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AMG Investor Presentation - August 2016

The document is an investor presentation by AMG Advanced Metallurgical Group N.V. that provides an overview of the company. It discusses AMG's business segments which involve sourcing, processing, and supplying critical raw materials. It highlights AMG's focus on enabling technologies to reduce CO2 emissions and notes several critical raw materials identified by the EU and US that AMG produces. The presentation provides financial highlights for Q2 2016, showing increases in earnings per share, EBITDA, and gross profit compared to Q2 2015. It outlines AMG's 2016 financial objectives of improving return on capital employed and gross margin while pursuing growth opportunities and maintaining a conservative balance sheet.

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LEADING THE CRITICAL MATERIALS REVOLUTION AMG Advanced Metallurgical Group N.V. Investor Presentation August 4, 2016
2 About AMG 4 CO2 Reduction 5 Strong Capital Structure 6 Critical Raw Materials 7 Critical Materials Price Trends 8 Critical Materials Prices: 10 Year Perspective 9 AMG Business Segments 10 Global Footprint 11 Health and Safety Focus 13 Financial Highlights 14 Strategy & Outlook 26 Key Products & End Markets 30 Appendix 36 TABLE OF CONTENTS
3 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
4 SUPPLY: AMG Sources, processes, and supplies the critical materials the market demands GLOBAL TRENDS CO2 emission reduction, population growth, increasing affluence, and energy efficiency DEMAND Innovative new products that are lighter, stronger, and resistant to higher temperatures AMG IS A CRITICAL MATERIALS COMPANY
5 AMG: MITIGATING TECHNOLOGIES Products and Processes saving raw materials, energy and CO2 emissions during manufacturing (i.e., recycling of Ferrovanadium) AMG: ENABLING TECHNOLOGIES Products and Processes saving CO2 emissions during use (i.e., light-weighting and fuel efficiency in the aerospace and automotive industries) AMG HAS DEVELOPED INTO A LEADER IN ENABLING TECHNOLOGIES A GLOBAL IMPERATIVE FOR THE 21ST CENTURY CO2 REDUCTION LEADER IN ADVANCED TECHNOLOGIES TO ADDRESS CO2 REDUCTION
6 6 • Refinanced credit facility in 2016, providing a stable capital base and liquidity for strategic growth • Deleveraged balance sheet; zero net debt at end of FY15 OPTIMIZED CAPITAL STRUCTURE • Rigorous process to review strategic growth opportunities that is both selective and opportunistic • Organic growth strategy is focused on areas of our portfolio that are marked by strong demand growth or supply limitations • Financially and operationally capable of quickly assessing opportunities • Initiated first dividend to shareholders in 2015 • Reflecting AMG commitment to return value to shareholders DISCIPLINED ORGANIC GROWTH & ACQUISITIONS RETURN EXCESS CASH TO SHAREHOLDERS Strong capital structure, free of net debt, positioned for growth Driving long-term sustainable growth and shareholder value
7 Heavy REE Niobium Chromium Light REE Magnesium Germanium Indium Gallium Cobalt Beryllium PGMS Fluorspar Phosphate Rock Borate Magnesite Tungsten Coking Coal Vanadium Aluminum alloys TinMolybdenum Nickel Antimony Silicon Metal Natural Graphite Tantalum SUPPLYRISK ECONOMIC IMPORTANCE Critical Raw Materials • The EU identified 20 critical raw materials* to the European economy in 2014, focusing on two determinants: economic importance and supply risk • The US identified 30 critical materials* which are vital to national defense, primarily through assessing supply risk • AMG has a unique critical materials portfolio comprising: – 5 EU critical raw materials – 4 US critical raw materials – Highly engineered Titanium Alloys for the aerospace industry – High value added Aluminum Master Alloys – Vanadium, Nickel and Molybdenum from recycled secondary raw materials Melted or treated by AMG vacuum systemsProduced by AMG Critical raw materials identified by the US and produced by AMG EU Critical Raw Materials *Report on Critical Raw Materials for the EU, May 2014; Strategic and Critical Materials 2015 Report on Stockpile Requirements by Department of Defense in January 2015. Titanium alloys Lithium
8 Critical Materials Price Trends CRITICAL MATERIAL PRICES OUTPERFORM THE LME -50% 0% 50% 100% 150% 200% 1. AMG EU Critical Materials 2. AMG Portfolio (includes #1) 3. LME Metals 4. Oil 10 Yr CAGR: -3.7% 10 Yr CAGR: 2.2% 10 Yr CAGR: 2.7% 10 Yr CAGR: -4.1% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 AMG: EU Critical Materials OIL LME Metals AMG Portfolio Note: Compound annual growth rates are calculated over the period Jun ‘06 through Jun ‘16 using the equation ((Ending Value / Beginning Value) ^ (1 / # of years) - 1) where ending value is avg monthly price in Jun ‘16 and beginning value is avg monthly price in Jun ‘06; and where AMG EU Critical Materials include Sb, Cr, Graphite & Si; AMG Portfolio includes Sb, Cr, FeV, Li, Nb, Si, Sr, Graphite, Ta, Sn & Ti; and LME Metals include Al, Co, Cu, Pb, Mo, Ni, & Zn. Avg annual growth rates (plotted above) are calculated over the same period using the equation ((Ending Value / Beginning Value) -1) and considering the same metal categorizations where ending value is avg monthly price in Jun of the given year and beginning value is avg monthly price in Jun ‘06. The cumulative average 10 year price appreciation of the AMG Portfolio was 6.4 percentage points higher than LME Metals and 6.8 points higher than oil, while the AMG EU Critical Materials outperformed LME Metals and oil by 5.9 and 6.3 percentage points, respectively
9 Critical Materials Prices: 10 Year Perspective AMG has significant potential upside within certain critical materials based on historical price ranges Note: Metal Positions are measured on a scale of 0 to 10, with 0 being the minimum price and 10 being the maximum price. They are calculated using the formula [(Jun ‘06 month avg – min. monthly avg) / (max. monthly avg – min. monthly avg) *10] where maximum and minimum monthly averages are measured over the period 1 Jun ‘06 through 30 Jun ‘16. 1.9 1.2 0.3 1.5 2.5 1.7 0.9 1.7 5.8 0.8 1.8 3.9 0.8 1.1 1.1 4.5 2.1 2.2 5.3 5.8 1.7 3.2 0 2.5 5 7.5 10 Scale Metals Jun 2016 Position Jun 2015 Position Cr Mo Ni FeV Ti Al C Si Ta Sb Highest Price in 10 years Lowest Price in 10 years [unchanged] • Metal prices are measured on a scale of 0 to 10, with 0 and 10 representing the minimum and maximum average quarterly prices occurring during the past 10 years • The positions demonstrate the current price level of each metal with respect to their various historical price points over the past 10 years Nb
10 AMG Business Segments AMG CRITICAL MATERIALS AMG’S CONVERSION, MINING, AND RECYCLING BUSINESSES • VANADIUM • SUPERALLOYS • TITANIUM ALLOYS & COATINGS • ALUMINUM ALLOYS • TANTALUM & NIOBIUM • ANTIMONY • GRAPHITE • SILICON AMG ENGINEERING AMG’S VACUUM SYSTEMS AND SERVICES BUSINESS • ENGINEERING • HEAT TREATMENT SERVICES
11 11 AMG Global Footprint – Critical Materials
12 12 AMG Global Footprint – Engineering Mexico City, MEXICO Port Huron (MI), USA Berlin, GERMANY Limbach, GERMANY Mumbai, INDIA Suzhou, CHINA Wixom (MI), USA Grenoble, FRANCE Headquarters Production Facility Heat Treatment Services Hanau, GERMANY Head Office
13 Health and Safety Focus LEADING SAFETY INDICATORS • The number of safety improvement items reported increased by 38% compared to the 12 month period ending June 2015. These are essential in order to avoid potential injuries. • Incident severity rate over the 12 months ending June 2016 is down 9% from the previous 12 month period. • Days away from work resulting from these lost time incidents are down 7%. RIGOROUS COMMITMENT TO SAFETY REFLECTED IN CONTINUALLY IMPROVING SAFETY RECORDS PERIOD ENDING JUNE LOST TIME INCIDENTS IN THE LAST 12 MONTHS 12 MONTH AVERAGE LOST TIME INCIDENT RATE 12 MONTH AVERAGE INCIDENT SEVERITY RATE 2015 35 1.29 0.15 2016 36 1.33 0.14
FINANCIAL HIGHLIGHTS AMG Advanced Metallurgical Group N.V.
15 AMOUNTS IN $M (EXCEPT EARNINGS PER SHARE) Q2 2016 Q2 2015 % CHANGE REVENUE $248.3 $257.4 (4%) GROSS PROFIT $53.8 $44.6 20% GROSS MARGIN % 21.6% 17.3% 25% PROFIT BEFORE INCOME TAXES $15.6 $8.3 88% EBITDA $26.0 $25.1 4% EBITDA MARGIN % 10.5% 9.8% 7% NET DEBT $6.2 $41.9 (85%) RETURN ON CAPITAL EMPLOYED (ROCE) 17.8% 15.7% 13% NET INCOME ATTRIBUTABLE TO SHAREHOLDERS $13.4 $3.8 253% EARNINGS PER SHARE 0.48 0.14 243% Q2 2016 at a Glance • Q2 ‘16 EBITDA up 4% versus Q2 ‘15 due to improved profitability within AMG Engineering • Annualized ROCE increased to 17.8% versus 15.7% in Q2 2015 • Q2 ‘16 revenue declined by $9 million, or 4%, compared to Q2 ‘15, driven largely by weak metal prices • Net debt: $6.2 million – $35.7 million reduction of net debt since Q2 2015 – Net debt to LTM EBITDA: 0.08x INCREASES IN EARNINGS PER SHARE OF 243%, COMPARED TO Q2 2015
16 $25.1 $20.4 $9.7 $21.2 $26.0 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 $257.4 $241.9 $220.8 $237.4 $248.3 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 $44.6 $39.7 $32.4 $44.3 $53.8 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Financial HighlightsFinancial Highlights REVENUE (IN MILLIONS OF US DOLLARS) EBITDA (IN MILLIONS OF US DOLLARS) GROSS PROFIT (IN MILLIONS OF US DOLLARS) 4% YoY 20% YoY $81.8 $67.4 $48.0 $50.5 $92.8 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 ORDER INTAKE (IN MILLIONS OF US DOLLARS) 4% YoY 13% YoY
17 IMPROVE ROCE IMPROVE GROSS MARGIN • Increase ROCE through operational improvements and disciplined capital management • Increase productivity through continuous cost and product mix optimization 2016 Financial Objectives FINANCIAL OBJECTIVE DESCRIPTION PURSUE GROWTH OPPORTUNITIES MAINTAIN CONSERVATIVE BALANCE SHEET • Optimize capital structure for financial flexibility PROGRESS UPDATE • Net debt down by $35.7 million, or 85%, versus the end of Q2 2015 • Completed enlargement and extension of syndicated credit facility - from $320 million to $400 million with the maturity extended from May 2018 to July 2021 • On July 20th, 2016, AMG’s Supervisory Board approved the construction of a lithium concentrate (spodumene) plant at the Mibra mine in Brazil, with an initial annual production of 90,000 tons, expandable to 140,000 tons • Annualized ROCE increased to 17.8% in the second quarter 2016, as compared to 15.7% in the second quarter 2015 • AMG gross margin increased to 21.6% in Q2 2016 from 17.3% in Q2 2015 • Pursue organic opportunities in high-growth areas within the existing product portfolio • Pursue opportunities for horizontal and vertical industry consolidation across AMG’s critical materials portfolio
18 Financial Data: ROCE & EBITDA • Q2 ‘16 EBITDA up 4% versus Q2 ’15 due to improved profitability within AMG Engineering • Q2 2016 annualized ROCE improved to 17.8% from 15.7% in Q2 2015 • ROCE improvements are the result of efficient use of capital and improved profitability ANNUALIZED ROCE EBITDA (IN MILLIONS OF US DOLLARS) $25.1 $20.4 $9.7 $21.2 $26.0 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q2 ‘16 ROCE IMPROVED TO 17.8% FROM 15.7% IN Q2 ‘15 Q2 ‘16 EBITDA UP 4% VERSUS Q2 ‘15 9.2% 7.4% 11.9% 12.0% 15.7% 17.8% 2012 2013 2014 2015 Q2 '15 Q2 '16
19 $194.2 $160.5 $87.8 $41.9 $6.2 2012 2013 2014 Q2 '15 Q2 '16 -$10 $5 $20 $35 $50 Q1 Q2 Q3 Q4 2012 2013 2014 2015 2016 Financial Data: Net Debt & Operating Cash flowFinancial Data: Net Debt & Operating Cash Flow • Net debt: $6.2 million – $188.0 million reduction of net debt since December 31, 2012 – Net Debt to LTM EBITDA: 0.08x • AMG’s primary debt facility is a $400 million multicurrency term loan and revolving credit facility – 5 year term (until 2021) with an accordion feature that allows the Company, subject to certain conditions, to increase the commitment amount by up to $100 million – In compliance with all debt covenants • Q2 ‘16 cash flows from operating activities were $24.3M • Cash flows from the first half of 2016 exceeded those from the first half of 2015 by 33% NET DEBT (IN MILLIONS OF US DOLLARS) OPERATING CASH FLOW (IN MILLIONS OF US DOLLARS) $188M REDUCTION IN NET DEBT SINCE 2012 H1 2016 CASH FLOW 33% HIGHER THAN H1 2015
20 Divisional Financial Highlights – Q2 2016 v Q2 2015 REVENUE EBITDA (in USD millions) (in USD millions)Q2 2016 EBITDA: $26.0 Q2 2016 REVENUE: $248.3 Q2 2016 GROSS MARGIN: 21.6% GROSS MARGIN CAPITAL EXPENDITURE (in USD millions)Q2 2016 CAPEX: $7.5 $56.3 $201.2 $66.7 $181.6 AMG Engineering AMG Critical Materials Q2 2016 Q2 2015 $4.2 $21.0 $5.6 $20.5 AMG Engineering AMG Critical Materials Q2 2016 Q2 2015 $0.5 $2.8 $1.3 $6.2 AMG Engineering AMG Critical Materials Q2 2016 Q2 2015 22.2% 16.0% 23.3% 21.0% AMG Engineering AMG Critical Materials Q2 2016 Q2 2015
21 WORKING CAPITAL DAYS REDUCED BY 78% SINCE Q3’10 Financial Highlights 79 69 70 70 70 65 65 65 65 62 61 53 47 43 47 42 31 23 28 30 30 19 26 17 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 Q114 Q214 Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Working Capital Reduction 62 DAYS, OR 78% REDUCTION Q1 ‘11 Q2 ‘11 Q3 ‘11 Q4 ‘11 Q1 ‘12 Q2 ‘12 Q3 ‘12 Q4 ‘12 Q1 ‘13 Q2 ‘13 Q3 ‘13 Q4 ‘13 Q1 ‘14 Q2 ‘14 Q3 ‘14 Q3 ‘10 Q4 ‘10 Q4 ‘14 Q1 ‘15 Q2 ‘15 Q3 ‘15 Q4 ‘15 Q1 ‘16 Q2 ‘16
22 $201.2 $187.7 $166.3 $176.6 $181.6 $21.0 $15.5 $7.0 $16.5 $20.5 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Revenue EBITDA $2.8 $4.8 $10.0 $4.5 $6.2 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Financial Data: Net Debt & Operating Cash flowAMG Critical Materials REVENUE & EBITDA (IN MILLIONS OF US DOLLARS) CAPITAL EXPENDITURES (IN MILLIONS OF US DOLLARS) Q2 2016 REVENUE IMPACTED BY WEAK METALS PRICES INCREASE OF $3.4M Q2 ‘16 VS. Q2 ’15 DUE TO EXPANSION PROJECTS AND AMG ENGINEERING RELOCATION • Q2 2016 revenue down $19.6 million, or 10%, vs. Q2 2015 due to double-digit declines in average quarterly prices of Nickel, Aluminum, Chrome, Niobium and Antimony • Q2 ‘16 EBITDA margin increased to 11.3% from 10.4% in Q2 ‘15. • Capital expenditures increased to $6.2 million in Q2 2016 compared to $2.8 million in Q2 2015 • The largest capital expansion projects are AMG’s Ancuabe graphite mine project and AMG TAC’s titanium aluminide expansion
23 KEY PRODUCT Q2 ‘16 REV ($M) Q2 ‘15 REV ($M) VOLUME PRICE CURRENCY FeV & FeNiMo $22.8 $28.1 Al Master Alloys & Powders $43.0 $45.7 Chromium Metal $19.9 $20.5 Tantalum & Niobium $17.2 $23.8 Titanium Alloys & Coatings $21.1 $21.2 Antimony $19.0 $24.9 Graphite $16.4 $14.9 Silicon Metal $22.4 $22.1 AMG Critical Materials – Quarterly Revenue Drivers • Double-digit declines in the average quarterly prices of Nickel, Aluminum, Chrome, Niobium and Antimony negatively affected revenue in the second quarter of 2016 • Strong sales volumes of Aluminum Master Alloys & Powders, Titanium Alloys & Coatings, and Graphite were partially offset by lower sales of Niobium and Antimony • AMG’s ferrovanadium sales prices are indexed to the prior month’s average market price
24 Critical Materials – Average Quarterly Prices MATERIALS Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 FERROVANADIUM ($/LB) $9.76 $8.90 $6.79 $6.59 $10.03 MOLYBDENUM ($/LB) $7.50 $5.83 $4.85 $5.33 $7.42 NICKEL ($/MT) $13,005 $10,557 $9,434 $8,496 $8,819 ALUMINUM ($/MT) $1,765 $1,591 $1,495 $1,515 $1,571 CHROME ($/LB) $4.50 $4.41 $4.09 $3.92 $3.76 TANTALUM ($/LB) $80 $74 $59 $60 $62 NIOBIUM OXIDE ($/KG) $33 $28 $25 $25 $27 TI SPONGE ($/KG) $9.40 $9.40 $9.05 $8.69 $8.25 ANTIMONY ($/MT) $8,617 $6,888 $5,588 $5,359 $6,252 GRAPHITE ($/MT) $796 $750 $750 $725 $585 SILICON (CENTS/LB) $138 $127 $114 $103 $92 Q2 ‘16 VS. Q2 ‘15 % CHANGE 3% (1%) (32%) (11%) (16%) (23%) (17%) (12%) (27%) (27%) (33%) Q2 ‘16 VS. Q1 ‘16 % CHANGE 52% 39% 4% 4% (4%) 3% 8% (5%) 17% (19%) (11%)
25 $56.3 $54.1 $54.6 $60.8 $66.7 $4.2 $4.9 $2.6 $4.6 $5.6 Revenue EBITDA $81.8 $67.4 $48.0 $50.5 $92.8 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Financial Data: Net Debt & Operating Cash flowAMG Engineering REVENUE & EBITDA (IN MILLIONS OF US DOLLARS) ORDER INTAKE (IN MILLIONS OF US DOLLARS) EBITDA IMPROVEMENT DUE TO HIGHER SALES AND LOWER COSTS BOOK TO BILL RATIO OF 1.39X IN Q2 2016 • Q2 2016 revenue up 19% vs. Q2 2015 due to strong sales of plasma remelting furnaces for the aerospace market • EBITDA increased by $1.4 million in Q2 2016 versus Q2 2015, the highest quarterly EBITDA in twelve quarters due to higher levels of gross profit • AMG Engineering Order backlog of $158.8 million as of June 30, 2016, a 17% increase versus March 31, 2016 • AMG Engineering signed $92.8 million in new orders during the second quarter of 2016, a 1.39x book to bill ratio
STRATEGY & OUTLOOK AMG Advanced Metallurgical Group N.V.
27 AMG: Ready for Growth 2012 2013 2014 2015 2016 to 2020 Cost Reduction Product Mix Optimization Supply Chain Excellence Targeted W/C & Debt Levels Scaling Profitable Growth Cost-reduction and capex discipline in response to global economic slowdown Competitive advantage through manufacturing and supply chain excellence, accelerating cost-reduction efforts Properly positioned, financially and operationally, to pursue growth targets across portfolio Streamlined operations and improved operating performance by eliminating low-margin product lines Further reduction in both working capital and net debt, strengthening the balance sheet
28 28 Strategy AMG’s overriding strategic objective is to achieve industry leadership while being the low cost producer INDUSTRY CONSOLIDATION PROCESS INNOVATION & PRODUCT DEVELOPMENT Pursue opportunities for horizontal and vertical industry consolidation across AMG’s critical materials portfolio Continue to focus on process innovation and product development to improve the market position of AMG’s businesses AMG’s strategy is to build its critical materials business through industry consolidation, process innovation and product development EXPANSION OF EXISTING HIGH GROWTH BUSINESSES Pursue opportunities in high-growth areas within the existing product portfolio
29 29 2016 Outlook In this challenging environment, AMG will continue to reduce cost, optimize its product portfolio and maintain a conservative balance sheet AMG AMG ENGINEERING In this challenging market environment, AMG expects 2016 full year profitability to improve relative to 2015. AMG will also continue to generate strong operating cash flows throughout the year. AMG Engineering expects to return to historic levels of profitability in 2016. Based on the strong order backlog at the end of 2015, and improved cost position, management expects the business to continue to improve its financial performance in 2016. AMG CRITICAL MATERIALS Despite weak metals prices, AMG Critical Materials expects 2016 full year profitability to improve relative to 2015. CHANGE IN DIVIDEND POLICY The change in AMG’s dividend policy reflects a commitment to return value to shareholders and is a result of an improved balance sheet, ample liquidity and confidence in our ability to generate cash.
KEY PRODUCTS & END MARKETS AMG Advanced Metallurgical Group N.V.
31 Key Products REVENUE (IN MILLIONS OF US DOLLARS) GROSS PROFIT (IN MILLIONS OF US DOLLARS) $- $40 $80 $120 $160 $200 $240 $280 Q2 2015 Q2 2016 Vacuum Furnaces Ti Master Alloys & Coatings Al Master Alloys & Powders Vanadium & FeNiMo Chromium Metal Antimony Tantalum & Niobium Graphite Si Metal $- $10 $20 $30 $40 $50 $60 Q2 2015 Q2 2016 Q2 2016 $53.8 Q2 2016 $248.3 Q2 2015 $257.4 Q2 2015 $44.6
32 Critical Materials – Market Trends SPEC. METALS & CHEM.ENERGY TRANSPORTATION INFRASTRUCTURE CRITICAL MATERIALS MARKET TRENDSMAJOR END MARKETS MAJOR CUSTOMERS AMG ANTIMONY ANTIMONY TRIOXIDE ANTIMONY MASTERBATCHES ANTIMONY PASTES PLASTICSFLAME RETARDANTS MICRO CAPACITORS, SUPERALLOYS AMG BRAZIL TANTALUM & NIOBIUM COMMUNICATIONS & ELECTRONICS FUEL EFFICIENCY EXPANDED POLYSTYRENE (EPS), BATTERY ANODES AMG GRAPHITE NATURAL GRAPHITE ENERGY SAVING ENERGY STORAGE ALUMINUM ALLOYS, SOLAR AMG SILICON SILICON METAL FUEL EFFICIENCY CLEAN ENERGY BATTERIES AMG LITHIUM LITHIUM CONCENTRATE (SPODUMENE) RENEWABLE ENERGY COMMUNICATIONS & ELECTRONICS CONFIDENTIAL
33 Critical Materials – Market Trends AMG ALUMINUM ALUMINUM MASTER ALLOYS ALUMINUM POWDERS FUEL EFFICIENCY AEROSPACE, AUTOMOTIVE INFRASTRUCTURE AMG VANADIUM FERROVANADIUM FERRONICKEL- MOLYBDENUM INFRASTRUCTURE GROWTH AEROSPACE AMG TITANIUM ALLOYS & COATINGS TITANIUM MASTER ALLOYS & COATINGS FUEL EFFICIENCY ENERGY SAVING AMG SUPERALLOYS UK CHROMIUM METAL FUEL EFFICIENCYAEROSPACE CRITICAL MATERIALS MARKET TRENDSMAJOR END MARKETS MAJOR CUSTOMERS SPEC. METALS & CHEM.ENERGY TRANSPORTATION INFRASTRUCTURE
34 AMG ENGINEERING CAPITAL GOODS (VACUUM FURNACES) FUEL EFFICIENCY ELECTRONICS AMG ENGINEERING VACUUM HEAT TREATMENT SERVICES FUEL EFFICIENCY AEROSPACE, AUTOMOTIVE Engineering – Market Trends AEROSPACE, AUTOMOTIVE PRODUCTS & SERVICES MARKET TRENDSMAJOR END MARKETS MAJOR CUSTOMERS SPEC. METALS & CHEM.ENERGY TRANSPORTATION INFRASTRUCTURE
35 AMG IS A GLOBAL SUPPLIER OF CRITICAL MATERIALS TO: MARKET LEADING PRODUCER OF HIGHLY ENGINEERED SPECIALTY METALS AND VACUUM FURNACE SYSTEMS ~3,000 Employees ~$1 billion Annual Revenues At the forefront of CO2 Reduction Q2 2016 REVENUE AMG at a Glance TRANSPORTATIONENERGY INFRASTRUCTURE SPECIALTY METALS AND CHEMICALS BY END MARKET: BY REGION:BY SEGMENT: 44% Europe 32% North America 20% Asia 4% ROW 27% Engineering 73% Critical Materials 22% Infrastructure 23% Specialty Metals & Chemicals 39% Transportation 16% Energy
APPENDIX AMG Advanced Metallurgical Group N.V.
37 AS AT IN MILLIONS OF US DOLLARS JUNE 30, 2016 UNAUDITED DECEMBER 31, 2015 Fixed assets 211.9 215.8 Goodwill and intangibles 33.7 28.9 Other non-current assets 71.0 70.2 Inventories 131.4 126.4 Receivables 143.2 124.3 Other current assets 37.2 29.3 Cash 125.1 127.8 TOTAL ASSETS 753.4 722.7 TOTAL EQUITY 166.4 153.6 Long term debt 118.3 112.2 Employee benefits 136.7 137.9 Other long term liabilities 63.8 69.8 Current debt 13.0 14.5 Accounts payable 129.4 108.0 Advance payments 41.5 44.2 Accruals 43.9 42.9 Other current liabilities 40.5 39.6 TOTAL LIABILITIES 587.1 569.1 TOTAL EQUITY AND LIABILITIES 753.4 722.7 Consolidated Balance Sheet
38 FOR THE SIX MONTHS ENDED IN MILLIONS OF US DOLLARS JUNE 30, 2016 UNAUDITED JUNE 30, 2015 UNAUDITED Revenue 485.7 514.4 Cost of sales 387.7 426.5 Gross profit 98.0 87.9 Selling, general & administrative 66.1 63.0 Restructuring & environmental 0.5 1.4 Other income, net (0.4) (0.1) Operating profit 31.9 23.7 Net finance costs 5.2 7.4 Share of profit of associates 1.4 0.2 Profit before income taxes 28.2 16.5 Income tax expense 3.1 9.6 Profit for the period 25.1 6.9 Shareholders of the Company 25.4 6.5 Non-controlling interest (0.3) 0.4 ADJUSTED EBITDA 47.2 45.5 Consolidated Income Statement
39 Consolidated Statement of Cash Flows FOR THE SIX MONTHS ENDED IN MILLIONS OF US DOLLARS JUNE 30, 2016 UNAUDITED JUNE 30, 2015 UNAUDITED EBITDA 47.2 45.5 Change in working capital and deferred revenue (5.0) (15.5) Finance costs paid, net (3.2) (6.9) Other operating cash flow (15.3) (5.9) Cash flows from operations before taxes 23.7 17.2 Income tax paid (3.7) (2.2) Net cash flows from operations 20.0 15.1 Capital expenditures (14.4) (7.0) Other investing activities (4.9) 0.8 Net cash flows used in investing activities (19.3) (6.2) Net cash flows (used in) from financing activities (3.7) 25.4 Net (decrease) increase in cash and equivalents (3.0) 34.3 Cash and equivalents at January 1 127.8 108.0 Effect of exchange rate fluctuations on cash held 0.3 (5.2) CASH AND EQUIVALENTS AT JUNE 30 125.1 137.1
INVESTOR PRESENTATION AUGUST 2016

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AMG Investor Presentation - August 2016

  • 1.
    LEADING THE CRITICAL MATERIALS REVOLUTION AMG AdvancedMetallurgical Group N.V. Investor Presentation August 4, 2016
  • 2.
    2 About AMG 4 CO2Reduction 5 Strong Capital Structure 6 Critical Raw Materials 7 Critical Materials Price Trends 8 Critical Materials Prices: 10 Year Perspective 9 AMG Business Segments 10 Global Footprint 11 Health and Safety Focus 13 Financial Highlights 14 Strategy & Outlook 26 Key Products & End Markets 30 Appendix 36 TABLE OF CONTENTS
  • 3.
    3 THIS DOCUMENT ISSTRICTLY 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
  • 4.
    4 SUPPLY: AMG Sources, processes, andsupplies the critical materials the market demands GLOBAL TRENDS CO2 emission reduction, population growth, increasing affluence, and energy efficiency DEMAND Innovative new products that are lighter, stronger, and resistant to higher temperatures AMG IS A CRITICAL MATERIALS COMPANY
  • 5.
    5 AMG: MITIGATING TECHNOLOGIES Products andProcesses saving raw materials, energy and CO2 emissions during manufacturing (i.e., recycling of Ferrovanadium) AMG: ENABLING TECHNOLOGIES Products and Processes saving CO2 emissions during use (i.e., light-weighting and fuel efficiency in the aerospace and automotive industries) AMG HAS DEVELOPED INTO A LEADER IN ENABLING TECHNOLOGIES A GLOBAL IMPERATIVE FOR THE 21ST CENTURY CO2 REDUCTION LEADER IN ADVANCED TECHNOLOGIES TO ADDRESS CO2 REDUCTION
  • 6.
    6 6 • Refinanced creditfacility in 2016, providing a stable capital base and liquidity for strategic growth • Deleveraged balance sheet; zero net debt at end of FY15 OPTIMIZED CAPITAL STRUCTURE • Rigorous process to review strategic growth opportunities that is both selective and opportunistic • Organic growth strategy is focused on areas of our portfolio that are marked by strong demand growth or supply limitations • Financially and operationally capable of quickly assessing opportunities • Initiated first dividend to shareholders in 2015 • Reflecting AMG commitment to return value to shareholders DISCIPLINED ORGANIC GROWTH & ACQUISITIONS RETURN EXCESS CASH TO SHAREHOLDERS Strong capital structure, free of net debt, positioned for growth Driving long-term sustainable growth and shareholder value
  • 7.
    7 Heavy REE Niobium Chromium Light REE Magnesium Germanium Indium Gallium Cobalt Beryllium PGMS Fluorspar PhosphateRock Borate Magnesite Tungsten Coking Coal Vanadium Aluminum alloys TinMolybdenum Nickel Antimony Silicon Metal Natural Graphite Tantalum SUPPLYRISK ECONOMIC IMPORTANCE Critical Raw Materials • The EU identified 20 critical raw materials* to the European economy in 2014, focusing on two determinants: economic importance and supply risk • The US identified 30 critical materials* which are vital to national defense, primarily through assessing supply risk • AMG has a unique critical materials portfolio comprising: – 5 EU critical raw materials – 4 US critical raw materials – Highly engineered Titanium Alloys for the aerospace industry – High value added Aluminum Master Alloys – Vanadium, Nickel and Molybdenum from recycled secondary raw materials Melted or treated by AMG vacuum systemsProduced by AMG Critical raw materials identified by the US and produced by AMG EU Critical Raw Materials *Report on Critical Raw Materials for the EU, May 2014; Strategic and Critical Materials 2015 Report on Stockpile Requirements by Department of Defense in January 2015. Titanium alloys Lithium
  • 8.
    8 Critical Materials PriceTrends CRITICAL MATERIAL PRICES OUTPERFORM THE LME -50% 0% 50% 100% 150% 200% 1. AMG EU Critical Materials 2. AMG Portfolio (includes #1) 3. LME Metals 4. Oil 10 Yr CAGR: -3.7% 10 Yr CAGR: 2.2% 10 Yr CAGR: 2.7% 10 Yr CAGR: -4.1% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 AMG: EU Critical Materials OIL LME Metals AMG Portfolio Note: Compound annual growth rates are calculated over the period Jun ‘06 through Jun ‘16 using the equation ((Ending Value / Beginning Value) ^ (1 / # of years) - 1) where ending value is avg monthly price in Jun ‘16 and beginning value is avg monthly price in Jun ‘06; and where AMG EU Critical Materials include Sb, Cr, Graphite & Si; AMG Portfolio includes Sb, Cr, FeV, Li, Nb, Si, Sr, Graphite, Ta, Sn & Ti; and LME Metals include Al, Co, Cu, Pb, Mo, Ni, & Zn. Avg annual growth rates (plotted above) are calculated over the same period using the equation ((Ending Value / Beginning Value) -1) and considering the same metal categorizations where ending value is avg monthly price in Jun of the given year and beginning value is avg monthly price in Jun ‘06. The cumulative average 10 year price appreciation of the AMG Portfolio was 6.4 percentage points higher than LME Metals and 6.8 points higher than oil, while the AMG EU Critical Materials outperformed LME Metals and oil by 5.9 and 6.3 percentage points, respectively
  • 9.
    9 Critical Materials Prices:10 Year Perspective AMG has significant potential upside within certain critical materials based on historical price ranges Note: Metal Positions are measured on a scale of 0 to 10, with 0 being the minimum price and 10 being the maximum price. They are calculated using the formula [(Jun ‘06 month avg – min. monthly avg) / (max. monthly avg – min. monthly avg) *10] where maximum and minimum monthly averages are measured over the period 1 Jun ‘06 through 30 Jun ‘16. 1.9 1.2 0.3 1.5 2.5 1.7 0.9 1.7 5.8 0.8 1.8 3.9 0.8 1.1 1.1 4.5 2.1 2.2 5.3 5.8 1.7 3.2 0 2.5 5 7.5 10 Scale Metals Jun 2016 Position Jun 2015 Position Cr Mo Ni FeV Ti Al C Si Ta Sb Highest Price in 10 years Lowest Price in 10 years [unchanged] • Metal prices are measured on a scale of 0 to 10, with 0 and 10 representing the minimum and maximum average quarterly prices occurring during the past 10 years • The positions demonstrate the current price level of each metal with respect to their various historical price points over the past 10 years Nb
  • 10.
    10 AMG Business Segments AMGCRITICAL MATERIALS AMG’S CONVERSION, MINING, AND RECYCLING BUSINESSES • VANADIUM • SUPERALLOYS • TITANIUM ALLOYS & COATINGS • ALUMINUM ALLOYS • TANTALUM & NIOBIUM • ANTIMONY • GRAPHITE • SILICON AMG ENGINEERING AMG’S VACUUM SYSTEMS AND SERVICES BUSINESS • ENGINEERING • HEAT TREATMENT SERVICES
  • 11.
    11 11 AMG Global Footprint– Critical Materials
  • 12.
    12 12 AMG Global Footprint– Engineering Mexico City, MEXICO Port Huron (MI), USA Berlin, GERMANY Limbach, GERMANY Mumbai, INDIA Suzhou, CHINA Wixom (MI), USA Grenoble, FRANCE Headquarters Production Facility Heat Treatment Services Hanau, GERMANY Head Office
  • 13.
    13 Health and SafetyFocus LEADING SAFETY INDICATORS • The number of safety improvement items reported increased by 38% compared to the 12 month period ending June 2015. These are essential in order to avoid potential injuries. • Incident severity rate over the 12 months ending June 2016 is down 9% from the previous 12 month period. • Days away from work resulting from these lost time incidents are down 7%. RIGOROUS COMMITMENT TO SAFETY REFLECTED IN CONTINUALLY IMPROVING SAFETY RECORDS PERIOD ENDING JUNE LOST TIME INCIDENTS IN THE LAST 12 MONTHS 12 MONTH AVERAGE LOST TIME INCIDENT RATE 12 MONTH AVERAGE INCIDENT SEVERITY RATE 2015 35 1.29 0.15 2016 36 1.33 0.14
  • 14.
  • 15.
    15 AMOUNTS IN $M (EXCEPTEARNINGS PER SHARE) Q2 2016 Q2 2015 % CHANGE REVENUE $248.3 $257.4 (4%) GROSS PROFIT $53.8 $44.6 20% GROSS MARGIN % 21.6% 17.3% 25% PROFIT BEFORE INCOME TAXES $15.6 $8.3 88% EBITDA $26.0 $25.1 4% EBITDA MARGIN % 10.5% 9.8% 7% NET DEBT $6.2 $41.9 (85%) RETURN ON CAPITAL EMPLOYED (ROCE) 17.8% 15.7% 13% NET INCOME ATTRIBUTABLE TO SHAREHOLDERS $13.4 $3.8 253% EARNINGS PER SHARE 0.48 0.14 243% Q2 2016 at a Glance • Q2 ‘16 EBITDA up 4% versus Q2 ‘15 due to improved profitability within AMG Engineering • Annualized ROCE increased to 17.8% versus 15.7% in Q2 2015 • Q2 ‘16 revenue declined by $9 million, or 4%, compared to Q2 ‘15, driven largely by weak metal prices • Net debt: $6.2 million – $35.7 million reduction of net debt since Q2 2015 – Net debt to LTM EBITDA: 0.08x INCREASES IN EARNINGS PER SHARE OF 243%, COMPARED TO Q2 2015
  • 16.
    16 $25.1 $20.4 $9.7 $21.2 $26.0 Q2 15 Q315 Q4 15 Q1 16 Q2 16 $257.4 $241.9 $220.8 $237.4 $248.3 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 $44.6 $39.7 $32.4 $44.3 $53.8 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Financial HighlightsFinancial Highlights REVENUE (IN MILLIONS OF US DOLLARS) EBITDA (IN MILLIONS OF US DOLLARS) GROSS PROFIT (IN MILLIONS OF US DOLLARS) 4% YoY 20% YoY $81.8 $67.4 $48.0 $50.5 $92.8 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 ORDER INTAKE (IN MILLIONS OF US DOLLARS) 4% YoY 13% YoY
  • 17.
    17 IMPROVE ROCE IMPROVE GROSS MARGIN • Increase ROCEthrough operational improvements and disciplined capital management • Increase productivity through continuous cost and product mix optimization 2016 Financial Objectives FINANCIAL OBJECTIVE DESCRIPTION PURSUE GROWTH OPPORTUNITIES MAINTAIN CONSERVATIVE BALANCE SHEET • Optimize capital structure for financial flexibility PROGRESS UPDATE • Net debt down by $35.7 million, or 85%, versus the end of Q2 2015 • Completed enlargement and extension of syndicated credit facility - from $320 million to $400 million with the maturity extended from May 2018 to July 2021 • On July 20th, 2016, AMG’s Supervisory Board approved the construction of a lithium concentrate (spodumene) plant at the Mibra mine in Brazil, with an initial annual production of 90,000 tons, expandable to 140,000 tons • Annualized ROCE increased to 17.8% in the second quarter 2016, as compared to 15.7% in the second quarter 2015 • AMG gross margin increased to 21.6% in Q2 2016 from 17.3% in Q2 2015 • Pursue organic opportunities in high-growth areas within the existing product portfolio • Pursue opportunities for horizontal and vertical industry consolidation across AMG’s critical materials portfolio
  • 18.
    18 Financial Data: ROCE& EBITDA • Q2 ‘16 EBITDA up 4% versus Q2 ’15 due to improved profitability within AMG Engineering • Q2 2016 annualized ROCE improved to 17.8% from 15.7% in Q2 2015 • ROCE improvements are the result of efficient use of capital and improved profitability ANNUALIZED ROCE EBITDA (IN MILLIONS OF US DOLLARS) $25.1 $20.4 $9.7 $21.2 $26.0 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q2 ‘16 ROCE IMPROVED TO 17.8% FROM 15.7% IN Q2 ‘15 Q2 ‘16 EBITDA UP 4% VERSUS Q2 ‘15 9.2% 7.4% 11.9% 12.0% 15.7% 17.8% 2012 2013 2014 2015 Q2 '15 Q2 '16
  • 19.
    19 $194.2 $160.5 $87.8 $41.9 $6.2 2012 2013 2014Q2 '15 Q2 '16 -$10 $5 $20 $35 $50 Q1 Q2 Q3 Q4 2012 2013 2014 2015 2016 Financial Data: Net Debt & Operating Cash flowFinancial Data: Net Debt & Operating Cash Flow • Net debt: $6.2 million – $188.0 million reduction of net debt since December 31, 2012 – Net Debt to LTM EBITDA: 0.08x • AMG’s primary debt facility is a $400 million multicurrency term loan and revolving credit facility – 5 year term (until 2021) with an accordion feature that allows the Company, subject to certain conditions, to increase the commitment amount by up to $100 million – In compliance with all debt covenants • Q2 ‘16 cash flows from operating activities were $24.3M • Cash flows from the first half of 2016 exceeded those from the first half of 2015 by 33% NET DEBT (IN MILLIONS OF US DOLLARS) OPERATING CASH FLOW (IN MILLIONS OF US DOLLARS) $188M REDUCTION IN NET DEBT SINCE 2012 H1 2016 CASH FLOW 33% HIGHER THAN H1 2015
  • 20.
    20 Divisional Financial Highlights– Q2 2016 v Q2 2015 REVENUE EBITDA (in USD millions) (in USD millions)Q2 2016 EBITDA: $26.0 Q2 2016 REVENUE: $248.3 Q2 2016 GROSS MARGIN: 21.6% GROSS MARGIN CAPITAL EXPENDITURE (in USD millions)Q2 2016 CAPEX: $7.5 $56.3 $201.2 $66.7 $181.6 AMG Engineering AMG Critical Materials Q2 2016 Q2 2015 $4.2 $21.0 $5.6 $20.5 AMG Engineering AMG Critical Materials Q2 2016 Q2 2015 $0.5 $2.8 $1.3 $6.2 AMG Engineering AMG Critical Materials Q2 2016 Q2 2015 22.2% 16.0% 23.3% 21.0% AMG Engineering AMG Critical Materials Q2 2016 Q2 2015
  • 21.
    21 WORKING CAPITAL DAYSREDUCED BY 78% SINCE Q3’10 Financial Highlights 79 69 70 70 70 65 65 65 65 62 61 53 47 43 47 42 31 23 28 30 30 19 26 17 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 Q114 Q214 Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Working Capital Reduction 62 DAYS, OR 78% REDUCTION Q1 ‘11 Q2 ‘11 Q3 ‘11 Q4 ‘11 Q1 ‘12 Q2 ‘12 Q3 ‘12 Q4 ‘12 Q1 ‘13 Q2 ‘13 Q3 ‘13 Q4 ‘13 Q1 ‘14 Q2 ‘14 Q3 ‘14 Q3 ‘10 Q4 ‘10 Q4 ‘14 Q1 ‘15 Q2 ‘15 Q3 ‘15 Q4 ‘15 Q1 ‘16 Q2 ‘16
  • 22.
    22 $201.2 $187.7 $166.3 $176.6 $181.6 $21.0 $15.5 $7.0 $16.5 $20.5 Q2 2015Q3 2015 Q4 2015 Q1 2016 Q2 2016 Revenue EBITDA $2.8 $4.8 $10.0 $4.5 $6.2 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Financial Data: Net Debt & Operating Cash flowAMG Critical Materials REVENUE & EBITDA (IN MILLIONS OF US DOLLARS) CAPITAL EXPENDITURES (IN MILLIONS OF US DOLLARS) Q2 2016 REVENUE IMPACTED BY WEAK METALS PRICES INCREASE OF $3.4M Q2 ‘16 VS. Q2 ’15 DUE TO EXPANSION PROJECTS AND AMG ENGINEERING RELOCATION • Q2 2016 revenue down $19.6 million, or 10%, vs. Q2 2015 due to double-digit declines in average quarterly prices of Nickel, Aluminum, Chrome, Niobium and Antimony • Q2 ‘16 EBITDA margin increased to 11.3% from 10.4% in Q2 ‘15. • Capital expenditures increased to $6.2 million in Q2 2016 compared to $2.8 million in Q2 2015 • The largest capital expansion projects are AMG’s Ancuabe graphite mine project and AMG TAC’s titanium aluminide expansion
  • 23.
    23 KEY PRODUCT Q2 ‘16REV ($M) Q2 ‘15 REV ($M) VOLUME PRICE CURRENCY FeV & FeNiMo $22.8 $28.1 Al Master Alloys & Powders $43.0 $45.7 Chromium Metal $19.9 $20.5 Tantalum & Niobium $17.2 $23.8 Titanium Alloys & Coatings $21.1 $21.2 Antimony $19.0 $24.9 Graphite $16.4 $14.9 Silicon Metal $22.4 $22.1 AMG Critical Materials – Quarterly Revenue Drivers • Double-digit declines in the average quarterly prices of Nickel, Aluminum, Chrome, Niobium and Antimony negatively affected revenue in the second quarter of 2016 • Strong sales volumes of Aluminum Master Alloys & Powders, Titanium Alloys & Coatings, and Graphite were partially offset by lower sales of Niobium and Antimony • AMG’s ferrovanadium sales prices are indexed to the prior month’s average market price
  • 24.
    24 Critical Materials –Average Quarterly Prices MATERIALS Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 FERROVANADIUM ($/LB) $9.76 $8.90 $6.79 $6.59 $10.03 MOLYBDENUM ($/LB) $7.50 $5.83 $4.85 $5.33 $7.42 NICKEL ($/MT) $13,005 $10,557 $9,434 $8,496 $8,819 ALUMINUM ($/MT) $1,765 $1,591 $1,495 $1,515 $1,571 CHROME ($/LB) $4.50 $4.41 $4.09 $3.92 $3.76 TANTALUM ($/LB) $80 $74 $59 $60 $62 NIOBIUM OXIDE ($/KG) $33 $28 $25 $25 $27 TI SPONGE ($/KG) $9.40 $9.40 $9.05 $8.69 $8.25 ANTIMONY ($/MT) $8,617 $6,888 $5,588 $5,359 $6,252 GRAPHITE ($/MT) $796 $750 $750 $725 $585 SILICON (CENTS/LB) $138 $127 $114 $103 $92 Q2 ‘16 VS. Q2 ‘15 % CHANGE 3% (1%) (32%) (11%) (16%) (23%) (17%) (12%) (27%) (27%) (33%) Q2 ‘16 VS. Q1 ‘16 % CHANGE 52% 39% 4% 4% (4%) 3% 8% (5%) 17% (19%) (11%)
  • 25.
    25 $56.3 $54.1 $54.6 $60.8 $66.7 $4.2$4.9 $2.6 $4.6 $5.6 Revenue EBITDA $81.8 $67.4 $48.0 $50.5 $92.8 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Financial Data: Net Debt & Operating Cash flowAMG Engineering REVENUE & EBITDA (IN MILLIONS OF US DOLLARS) ORDER INTAKE (IN MILLIONS OF US DOLLARS) EBITDA IMPROVEMENT DUE TO HIGHER SALES AND LOWER COSTS BOOK TO BILL RATIO OF 1.39X IN Q2 2016 • Q2 2016 revenue up 19% vs. Q2 2015 due to strong sales of plasma remelting furnaces for the aerospace market • EBITDA increased by $1.4 million in Q2 2016 versus Q2 2015, the highest quarterly EBITDA in twelve quarters due to higher levels of gross profit • AMG Engineering Order backlog of $158.8 million as of June 30, 2016, a 17% increase versus March 31, 2016 • AMG Engineering signed $92.8 million in new orders during the second quarter of 2016, a 1.39x book to bill ratio
  • 26.
    STRATEGY & OUTLOOK AMG AdvancedMetallurgical Group N.V.
  • 27.
    27 AMG: Ready forGrowth 2012 2013 2014 2015 2016 to 2020 Cost Reduction Product Mix Optimization Supply Chain Excellence Targeted W/C & Debt Levels Scaling Profitable Growth Cost-reduction and capex discipline in response to global economic slowdown Competitive advantage through manufacturing and supply chain excellence, accelerating cost-reduction efforts Properly positioned, financially and operationally, to pursue growth targets across portfolio Streamlined operations and improved operating performance by eliminating low-margin product lines Further reduction in both working capital and net debt, strengthening the balance sheet
  • 28.
    28 28 Strategy AMG’s overriding strategicobjective is to achieve industry leadership while being the low cost producer INDUSTRY CONSOLIDATION PROCESS INNOVATION & PRODUCT DEVELOPMENT Pursue opportunities for horizontal and vertical industry consolidation across AMG’s critical materials portfolio Continue to focus on process innovation and product development to improve the market position of AMG’s businesses AMG’s strategy is to build its critical materials business through industry consolidation, process innovation and product development EXPANSION OF EXISTING HIGH GROWTH BUSINESSES Pursue opportunities in high-growth areas within the existing product portfolio
  • 29.
    29 29 2016 Outlook In thischallenging environment, AMG will continue to reduce cost, optimize its product portfolio and maintain a conservative balance sheet AMG AMG ENGINEERING In this challenging market environment, AMG expects 2016 full year profitability to improve relative to 2015. AMG will also continue to generate strong operating cash flows throughout the year. AMG Engineering expects to return to historic levels of profitability in 2016. Based on the strong order backlog at the end of 2015, and improved cost position, management expects the business to continue to improve its financial performance in 2016. AMG CRITICAL MATERIALS Despite weak metals prices, AMG Critical Materials expects 2016 full year profitability to improve relative to 2015. CHANGE IN DIVIDEND POLICY The change in AMG’s dividend policy reflects a commitment to return value to shareholders and is a result of an improved balance sheet, ample liquidity and confidence in our ability to generate cash.
  • 30.
    KEY PRODUCTS & ENDMARKETS AMG Advanced Metallurgical Group N.V.
  • 31.
    31 Key Products REVENUE (IN MILLIONSOF US DOLLARS) GROSS PROFIT (IN MILLIONS OF US DOLLARS) $- $40 $80 $120 $160 $200 $240 $280 Q2 2015 Q2 2016 Vacuum Furnaces Ti Master Alloys & Coatings Al Master Alloys & Powders Vanadium & FeNiMo Chromium Metal Antimony Tantalum & Niobium Graphite Si Metal $- $10 $20 $30 $40 $50 $60 Q2 2015 Q2 2016 Q2 2016 $53.8 Q2 2016 $248.3 Q2 2015 $257.4 Q2 2015 $44.6
  • 32.
    32 Critical Materials –Market Trends SPEC. METALS & CHEM.ENERGY TRANSPORTATION INFRASTRUCTURE CRITICAL MATERIALS MARKET TRENDSMAJOR END MARKETS MAJOR CUSTOMERS AMG ANTIMONY ANTIMONY TRIOXIDE ANTIMONY MASTERBATCHES ANTIMONY PASTES PLASTICSFLAME RETARDANTS MICRO CAPACITORS, SUPERALLOYS AMG BRAZIL TANTALUM & NIOBIUM COMMUNICATIONS & ELECTRONICS FUEL EFFICIENCY EXPANDED POLYSTYRENE (EPS), BATTERY ANODES AMG GRAPHITE NATURAL GRAPHITE ENERGY SAVING ENERGY STORAGE ALUMINUM ALLOYS, SOLAR AMG SILICON SILICON METAL FUEL EFFICIENCY CLEAN ENERGY BATTERIES AMG LITHIUM LITHIUM CONCENTRATE (SPODUMENE) RENEWABLE ENERGY COMMUNICATIONS & ELECTRONICS CONFIDENTIAL
  • 33.
    33 Critical Materials –Market Trends AMG ALUMINUM ALUMINUM MASTER ALLOYS ALUMINUM POWDERS FUEL EFFICIENCY AEROSPACE, AUTOMOTIVE INFRASTRUCTURE AMG VANADIUM FERROVANADIUM FERRONICKEL- MOLYBDENUM INFRASTRUCTURE GROWTH AEROSPACE AMG TITANIUM ALLOYS & COATINGS TITANIUM MASTER ALLOYS & COATINGS FUEL EFFICIENCY ENERGY SAVING AMG SUPERALLOYS UK CHROMIUM METAL FUEL EFFICIENCYAEROSPACE CRITICAL MATERIALS MARKET TRENDSMAJOR END MARKETS MAJOR CUSTOMERS SPEC. METALS & CHEM.ENERGY TRANSPORTATION INFRASTRUCTURE
  • 34.
    34 AMG ENGINEERING CAPITAL GOODS (VACUUMFURNACES) FUEL EFFICIENCY ELECTRONICS AMG ENGINEERING VACUUM HEAT TREATMENT SERVICES FUEL EFFICIENCY AEROSPACE, AUTOMOTIVE Engineering – Market Trends AEROSPACE, AUTOMOTIVE PRODUCTS & SERVICES MARKET TRENDSMAJOR END MARKETS MAJOR CUSTOMERS SPEC. METALS & CHEM.ENERGY TRANSPORTATION INFRASTRUCTURE
  • 35.
    35 AMG IS AGLOBAL SUPPLIER OF CRITICAL MATERIALS TO: MARKET LEADING PRODUCER OF HIGHLY ENGINEERED SPECIALTY METALS AND VACUUM FURNACE SYSTEMS ~3,000 Employees ~$1 billion Annual Revenues At the forefront of CO2 Reduction Q2 2016 REVENUE AMG at a Glance TRANSPORTATIONENERGY INFRASTRUCTURE SPECIALTY METALS AND CHEMICALS BY END MARKET: BY REGION:BY SEGMENT: 44% Europe 32% North America 20% Asia 4% ROW 27% Engineering 73% Critical Materials 22% Infrastructure 23% Specialty Metals & Chemicals 39% Transportation 16% Energy
  • 36.
  • 37.
    37 AS AT IN MILLIONSOF US DOLLARS JUNE 30, 2016 UNAUDITED DECEMBER 31, 2015 Fixed assets 211.9 215.8 Goodwill and intangibles 33.7 28.9 Other non-current assets 71.0 70.2 Inventories 131.4 126.4 Receivables 143.2 124.3 Other current assets 37.2 29.3 Cash 125.1 127.8 TOTAL ASSETS 753.4 722.7 TOTAL EQUITY 166.4 153.6 Long term debt 118.3 112.2 Employee benefits 136.7 137.9 Other long term liabilities 63.8 69.8 Current debt 13.0 14.5 Accounts payable 129.4 108.0 Advance payments 41.5 44.2 Accruals 43.9 42.9 Other current liabilities 40.5 39.6 TOTAL LIABILITIES 587.1 569.1 TOTAL EQUITY AND LIABILITIES 753.4 722.7 Consolidated Balance Sheet
  • 38.
    38 FOR THE SIXMONTHS ENDED IN MILLIONS OF US DOLLARS JUNE 30, 2016 UNAUDITED JUNE 30, 2015 UNAUDITED Revenue 485.7 514.4 Cost of sales 387.7 426.5 Gross profit 98.0 87.9 Selling, general & administrative 66.1 63.0 Restructuring & environmental 0.5 1.4 Other income, net (0.4) (0.1) Operating profit 31.9 23.7 Net finance costs 5.2 7.4 Share of profit of associates 1.4 0.2 Profit before income taxes 28.2 16.5 Income tax expense 3.1 9.6 Profit for the period 25.1 6.9 Shareholders of the Company 25.4 6.5 Non-controlling interest (0.3) 0.4 ADJUSTED EBITDA 47.2 45.5 Consolidated Income Statement
  • 39.
    39 Consolidated Statement ofCash Flows FOR THE SIX MONTHS ENDED IN MILLIONS OF US DOLLARS JUNE 30, 2016 UNAUDITED JUNE 30, 2015 UNAUDITED EBITDA 47.2 45.5 Change in working capital and deferred revenue (5.0) (15.5) Finance costs paid, net (3.2) (6.9) Other operating cash flow (15.3) (5.9) Cash flows from operations before taxes 23.7 17.2 Income tax paid (3.7) (2.2) Net cash flows from operations 20.0 15.1 Capital expenditures (14.4) (7.0) Other investing activities (4.9) 0.8 Net cash flows used in investing activities (19.3) (6.2) Net cash flows (used in) from financing activities (3.7) 25.4 Net (decrease) increase in cash and equivalents (3.0) 34.3 Cash and equivalents at January 1 127.8 108.0 Effect of exchange rate fluctuations on cash held 0.3 (5.2) CASH AND EQUIVALENTS AT JUNE 30 125.1 137.1
  • 40.