AMG Vital Supplies N.V. (AMVMF) Q2 2024 Earnings Name Transcript

AMG Vital Supplies N.V. (OTCPK:AMVMF) Q2 2024 Outcomes Earnings Convention Name August 1, 2024 3:00 AM ET

Firm Members

Michele Fischer – Senior Vice President of Communications
Heinz Schimmelbusch – Chairman and Chief Government Officer
Michael Connor – Chief Company Improvement Officer
Jackson Dunckel – Chief Monetary Officer
Eric Jackson – Chief Working Officer

Convention Name Members

Ephrem Ravi – Citigroup
Tom van Ravenhorst – ABN AMRO Financial institution N.V.
Jesus Molinos – ING

Operator

Good day, everybody. And welcome to right now’s AMG Q2 2024 Earnings Convention Name. At the moment, all contributors are in a listen-only mode. [Operator Instructions]. Please be aware that this name could also be recorded and I can be standing by do you have to want any help.

It’s now my pleasure to show right now’s name over to Head of Communications, Michele Fischer. Please go forward.

Michele Fischer

Welcome to AMG’s second quarter 2024 earnings name. Becoming a member of me on this name are Dr. Heinz Schimmelbusch, the Chairman of the Administration Board and Chief Government Officer; Mr. Jackson Dunckel, the Chief Monetary Officer; Mr. Eric Jackson, the Chief Working Officer; and Mr. Michael Connor, the Chief Company Improvement Officer.

AMG’s second quarter 2024 earnings press launch issued yesterday is on AMG’s web site.

In the present day’s name will start with a evaluate of the second quarter 2024 enterprise highlights by Dr. Schimmelbusch. Mr. Connor will touch upon technique. Mr. Dunckel will touch upon AMG’s monetary outcomes. And Mr. Jackson will talk about operations. On the completion of Mr. Jackson’s remarks, Dr. Schimmelbusch will touch upon outlook. We are going to then open the decision to take your questions.

Earlier than I move the decision to Dr. Schimmelbusch, I wish to expressly refer you to our assertion on forward-looking statements and the which means thereof, as we’ve used in any respect earlier events and we are going to use at this earnings name and which explanatory assertion has been revealed as a part of our monetary presentation and on our web site all in reference to this earnings name.

I’ll now move the ground to Dr. Schimmelbusch, AMG’s Chairman of the Administration Board and Chief Government Officer.

Heinz Schimmelbusch

Thanks, Michelle. The second quarter of 2024 adjusted EBITDA of $39 million displays the success of our strategic positioning and the diversified important supplies enterprise mannequin, enabling us to navigate market volatility successfully.

Aerospace continues to be a supply of progress, with AMG Engineering securing $90 million order consumption within the second quarter and a June thirtieth order backlog of $310 million. Moreover, AMG Chrome, AMG Graphite and AMG Antimony all carried out nicely in comparison with the second quarter final yr, and it’s noteworthy that each working unit at AMG was worthwhile within the second quarter of 2024.

I now come to progress alternatives and to discuss our progress initiatives, I’ve the pleasure to introduce our latest administration board member, Mike Connor, who was voted in our annual normal assembly in Could with an almost unanimous approval for appointment. He’s AMG’s Chief Company Improvement Officer, managing all of the AMG strategic approaches, and he’ll communicate on company technique going ahead. Mike?

Michael Connor

Thanks, Heinz. The spotlight of the second quarter of 2024 was our acquisition of strategic curiosity in Savannah Assets, which made AMG the corporate’s largest shareholder. Savannah is the only real proprietor of the Barroso Lithium Challenge in northern Portugal, which is Europe’s most vital useful resource of onerous rocks [Technical Difficulty].

On this partnership, AMG appears to be like to contribute its experience in sustainable mining practices and mineral extraction applied sciences, bringing to the desk a wealth of expertise in operational effectivity and environmental stewardship.

At present world worth ranges, AMG has been in a position to enhance its entry to lithium sources with minimal capital outlays. We consider that this collaboration marks a major milestone within the improvement of the [indiscernible] lithium business.

Our strategic progress investments are progressing as deliberate [Technical Difficulty]. In Brazil, the enlargement of our lithium focus plant from 90,000 tons to 130,000 tons is rampant and we anticipate to succeed in full nameplate capability of 130,000 tons within the fourth quarter this yr.

In Bitterfeld, Germany, the qualification course of for our lithium hydroxide refinery’s first 20,000 ton module is underway. And the manufacturing batches are anticipated to hit within the third quarter of 2024. Each of those initiatives strengthen our place within the lithium market.

With the profitable ramp-up of our Zanesville, Ohio plant, we’ve not solely expanded our manufacturing capability, but additionally strengthened our place as a frontrunner within the vanadium business.

Trying forward, we stay targeted on innovation and sustainability, as we consider that vanadium is positioned to play a serious function in the way forward for renewable vitality. On this be aware, our vanadium electrolyte plant in Nuremberg, Germany is within the remaining phases of completion. We anticipate to have nameplate capability accessible by the fourth quarter of this yr as a part of our vertical integration into LIVA batteries.

Our Vanadium enterprise demonstrated sturdy quantity progress, 23% within the second quarter of 2024 versus the second quarter of final yr, serving to to offset a 29% decline in progress. Our operations in Ohio proceed to be the low price world producer of carbonates, considerably outperforming main mining operations.

We consider the way forward for vitality storage programs can be pushed by ongoing innovation, within the rising effectivity, decreasing price, and increasing storage capability. Developments in battery know-how, akin to solid-state batteries and circulation batteries, maintain promise for ever increased vitality densities and longer life spans. Furthermore, synthetic intelligence and superior management programs are being built-in to optimize vitality storage operations to maximise grid flexibility.

AMG LIVA is on the forefront of at the present time pattern and is presently engaged within the execution of a number of battery initiatives to optimize the vitality administration of business crops and incorporate renewable vitality sources.

AMG LIVA just lately positioned into service a hybrid vitality storage system with 4.5 megawatt hours of capability, delivery wind and photo voltaic vitality for our main industrial plant, enabling 80% self-sufficiency. We consider there’s huge potential on this house and we’re nicely positioned to capitalize on the quickly rising enterprise.

I am additionally happy to report that we’ve vital liquidity and assist our many progress alternatives. Money readily available is $308 million. AMG has over $500 million in complete liquidity.

I’ll now move the ground to Jackson Dunckel, AMG’s Chief Monetary Officer. Jackson?

Jackson Dunckel

Thanks, Mike. I will be referring to the second quarter 2024 investor presentation posted yesterday on our web site. Beginning on web page 5 of the presentation, I might wish to reiterate Heinz’s feedback in regards to the energy of the EBITDA efficiency this quarter. With very low lithium and vanadium costs, the remainder of AMG’s portfolio demonstrated vital energy and delivered glorious outcomes.

Web loss attributable to shareholders for Q2 2024 was $11 million, however this was strongly affected by our strategic mission prices, which symbolize the continued funding into our battery grade lithium hydroxide enterprise and our LIVA battery progress plans. Mixed with a listing price adjustment and restructuring cost, these three objects accounted for a $14 million incomes deduction.

Transferring on to web page 6, you may see the worth and quantity actions for our principal key merchandise represented by arrows, which I will go into in additional element as we evaluate the segmental slides.

On web page 7, you will discover that we have added a brand new slide displaying our leverage and valuation figures for the present quarter as in comparison with year-end 2023. It is necessary to notice that we have invested $650 million over the past 4 years for our lithium and vanadium enlargement initiatives, which has impacted the return on capital metrics displayed right here. However, we’ve vital liquidity to assist our future progress alternatives.

Now I will evaluate our three segments and I will begin with AMG Lithium, which is proven on web page 8 of the presentation. On the highest left, you may see that Q2 2024 revenues decreased 71% versus Q2 2023. This lower was pushed by a 59% decline in lithium costs in addition to by decrease lithium focus volumes that are impacted by the continued ramp of our spodumene enlargement presently underway.

Q2 2024 gross revenue decreased to $4 million from $90 million within the second quarter of 2023 due primarily to the aforementioned decline in lithium costs.

EBITDA for the second quarter 2024 got here in at $2 million.

The quarterly CapEx, proven on the underside left, of $16 million was pushed by our two enlargement initiatives in Bitterfeld, Germany, and Brazil.

Turning now to web page 9 of our presentation, which exhibits the AMG Vanadium section. AMG Vanadium’s income for the quarter decreased 7% to $168 million in comparison with Q2 2023. As a consequence of decrease gross sales costs throughout the section, which have been partially offset by elevated volumes in vanadium and chrome metallic.

Q2 2024 gross revenue elevated by 15% in comparison with Q2 2023, due primarily to the upper gross sales volumes in vanadium and chrome metallic.

Q2 2024 adjusted EBITDA elevated 27% in comparison with Q2 2023 to $20 million on account of elevated volumes in vanadium and chrome metallic in addition to the continued good thing about Part 45X manufacturing credit score for which AMG Vanadium has certified. This profit is presently operating at $10 million yearly, however we proceed to debate with our advisors because the IRS finalizes the laws. Given the uncertainty, we’re aiming for conservatism round our estimates.

Transferring on to AMG Applied sciences on web page 10, beginning on the highest left, you may see that Q2 2024 income elevated by $33 million or 26% versus Q2 2023. This enchancment was pushed by sturdy revenues in our engineering unit in addition to increased gross sales volumes of silicon, graphite, and antimony and better gross sales costs of antimony.

Adjusted EBITDA of $18 million in the course of the quarter was greater than thrice the $5 million within the prior yr. The rise was primarily on account of increased profitability in our engineering enterprise, in addition to sturdy performances from our graphite and antimony models.

AMG Silicon started working two of its 4 furnaces in March of 2024. As we plan to run two of 4 furnaces for the rest of the yr, the outcomes of AMG Silicon stay excluded from EBITDA.

Turning now to web page 11 of the presentation, on the highest left, you may see the AMG’s Q2 2024 SG&A bills have been $45 million versus $49 million in Q2 2023. The lower was largely attributable to a one-time pension expense associated to worker profit plans in Q2 2023, partially offset by the rise in headcount in our lithium, engineering, and LIVA enterprise.

AMG’s web finance price in Q2 2024 of $8 million was 3% increased than in Q2 2023.

AMG recorded an revenue tax expense of $11 million within the second quarter of 2024 in comparison with $27 million within the second quarter of 2023. This variance was primarily on account of decrease profitability within the present quarter, but additionally on account of a $7 million elevated deferred tax expense associated to the depreciation of the Brazilian reais versus the US greenback. Fluctuations within the Brazilian reais alternate fee influence the valuation of the corporate’s deferred tax positions in Brazil.

AMG paid taxes of $4 million in Q2 2024 in comparison with tax funds of $35 million in Q2 2023. The diminished money funds within the present interval have been largely a results of the lower in profitability year-over-year.

Turning to web page 12 of the presentation, you may see on the highest left, the money utilized in working actions was $9 million in Q2 2024 in comparison with money from working actions of $60 million in the identical interval of 2023. This was on account of decrease profitability within the present quarter, in addition to ongoing working capital funding into our lithium companies.

AMG ended the quarter with $453 million of web debt, and as of June thirtieth, 2024, we had $308 million in unrestricted money and $200 million accessible on revolving credit score. As such, we had $508 million of complete liquidity on the finish of the quarter. That concludes my remarks. Eric?

Eric Jackson

Thanks, Jackson. Though falling costs for lithium and vanadium merchandise negatively impacted our monetary efficiency within the quarter, all working models are acting on or higher than deliberate.

We continued our price discount and effectivity applications within the second quarter. And as Mike talked about, the execution of our strategic progress initiatives stay on schedule.

Our Brazil lithium operation delivered 17,092 metric tons of lithium focus within the second quarter. The common realized gross sales worth was $891 per ton, besides China. And the common price was $543 per ton, besides China. Each complete manufacturing volumes and the online price of manufacturing higher than deliberate and underscore the sturdy execution and low price place of our lithium focus operation in Brazil.

Our lithium focus plant enlargement from 90,000 tons to 130,000 tons ramp is ramping up and we anticipate to provide at 110,000 ton annualized capability within the third quarter and at full 130,000 ton annualized capability within the fourth quarter.

AMG Lithium’s battery-grade lithium hydroxide refinery’s first 20,000 ton module in Germany is on schedule. The plant will set new business requirements on high quality administration, security, and product dealing with for lithium hydroxide.

We’ve accomplished commissioning of the utilities, the totally computerized warehouse, and the feedstock product transportation system and we’re within the means of chilly commissioning. We anticipate to ship manufacturing batches within the third quarter of 2024.

AMG Vanadium’s operations in Ohio proceed to carry out exceptionally nicely and exceeded goal manufacturing volumes within the first half of 2024. The manufacturing from the roasting operation achieved document excessive manufacturing in June.

Our operational and monetary efficiency continues to exceed the efficiency of our publicly listed rivals, as right now’s market costs are beneath a lot of their working prices.

It is necessary to notice that the EBITDA of our Vanadium section elevated by 27% within the second quarter of 2024 over the prior-year interval, whereas on the identical time ferrovanadium costs fell 29%. That is indicative of our staff’s operational focus and additional validates the worth and economics of our recycling enterprise mannequin.

In Could 2024, AMG Titanium signed a multi-year contract extension with SAFRAN to produce titanium aluminides for manufacturing within the CFM Worldwide LEAP engine. AMG’s titanium aluminide supplies are used to provide low-pressure turbine blades for the LEAP engine used within the single-aisle plane. Titanium aluminide blades are proof against temperatures in extra of 750 levels Celsius and scale back the mass and weight of the blades, contributing to the improved efficiency in decreasing gasoline consumption by 15% in comparison with prior engine fashions.

AMG Titanium has provided titanium aluminide to SAFRAN since 2014 for the LEAP engines within the Boeing 737 MAX and the Airbus A320 Thales. AMG titanium was in a position to leverage synergies with ALD Vacuum Applied sciences, our engineering enterprise, to collectively develop the know-how and tools to provide this.

When it comes to our know-how section, AMG Engineering signed $90 million in new orders in the course of the quarter, pushed by sturdy orders for re-melt and turbine blade coating processes. As talked about, we’ve an order backlog of $310 million on the finish of the quarter, pushed by the sturdy aerospace market.

Our different working models beneath the AMG Applied sciences umbrella, Antimony and Graphite, additionally carried out exceptionally nicely within the quarter and made a major contribution to the $12.4 million quarter-over-quarter enhance in AMG Applied sciences EBITDA.

I’m repetitive after I say this, however all through our group, our overriding operational aims are to be the low price, highest high quality, and most environmentally accountable producer of our merchandise.

I’d now wish to move it ahead to Dr. Schimmelbusch, AMG’s Chief Government Officer.

Heinz Schimmelbusch

Thanks, Eric. AMG Lithium B.V., the dad or mum of all of AMG’s lithium actions, will fee the primary European lithium refinery on September 18, 2024 on the website in Bitterfeld in Saxony-Anhalt. AMG Lithium will produce lithium hydroxide battery grade with an annual capability of 20,000 tons per yr, sufficient for the batteries of round 500,000 electrical automobiles.

With the refinery, we’re making a decisive contribution to securing the provision of the important uncooked materials for the business in Germany and Europe. The institution of our personal full lithium worth chain additionally contributes to the European Vital Supplies Act and affords larger independence for our supplies and demanding supplies.

The event of the battery business in Europe is in full swing, regardless of the numerous discussions surrounding e-mobility. Lithium hydroxide is likely one of the most necessary important supplies and we’re prepared for the ramp up with this lithium refinery.

Along with the dependable provide of lithium we supply significantly nicely, we rating significantly nicely on our technological experience. Our staff has a lot of years of expertise within the manufacturing of battery-grade lithium salts of the very best high quality.

Now, wanting forward, we stay targeted on our lithium initiatives and anticipate improved market situations. We anticipate our adjusted EBITDA to exceed $130 million for 2024.

Operator, we might now wish to open up for questions.

Query-and-Reply Session

Operator

[Operator Instructions]. We are going to take our first query from Ephrem Ravi with Citigroup.

Ephrem Ravi

Just a few questions, firstly, Savannah’s scoping examine estimated a CapEx for the mission of about $280 million they usually have additionally mentioned you may offtake as much as 90 kilotons each year for 10 years when you present them with a funding answer. Given the market cap of round $100 million, is not shopping for out Savannah preferable to offering the funding for one more $45,000 offtake. And once more, simply when you may give us a context why we simply sort of took an 18% stake and never a much bigger chunk of the corporate.

Heinz Schimmelbusch

Speaking in regards to the financing of Savannah is a little bit early as a result of the mission is beneath improvement. However let me point out one specific merchandise. We’re working in Germany and we’ve an off-take settlement with Savannah. And all of that leads finally to a mission financing which is a serious factor of it, is the German authorities establishment which offers authorities assured long-term financing for important materials import contracts. And that is a major synergy between Savannah and AMG.

Ephrem Ravi

Additionally in your new time period mortgage of $100 million, you have mentioned that you’ll use it for lithium useful resource improvement. Simply to make clear that it means upstream useful resource improvement slightly than downstream processing capability if I am decoding it appropriately.

Heinz Schimmelbusch

Sure. Appropriate.

Ephrem Ravi

And final one. As you ramp as much as 130,000 tons of lithium focus, may you give us a sign when you’re anticipating any enchancment in unit price at Nidra [ph] (00:22:35)?

Heinz Schimmelbusch

Eric?

Eric Jackson

Minor enchancment. Minor enchancment, truly. And naturally, the Brazilian reais has weakened just lately. Which will additionally assist us on the discount of our prices.

Heinz Schimmelbusch

And simply be reminded that our price is 550 ship [ph] China, which is a really, very low mark.

Operator

[Operator Instructions]. We are going to take our subsequent query from Tom van Ravenhorst with ABN AMRO.

Tom van Ravenhorst

One query from my aspect. I noticed the sturdy operational efficiency within the vanadium sector and I used to be planning when you may give any steering on the margins going ahead, if that is sustainable.

Eric Jackson

I consider it is sustainable. The vanadium section contains our vanadium operations in Germany in addition to Ohio and chrome companies. And as we talked about, our vanadium recycling enterprise mannequin is exceptionally sturdy. Our manufacturing prices are, as we talked about, decrease than our competitors. Aside from any one-time changes, I believe the profitability is sustainable.

Heinz Schimmelbusch

You refer possibly particularly to the vanadium enterprise. And our vanadium enterprise is, opposite to the first vanadium mining enterprise, is benefiting from charges which we accumulate for recycling, for extracting vanadium and different metals from the spent catalysts which we use as feed materials. And the metals extracted are vanadium, but additionally molybdenum nickel. So we’ve three metals in a approach.

The fourth revenue stream is money. So we, in a approach, have adverse mining prices in a sloppy definition. So that’s an intrinsic aggressive benefit vis-à-vis main mines, which I believe is essential in phases of low vanadium costs. In order that’s, I believe, a cause for the steadiness of our vanadium enterprise. So we’re nonetheless rising manufacturing. And [indiscernible] obtain charges to do what we do.

Operator

We are going to take our subsequent query from Jesus Molinos with ING.

Jesus Molinos

First query, what’s driving the sturdy earnings restoration in engineering? And do you see this enchancment as sustainable?

Heinz Schimmelbusch

Engineering is benefiting from a robust demand of excessive efficiency metal associated furnace generations. And that, in our interpretation, is a operate of progress in that sector, aerospace associated. And likewise, in renewed capability drives. So the crops globally, the crops in high-performance steel-related furnaces are fairly outdated and they’re present process renewal, renewing, each in America and in China. And that’s, I believe, the start of a longer-term improvement, which advantages us as we’ve very excessive market shares within the furnaces associated to that materials, excessive efficiency metal.

Now the opposite pattern on this enterprise is that yearly, the proportion of secondary uncooked materials in all of our clients’ crops is rising. Remelting, recycling, perfection of using re-melt and re-scrap, scrap melting, and that could be a pattern which is ongoing and will not cease within the foreseeable future, on the contrary.

Jesus Molinos

In your public assertion, you talked about that you just anticipate improved market situations. Is that this tied to lithium? And may you present some context as pricing nonetheless appears very subdued?

Heinz Schimmelbusch

I believe it is a broad ranging remark. When you take a look at the associated fee curve of, for instance, lithium, then there are, at this time costs, there is a sure vital proportion of producers that are beneath money prices, working beneath money prices, costs beneath money prices. Now you may have predictions of how lengthy that’s sustainable, however it’s cheap to imagine that there can be a discount of capability.

We secondly consider that the demand, as I discussed, as towards extra pessimistic statements strikes to be globally slightly secure. That means, the expansion charges are slightly secure. And if these two issues meet, then it’s cheap to anticipate the worth correction.

Now the costs are after all artificially, in our interpretation, discounted due to specific uncooked supplies in China known as [indiscernible], that are excessive price mines, excessive price and excessive environmentally cumbersome mines, that are operated as vertically integration of components of the Chinese language manufacturing. So that’s, I believe, additionally not essentially sustainable. That is lithium.

Vanadium, two of the western – and I believe there should not extra, the 2 of the western main producers are working beneath money prices, so costs beneath money prices. And that’s, after all, an unsustainable state of affairs. In order costs are low, and in our interpretation, partly artificially low, given the strategic orientation of a few of these industries, it will right itself.

Jesus Molinos

My final query is, what’s your view on the present new battery provide chain the place some gamers are backtracking on their EV progress plan or switching to LFP over NMC?

Heinz Schimmelbusch

Nicely, we consider, after we analyze the demand statistics, there may be not a lot of a change. While you look from the ahead line to 2030, there are solely minor corrections – insignificant corrections of the estimated complete demand of e-cars in 2030 vis-a-vis now. So the demand appears to be slightly resilient. And so, that is all we are able to say. We’ve our statistics evaluation, and that’s the end result. So we consider that the demand can be growing slightly sturdy.

Operator

[Operator Instructions]. And it does seem that we’ve no additional questions at the moment. I will flip the decision again over to Michelle Fisher for any closing remarks.

Michele Fischer

This concludes our second quarter 2024 earnings name. Thanks everybody for becoming a member of.

Operator

Thanks. This does conclude right now’s program. Thanks in your participation. You could disconnect at any time.