Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- AMG Critical Materials NV (AMVMF, Financial) reported a strong adjusted EBITDA of $39 million for Q2 2024, showcasing effective strategic positioning and a diversified business model.
- The company secured a significant $90 million order intake in the aerospace sector, contributing to a robust order backlog of $310 million.
- AMG's acquisition of a strategic interest in Savannah Resources positions it as the largest shareholder, enhancing its access to Europe's significant lithium resources.
- The expansion of AMG's lithium concentrate plant in Brazil is on track, with expectations to reach full capacity by the fourth quarter of 2024.
- AMG Vanadium demonstrated strong volume growth of 23% in Q2 2024, offsetting a 29% decline in prices, and continues to be a low-cost global producer.
Negative Points
- AMG Critical Materials NV (AMVMF) reported a net loss attributable to shareholders of $11 million for Q2 2024, impacted by strategic project costs and restructuring charges.
- The company's lithium segment experienced a 71% revenue decrease compared to Q2 2023, driven by a 59% decline in lithium prices and lower concentrate volumes.
- Falling prices for lithium and vanadium negatively impacted financial performance, despite operational units performing as planned.
- AMG's cash used in operating activities was $9 million in Q2 2024, a significant decrease from $60 million in the same period of 2023, due to lower profitability and working capital investments.
- The company faces challenges with low lithium and vanadium prices, affecting overall profitability and necessitating ongoing cost reduction and efficiency programs.
Q & A Highlights
Q: Savannah's scoping study estimated a CapEx for the project of about $280 million, and they have also said you can offtake up to 90 kilotonnes per annum for 10 years if you provide them with a funding solution. Why did you take an 18% stake and not a bigger chunk of the company?
A: Talking about the financing of Savannah is a little early because the project is under development. We have an offtake agreement with Savannah, and there are significant synergies between Savannah and AMG, including potential project financing with German government support.
Q: On your new term loan of $100 million, will it be used for upstream resource development rather than downstream processing capacity?
A: Yes, that is correct.
Q: As you ramp up to 130,000 tons of lithium concentrate, are you expecting any improvement in unit cost at Mibra?
A: Minor improvement is expected. The recent weakening of the Brazilian real may also help reduce production costs.
Q: Can you provide guidance on the sustainability of margins in the vanadium sector?
A: We believe the margins are sustainable. Our vanadium recycling business model is strong, with production costs lower than our competition, providing stability even during low vanadium price phases.
Q: What's driving the strong earnings recovery in engineering, and is this improvement sustainable?
A: Engineering is benefiting from strong demand for high-performance steel-related furnace generations, driven by growth in aerospace and renewed capacity drives. This trend is expected to continue, benefiting our market share in high-performance steel furnaces.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
