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Annual Report 2008 - AMG Advanced Metallurgical Group NV

Annual Report 2008 - AMG Advanced Metallurgical Group NV

Advanced Materials Division $756.7M Revenue increased 10% over 2007 $62.1M EBITDA grew by 13% from the comparable period in 2007 Revenue by market 2008 The Division had record operating results for 2008, increasing sales by more than 10% to $756.7 million and expanding EBITDA by 13% to $62.1 million. Although record results were achieved for the year, the global economic crisis and the resulting collapse in demand and prices led to margin compression, inventory write-downs and a fourth quarter operating loss. Entering 2009, the Division faces uncertain demand in many of its end markets, specifically infrastructure, energy and fuel efficiency. The year 2009 will be challenging and aggressive actions are being taken to reposition the businesses for a dramatically changed environment. The Division is reducing staffing by more than 15% from the end of the third quarter and has deferred almost all discretionary capital spending. The Division’s objective in 2009 is to deliver increased cash flow stemming not only from operations but also a reduction in working capital and reduced capital spending. Metals Prices Market prices have dropped across all metals markets. Although in certain markets AMG is a converter which passes through metals costs to its customers, in other businesses it purchases metals for its own account and, accordingly, has metals price risk. An example of the latter is ferrovanadium, where the price has decreased from $29.50/lb to $13.13/lb during the fourth quarter 2008. $ Antimony Cr Metal Vanadium 1 Mo Oxide Nickel Dec 31, 2007 5,608/mt 4.70/lb 18.50/lb 32.38/lb 12.46/lb Sep 30, 2008 6,750/mt 5.83/lb 29.50/lb 32.25/lb 8.00/lb Dec 31, 2008 4,462/mt 4.25/lb 13.13/lb 9.50/lb 4.89/lb Q4 Decrease -33.9% -27.1% -55.5% -70.5% -38.9% 1 Price is Ferrovanadium North America. AMG also produces vanadium pentoxide. 16 Report of the Management Board | Business Review: Advanced Materials Division

AMG’s Advanced Materials Division is a global leader in the production of specialty metals, alloys and high performance materials. RECYCLING VANADIUM Recycling The Division’s vanadium recycling operations delivered record annual production of 4.6 million pounds of ferrovanadium and 1.3 million pounds of vanadium pentoxide. Strong results for the first three quarters of the year were offset by lower demand in the fourth quarter as a result of the dramatic downturn in steel production and lower demand for ferroalloys. In our primary ferrovanadium market, the North American steel industry, capacity utilization rates fell from 90% for much of 2008 to 35% at year-end. This collapse in demand resulted in substantially lower prices for ferrovanadium and ferronickel-molybdenum as prices fell more than 50% in the last three months of the year. This resulted in a substantial increase in inventory and significant margin compression during the fourth quarter and required year-end inventory write-downs. In order to maximize liquidity, the timetable for the unit’s expansion has been extended to better match demand and reduce 2009 capital expenditures. Key achievements Attained record revenue and EBITDA of $756.7 million and $62.1 million Achieved record production levels for ferrovanadium and ferronickel-molybdenum Expanded capacity, increased sales of thin film solar coating materials by 35% over 2007 and continued to expand product line of proprietary coating materials and processes for thin film photovoltaic market Doubled tantalum mining capacity to 300,000 pounds tantalum oxide per annum with contract for sale of 2009 production Entered into 50/50 joint venture with Norsk Hydro ASA to further develop technology for low cost production of magnesium and precipitated silica in Norway Expanded Brazilian hydroelectric power plant capacity Report of the Management Board | Business Review: Advanced Materials Division 17

PDF 3.89 MB - AMG Advanced Metallurgical Group NV
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