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AMAG: Decline in Earnings

Published: August 3, 2012; 16:37 · (Vindobona)

Today, the Austrian aluminum company presented the results of the second quarter and refers to the difficult market environment. Sales remained stable.

AMAG: Decline in Earnings / Picture: © AMAG

The operative development of the AMAG Group in the 1st half-year of 2012 was very satisfactory, confirming the successful business model. For instance, the Rolling Division recorded a positive development in the 1st half-year of 2012, with earnings being on the level of the record year of 2011. Major reasons for this are the high share of specialties and a high level of diversification. In the Casting Division, the margin pressure caused by the difficult market environment in Southeastern Europe was only partly absorbed by shifts in the product mix towards higher-value products.

"In the 1st half-year of 2012, demand for rolled products from the automotive and aircraft industries, but also from the trade segment, continued to rise. In addition to our key markets of Austria, Germany, USA, France, Italy and Scandinavia we were likewise able to  score in the new markets of Spain, the Czech Republic and Poland," stresses Gerhard Falch, CEO of AMAG Austria Metall AG. "In April 2012 we were able to hold the groundbreaking ceremony for "AMAG 2014". Until 2014, 220m will be invested in the plant expansion at the Ranshofen location. A further milestone regarding our Alouette smelter in Canada was achieved with the signing of the electricity supply contract that will run until 2041," continues Gerhard Falch.

The average price of aluminium on the London Metal Exchange LME being down and the cost of raw materials being high led to a lower profit contribution from the Metal Division, but higher shipment volumes, the use of hedging instruments, and positive effects from USD conversion made up for part of the decline in the aluminium price.

At 429.9m in the 1st half-year of 2012 (1st half-year of 2011: 429.2m), sales for the AMAG Group were on the prior year's level. The lower aluminium price

was offset by the increase in shipment volumes and by currency effects. In the first six months of 2012, external shipment volumes amounted to 173,300 tons; this 5.1 percent increase over the 1st half-year of 2011 is mainly due to the Metal Division.

The earnings before interest, taxes, depreciation and amortization (EBITDA) of the AMAG Group amounted to 72.2m in the 1st half-year of 2012 after reaching 81.9m in the 1st half-year of 2011, with the high cost of raw materials and the lower aluminium price leading to lower earnings in the Metal Division. The EBITDA margin amounted to 16.8 percent in the 1st half-year of 2012 (1st half-year of 2011: 19.1 percent).

In the 1st half-year of 2012, the Metal Division contributed 22.2m (30.8 percent) to the Group EBITDA, the Casting Division 4.2m (5.8 percent), the Rolling Division 41.7m (57.7 percent) and the Service Division 4.1m (5.7 percent).

The increased investment activities of the past years led to an increase in depreciation to 24.8m in the 1st half-year of 2012, after 22.4m in the 1st half-year of 2011. The operating result (EBIT) for the AMAG Group was 47.4m after amounting to 59.5m in the 1st half-year of 2011. In analogy to the operating performance, consolidated net income after taxes changed from 48.1m in the 1st half-year of 2011 to 39.4m in the 1st half-year of 2012.

An equity ratio of 59 percent continued to provide for a high-level capital structure as of June 30, 2012, compared to 62 percent at the end of 2011. At 535.9m, equity as at the closing date of June 30, 2012 was down slightly from the level recorded at yearend 2011 (December 31, 2011: 542.6m).

As at the end of June 2012, net financial debt amounted to 38.9m (December 31, 2011: 13.0m), which results in a gearing ratio of 7.3 percent. In May 2012, AMAG successfully placed a bonded loan ("Schuldscheindarlehen") in the amount of 70m.

Operative cash flow at 67.0m clearly surpassed the amount reported for the comparable period in the prior year (1st half-year of 2011: 55.8m). Investment measures taken in order to enlarge capacity and improve quality generated cash flow from investing activities in the amount of 38.9m, which represents a 133 percent increase compared to the 1st half-year of the prior year.

 

Outlook for 2012

On the basis of the good order situation in the Casting and Rolling Divisions AMAG expects the utilization rate of the production plants at the Ranshofen location to continue on a high level in the second half-year of 2012. Based on these assumptions, earnings will also continue on a high level. The price of aluminium being lower in comparison to the prior year puts a burden on the Metal Division, causing its profit contribution to go down despite full capacity utilization.

All in all, the Management Board expects the satisfactory business trend to continue in the 2nd half-year of 2012. "Current market forecasts confirm that the aluminium industry will continue to grow in the medium term. The plant expansion at Ranshofen sees us optimally prepared for the future," confirms Gerhard Falch.

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