down from 17% in Q2’12  Challenging prices for silicon metal (13%↓) and antimony (10%↓)  Q2’13 EBITDA 7% of revenue, down from 8% in Q2’12 ■ $0.3M decrease in personnel costs ■ Q2’13 CAPEX $2.3M  $0.7M for silicon metal furnace efficiency upgrade  $0.7M for maintenance AMG Mining Financial Summary Capital Expenditure ( in USD millions) ( in USD millions) - - $5.9 $2.3 Q2 12 Q2 13
  19. 19. 19 $65.4 $66.6 $4.2 $8.4 $3.0 $8.0 $- $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 $80.0 Q2 12 Q2 13 Revenue EBITDA  Q2’13 revenue up 2% from Q2’12  Nuclear furnaces up 72%  Casting and sintering furnaces up 34%  Heat Treatment furnaces down 45%  Remelting furnaces down 20%  Q2’13 gross margin 27% of revenue, up from 23% in Q2’12  Improved profitability on certain large projects  Increased focus on cost control  Q2’13 EBITDA 13% of revenue, improved from 6% of revenue in Q2’12  Order backlog up 10% to $145.2M at June 30, 2013  Order intake $76.4M in Q2 ‘13  1.15x book to bill ratio AMG Engineering Financial Summary - - - - - $36.4 $79.7 $67.8 $30.9 $76.4 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Order Intake ( in USD millions) ( in USD millions)
  20. 20. Outlook
  21. 21. 21 Outlook ■ AMG’s markets, particularly for the European centric businesses, remain challenging ■ AMG should generate significant cash flows and further reduce net debt in 2013 ■ AMG announces Q3 2013 financial results on November 8, 2013  Improved margins through cost reductions  Natural graphite volumes consistent with 2012  Declining prices on antimony and graphite delaying mine development  Operating cash flow should improve over prior year  H2’13 will be more challenging than H1’13  Significant declines in metal prices are impacting revenues and profitability  Chrome metal down 27%  FeV down 13%  AMG Vanadium expansion on target to reach full capacity in 2013  Market remains challenging  Simplifying organizational structure  Headcount reduction should improve margins  EBITDA will be consistent with prior year  Operating cash flow should improve over prior year AMG Processing AMG EngineeringAMG Mining
  22. 22. 22 Appendix
  23. 23. 23 Consolidated Balance Sheet Balance Sheet ($’000) Actual As of 31-December-12* 30-June-13 (restated) Fixed assets 288.3 253.5 Goodwill and intangibles 38.7 36.3 Other non-current assets 77.7 75.5 Inventories 211.5 194.8 Receivables 177.2 171.2 Other current assets 33.8 33.7 Cash 121.6 112.2 TOTAL ASSETS 948.8 877.2 TOTAL EQUITY 175.3 133.1 Long-term debt 265.6 5.9 Pension liabilities 138.0 131.9 Other long-term liabilities 78.9 82.4 Current debt 50.3 286.3 Accounts payable 125.3 132.3 Advance payments 27.0 27.4 Accruals 58.9 47.2 Other current liabilities 29.5 30.7 TOTAL LIABILITIES 773.5 744.1 TOTAL LIABILITIES & EQUITY 948.8 877.2 * 2012 Balance Sheet restated for IFRS required adjustments to pension liabilities and mine stripping costs
  24. 24. 24 Consolidated Income Statement Income Statement ($’000) Actual For the three months ended 30-June-12 30-June-13 (restated) Revenue 319,591 291,528 Cost of sales 265,694 242,910 Gross profit 53,897 48,618 Selling, general & admin. 37,803 33,994 Asset impairment & restructuring 7,821 55,102 Environmental 560 44 Other income (234) (300) Operating profit (loss) 7,947 (40,222) Net finance costs 5,893 6,111 Share of profit of associates 83 156 Profit (loss) before income taxes 2,137 (46,177) Income tax expense (benefit) 5,453 (1,788) Loss for the period (3,316) (44,389) Shareholders of the Company (2,528) (42,230) Non-controlling interest (788) (2,159) Adjusted EBITDA 23,198 22,184
  25. 25. 25 Consolidated Statement of Cash Flows Cash Flow Statement ($’000) Actual For the year ended 30-June-12 30-June-13 (restated) EBITDA 44,472 44,383 +/- Change in operating assets/liabilities (23,517) 11,360 -Interest paid, net (9,017) (9,296) Other operating cash flow 540 (4,187) Cash flows from operations before taxes 12,478 42,260 Income tax paid (9,344) (9,629) Total cash flows from operations 3,134 32,631 Capital expenditures (23,443) (16,219) Other investing activities 534 (2,471) Cash flows (used in) investing activities (22,909) (18,690) Cash flows from (used in) financing activities 34,171 (22,494) Net increase (decrease) in cash 14,396 (8,553) Beginning cash 79,571 121,639 Effects of exchange rates on cash (343) (856) Ending cash 93,624 112,230
  26. 26. 26 AMG Global Locations area enlarged above Offices

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