AMG Advanced Metallurgical Group N.V.

Good day, everyone, and welcome to today's AMG Q2 2025 earnings conference call. At this time, all participants are in a listen-only mode. Later, you will have an opportunity to ask questions during the question-and-answer session. You may register to ask a question at any time by pressing the star and 1 on your telephone keypad. Please note this call is being recorded, and I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Thomas Swoboda. Please go ahead, sir.

Yes. Good morning, everyone, and welcome to IMG's second quarter 2025 earnings call. Joining me on this call is Dr. Heinz Schimmelbusch, the chairman of the board and chief exec officer. Mr. Jackson Dunkle, the Chief Financial Officer, and Mr. Michael Connor, the Chief Corporate Development Officer. AMG's second quarter earnings press release issued yesterday is on AMG's website. Today's call will begin with a review of the second quarter 2025 business highlights by Dr. Schimmelbusch. Mr. Connor will comment on strategy and Mr. Dunkle will comment on AMG's financial results. At the completion of Mr. Danko's remarks, Dr. Schimmelbusch will comment on outlook. We will then open the line to take your questions. Before I pass the call to Dr. Schimmelbusch, I would like to expressly refer you to our statement on forward-looking statements and the meaning thereof, as we have used at all previous occasions and we use at this earnings call, and which explanatory statements has been published as part of our financial presentation and on our website, all in connection with this earnings call. I will now pass the floor to Dr. Schimmelbusch, AMG's Chairman of the Management Board and Chief Executive Officer. Dr. Schimmelbusch.

Thank you, Thomas. I am pleased to report our highest quarterly adjusted EBP rate since June 4, 2023. a 79% increase versus Q2 last year. AMG Technologies broke this exceptional decide with an adjusted EBITDA of 53 million, almost three times the 18 million achieved by the segment in the same quarter last year. The strength of our performance continues to demonstrate the value for a diversified physical materials portfolio, with AMG Engineering's ongoing high-order backlog and the high profitability from AMG Antimony bolstering AMG's technologies' results compared to last year. We are not experiencing any negative effects to date on the status of the analysis. that we expect that this will continue. Michael.

Thank you, Mike. Good morning, everyone. I'd like to provide an update on AMG's strategic positioning, highlighting key developments and progress made over the past four years. As announced in April, we've taken an important step towards strengthening critical materials production in the United States. by approving the expansion of our existing facilities in Newcastle, Pennsylvania, including the refining of chrome metal for high-security applications. Chrome is classified as a critical material by the United States government, yet domestic production remains extremely limited. While this represents only a small step, AMG is actively contributing, narrowing a vital supply gap, and supporting the long-term resilience of downstream industries such as aerospace, energy, and specialty hours. This initiative is fully aligned with U.S. industrial policy and reinforces our long-standing commitment to resilient, mutually anchored supply chains. More broadly, A&B is uniquely positioned across its portfolio to strengthen Western critical materials supply chains. As governments in the U.S., EU, and Gulf states accelerate efforts access to strategic raw materials, our diversified platform provides distinct structural advantage. We operate across upstream, midstream, and refining, and are able to offer localized, reliable solutions tailored to the demands of today's geopolitical and regulatory environments. This multi-regional, multi-material footprint continues to be a key competitive differentiator. The lithium market has shown early signs of stabilization following a steep decline from earlier this year. Supply cuts, finding inventories, and steady demand growth between beans and energy storage are beginning to rebalance the market, with prices appearing to strengthen heading into the second half of 2020. In Europe, we are establishing a comprehensive lithium platform that integrates resource access and refinement. creating a robust foundation to meet the accelerating needs of the first electric, payable, and energy storage sectors. As you might recall in April, we signed an exclusive agreement with Google to go establish a spotting and concentrate facility in Portland. We can provide an additional long-term regional feedstock option for our bitterfield refinery in Germany. The current ramp-up remains on track. In addition, we recently participated in equity raises for Savannah Resources and Zimbabwe, further supporting two of the region's most promising lithium-ion developments. These moves are squarely aligned with the EU's Critical Raw Materials Act and reinforces AMG's role in enabling regional self-sufficiency to battery rate. Despite some short-term operational challenges, AMD's Brazilian mining operations remain a cornerstone of our global resource platform. The app has continued to demonstrate its strong long-term potential and the ongoing process improvements by an experienced and committed operational team. These operations are strategically important for our living and highway, and our well-conditioned delivers the same value that performance multiplies. Meanwhile, the Saudi Arabia continues to make substantial progress on our joint ventures in percent of Iraq. This initiative reflects A&B's global execution capability and its alignment with strategic national goals. The project is a powerful example of how we integrate technical expertise, local industrial policies for long-term economic diversification and resource transformation. I will now hand over the floor to Jackson Melville, AMG's Chief Financial Officer. Jackson.

Thank you, Mike. I'll be referring to the second quarter 2025 investor presentation posted yesterday on the website. Starting on page five of the presentation, I'd like to emphasize Heinz's comments about the strength of AMG's portfolio. AMG delivered the highest quarterly EBITDA since the fourth quarter of 2023, despite the continued low lithium and vanadium prices. On page six, you can see the price and volume movements for our key products represented by arrows, which underscore our segmental results. As you'll hear in our divisional results, despite the number of volume arrows pointing down, we are by and large not experiencing a drop in demand across our business units. AMG Lithium results are shown on page eight. On the top left, you can see that Q2 25 revenues decreased 3% versus the prior year. This variance was driven mainly by both a decline in lithium prices as well as a decrease in lithium concentrate volumes, partially offset by tantalum sales price increases. In Brazil, we are currently running at an annualized production rate of 110,000 tons due to the failure of one piece of equipment associated with our expansion project. As noted in yesterday's release, we are addressing this issue. Despite the decrease in lithium market prices and depressed volumes, we remain profitable. Adjusted EBITDA for the segment in Q2-25 increased 66% compared with the second quarter of last year, primarily due to the low cost per ton in the current quarter. Bayview Venadium results are shown on page 9. Revenue for the quarter decreased by 4% compared to Q2-24, due mainly to lower volumes of ferrovenadium and titanium alloys. The ferrovanadium decline was driven by production issues from our refinery suppliers, and the titanium alloy decline was due to downstream aerospace production issues. The lower volumes were partially offset by increased sales prices in ferrovanadium and chrome metal. Q2 25 adjusted EBITDA of $15 million for our vanadium division was 23% below Q2 of last year. This decrease was primarily due to lower sales volumes. While EBITDA decreased compared to Q2-24, AMG Vanadium does continue to benefit from Section 45X production credits. AMG Vanadium is increasing its presence in Saudi Arabia and the Middle East, and in the context of this effort, we are successful in bidding for significant quantities of spent catalyst in the region. Although this increase in working capital had a significant negative effect on our operating cash flow in the current quarter, this incremental inventory will help AMG Vanadium reduced the volatility of SPED catalyst supply deliveries. The results for AMG Technologies are shown on page 10. The Q2 25 revenue increased by $83 million, or 53% versus Q2 24. This improvement was driven by higher antimony sales prices in the current period. Adjusted EBITDA of $53 million during Q2 was almost triple the same period last year. This increase was also due to higher profitability in AMG Antimony. Page 11 of the presentation shows our main income statement items. The key change on this page is regarding our tax expense, which is $7 million in the current quarter compared to $11 million during Q2 24. The Q2 25 expense was primarily driven by strong profitability in the quarter, as well as tax expense from unabsorbed losses, but these were partially offset by Brazilian deferred tax benefit related to depreciation of the Brazilian Real. Page 12 of the presentation shows our cash flow metrics. The key item on the page is our Q2 25 return on capital employed of 14.9% in the current period, which was higher than in any quarter since Q4 23. AMG ended the quarter with $502 million of net debt, and as of June 30th, we had $262 million of unrestricted cash and $200 million available on a revolving credit facility. The resulting $462 million of total liquidity at the end of the quarter demonstrates our ability to fully fund all approved capital expenditure projects. We continue to expect capital expenditures to be in the $75 million to $100 million range for 2025. That concludes my remarks. Dr. Shimlish.

Thank you, Jackson. of 129 million represents a very strong first half of 2025 despite low lithium and vanadium prices. Our AMG technology sequence continues to perform particularly well, even by a very high order in AMG engineering and by high operability in AMG engineering. From today's perspective, we estimate the temporary tailwind from selling low-price anti-money inventories at more than $50 million for the full year 2025. Based on that, and considering uncertain economic and market conditions globally, we increase our adjusted EBITDA output from $107 million or more in 2025. to 200 million or more in 2025. Operator, we would now like to open the line for questions.

At this time, we'll open the question and answer session. If you would like to ask a question, please press star and 1 on your telephone keypad, and you will be placed into the queue in the order received. You may remove yourself from the queue at any time by pressing pound and one. Once again, if you would like to ask a question, please press star and one on your phone now. And our first question comes from Martin Denderver from ABN AMRO. Please go ahead, Martin.

Yes, thank you, operator, and good morning, gentlemen. I have three questions, please, and I'll take them one by one. My first question is with regards to the operational issue in AMG lithium and the faulty part, if you will, in the expansion program. Can you help us understand when you think you will have solved that issue so then we can go back to the 130,000 metric tons? Yeah.

So, it is a discrete equipment issue. So, a single piece of equipment. which we are in the process of fixing, and we do believe is eminently fixable. As to when we're going to be able to deliver that, you know, you will see, we will report that as soon as it happens.

We are producing presently 110,000 tons. That is in between the 90,000 tons of the previous capacity and 130,000. those of the intended capacity, and we are building that gap when these equipment issues are solved, which we are working on.

Great. Thank you. So, I shouldn't assume anything more than one quarter of the required time to get back to normal. Is that the right way to think about it?

We are, if we had a timeframe, we would give it to you and we're not giving it to you. So, I'm afraid that's a little aggressive.

No, I mean, it is. Okay. When you operate . I mean, you will not expect us to expect the issues are being solved .

Yeah, in a running plan.

Okay, I'll move on. My second question is with regards to vanadium. Now that you have purchased inventory from the Middle East, do you think you are able to get to a stable vanadium content? And in relation to that, given that new supply situation, would you be able to get to help us in understanding what the new EBITDA profitability level would be for Cambridge 1 and 2, given this change in the supply situation?

Well, our flow of catalysts internationally is increasing, but only in the East. We're extremely happy to know that a big plant, a swing plant in Ohio, becoming a global organ solver in the industry. Not only that by North America, but by global goals. Secondly, in the Middle East, the major factor now in the taking of spent cannabis in the Middle East, or such biddings. This is being turned into a regular feed flow. We are also investing in some updating facilities which will be easing our competitive profile there. We are also entering phase of the capacity in our phase two project in Saudi Arabia. So that is a very well positioned development. I'm very happy about that position in the native industry. So I don't know whether that answers your question.

Well, the line is quite bad, so I'm not sure that I caught everything, but I'll take that offline. And my third question is on antimony. It's very helpful that you have quantified the one-off effect of selling the low-priced antimony. But can you help us understand, if we assume a steady price at this level, what the new normal EBITDA contribution would be for antimony given the higher price level? It used to be a 10 million EBITDA unit, roughly speaking. What would be the new contribution assuming steady prices?

But as you obviously will understand, this is a market which is very dynamic circumstances. And so to predict what the new operational earnings that is challenging, I would safely say it would be significantly higher.

Any way that you can help us quantify that a bit? Is it double? Is it triple? Significantly higher, I understand, but it doesn't help us much, really. I'm sorry to say.

It's not wounded in such predictions in commodity markets. It's simply not .

I understand those were my questions. Thank you very much.

And our next question comes from Michael Kuhn from Deutsche Bank. Please go ahead, Michael.

Good morning, gentlemen. Happy to join this call for the first time. A few questions from my side. I would start with the free cash flow, which was, let's say, strongly supported from a profit perspective but burdened by outflows through the working capital. Can we maybe expect a let's say normalization or improving situation on the working capital side in H2 and is there still a chance for you to reach free cash flow break even for FY25?

The answer is in terms of normalization, I'm sensitive to saying that our quarterly operating cash flows and free cash flows, won't continue to be volatile given the number of outflows and inflows that we experience. That being said, we have significantly higher cash flow in the second half, and we do have, you know, a chance to get free cash flow breakeven for the full year.

Excellent. Thank you for that. Then on your Chrome plan, in the U.S., maybe a quick update on how you're progressing, and in that context, do you see, let's say, sufficient demand, or would there be any risk of, let's say, cannibalization versus your existing capacities?

So our home metal plant project in Pennsylvania, in the neighborhood of Pittsburgh, on the plan, it's executed as expected. We therefore expect that the impact it was in 1956. And there is no, essentially we sold out.

Okay. Thank you for that. Sold out. Sounds good. On the U.S., one more question. Obviously, we're seeing very significant efforts by the U.S. government to improve independence in the area of critical materials, and you're obviously a player in that area. Beyond chrome, is there Any discussions going on with the U.S. government in terms of further investments or, let's say, how your company could help achieving a better level of independence in the area of critical materials?

The simple answer is yes. I mean, .

All right. And given the quick answer, I would ask one last question on Bitterfeld, which you commissioned in the second quarter. Have there been, let's say, recent discussions with potential clients or with clients where you have signed contracts already What would you expect from today's perspective in terms of the ramp, the capacity utilization, and when you might be able to achieve, let's say, utilization that would make this plan break even?

The design capacity is covered by the context. In order to reach the design capacity, there is an end of schedule, and we are on schedule. This rent-out schedule is called a qualification process. And the qualification happens customer by customer under the respective conflicts with individual customers. That's what's happening, and we are all packed. Excellent. Thank you for that.

Once again, if you would like to ask a question, please press star and 1 on your phone now. And we do have a question from Martijn Verbeek from the IDEA. Please go ahead, Martijn.

Good morning, gentlemen. It's Martijn Beek of the IDEA. A couple of questions from my side, please. Firstly, due to this single piece of equipment which failed, you have now a nameplate capacity of 110. However, that should suggest more or less 27 and a half K per quarter. However, the volume at this stage is still 50% of that level. I do believe that the first quarter you mentioned that you did some maintenance, but how should we see that in the upcoming quarters? What kind of volume do you expect to ship?

We prefer to answer in terms of the second half, and you should see in the second half we will be at 110,000 tons of capacity, i.e., 55,000 tons in the second half. That being said, it will likely be backwards weighted to the fourth quarter.

Okay, thank you. Secondly, you give an explanation for the increase in the inventories, which went up by some 50 million. Is that purely due to the spent capitalist bidding, or is it also partly due to lithium inventory?

No, it's partly due to vanadium as well as antimony, because as we continue to buy inventory at higher prices, it has increased our inventory value.

So the bidding of these spent catalysts did not have an impact on your working capital? No, it did, both.

What I'm saying is it's both vanadium as well as antimony.

Okay, sorry. I misunderstood you. And what's the, what will you, will you continue bidding for spent catalysts in quarters ahead?

Well, we will decide that as the biddings come up, but doesn't really expect

And to get back to a previous question with a very modest answer from you with respect to the cooperation with the U.S. bodies on critical materials, could you elaborate a bit more on these talks?

So I think it's important to highlight that we have ongoing conversations in all the areas we operate. As you can see, U.S. industrial policy, as well as the EQ Critical Materials Act, our operations in the Gulf states are all of strong interest to the government. And we have ongoing conversations across our portfolio of materials, across our geographic locations. That's not new, but obviously there has been an increased focus in both as far as supporting regulations across the globe. So I don't think we want to give any specific conversations, but we'll say that obviously across our portfolio and across our geographies, we're seeing a lot of interest in support for our existing operations as well as potential expansion opportunities.

Okay. Thank you. Your OPEX was also hit by a one-off executive retirement benefit expense, 3.3 million, which is, in my view, quite a lot. Could you give some color to that as well?

Yeah. That's related to retirements in our U.S. offices.

Okay. Thank you very much.

And at this time, there are no further questions. I'll turn the call back over to Thomas to close out the call.

Yes. Thank you very much for the interest in AMG. We will see you on the road. And that concludes our call today. Thank you so much.

This does conclude today's AMG Q2 2025 earnings conference call. Thank you for your participation. You may now disconnect.