4 years ago

Annual Report 2008 - AMG Advanced Metallurgical Group NV

Annual Report 2008 - AMG Advanced Metallurgical Group NV

Timminco Limited $237.8M

Timminco Limited $237.8M Revenue increased 53% over 2007 $20.0M EBITDA grew by $24.9 million from the comparable period in 2007 Revenue by market 2008 Timminco revenues and EBITDA for 2008 were $237.8 million and $20.0 million, respectively, compared to $155.5 million and a loss of $4.9 million in 2007. The primary driver of these increases was the core solar silicon business. Timminco believes its gross margin per ton of UMSi will improve in 2009 as the Bécancour plant achieves operational efficiencies and as fixed costs are spread over increased production of UMSi. Although the company had EBITDA of $20.0 million in 2008, it suffered a net loss stemming from write-offs relating to the closure of its legacy magnesium business in Canada and its minority investment in Fundo Wheels. After adjusting for these non-recurring items, Timminco generated net income of $1.2 million in 2008 compared to a loss of $7.0 million in 2007. Solar Grade Silicon Timminco’s solar silicon business achieved revenues of $59.4 million in 2008, an increase of $55.8 million over 2007. Timminco began commercial production of UMSi in 2007 and signed four long term contracts with manufacturers of solar silicon ingots in that year. Anticipating significant additional demand, the company began construction of an expanded facility in early 2008. By the end of the year, Timminco had achieved important milestones: six purification lines had been commissioned and additional long term contracts were signed. Timminco’s customers have progressively improved the efficiency of solar cells produced with Timminco’s solar raw material and a number of those customers have launched specific products using 100% Timminco UMSi as the base material of their solar cells. The severe downturn of the solar products markets in the first quarter of 2009 has led to the decision to delay the ramp up of UMSi production lines to adjust production to the actual demand. Silicon Metal Timminco’s operations in Bécancour produce approximately 50,000 mt annually for the aluminum, chemical and polysilicon (semiconductor and solar) markets. The Bécancour location gives the company an abundant supply of competitively priced hydroelectric power and a major transport link to Europe through the 24 Report of the Management Board | Business Review: Timminco Limited

2008 was a transformational year for Timminco as it assumed world leadership in the production of upgraded metallurgical silicon, a raw material for solar silicon ingots. A SOLAR CELL MADE WITH TIMMINCO’S SOLAR GRADE SILICON St. Lawrence Seaway. The markets for silicon metal have contracted in the first quarter of 2009 and Timminco will react with a temporary shutdown of its smelters. Magnesium The volatility of raw material prices and traditionally low margins has led to the magnesium business being a non-core activity. As part of its strategic plan, Timminco has begun winding down operations at its Aurora, Colorado extrusion facility, having previously ceased activities at its Haley, Ontario plant in June, 2008. In early 2009, Timminco entered into a joint venture pursuant to which it ceded control of the magnesium business and retained a minority interest. Other Businesses During 2008, Timminco also had a minority investment in Fundo Wheels, a Norwegian company manufacturing aluminum automobile wheels. Production difficulties and the recent sharp drop in automobile sales contributed to continuing losses and a reduction of the carrying value of this investment to zero on Key achievements Generated $20.0 million of EBITDA in 2008 compared to a loss in 2007. Completed installation of six purification lines for the production of UMSi, planned to be the largest facility of its kind upon completion Shipped 1,045 mt of UMSi with deliveries primarily to customers on long-term supply contracts. the company’s balance sheet. Subsequent to year-end, Fundo Wheels ceased operations. Outlook Timminco believes it will become a low-cost producer of solar silicon feedstock for the photovoltaic industry. Despite the economic crisis that has affected the demand for solar energy, Timminco will continue to work on improving product quality and lowering production costs to ensure a successful long-term future as conditions improve. Report of the Management Board | Business Review: Timminco Limited 25

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