Download pdf - Amg investor presentation august 2013

Investor Presentation August 2013

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THIS DOCUMENT IS STRICTLY CONFIDENTIAL AND IS BEING PROVIDED TO YOU SOLELY FOR YOUR INFORMATION BY AMGADVANCED METALLURGICAL GROUP N.V. (THE “COMPANY”) AND MAY NOT BE REPRODUCED IN ANY FORM OR FURTHERDISTRIBUTED TO ANY OTHER PERSON OR PUBLISHED, IN WHOLE OR IN PART, FOR ANY PURPOSE. FAILURE TO COMPLYWITH 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 tobuy 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 basisof, 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 conjunctionherewith and any accompanying materials are for information only and are not a prospectus, offering circular or admission document. Thispresentation does not form a part of, and should not be construed as, an offer, invitation or solicitation to subscribe for or purchase, ordispose of any of the securities of the companies mentioned in this presentation. These materials do not constitute an offer of securities forsale in the United States or an invitation or an offer to the public or form of application to subscribe for securities. Neither this presentation noranything contained herein shall form the basis of, or be relied on in connection with, any offer or commitment whatsoever. The informationcontained in this presentation has not been independently verified. No representation or warranty, express or implied, is made as to, and noreliance should be placed on, the fairness, accuracy or completeness of the information or the opinions contained herein. The Company andits 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 losshowsoever 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 financialposition, 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 andexpectations of the management board of directors of the Company and are subject to risks and uncertainties that may cause actual resultsto 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 ofcompetitive 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 withoutnotice.

This document has not been approved by any competent regulatory or supervisory authority.

Cautionary Note

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OverviewListed: 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

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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

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Critical Raw Materials

Fe

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

CTa

Nb

Ti SiMo

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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

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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


AMG Mining – mine based value chains

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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


AMG Engineering – vacuum systems and services

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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

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■ 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

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Financial Highlights

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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

Down9% 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

Down10%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)

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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

CashDebtNet 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)

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$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

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Key Products

H1 2013: $588.0

Revenue Gross Profit

H1 2013: $96.9( in USD millions) ( in USD millions)

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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)

Aerospace40.6%

Infrastructure12.3%

Energy17.7%


29.4%

Aerospace46.0%

Energy16.2%


28.1%

Infrastructure9.7%

Aerospace + 4%vs. H1 2012

Focusing on higher margin products for

Aerospace

Aerospace + 4%vs. H1 2012

Focusing on higher margin products for

Aerospace

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■ 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 ProcessingFinancial Summary

- -

$3.1$4.3

Q2 12 Q2 13

Capital Expenditure

( in USD millions)

( in USD millions)

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$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 MiningFinancial Summary

Capital Expenditure

( in USD millions)

( in USD millions)

- -

$5.9

$2.3

Q2 12 Q2 13

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$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 EngineeringFinancial 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)

Outlook

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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

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Appendix

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Consolidated Balance SheetBalance Sheet ($’000) ActualAs of 31-December-12* 30-June-13

(restated)Fixed assets 288.3 253.5Goodwill and intangibles 38.7 36.3Other non-current assets 77.7 75.5

Inventories 211.5 194.8Receivables 177.2 171.2Other current assets 33.8 33.7Cash 121.6 112.2TOTAL ASSETS 948.8 877.2

TOTAL EQUITY 175.3 133.1

Long-term debt 265.6 5.9Pension liabilities 138.0 131.9Other long-term liabilities 78.9 82.4

Current debt 50.3 286.3Accounts payable 125.3 132.3Advance payments 27.0 27.4Accruals 58.9 47.2Other current liabilities 29.5 30.7TOTAL LIABILITIES 773.5 744.1TOTAL LIABILITIES & EQUITY 948.8 877.2

* 2012 Balance Sheet restated for IFRS required adjustments to pension liabilities and mine stripping costs

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Consolidated Income StatementIncome Statement ($’000) Actual For the three months ended 30-June-12 30-June-13

(restated)Revenue 319,591 291,528Cost of sales 265,694 242,910Gross profit 53,897 48,618

Selling, general & admin. 37,803 33,994Asset impairment & restructuring 7,821 55,102Environmental 560 44Other income (234) (300)Operating profit (loss) 7,947 (40,222)

Net finance costs 5,893 6,111

Share of profit of associates 83 156Profit (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

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Consolidated Statement of Cash FlowsCash Flow Statement ($’000) ActualFor 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 42,260Income 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 79,571 121,639Effects of exchange rates on cash (343) (856)Ending cash 93,624 112,230

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AMG Global Locations

area enlarged

above

Offices