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Annual Report 2008 - AMG Advanced Metallurgical Group NV

Annual Report 2008 - AMG Advanced Metallurgical Group NV

The

The Advanced Materials Division’s objective is to deliver increased cash flow in 2009 despite a difficult and challenging environment. Fuel Efficiency Titanium has the highest strength-to-weight ratio of any metal. Its use reduces weight which drives fuel efficiency. New aircraft models use increasing amounts of titanium thereby driving industry growth. The Division’s titanium master alloys and titanium aluminide businesses reported excellent full year results. Although sales improved year-over-year, fourth quarter results were weaker than the first three quarters on reduced demand from the aerospace sector. This business continues important development projects such as developing titanium aluminide products for aerospace applications, among others. Chromium metal products are used in alloys for jet engines and gas turbines. These products delivered strong 2008 full year results on slightly higher volume, higher prices and improved margins. Margins were expanded based on well-positioned raw material supplies, improved product mix and strong end market demand. This market also weakened significantly in the fourth quarter of the year resulting in year-end inventory levels being higher than planned. Solar Coating materials sales to thin film solar end markets increased by 35% as AMG gained market share. In particular, AMG’s leadership in coating materials for thin film solar panels is driven by its production of rotatable sputtering target materials for transparent conductive oxides. These oxides are performance-critical external coatings, applied by vapor deposition in layers as thin as 1 micron, to enhance the efficiency of thin film solar cells. Other Aluminum powders and aluminum master alloys delivered disappointing full year results on essentially unchanged volumes but weaker margins. This segment suffers from excess global capacity and weak end markets. The aluminum powders business was downsized midyear as one of the three production lines was closed to focus on higher value-added alloy powders. This resulted in a 25% reduction of staffing. The two aluminum master alloy production units continue to consolidate activities and streamline management. Tantalum products had a difficult 2008 as the strong Brazilian Real and weak demand resulted in higher costs and increased inventory levels. The Division substantially completed the doubling of its low cost tantalum ore mining capacity and has contracted to sell the plant’s full capacity for 2009. The closure of the world’s largest supplier of tantalum concentrates and a weaker Brazilian Real positions the company to improve on its 2008 performance. The completion of the hydroelectric power plant in 2009 will contribute to lower operating costs in the second half of 2009. The Division’s antimony operation is the largest European producer of antimony trioxide. The unit was able to maintain strong margins with year-over-year sales increasing by 10%. 18 Report of the Management Board | Business Review: Advanced Materials Division

VANADIUM ALUMINUM – A TITANIUM MASTER ALLOY Outlook The near term outlook for the Advanced Materials Division is challenging. Demand for many of its key products has weakened with the global recession and prices have fallen precipitously. These effects will continue to be felt at least through the first half of 2009 as margins are compressed and operations run at less than full capacity. AMG continues, however, to believe in the competitive position of its products and the value that they deliver to customers. The Division’s current focus is to aggressively reduce costs, selectively invest in high opportunity projects and position the businesses for successful operations even if present conditions persist. Report of the Management Board | Business Review: Advanced Materials Division 19

PDF 3.89 MB - AMG Advanced Metallurgical Group NV
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