Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, “We obviously had a disappointing quarter. Profitability was negatively impacted by deteriorating market prices as current spot prices across all of AMG’s portfolio are significantly below the prices which we experienced in the first quarter of 2019.
The second quarter of 2019 was particularly impacted by an unusual market price development in vanadium over the past several quarters. Market prices climbed consistently from the beginning of 2018 into the first quarter of 2019 and then plunged in a very short period beginning late in the first quarter of 2019 until present. We have seen spikes and crashes in the vanadium market before, however, this pattern is unique in the history of the metal. Traditionally, vanadium prices follow a consistent pattern - a short spike followed by a swift decline. This parallel pattern has a minimal effect on our inventory position as we build only a limited volume of high-priced inventory in the short spike period. In contrast, the sustained period of price acceleration in 2018 and into 2019 resulted in the buildup of a significant volume of high-priced vanadium inventory. This unusual pattern resulted in a substantial impact to our profitability as our inventory position experienced cost adjustments due to the sudden and severe decline in market price which eliminate the profitability on sales for the entire working capital cycle.
Despite the decline in price, if you exclude the transitional implications of the higher cost inventory on profitability, AMG’s vanadium business is robust and very profitable at the current market price. Additionally, we believe that the profitability associated with catalyst recycling will benefit dramatically over the next several years from the various macro trends impacting the industry.”
In 000’s US dollar
Q2 ‘19 Q2 ‘18 Change
Revenue $303,612 $329,321 (8%)
Gross (loss) profit (4,159) 79,161 N/A
Gross margin (1.4%) 24.0%
Operating (loss) profit (37,885) 42,019 N/A
Operating margin (12.5%) 12.8%
Net (loss) income attributable to shareholders (31,096) 17,309 N/A
Adjusted net income 5,953 16,546 (64%)
EPS - Fully diluted (1.02) 0.54 N/A
EBIT (1) 13,660 42,751 (68%)
EBITDA (2) 23,791 50,749 (53%)
EBITDA margin 7.8% 15.4%
Cash (used in) operating activities (11,027) (1,197) N/M
EBIT is defined as earnings before interest and income taxes. EBIT excludes restructuring, asset impairment and equity-settled share-based payments and includes foreign currency gains or losses.
EBITDA is defined as EBIT adjusted for depreciation and amortization.
AMG Critical Materials
Q2 ‘19 Q2 ‘18 Change
Revenue $198,512 $223,788 (11%)
Gross (loss) profit (25,189) 51,623 N/A
Gross profit excluding
exceptional items 22,564 51,469 (56%)
Operating (loss) profit (43,029) 30,780 N/A
EBITDA 12,385 36,579 (66%)
AMG Critical Materials’ revenue in the second quarter decreased by $25.3 million, or 11%, to $198.5 million, driven largely by lower average prices across all seven business units during the quarter, partially offset by higher sales volumes of chrome metal, antimony, silicon metal, and lithium.
Gross (loss) profit in the second quarter decreased by $76.8 million to ($25.2) million. The reduction in gross profit was largely driven by lower vanadium profitability including a non-cash expense related to a vanadium inventory adjustment. In addition, AMG recorded non-cash impairments of $5.2 million associated with capitalized costs for the engineering of Spodumene II in the second quarter 2019.
SG&A expenses in the second quarter of 2019 decreased by $3.0 million, or 14%, compared to the same period in the prior year, primarily due to lower variable compensation expense.